CHANGEPOINT CORP, F-1/A, 2000-06-30

CHANGEPOINT CORP
F-1/A, 2000-06-30
BUSINESS SERVICES, NEC

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 2000

REGISTRATION NO. 333-31918

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

AMENDMENT NO. 2
TO

FORM F-1

REGISTRATION STATEMENT

UNDER THE

SECURITIES ACT OF 1933

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

CHANGEPOINT CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
ONTARIO 7372 NOT APPLICABLE
(PROVINCE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

1595 SIXTEENTH AVENUE
SUITE 700
RICHMOND HILL, ONTARIO, CANADA
L4B 3N9
(905) 886-7000

(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

CT CORPORATION SYSTEM
111 8(TH) AVENUE
NEW YORK, NEW YORK 10011
(212) 894-8940

(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

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

COPIES TO:

<TABLE>
<S> <C> <C>
CHRISTOPHER W. MORGAN, ESQ. JOSEPH B. MAIEROVITS, ESQ. KEVIN M. DENNIS, ESQ.
Skadden, Arps, Slate, Goldman, Spring, Schwartz & Kichler SCOTT F. DUGGAN, ESQ.
Meagher & Flom LLP Suite 700, 40 Sheppard Avenue West Goodwin, Procter & Hoar LLP
Royal Bank Plaza, North Tower, Suite Toronto, Ontario M2N 6K9 Exchange Place
1820 (416) 225-9400 Boston, Massachusetts 02109
Toronto, Ontario M5J 2J4 (617) 570-1000
(416) 777-4700
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

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

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

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE>
PART I
INFORMATION REQUIRED TO BE
DELIVERED TO OFFEREES OR PURCHASERS
<PAGE>
We will amend and complete the information in this prospectus. Although we are
permitted by U.S. federal securities law to offer these securities using this
prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities has been declared
effective by the SEC. This prospectus is not an offer to sell these securities
or our solicitation of your offer to buy these securities in any jurisdiction
where that would not be permitted or legal.
<PAGE>
SUBJECT TO COMPLETION , 2000.
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PROSPECTUS

, 2000

[LOGO]

5,000,000 COMMON SHARES

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<TABLE>
<S> <C>
CHANGEPOINT CORPORATION: THE OFFERING:

- We provide Web-based software and an online - We are offering 5,000,000 of our common
exchange to manage the entire IT services shares.
delivery process. - The underwriters have an option to purchase up
to 750,000 additional common shares from
Changepoint to cover over-allotments.
- This is the initial public offering of our
common shares. We anticipate that the initial
public offering price will be between $8.00
and $10.00 per common share.

PROPOSED SYMBOL AND MARKET: - We plan to use the proceeds from this offering
- CPNT/Nasdaq National Market to fund sales and marketing activities,
research and development expenditures, working
capital and other general corporate purposes.
- Closing: , 2000.
</TABLE>

<TABLE>
<CAPTION>
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Per Share Total
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<S> <C> <C>
Public offering price: $9.00 $45,000,000

Underwriting commission: 0.63 3,150,000

Proceeds to Changepoint: 8.37 41,850,000
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</TABLE>

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.

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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE

U.S. BANCORP PIPER JAFFRAY

CIBC WORLD MARKETS

DLJDIRECT INC.
<PAGE>
[DESCRIPTION OF INSIDE COVER ARTWORK]

The following statement appears in a shaded rectangular box at the top of
the page:

Professional Services Automation
and Business to Business Exchange
for the IT Services Marketplace.

Underneath the box appears a three-dimensional diagram, representing
corporate IT departments, professional services organizations and staffing
companies. The prong representing corporate IT departments is in the form of a
flat cylinder, on top of which are pictures of buildings and a computer. The
prong representing professional services organizations is in the form of a flat
cylinder, on top of which are pictures of buildings, a car, a person carrying a
briefcase and an airplane. The prong representing staffing companies is in the
form of a flat cylinder, on top of which are a number of persons and a building.
Underneath each of the cylinders appears the word "Changepoint." In the center
of the three cylinders is a sphere bearing the term "myChangepoint." Each of the
cylinders is connected to the sphere and people appear to be travelling from
each of the cylinders toward the sphere. The three-dimensional diagram sits atop
an oval bearing the word "Internet".

Beneath the diagram appears the following:

Streamlining the IT services delivery process.

<PAGE>

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, common shares only in jurisdictions where offers and sales are permitted.
The information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of any
sale of our common shares. We are under no duty to update the information in
this prospectus other than as required by law.

Except pursuant to a Canadian prospectus or prospectus exemption under
applicable securities legislation, the common shares may not be offered or sold
in Canada, and this prospectus is not an offer to sell, and we are not by this
prospectus soliciting offers to buy these securities, in Canada.

TABLE OF CONTENTS

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

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

Special Note Regarding Forward-
Looking Statements and Market
Data............................ 19

Exchange Rate Information......... 19

Enforceability of Civil
Liabilities..................... 20

Use of Proceeds................... 20

Dividend Policy................... 20

Corporate Information............. 20

Capitalization.................... 21

Dilution.......................... 22

Selected Consolidated Financial
Data............................ 23

Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 25
</TABLE>

Business.......................... 36

Management........................ 48

Transactions with Related
Parties......................... 55

Principal Shareholders............ 57

Description of Share Capital...... 59

Shares Eligible for Future Sale... 62

Tax Considerations................ 64

Underwriting...................... 68

Legal Matters..................... 71

Experts........................... 71

Additional Information............ 72

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

<PAGE>
(This page has been left blank intentionally.)
<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION ABOUT CHANGEPOINT AND THE COMMON SHARES BEING SOLD IN THIS OFFERING
AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED
ELSEWHERE IN THIS PROSPECTUS.

CHANGEPOINT CORPORATION

We provide Web-based software and an online exchange, myChangepoint.com,
which enable our customers to effectively manage the entire information
technology, or IT, services delivery process. Our comprehensive solution
automates and streamlines the business processes of IT services organizations
and facilitates business transactions and collaboration among buyers and
suppliers of IT services over the Internet. Our software is designed for and
marketed to both professional services organizations and corporate IT
departments. We recently introduced myChangepoint.com, which extends the
benefits of our software by enabling IT services organizations to manage the
interactions with their customers and partners over the Internet. The benefits
of our software are further enhanced when our customers extend the functionality
of our software through myChangepoint.com in order to include outside
participants in the IT services delivery process. We expect to derive revenues
from myChangepoint.com beginning in the fourth quarter of fiscal 2000. To date,
over 100 professional services organizations and corporate IT departments have
purchased our software, including Baltimore Gas & Electric, BellSouth, Dell,
Emerald Solutions, Greenwich Technologies, Guardian Life Insurance, Interwoven
and QAD.

Faced with shorter deadlines, higher customer expectations, increased
complexity of IT projects and an ongoing shortage of skilled IT professionals,
IT services organizations are increasingly relying on a network of IT services
firms and independent professionals to provide additional capacity, specialized
skills and regional expertise. We believe that, due to the high level of
collaboration and interdependence among professional services organizations,
corporate IT departments and independent IT professionals, the efficient
management of IT services delivery, including the management of resources,
projects and knowledge, has become one of the most significant problems facing
the IT services industry.

Many companies are beginning to use the Internet to more closely collaborate
with their customers and partners and streamline their operations. However, to
date, the business processes of professional services organizations and
corporate IT departments as well as the interactions among IT services
organizations have been largely unautomated and inefficient. This often results
in the misallocation and underutilization of resources, bottlenecks and delays
in the delivery of services and, ultimately, lost revenues.

We believe that competitive pressures to complete complex IT initiatives
rapidly have created a significant demand for solutions that manage the delivery
of IT services and facilitate business transactions and collaboration among
buyers and suppliers of IT services over the Internet.

Our Web-based software and myChangepoint.com are designed to improve and
streamline the delivery of IT services across the services supply chain.
Specifically, we designed our solution to:

- efficiently manage the core business processes of IT services
organizations, including the management of new IT engagements and ongoing
projects, the allocation of resources, the sharing of information and
knowledge, invoicing and customer support;

- facilitate collaboration over the Internet between IT services
organizations and their customers and partners by allowing them to
coordinate the management of resources and projects, as well as capture
associated time and expense billing information; and

- effectively source, procure and manage external IT services professionals
over the Internet according to their availability and specific skill sets.

3
<PAGE>
We believe our solution offers the following benefits to professional
services organizations:

- INCREASED REVENUES. Our solution enables professional services
organizations to increase revenues through improved management of new
business opportunities, more efficient services delivery and more accurate
financial management.

- HIGHER UTILIZATION AND RETENTION RATES. Our resource management
capabilities allow our customers to accurately monitor the availability,
skills and desired assignments of their IT services professionals to
maximize the utilization of their staff and improve employee retention.

- IMPROVED CUSTOMER SATISFACTION. Through better allocation of resources and
improved ability to leverage the knowledge within their organizations and
across the IT services supply chain, professional services organizations
are able to rapidly respond to changing customer demands and improve the
delivery of IT services, resulting in higher customer satisfaction.

We believe our solution offers the following benefits to corporate IT
departments:

- INCREASED SPEED OF TECHNOLOGY DELIVERY. By improving the coordination of
the IT services delivery process throughout the IT services supply chain,
our solution decreases overall delivery times and increases the likelihood
of success for IT projects.

- IMPROVED PRODUCTIVITY AND QUALITY OF WORK. The efficiencies gained by
using our solution enable corporate IT departments to maximize
productivity and improve the quality of work.

- ALIGNING IT RESOURCES WITH BUSINESS OBJECTIVES. Through improved
monitoring of ongoing and pending IT projects, our customers can
effectively and strategically deploy scarce IT services personnel to
better meet their business objectives and priorities.

We sell our software primarily through our direct sales force located in the
United States, Canada, and the United Kingdom. Through our partnership with
Corio, we also offer our software as an online hosted service.

Our objective is to be the leading provider of Web-based solutions for
managing the delivery of IT services. Key elements of our strategy include
maintaining leadership in providing Web-based solutions to the IT services
industry, establishing myChangepoint.com as the leading online exchange for IT
services, targeting large IT services organizations, continuing to expand our
direct and indirect sales channels and expanding internationally. In addition,
we will seek to leverage the network effect created as our customers introduce
our solution to their partners and customers by using myChangepoint.com to
collaborate and manage their interactions with them.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common shares offered.............................. 5,000,000 shares

Common shares to be outstanding after
the offering..................................... 24,054,766 shares

Use of proceeds.................................... To fund sales and marketing activities, research
and development expenditures, working capital
and other general corporate purposes.

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

Unless otherwise indicated, all information in this prospectus:

- assumes the underwriters have not exercised the option granted by us to
purchase up to 750,000 additional common shares in this offering;

- gives effect to the termination of the redemption feature relating to
3,252,381 of our common shares, which will occur prior to the closing of
this offering;

- gives effect to the conversion of all outstanding Class A redeemable
convertible preferred shares into an aggregate of 5,983,962 common shares,
which will occur prior to the closing of this offering; and

- gives effect to the conversion of all outstanding Class B redeemable
convertible preferred shares into an aggregate of 2,873,696 common shares,
which will occur prior to the closing of this offering.

The number of common shares to be outstanding after the offering is based on
the number of shares outstanding as of June 26, 2000. The number of shares to be
outstanding excludes:

- 2,237,066 common shares issuable upon exercise of options outstanding at
June 26, 2000, with a weighted average exercise price of $5.88 per share;
and

- 1,811,635 common shares reserved for future issuance under our stock
option plans as of June 26, 2000.

PRESENTATION OF FINANCIAL INFORMATION

Our financial statements are reported in U.S. dollars and have been prepared
in accordance with generally accepted accounting principles in the United
States.

We express all dollar amounts in this prospectus in U.S. dollars, except
where otherwise indicated. References to "$" are to U.S. dollars and references
to "Cdn$" are to Canadian dollars. This prospectus contains a translation of
some Canadian dollar amounts into U.S. dollars at specified exchange rates
solely for your convenience. See "Exchange Rate Information."

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The pro forma information below gives effect to the:

- issuance of 2,873,696 Class B redeemable convertible preferred shares for
net proceeds of $24.8 million on May 26, 2000;

- termination of the redemption feature relating to 3,252,381 of our common
shares, which will occur prior to the closing of this offering;

- conversion of all outstanding Class A redeemable convertible preferred
shares into common shares, which will occur prior to the closing of this
offering, as if the conversion occurred at the beginning of the period or
the date of issuance, where later; and

- conversion of all outstanding Class B redeemable convertible preferred
shares into common shares, which will occur prior to the closing of this
offering, as if the conversion occurred January 31, 2000.

Gross profit................................... 1,280 2,507 4,580 1,958 3,069
Loss from operations........................... (1,300) (1,421) (664) (295) (2,925)
Net loss....................................... (1,117) (1,347) (384) (285) (2,772)
Pro forma basic and diluted net loss per
share........................................ $ (0.03) $ (0.18)
Pro forma shares used in computation,
pro forma basic and diluted.................. 12,041 15,434
</TABLE>

The pro forma as adjusted column of the table below also gives effect to the
sale in this offering of 5,000,000 common shares at an assumed initial public
offering price of $9.00 per common share and after deducting estimated
underwriting commissions and estimated offering expenses.

<TABLE>
<CAPTION>
AS OF JANUARY 31, 2000
---------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
--------- --------- ---------
<S> <C> <C> <C>
BALANCE SHEETS DATA:
Cash and cash equivalents and short-term investments........ $ 4,149 $28,965 $69,815
Working capital............................................. 5,524 30,340 71,190
Total assets................................................ 8,602 33,418 74,268
Long-term liabilities....................................... 94 94 94
Class A redeemable convertible preferred shares............. 74,800 -- --
Common shares eligible for redemption....................... 40,655 -- --
Shareholders' equity (deficiency)........................... (109,164) 31,107 71,957
</TABLE>

6
<PAGE>
RISK FACTORS

INVESTING IN OUR COMMON SHARES WILL SUBJECT YOU TO RISKS INHERENT IN OUR
BUSINESS. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AS WELL AS OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR COMMON
SHARES. IF ANY OF THE RISKS DESCRIBED BELOW OCCURS, OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED. IN SUCH CASES,
THE PRICE OF OUR COMMON SHARES COULD DECLINE, AND YOU MAY LOSE PART OR ALL OF
YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF LOSSES, WE MAY INCUR LOSSES IN THE FUTURE AND OUR LOSSES
MAY INCREASE BECAUSE OF OUR PLAN TO INCREASE OPERATING EXPENSES.

We have a history of losses and we expect to continue to experience losses
and negative cash flow even if sales of our products continue to grow, and we
may not generate sufficient revenues to achieve profitability in the future. Our
net loss was $1.1 million, $1.3 million and $384,000 for fiscal 1997, 1998 and
1999 and $2.8 million for the six months ended January 31, 2000. We may incur
larger losses over the subsequent six months and in future years. We have
increased our operating expenses by more than 100% during the six months ended
January 31, 2000 compared with the six months ended January 31, 1999 and expect
to continue increasing our operating expenses because of increases in:

- the number of our employees;

- sales and marketing activities; and

- other costs related to the implementation of our growth strategy.

WE ONLY RECENTLY INTRODUCED MYCHANGEPOINT.COM AND IT MAY NOT GAIN
MARKET ACCEPTANCE.

If the market for myChangepoint.com does not develop or if myChangepoint.com
does not gain market acceptance, our growth strategy may not be achieved. We
recently introduced myChangepoint.com, which enables corporate IT departments
and professional services organizations to interact over the Internet to
streamline the IT services delivery process. We expect to derive revenues from
myChangepoint.com beginning in the fourth quarter of fiscal 2000. However, we do
not yet have any customers using myChangepoint.com and cannot be certain that a
significant market will develop for this product, or that myChangepoint.com will
be able to accommodate a large number of users. In addition, the use of the
Internet is evolving rapidly and we do not know what forms of products and
services may emerge as alternatives to myChangepoint.com or to any future
Web-based features or products we may introduce. We may also have difficulty
scaling and adapting our existing myChangepoint.com architecture to accommodate
increased traffic and technology advances. Some of our customers using earlier
versions of our software will have to upgrade to the current version of our
software in order to benefit from the functionality provided by
myChangepoint.com.

FAILURE OF OUR SOFTWARE TO GAIN INCREASED MARKET ACCEPTANCE AND COMPETE
SUCCESSFULLY WOULD PREVENT US FROM ACHIEVING OUR GROWTH STRATEGY AND ADVERSELY
AFFECT OUR OPERATING RESULTS.

We currently derive substantially all of our revenues and growth from sales
of licenses of our software and the provision of related services to
professional services organizations and corporate IT departments. Accordingly,
failure of our software to gain increased market acceptance and compete
successfully would prevent us from achieving our growth strategy and adversely
affect our operating results. We recently introduced myChangepoint.com and
intend to continue to invest heavily in research and development and sales and
marketing activities related to this product. It is uncertain whether we will
recognize significant revenue, in the form of transaction fees or otherwise,
from myChangepoint.com.

7
<PAGE>

THE MARKET FOR OUR SOLUTION IS NEWLY EMERGING AND OUR FUTURE OPERATING RESULTS
AND GROWTH PROSPECTS DEPEND ON THIS MARKET'S CONTINUED GROWTH.

If IT services organizations do not continue to embrace solutions that
automate their business processes, the demand for and market acceptance of our
solution will be adversely affected. IT services organizations have only
recently begun to automate the management of their business processes. This
market may not continue to develop and grow and IT services organizations may
not choose to use our solution over manual processes, internally-developed
applications or solutions that offer limited functionality. Companies that have
already invested substantial resources in existing systems may be reluctant to
adopt a new approach that may replace, limit or compete with their existing
systems.

INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE.

The market for our products is intensely competitive, evolving and subject
to rapid technological change. We expect the intensity of competition to
increase in the future. Increased competition may result in price reductions,
reduced gross margins and loss of market share.

We currently face competition principally from developers of software used
to automate professional services and manage projects, relationships with
contractors and enterprise resources. Developers of software used to automate
professional services provide the most direct competition because their software
also automates and integrates aspects of the IT services business. We compete
with developers of software used to manage projects, relationships with
contractors and enterprise resources since these products each seek to automate
at least one aspect of the IT services business. We also face competition from
staffing companies and time and expense reporting software vendors. Many of our
potential customers have the ability to internally develop solutions, and may do
so rather than choose to purchase our products. In addition, as we continue to
promote myChangepoint.com to the IT services industry, we may begin competing
with companies with whom we have not previously competed. It is also possible
that new competitors will enter the market or that our competitors will form
alliances that may enable them to increase their market share.

Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of customers than we do. We
may not be able to compete successfully against current and future competitors.

WE HAVE EXPERIENCED RAPID GROWTH, WHICH HAS PLACED A STRAIN ON OUR RESOURCES,
AND ANY FAILURE TO MANAGE OUR GROWTH EFFECTIVELY MAY ADVERSELY AFFECT OUR
OPERATING RESULTS.

Failure to manage our growth could negatively affect the quality of our
products, our ability to respond to our customers and retain key personnel, and
our business in general. We have been expanding our operations rapidly and
intend to continue this expansion for the foreseeable future. This expansion has
placed, and is expected to continue to place, a significant strain on our
managerial, operational and financial resources as we integrate new employees
and develop more customer and business relationships. On June 26, 2000, we had a
total of 236 full-time employees compared to 96 on October 31, 1999. In
addition, since July 31, 1999, we have opened 12 new offices. We expect to
continue to hire new employees and open new offices at a rapid pace. We must
improve our financial and accounting systems, controls, reporting systems and
procedures and integrate new personnel to manage our growth and expanded
operations effectively.

FAILURE TO CONTINUE TO DEVELOP ENHANCEMENTS TO OUR PRODUCTS AND NEW APPLICATIONS
AND FEATURES THAT RESPOND TO THE CHANGING NEEDS OF OUR CUSTOMERS, RAPID
TECHNOLOGICAL CHANGE AND ADVANCES INTRODUCED BY OUR COMPETITORS IMPAIR OUR
ABILITY TO INCREASE OUR MARKET SHARE.

If we do not properly identify the feature preferences of our existing and
potential customers, or if we fail to deliver features that meet the
requirements of these customers on a timely basis, our ability

8
<PAGE>

to market our products successfully, increase our market share and increase our
revenues will be impaired. The market in which we compete is characterized by:

- rapid technological change;

- frequent new product introductions;

- changes in customer requirements; and

- evolving industry standards.

To be successful, we must continually improve the performance, features and
reliability of our technology, particularly in response to customer needs and
competitive offerings. Our success depends on our ability to enhance our
existing software and to develop new functionality and technologies that address
the increasingly sophisticated and varied needs of the IT services industry.

DELAYS IN INTRODUCING NEW AND ENHANCED PRODUCTS COULD CAUSE US TO LOSE MARKET
SHARE AND HARM OUR ABILITY TO MAINTAIN OR INCREASE REVENUES.

The development of proprietary technologies entails significant technical
and business risks and requires substantial expenditures and lead time. If we
experience product delays in the future, we may face:

- customer dissatisfaction;

- cancellation of orders and license agreements;

- negative publicity;

- loss of revenues;

- slower market acceptance; and

- legal actions by customers.

In the future, our efforts to remedy product delays may not be successful
and we may lose customers as a result. Delays in bringing to market new products
or product enhancements could be exploited by our competitors. If we lose market
share as a result of lapses in our product development, we may not be able to
maintain or increase revenues.

FACTORS RELATING TO OUR BUSINESS AND THE MARKET FOR SOLUTIONS FOR THE IT
SERVICES INDUSTRY MAY CAUSE OUR FUTURE OPERATING RESULTS TO FLUCTUATE FROM
PERIOD TO PERIOD AND THE PRICE OF OUR COMMON SHARES TO DECLINE SUBSTANTIALLY.

Our operating results have varied in the past, and we expect that they may
continue to fluctuate in the future. If our quarterly revenues or operating
results fluctuate and fall below the expectations of investors, the price of our
common shares could decline substantially. Factors that could affect the amount
and timing of our revenues and cause quarterly fluctuations in our operating
results include the following:

- the timing of new releases of our products;

- changes in our pricing policies or those of our competitors;

- the mix of direct and indirect sales channels through which our products
are sold;

- our ability to successfully expand our sales force and marketing programs;

- our ability to successfully expand our international operations; and

- any costs or expenses related to our anticipated move to new offices.

Our operating results may also be adversely affected by the following
factors over which we have little or no control:

- market acceptance of our products, particularly myChangepoint.com;

9
<PAGE>
- the evolving and varying demand for information technology services;

- the timing of execution of large contracts that materially affect our
operating results, which can be affected by customer order deferrals in
anticipation of new product introductions, product enhancements and the
discretionary nature of customer budgeting and purchasing cycles; and

- U.S. and global economic conditions.

Our expense levels are based, in part, on our expectations regarding future
revenue levels. As a result, if total revenues for a particular quarter are
below our expectations, we cannot proportionately reduce operating expenses for
that quarter. Therefore, this revenue shortfall would have a disproportionate
negative effect on our operating results for that quarter.

WE MAY SEEK TO GROW BY MAKING ACQUISITIONS, BUT WE HAVE NEVER ACQUIRED ANOTHER
BUSINESS AND WE MAY NOT BE ABLE TO SUCCESSFULLY COMPLETE ANY ACQUISITIONS WE
UNDERTAKE OR INTEGRATE ANY ACQUIRED BUSINESS WITH OUR OWN.

If we undertake an acquisition or investment, we may not realize the
anticipated benefits. We intend to consider investments in complementary
companies, products or technologies. If we buy a company, we may not be able to
successfully assimilate the acquired personnel, products, operations and
technology into our business. These difficulties could disrupt our ongoing
business, distract our management and employees or increase our expenses. In
connection with a merger or acquisition for shares, the issuance of these
securities may be dilutive to our existing shareholders or affect profitability.
Furthermore, we may have to issue equity or incur debt to pay for future
acquisitions or investments, the issuance of which could be dilutive to us or
our existing shareholders or affect our profitability. In addition, our
operating results may suffer because of acquisition-related costs or
amortization costs for acquired goodwill and other acquired intangible assets.

FAILURE TO ATTRACT, TRAIN AND RETAIN ADDITIONAL QUALIFIED PERSONNEL COULD
ADVERSELY AFFECT OUR EXPANSION PLANS.

Our ability to implement our growth strategy depends considerably upon our
success in recruiting, training and retaining additional personnel. We intend to
increase the number of our sales and marketing, research and development, client
services and customer support personnel significantly over the next 12 months.
Competition for these individuals is intense as there is a limited number of
experienced people available with the necessary skills. We have at times
experienced, and continue to experience, difficulty in recruiting qualified
personnel. Our ability to grow our business and increase our market share will
be impeded if we fail to hire or retain qualified personnel or if newly hired
personnel fail to develop the necessary skills or develop these skills slower
than we anticipate.

THE LOSS OF ANY OF OUR EXECUTIVE OFFICERS COULD ADVERSELY AFFECT OUR BUSINESS.

If any of our executive officers resign or are seriously injured and unable
to work, and we are unable to find a qualified replacement, our business could
be harmed. Our future success depends to a significant degree on the skills,
experience and efforts of our executive officers. In particular, we depend upon
the continued services of Gerald Smith, our Chairman, President and Chief
Executive Officer, and Randall Remme, our Chief Technology Officer and Vice
President, Product Development. Messrs. Smith and Remme do not have employment
agreements that would require them to work solely for us on a long-term basis
and, therefore, could terminate their employment with us at any time without
penalty.

OUR FUTURE REVENUE GROWTH COULD BE IMPAIRED IF WE ARE UNABLE TO DEVELOP
ADDITIONAL DISTRIBUTION CHANNELS FOR OUR PRODUCTS.

If we fail to develop and maintain relationships with significant indirect
distribution channels, or if these distribution channels are not successful in
their sales efforts, our ability to acquire new customers

10
<PAGE>

and increase revenues may be impaired. We believe that our success in
penetrating our target market depends in part on our ability to develop and
expand our indirect distribution channels, including third-party distribution
companies, software vendors and application service providers. Since our
agreements with third-party distributors generally are non-exclusive and
normally terminable without penalty on short notice, some third parties may
choose to discontinue working with us or may decide to work with our
competitors. As we develop additional indirect distribution channels, we may
experience conflicts with our direct sales force since both of these
distribution channels may target the same customer bases. If we are not able to
successfully manage these potential conflicts, we may not be able to maximize
our revenue growth.

OUR TECHNOLOGY COULD CONTAIN UNDETECTED OR UNRESOLVED DEFECTS OR ERRORS THAT
COULD RESULT IN INCREASED OPERATING COSTS OR HARM TO OUR REPUTATION.

We face the possibility of higher costs as a result of the complexity of our
products and the potential for undetected or unresolved errors. Our products
have in the past contained, and may in the future contain, undetected or
unresolved errors. If our software contains undetected errors, we could
experience:

- loss of or delay in revenues expected from the new product and an
immediate and significant loss of market share;

- loss of existing customers that upgrade to the new product and of new
customers;

- failure to achieve market acceptance;

- diversion of development resources;

- injury to our reputation;

- increased service and warranty costs;

- legal actions by customers; and

- increased insurance costs.

In addition, an associated product liability claim could harm our business
by increasing our costs, damaging our reputation and distracting our management.

TECHNICAL PROBLEMS WITH INTERNAL OR OUTSOURCED COMPUTER AND COMMUNICATIONS
SYSTEMS COULD RESULT IN REDUCED REVENUES AND HARM TO OUR REPUTATION.

The success of myChangepoint.com depends on the efficient and uninterrupted
operation of our own and outsourced computer and communications hardware and
software systems. Any system failure that causes an interruption in our service
or a decrease in responsiveness could harm our relationships with our clients
and result in reduced revenues. We currently host myChangepoint.com at our
corporate offices in Richmond Hill, Ontario. These systems and operations are
vulnerable to damage or interruption from human error, natural disasters,
telecommunications failures, break-ins, sabotage, computer viruses and similar
adverse events. Our operations depend on our ability to protect our systems
against damage or interruption. We cannot guarantee that our Internet access
will be uninterrupted, error-free or secure. Our disaster recovery plan in the
event of damage or interruption has not been formally tested and may not perform
as intended, and our insurance policies may not adequately compensate us for
losses that we may incur.

IF OUR SECURITY SYSTEM IS BREACHED, OUR REPUTATION AND ABILITY TO RETAIN
EXISTING AND ATTRACT NEW CUSTOMERS COULD SUFFER.

A fundamental requirement for business-to-business transactions over the
Internet is the secure transmission and storage of confidential information.
Customers that use myChangepoint.com to manage the delivery of IT services
transmit confidential information over the Internet about their

11
<PAGE>

businesses. If unauthorized third parties are successful in obtaining
confidential information from us or users of myChangepoint.com, our reputation
may be damaged and our ability to retain existing and attract new customers may
be impaired and we may be subjected to liability.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WHICH COULD
SIGNIFICANTLY HARM OUR ABILITY TO GAIN MARKET SHARE AND INCREASE REVENUES.

Unauthorized copying or other misappropriation of our technology could
enable third parties to benefit from our technology without paying us for it,
which would significantly harm our ability to gain market share and increase
revenues. We rely on contractual restrictions, such as confidentiality
agreements and licenses, to establish and protect our proprietary rights. We
currently have no patents or patent applications pending relating to our
products or technology. Despite any precautions that we take to protect our
intellectual property:

- laws and contractual restrictions may be insufficient to prevent
misappropriation of our technology or deter others from developing similar
technologies;

- current laws that prohibit software copying provide only limited
protection from software "pirates," and effective trademark, copyright and
trade secret protection may be unavailable or limited in foreign
countries;

- third parties may claim common law trademark rights based upon state,
provincial or foreign laws that precede any registrations we may receive
for our trademarks; and

- policing unauthorized use of our products and trademarks is difficult,
expensive and time-consuming, and we may be unable to determine the extent
of this unauthorized use.

It is possible that our intellectual property rights could be successfully
challenged by one or more third parties, which could result in our inability to
exploit, or our loss of the right to prevent others from exploiting, our
intellectual property, including our tradename, trademarks, domain names and
copyrights.

CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE THEIR PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND INCREASE OUR COSTS.

Substantial litigation over intellectual property rights exists in our
industry. We expect that software in our industry may be increasingly subject to
third-party infringement claims as the number of competitors grows and the
functionality of products and technology in different industry segments
overlaps. Third parties may currently have, or may eventually be issued, patents
that our products or technology may infringe.

Any of these third parties might make a claim of infringement against us.
Any litigation could result in the expenditure of significant financial
resources and the diversion of management's time and resources. In addition,
litigation in which we are accused of infringement may cause negative publicity,
have an impact on prospective customers, cause product shipment delays, require
us to develop non-infringing technology or require us to enter into royalty or
license agreements, which may not be available on acceptable terms, or at all.
If a successful claim of infringement were made against us and we could not
develop non-infringing technology or license the infringed or similar technology
on a timely and cost-effective basis, our business could be significantly harmed
and we could be exposed to legal actions by our customers.

OUR INTERNATIONAL EXPANSION EFFORTS MAY NOT BE SUCCESSFUL, WHICH WOULD IMPAIR
THE GROWTH OF OUR BUSINESS.

Our operations outside the United States and Canada are located in the
United Kingdom and, to date, have been limited. We plan to expand our existing
international operations and establish additional facilities or business
relationships in other parts of the world. The expansion of our existing

12
<PAGE>
international operations and entry into additional international markets are key
parts of our growth strategy and will require significant management attention
and financial resources. In addition, to grow our international sales
operations, we will need to expand our international sales channel management
and support organizations and customize our products for local markets. Even if
we are able to expand our international operations successfully, we may not be
able to maintain or increase international market demand for our products.

IF WE FAIL TO ADAPT APPROPRIATELY TO THE CHALLENGES ASSOCIATED WITH OPERATING
INTERNATIONALLY, THE GROWTH OF OUR BUSINESS MAY BE IMPEDED AND OUR OPERATING
RESULTS MAY BE ADVERSELY AFFECTED.

Expanding our operations outside the United States and Canada subjects us to
numerous inherent potential risks associated with international operations.
Factors that could negatively impact our sales and results of operations
include:

- greater difficulty in accounts receivable collection;

- the burden of complying with multiple and conflicting regulatory
requirements;

- foreign exchange controls;

- longer payment cycles;

- import and export restrictions and tariffs;

- potentially adverse tax consequences; and

- political and economic instability.

In addition, our ability to expand our business in certain countries
depends, in part, on our ability to modify our products for different tax
configurations and multiple currencies. We also plan to configure our products
for multiple languages. We expect to rely on third parties to adapt our software
to local business practices and translate it into local languages. If any of
these third parties should fail to properly adapt or translate our software, our
reputation could be damaged, we could be subjected to liability, and our
international expansion plans could suffer.

OUR SALES CYCLE IS LONG AND SALES DELAYS COULD CAUSE OUR OPERATING RESULTS TO
VARY WIDELY.

The long sales cycle for our products may cause product revenues and
operating results to vary significantly from period to period, which could
negatively impact the price of our common shares. Our sales cycle is subject to
a number of significant risks, including customers' budgetary constraints and
internal acceptance reviews, over which we have little or no control. We invest
significant amounts of time and resources, and we incur significant costs
educating and providing information to our prospective customers regarding the
use and benefits of our technology. Many of these customers evaluate our
technology relatively slowly and deliberately, depending on the specific
technical capabilities of the customer, the size of the deployment, the level of
interaction between the customer and related customers and suppliers of IT
services, and the complexity of the customer's requirements. Further, we cannot
guarantee that prospective customers will purchase our services or software
after evaluating our technology even though we will have spent time and
resources educating and providing information to these customers. Consequently,
if sales expected from a specific customer in a particular quarter are not
realized in that quarter, we are unlikely to be able to generate revenues from
alternate sources in time to compensate for the shortfall. As a result, and due
to the relatively large size of a typical order, a lost or delayed sale could
result in revenues and operating results that are lower than expected and could
adversely affect our financial position.

WE EXPECT SEASONAL TRENDS TO CAUSE OUR QUARTERLY REVENUES TO FLUCTUATE, WHICH
MAY NEGATIVELY IMPACT THE PRICE OF OUR COMMON SHARES.

We have experienced, and expect to continue to experience, seasonality with
respect to product license revenues. In recent years, we have experienced
relatively greater revenues from licenses in the

13
<PAGE>

fourth quarter of our fiscal year, which ends on July 31, than in each of the
first three quarters, particularly the first quarter. We believe that these
fluctuations are caused, in part, by customer buying patterns and the efforts of
our direct sales force to meet or exceed fiscal year-end quotas. We expect that
these trends are likely to continue in the future. If our quarterly revenues
fall below the expectations of investors, the price of our common shares could
decline substantially.

FLUCTUATIONS IN EXCHANGE RATES MAY NEGATIVELY AFFECT OUR OPERATING RESULTS.

A substantial portion of our revenues are now, and are expected to continue
to be, realized in currencies other than Canadian dollars. Our operating
expenses are primarily paid in Canadian dollars. Fluctuations in the exchange
rate between the Canadian dollar and these other currencies may have a material
effect on our results of operations. In particular, we may be adversely affected
by a significant strengthening of the Canadian dollar against the U.S. dollar.
We do not currently engage in currency hedging activities.

OUR INSURANCE MAY NOT BE SUFFICIENT TO COVER ALL POTENTIAL PRODUCT LIABILITY AND
WARRANTY CLAIMS, WHICH COULD EXPOSE US TO SUBSTANTIAL OPERATING LOSSES.

Our products are integrated into our clients' internal IT infrastructure.
The sale and support of our products result in the risk of product liability or
warranty claims based on damage to this infrastructure. In addition, the failure
of our products to perform to client expectations could give rise to warranty
claims. Our insurance would likely not cover potential claims of this type or
may not be adequate to protect us from all liability that may be imposed.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO GROW OUR BUSINESS, WHICH WE MAY NOT
BE ABLE TO DO.

If we are unable to raise additional funds when needed, or on terms
acceptable to us, our ability to operate and grow our business could be impeded.
Our future liquidity and capital requirements are difficult to predict because
they depend on numerous factors, including the success of our existing and new
product offerings as well as competing technological and market developments. As
a result, we may not be able to generate sufficient cash from our operations to
meet additional working capital requirements, support additional research and
development or capital expenditures, or take advantage of investment or
acquisition opportunities. Accordingly, we may need to raise additional capital
in the future.

Our ability to obtain additional financing will be subject to a number of
factors, including market conditions and our operating performance. These
factors may make the timing, amount, terms and conditions of additional
financing unattractive for us. If we raise additional funds by selling equity
securities, the relative equity ownership of our existing investors could be
diluted or the new investors could obtain terms more favorable than previous
investors. If we raise additional funds through debt financing, we could incur
significant borrowing costs.

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

The latest versions of our products are Year 2000 tested and to the best of
our knowledge are free from any Year 2000 problems. However, there may be latent
undiscovered defects that affect the operation of our products, even though we
expected such defects to become evident on January 1, 2000. Should such defects
exist, they may have a detrimental effect on the operation of our products.
Earlier versions of our products may not be Year 2000 compliant, and we do not
intend to make them Year 2000 compliant. While we have checked with third
parties from whom we license software that they have taken Year 2000 readiness
measures, and we have not experienced any failures to date, our assurances are
only as good as their statements and any Year 2000 defects in our licensed
software that have escaped detection, in both their and our testing, may have
adverse effects on the operation of our

14
<PAGE>
products. Additionally, the Year 2000 problem may affect us by causing
disruptions in the business operations of, or delay technology purchases by,
companies with which we do business, causing a decrease in our revenues.

HOLDING OUR SHARES COULD RESULT IN ADVERSE TAX CONSEQUENCES IF WE ARE TREATED AS
A PASSIVE FOREIGN INVESTMENT COMPANY.

Holding shares in a foreign company that is classified as a passive foreign
investment company may result in adverse tax consequences. We do not believe
that we are currently a passive foreign investment company and do not expect to
become one in the future. However, in the event we are treated as a passive
foreign investment company, these adverse tax consequences could result. See
"Tax Considerations -- Passive Foreign Investment Companies."

DIVIDENDS YOU RECEIVE FROM US MAY CONSTITUTE ORDINARY TAXABLE INCOME.

We have never paid a dividend, and we do not have plans to pay dividends in
the future. However, if we should pay dividends to you in the future, such
dividends may constitute taxable income. Generally, dividends you receive from
us will constitute first, ordinary taxable income to the extent of our available
earnings and profits, and second, a tax-free return of capital or capital gain,
depending on your adjusted tax basis in our shares. A further discussion of the
tax treatment of dividends can be found under the heading "Tax
Considerations--United States Federal Income Tax Considerations."

U.S. PERSONS HOLDING 10% OR MORE OF OUR COMMON SHARES MAY HAVE ADVERSE TAX
CONSEQUENCES IF WE ARE CLASSIFIED AS A CONTROLLED FOREIGN CORPORATION.

If we are classified as a controlled foreign corporation, U.S. persons who
hold, directly, indirectly or constructively, 10% or more of the combined voting
power of our stock may be required to include in income their pro rata shares of
our "Subpart F" income, as defined by the Internal Revenue Code. In general, we
would be classified as a controlled foreign corporation if 50% or more of our
shares (measured by total voting power or total value) are held by U.S. persons
who each hold shares constituting at least 10% of our total combined voting
power. We do not believe that we are a controlled foreign corporation, and we do
not anticipate that we will become a controlled foreign corporation as a result
of the offering. However, we cannot assure you that we will not qualify as a
controlled foreign corporation in the future. A further discussion of the tax
treatment of controlled foreign corporations can be found under the heading "Tax
Considerations-- United States Federal Income Tax Considerations--Controlled
Foreign Corporation."

RISKS RELATED TO OUR INDUSTRY

IF THE CURRENT DEMAND FOR IT SERVICES DOES NOT CONTINUE, OUR ABILITY TO GROW AND
INCREASE REVENUES COULD BE MATERIALLY AND ADVERSELY AFFECTED.

The market for IT services is evolving rapidly. Demand and market acceptance
for IT services depend on a number of factors, including the following:

- the growth in consumer access to, and acceptance of, new interactive
technologies such as the Internet;

- the adoption of Internet-based business models; and

- the development of technologies that facilitate two-way communication
between companies and targeted audiences.

Industry analysts and others have made many favorable predictions concerning
the growth of information technology and IT services. These predictions should
not be relied upon as conclusive. If the market for IT services fails to grow as
quickly as anticipated, our growth and ability to increase revenues could be
materially and adversely affected.

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<PAGE>

OUR FUTURE REVENUES DEPEND ON THE CONTINUED GROWTH IN THE USE AND EFFICIENT
OPERATION OF THE INTERNET.

Promoting myChangepoint.com is a key component of our growth strategy.
Consequently, our future revenues and profits, if any, substantially depend upon
the continued acceptance and use of the Internet, which is evolving as a
communications medium. Rapid growth in the use of the Internet is a recent
phenomenon and may not continue. As a result, a broad base of customers that are
willing to use the Internet as a primary means of managing IT services may not
develop or be maintained. If businesses do not continue to accept the Internet
as a communications medium, the demand for myChangepoint.com could be
significantly reduced and any future Internet-based features that we develop or
market may not be commercially successful.

Factors that could inhibit the growth of the Internet and its use as a
communications medium include:

- delays in the development or adoption of new equipment, standards and
protocols to handle increased levels of Internet activity, security,
reliability, cost, ease of use, accessibility and quality of service;

- the ability of the Internet to support the demands placed on it by
continued growth;

- concerns about privacy and the use of data collected over the Internet;

- the possibility that U.S. federal, Canadian, state, provincial, local or
foreign governments will adopt laws or regulations limiting the use of the
Internet or the use of information collected from communications or
transactions over the Internet; and

- the possibility that governments will seek to tax Internet commerce.

RISKS RELATED TO THIS OFFERING

WE WILL HAVE BROAD DISCRETION REGARDING THE USE OF PROCEEDS FROM THIS OFFERING,
WHICH WE MAY NOT USE TO DEVELOP AND GROW OUR BUSINESS EFFECTIVELY.

We do not have specific uses for a significant portion of the proceeds from
this offering. As a result, our management will have broad discretion in how we
use the net proceeds from this offering. You will not have the opportunity to
evaluate the economic, financial or other information on which we base our
decisions regarding the use of the net proceeds from this offering, and we may
spend these proceeds in ways that do not increase our operating results or
market value.

INVESTORS WILL INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER DILUTION.

If you purchase common shares in this offering, you will incur immediate
dilution of $5.98 in the pro forma net tangible book value per common share from
the price you pay for the common shares. We also have a large number of
outstanding options to purchase common shares with exercise prices significantly
below the estimated public offering price for the common shares. To the extent
these securities are exercised, there will be further dilution. See "Dilution."

WE EXPECT MORE THAN 19 MILLION COMMON SHARES TO BECOME AVAILABLE FOR SALE
180 DAYS FROM THE DATE OF THIS PROSPECTUS, AND SALES OF THESE COMMON SHARES MAY
DEPRESS OUR SHARE PRICE.

After this offering, we will have outstanding 24.1 million common shares.
Sales of a substantial number of our common shares in the public market
following this offering could cause the market price of our common shares to
drop. All of the common shares sold in this offering will be freely tradeable.
We expect that the remaining 19.1 million common shares outstanding after this
offering will be available for sale in the public market 180 days after the date
of this prospectus. See "Shares Eligible for Future Sale."

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<PAGE>
OUR SHARE PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL AT OR ABOVE
THE OFFERING PRICE.

There has previously not been a public market for our common shares. A risk
exists that there will be limited investor interest in our common shares and
that a liquid market for our shares may not develop. The initial public offering
price for our common shares will be determined by negotiations between us and
the representatives of the underwriters. Among the factors to be considered in
these negotiations are prevailing market conditions, our financial information,
market valuations of other companies that we and the representatives believe to
be comparable to us, estimates of our business potential and the present state
of our development.

The initial public offering price for our common shares may not be
indicative of the prices that will prevail in the trading market. In addition,
the stock market in general, and the Nasdaq National Market and software and
Internet-based companies like ours in particular, have experienced extreme price
and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of such companies. The trading prices of many
technology companies are at or near historical highs and these trading prices
may not be sustained. These broad market and industry factors may have a
material adverse effect on the market price of our common shares, regardless of
our actual performance. You may not be able to resell your common shares at or
above the initial public offering price.

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could have a material adverse effect on our business and
the market price of our common shares.

AFTER THIS OFFERING, OUR OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS WILL
BENEFICIALLY OWN MORE THAN 42.9% OF OUR COMMON SHARES, AND, IF ACTING TOGETHER,
WILL BE ABLE TO CONTROL MATTERS SUBMITTED TO SHAREHOLDERS FOR APPROVAL.

Following this offering our executive officers, directors and other
principal shareholders, in the aggregate, will beneficially own approximately
42.9% of our outstanding common shares. As a result, these shareholders, if
acting together, will be able to control matters requiring shareholder approval,
including the election of directors, thereby permitting these shareholders to
obtain control of our management and affairs. The voting power of these
shareholders under certain circumstances could have the effect of delaying or
preventing a change in control of Changepoint, the effect of which may be to
deprive our shareholders of a control premium that might otherwise be realized
in connection with an acquisition of our company.

BECAUSE WE ARE A CANADIAN COMPANY, IT MAY BE DIFFICULT FOR YOU TO ENFORCE
AGAINST US LIABILITIES BASED SOLELY UPON THE FEDERAL SECURITIES LAWS OF THE
UNITED STATES.

We have been amalgamated and organized under the laws of the Province of
Ontario, and our executive offices are located in Ontario. Many of our
directors, controlling persons and officers, and representatives of the experts
named in this prospectus, are residents of Canada and a substantial portion of
their assets and a majority of our assets are located outside the United States.
Consequently, it may be difficult for you to effect service of process within
the United States upon the directors, controlling persons, officers and
representatives of experts who are not residents of the United States or to
enforce against them judgments of courts of the United States based upon civil
liability under the federal securities laws of the United States. See
"Enforceability of Civil Liabilities."

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<PAGE>
OUR BOARD OF DIRECTORS MAY ISSUE, WITHOUT SHAREHOLDER APPROVAL, PREFERRED SHARES
THAT HAVE RIGHTS AND PREFERENCES SUPERIOR TO THOSE OF COMMON SHARES THAT MAY
DELAY OR PREVENT A CHANGE OF CONTROL.

Prior to the completion of this offering, Changepoint will amalgamate with
several holding companies that are controlled by existing shareholders. Our new
articles of amalgamation will grant to our board of directors the authority to
issue an unlimited number of preferred shares in one or more series. Our board
of directors therefore will be able to set the rights and preferences of, and
issue, any series of preferred shares in its sole discretion without the
approval of the holders of common shares. The rights and preferences of these
preferred shares may be superior to those of the common shares. Accordingly, the
issuance of preferred shares may adversely affect the rights of holders of
common shares. The issuance of preferred shares could also have the effect of
delaying or preventing a change of control of our company. Immediately after
this offering, there will be no preferred shares outstanding issued under this
grant of authority. See "Description of Share Capital."

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<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

This prospectus contains forward-looking statements under "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere. These include statements about
our expectations, beliefs, intentions or strategies for the future, which we
indicate by words or phrases such as "anticipate," "expect," "intend," "plan,"
"will," "we believe," and similar language. We base all forward-looking
statements on our current expectations, and these statements are subject to
risks and uncertainties and to assumptions we have made. Important factors that
could cause our actual results to differ materially from those expressed or
implied by these forward-looking statements include those listed under "Risk
Factors" or described elsewhere in this prospectus.

This prospectus also contains market data related to the Internet,
e-commerce and the IT services industry that have been included in studies
published by the market research firms of Dataquest and Gartner Group. These
market data include projections that are based on a number of assumptions,
including:

- IT services providers will be unable to internally track and implement new
information technology;

- a shortage of skilled IT services professionals will persist;

- IT solutions will become more standardized;

- capital will continue to be available to IT services providers;

- business-to-business e-commerce will grow to be the norm in many
industries by 2004; and

- Internet-based marketplaces will drive 40% of business-to-business
e-commerce by 2004.

If these assumptions turn out to be incorrect, actual results may differ from
the projections based on these assumptions.

EXCHANGE RATE INFORMATION

The following table sets forth, for each period indicated, the high and low
exchange rates for Canadian dollars expressed in U.S. dollars, the average of
such exchange rates on the last day of each month during such period, and the
exchange rate at the end of such period, based on the inverse of the noon buying
rate.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
-------------------------------------------------------------- -----------------------
1995 1996 1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
High................. US$0.7457 US$0.7527 US$0.7513 US$0.7292 US$0.6891 US$0.6661 US$0.6969
Low.................. 0.7023 0.7235 0.7145 0.6617 0.6341 0.6341 0.6632
End.................. 0.7302 0.7274 0.7236 0.6617 0.6636 0.6625 0.6888
Average.............. 0.7265 0.7346 0.7305 0.6975 0.6614 0.6512 0.6814
</TABLE>

On June 26, 2000, the inverse of the noon buying rate was Cdn$1.00 per
$0.6743.

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<PAGE>

ENFORCEABILITY OF CIVIL LIABILITIES

Many of our directors, controlling persons and officers, and representatives
of the experts named in this prospectus, are residents of Canada, and a
substantial portion of their assets and a majority of our assets are located
outside the United States. As a result, it may be difficult for investors to
effect service of process within the United States upon the directors,
controlling persons, officers and representatives of experts who are not
residents of the United States or to enforce against them judgments of courts of
the United States based upon civil liability under the federal securities laws
of the United States. There is doubt as to the enforceability in Canada against
us or against any of our directors, controlling persons, officers or experts who
are not residents of the United States, in original actions or in actions for
enforcement of judgments of United States courts, of liabilities based solely
upon the federal securities laws of the United States.

USE OF PROCEEDS

We expect to receive approximately $40,850,000 in net proceeds from the sale
of 5,000,000 common shares in this offering, assuming an initial public offering
price of $9.00 per common share. We estimate the net proceeds will be
approximately $47,127,500 if the underwriters' over-allotment option is
exercised in full. The principal purposes of this offering are to obtain
additional capital, create a public market for our common shares and facilitate
our future access to the public capital markets.

We intend to use our net proceeds to fund sales and marketing activities,
research and development expenditures, working capital and other general
corporate purposes. We have not yet determined with any certainty the manner in
which we will allocate the net proceeds. The amounts and timing of these
expenditures will vary depending on a number of factors, including future
revenue growth, if any, the amount of cash we generate from operations, if any,
and the progress of our product development efforts.

We may also use a portion of the net proceeds of this offering to fund
acquisitions of, or investments in, businesses, products or technologies that
expand, complement or are otherwise related to our current business and
products. However, we have no present plans, agreements or commitments, and are
not currently engaged in any negotiations, with respect to any such acquisition
or investment. Pending the uses described above, we intend to invest the net
proceeds in short-term, interest-bearing, investment-grade securities.

DIVIDEND POLICY

We have not paid any cash dividends on our common shares and we currently do
not have any plans to pay dividends on our common shares. We intend to retain
all of our available funds for use in the operation of our business. Any future
determination by us to pay dividends will be at the discretion of our board of
directors and in accordance with the terms and conditions of any outstanding
indebtedness or other securities and will depend upon our financial condition,
results of operations, capital requirements and such other factors as our board
of directors considers relevant.

CORPORATE INFORMATION

We have been amalgamated and organized under the laws of the Province of
Ontario. Our principal executive offices are located at 1595 Sixteenth Avenue,
Suite 700, Richmond Hill, Ontario, Canada L4B 3N9. Our telephone number at that
location is (905) 886-7000. Our Web site address is www.changepoint.com. The
information contained on our Web site is not part of this prospectus.
Changepoint, myChangepoint.com and the Changepoint logo are trademarks of
Changepoint. This prospectus also makes reference to trademarks of other
companies.

20
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of January 31, 2000:

- on a pro forma basis to reflect the issuance of 2,873,696 Class B
redeemable convertible preferred shares for net proceeds of $24.8 million
on May 26, 2000 and to reflect the conversion of the same Class B shares
into 2,873,696 common shares prior to the closing of this offering;

- on a pro forma basis to reflect the conversion of all of our outstanding
Class A redeemable convertible preferred shares into 5,983,962 common
shares prior to the closing of this offering and to reflect the
termination of the redemption feature relating to 3,252,381 of our common
shares, which will occur prior to the closing of this offering; and

- on a pro forma as adjusted basis to give effect to the sale of the
5,000,000 common shares offered by this prospectus at an assumed initial
public offering price of $9.00 and after deducting estimated underwriting
commissions and estimated offering expenses.

The table below does not include:

- 1,901,000 common shares issuable upon the exercise of options outstanding
as of January 31, 2000; and

- 2,021,289 shares reserved for future issuance under our stock option plans
as of January 31, 2000.

<TABLE>
<CAPTION>
AS OF JANUARY 31, 2000
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents, and short-term investments....... $ 4,149 $ 28,965 $ 69,815
========= ========= =========
Current portion of obligations under capital leases......... $ 87 $ 87 $ 87
========= ========= =========
Obligations under capital leases, net of current portion.... $ 94 $ 94 $ 94
Class A redeemable convertible preferred shares;
5,983,962 shares authorized, 5,983,962 shares issued and
outstanding, actual; no shares authorized, issued or
outstanding, pro forma and pro forma as adjusted.......... 74,800 -- --
Common shares eligible for redemption; unlimited shares
authorized, 3,252,381 shares issued and outstanding,
actual; no shares authorized, issued or outstanding, pro
forma and pro forma as adjusted........................... 40,655 -- --
Shareholders' equity (deficiency):
Common shares; unlimited shares authorized;
6,701,059 shares issued and outstanding, actual;
18,811,098 shares issued and outstanding, pro forma;
23,811,098 shares issued and outstanding, pro forma as
adjusted................................................ 4,425 144,696 185,546
Share purchase loans receivable........................... (56) (56) (56)
Deferred stock-based compensation......................... (3,353) (3,353) (3,353)
Cumulative other comprehensive income (loss).............. 28 28 28
Accumulated deficit....................................... (110,208) (110,208) (110,208)
--------- --------- ---------
Total shareholders' equity (deficiency)................. (109,164) 31,107 71,957
--------- --------- ---------
Total capitalization.................................. $ 6,385 $ 31,201 $ 72,051
========= ========= =========
</TABLE>

21
<PAGE>
DILUTION

Our pro forma net tangible book value as of January 31, 2000 was
$31.1 million, or $1.65 per common share. Pro forma net tangible book value per
share is equal to our total tangible assets less total liabilities, divided by
the number of outstanding common shares, including common shares eligible for
redemption, and after giving effect to the automatic conversion of all of our
outstanding Class A and Class B redeemable convertible preferred shares.

After giving effect to the sale of 5,000,000 common shares in this offering
at an assumed initial public offering price of $9.00 per common share, and after
deducting the estimated underwriting commissions and estimated offering
expenses, our adjusted pro forma net tangible book value as of January 31, 2000
would have been $71.9 million, or $3.02 per common share. This amount represents
an immediate increase in pro forma net tangible book value of $1.37 per common
share to existing shareholders and an immediate dilution of $5.98 per common
share to new investors purchasing common shares in this offering. The following
table illustrates this dilution to new investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per common share...... $ 9.00
Pro forma net tangible book value per common share as of
January 31, 2000.......................................... $1.65
-----
Increase per common share attributable to this offering..... 1.37
-----
Adjusted pro forma net tangible book value per common share
after this offering....................................... 3.02
------
Dilution per common share to new investors in this
offering.................................................. $ 5.98
======
</TABLE>

If the underwriters exercise their option to purchase additional common
shares in this offering, our adjusted pro forma net tangible book value at
January 31, 2000 would be $78.2 million, or $3.18 per common share, representing
an immediate increase in pro forma net tangible book value to our existing
shareholders of $1.53 per share and an immediate dilution to new investors
purchasing common shares in this offering of $5.82 per common share.

The table below shows on a pro forma basis as of January 31, 2000, after
giving effect to the issuance of Class B redeemable convertible preferred shares
for net proceeds of $24.8 million and the automatic conversion of all our
outstanding Class A and Class B redeemable convertible preferred shares, the
difference between our existing shareholders and our new investors purchasing
common shares in this offering with respect to the number of common shares
purchased, the total consideration paid and the average price per common share
paid, before deducting estimated underwriting commissions and estimated offering
expenses:

<TABLE>
<CAPTION>
COMMON SHARES
PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders...................... 18,811,098 79% $39,781,000 49% $2.11
New investors.............................. 5,000,000 21% 40,850,000 51%
---------- ---- ----------- ----
Total...................................... 23,811,098 100% $80,631,000 100%
========== ==== =========== ====
</TABLE>

If the underwriters' option to purchase additional common shares is
exercised in full, the number of common shares held by new investors purchasing
common shares in this offering will increase to 5,750,000, or 23%, of the total
common shares outstanding after this offering.

As of January 31, 2000, we had outstanding options to purchase 1,901,000
common shares at a weighted average exercise price of $3.29 per share, of which
1,026,250 common shares were held by officers, directors or affiliates of
Changepoint. In addition, there were 700,795 options available for future grant
under our 1999 Stock Option Plan and 697,611 options available for future grant
under our 1997 Stock Option Plan. If the options outstanding at January 31, 2000
were exercised, the dilution to new investors would be approximately $5.96 per
share.

22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

You should read the selected consolidated financial data set forth below in
conjunction with our consolidated financial statements and the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.

The consolidated statements of operations data for each of the three years
ended July 31, 1997, 1998 and 1999 and the consolidated balance sheets data as
of July 31, 1998 and 1999 are derived from our consolidated financial statements
that have been audited by KPMG LLP, independent auditors, and are included
elsewhere in this prospectus. The consolidated statements of operations data for
the years ended July 31, 1995 and 1996 and the consolidated balance sheets data
as of July 31, 1995 and 1996 are derived from audited consolidated financial
statements not included in this prospectus. The consolidated statements of
operations data for the six months ended January 31, 1999 and 2000 and the
consolidated balance sheet data as of January 31, 2000 have been derived from
our unaudited consolidated financial statements included elsewhere in this
prospectus that include, in the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
this unaudited financial information. The historical results presented below are
not necessarily indicative of the results to be expected for any future period.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
---------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Products.................................... $ 150 $ 316 $ 1,008 $ 1,821 $ 3,974 $ 1,774 $ 2,781
Services.................................... 2,001 2,621 1,922 1,986 1,963 814 1,157
------- ------- ------- ------- ------- ------- ---------
Total revenues............................ 2,151 2,937 2,930 3,807 5,937 2,588 3,938
------- ------- ------- ------- ------- ------- ---------
Cost of revenues:
Products.................................... 29 60 172 69 206 119 19
Services.................................... 1,316 1,848 1,478 1,231 1,151 511 850
------- ------- ------- ------- ------- ------- ---------
Total cost of revenues.................... 1,345 1,908 1,650 1,300 1,357 630 869
------- ------- ------- ------- ------- ------- ---------
Gross profit.................................. 806 1,029 1,280 2,507 4,580 1,958 3,069
------- ------- ------- ------- ------- ------- ---------
Operating expenses:
Research and development.................... 109 177 1,283 1,536 2,073 881 1,264
Sales and marketing......................... 61 100 781 1,670 2,178 982 3,121
General and administrative.................. 414 455 516 722 993 390 706
Amortization of stock-based compensation.... -- -- -- -- -- -- 903
------- ------- ------- ------- ------- ------- ---------
Total operating expenses.................. 584 732 2,580 3,928 5,244 2,253 5,994
------- ------- ------- ------- ------- ------- ---------
Income (loss) from operations................. 222 297 (1,300) (1,421) (664) (295) (2,925)
Interest income............................... -- -- 52 57 50 36 153
Other income.................................. -- -- -- -- 250 -- --
------- ------- ------- ------- ------- ------- ---------
Income (loss) before provision for income
taxes....................................... 222 297 (1,248) (1,364) (364) (259) (2,772)
Provision for income tax expense (recovery)... 70 108 (131) (17) 20 26 --
------- ------- ------- ------- ------- ------- ---------
Net income (loss)............................. 152 189 (1,117) (1,347) (384) (285) (2,772)
Class A preferred share accretion............. -- -- -- -- (2,293) -- (65,136)
Common shares eligible for redemption
accretion................................... -- -- (729) (498) (458) -- (35,801)
------- ------- ------- ------- ------- ------- ---------
Net income (loss) applicable to common
shares...................................... $ 152 $ 189 $(1,846) $(1,845) $(3,135) $ (285) $(103,709)
======= ======= ======= ======= ======= ======= =========
Basic and diluted net income (loss) per
share....................................... $168.89 $ 0.07 $ (0.23) $ (0.16) $ (0.26) $ (0.02) $ (10.19)
======= ======= ======= ======= ======= ======= =========
Shares used in computation, basic and
diluted..................................... 0.9 2,520 8,002 11,211 12,041 12,091 10,175

Pro forma basic and diluted net loss per
share....................................... $ (0.03) $ (0.18)
======= =========
Pro forma shares used in computation, pro
forma basic and diluted..................... 12,041 15,434
</TABLE>

23
<PAGE>

<TABLE>
<CAPTION>
AS OF
AS OF JULY 31, JANUARY 31,
---------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEETS DATA:
Cash and cash equivalents, and short-term
investments................................. $ 132 $ 239 $ 181 $ 1,598 $ 4,504 $ 689 $ 4,149
Working capital............................... 237 372 868 2,082 5,954 1,874 5,524
Total assets.................................. 727 987 2,073 3,434 7,811 3,214 8,602
Long-term liabilities......................... -- -- -- 52 131 37 94
Class A redeemable convertible preferred
shares...................................... -- -- -- -- 6,557 -- 74,800
Common shares eligible for redemption......... -- -- -- 5,873 6,243 5,873 40,655
Shareholders' equity (deficiency)............. 365 537 (1,282) (3,359) (6,475) (3,635) (109,164)
</TABLE>

24
<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 THE RELATED NOTES APPEARING ELSEWHERE IN THIS
PROSPECTUS.

OVERVIEW

Our company was founded in 1989, and in late 1992 began to focus its efforts
on providing project management consulting services to the IT services industry.
In 1994, we recognized a market opportunity to develop software that addressed
the needs of the IT services industry, and began to develop the first generation
of our existing solution. We first released our software in late 1994 and, in
1996, began to expand our sales and research and development infrastructure. As
our software business grew, we began to phase out our consulting services, and
discontinued those services by early 1998. Since then, we have continued
expanding the functionality of our software, and in early 1999, released our
Web-based solution to enable IT services organizations to manage all aspects of
the IT services delivery process. In order to leverage the Internet and extend
the functionality of our software across the IT services supply chain, we
recently introduced our online exchange, myChangepoint.com.

Our revenues were $2.9 million, $3.8 million and $5.9 million in fiscal
1997, 1998 and 1999 and $3.9 million for the six months ended January 31, 2000.
Currently, we derive substantially all of our revenues from the sale of software
product licenses and from the provision of related services, including
implementation, training and maintenance services. In the future, we also expect
to derive revenues from online transactions facilitated through
myChangepoint.com and from monthly fees from users of myChangepoint.com. We
expect to charge a transaction fee to corporate IT departments, professional
services organizations and staffing companies for each IT professional sourced
or placed through myChangepoint.com and to charge a monthly fee to those
customers for each external IT professional managed through myChangepoint.com.
We expect to derive revenues from myChangepoint.com beginning in the fourth
quarter of fiscal 2000.

We primarily sell our products through our direct sales force. However, we
have recently developed indirect distribution channels and expect to derive an
increasing percentage of our revenues from these channels in the future.

We license our software based on the number of users licensed and the level
of functionality requested by each customer. We recognize our product revenues
in accordance with the American Institute of Certified Public Accountants, or
AICPA, Statement of Position 97-2, "Software Revenue Recognition," and related
amendments and interpretations contained in the AICPA's Statement of Position
98-9. We recognize revenues allocated to software licenses when all of the
following conditions have been met:

- persuasive evidence of an arrangement exists;

- delivery of the product has occurred;

- no significant company obligations with regard to implementation remain;

- the license fee is fixed or determinable; and

- collectibility of the license fee is probable.

Delivery of the software is deemed to occur upon shipment of the software
unless customers are provided the opportunity to return the products, in which
case revenues are recognized only when any refund obligations have expired.

Substantially all of our software license agreements constitute
multiple-element arrangements as they include the license of our software as
well as the related implementation, training and

25
<PAGE>
maintenance services. We allocate the revenues in these multiple-element
arrangements based on our assessment of the fair value of each element.
Implementation and training services are typically delivered on a
time-and-material basis, and revenues from these services are recognized when
the services are delivered. Revenues from maintenance and support services are
recognized ratably over the related contractual period, which is typically
one year.

We currently derive substantially all of our revenues from customers in
North America. We recently established an office in London, England to pursue
sales opportunities in Europe and intend to establish additional distribution
relationships outside North America. As a result, we expect international
revenues to increase as a percent of our total revenues in the future.

In connection with the granting of stock options to our employees and
directors, we recorded deferred stock-based compensation totaling $4.3 million
for the six months ended January 31, 2000. This amount represents the total
difference between the exercise prices of stock options and the fair value of
the underlying common shares on the date such stock options were granted. This
amount is included as a component of shareholders' equity and is being amortized
by charges to operations over the vesting period of the options, consistent with
the method described in Accounting Principles Board Opinion No. 25. As of
January 31, 2000, we had a total of $3.4 million of deferred stock-based
compensation that had not been amortized. The amortization of deferred
stock-based compensation is classified as a separate component of operating
expenses in our consolidated statement of operations.

Our net loss was $1.1 million, $1.3 million and $384,000 in fiscal 1997,
1998 and 1999 and $2.8 million for the six months ended January 31, 2000. These
losses resulted from costs incurred in the development and sale of our products
and services. We expect to continue to experience significant growth in our
operating expenses, particularly in the areas of sales and marketing. As a
result, we expect to incur additional losses and cannot assure you that we will
achieve or sustain profitability in the future.

In connection with prior financings, we issued securities that are
redeemable if we do not complete a public offering by September 1, 2004. All of
these rights will terminate upon the completion of this offering. These
securities are redeemable at the higher of their original issuance prices or
fair market value. Accordingly, we have valued these securities at their fair
market values as of January 31, 2000. As a result, we recorded a $100.9 million
non-cash charge to deficit in the six months ended January 31, 2000. Pro forma
for this offering, the shareholders' deficiency is eliminated, yielding a
shareholders' equity of $6.3 million.

From January 1997 until June 1999, we offered a Web-based team collaboration
software product, involv. In June 1999, we sold our involv business to a
third-party. This sale had no material impact on our results of operations as
involv accounted for a small portion of our revenues and expenses. We did not
record any gain or loss on the disposition as no cash was received on the sale
and no value was assigned to the consideration received, and the recorded
amounts of the assets disposed of were insignificant. There were no costs
associated with the disposition, and the purchaser retained all the involv
employees and any related liabilities.

As a Canadian Controlled Private Corporation, or CCPC, we have qualified for
investment tax credits under the Income Tax Act (Canada) on eligible research
and development expenditures. Prior to this offering, refundable investment tax
credits, which result in cash payments to us, have been recorded at a rate of
35% of eligible current and capital research and development expenditures. Prior
to this offering, we were entitled to an investment tax credit at these rates
for the first Cdn$2.0 million (approximately $1.4 million) of eligible research
and development expenditures and a further investment tax credit at the rate of
20% of eligible research and development expenditures in excess of
Cdn$2.0 million. Investment tax credits on current expenditures earned at the
35% rate are fully refundable to CCPCs. Investment tax credits earned by a CCPC
on capital expenditures at the 35% rate are refundable at a rate of 40% of the
amount of the credit. We will earn investment tax credits at

26
<PAGE>
a rate of 20% of eligible current and capital research and development
expenditures made after we complete our initial public offering. While a portion
of investment tax credits earned as a CCPC are refundable, investment tax
credits earned after we complete this offering may only be used to offset income
taxes otherwise payable. Investment tax credits are accounted for as a reduction
of research and development expenditure for items of a current nature and a
reduction of the related asset cost for items of a long-term nature.

We believe that period-to-period comparisons of our historical operating
results are not necessarily meaningful and should not be relied upon as being a
good indication of our future performance. Our prospects must be considered in
light of the risks, expenses and difficulties frequently experienced by
companies in new and rapidly evolving markets like ours. We cannot assure you
that we will successfully address the risks and challenges that we face.
Although we have experienced significant revenue growth recently, this trend may
not be sustainable. Furthermore, we may not achieve or maintain profitability in
the future.

RESULTS OF OPERATIONS

The following table sets forth our statements of operations data as a
percentage of total revenues:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JULY 31, ENDED JANUARY 31,
------------------------------ ----------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Products........................................ 34.4% 47.8% 66.9% 68.5% 70.6%
Services........................................ 65.6 52.2 33.1 31.5 29.4
------ ------ ------ ------ --------
Total revenues................................ 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ --------
Cost of revenues:
Products........................................ 5.9 1.8 3.5 4.6 0.5
Services........................................ 50.4 32.3 19.4 19.7 21.6
------ ------ ------ ------ --------
Total cost of revenues........................ 56.3 34.1 22.9 24.3 22.1
------ ------ ------ ------ --------
Gross profit...................................... 43.7 65.9 77.1 75.7 77.9
------ ------ ------ ------ --------
Operating expenses:
Research and development........................ 43.8 40.3 34.9 34.0 32.1
Sales and marketing............................. 26.7 43.9 36.7 37.9 79.3
General and administrative...................... 17.6 19.0 16.7 15.1 17.9
Amortization of stock-based compensation........ -- -- -- -- 22.9
------ ------ ------ ------ --------
Total operating expenses...................... 88.1 103.2 88.3 87.0 152.2
------ ------ ------ ------ --------
Loss from operations.............................. (44.4) (37.3) (11.2) (11.3) (74.3)
Interest income................................... 1.8 1.5 0.8 1.3 3.9
Other income...................................... -- -- 4.2 -- --
------ ------ ------ ------ --------
Loss before provision for income taxes............ (42.6) (35.8) (6.2) (10.0) (70.4)
Provision for income tax expense (recovery)....... 4.5 0.4 (0.3) (1.0) --
------ ------ ------ ------ --------
Net loss.......................................... (38.1)% (35.4)% (6.5)% (11.0)% (70.4)%
====== ====== ====== ====== ========
</TABLE>

27
<PAGE>
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000

REVENUES

TOTAL REVENUES. Total revenues increased 52.1% from $2.6 million to
$3.9 million for the six months ended January 31, 1999 and 2000.

PRODUCTS. Product revenues increased 56.8% from $1.8 million to
$2.8 million for the six months ended January 31, 1999 and 2000. The increase in
product revenues was primarily due to greater market acceptance of our software
and increased sales to new customers.

SERVICES. Service revenues increased 42.1% from $814,000 to $1.2 million
for the six months ended January 31, 1999 and 2000. The growth in service
revenues was primarily due to increased maintenance revenues resulting from our
larger customer base and increased implementation services provided in
connection with new license sales.

COST OF REVENUES

PRODUCTS. Cost of product revenues consists primarily of the cost of
third-party software purchased for resale. Changepoint only resells third-party
software to the occasional customer who requests such software, resulting in
high variability for cost of product revenues. Cost of product revenues was
$119,000 and $19,000 for the six months ended January 31, 1999 and 2000,
representing 6.7% and 0.7% of product revenues in the respective periods.

SERVICES. Cost of service revenues consists primarily of payroll and
related costs for our services staff. Cost of service revenues was $511,000 and
$850,000 for the six months ended January 31, 1999 and 2000, representing 62.8%
and 73.5% of service revenues in the respective periods. The dollar increase was
attributable primarily to the addition of nine service personnel during the six
months ended January 31, 2000. The increase as a percentage of service revenues
was attributable primarily to the cost of training the newly hired service
personnel. We anticipate that cost of service revenues will increase in absolute
dollars as we continue to hire additional service personnel.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of compensation and related costs for research and development
employees and costs related to developing new products and quality assurance
activities. Research and development expenses increased 43.5% from $881,000 to
$1.3 million for the six months ended January 31, 1999 and 2000, representing
34.0% and 32.1% of total revenues in the respective periods. This increase was
attributable primarily to the addition of 10 research and development personnel
during the period. We anticipate that research and development expenses will
increase in the future as we continue to hire additional research and
development personnel. To date, all research and development expenses have been
expensed as incurred.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
compensation and related costs for sales and marketing personnel, including
travel and entertainment, public relations, advertising, trade shows and
marketing materials. Sales and marketing expenses increased 217.8% from $982,000
to $3.1 million for the six months ended January 31, 1999 and 2000, representing
37.9% and 79.3% of total revenues in the respective periods. The increase in
sales and marketing expenses was attributable primarily to the addition of
34 sales and marketing personnel during the period, the opening of eight sales
offices, and higher marketing costs due to expanded promotional activities. We
intend to significantly expand our direct and indirect sales channels. As a
result, we anticipate that sales and marketing expenses will continue to
increase in the future.

28
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation and related costs for administrative personnel and
foreign exchange gains or losses. General and administrative expenses increased
81.0% from $390,000 to $706,000 for the six months ended January 31, 1999 and
2000, representing 15.1% and 17.9% of total revenues in the respective periods.
The increase was due primarily to the addition of four administrative personnel
during the period, increased travel and other activities, and increased
incentive compensation expenses. We expect that general and administrative
expenses will increase as we add personnel and incur related costs to facilitate
the growth of our business.

AMORTIZATION OF DEFERRED STOCK-BASED COMPENSATION. We incurred a charge of
$903,000 in the six months ended January 31, 2000 related to the amortization of
the total difference between the exercise prices and the fair values on the date
of grant of stock options.

INTEREST INCOME. Interest income increased 325.0% from $36,000 to $153,000
for the six months ended January 31, 1999 and 2000, reflecting the interest
earned on the cash, cash equivalents and short-term investments balance arising
from our financings in July and October 1999.

FISCAL 1998 AND 1999

REVENUES

TOTAL REVENUES. Total revenues increased 55.9% from $3.8 million in fiscal
1998 to $5.9 million in fiscal 1999.

PRODUCTS. Product revenues increased 118.2% from $1.8 million in fiscal
1998 to $4.0 million in fiscal 1999. The increase was primarily due to greater
market acceptance of our software and the introduction of our Web-based solution
in early 1999.

Product revenues accounted for 47.8% and 66.9% of total revenues in fiscal
1998 and 1999. This increase as a percentage of revenues is attributable
primarily to our increased focus on our software business, and the fact that we
no longer provided IT project management consulting services in fiscal 1999.

SERVICES. Service revenues were $2.0 million in fiscal 1998 and 1999.
Revenues from services related to our software increased from $1.4 million in
fiscal 1998 to $2.0 million in fiscal 1999 due to increased market acceptance of
our software while revenues from IT project management consulting services
decreased from $538,000 to nil as we no longer provided these services in fiscal
1999.

COST OF REVENUES

PRODUCTS. Cost of product revenues was $69,000 in fiscal 1998 and $206,000
in fiscal 1999, representing 3.8% and 5.2% of product revenues in the respective
periods. The increase was primarily due to increased resales of third-party
software with our software.

SERVICES. Cost of service revenues was $1.2 million in fiscal 1998 and
1999, representing 62.0% and 58.8% of service revenues during the respective
periods. The cost of services related to our software increased 104.1% from
$564,000 in fiscal 1998 to $1.2 million in fiscal 1999 consistent with the
increased sales of our software and greater demands by our customers for
services. The cost of services for IT project management consulting services
decreased from $667,000 in fiscal 1998 to nil in fiscal 1999 as we no longer
provided these services.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses increased 35.0%
from $1.5 million in fiscal 1998 to $2.1 million in fiscal 1999, representing
40.3% and 34.9% of total revenues

29
<PAGE>

in the respective periods. The increase was primarily due to an increase in
research and development personnel.

SALES AND MARKETING. Sales and marketing expenses increased 30.4% from
$1.7 million in fiscal 1998 to $2.2 million in fiscal 1999, representing 43.9%
and 36.7% of total revenues in the respective periods. The increase in expenses
was primarily due to expanded marketing activities, including trade shows and
other public relations activities, as well as an increase in sales and marketing
personnel.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
37.5% from $722,000 in fiscal 1998 to $993,000 in fiscal 1999, representing
19.0% and 16.7% of total revenues in the respective periods. The increase in
expenses was primarily due to increased consultant and compensation expenses and
increased travel, which was partially offset by lower foreign exchange losses.

INTEREST INCOME AND OTHER INCOME. Interest income decreased 12.3% from
$57,000 in fiscal 1998 to $50,000 in fiscal 1999, reflecting the interest earned
on the cash and cash equivalents arising from our financings in September 1996
and November 1997. In fiscal 1999, other income included a $250,000 break-up fee
from a third party in connection with an uncompleted transaction to acquire
Changepoint.

FISCAL 1997 AND 1998

REVENUES

TOTAL REVENUES. Total revenues increased 29.9% from $2.9 million in fiscal
1997 to $3.8 million in fiscal 1998.

PRODUCTS. Product revenues increased 80.7% from $1.0 million in fiscal 1997
to $1.8 million in fiscal 1998. The increase was primarily due to greater market
acceptance of our Changepoint software, as well as the additional product
revenues of $270,000 relating to the introduction of our involv product in
fiscal 1998.

SERVICES. Service revenues were $1.9 million in fiscal 1997 and
$2.0 million in fiscal 1998. Revenues from services related to our Changepoint
software increased 102.8% from $0.7 million in fiscal 1997 to $1.4 million in
fiscal 1998 due to increased market acceptance of our software. Revenues from IT
project management consulting services decreased 55.5% from $1.2 million in
fiscal 1997 to $0.5 million in fiscal 1998 as we phased out these services in
fiscal 1998.

Changepoint did not incur any costs relating to the phase-out of the
consulting services as most of the personnel and fixed assets used in the IT
project management consulting services were redeployed to servicing our software
customers.

COST OF REVENUES

PRODUCTS. Cost of product revenues was $172,000 in fiscal 1997 and $69,000
in fiscal 1998, representing 17.1% and 3.8% of product revenues in the
respective periods. These costs represent the cost of third-party software sold
to customers. In fiscal 1997, the entire cost of product revenues relates to
third-party software sold with our Changepoint software. In fiscal 1998, $21,000
of the cost of product revenues relates to third-party software sold with our
Changepoint software, and $48,000 relates to third-party software sold with our
involv software.

SERVICES. Cost of service revenues was $1.5 million in fiscal 1997 and
$1.2 million in fiscal 1998, representing 76.9% of service revenues in fiscal
1997 and 62.0% of service revenues in fiscal 1998. The cost of services related
to our Changepoint software increased 52.0% from $371,000 in fiscal 1997 to
$564,000 in fiscal 1998 due to the company providing more services relating to
the Changepoint

30
<PAGE>

software. This increase was offset by the phasing-out of IT project management
consulting services, which had lower gross margins.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT. Research and development expenses increased 19.7%
from $1.3 million in fiscal 1997 to $1.5 million in fiscal 1998, representing
43.8% and 40.3% of total revenues for the respective periods. The increase was
primarily due to an increase in research and development personnel.

SALES AND MARKETING. Sales and marketing expenses increased 113.8% from
$781,000 in fiscal 1997 to $1.7 million in fiscal 1998, representing 26.7% and
43.9% of total revenues for the respective periods. The increase in expenses was
primarily due to expanded marketing activities, including trade shows and other
public relations activities, as well as an increase in sales and marketing
personnel.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
39.9% from $516,000 in fiscal 1997 to $722,000 in fiscal 1998, representing
17.6% and 19.0% of total revenues for the respective periods. The increase in
expenses was primarily due to increased consultant and compensation expenses and
increased travel. In fiscal 1998, we recorded foreign exchange losses of
$136,000, which increased general and administrative expenses.

INTEREST INCOME. Interest income increased 9.6% from $52,000 in fiscal 1997
to $57,000 in fiscal 1998, reflecting the interest earned on the cash and cash
equivalents arising from our financings in September 1996 and November 1997.

31
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following table sets forth unaudited consolidated statements of
operations data for the six quarters ended January 31, 2000, as well as such
data expressed as a percentage of our total revenues for the periods presented.
The information in the table below should be read in conjunction with our annual
audited consolidated financial statements and related notes included elsewhere
in this prospectus. We have prepared this information on the same basis as our
consolidated financial statements and the information includes all adjustments,
consisting only of normal recurring adjustments that we consider necessary for a
fair presentation of our financial position and operating results for the
quarters presented. Our quarterly operating results have varied substantially in
the past and may vary substantially in the future. You should not draw any
conclusions about our future results for any period from the results of
operations for any particular quarter.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1998 1999 1999 1999 1999 2000
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Products......................... $ 523 $1,250 $1,004 $ 1197 $ 962 $ 1,819
Services......................... 434 381 584 564 502 655
------ ------ ------ ------ ------ -------
Total revenues................. 957 1,631 1,588 1,761 1,464 2,474
------ ------ ------ ------ ------ -------
Cost of revenues:
Products......................... 101 22 49 34 4 15
Services......................... 226 284 255 386 344 506
------ ------ ------ ------ ------ -------
Total cost of revenues......... 327 306 304 420 348 521
------ ------ ------ ------ ------ -------
Gross profit....................... 630 1,325 1,284 1,341 1,116 1,953
------ ------ ------ ------ ------ -------
Operating expenses:
Research and development......... 481 400 611 581 564 700
Sales and marketing.............. 419 562 535 662 1,007 2,114
General and administrative....... 161 227 437 168 253 453
Amortization of stock-based
compensation................... -- -- -- -- -- 903
------ ------ ------ ------ ------ -------
Total operating expenses....... 1,061 1,189 1,583 1,411 1,824 4,170
------ ------ ------ ------ ------ -------
Income (loss) from operations...... (431) 136 (299) (70) (708) (2,217)
Interest income.................... 25 11 11 3 79 74
Other income....................... -- -- -- 250 -- --
------ ------ ------ ------ ------ -------
Income (loss) before provision for
income taxes..................... (406) 147 (288) 183 (629) (2,143)
Provision for income tax expense
(recovery)....................... 20 5 (5) -- -- --
Minority interest.................. -- 1 (28) 27 -- --
------ ------ ------ ------ ------ -------
Net income (loss).................. $ (426) $ 141 $ (255) $ 156 $ (629) $(2,143)
====== ====== ====== ====== ====== =======
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
---------------------------------------------------------------------------------
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, OCTOBER 31, JANUARY 31,
1998 1999 1999 1999 1999 2000
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Products......................... 54.7% 76.7% 63.2% 68.0% 65.7% 73.6%
Services......................... 45.3 23.3 36.8 32.0 34.3 26.4
------ ------ ------ ------ ------ ------
Total revenues................. 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------
Cost of revenues:
Products......................... 10.6 1.4 3.1 1.9 0.3 0.6
Services......................... 23.7 17.4 16.0 21.9 23.4 20.5
------ ------ ------ ------ ------ ------
Total cost of revenues......... 34.3 18.8 19.1 23.9 23.7 21.1
------ ------ ------ ------ ------ ------
Gross profit....................... 65.7 81.2 80.9 76.1 76.3 78.9
------ ------ ------ ------ ------ ------
Operating expenses:
Research and development......... 50.3 24.5 38.5 33.0 38.5 28.3
Sales and marketing.............. 43.8 34.5 33.8 37.6 68.8 85.5
General and administrative....... 16.6 13.8 27.5 9.4 17.3 18.3
Amortization of stock-based
compensation................... -- -- -- -- -- 36.5
------ ------ ------ ------ ------ ------
Total operating expenses....... 110.7 72.8 99.8 80.0 124.6 168.6
------ ------ ------ ------ ------ ------
Income (loss) from operations...... (45.0) 8.4 (18.9) (3.9) (48.3) (89.6)
Interest income.................... 2.6 0.6 0.7 0.2 5.4 3.0
Other income....................... -- -- -- 14.2 -- --
------ ------ ------ ------ ------ ------
Income (loss) before provision for
income taxes..................... (42.4) 9.0 (18.2) 10.5 (42.9) (86.7)
Provision for income tax expense
(recovery)....................... 2.1 0.3 (0.3) -- -- --
Minority interest.................. -- 0.1 (1.8) 1.7 -- --
------ ------ ------ ------ ------ ------
Net income (loss).................. (44.5)% 8.6% (16.1)% 8.8% (42.9)% (86.7)%
====== ====== ====== ====== ====== ======
</TABLE>

Revenues for the quarter ended January 31, 1999 increased significantly as a
result of two large contracts that we entered into during the quarter. Revenues
were lower in the quarter ended October 31, 1999 than in the previous quarter as
a result of seasonality. In recent years, we have experienced relatively greater
revenues from licenses in the fourth quarter of our fiscal year than in each of
the first three quarters, particularly the first quarter. We believe that these
fluctuations are caused, in part, by customer buying patterns and the efforts of
our direct sales force to meet or exceed fiscal year-end quotas. We generally
recorded net losses for the six quarters ended January 31, 2000. However, we
recorded net income for the quarter ended January 31, 1999 as a result of the
two large contracts entered into during the quarter. We also recorded net income
for the quarter ended July 31, 1999 due to the receipt of a $250,000 break-up
fee from a third party in connection with an uncompleted transaction by the
third party to acquire Changepoint. Net losses in the quarters ended
October 31, 1999 and January 31, 2000 increased due to higher expenses as we
substantially increased our sales and marketing activities.

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

33
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations primarily through the
sale of securities and the sale of our products and services. As of January 31,
2000, we have raised approximately $12.0 million, net of offering costs, through
private placements of securities. At January 31, 2000, we had cash and cash
equivalents aggregating $353,000, and short-term investments of $3.8 million.

Cash used in operating activities was $1.4 million, $1.1 million and
$1.2 million in fiscal 1997, 1998 and 1999 and $1.7 million for the six months
ended January 31, 2000. Cash used during the respective periods was due to
operating losses and increased accounts receivable.

Cash used in investing activities, consisting of the purchase of computer
equipment, software, furniture and equipment to support our growing number of
employees and was $480,000, $99,000 and $3,000 in fiscal 1997, 1998 and 1999 and
$429,000 for the six months ended January 31, 2000. We also invested
$3.8 million in short-term investments in the period ended January 31, 2000.

Cash provided by financing activities was $1.9 million, $2.8 million and
$4.1 million in fiscal 1997, 1998 and 1999 and $1.5 million for the six months
ended January 31, 2000. Cash provided by financing activities resulted from
private placements of special warrants, common shares eligible for redemption,
and Class A redeemable convertible preferred shares.

We have a credit facility with a Canadian chartered bank, which includes a
Cdn$1.5 million (approximately $1.0 million) operating line of credit and a
lease line of credit of Cdn$500,000 (approximately $346,000) to purchase
equipment and furniture. No amounts had been drawn on the operating line of
credit as of January 31, 2000. As of January 31, 2000, $181,000 had been drawn
on the lease line of credit. Borrowings under the operating line of credit are
repayable on demand and bear interest at the bank's prime rate plus 1.0%.
Borrowings under the lease line of credit have interest rates determined on a
per transaction basis. The credit facility is secured by all of our personal
property, including our inventory, equipment and accounts receivable and the
shares of our subsidiaries, and is guaranteed by our U.S. subsidiary.

We expect to devote substantial resources to continue our research and
development efforts, expand our sales, support, marketing and product
development organizations, expand internationally and build the infrastructure
necessary to support our growth. As a result, we anticipate that capital
expenditures will continue to increase in absolute dollars in the foreseeable
future. We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and short-term investments, will be sufficient to
fund our operations for at least the next 12 months. Thereafter, we may need to,
or prior to that time we may choose to, raise additional funds or seek other
financing arrangements in order to facilitate more rapid expansion, including
significant increases in personnel and office facilities, to develop new or
enhance existing products or services, to respond to competitive pressures, or
to acquire or invest in complementary businesses, technologies, services or
products. In the event additional financing is required, we may not be able to
raise it on acceptable terms or at all, and any such financing may be dilutive
to existing investors. In addition, although there are no present
understandings, commitments or agreements with respect to any acquisition of
other businesses, products or technologies, we may, from time to time, evaluate
potential acquisitions of other businesses, products and technologies. In order
to consummate potential acquisitions, we may issue additional securities or need
additional equity or debt financing and any such financing may be dilutive to
existing investors.

YEAR 2000 COMPLIANCE

We have not experienced any significant disruptions related to Year 2000
issues, nor do we expect to experience any Year 2000-related disruptions in the
operation of our systems. To our knowledge, none of our customers or suppliers
have experienced any Year 2000-related issues with our products.

34
<PAGE>
Although most Year 2000 problems should have become evident on January 1, 2000,
additional Year 2000-related problems may become evident only after that date.
We will continue to monitor our mission critical computer applications and those
of our suppliers and vendors throughout the year, to ensure that any Year 2000
matters that may arise are promptly addressed. We do not expect to incur any
significant costs relating to Year 2000 matters.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" or
SFAS No. 133. SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument be recorded on the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133, as
recently amended, is effective for the fiscal year ending July 31, 2001. We do
not believe that adopting SFAS No. 133 will have a material effect on our
financial position or results of operations.

QUALITATIVE AND QUANTITATIVE MARKET RISK

We develop products in Canada and sell these products in North America and
Europe. Generally, our sales are made in local currency, which to date has been
mostly United States dollars. As a result, our financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in foreign markets. We do not currently use derivative
instruments to hedge our foreign exchange risk. Our interest income is sensitive
to changes in the general level of Canadian and U.S. interest rates,
particularly since the majority of our investments are in short-term
instruments. Because of the short-term nature of our short-term investments, we
have concluded that there is no material market risk exposure.

35
<PAGE>
BUSINESS

We provide Web-based software and an online exchange, myChangepoint.com,
which enable our customers to effectively manage the entire IT services delivery
process. Our comprehensive solution automates and streamlines the business
processes of IT services organizations and facilitates business transactions and
collaboration among buyers and suppliers of IT services over the Internet. Our
software is designed for and marketed to both professional service organizations
and corporate IT departments. We recently introduced myChangepoint.com, which
extends the benefits of our software by enabling IT services organizations to
manage the interactions with their customers and partners over the Internet. The
benefits of our software are further enhanced when our customers extend the
functionality of our software through myChangepoint.com in order to include
outside participants in the IT services delivery process. To date, over
100 professional services organizations and corporate IT departments have
purchased our software, including Baltimore Gas & Electric, BellSouth, Dell,
Emerald Solutions, Greenwich Technology, Guardian Life Insurance, Interwoven and
QAD.

INDUSTRY BACKGROUND

THE IT SERVICES INDUSTRY

Economic growth and productivity gains during the past decade have been
driven, to a significant extent, by technological advances and corporate
spending on information technology. Companies are increasingly recognizing the
strategic role of information technology as a critical component of their
business initiatives and growth strategies. The importance of and dependence on
information technology have led to the rapid growth of the market for IT
services. In recent years, corporate initiatives to automate business operations
and improve customer interactions as well as more recent initiatives to
implement e-commerce and e-business strategies have further increased the demand
for IT services. Dataquest estimates that worldwide spending on IT services will
increase from $287 billion in 1998 to $633 billion in 2003.

In today's competitive business environment, companies are under pressure to
rapidly deploy and implement new IT solutions. Faced with shorter deadlines,
higher customer expectations, increased complexity of IT projects, and an
ongoing shortage of skilled IT professionals, professional services
organizations and corporate IT departments are often unable to single-handedly
deliver complete IT solutions. As a result, they are relying on a network of IT
services firms and independent professionals to provide additional capacity as
well as specialized skills and regional expertise. This network provides a
critical link in the IT services delivery process. We believe that, due to the
high level of collaboration and interdependence among professional services
organizations, corporate IT departments and independent IT professionals, the
efficient management of IT services delivery, including the management of
knowledge, resources and projects, has become one of the most significant
problems facing the IT services industry.

THE EMERGENCE OF INTERNET-BASED EXCHANGES FOR E-COMMERCE AND COLLABORATION

The Internet has emerged as a major platform for business by changing the
way companies communicate and share information as well as creating new ways for
conducting commerce. The Internet allows companies to more closely collaborate
with their customers and partners and streamline their operations. Companies can
exchange information, integrate their business processes with those of their
customers and partners, coordinate resources and effectively manage the delivery
of goods and services. In many industries, business-to-business, or B2B, online
exchanges are leveraging the low cost, broad accessibility and ease of use of
the Internet to facilitate the buying and selling of goods and services as well
as reduce transactional costs and inefficiencies. The Gartner Group estimates
that worldwide B2B e-commerce will increase from $145 billion in 1999 to more
than $7 trillion in 2004, of

36
<PAGE>

which $2.7 trillion will occur through online exchanges. We believe that online
exchanges are particularly well-suited for industries that are highly dispersed
and fragmented, have a large number of participants and require significant
collaboration and sharing of information among these participants.

MARKET OPPORTUNITY

To date, the business processes of professional services organizations and
corporate IT departments as well as the interactions among IT services
organizations have been largely unautomated and inefficient. Much of IT services
procurement, project collaboration, workflow management and invoicing is
performed using manual processes, internally-developed applications or solutions
that offer limited functionality. Moreover, these applications are frequently
incompatible with one another and do not allow IT services organizations to take
a centralized approach to managing their business. This often results in the
misallocation and under-utilization of resources, bottlenecks and delays in the
delivery of services and, ultimately, lost revenues.

We believe that competitive pressures to complete complex IT initiatives
rapidly has created a significant demand for solutions that streamline the
delivery of IT services and facilitate business transactions and collaboration
among buyers and suppliers of IT services over the Internet.

THE CHANGEPOINT SOLUTION

Our Web-based software and online exchange are designed to improve and
streamline the delivery of IT services across the IT services supply chain.
Specifically, we designed our solution to:

- effectively source, procure and manage external IT services professionals
over the Internet according to their availability and specific skill sets.

[LOGO]
The diagram consists of a series of four concentric circles. The inner
circle represents the myChangepoint.com online exchange. Within this circle
appears the following text:
"Internet Exchange"
"myChangepoint.com"
"www.mychangepoint.com"
The middle region, between the second and third concentric circles,
represents the Changepoint software. Within this area appears the following
text:
"Changepoint Software"
The outer region, between the third and fourth concentric circles,
represents the organizations that use the online exchange, myChangepoint.com,
and the Changepoint software. This area is broken into three sections,
"Professional Services Organizations," "Corporate IT Departments," and
"Online & Traditional Staffing Organizations." Double-sided arrows point between
each of these sections and the inner circle, representing myChangepoint.com.
The following language appears in the upper-right part of the outer region,
just below and to the right of the "Corporate IT Departments," label:
- "Increased speed of technology delivery
- Improved productivity & quality of work
- Aligning IT resources with business objectives."
The following language appears in the bottom-center of the outer region,
just below the "IT Staffing Opportunities" label:
- "Increased revenue
- Higher utilization and retention rates
- Improved customer satisfaction."
The following language appears in the upper-left part of the outer region,
just below and to the left of the "Professional Services Organization" label:
- "Increased revenue
- Higher utilization and retention rates
- Improved customer satisfaction."

37
<PAGE>
We believe our solution offers the following specific benefits to
professional services organizations and corporate IT departments:

PROFESSIONAL SERVICES ORGANIZATIONS

INCREASED REVENUES. Our solution enables professional services
organizations to increase revenues through improved creation and management of
new business opportunities, more efficient services delivery and more accurate
financial management. By providing an overall view of available resources, our
solution allows professional services organizations to manage resources more
effectively, which maximizes the number of projects they can service. In
addition, through myChangepoint.com, professional services organizations can
supplement their own staff and access specific skills in order to accelerate the
delivery of IT services. The sophisticated time and expense tracking
capabilities of our solution allow professional services organizations to
accurately record and invoice all billable work. Customers receive and approve
bills faster and with fewer disputes, leading to more complete, timely and
efficient payment for services.

HIGHER UTILIZATION AND RETENTION RATES. Our resource management
capabilities allow professional services organizations to accurately monitor the
availability and skills of their IT services professionals to maximize the
utilization of their staff, increasing both revenues and profits. In addition,
our solution enables professional services organizations to reduce
administrative burdens for IT services professionals, allowing them to focus on
supplying billable IT services. Our solution also allows professional services
organizations to consider the preferences of available IT services personnel and
match individuals with desired assignments, which improves employee satisfaction
and retention.

IMPROVED CUSTOMER SATISFACTION. Through myChangepoint.com, a professional
services organization can keep its customers fully informed and involved in the
IT services delivery process throughout the entire engagement by allowing the
customer to review and approve progress reports, time and expenses, and
invoices. As a result, professional services organizations can build closer
relationships with their customers. In addition, through better allocation of
resources and improved ability to leverage the knowledge within their
organizations and across the IT services supply chain, professional services
organizations are able to rapidly respond to changing customer demands and
improve the delivery of IT services, resulting in higher customer satisfaction.

CORPORATE IT DEPARTMENTS

INCREASED SPEED OF TECHNOLOGY DELIVERY. Our solution reduces the complexity
associated with using multiple IT services suppliers and provides the tools to
efficiently coordinate and manage IT projects. By improving the coordination of
the IT services delivery process across the IT services supply chain, our
solution decreases overall delivery times and increases the likelihood of
success for IT projects. In addition, through myChangepoint.com, a corporate IT
department can search for skilled IT professionals. By matching the demands of
the project with the appropriate skilled personnel, corporate IT departments can
reduce the risk of delayed and incomplete projects.

IMPROVED PRODUCTIVITY AND QUALITY OF WORK. The efficiencies gained by using
our solution enable corporate IT departments to maximize the productivity and
improve the quality of work of each IT project team member and the project team
as a whole. Given the use of technology as a competitive advantage, increasing
productivity and delivering quality work are corporate IT department
imperatives.

ALIGNING IT RESOURCES WITH BUSINESS OBJECTIVES. Our solution enables
corporate IT departments to manage all aspects of the IT services delivery
process. Through improved monitoring of ongoing and pending IT projects,
corporate IT departments and project managers can effectively and strategically
deploy scarce IT services personnel to better meet the organization's business
objectives and priorities.

38
<PAGE>
GROWTH STRATEGY

Our objective is to be the leading provider of Web-based solutions for
managing the delivery of IT services. Key elements of our strategy include:

MAINTAIN LEADERSHIP IN PROVIDING WEB-BASED SOLUTIONS TO THE IT SERVICES
INDUSTRY. We focus exclusively on delivering comprehensive solutions to the IT
services industry. As a result, we have developed extensive knowledge and an
in-depth understanding of this market. We plan to continue to improve the
technology and functionality of our Web-based software and online exchange to
respond to the changing needs of the IT services industry. We intend to maintain
our leadership in this market through internal development, strategic
relationships and potential acquisitions of complementary technologies or
businesses.

ESTABLISH MYCHANGEPOINT.COM AS THE LEADING ONLINE EXCHANGE FOR IT
SERVICES. We believe that myChangepoint.com enables the efficient management of
IT services delivery throughout the IT services supply chain by integrating the
business processes of both buyers and suppliers. We intend to devote significant
resources to accelerate the market adoption of myChangepoint.com as the means to
source, procure and manage IT services as well as collaborate and interact with
customers and partners in the delivery of IT services.

LEVERAGE THE NETWORK EFFECT CREATED BY THE CHANGEPOINT SOLUTION. Our
software is designed for and marketed to both the buyers and suppliers of
IT services. Through myChangepoint.com, our customers can extend the
functionality of our software to their customers and partners. Therefore, we
believe that our customers will drive usage of our software and online exchange
among their extensive networks of business partners. We intend to continue to
leverage our relationships with our customers to market our solution to their
customers and partners.

TARGET LARGE IT SERVICES ORGANIZATIONS. We believe that large professional
services organizations and corporate IT departments will increasingly use the
Internet to efficiently source, manage and deliver their services and represent
a significant and growing source of demand for our solution. We also believe
that large IT services organizations provide valuable sales references and
feedback to drive product enhancements. Therefore, we will continue to
aggressively market our solution to these organizations.

CONTINUE TO EXPAND DIRECT AND INDIRECT SALES CHANNELS. We currently sell
our solution primarily through our direct sales force. In addition, through our
strategic relationship with Corio, a leading application service provider, we
also offer our software as an online hosted service. We intend to expand our
direct sales force as well as develop indirect sales channels.

EXPAND INTERNATIONALLY. We believe that a significant opportunity exists to
market our solution internationally. We currently have an office in the United
Kingdom from which we market our solution in Europe. Our software addresses the
complexity of global deployments, including different tax structures and
multiple currencies. In addition, we plan to release our software with support
for multiple languages. We intend to rapidly expand our international sales and
marketing activities.

39
<PAGE>
PRODUCTS

We provide Web-based software and an online exchange that enable IT services
organizations to manage all aspects of the IT services delivery process, both
internally and throughout the entire IT services supply chain. The following
table highlights the key functional elements of our solution.

<S> <C> <C>
PROFESSIONAL SERVICES
FUNCTIONAL CATEGORY ORGANIZATIONS CORPORATE IT DEPARTMENTS
------------------------------------------------------------------------------------------------------
Client Relationship Management
OPPORTUNITY/DEMAND MANAGEMENT Sales - Marketing Work Request Management

SERVICES DELIVERY MANAGEMENT Engagements - Projects Engagements - Projects
Tasks - Resources Tasks - Resources
Services Supply Chain Services Supply Chain
Integration Integration

FINANCIAL MANAGEMENT Contracts - Time and Expenses Contracts - Time and Expenses
Invoicing Cross-Charging

SUPPORT MANAGEMENT Customer Support Customer Support - Help Desk

REPORTING AND ANALYSIS Performance Management Performance Management
Revenue Forecasting Budgeting
</TABLE>

Our solution has two main components. The first is our Web-based software
applications, Changepoint for Professional Services Organizations and
Changepoint for Corporate IT, which automate core IT services business
processes. The second is our online exchange, myChangepoint.com, which is
tightly integrated with our software and extends its functionality to
participants in the IT services supply chain that may not be using our software.

CHANGEPOINT FOR PROFESSIONAL SERVICES ORGANIZATIONS

Changepoint for Professional Services Organizations is Web-based software
that enables professional services organizations to manage the business of
delivering IT services. Further, this application connects to myChangepoint.com
over the Internet so that a professional services organization can coordinate
its activities with those of its customers and partners.

The following are the major functional capabilities of Changepoint for
Professional Services Organizations:

OPPORTUNITY MANAGEMENT. Our software provides the tools to automate and
manage the process of marketing and selling professional services. Our customers
are able to manage marketing campaigns, track competitions, align their sales
activities with their delivery capabilities and automate their sales forces.

SERVICES DELIVERY MANAGEMENT. Our software allows our customers to manage
engagements, including deliverables, contract details, staffing, billing rates
and workflow rules. Our software also provides project management capabilities,
including the distribution and tracking of tasks and their status, and is
integrated with Microsoft Project. Professional services organizations can
manage their resources by tracking reported availability and workloads and
enabling personnel searches based on criteria such as skills and availability.

40
<PAGE>

FINANCIAL MANAGEMENT. Our software enables professional services
organizations to record and track time and expense data and create invoices
based on this data and resource billing rates. Billable time and expense data
can be assembled into invoices and routed for approval before delivery to
customers. In addition, our financial management functionality can be integrated
with major financial packages and accounting systems.

41
<PAGE>

SUPPORT MANAGEMENT. Our software allows professional services organizations
to automate the process of providing ongoing support to their customers. Our
software provides the tools for managing customer support, including tracking
customer calls and issues, routing problems to the appropriate resources,
tracking IT assets and developing and sharing a knowledge base.

REPORTING AND ANALYSIS. Our software allows management to make better
informed decisions and more accurately forecast revenues by providing extensive
reporting and analysis capabilities.

CHANGEPOINT FOR CORPORATE IT

Changepoint for Corporate IT is Web-based software that enables a corporate
IT department to manage the complete process of delivering internal IT services.
Further, this application connects to myChangepoint.com over the Internet so
that a corporate IT department can interoperate and work with professional
services organizations and external IT contract staff in the same manner as with
internal staff.

The following are the major functional capabilities of Changepoint for
Corporate IT:

DEMAND MANAGEMENT. Our software provides the tools to manage the
relationship between a corporate IT department and other departments within the
organization. This includes contact management, the scheduling of work and
activities, and prioritization of corporate IT department service requests.

SERVICES DELIVERY MANAGEMENT. Our software allows our customers to manage
internal engagements, including deliverables, contract details, staffing,
billing rates and workflow rules. Our software also provides project management
capabilities, including the distribution and tracking of tasks and their status,
and is integrated with Microsoft Project. Corporate IT departments can manage
their resources by tracking reported availability and workloads, and enabling
personnel searches based on criteria such as skills and availability. Our
solution also allows corporate IT departments to store and retrieve departmental
knowledge.

FINANCIAL MANAGEMENT. Our software enables corporate IT departments to
capture and track time and expense data and create invoices or cross charges
based on this data and resource billing rates. Billable time and expense data
can be assembled into departmental cross charges either by invoices generated by
Changepoint for Corporate IT or by integration to common back office accounting
systems or popular financial packages.

SUPPORT MANAGEMENT. Our software allows corporate IT departments to
automate the process of providing ongoing support within the organization. Our
software also provides the tools for managing internal systems support,
including tracking support calls and issues, routing problems to the appropriate
resources, tracking IT assets and developing and sharing a knowledge base.

REPORTING AND ANALYSIS. Our software allows management to make better
informed decisions and more accurately budget by providing extensive reporting
and analysis capabilities.

MYCHANGEPOINT.COM

myChangepoint.com is an online exchange that allows professional services
organizations and corporate IT departments to integrate their business processes
in the delivery of IT services. Through myChangepoint.com, IT services
organizations can extend the functionality of our software to their customers
and partners, as well as external IT contract staff by allowing them to receive
work assignments, report status and submit time and expenses through an
easy-to-use, browser-based interface.

myChangepoint.com provides the following specific capabilities:

- coordinating the management of resources and projects among buyers and
sellers of IT services;

- managing time and expense reporting and the associated approval process
and invoicing; and

- sourcing and procuring external IT services personnel based on required
skills and availability.

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<PAGE>
CUSTOMERS

To date, over 100 professional services organizations and corporate IT
departments have purchased our software. The following is a list of our
customers:

By integrating business processes between IT services organizations,
myChangepoint.com enables our customers to build more flexible and collaborative
business relationships.

<TABLE>
<CAPTION>
PROFESSIONAL SERVICES ORGANIZATIONS
<S> <C> <C>
Acceleron Solution El Camino Resources OneSoft
Algorithmics Electric Farm OpenText
Allegiant Technology Emerald Solutions Patricia Seybold Group
Anderson Financial Network EXE Technologies PICA GmbH
Apex IT Florida Manufacturing PointB
AVCOM Technology Center Professional Development Group
Barnhill and Associates Geotrain Corporation Promethean System Consultants
Brokercom Greenwich Technology Partners QAD
Capita Tech Habenero Studios Ltd Rhino Productions
Castek InfoAdvantage Rt. 1
Catalyst Solutions InSystems Technology Selectica
Caught in the Web Inteq Semtor
Chicago Consulting Interactive Papyrus Softrax
Citria Internet Frontier Solution Technology
Commercialware Interwoven Spectra Securities Software
Compass Technology Ironside Technologies Steeves and Associates
Computer Methods International JPH International Storage Tek
Concept Five Technologies Lightbridge StrataSys
Concrete Media Longview Solutions SunGard Planning Solutions
Corio Lotus Development Symbius Corp
Corridor Consulting Macromedia SYMIX
CYBERplex Mortice Kern Systems Synergy International
Delano Technology Motive Communications TEK/Allegis Group
Delfour Navigator Systems Timberline Software
Dell Computer Netera Trimax Retail Systems
Digital Medical Systems NetNumina Wingspan
Xerox

CORPORATE IT DEPARTMENTS

Abbott Laboratories Canam Manac Integris Health
Accidental Compensation Canmet IBM -- Foremost Insurance
Baltimore Gas & Electric Chesapeake Display and L.R. Nelson Corp.
BellSouth Telecommunications Packaging Manulife Financial
California Department of Conseco (Greentree) Financial Ministry of Transportation
Transportation Electricidad De Caracas Revenue Canada
Canada Life Financial FedEx - Custom Critical Toronto Stock Exchange
Canadian National Railway Guardian Life Insurance Wolverine World Wide
Canadian Tire Howmet Corporation
</TABLE>

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<PAGE>
The following case studies illustrate how selected customers have used our
software products to address their business needs.

GUARDIAN LIFE INSURANCE

Guardian Life Insurance is one of the largest mutual life insurance
companies in the United States, offering a broad range of insurance and
financial products.

BUSINESS CHALLENGE. Guardian's IT department treats each of Guardian's
business units as a client that is billed for IT initiatives the department
undertakes on its behalf. Guardian currently has over 400 IT personnel and
augments its services delivery capacity by using a variety of professional
services organizations, which provide over 200 additional IT professionals.
Guardian's IT department must deliver detailed cost reports for all IT projects
to ensure accurate billing and to provide its internal clients with a view of
how they are spending their IT budgets. As Guardian's IT needs have increased in
recent years, Guardian required a comprehensive solution to effectively track
and centrally manage and coordinate the delivery of IT services by its IT
department and external IT staff.

SOLUTION. Guardian chose Changepoint for Corporate IT to manage the
operations of its IT department. Our solution enables Guardian's IT department
to reduce the complexity associated with using multiple IT services suppliers
and provides the tools to efficiently coordinate and centrally manage activities
related to all IT projects. Through improved monitoring of all IT services
activities, Guardian can effectively and strategically deploy its IT services
personnel to better meet the organization's business initiatives. In addition,
the integrated invoicing or cross-charging capabilities of our software
automates the process of inter-office billing for IT services and removes the
administrative burden of manually performing this task. Contractor management is
also greatly improved as Guardian can now monitor and track contractor time and
expenses and payment with the same efficiency as it does its own staff.

QAD

QAD is a provider of enterprise resource planning and e-business software
with over 1,600 employees in 21 countries.

BUSINESS CHALLENGE. QAD needed solutions to address the challenges of both
its IT department and its professional services division, which services
external customers. Specifically, QAD's IT department needed an automated
solution to manage and streamline its internal IT services delivery across 13
countries. The company wanted to improve the consistency of its global IT
solution delivery and resource management effectiveness and more accurately
align internal IT efforts with business priorities. Further, QAD's professional
services division, with approximately 400 IT professionals, was in need of a
solution that could scale to meet increased demands as a result of significant
growth and that would enable QAD to effectively control the core processes of
its services delivery business.

SOLUTION. QAD chose Changepoint for Corporate IT to manage its internal IT
services delivery process. Our solution has enabled QAD's corporate IT
department to improve the consistency in quality of service delivery through
more effective project management and reporting and increased resource
utilization. With our software, QAD now has the reporting and analytic
capabilities to ensure that its internal IT efforts are aligned with its
strategic initiatives. QAD is also using Changepoint for Professional Services
Organizations to manage its entire professional services division. Our solution
has resulted in more efficient management of business processes in QAD's
services delivery, yielding greater margins and improved utilization of its IT
professionals through more accurate monitoring and placement.

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<PAGE>
CYBERPLEX

CYBERplex is a professional services organization focused on providing
Internet and e-commerce solutions.

BUSINESS CHALLENGE. As a fast-growing professional services organization,
CYBERplex faced the challenge of effectively managing its ongoing engagements
and pipeline of upcoming projects as well as accurately tracking its project
plans, time and expense, and invoicing. CYBERplex's internally-developed systems
lacked the functionality and scalability required by the organization's rapid
growth. As a result, CYBERplex sought an integrated solution to automate and
effectively manage its entire IT services delivery business.

SOLUTION. CYBERplex chose to deploy Changepoint for Professional Services
Organizations to automate its entire IT service delivery business. Our solution
enables CYBERplex to better control the core processes of its professional
services business. Specifically, our software provides improved opportunity
creation and management, better resource management, enhanced services delivery
processes and more accurate time and expense capture and invoicing. Changepoint
has allowed CYBERplex to benefit from a significant improvement in business
performance across the organization.

INTERWOVEN

Interwoven is a provider of content management software and services for
corporate Web sites, enabling electronic commerce, customer relationship
management, supply chain management and knowledge management for Web leaders and
Fortune 1000 companies moving to the Web.

BUSINESS CHALLENGE. Interwoven needed an integrated solution that could
scale to meet the demands for its services as a result of rapid growth in the
market for its products. Interwoven needed to manage its decentralized workforce
and effectively control and coordinate the business processes and activities
related to its professional services delivery.

SOLUTION. Interwoven deployed Changepoint for Professional Services
Organizations to manage its entire professional services delivery process. By
automating field operations, our solution, integrated with Softrax's operations
and financial software, provides Interwoven with the critical centralized
management functions for its workforce. In addition, our solution enables
Interwoven to implement a standard engagement management process. Interwoven can
now instantly search and match appropriately skilled staff with specific
assignments, efficiently deploy projects, capture time and expense data and
generate accurate invoices more quickly than before.

STRATEGIC RELATIONSHIPS

We believe that strategic relationships are important for increasing our
market presence and expanding our business. To date, we have entered into the
following significant strategic relationships:

CORIO. In December 1999, we signed a five-year agreement with Corio, a
leading application service provider, under which Corio will market, sell and
host our software on its servers and pay us a percentage of the hosting fees
charged to its customers. This arrangement allows customers to access our
software from Corio's servers without any supporting software or infrastructure
of their own. Our agreement contains a one-year joint marketing provision under
which Changepoint and Corio will exclusively promote each others' solutions. To
date, Corio has sold our software as part of its applications suite to
two customers.

SKILLSVILLAGE. In February 2000, we entered into a one-year, renewable
agreement with SkillsVillage, an online IT staffing exchange, to provide our
customers with access to the SkillsVillage recruiting network. Under this
arrangement, SkillsVillage pays us a transaction fee each time a staffing

45
<PAGE>
request posted by one of our customers is fulfilled through the SkillsVillage
network. Our customers use myChangepoint.com to access the SkillsVillage
network.

In the future, we plan to enter into similar agreements with other
recruiting services and staffing organizations in order to provide our customers
with the broadest possible personnel pool in which to search for appropriately
skilled IT services professionals.

CLIENT SERVICES AND CUSTOMER SUPPORT

We believe that high quality client services and customer support are
critical to ongoing customer satisfaction. Our client services group provides
the professional services necessary to successfully implement our software.
These services include project management, process consulting, customization,
technical implementation and integration as well as training. Our client
services group is located in offices in Chicago, Illinois; Burlington,
Massachusetts; Toronto, Ontario; and London, England. We will continue to expand
the client services group to keep pace with our increasing sales and customer
base.

Our customer support group provides maintenance and technical support to our
customers. Our customers have the option of purchasing a maintenance agreement,
which is typically a one-year renewable contract, that entitles them to software
updates and technical support, including telephone support and twenty-four hour
access to the support area of our Web site.

SALES AND MARKETING

To date, we have primarily sold our software through our direct sales force
located in the United States, Canada and the United Kingdom. Our sales force
includes both sales and pre-sales technical staff who are responsible for
evaluating customer needs and recommending the product and product features that
will most benefit our customers. In addition, we have developed indirect sales
channels through relationships with Corio and Softrax, an independent software
vendor. We entered into a three-year OEM agreement with Softrax in
December 1999. Under this agreement, Softrax has the right to integrate our
software into its operational and financial software applications, and we
receive a percentage of all sales of these software applications. Further, we
are currently building a sales force that will focus specifically on developing
additional indirect sales relationships.

In December 1999, we entered into a services agreement with Protege
Software, under which Protege has agreed to provide administrative and sales
services through July 31, 2001, in order to establish our European direct sales
presence. To date, Protege has assisted us with establishing our United Kingdom
office and has commenced sales efforts for us in Europe.

We direct our marketing efforts towards promoting our products and services,
creating market and brand awareness, and generating sales opportunities. Our
marketing initiatives include conducting both live and Internet-based seminars,
participating in industry trade shows and conferences, advertising through print
and Web media, and direct marketing using e-mail and traditional mailers.
Further, we engage in extensive public relations efforts designed to develop
relationships with members of trade and business press and industry analysts. We
also conduct joint marketing campaigns with strategic partners such as Corio.

COMPETITION

The market for our software is highly competitive and constantly changing,
and we believe that it will become increasingly competitive in the foreseeable
future. The market is evolving rapidly from both a commercial and technological
perspective. We believe that the principal competitive factors affecting our
market are:

- product features and functionality;

46
<PAGE>
- product quality and performance;

- ease of use;

- breadth and depth of the offered solution;

- a significant base of reference customers;

- customer service and support; and

- an in-depth understanding and knowledge of the IT services industry.

We believe that we compete favorably with respect to these factors.

We currently, and will for the foreseeable future, face competition from
many sources, including developers of software used to automate professional
services and manage projects, relationships with contractors and enterprise
resources. Professional services automation developers provide the most direct
competition because their software also automates and integrates aspects of the
IT services business. We compete with developers of software used to manage
projects, relationships with contractors and enterprise resources since these
products each seek to automate at least one aspect of the IT services business.
We also face competition from staffing companies and time and expense reporting
software vendors. Many of our potential customers have the ability to develop
their own solutions, and may do so rather than purchasing our products.

Some of our competitors offer products that are designed to address the
needs of professional services organizations. Other competitors offer products
to address the needs of corporate IT departments. We do not believe that any of
our competitors provide solutions that adequately address the needs of both
buyers and suppliers of IT services.

RESEARCH AND DEVELOPMENT

We believe that our future success depends in large part on our ability to
maintain and enhance our core technology and product functionality, and to
develop and exploit new technologies and functionality. In order to do so, it is
important that we recruit highly skilled software developers. We have
established a process for product development that defines and addresses the
activities required to successfully bring product concepts and development
projects to market. This process incorporates feedback from our sales, marketing
and business development efforts into the development cycle to allow for faster
releases of new products. To date, we have devoted significant resources to our
product development efforts and intend to continue to do so in the foreseeable
future.

INTELLECTUAL PROPERTY

We rely on a combination of copyright, trade secret and trademark laws,
confidentiality procedures, contractual provisions and other similar measures to
protect our proprietary information and technology. We do not currently hold any
patents or registered copyrights. However, we will assess appropriate occasions
for seeking additional intellectual property protections for those aspects of
our technology that we believe constitute innovations providing significant
competitive advantages. Such future applications may or may not result in the
registration of patents, trademarks or copyrights.

As part of our confidentiality procedures, we generally require our
employees, clients and potential business partners to enter into confidentiality
and non-disclosure agreements before we will disclose any sensitive aspects of
our products, technology or business plans. In addition, we generally require
employees to agree to surrender to us any proprietary information, inventions or
other intellectual property they generate or come to possess while employed by
us. These efforts afford only limited protection.

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<PAGE>
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary and third parties may attempt to develop similar
technology independently. These precautions may not prevent misappropriation or
infringement of our intellectual property. In addition, laws of some countries
do not protect our proprietary rights to the same extent as do the United States
or Canada. We cannot assure you that protection of our proprietary rights will
be adequate or that our competitors will not independently develop similar
technology.

There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property rights. We expect that software
product developers and providers of Internet-related solutions will increasingly
be subject to infringement claims as the number of products and competitors in
our industry grows and the functionality of products in different industries
increasingly overlaps.

Furthermore, former employers of our current and future employees may assert
that our employees have improperly disclosed confidential or proprietary
information to us. Any such claims, with or without merit, could be
time-consuming to defend, divert management's attention and resources, result in
costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements which may not be available on terms acceptable
to us or at all. In addition, parties making these claims may be able to obtain
an injunction, which could prevent us from selling our products in the United
States or abroad. A successful infringement claim against us and our failure or
inability to license the infringed rights or develop or license technology with
comparable functionality could have a material adverse effect on our business,
operating results and financial condition.

EMPLOYEES

As of June 26, 2000, we had 236 full-time employees, including 72 in
research and development, 89 in sales and marketing, 58 in client services and
customer support and 17 in general and administrative. None of our employees is
covered by collective bargaining agreements and we have never experienced a
strike or work stoppage. We believe our relations with our employees are good.

FACILITIES

Our corporate headquarters are located in Richmond Hill, Ontario, where we
lease approximately 27,000 square feet. The lease for the principal portion of
our space expires on September 30, 2000. We have entered into a 10-year lease,
which, as of June 2000, will provide us with approximately 50,000 square feet
for a new corporate headquarters in Richmond Hill, Ontario. We also lease office
space in Phoenix, Arizona; Los Angeles, San Bruno and Campbell, California;
Atlanta, Georgia; Chicago, Illinois; Burlington, Massachusetts; Livonia,
Michigan; White Plains, New York; Dallas and Houston, Texas; Alexandria,
Virginia; and London, England. We do not own any real property.

LEGAL PROCEEDINGS

We are not currently party to any material legal proceedings, nor are we
aware of any proceedings that are contemplated.

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<PAGE>
MANAGEMENT

OFFICERS AND DIRECTORS

The following table sets forth the name, age and position with Changepoint
for each of our officers and directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- --------
<S> <C> <C>
OFFICERS

Gerald W. Smith........................... 35 Chairman, President and Chief Executive
Officer

John A. Anhang............................ 39 Chief Financial Officer and Vice
President, Finance and Administration

Randall N. Remme.......................... 36 Chief Technology Officer and Vice
President, Product Development

L. Geoffrey Joynt......................... 37 Executive Vice President, Sales

P. Douglas Cummings....................... 41 Vice President, Global Accounts

Harvey Gordon............................. 51 Vice President, Business Development

Paul Lupinacci............................ 35 Vice President, Product Support

Richard P. Moreau......................... 44 Vice President, Client Services

Charles E. Tatham......................... 31 Vice President, Marketing

DIRECTORS

Bernard M. Goldsmith...................... 56 Director

David C. Wetmore(1)....................... 51 Director

Robert J. Sywolski(2)..................... 62 Director

J. Ian Giffen(1).......................... 42 Director

David W. Ferguson(1)(2)................... 40 Director

Howard T. Gwin(2)......................... 41 Director
</TABLE>

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

(1) Member of the audit committee

(2) Member of the compensation committee

OFFICERS

GERALD W. SMITH has been our Chairman since October 1996 and our President
and Chief Executive Officer since July 1994. From October 1992 to July 1994,
Mr. Smith was our Vice President of Consulting Services. Mr. Smith is a licensed
Professional Engineer and has a bachelor of science degree in mechanical
engineering from the University of Toronto and a master of business
administration degree from McMaster University.

JOHN A. ANHANG has been our Chief Financial Officer and Vice President of
Finance and Administration since January 1997, and has been our Corporate
Secretary since December 1999. From March 1995 to January 1997, Mr. Anhang was
Vice President and Chief Financial Officer at Footprint Software, a provider of
retail delivery systems for financial institutions. From January 1994 to
March 1995, Mr. Anhang was a consultant at Cole and Partners, a corporate
finance consulting firm. Mr. Anhang is a licensed Professional Engineer and has
a bachelor of science degree in chemical

48
<PAGE>
engineering from Yale University and a master of business administration degree
from the University of Western Ontario.

RANDALL N. REMME has been our Vice President of Product Development since
1993 and our Chief Technology Officer since September 1998. Since joining
Changepoint, Mr. Remme has been, and continues to be, responsible for the design
and architecture of all aspects of our solution.

L. GEOFFREY JOYNT has been our Executive Vice President of Sales since
January 2000. From July 1998 to December 1999, Mr. Joynt was Vice President of
Sales at PowerCerv, a vendor of enterprise resource planning software. From
July 1995 to June 1998, Mr. Joynt was a Regional Vice President at Epicor
Software, a vendor of enterprise resource planning software. From July 1994 to
June 1995, Mr. Joynt served as an Account Executive at Epicor. Mr. Joynt has a
bachelor of arts degree in economics from York University.

P. DOUGLAS CUMMINGS has been our Vice President of Global Accounts since
December 1999. From July 1998 to November 1999, Mr. Cummings served as Vice
President of Operations Management Services at Compaq Canada, a provider of
information technology products and software, and from August 1997 to
June 1998, was Director of Major Account Sales at Compaq Canada. From
April 1997 to August 1997, Mr. Cummings was Acting General Manager at Tandem
Computers Canada, a provider of specialized information technology products and
services, and, from October 1994 to April 1997, was Vice President of Sales and
Operations at Tandem Computers Canada. Mr. Cummings has a bachelor of science
degree from the University of Western Ontario.

HARVEY GORDON has been our Vice President of Business Development since
November 1999. From January 1997 to October 1999, Mr. Gordon was Vice President
of Business Development at Algorithmics, a developer of risk management software
for financial institutions. From February 1996 to December 1996, Mr. Gordon was
Vice President of Sales and Marketing at Algorithmics. From February 1994 to
January 1996, Mr. Gordon was Senior Vice President of Sales and Marketing at
Minicom Data, a developer and vendor of real estate and asset management
software. Mr. Gordon has both a bachelor of science degree in engineering
science and a master of science degree in computer science from the University
of Toronto and has completed the Business Management Development program at
Bishop's University.

PAUL LUPINACCI has been our Vice President of Product Support since
April 1998. From May 1997 to April 1998, Mr. Lupinacci served as our Vice
President of Business Partners. From April 1995 to April 1997, Mr. Lupinacci
served as our Director of Implementation. Mr. Lupinacci is a licensed
Professional Engineer and has a bachelor of applied science degree from the
University of Toronto and a master of business administration degree from York
University.

RICHARD P. MOREAU has been our Vice President of Client Services since
October 1997. From October 1995 to October 1997, Mr. Moreau served as our
Director of Client Services. From March 1995 to October 1995, Mr. Moreau served
as a consultant to Changepoint. Prior to that, Mr. Moreau served in a variety of
positions, including System Development Supervisor, at Ontario Hydro, an
electric power generation and distribution company. Mr. Moreau has a bachelor of
engineering and management degree from McMaster University and a master of
business administration degree from York University.

CHARLES E. TATHAM has been our Vice President of Marketing since
September 1996. From May 1995 to August 1996, Mr. Tatham served as Business
Partner Sales Manager at Lotus, a software development company and, prior to
that, Mr. Tatham served in various technical, marketing and sales capacities at
Lotus. Mr. Tatham has a bachelor of science degree in psychology from the
University of Toronto.

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<PAGE>
DIRECTORS

BERNARD M. GOLDSMITH has served as one of our directors since
November 1999. Since 1987, Mr. Goldsmith has been a Managing Director of Updata
Capital, an investment banking firm. Mr. Goldsmith is a director of Compuware
Corporation, a consulting and systems software firm, a director of Dendrite
International, a supplier of customer relationship management software and
services, and a director of Astea International, a provider of field services
software and services. Mr. Goldsmith has a bachelor of arts degree from Rutgers
University.

DAVID C. WETMORE has served as one of our directors since November 1999.
Since 1995, Mr. Wetmore has been a Managing Director of Updata Capital, and
prior to that he served as Chief Operating Officer of Legent Corporation, a
provider of system software and services. Mr. Wetmore is a director of
CareerBuilder an Internet recruiting company, a director of Walker Interactive
Systems, a developer and provider of business systems software and services, and
a director of the Nationwide Family of Funds, a mutual fund company.
Mr. Wetmore has a bachelor of science degree from the University of Notre Dame
and a masters of business administration from Ohio State University, and is a
member of the American Institute of Certified Public Accountants.

ROBERT J. SYWOLSKI has served as one of our directors since November 1999.
Since March 2000, Mr. Sywolski has been the Chief Executive Officer of
Blackbaud, a developer of fund-raising and accounting applications for
not-for-profit organizations. From February 1998 to March 2000, Mr. Sywolski was
a Managing Member of JMI Associates III, the general partner of JMI Equity Fund,
a private equity fund. From August 1995 to January 1998, Mr. Sywolski was Chief
Executive Officer at Huthwaite, a consulting company. Prior to that,
Mr. Sywolski served as Chief Executive Officer at Business Mail Express, a
company specializing in high-volume corporate mailings. Mr. Sywolski has a
bachelor of science degree in electrical engineering from Widener University and
a masters of business administration degree from Long Island University.

J. IAN GIFFEN has served as one of our directors since September 1999. Since
September 1996, Mr. Giffen has been a technology consultant and advisor to
software companies and technology investment funds. From February 1996 to
September 1996, Mr. Giffen was Vice President and Chief Financial Officer of
Algorithmics. From January 1992 to January 1996, Mr. Giffen was Vice President
and Chief Financial Officer at Alias Research, a developer of 3D graphics
software. Mr. Giffen is a director of Macromedia, a developer of software for
Web publishing, multimedia and graphics, a director of Delano Technology, a
producer of Internet communications software, and a director of MGI Software, a
producer of digital imaging software. Mr. Giffen also is a consultant to XDL
Capital, a private venture capital firm. Mr. Giffen is a Chartered Accountant
and has a bachelor of arts degree in business administration from the University
of Strathclyde.

DAVID W. FERGUSON has served as one of our directors since October 1996.
Since July 1994, Mr. Ferguson has been a Managing Director at Vengrowth Capital
Management, a private venture capital firm. Mr. Ferguson is a director of OCI
Communications, a competitive local exchange carrier, and a director of Andaurex
Industries, a project engineering firm. Mr. Ferguson is a Chartered Accountant
and has a bachelor of commerce degree from the University of Manitoba and a
master of business administration degree from the University of Western Ontario.

HOWARD T. GWIN has served as one of our directors since March 2000. Since
January 2000, Mr. Gwin has been President and Chief Operating Officer of Solect
Technology Group, a provider of billing, customer care and service management
software. From November 1994 to January 2000, Mr. Gwin held a variety of
positions at Peoplesoft, a provider of enterprise application software,
including Managing Director, Europe, Senior Vice President, International and
Executive Vice President, Worldwide Operations. Mr. Gwin has a bachelor of
business administration from Simon Fraser University.

50
<PAGE>
BOARD OF DIRECTORS

Our board of directors is currently comprised of seven persons. Pursuant to
our charter documents, the size of the board or directors may range from a
minimum of one to a maximum of 12 persons. In accordance with the provisions of
the BUSINESS CORPORATIONS ACT (Ontario), our directors are authorized from time
to time to increase the size of the board of directors, and to fix the number of
directors, up to the maximum of 12 persons, without the prior consent of our
shareholders. Each director is elected at the annual meeting of shareholders to
serve for a stated term which will expire no later than the third annual meeting
following the election. In accordance with the provisions of the BUSINESS
CORPORATIONS ACT (Ontario), our directors may appoint an additional director or
directors between meetings of our shareholders if, after such appointment, the
total number of directors would not exceed one and one-third times the number of
directors required to have been elected at the last annual meeting of
shareholders.

Because Changepoint is an Ontario corporation, a majority of our board of
directors as well as a majority of the members of each committee of our board of
directors must be Canadian residents.

Messrs. Goldsmith, Sywolski and Ferguson were appointed as directors
pursuant to the terms of a shareholders agreement in connection with our prior
financings. Although the shareholders agreement terminates upon the closing of
this offering, Messrs. Goldsmith, Sywolski and Ferguson will continue to serve
as directors and members of the audit and compensation committees subject to
election at our annual shareholders' meetings.

BOARD COMMITTEES

The board of directors has established an audit committee and a compensation
committee.

AUDIT COMMITTEE. Our audit committee reviews and monitors our corporate
accounting and reporting practices, as well as our financial and accounting
controls. Our audit committee oversees our internal and external audits,
including the results and scope of the annual audit and other services provided
by our independent auditors and our compliance with legal matters that have a
significant impact on our financial reports. The audit committee reports to our
board of directors on our financial statements prior to approval by our board of
directors. In addition, the audit committee is responsible for reviewing and
recommending the appointment of our independent auditors. The current members of
the audit committee are Messrs. Wetmore, Giffen and Ferguson.

COMPENSATION COMMITTEE. Our compensation committee reviews and makes
recommendations to the board regarding all forms of compensation provided to our
executive officers and directors, including stock compensation and loans. The
current members of the compensation committee are Messrs. Gwin, Sywolski and
Ferguson.

COMPENSATION OF DIRECTORS

Our by-laws allow us to compensate our directors. We do not currently
compensate our directors with cash fees, but they are reimbursed for
out-of-pocket expenses incurred in connection with meetings of the board of
directors or its committees. Directors are also eligible to participate in the
1999 Stock Option Plan. See "1999 Stock Option Plan."

In December 1999, Messrs. Goldsmith, Wetmore, Sywolski, Giffen and Ferguson
each received options to purchase 20,000 common shares for their services as
directors. In March 2000, Mr. Gwin received options to purchase 20,000 common
shares for his services as a director. In May 2000, Mr. Gwin received options to
purchase 10,000 common shares for his services as a consultant. We granted these
options under the 1999 Stock Option Plan. Each option was fully vested when
granted and expires ten years from the date of grant. Options granted to Messrs.
Goldsmith, Wetmore,

51
<PAGE>

Sywolski, Giffen and Ferguson have an exercise price of $1.72. Options granted
to Mr. Gwin have an exercise price of $15 and $9, respectively.

INDEMNIFICATION

In accordance with the BUSINESS CORPORATIONS ACT (Ontario), our by-laws
contain provisions relating to the limitation of liability and indemnification
of our directors and officers. Our by-laws require us to indemnify our present
and former directors and officers, or any person who acts or acted at our
request as a director or officer of another company of which we are or were a
shareholder or creditor. We will indemnify the director or officer against all
amounts paid to settle or satisfy a judgment reasonably incurred in respect of
any action or proceeding to which the director or officer is made a party by
reason of being or having been such a director or officer if:

- he acted honestly and in good faith with a view to our best interests; and

- in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, he had reasonable grounds for believing
that his conduct was lawful.

Further, we maintain directors' and officers' liability insurance which insures
our directors and officers against liability incurred by, arising from or
against them for certain of their acts, errors or omissions.

EXECUTIVE COMPENSATION AWARDED IN LAST FISCAL YEAR

The following table sets forth the actual compensation paid or awarded to
our named executive officers, who include our chief executive officer and our
executive officers who earned more than $100,000, during the fiscal year ended
July 31, 1999. Based on these criteria, our named executive officers are Gerald
Smith, our Chairman, President and Chief Executive Officer and John Link, who
was our Vice President of Sales during the fiscal year ended July 31, 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING
SALARY BONUS OPTIONS
NAME AND PRINCIPAL POSITION ($) ($) (#)
--------------------------- -------- -------- ------------
<S> <C> <C> <C>
Gerald Smith, Chairman, President and Chief Executive
Officer................................................... $72,831 $38,807 --
John Link, Vice President of Sales.......................... $76,396 $56,694 --
</TABLE>

During the fiscal year ended July 31, 1999, the aggregate compensation paid
to all of our officers and directors as a group, for services in all capacities,
was $676,160, based on currency exchange rates during the fiscal year.

OPTION GRANT IN LAST FISCAL YEAR

There were no options granted to the named executive officers during the
fiscal year ended July 31, 1999.

STOCK OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

There were no options exercised by the named executive officers during the
fiscal year ended July 31, 1999. At July 31, 1999, John Link held exercisable
options to acquire 33,333 common shares and unexercisable options to acquire
66,667 common shares. The value of John Link's exercisable options was $9,955,
and the value of his unexercisable options was $19,911. Gerald Smith did not own
any options at July 31, 1999.

52
<PAGE>

OPTIONS OWNED BY OFFICERS AND DIRECTORS

As of June 26, 2000, our officers and directors owned options entitling them
to purchase 1,021,250 of our common shares.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION PROGRAM

With the exception of Mr. Smith, who was a member of the compensation
committee until April 3, 2000, no member of the compensation committee is or has
been an officer or employee of ours. All decisions regarding the compensation of
our executive officers for the fiscal year ended July 31, 1999 were made by the
compensation committee, except that Mr. Smith did not participate in
deliberations or decisions regarding his own compensation. None of our executive
officers serves as a member of the board of directors or compensation committee
of any other entity that has one or more executive officers serving as a member
of our board of directors or compensation committee.

EMPLOYMENT AGREEMENTS

We executed an offer letter with John Link, who was our Vice President of
Sales during the fiscal year ended July 31, 1999. This letter, effective
April 1998, established Mr. Link's initial base salary at Cdn$120,000
(approximately $79,500). In the fiscal year ended July 31, 1999, Mr. Link
received total compensation, consisting of base salary and bonus, of Cdn$201,000
(approximately $133,000).

We do not have an employment agreement with Gerald Smith.

EMPLOYEE STOCK OPTION PLANS

1997 STOCK OPTION PLAN

Our board of directors adopted the 1997 Stock Option Plan in August 1997.
The 1997 Stock Option Plan permits us to grant stock options to our full-time
employees in good standing. Directors and others, who are not full-time
employees, are not eligible to participate under this plan. The 1997 Stock
Option Plan allows for the issuance of up to 1,000,000 common shares. As of
June 26, 2000, options to purchase 452,573 shares have been granted to employees
under the 1997 Stock Option Plan, of which 175,495 common shares held by former
employees have been cancelled and options to purchase 695,290 common shares
remain available for grant. No options have been granted under the 1997 Stock
Option Plan since September 1998.

The 1997 Stock Option Plan is interpreted and administered by our board of
directors. Subject to the provisions of the plan, our board of directors selects
the individuals eligible to receive awards and determines the terms and
conditions of the awards granted.

An optionee's rights under the 1997 Stock Option Plan are not transferable
or assignable. An optionee therefore may not transfer, assign, pledge or dispose
of or encumber any of the options received by him or her under this plan.

The exercise price of options granted under the 1997 Stock Option Plan is
determined by our board of directors. Options typically vest according to a
schedule. In most cases, vesting occurs over three years, and terminates five
years from the date of grant. Upon the exercise of options, the option exercise
price must be paid in full in cash.

In the event of a reorganization or merger or sale or lease of all or
substantially all of our assets, regardless of whether we are the surviving
entity, each option granted under the 1997 Stock Option Plan will be adjusted to
apply to the securities that a holder of the common shares underlying each
option would have been entitled to under the terms of the reorganization, merger
or sale or lease of all or substantially all of our assets.

53
<PAGE>
1999 STOCK OPTION PLAN

Our board of directors and shareholders adopted the 1999 Stock Option Plan,
effective August 1, 1999. The 1999 Stock Option Plan permits us to grant
incentive stock options and non-qualified stock options. These grants may be
made to our directors, officers, employees and consultants. The 1999 Stock
Option Plan allows for the issuance of up to 3,000,000 common shares. As of June
26, 2000, options to purchase 2,047,905 common shares have been granted to
directors, employees and Protege Virtual Management Limited under the 1999 Stock
Option Plan, of which 164,250 held by former employees have been cancelled, and
options to purchase 1,116,345 common shares remain available for grant.

The 1999 Stock Option Plan is interpreted and administered by our board of
directors. Subject to the provisions of the plan, our board of directors selects
the individuals eligible to receive awards, determines the terms and conditions
of the awards granted, including the number of common shares covered by each
option and the time or times when options will be granted and exercisable. An
optionee's rights under the 1999 Stock Option Plan are not transferable or
assignable. An optionee therefore may not transfer, assign, pledge or dispose of
or encumber any of the options received by him or her under this plan.

The exercise price of options granted under the 1999 Stock Option Plan is
determined by our board of directors. Under current law, incentive stock options
and options intended to qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended, may not be
granted at an exercise price less than the fair market value of the common
shares 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 of outstanding capital stock. Similarly, under this plan,
non-qualified options may not be granted at prices less than the fair market
value of the underlying common shares on the date of grant. Options typically
are subject to vesting schedules and terminate ten years from the date of grant,
unless otherwise stipulated by our board of directors. However, an incentive
stock option granted to an optionee holding more than 10% of the voting power of
outstanding capital stock must terminate within five years from the date of
grant. Upon the exercise of options, the option exercise price must be paid in
full in cash or in an alternative manner approved by our board of directors.

The 1999 Stock Option Plan provides that in the event of any capital
reorganization, reclassification, subdivision or consolidation of our capital
stock, or any merger or amalgamation of us with another corporation, a condition
of that transaction will be that the optionee will have the right to purchase
the number of shares of stock or other securities being exchanged for the number
of common shares that the optionee would have had the right to purchase upon
exercising his or her option had the transaction not taken place.

OTHER STOCK OPTION GRANTS

Prior to the adoption of our 1999 Stock Option Plan, we also granted options
from time to time to our directors and employees under individual option
agreements. Under these agreements, we have granted options to purchase 608,635
of our common shares.

Each agreement evidences an option to purchase the number of our common
shares set forth in the agreement at a designated exercise price. These options
typically vest according to a schedule, although under some grants, the option
vests on the execution date of the agreement. These options generally terminate
five years from the date of grant. Upon exercising an option or a portion of an
option, the option exercise price must be paid in full in cash. Neither the
option nor any of the rights granted to the optionee under any of these
agreements is transferable.

54
<PAGE>
Each agreement provides that in the event of any capital reorganization,
reclassification, subdivision or consolidation of our capital stock, or any
merger or amalgamation of us with another corporation, a condition of that
transaction will be that the optionee will have the right to purchase the number
of shares of stock or other securities being exchanged for the number of common
shares that the optionee would have had the right to purchase upon exercising
his or her option had the transaction not taken place.

EMPLOYEE STOCK PURCHASE PLAN

Our board of directors and shareholders adopted an Employee Stock Purchase
Plan, effective upon the closing of this offering. Under the plan, our employees
can subscribe through payroll withholdings to purchase common shares from our
treasury at 85% of the lesser of: (1) the fair market value of the common shares
on the first business day of the purchase period, and (2) the fair market value
of the common shares on the purchase date. An aggregate 1,000,000 common shares
have been reserved for purchase under the plan, subject to adjustments in the
event of stock dividends, stock splits, combinations of shares, or other similar
changes in our capitalization.

TRANSACTIONS WITH RELATED PARTIES

FINANCINGS

On November 3, 1997, we issued 2,000,000 units for net proceeds of
Cdn$4.0 million (approximately $2.8 million). Each unit consisted of 1 common
share of the Company and one option to purchase 0.1765 additional common shares
without further payment, exercisable if we did not complete an initial public
offering or sale of our business by November 3, 1999. Pursuant to this offering,
Vengrowth Capital Management, Inc. purchased 1,000,000 common shares and
1,000,000 options. On November 3, 1999, these options were exercised and
176,471 common shares were issued. David Ferguson, one of our directors, is a
managing director of Vengrowth.

On July 31, 1999, we raised Cdn$6.4 (approximately $4.2) million, net of
offering expenses, through an initial private placement of Class A redeemable
convertible preferred shares. Pursuant to this initial offering, The Vengrowth
Investment Fund Inc. purchased 2,020,408 Class A redeemable convertible
preferred shares. David Ferguson, one of our directors, is a managing director
of Vengrowth Capital Management Inc., the manager of The Vengrowth Investment
Fund Inc.

On October 8, 1999, we raised Cdn$4.6 (approximately $3.1) million, net of
offering expenses, through a second private placement of Class A redeemable
convertible preferred shares. Pursuant to this second offering, two of our
directors, Bernard Goldsmith and David Wetmore, purchased 414,001 and 246,636
Class A redeemable convertible preferred shares, respectively, and JMI Equity
Fund, L.P. purchased 2,448,980 Class A redeemable convertible preferred shares.
Robert Sywolski, one of our directors, is a general partner of JMI.

On May 26, 2000, we raised Cdn$37.0 (approximately $24.8) million, net of
offering expenses, through a private placement of Class B redeemable convertible
preferred shares. Pursuant to this offering, The Vengrowth Investment Fund Inc.
purchased 526,120 Class B redeemable convertible preferred shares and The
Vengrowth II Investment Fund Inc. purchased 262,874 Class B redeemable
convertible preferred shares. David Ferguson, one of our directors, is a
managing director of Vengrowth Capital Management Inc., the manager of The
Vengrowth Investment Fund Inc. and The Vengrowth II Investment Fund Inc.

55
<PAGE>
LOANS TO OFFICERS

In 1997, we loaned Cdn$100,000 (approximately $69,000) to Randall Remme, our
Chief Technology Officer and Vice President, Product Development, at an interest
rate of 6% per annum. Mr. Remme repaid this loan on July 30, 1999.

In August 1999, we loaned Cdn$250,000 (approximately $170,000) to Gerald
Smith, our Chairman, President and Chief Executive Officer at an interest rate
of 6% per annum. Mr. Smith repaid this loan on November 30, 1999.

56
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth information about the beneficial ownership of
our outstanding common shares on June 26, 2000, by:

- each of the named executive officers;

- each of our directors;

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

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

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes any common shares as
to which a person or entity has sole or shared voting power or investment power
and any common shares as to which the person or entity has the right to acquire
beneficial ownership within 60 days after June 26, 2000 through the exercise of
options, conversion of securities or otherwise. Except as noted below, we
believe that the persons named in the table have sole voting and investment
power with respect to the common shares set forth opposite their names.
Percentage of beneficial ownership before the offering is based on 19,054,766
common shares outstanding as of June 26, 2000, including 8,857,658 common shares
into which our outstanding redeemable convertible preferred shares will convert
upon completion of this offering and 10,197,108 common shares outstanding as of
June 26, 2000. All shares included in the table below under "Stock Options"
represent stock options that are exercisable within 60 days after June 26, 2000.
Unless otherwise indicated, the address of each of the individuals listed in the
table below is in care of Changepoint Corporation, 1595 Sixteenth Avenue, Suite
700, Richmond Hill, Ontario, Canada L4B 3N9.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES BENEFICIALLY
BENEFICIALLY OWNED OWNED
----------------------------------- -------------------
OUTSTANDING STOCK TOTAL BEFORE AFTER
SHARES OPTIONS NUMBER OFFERING OFFERING
----------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Gerald W. Smith(1)............................. 2,787,755 -- 2,787,755 14.6%
Barry M. Goldsmith............................. 419,001 -- 419,001 2.2
David C. Wetmore............................... 266,636 -- 266,636 1.4
Robert J. Sywolski(2).......................... -- 20,000 20,000 *
J. Ian Giffen.................................. -- 20,000 20,000 *
David W. Ferguson(2)(3)........................ 4,692,814 30,000 4,722,814 24.8
Howard T. Gwin................................. -- 30,000 30,000 *
The Vengrowth Investment Fund Inc.(2)(4)....... 4,692,814 30,000 4,722,814 24.8
145 Wellington Street West,
Suite 200
Toronto, Ontario M5J 1H8
JMI Equity Fund (Barbados) SRL(2).............. 2,448,980 20,000 2,468,980 13.0
1119 St. Paul Street
Baltimore, Maryland 21202
Paul Edwards(1)................................ 1,901,673 -- 1,901,673 10.0
XDL Changepoint Holdings Inc.(5)............... 1,293,988 -- 1,293,988 6.8
40 Sheppard Avenue West
Suite 606
Toronto, Ontario M2N 6K9
All current directors and executive officers as 10,100,338 230,835 10,331,173 54.2
a group (15 persons)(3)......................
</TABLE>

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

* Less than 1% of our outstanding common shares.

57
<PAGE>

(1) An aggregate of 4,848,860 common shares beneficially owned by Gerald W.
Smith, Paul Edwards, Paul Lupinacci and Randall N. Remme are held through
holding companies that will amalgamate with Changepoint immediately prior to
the closing of this offering. See "Description of Share Capital--General."

(2) The options to purchase 30,000 common shares held by The Vengrowth
Investment Fund Inc. and the options to purchase 20,000 common shares held
by JMI Equity Fund (Barbados) SRL, represented in the table above under the
"Stock Options" column, are held in the names of David W. Ferguson and
Robert J. Sywolski, respectively.

(3) Includes 4,429,940 common shares owned by The Vengrowth Investment
Fund Inc. and 262,874 common shares owned by The Vengrowth II Investment
Fund Inc. Mr. Ferguson is Managing Director of Vengrowth Capital Management.
Mr. Ferguson disclaims beneficial ownership of the common shares held by
Vengrowth, except to the extent of his pecuniary interest therein.

(4) Includes 262,874 common shares owned by The Vengrowth II Investment Fund
Inc. Both funds are managed by Vengrowth Capital Management.

(5) Includes 451,455 common shares owned by XDL Intervest Limited Partnership;
87,705 common shares owned by XDL Intervest (U.S.A.) Limited Partnership;
and 20,541 common shares owned by XDL Intervest (EF) Limited Partnership.
All of the above funds are managed by XDL Capital Corporation.

To our knowledge, we are not directly or indirectly owned or controlled by
another corporation or by any foreign government. We are not aware of any
arrangements, the operation of which may at a subsequent date result in a change
of control of our company.

58
<PAGE>
DESCRIPTION OF SHARE CAPITAL

GENERAL

Prior to the closing of this offering, Changepoint will amalgamate with
several holding companies that are controlled by existing shareholders. We have
been advised by the principals that these holding companies do not own or
control any assets other than common shares of Changepoint, nor do they have any
liabilities or conduct any operations. Upon the amalgamation, the Changepoint
common shares held by the holding companies will be issued to the
above-described shareholders of the holding companies. As a result, the
shareholders of the holding companies will hold our common shares directly. The
amalgamation will have no effect on our issued and outstanding share capital.

Prior to the amalgamation, our authorized share capital consists of an
unlimited number of common shares, 5,983,962 Class A redeemable convertible
preferred shares and 2,873,696 Class B redeemable convertible preferred shares.
Following the amalgamation, our authorized share capital will consist of an
unlimited number of common shares and an unlimited number of preferred shares,
issuable in one or more series. As of June 26, 2000, there were
10,197,108 common shares issued and outstanding, 5,983,962 Class A redeemable
convertible preferred shares issued and outstanding and 2,873,696 Class B
redeemable convertible preferred shares issued and outstanding.

Prior to the closing of this offering, all of our then-outstanding
redeemable convertible preferred shares will be converted into common shares,
and this class of preferred shares will be cancelled. Based on the number of
common shares outstanding as of June 26, 2000, after giving effect to the
conversion of all Class A and Class B redeemable convertible preferred shares
into common shares and the amalgamation, but prior to giving effect to this
offering and assuming no exercise of currently outstanding options, there will
be 19,054,766 common shares outstanding held of record by 50 shareholders. After
giving effect to this offering, but assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options, there will be
24,054,766 common shares outstanding.

COMMON SHARES

Holders of common shares are entitled to receive notice of and to attend all
meetings of shareholders and to vote at all such meetings together as a single
class, except in respect of matters where only the holders of shares of a
specified class or specified series of shares are entitled to vote separately.
The common shares carry one vote per share. Holders of common shares are
entitled, subject to the rights, privileges, restrictions and conditions
attaching to any other class of our shares, to receive any dividend declared by
our board of directors. In the event of any liquidation, dissolution or
winding-up of Changepoint or other distribution of assets of Changepoint among
our shareholders for the purpose of winding-up our affairs, subject to the
rights, privileges, restrictions and conditions attaching to any other class of
our shares, the assets and funds of Changepoint will be distributed among the
holders of common shares and the holders of any other class of our shares. This
distribution will be made pro rata based on the number of common shares held by
each holder, assuming conversion into common shares of all other classes of our
shares, and any other participating outstanding series or class of our shares
convertible into common shares. All outstanding common shares are fully paid and
nonassessable, and the common shares to be issued in this offering will be fully
paid and nonassessable.

PREFERRED SHARES

Our articles of amalgamation will provide that the board of directors has
the authority, without further action by the shareholders, to issue up to an
unlimited number of preferred shares in one or more series. The preferred shares
will be entitled to dividend and liquidation preferences over the common shares.
The board may also fix the designations, rights, powers, preferences, privileges
and

59
<PAGE>
relative, participating, optional or special rights of any preferred shares
issued, including any qualifications, limitations or restrictions. Special
rights which may be granted to a series of preferred shares may include dividend
rights, conversion rights, voting rights, terms of redemption and liquidations
preferences, any of which may be superior to the rights of the common shares.
Preferred share issuances could decrease the market price of the common shares
and may adversely affect the voting and other rights of the holders of common
shares. The issuance of preferred shares also could have the effect of delaying
or preventing a change of control of Changepoint. We currently do not have any
plans to issue preferred shares.

REGISTRATION RIGHTS

Pursuant to the Second Amended and Restated Registration Rights Agreement
dated May 26, 2000, among us and the holders of our Class A and Class B
redeemable convertible preferred shares, the holders of 8,857,658 common shares
will be entitled to rights with respect to the registration of these shares
under the U.S. Securities Act, as described below.

DEMAND REGISTRATION RIGHTS. At any time after six months following the
effective date of the registration statement related to this offering, the
holders of at least 40% of the common shares having registration rights can
request that we register all or a portion of their shares, so long as such
registration covers at least 20% of their common shares or any lesser percentage
if the total offering price of the common shares to the public is at least
$2 million. We will only be required to file two registration statements in
response to their demand registration rights.

PIGGYBACK REGISTRATION RIGHTS. If we register any securities for public
sale, the shareholders with registration rights will have the right to include
their common shares in the registration statement. The managing underwriter of
any underwritten offering will have the right to limit the number of common
shares included in a registration statement by these holders if it is of the
opinion that the inclusion of these common shares would adversely affect the
marketing of the securities to be sold by the Company.

FORM S-3 REGISTRATION RIGHTS. The holders of the common shares having
registration rights can request that we register their shares if we are eligible
to file a registration statement on Forms F-3 or S-3 and if the total price of
the shares offered to the public is at least $500,000.

CANADIAN OFFERINGS. The holders of shares having registration rights also
have rights with respect to demand, piggyback and short-form registrations in
Canada, which rights are substantially similar to those described in the
paragraphs above, with appropriate changes to recognize the differences between
U.S. and Canadian offerings.

We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, which will be paid by the selling shareholders.

Holders of these registration rights have waived the exercise of any demand
registration rights for 180 days following the date of this prospectus.

OWNERSHIP RESTRICTIONS

There is no law or governmental decree or regulation in Canada that
restricts the export or import of capital, or affects the remittance of
dividends, interest or other payments to non-resident holders of common shares,
other than withholding tax requirements. See "Tax Considerations."

There is no limitation imposed by Canadian law or by our articles of
amalgamation or other charter documents on the right of a non-resident to hold
or vote common shares, other than as provided by the Investment Canada Act, as
amended by the North American Free Trade Agreement Implementation Act (Canada)
and the World Trade Organization Agreement Implementation Act. The Investment
Canada Act requires notification and, in certain cases, advance review and
approval by the

60
<PAGE>

Government of Canada of the acquisition by a "non-Canadian" of "control" of a
"Canadian business," all as defined in the Investment Canada Act. Generally
speaking, the threshold for review will be higher in monetary terms for a member
of the World Trade Organization or North American Free Trade Agreement.

TRANSFER AGENTS AND REGISTRAR

The registrar and transfer agent for our common shares is American
Securities Transfer and Trust Incorporated. Its address is 1 Liberty Plaza, New
York, New York 10006, and its telephone number at this location is
(800) 663-9097.

61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, a total of 24,054,766 of our common shares
will be outstanding, assuming no exercise of the underwriters' over-allotment
option or of any outstanding options. The sale of substantial numbers of common
shares in the public market, or the possibility of such a sale, could adversely
affect prevailing market prices for our common shares and could impair our
ability to raise capital through the sale of our equity securities. As described
below, most of our common shares currently outstanding will not be available for
sale immediately after this offering due to restriction on resale. Public sales
of substantial amounts of our common shares following the lapse of those
restrictions could adversely affect the prevailing market price of our common
shares and our ability to raise capital in the future.

All of the common shares sold in this offering will be freely tradable
without restriction under the Securities Act of 1933, except by "affiliates" as
defined in Rule 144 under the Securities Act.

For the reasons set forth below, we believe that the following presently
outstanding common shares will be eligible for resale in the public market in
the United States at the following times:

<TABLE>
<CAPTION>
NUMBER OF
SHARES
----------
<S> <C>
At the date of this prospectus.............................. --
180 days after the date of this prospectus.................. 19,054,766
Later than 180 days after the date of this prospectus....... --
</TABLE>

Each of our directors, officers and shareholders have entered into lock-up
agreements pursuant to which they have agreed not to dispose of or hedge any of
their common shares for 180 days following the date of the prospectus without
the consent of Donaldson, Lufkin & Jenrette Securities Corporation on behalf of
the underwriters. See "Underwriting."

We intend to file with the SEC a registration statement on Form S-8
following the date of this prospectus. The S-8 registration statement will allow
holders of common shares that are issued under equity incentive arrangements to
resell those common shares in the public market, subject to lock-up agreements
entered into by certain of the option holders and any restrictions imposed by
Canadian law.

U.S. RESALE RESTRICTIONS

We believe that upon completion of this offering, 986,445 common shares will
be held by U.S. residents. As a result of the lock-up agreements and the
provisions of Rule 144 and Rule 701 under the Securities Act, such common shares
will be available for sale in the public market in the United States as set
forth in the table above, subject in some cases to Rule 144 limitations.

In general, under Rule 144, as in effect on the date of this prospectus, any
person, including any of our affiliates, who has beneficially owned common
shares for at least one year will be entitled to sell, in any three-month
period, a number of shares that, together with sales of any common shares with
which such person's sales must be aggregated, does not exceed the greater of:

- 1% of the then outstanding common shares, which will equal approximately
240,548 common shares after the closing of this offering; and

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

Sales of restricted securities pursuant to Rule 144 are subject to
requirements relating to manner of sale, notice and availability of current
public information about Changepoint. Persons who are our affiliates must also
comply with the restrictions and requirements of Rule 144, other than the
one-year

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holding period requirement, in order to sell common shares in the public market
which are not restricted securities.

Under Rule 144(k), a person who is deemed to have been our affiliate at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without having to comply with the manner of sale, public information,
volume limitation or notice filing provision of Rule 144.

Our employees, directors, officers, consultants or advisors may rely on
Rule 701 to resell common shares issued to them, pursuant to written
compensatory benefit plans or written contracts relating to their compensation.
Rule 701 also will apply to common shares acquired upon exercise of options
granted before the date of this prospectus, including exercises after the date
of this prospectus. Common shares issued in reliance on Rule 701 are restricted
securities and, subject to the 180-day lock-up agreements described above, may
be sold beginning 90 days after the date of this prospectus:

- by persons other than affiliates of Changepoint, subject only to the
manner of sale provisions of Rule 144; and

- by persons deemed to be affiliates of Changepoint under Rule 144 without
compliance with its one-year minimum holding period requirements.

Holders of 8,857,658 common shares will be entitled to require us to
register their common shares under the Securities Act, subject to the lock-up
agreements. See "Description of Share Capital--Registration Rights."

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<PAGE>
TAX CONSIDERATIONS

In this section we summarize the material anticipated United States and
Canadian federal income tax considerations relevant to a purchase of common
shares in this offering by individuals and corporations which:

- for purposes of the United States Internal Revenue Code, the Income Tax
Act (Canada) and the Canada-United States Income Tax Convention (1980),
are resident in the United States, or are otherwise subject to United
States federal income taxation without regard to source of income, and not
in Canada;

- hold the common shares as capital assets for purposes of the Internal
Revenue Code and capital property for purposes of the Income Tax Act
(Canada);

- deal at arm's length with us for purposes of the Income Tax Act (Canada);

- do not use or hold the common shares in carrying on a business in Canada,
through a permanent establishment or in connection with a fixed base in
Canada or otherwise, and are not an insurer which carries on business in
Canada or elsewhere; and

- in the case of individual holders, are also U.S. citizens.

We will refer to persons who satisfy the above conditions as "Unconnected
U.S. Shareholders."

We will assume, for purposes of this discussion, that you are an Unconnected
U.S. Shareholder. The tax consequences of a purchase of common shares by persons
who are not Unconnected U.S. Shareholders may differ substantially from the tax
consequences discussed in this section. The Income Tax Act (Canada) contains
rules relating to securities held by some financial institutions. We do not
discuss these rules and holders that are financial institutions should consult
their own tax advisors.

This discussion is based upon:

- the current provisions of the Income Tax Act (Canada) and regulations
under the Income Tax Act (Canada);

- the current provisions of the Internal Revenue Code and the regulations
thereunder;

- the current provisions of the Canada-United States Income Tax Convention
(1980);

- our understanding of the current administrative policies and practices
published by the Canada Customs and Revenue Agency;

- all specific proposals to amend the Income Tax Act (Canada) and the
regulations under the Income Tax Act (Canada) that have been publicly
announced by or on behalf of the Minister of Finance (Canada) prior to the
date of this prospectus and an assumption that the proposed amendments
will be enacted in their current form;

- the administrative policies published by the U.S. Internal Revenue
Service; and

- judicial decisions,

all of which are subject to change either prospectively or retroactively. We do
not discuss the potential effects of any recently proposed legislation in the
United States and do not take into account the tax laws of the various provinces
or territories of Canada or the tax laws of the various state and local
jurisdictions of the United States or foreign jurisdictions.

WE INTEND THIS DISCUSSION TO BE A GENERAL DESCRIPTION OF THE U.S. FEDERAL
AND CANADIAN FEDERAL INCOME TAX CONSIDERATIONS MATERIAL TO A PURCHASE OF COMMON
SHARES. THIS DISCUSSION DOES NOT ADDRESS ALL POSSIBLE TAX CONSEQUENCES RELATING
TO AN INVESTMENT IN OUR COMMON SHARES. WE HAVE NOT TAKEN INTO ACCOUNT YOUR
PARTICULAR CIRCUMSTANCES AND DO NOT ADDRESS CONSEQUENCES PECULIAR TO YOU UNDER
PROVISIONS OF U.S. OR CANADIAN INCOME TAX LAW. THEREFORE, YOU SHOULD CONSULT
YOUR OWN TAX ADVISOR REGARDING THE PARTICULAR CONSEQUENCES TO YOU OF PURCHASING
COMMON SHARES IN THIS OFFERING.

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<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

As an Unconnected U.S. Shareholder, you generally will include in income
dividend distributions paid by us to the extent of our current or accumulated
earnings and profits. You must include in income an amount equal to the
U.S. dollar value of such dividends on the date of receipt based on the exchange
rate on such date, without reduction for the Canadian withholding tax. You will
generally be entitled to a foreign tax credit, or deduction for U.S. federal
income tax purposes, in an amount equal to the Canadian tax withheld. To the
extent dividend distributions paid by us exceed our current or accumulated
earnings and profits, they will be treated first as a return of capital up to
your adjusted tax basis in the shares, and then as a gain from the sale or
exchange of the shares. We will report to you the portion of any dividend
distribution that exceeds our current or accumulated earnings and profits, as
required by the Internal Revenue Code and regulations thereunder.

Dividends paid by us generally will constitute "passive income" for purposes
of the foreign tax credit, which could reduce the amount of foreign tax credit
that you may claim. The Internal Revenue Code applies various limitations on the
amount of foreign tax credit that may be claimed by a U.S. taxpayer. Because of
the complexity of those limitations, you should consult your own tax advisor
with respect to the amount of the foreign taxes you may claim as a credit.

Dividends paid by us on the shares will not generally be eligible for the
"dividends received" deductions. An Unconnected U.S. Shareholder which is a
corporation may, under some circumstances, be entitled to a 70% deduction of the
U.S. source portion of dividends received from us if such Unconnected
U.S. Shareholder owns shares representing at least 10% of our voting power and
value.

If you sell the shares, you generally will recognize United States source
gain or loss in an amount equal to the difference, if any between the amount
realized on the sale and your adjusted tax basis in the shares. Subject to the
following discussion of our being treated as a passive foreign investment
company, any gain or loss you recognize upon the sale of shares held as capital
assets will be long-term or short-term capital gain or loss, depending on
whether the shares have been held by you for more than one year.

Under current U.S. tax regulations, dividends paid by us on the shares
generally will not be subject to U.S. information reporting or the 31% backup
withholding tax unless they are paid in the United States through a U.S. or
U.S.-related paying agent, including a broker. If you furnish the paying agent
with a duly completed and signed Form W-9 such dividends will not be subject to
the backup withholding tax. You will be allowed a refund or a credit equal to
any amounts withheld under the U.S. backup withholding tax rules against your
U.S. federal income tax liability, provided you furnish the required information
to the Internal Revenue Service.

PERSONAL HOLDING COMPANIES

We could be classified as a personal holding company for U.S. federal income
tax purposes if both of the following tests are satisfied:

- at any time during the last half of our taxable year, five or fewer
individuals own or are deemed to own more than 50% of the total value of
our outstanding shares; and

- we receive 60% or more of our U.S. related adjusted ordinary gross income
from specified passive sources, such as interest, dividends, rents and
royalty payments.

A personal holding company is taxed on a portion of its undistributed
U.S. source income, including specific types of foreign source income which are
connected with the conduct of a U.S. trade or business, to the extent this
income is not distributed to shareholders. We do not believe we are a personal
holding company presently, and we do not expect to become one. However, we can
not assure you that we will not qualify as a personal holding company in the
future.

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FOREIGN PERSONAL HOLDING COMPANIES

We could be classified as a foreign personal holding company if in any
taxable year both of the following tests are satisfied:

- five or fewer individuals who are United States citizens or residents own
or are deemed to own more than 50% of the total voting power of all
classes of our shares entitled to vote or the total value of our shares;
and

- at least 60%, 50% in some cases, of our gross income consists of "foreign
personal holding company income," which generally includes passive income
such as dividends, interests, gains from the sale or exchange of shares or
securities, rent and royalties.

If we are classified as a foreign personal holding company and if you hold
shares in us, you may have to include in your gross income as a dividend your
pro rata portion of our undistributed foreign personal holding company income.
If you dispose of your shares prior to such date, you will not be subject to tax
under these rules. We do not believe we are a foreign personal holding company
presently, and we do not expect to become one. However, we can not assure you
that we will not qualify as a foreign personal holding company in the future.

PASSIVE FOREIGN INVESTMENT COMPANIES

We could be classified as a passive foreign investment company if, for any
taxable year, either:

- 75% or more of our gross income is "passive income," which includes
interest, dividends and some types of rents and royalties, or

- the average percentage, by fair market value, or, in some cases, by
adjusted tax basis, of our assets that produce or are held for the
production of "passive income" is 50% or more.

Distributions which constitute "excess distributions," as defined in
Section 1291 of the Internal Revenue Code, from a passive foreign investment
company and dispositions of shares of a passive foreign investment company are
subject to the highest rate of tax on ordinary income in effect and to an
interest charge based on the value of the tax deferred during the period during
which the shares are owned. However, if an Unconnected U.S. Shareholder makes a
timely election to treat us as a qualified electing fund under section 1295, the
above-described rules generally will not apply. Instead, the Unconnected
U.S. Shareholder would include annually in his gross income his pro rata share
of our ordinary earnings and net capital gain, regardless of whether such income
or gain was actually distributed. Tax on this income, however, may be deferred.
In order to make a qualified electing fund election, the Unconnected
U.S. Shareholder must receive from us annually an information statement setting
forth the earnings and capital gains for the year.

In addition, subject to specific limitations, Unconnected U.S. Shareholders
owning actually or constructively marketable shares in a passive foreign
investment company may make an election to mark those shares to market annually,
rather than being subject to the above-described rules. Amounts included in or
deducted from income under this mark to market election and actual gains and
losses realized upon the sale or disposition of the shares, subject to specific
limitations, will be treated as ordinary gains or losses.

In addition, special rules apply if we qualify as both a passive foreign
investment company and a "controlled foreign corporation," as defined below, and
an Unconnected U.S. Shareholder owns, actually or constructively, 10% or more of
the total combined voting power of all classes of our shares entitled to vote.

We believe that we will not be a passive foreign investment company for the
current fiscal year and we do not expect to become a passive foreign investment
company in future years. You should be aware, however, that if we are or become
a passive foreign investment company we may not be able to satisfy
record-keeping requirements that would permit you to make a qualified electing
fund election.

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<PAGE>
You should consult your tax advisor with respect to how the passive foreign
investment company rules affect your tax situation, including the advisability
of making an election to treat us as a qualified electing fund or making a mark
to market election.

CONTROLLED FOREIGN CORPORATION

If more than 50% of the voting power of all classes of our shares or the
total value of our shares is owned, directly or indirectly, by citizens of the
United States, U.S. domestic partnerships and corporations or estates or trusts
other than foreign estates or trusts, each of which owns 10% or more of the
total combined voting power of all classes of our shares, we could be treated as
a "controlled foreign corporation" under Subpart F of the Internal Revenue Code.
This classification would effect many complex results, including requiring such
shareholders to include in income their pro rata shares of our "Subpart F
Income." The term "Subpart F Income" is defined by the Internal Revenue Code and
includes certain specified categories of income earned by a controlled foreign
corporation. In addition, gain from the sale or exchange of shares by an
Unconnected U.S. Shareholder who is or was such a 10% or greater shareholder at
any time during the five-year period ending with the sale or exchange will be
ordinary dividend income to the extent of our earnings and profits attributable
to the shares sold or exchanged.

We do not believe that we are a controlled foreign corporation and we do not
anticipate that we will become a controlled foreign corporation as a result of
the offering. However, we can not assure you that we will not qualify as a
controlled foreign corporation in the future.

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

In this section, we summarize the material anticipated Canadian federal
income tax considerations relevant to your purchase of common shares. This
section will only apply if you do not use or hold and are not deemed to use or
hold the common shares in, or in the course of, carrying on a business in Canada
for the purposes of the Income Tax Act (Canada).

Under the Income Tax Act (Canada), as an Unconnected U.S. Shareholder, you
will generally be exempt from Canadian tax on a capital gain realized on an
actual or deemed disposition of the common shares unless you, persons with whom
you did not deal at arm's length for the purposes of the Income Tax Act
(Canada), or you and such persons owned or had interests in or rights or options
to acquire 25% or more of our issued common shares of any class of the capital
stock of our company at any time during the five year period immediately
preceding the disposition or deemed disposition. Where a capital gain realized
on a disposition or deemed disposition of our common shares is subject to tax
under the Income Tax Act (Canada), the Canada-United States Income Tax
Convention (1980) will exempt the capital gain from Canadian tax if, on the
disposition of our shares, the value of our common shares is not derived
principally from real property situated in Canada. This relief under the
Canada-United States Income Tax Convention (1980) may not be available if you
had a permanent establishment or fixed base available in Canada during the
12 months immediately preceding the disposition of the shares.

Dividends paid, credited or deemed to have been paid or credited on the
shares to Unconnected U.S. Shareholders will generally be subject to a Canadian
withholding tax at a rate of 25% under the Income Tax Act (Canada). Under the
Canada-United States Income Tax Convention (1980), the rate of withholding tax
generally applicable to Unconnected U.S. Shareholders who beneficially own the
dividends is reduced to 15%. In the case of Unconnected U.S. Shareholders that
are companies that beneficially own at least 10% of our voting shares, the rate
of withholding tax on dividends is reduced to 5%.

The Canadian federal government does not currently impose any estate taxes
or succession duties, however, if you die, there is generally a deemed
disposition of the common shares held at that time for proceeds of disposition
equal to the fair market value of the shares immediately before your death.
Capital gains realized on the deemed disposition, if any, will generally have
the income tax consequences described above.

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<PAGE>
UNDERWRITING

Subject to the terms and conditions contained in an underwriting agreement
dated , 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, U.S. Bancorp Piper
Jaffray Inc., CIBC World Markets Corp. and DLJDIRECT Inc., have severally agreed
to purchase from us the number of common shares set forth opposite their names
below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
U.S. Bancorp Piper Jaffray Inc..............................
CIBC World Markets Corp.....................................
DLJDIRECT Inc...............................................
---------
Total................................................... 5,000,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
to purchase and accept delivery of the common shares offered by this prospectus
are subject to approval by their counsel of legal matters concerning the
offering and to conditions that must be satisfied by us. The underwriters are
obligated to purchase and accept delivery of all of the common shares offered by
this prospectus, other than those common shares covered by the over-allotment
option described below, if any are purchased.

The underwriters initially propose to offer the common shares in part
directly to the public at the initial public offering price set forth on the
cover page of this prospectus and in part to dealers, including the
underwriters, at such price less a concession not in excess of $0.63 per common
share. The underwriters may allow, and such dealers may re-allow, to other
dealers a concession not in excess of $0.63 per common share. After the initial
offering of the common shares, the public offering price and other selling terms
may be changed by the representatives at any time without notice. The
underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.

The following table shows the underwriting commissions to be paid by us to
the underwriters assuming either no exercise or full exercise by the
underwriters of their over-allotment options.

<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
<S> <C> <C>
Per share............................................ $ 0.63 $ 0.63
Total................................................ $3,150,000 $3,622,500
</TABLE>

Changepoint will pay the offering expenses, estimated to be $1,000,000.

An electronic prospectus will be available on the Web site maintained by
DLJDIRECT Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Other than the prospectus in electronic format, the information on
this Web site relating to the offering is not part of this prospectus and has
not been approved or endorsed by Changepoint or the underwriters, and should not
be relied on by prospective investors.

Changepoint has granted to the underwriters an option, exercisable for
30 days after the date of this prospectus, to purchase, from time to time, in
whole or in part, up to an aggregate of

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<PAGE>
additional common shares at the initial public offering price less underwriting
commissions. The underwriters may exercise the option solely to cover
over-allotments, if any, made in connection with the offering. To the extent
that the underwriters exercise the option, each underwriter will become
obligated, subject to conditions contained in the underwriting agreement, to
purchase its pro rata portion of such additional common shares based on the
underwriters' percentage underwriting commitment as indicated in the above
table.

Changepoint has agreed to indemnify the underwriters against liabilities
which may arise in connection with the offering, including liabilities under the
Securities Act, or to contribute to payments that the underwriters may be
required to make.

Changepoint, its officers, directors, shareholders and substantially all of
its option holders are subject to agreements providing that, with limited
exceptions, they will not:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend, or otherwise transfer or dispose of directly
or indirectly any common shares or any securities convertible into or
exercisable or exchangeable for common shares; or

- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common shares, whether any such transaction described above is to be
settled by delivery of common shares or other securities, in cash or
otherwise

for a period of 180 days after the date of this prospectus. Donaldson, Lufkin &
Jenrette Securities Corporation may release some or all of these shares from
such restrictions prior to the expiration of the 180-day period lock-up period,
although it has no current intention of doing so. Donaldson, Lukfin & Jenrette
Securities Corporation will consider, among other factors, the shareholder's
reasons for requesting the release, the number of shares for which release is
being requested and the market conditions at the time of release. Changepoint
currently is not aware of any officer, director or current shareholder that
intends to ask for a release from the lock-up restrictions.

In addition, during such 180-day period, Changepoint has also agreed not to
file any registration statement with respect to the registration of any common
shares or any securities convertible into or exercisable or exchangeable for
common shares without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation, other than a registration statement on Form S-8 relating
to the registration of common shares underlying options. Furthermore, no
Changepoint shareholders have demand registration rights that may be exercised
during such 180 day period which have not been waived.

Prior to the offering, there has been no established trading market for the
common shares. The initial public offering price of the common shares offered by
this prospectus will be determined by negotiation among Changepoint and the
underwriters. The factors to be considered in determining the initial public
offering price include:

- the history of and the prospects for the industry in which Changepoint
competes;

- the past and present operations of Changepoint;

- the historical results of operations of Changepoint;

- the prospects for future earnings of Changepoint;

- the recent market prices of securities of generally comparable companies;
and

- the general condition of the securities markets at the time of the
offering.

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<PAGE>

The underwriters have reserved up to 500,000 common shares to be sold in
this offering for sale to some of our employees and associates of our employees
and directors, and to other individuals or companies who have commercial
arrangements or personal relationships with us, including a company with which
we have a relationship that has a contractual right to participate. Through this
directed share program, we intend to ensure that those individuals and companies
that have supported us, that have a contractual relationship, or who are in a
position to support us in the future, have the opportunity to purchase our
common shares at the same price that we are offering our common shares to the
general public. Prospective participants will not receive any investment
materials other than a copy of this prospectus, and will be permitted to
participate in this offering at the initial public offering price presented on
the cover page of this prospectus. No commitment to purchase common shares by
any participant in the directed share program will be accepted until after the
registration statement of which this prospectus is a part is effective and an
initial public offering price has been established. The number of common shares
available for sale to the general public will be reduced by the number of common
shares sold through the directed share program. Any common shares reserved for
the directed share program which are not so purchased will be offered by the
underwriters to the general public on the same basis as the other common shares
offered hereby.

Of the 500,000 common shares to be reserved in the directed share program,
up to 150,000 common shares may be offered directly by Changepoint to its
employees who reside in Canada at the initial public offering price. In
accordance with applicable Canadian securities laws, the underwriters may not
receive any commissions on sales of securities by Changepoint to such employees.
Consequently, to the extent that these employees purchase shares in the directed
share program, the underwriters' commissions, as set forth in the table above
and on the cover page of this prospectus, will be reduced accordingly. No
commitment to purchase common shares by any employee who resides in Canada will
be accepted by Changepoint until after the registration statement of which this
prospectus is a part is effective. Any common shares reserved for employees who
reside in Canada which are not so purchased will be offered by the underwriters
to the general public on the same basis as the other common shares offered
hereby.

Other than in the United States, no action has been taken by Changepoint or
the underwriters that would permit a public offering of the common shares
offered in any jurisdiction where action for that purpose is required. The
common shares offered may not be offered or sold, directly or indirectly, nor
may this prospectus or any other offering material or advertisements in
connection with the offer and sale of any such common shares be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of such jurisdiction.
Persons into whose possession this prospectus comes are advised to inform
themselves about and observe any restrictions relating to the offering and the
distribution of this prospectus. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any common shares offered in any
jurisdiction in which such an offer or a solicitation is unlawful.

The common shares may be offered in Canada by the underwriters or their
Canadian affiliates pursuant to a prospectus qualifying the common shares for
distribution in certain provinces in Canada or pursuant to prospectus exemptions
under applicable securities legislation. Each of the underwriters has agreed
that it will only distribute common shares in Canada in accordance with
prospectus and registration requirements of applicable securities legislation or
exemptions from these requirements.

In connection with the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common shares.
Specifically, the underwriters may over-allot the offering, creating a syndicate
short position. The underwriters may bid for and stabilize the price of the
common shares. In addition, the underwriting syndicate may reclaim selling
concessions from syndicate members and selected dealers if they repurchase
previously distributed common shares in syndicate covering transactions, in
stabilizing transactions or otherwise. These activities may stabilize

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<PAGE>
or maintain the market price of the common shares above independent market
levels. The underwriters are not required to engage in these activities, and may
end any of these activities at any time.

LEGAL MATTERS

Goldman, Spring, Schwartz & Kichler, Toronto, Ontario, will pass upon the
legality of the common shares offered by this prospectus. Skadden, Arps, Slate,
Meagher & Flom LLP, Toronto, Ontario is acting as our United States counsel with
respect to the offering. Goodwin, Procter & Hoar LLP, Boston, Massachusetts, is
acting as United States counsel to the underwriters. Goodman, Phillips &
Vineberg, Toronto, Ontario, is acting as Canadian counsel to the underwriters.

EXPERTS

The consolidated balance sheets of Changepoint as of July 31, 1998 and 1999
and the consolidated statements of operations, comprehensive income (loss),
shareholders' equity (deficiency) and cash flows for each of the years in the
three year period ended July 31, 1999 included in this prospectus have been
audited by KPMG LLP, independent public accountants, as indicated in their
report with respect thereto, and are included in this prospectus in reliance
upon the authority of KPMG LLP as experts in auditing and accounting.

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ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, a registration statement on Form F-1 covering the
common shares being sold in this offering. We have not included in this
prospectus all the information contained in the registration statement, and you
should refer to the registration statement and its exhibits for further
information.

Any statement in this prospectus about any of our contracts or other
documents is not necessarily complete. If the contract or document is filed as
an exhibit to the registration statement, the contract or document is deemed to
modify the description contained in this prospectus. You must review the
exhibits themselves for a complete description of the contract or document.

You may review a copy of the registration statement, including exhibits and
schedules filed with it, at the SEC's public reference facilities in Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies of such
materials from the Public Reference Section of the SEC, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You
may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The SEC maintains a Web site (HTTP://WWW.SEC.GOV) that contains
reports, proxy and information statements and other information regarding
registrants, such as Changepoint, that file electronically with the SEC.

You may read and copy any reports, statements or other information that we
file with the SEC at the addresses indicated above, and you may also access them
electronically at the Web site set forth above. These SEC filings are also
available to the public from commercial document retrieval services.

Prior to this offering, we have not been required to file reports with the
SEC. Following consummation of the offering, we will be required to file reports
and other information with the SEC under the Securities Exchange Act of 1934. As
a foreign private issuer, we are exempt from the rules under the Exchange Act
prescribing the furnishing and content of proxy statements, and our officers,
directors and principal shareholders are exempt from the reporting and
short-swing profit recovery provisions contained in Section 16 of the Exchange
Act. Under the Exchange Act, as a foreign private issuer, we are not required to
publish financial statements as frequently or as promptly as United States
companies.

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CHANGEPOINT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Form of Auditors' Report.................................... F-2

Consolidated Balance Sheets................................. F-3

Consolidated Statements of Operations....................... F-4

Consolidated Statements of Comprehensive Income (Loss)...... F-5

Consolidated Statements of Shareholders' Equity
(Deficiency).............................................. F-6

Consolidated Statements of Cash Flows....................... F-7

Notes to Consolidated Financial Statements.................. F-8
</TABLE>

F-1
<PAGE>

FORM OF INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Changepoint Corporation

We have audited the accompanying consolidated balance sheets of Changepoint
Corporation as of July 31, 1998 and 1999 and the related consolidated statements
of operations, comprehensive income (loss), shareholders' equity (deficiency)
and cash flows for each of the years in the three year period ended July 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as at July 31, 1998 and 1999 and the results of its operations and its cash
flows for each of the years in the three year period ended July 31, 1999 in
conformity with generally accepted accounting principles in the United States.

Chartered Accountants

Toronto, Canada
September 20, 1999, except
as to note 16 which is
as of May 26, 2000

F-2
<PAGE>
CHANGEPOINT CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JANUARY 31,
2000
JULY 31, PRO FORMA
------------------- JANUARY 31, SHAREHOLDERS'
1998 1999 2000 EQUITY
-------- -------- ------------ -------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,598 $ 4,504 $ 353
Short-term investments (note 3)........................... -- -- 3,796
Accounts receivable, net of allowance for doubtful
accounts of $81 at July 31, 1998; $231 at July 31, 1999;
and $248 at January 31, 2000............................ 1,014 2,311 2,989
Investment tax credits receivable......................... 131 44 46
Prepaid expenses and other................................ 207 450 557
------- ------- ---------
Total current assets........................................ 2,950 7,309 7,741
Property and equipment (note 4)............................. 484 502 861
------- ------- ---------
Total assets.............................................. $ 3,434 $ 7,811 $ 8,602
======= ======= =========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 127 $ 141 $ 392
Accrued liabilities (note 5).............................. 507 731 1,018
Deferred revenue.......................................... 209 401 720
Current portion of obligations under capital leases
(note 7)................................................ 25 82 87
------- ------- ---------
Total current liabilities................................... 868 1,355 2,217

LONG-TERM LIABILITIES:
Obligations under capital leases (note 7)................. 52 131 94
------- ------- ---------
Total liabilities....................................... 920 1,486 2,311

Class A redeemable convertible preferred shares (note 8):
Authorized:
5,983,962 shares
Issued and outstanding:
4,022,450 shares at July 31, 1999 and 5,983,962 shares
at January 31, 2000..................................... -- 6,557 74,800 $ --
Common shares eligible for redemption (note 9):
Issued and outstanding:
3,944,085 shares at July 31, 1998; 3,838,044 shares at
July 31, 1999; and 3,252,381 shares at January 31,
2000.................................................... 5,873 6,243 40,655 --
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common shares:
Authorized:
Unlimited shares
Issued and outstanding:
8,106,007 shares at July 31, 1998; 6,789,345 shares at
July 31, 1999; 6,701,059 shares at January 31, 2000;
and 15,937,402 shares at January 31, 2000
pro forma............................................. 178 182 4,425 119,880
Share purchase loans receivable........................... (93) (93) (56) (56)
Deferred stock-based compensation......................... -- -- (3,353) (3,353)
Cumulative other comprehensive income (loss).............. (244) (229) 28 28
Deficit................................................... (3,200) (6,335) (110,208) (110,208)
------- ------- --------- ---------
Total shareholders' equity (deficiency)................. (3,359) (6,475) (109,164) $ 6,291
------- ------- --------- =========
Total liabilities and shareholders' equity.................. $ 3,434 $ 7,811 $ 8,602
======= ======= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
CHANGEPOINT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
------------------------------ --------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Products.................................................. $ 1,008 $ 1,821 $ 3,974 $ 1,774 $ 2,781
Services.................................................. 1,922 1,986 1,963 814 1,157
------- ------- ------- ------- ---------
Total revenues 2,930 3,807 5,937 2,588 3,938
------- ------- ------- ------- ---------

COST OF REVENUES:
Products.................................................. 172 69 206 119 19
Services.................................................. 1,478 1,231 1,151 511 850
------- ------- ------- ------- ---------
Total cost of revenues.................................. 1,650 1,300 1,357 630 869
------- ------- ------- ------- ---------
Gross profit................................................ 1,280 2,507 4,580 1,958 3,069

OPERATING EXPENSES:
Research and development.................................. 1,283 1,536 2,073 881 1,264
Sales and marketing....................................... 781 1,670 2,178 982 3,121
General and administrative................................ 516 722 993 390 706
Amortization of deferred stock-based compensation*........ -- -- -- -- 903
------- ------- ------- ------- ---------
Total operating expenses................................ 2,580 3,928 5,244 2,253 5,994
------- ------- ------- ------- ---------
Loss from operations........................................ (1,300) (1,421) (664) (295) (2,925)
Interest income............................................. 52 57 50 36 153
Other income (note 15)...................................... -- -- 250 -- --
------- ------- ------- ------- ---------
Loss before provision for income taxes...................... (1,248) (1,364) (364) (259) (2,772)
Provision for income tax expense (recovery)................. (131) (17) 20 26 --
------- ------- ------- ------- ---------
Net loss.................................................... (1,117) (1,347) (384) (285) (2,772)

Class A preferred share accretion (note 8).................. -- -- (2,293) -- (65,136)
Common shares eligible for redemption accretion............. (729) (498) (458) -- (35,801)
------- ------- ------- ------- ---------
Net loss applicable to common shares........................ $(1,846) $(1,845) $(3,135) $ (285) $(103,709)
======= ======= ======= ======= =========
Basic and diluted net loss per common share................. $ (0.23) $ (0.16) $ (0.26) $ (0.02) $ (10.19)
======= ======= ======= ======= =========
Shares used in computation, basic and diluted............... 8,002 11,211 12,041 12,091 10,175
======= ======= ======= ======= =========
Pro forma basic and diluted net loss per common share....... $ (0.03) $ (0.18)
======= =========
Pro forma shares used in computation, pro forma basic and
diluted................................................... 12,041 15,434
======= =========
</TABLE>

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

* Note: The amortization of deferred stock-based compensation relates to the
cost of services revenues and operating expenses as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
------------------------------ --------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Amortization of deferred stock-based compensation:
Cost of services revenues............................... $ -- $ -- $ -- $ -- $ 42
Research and development................................ -- -- -- -- 36
Sales and marketing..................................... -- -- -- -- 202
General and administrative.............................. -- -- -- -- 623
------- ------- ------- ------- ---------
$ -- $ -- $ -- $ -- $ 903
======= ======= ======= ======= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
CHANGEPOINT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net loss........................................ $ (1,117) $ (1,347) $ (384) $ (285) $ (2,772)
Other comprehensive income (loss):
Foreign currency translation adjustment....... (1) (241) 15 9 257
-------- -------- ------ ------ --------
Comprehensive loss.............................. $ (1,118) $ (1,588) $ (369) $ (276) $ (2,515)
======== ======== ====== ====== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
CHANGEPOINT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
CUMULATIVE
SHARE OTHER TOTAL
COMMON SHARES PURCHASE DEFERRED COMPREHENSIVE RETAINED SHAREHOLDERS'
--------------------- LOANS STOCK-BASED INCOME EARNINGS EQUITY
NUMBER AMOUNT RECEIVABLE COMPENSATION (LOSS) (DEFICIT) (DEFICIENCY)
---------- -------- ---------- ------------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, JULY 31, 1996........... 7,988,734 $ 48 $ -- $ -- $ (2) $ 491 $ 537
Stock options exercised........... 82,134 93 (93) -- -- -- --
Issuance of common shares for
cash............................ 27,639 28 -- -- -- -- 28
Currency translation adjustment... -- -- -- -- (1) -- (1)
Adjustment to fair value on common
shares eligible for redemption
(note 9)........................ -- -- -- -- -- (729) (729)
Net loss.......................... -- -- -- -- -- (1,117) (1,117)
---------- ------ ---- ------- ----- --------- ---------
BALANCES, JULY 31, 1997........... 8,098,507 169 (93) -- (3) (1,355) (1,282)
Issuance of common shares for
cash............................ 7,500 9 -- -- -- -- 9
Currency translation adjustment... -- -- -- -- (241) -- (241)
Adjustment to fair value on common
shares eligible for
redemption...................... -- -- -- -- -- (498) (498)
Net loss.......................... -- -- -- -- -- (1,347) (1,347)
---------- ------ ---- ------- ----- --------- ---------
BALANCES, JULY 31, 1998........... 8,106,007 178 (93) -- (244) (3,200) (3,359)
Stock options exercised........... 73,134 33 -- -- -- -- 33
Issuance of Class A preferred
shares in exchange for common
shares.......................... (1,389,796) (29) -- -- -- -- (29)
Currency translation adjustment... -- -- -- -- 15 -- 15
Class A preferred share accretion
(note 8)........................ -- -- -- -- -- (2,293) (2,293)
Adjustment to fair value on common
shares eligible for redemption
(note 9)........................ -- -- -- -- -- (458) (458)
Net loss.......................... -- -- -- -- -- (384) (384)
---------- ------ ---- ------- ----- --------- ---------
BALANCES, JULY 31, 1999........... 6,789,345 182 (93) -- (229) (6,335) (6,475)
Compensation options exercised*... 38,882 37 -- -- -- -- 37
Purchase of common shares for
cancellation*................... (127,168) (50) -- -- -- (164) (214)
Deferred stock-based
compensation*................... -- 4,256 -- (4,256) -- -- --
Currency translation
adjustment*..................... -- -- -- -- 257 -- 257
Class A preferred shares
accretion* (note 8)............. -- -- -- -- -- (65,136) (65,136)
Adjustment to fair value on common
shares eligible for redemption*
(note 9)........................ -- -- -- -- -- (35,801) (35,801)
Payment of share purchase loans
receivable*..................... -- -- 37 -- -- -- 37
Amortization of deferred
stock-based compensation*....... -- -- -- 903 -- -- 903
Net loss*......................... -- -- -- -- -- (2,772) (2,772)
---------- ------ ---- ------- ----- --------- ---------
BALANCES, JANUARY 31, 2000*....... 6,701,059 $4,425 $(56) $(3,353) $ 28 $(110,208) $(109,164)
========== ====== ==== ======= ===== ========= =========
</TABLE>

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

* Unaudited

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
CHANGEPOINT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $(1,117) $(1,347) $ (384) $ (285) $(2,772)
Depreciation and amortization........................... 137 164 163 83 86
Amortization of deferred stock-based compensation....... -- -- -- -- 903
Changes in non-cash operating working capital:
Accounts receivable................................... (594) 22 (1,080) (583) (395)
Investment tax credits receivable..................... (132) -- (87) (57) (2)
Prepaid expenses and other............................ 13 (209) (227) (83) (108)
Accounts payable...................................... (74) 71 43 (63) 269
Accrued liabilities................................... 261 (9) 151 28 52
Deferred revenue...................................... 64 161 190 88 297
------- ------- ------- ------ -------
Net cash used in operating activities................... (1,442) (1,147) (1,231) (872) (1,670)
------- ------- ------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments...................... -- -- -- -- (3,796)
Purchase of property and equipment...................... (480) (99) (3) (15) (429)
------- ------- ------- ------ -------
Net cash used in investing activities................... (480) (99) (3) (15) (4,225)
------- ------- ------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Class A preferred shares.................... -- -- 4,235 -- 3,107
Issuance of special warrants............................ 1,836 -- -- -- --
Issuance of common shares eligible for redemption....... -- 2,810 -- -- --
Issuance of common shares............................... 28 9 33 -- 37
Repurchase of common shares eligible for redemption..... -- -- -- -- (1,389)
Purchase of common shares for cancellation.............. -- -- (88) -- (214)
Repayment of obligations under capital leases........... -- (13) (40) (26) (32)
------- ------- ------- ------ -------
Net cash from (used in) financing activities............ 1,864 2,806 4,140 (26) 1,509
------- ------- ------- ------ -------
Effect of currency translation on cash balances........... (1) (143) -- 4 235
------- ------- ------- ------ -------
Increase (decrease) in cash and cash equivalents.......... (59) 1,417 2,906 (909) (4,151)
Cash and cash equivalents, beginning of period............ 240 181 1,598 1,598 4,504
------- ------- ------- ------ -------
Cash and cash equivalents, end of period.................. $ 181 $ 1,598 $ 4,504 $ 689 $ 353
======= ======= ======= ====== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.............................................. $ -- $ 3 $ 8 $ 3 $ 1
Income taxes.......................................... -- -- 25 25 --
------- ------- ------- ------ -------
$ -- $ 3 $ 33 $ 28 $ 1
======= ======= ======= ====== =======
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations............................... $ -- $ 95 $ 175 $ -- $ --
======= ======= ======= ====== =======
Deferred stock-based compensation....................... $ -- $ -- $ -- $ -- $ 4,256
======= ======= ======= ====== =======
Class A preferred shares accretion...................... $ -- $ -- $ -- $ -- $65,136
======= ======= ======= ====== =======
Adjustment to fair value on common shares eligible for
redemption............................................ $ -- $ -- $ -- $ -- $35,801
======= ======= ======= ====== =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 1--DESCRIPTION OF THE BUSINESS

Changepoint Corporation ("the Company") designs, develops, and markets
comprehensive solutions to automate and streamline the business processes of
information technology, or IT, services organizations and facilitate business
transactions and collaboration among buyers and suppliers of IT services over
the Internet.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

These financial statements are stated in U.S. dollars, except as otherwise
noted. They have been prepared in accordance with accounting principles
generally accepted in the United States.

BASIS OF CONSOLIDATION

These consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany transactions and
balances have been eliminated.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The unaudited interim consolidated balance sheet of the Company as of
January 31, 2000 and the consolidated statements of operations, comprehensive
income (loss), shareholders' equity (deficiency) and cash flows for the six
months ended January 31, 1999 and 2000 have been included herein. In the opinion
of management, these unaudited interim consolidated financial statements reflect
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company as of January 31, 2000 and
the results of its operations and its cash flows for the six months ended
January 31, 1999 and 2000. Results for the six months ended January 31, 2000 are
not necessarily indicative of the results to be expected for the entire year.

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.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company considers all highly liquid investments with an original
maturity date of three months or less from the date of purchase to be cash
equivalents.

The Company has classified its short-term investments as "available for
sale". These items are carried at fair value, based on the quoted market prices,
and unrealized gains and losses, if material, are reported as a separate
component of accumulated other comprehensive income (loss) in shareholders'
equity. Because of the short-term nature of the Company's short-term
investments, realized and unrealized gains and losses have been immaterial.

F-8
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, net of accumulated depreciation
and amortization, and are depreciated and amortized over their estimated useful
lives.

All internal use software is accounted for in accordance with Statement of
Position ("SOP") 98-1 Accounting for Costs of Computer Software Developed or
Obtained for Internal Use. Any costs that meet the criteria for capitalization
under SOP 98-1 will be included in property and equipment as computer software.
To date, no such costs have been capitalized.

Expenditures for maintenance and repairs have been charged to the statement
of operations as incurred. Depreciation and amortization are computed using the
following methods and annual rates:

<TABLE>
<CAPTION>
ASSET BASIS RATE
----- ----- ----
<S> <C> <C>
Computer hardware....................... Declining balance 30%
Furniture and fixtures.................. Declining balance 20%
Computer software....................... Straight-line 1 - 3 years
Leasehold improvements.................. Straight-line Over the term of the lease
</TABLE>

The Company regularly reviews the carrying values of its property and
equipment by comparing the carrying amount of the asset to the expected future
cash flows to be generated by the asset. If the carrying value exceeds the
amount recoverable, a writedown of the asset to estimated fair value is charged
to the statement of operations. Assets to be sold are carried at estimated fair
value less disposal costs.

REVENUE RECOGNITION

The Company recognizes revenue in accordance with Statement of Position
("SOP") 97-2, Software Revenue Recognition, as amended by SOP 98-4 and
SOP 98-9. SOP 97-2, as amended, generally requires revenue earned on software
arrangements involving multiple elements to be allocated to each element based
on the relative fair value of the elements.

To date, the Company has derived its revenue from licenses of its products,
maintenance and support, implementation, training and consulting services.

Revenue recognized from multiple-element software arrangements is allocated
to each element of the arrangement based on the fair values of the elements,
such as software products, maintenance and support, and implementation and
training services. The determination of fair value is based on objective
evidence specific to the Company.

Revenue from license fees is recognized when persuasive evidence of an
arrangement exists, delivery of the product has occurred, no significant Company
obligations with regard to implementation remain, the fee is fixed or
determinable, and collectibility is probable. If collectibility is not
considered probable, revenue is recognized when the fee is collected.

F-9
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Maintenance and support revenue is deferred and recognized on a
straight-line basis over the life of the related agreement, which is typically
one year. Revenue from implementation, training, consulting and other services
is recognized when the services are performed.

Deferred revenue includes amounts billed to customers for which revenue has
not been recognized which generally results from deferred maintenance and
support and consulting services not yet rendered.

CURRENCY TRANSLATION

Monetary assets and liabilities of the Company and of its wholly owned
subsidiaries, which are integrated foreign operations, are denominated in
foreign currencies and translated into Canadian dollars (which is considered to
be the functional currency) at the exchange rate prevailing at the balance sheet
date. Non-monetary assets and liabilities are translated at the historical
exchange rates. Transactions included in operations are translated at the
average rates in effect during such period, except for depreciation, which is
translated at historical rates. Exchange gains and losses resulting from the
translation of these foreign denominated amounts are reflected in the
consolidated statement of operations in the period in which they occur.

Foreign exchange gains (losses) included in the net loss for the years ended
July 31, 1997, 1998 and 1999 are $(19,000), $(135,000) and $(42,000),
respectively, and for the six months ended January 31, 1999 and 2000 are $23,000
and $(41,000), respectively.

As the Company's reporting currency is the U.S. dollar, the Company
translates consolidated assets and liabilities denominated in Canadian dollars
into U.S. dollars at the exchange rate prevailing at the balance sheet date, and
the consolidated results of operations at the average rate for the period.
Cumulative translation adjustments are included in other comprehensive income
(loss).

RESEARCH AND DEVELOPMENT EXPENSES

Costs related to research, design and development of computer software to be
sold, leased or otherwise marketed are charged to research and development
expense as incurred. Such development costs are capitalized beginning when a
product's technological feasibility has been established and ending when a
product is available for general release to customers. To date, completing a
working model of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any such development
costs since such costs have not been significant.

Costs related to research, design and development of computer software for
internal use are capitalized or expensed as incurred in accordance with the
provisions of SOP 98-1. To date, no such costs have met the criteria for
capitalization set out in SOP 98-1 and accordingly, all such costs have been
charged to research and development expense as incurred.

INVESTMENT TAX CREDITS

The Company is entitled to Canadian federal and provincial investment tax
credits, which are earned as a percentage of eligible current and capital
research and development expenditures incurred

F-10
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in each taxation year. Certain investment tax credits are fully refundable to
the Company until such time as the Company loses its status as a Canadian
Controlled Private Corporation. All other investment tax credits are available
to be applied against future income tax liabilities, subject to a 10-year
carryforward period. Investment tax credits are accounted for as a reduction of
the related expenditure for items of a current nature and a reduction of the
related asset cost for items of a long-term nature, provided that the Company
has reasonable assurance that the tax credits will be realized.

INCOME TAXES

Under the asset and liability method of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect of a change in tax rates on deferred tax
assets and liabilities is recognized in the consolidated statement of operations
in the period that includes the enactment date.

STOCK-BASED COMPENSATION

The Company follows Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees" and related interpretations, in
accounting for its employee stock options. Under APB 25, deferred stock-based
compensation is recorded at the option grant date at an amount equal to the
difference between the fair market value of a common share and the exercise
price of the option. Deferred stock-based compensation resulting from employee
option grants is amortized over the vesting period of the individual options,
which is generally three years.

NET LOSS PER COMMON SHARE

Net loss per common share has been calculated on the basis of earnings
divided by the weighted average number of common shares, including common shares
eligible for redemption, outstanding during each period. Diluted net loss per
common share has been calculated assuming that the Class A redeemable
convertible preferred shares and stock options outstanding at the end of the
period had been converted or exercised at the later of the beginning of the
period or their date of issuance, where such conversion or exercise would be
dilutive. Pro forma basic and diluted net loss per common share has been
calculated to give effect to the conversion of all outstanding Class A
redeemable convertible preferred shares which will occur upon the completion of
the public share offering.

FINANCIAL INSTRUMENTS

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents,
short-term investments and accounts receivable. Cash

F-11
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
equivalents consist of deposits with, or guaranteed by, major commercial
banks, the maturities of which are three months or less from the date of
purchase. With respect to accounts receivable, the Company performs periodic
credit evaluations of the financial condition of its customers and typically
does not require collateral from them. Management assesses the need for
allowances for potential credit losses by considering the credit risk of
specific customers, historical trends and other information.

FOREIGN CURRENCY RISK MANAGEMENT

A substantial portion of the Company's sales are denominated in U.S.
dollars. The Company uses the revenue stream in U.S. dollars as a natural
hedge to cover expenses denominated in U.S. dollars. The Company does not
hedge the risk related to fluctuations of the exchange rate between U.S. and
Canadian dollars from the date of the sales transaction to the collection
date due to the short-term nature of this exposure.

FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The carrying values of cash and cash equivalents, short-term
investments, accounts receivable, accounts payable and accrued liabilities
approximate their fair values due to the relatively short periods to
maturity of the instruments. In addition, the carrying values of obligations
under capital leases and Class A redeemable convertible preferred shares and
common shares eligible for redemption approximate their fair values. The
following methods and assumptions were used to estimate the fair value of
the following financial instruments:

(a) Obligations under capital leases--at the present value of the
contractual future payments of principal and interest, discounted at
the current market rates of interest available to the Company for the
same or similar debt instrument.

(b) Class A redeemable convertible preferred shares -- at the greater of
the estimated fair value of the common shares into which the Class A
shares are convertible, and the present value of contractual future
payments of dividends and capital, discounted at the current market
rates of interest available to the Company for the same or similar
instrument.

COMPREHENSIVE LOSS

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income", which establishes standards for the
reporting and presentation of comprehensive income. This standard defines
comprehensive income as the changes in equity of an enterprise except those
resulting from shareholder transactions.

F-12
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes methods of accounting for derivative financial instruments
and hedging activities related to those instruments as well as other hedging
activities. The Company has not assessed the impact on its financial position,
results of operations or cash flows of adopting SFAS No. 133. The Company will
be required to implement SFAS No. 133, as amended by SFAS No. 137 for its fiscal
year ending July 31, 2002.

NOTE 3--SHORT-TERM INVESTMENTS

The Company's investments consist of commercial paper and bankers'
acceptances all due within one year.

NOTE 4--PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
JULY 31,
--------------------- JANUARY 31,
1998 1999 2000
--------- --------- ------------
<S> <C> <C> <C>
Computer hardware................................... $ 418 $ 497 $ 774
Furniture and fixtures.............................. 274 337 373
Computer software................................... 33 33 147
Leasehold improvements.............................. 116 116 121
----- ----- ------
841 983 1,415
Less accumulated depreciation and amortization...... (357) (481) (554)
----- ----- ------
$ 484 $ 502 $ 861
===== ===== ======
</TABLE>

The cost and the accumulated depreciation and amortization of assets under
capital leases are $84,000 and $10,000 at July 31, 1998; $260,000 and $33,000 at
July 31, 1999; and $270,000 and $66,000 at January 31, 2000.

NOTE 5--ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
JULY 31,
--------------------- JANUARY 31,
1998 1999 2000
--------- --------- ------------
<S> <C> <C> <C>
Accrued payroll related expenses.................... $ 397 $ 569 $ 887
Accrued other....................................... 110 162 131
----- ----- ------
$ 507 $ 731 $1,018
===== ===== ======
</TABLE>

F-13
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 6--OPERATING LINE OF CREDIT

The Company has an operating line of credit of up to Cdn $1,500,000
(approximately $1,038,000) payable on demand, bearing interest at prime plus 1%
and secured by a general security agreement, which provides for charges on all
assets of the Company. No amounts had been drawn on the operating line at
July 31, 1998, July 31, 1999 or January 31, 2000.

NOTE 7--OBLIGATIONS UNDER LEASES

CAPITAL LEASES

The following is an analysis by year of the future minimum lease payments
for capital leases (in thousands):

<TABLE>
<S> <C>
Year ending July 31,
2000...................................................... $ 52
2001...................................................... 93
2002...................................................... 53
----
198

Less amount representing interest (at rates ranging
from 6.66% to 7.5%)....................................... 17
----
Balance of obligation....................................... 181
Less current portion........................................ 87
----
$ 94
====
</TABLE>

OPERATING LEASES

The Company is committed to make payments under an operating lease agreement
for office space expiring in November, 2010. Future minimum lease payments by
fiscal year are as follows (in thousands):

<TABLE>
<S> <C>
Year ending July 31,
2000...................................................... $ 163
2001...................................................... 287
2002...................................................... 339
2003...................................................... 339
2004...................................................... 339
Thereafter................................................ 2,387
------
$3,854
======
</TABLE>

Rent expense was $132,000, $290,000 and $301,000 for the years ended
July 31, 1997, 1998 and 1999, respectively and $144,000 and $249,000 for the six
months ended January 31, 1999 and 2000, respectively.

F-14
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 8--CLASS A REDEEMABLE CONVERTIBLE PREFERRED SHARES

The Company is authorized to issue and has issued 5,983,962 Class A
redeemable convertible preferred shares (the "Class A Shares").

The holders of the Class A Shares are entitled to receive cumulative
dividends, at a rate per annum of $0.17 per share. To January 31, 2000, there
have been no dividends paid or declared by the Company and dividends in arrears
amounted to approximately $449,000. The Class A Shares are convertible into
common shares at the option of the holder, initially on a one-for-one basis and
thereafter based on a formula and subject to adjustments for future dilution.
Class A Shares automatically convert into common shares at the then applicable
conversion rate upon a public offering of the Company's common shares. Such a
public offering must be at a price per share of not less than approximately
$9.00 and must be for aggregate proceeds in excess of $20,000,000. Each holder
of Class A Shares is entitled to that number of votes equal to the number of
common shares into which the Class A shares are convertible.

All the Class A Shares are required to be redeemed on or after June 1, 2005
if such redemption is approved by a majority of the then outstanding Class A
Shares. The redemption price for the Class A Shares is an amount equal to the
greater of (i) the Liquidation Preference Payment, or (ii) the fair market value
of the Class A Shares. The Liquidation Preference Payment is the amount equal to
the greater of (i) $1.70 per Class A Share plus all accrued dividends unpaid
thereon (whether or not declared) and any other dividends declared but unpaid
thereon, computed to the date payment thereof is made available, or (ii) such
amount per Class A Share as would have been payable had each such Class A Share
been converted to common shares based on a formula immediately prior to the
liquidation, dissolution or winding up of the Company. Accordingly, such shares
have been classified outside of equity and are being adjusted to fair value at
each reporting period, with periodic adjustments recorded as preferred share
accretion.

The following summarizes the activities in the Class A shares for each of
the periods noted below (in thousands, except number of shares):

<TABLE>
<CAPTION>
NUMBER OF
SHARES AMOUNT
--------- --------
<S> <C> <C>
Balances, July 31, 1997 and 1998........................ -- $ --
Issued in exchange for 2,084,694 common shares.......... 1,389,796 29
Issued for cash......................................... 2,632,654 4,235
Adjustment to fair value................................ -- 2,293
--------- -------
Balances, July 31, 1999................................. 4,022,450 6,557
Issued for cash (unaudited)............................. 1,961,512 3,107
Adjustment to fair value (unaudited).................... -- 65,136
--------- -------
Balances, January 31, 2000 (unaudited).................. 5,983,962 $74,800
========= =======
</TABLE>

F-15
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 9--COMMON SHARES ELIGIBLE FOR REDEMPTION

In September 1996, the Company issued 1,767,352 special warrants and
1,767,352 options to buy common shares for net proceeds of $1,836,000. Each
special warrant entitled the holder to acquire 1 common share for no additional
consideration if the Company issued shares in an initial public offering by
September 1, 1997. Otherwise, each special warrant entitled the holder to
acquire 1.1 common shares for no additional consideration. The special warrants
were exercised on September 30, 1997 and 1,944,085 common shares were issued.
Each option entitles the holder to acquire, without further payment,
0.14 common shares in the event that the price of a common share in an initial
public offering or a sale of the shares of the Company to a third party produces
an effective yield of less than 25% per annum to the holder of the common shares
issued in this offering. As of January 31, 2000, there were 1,446,016 options
outstanding.

On November 3, 1997, the Company issued 2,000,000 units for net proceeds of
$2,810,000. Each unit consists of 1 common share of the Company and one option
to purchase 0.1765 additional common shares without further payment exercisable
if the Company does not complete an initial public offering or sale of the
Company by November 3, 1999. During the six month period ended January 31, 2000,
all of the options issued in connection with this financing were either
purchased for cancellation or exercised.

The holders of the common shares acquired through either the conversion of
the special warrants or the purchase of units have the right to sell their
common shares back to the Company for fair market value on June 1, 2005 if the
Company does not complete a public offering of common shares for proceeds of at
least $4,842,000 on specified stock exchanges, or has not been sold or is in
material default under the terms of the shareholders' agreement.

Accordingly, such shares have been classified outside of equity and are
being adjusted to fair value at each reporting period by charges to deficit.

F-16
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 9--COMMON SHARES ELIGIBLE FOR REDEMPTION (CONTINUED)
The following summarizes the activity in the special warrants and common
shares eligible for redemption related to the above financings (in thousands,
except number of special warrants and shares):

<TABLE>
<CAPTION>
COMMON SHARES ELIGIBLE
SPECIAL WARRANT FOR REDEMPTION
--------------------- -----------------------
NUMBER AMOUNT NUMBER AMOUNT
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Balances, July 31, 1996............................. -- $ -- -- $ --
---------- ------- ---------- -------
September 12, 1996 financing........................ 1,767,352 1,836 -- --
Adjustment to fair value............................ -- 729 -- --
---------- ------- ---------- -------
Balances, July 31, 1997............................. 1,767,352 2,565 -- --
Exercise of special warrants........................ (1,767,352) (2,565) 1,944,085 2,565
November 3, 1997 financing.......................... -- -- 2,000,000 2,810
Adjustment to fair value............................ -- -- -- 498
---------- ------- ---------- -------
Balances, July 31, 1998............................. -- -- 3,944,085 5,873
Purchase for cancellation........................... -- -- (106,041) (88)
Adjustment to fair value............................ -- -- -- 458
---------- ------- ---------- -------
Balances, July 31, 1999............................. -- -- 3,838,044 6,243
Purchase for cancellation (unaudited)............... -- -- (834,928) (1,389)
Exercise of options (unaudited)..................... -- -- 249,265 --
Adjustment to fair value (unaudited)................ -- -- -- 35,801
---------- ------- ---------- -------
Balances, January 31, 2000 (unaudited).............. - $ -- 3,252,381 $40,655
========== ======= ========== =======
</TABLE>

NOTE 10--EMPLOYEE STOCK OPTION PLANS

1997 EMPLOYEE STOCK OPTION PLAN

The 1997 Employee Stock Option Plan (the "1997 Plan") was established for
the benefit of employees of the Company and provides for the granting of up to
1,000,000 options. Options granted under the 1997 Plan vest over three years and
expire five years from the date of grant. As a result of the establishment of
the 1999 Employee Stock Option Plan, no additional options have been granted
under the 1997 Plan since September 2, 1998.

1999 EMPLOYEE STOCK OPTION PLAN

The 1999 Employee Stock Option Plan (the "1999 Plan") was established for
the benefit of employees and directors of the Company. The 1999 Plan provides
for the granting of up to 3,000,000 options. Generally, options granted under
the Plan vest over three years and expire ten years from the date of grant. In
some cases, options granted under the 1999 Plan may vest immediately, or over
periods other than three years.

F-17
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 10--EMPLOYEE STOCK OPTION PLANS (CONTINUED)
OTHER GRANTS OF EMPLOYEE STOCK OPTIONS

In addition to the stock options granted pursuant to the 1997 Plan and the
1999 Plan, the Company also issued additional options to employees and directors
between May 1996 and July 1999. The terms and conditions of such options varied
from case to case.

Details of employee stock option transactions are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------ SIX MONTHS ENDED
1997 1998 1999 JANUARY 31, 2000
-------------------- -------------------- -------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
PRICE PER PRICE PER PRICE PER PRICE PER
NUMBER SHARE NUMBER SHARE NUMBER SHARE NUMBER SHARE
-------- --------- -------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of period..... 44,367 $0.01 326,501 $1.05 581,679 $1.12 617,690 $1.28
Granted.............................. 364,268 $1.19 389,333 $1.41 263,240 $1.47 1,358,205 $4.00
Exercised............................ (82,134) $1.14 -- -- (73,134) $0.45 -- --
Cancelled............................ -- -- (134,155) $1.37 (154,095) $1.47 (74,895) $1.58
-------- -------- -------- ---------
Outstanding, end of period........... 326,501 $1.05 581,679 $1.12 617,690 $1.28 1,901,000 $3.29
======== ======== ======== =========
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JULY 31, ENDED
------------------------------ JANUARY 31,
1997 1998 1999 2000
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Weighted average fair value of options granted during the
period with exercise prices equal to fair value at date of
grant..................................................... $1.19 $1.41 $1.47 $1.68
Weighted average fair value of options granted during the
period with exercise prices less than fair value at date
of grant.................................................. -- -- -- $9.17
Weighted average fair value of options granted during the
period with exercise prices greater than fair value at
date of grant............................................. -- -- -- --
</TABLE>

The stock options expire at various dates between May 2003 and
January 2010. As of January 31, 2000, the weighted average remaining contractual
lives of outstanding and exercisable options were as follows:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
EXERCISE NUMBER CONTRACTUAL LIFE NUMBER
PRICES OUTSTANDING (YEARS) EXERCISABLE
-------- ----------- ---------------- -----------
<S> <C> <C> <C>
$ 1.08 180,000 1.98 180,000
$ 1.38 249,706 2.88 143,138
$ 1.56 172,089 3.58 64,643
$ 1.73 913,705 9.66 123,205
$10.00 385,500 9.70 --
--------- -------
1,901,000 510,986
========= =======
</TABLE>

F-18
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 10--EMPLOYEE STOCK OPTION PLANS (CONTINUED)
The Company recorded deferred stock-based compensation amounting to
$4,256,000 for the period from August 1, 1999 to January 31, 2000. Amortization
of deferred stock-based compensation amounted to $903,000 for the period from
August 1, 1999 to January 31, 2000. The compensation was determined based on the
fair value at the grant date of the stock options.

Had compensation expense for the Company's stock option plans been
determined based on the fair value at the grant dates for the awards under the
plan consistent with the method under SFAS 123, "Accounting for Stock-Based
Compensation", the Company's net loss and net loss per common share would have
been reported as the pro forma amounts indicated in the table below. To
determine the fair value of each option on the grant date the following
assumptions were used: dividend yield of 0.0%, zero volatility, a weighted
average risk free interest rate of 5.5% and a weighted average expected life of
options of 5 years.

Historical and pro forma information for the periods indicated is as follows
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
--------------------------- -----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net loss--as reported........................... $1,117 $1,347 $ 384 $ 285 $2,772
Net loss--pro forma............................. 1,140 1,388 456 321 2,183
Net loss per common share--as reported.......... 0.23 0.16 0.26 0.02 10.19
Net loss per common share--pro forma............ 0.23 0.17 0.27 0.03 10.13
Weighted average grant date fair value of
options granted during the period............. 1.19 1.41 1.47 1.47 7.13
</TABLE>

NOTE 11--INCOME TAXES

Income tax expense (recovery) attributable to loss for the period consists
of (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
--------------------------- -----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current:
Domestic...................... $(131) $ (17) $ -- $ -- $ --
Foreign....................... -- -- 20 26 --
----- ----- ----- ----- -----
$(131) $ (17) $ 20 $ 26 $ --
===== ===== ===== ===== =====
</TABLE>

F-19
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 11--INCOME TAXES (CONTINUED)
The provision for income taxes differs from the amount computed by applying
the combined federal and provincial income tax rate of 44.6% to the loss before
provision for income taxes as a result of the following (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
--------------------------- -----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Loss before provision for income taxes.......... $(1,248) $(1,364) $(364) $(259) $(2,717)
======= ======= ===== ===== =======
Computed expected tax recovery.................. $ (557) $ (608) $(162) $(116) $(1,212)
Increase (reduction) in income tax recovery
resulting from:
Effect of different tax rates on losses of
foreign subsidiaries........................ 135 508 312 200 43
Permanent differences:
Utilization of net capital loss............. -- -- (109) -- --
Amortization of deferred stock-based
compensation.............................. -- -- -- -- 403
Change in beginning of the period balance of
the valuation allowance allocated to income
tax expense................................. 306 34 (23) (67) 768
Other......................................... (15) 49 2 9 (2)
------- ------- ----- ----- -------
Provision for income tax expense (recovery)... $ (131) $ (17) $ 20 $ 26 $ --
======= ======= ===== ===== =======
</TABLE>

F-20
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 11--INCOME TAXES (CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the future tax assets and future tax liabilities at July 31, 1998
and 1999 and January 31, 2000 are presented below (in thousands):

<TABLE>
<CAPTION>
JULY 31,
--------------------- JANUARY 31,
1998 1999 2000
--------- --------- ------------
<S> <C> <C> <C>
Future tax assets:
Non-capital loss carried forward.......... $211 $151 $901
Share issue costs......................... -- 18 72
Other..................................... -- 19 14
---- ---- ----
Total gross future tax assets............. 211 188 987
Less valuation allowance.................. 211 188 956
---- ---- ----
Net future tax assets..................... -- -- 31

Future tax liabilities:
Depreciation and amortization............. -- -- (31)
---- ---- ----
Total gross future tax liabilities........ -- -- (31)
---- ---- ----
Net future tax assets (liabilities)....... $ -- $ -- $ --
==== ==== ====
</TABLE>

In assessing the realizability of future tax assets, management considers
whether it is more likely than not that some portion or all of the future tax
assets will not be realized. The ultimate realization of future tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income, uncertainties related to the industry in which
the Company operates and tax planning strategies in making this assessment.

As of January 31, 2000, the Company had losses and deductions of
approximately $1,120,000 available to reduce future years' taxable income in
Canada, of which $860,000 expire in 2007 and the remainder expire in 2005. In
addition, the Company has approximately $750,000 of losses and deductions
available to reduce future years' taxable income in the United States, all of
which expire in 2020.

Furthermore, the Company has capital losses of approximately $380,000 which
may be utilized to reduce future taxes on capital gains and have no expiry date.
The income tax benefits of these losses have not been reflected in the
consolidated financial statements.

NOTE 12--SEGMENTED INFORMATION

The Company is managed along product lines and currently operates in one
reportable segment: the development and sale of Web-based software that
automates and streamlines the business processes of professional services
organizations and corporate IT departments ("Changepoint Solution").

F-21
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 12--SEGMENTED INFORMATION (CONTINUED)
Until March 31, 1998, the Company also engaged in providing project
management consulting services to the IT service industry, which it phased out
to focus on its software business.

From January 1, 1997 until June 30, 1999, the Company also offered an
Internet software product called "involv" which was a Web-based team
collaboration product that allowed groups of individuals to work together over
the Internet or over corporate intranets on team initiatives. On June 30, 1999,
the Company sold its interest in the involv product to focus exclusively on its
Changepoint Solution (see note 14).

Accordingly, the Company operated in two reportable segments in the year
ended July 31, 1997, three segments in the year ended July 31, 1998, two
segments in the year ended July 31, 1999, and one segment in the period ended
January 31, 2000.

Management evaluated the performance of its segments and allocated resources
to them based on gross margin. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies. The Company's assets, operating expenses, interest and
other income are maintained at the Company's corporate headquarters and are not
allocated to the segments.

Year ended July 31, 1997 (in thousands):

<TABLE>
<CAPTION>
CONSULTING CHANGEPOINT
SERVICES SOLUTION TOTAL
---------- ----------- --------
<S> <C> <C> <C>
Product revenues.............................. $ -- $1,008 $ 1,008
Service revenues.............................. 1,208 714 1,922
------- ------ -------
1,208 1,722 2,930
Cost of revenues.............................. (1,107) (543) (1,650)
------- ------ -------
Gross profit.................................. $ 101 $1,179 $ 1,280
======= ====== =======
</TABLE>

Year ended July 31, 1998 (in thousands):

<TABLE>
<CAPTION>
CONSULTING CHANGEPOINT
SERVICES INVOLV SOLUTION TOTAL
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
Product revenues................... $ -- $270 $1,551 $ 1,821
Service revenues................... 538 -- 1,448 1,986
----- ---- ------ -------
538 270 2,999 3,807
Cost of revenues................... (667) (48) (585) (1,300)
----- ---- ------ -------
Gross profit....................... $(129) $222 $2,414 $ 2,507
===== ==== ====== =======
</TABLE>

F-22
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 12--SEGMENTED INFORMATION (CONTINUED)
Year ended July 31, 1999 (in thousands):

<TABLE>
<CAPTION>
CHANGEPOINT
INVOLV SOLUTION TOTAL
-------- ----------- --------
<S> <C> <C> <C>
Product revenues............................ $ 273 $3,701 $ 3,974
Service revenues............................ -- 1,963 1,963
------- ------ -------
273 5,664 5,937
Cost of revenues............................ (98) (1,259) (1,357)
------- ------ -------
Gross profit................................ $ 175 $4,405 $ 4,580
======= ====== =======
</TABLE>

All long-lived assets relating to the Company's operations are located in
Canada. Revenue per geographic location, based on the location of the external
customer, is as follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
--------------------------- -----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue by geographic locations:
United States................. $ 715 $2,067 $3,674 $1,213 $2,814
Canada........................ 2,202 1,718 1,951 1,375 914
United Kingdom................ 13 2 141 -- 148
New Zealand................... -- -- -- -- 62
Venezuela..................... -- 20 171 -- --
------ ------ ------ ------ ------
$2,930 $3,807 $5,937 $2,588 $3,938
====== ====== ====== ====== ======
</TABLE>

For the year ended July 31, 1997, three customers accounted for 18%, 16%,
and 10% of revenues, respectively. For the year ended July 31, 1998, one
customer accounted for 13% of revenues. For the six months ended January 31,
1999, three customers accounted for 15%, 12% and 10% of revenues, respectively.
For the six months ended January 31, 2000 and the year ended July 31, 1999, no
customer accounted for more than 10% of revenues.

As of July 31, 1998, the Company had receivables from two significant
customers amounting to 36% and 11% of total accounts receivable and 12% and 10%
at July 31, 1999. As of January 31, 2000, the Company had no customer accounts
receivable balance over 10% of total accounts receivable.

F-23
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 13--NET LOSS PER COMMON SHARE

The following table reconciles the numerators and denominators of the
historical and pro forma basic and diluted net loss per common share computation
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
--------------------------- --------------------
1997 1998 1999 1999 2000
------- ------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator for basic and diluted net loss per
common share:
Net loss................................... $(1,117) $(1,347) $ (384) $ (285) $ (2,772)
Class A preferred share accretion........ -- -- (2,293) -- (65,136)
Common share eligible for redemption
accretion.............................. (729) (498) (458) -- (35,801)
------- ------- ------- -------- ---------
Net loss applicable to common shares....... $(1,846) $(1,845) $(3,135) $ (285) $(103,709)
======= ======= ======= ======== =========
Denominator for basic and diluted net loss
per common share:
Weighted average number of
common shares............................ 8,002 11,211 12,041 12,091 10,175
======= ======= ======= ======== =========
Basic and diluted net loss per
common share............................... $ (0.23) $ (0.16) $ (0.26) $ (0.02) $ (10.19)
======= ======= ======= ======== =========
Numerator for pro forma basic and diluted net
loss per common share:
Net loss................................... $ (384) $ (2,772)

Denominator:
Weighted average common shares, basic
and diluted.............................. 12,041 10,175
Conversion of Class A preferred shares..... -- -- 5,259
------- ------- ------- -------- ---------
12,041 15,434
======= ======= ======= ======== =========
Pro forma basic and diluted net loss per
common share............................... $ (0.03) $ (0.18)
</TABLE>

Due to the net loss for all periods presented, all potential common shares
outstanding are considered anti-dilutive and are excluded from the calculation
of diluted loss per common share.

NOTE 14--SALE OF INVOLV CORPORATION

On June 30, 1999, the Company sold its subsidiary involv Corporation to a
third party.

The Company received shares of the purchaser and two promissory notes
aggregating Cdn. $500,000 (approximately $346,000) as consideration. In
addition, the Company may receive additional amounts based upon future revenue
and future equity financings of the purchaser. As the purchaser is a development
stage company without the financing to pay the Company in cash, the

F-24
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 14--SALE OF INVOLV CORPORATION (CONTINUED)
Company has not recorded any proceeds on the sale and there was no gain or loss
on the sale. Any payments received from the purchaser will be recorded as income
when received.

NOTE 15--OTHER INCOME

The other income of $250,000 in 1999 represents a payment received by the
Company in connection with an unconsummated business relationship.

NOTE 16--SUBSEQUENT EVENTS

(a) On February 29, 2000, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission
("SEC") that would permit the Company to sell its common shares in
connection with a proposed initial public offering ("IPO"). If the
offering is consummated under the terms presently anticipated, all the
then outstanding Class A redeemable convertible preferred shares will
automatically convert into common shares of the Company on a one-for-one
basis upon the closing of the proposed IPO. In addition, the right of
holders of common shares eligible for redemption to sell their shares to
the Company for fair market value will be cancelled upon closing of the
offering under the terms presently anticipated. The effect of the
conversion of the Class A shares and the expiry of the redemption
privilege on certain common shares have been reflected as unaudited pro
forma shareholders' equity in the accompanying consolidated balance sheet
as at January 31, 2000.

(b) Effective February 1, 2000 and as amended March 31, 2000, the Company
entered into an agreement with Protege Virtual Management Limited
("Protege"), under which Protege has agreed to provide certain
administrative and sales services in order to establish the Company's
European direct sales presence. Protege will receive a fixed monthly fee
in connection with providing these services as well as commissions on
sales of Company products in Europe initiated by Protege. In connection
with the agreement, the Company granted options to Protege for 120,000
shares with an exercise price of $1.63. The options vested immediately
and were exercised on April 10, 2000. The fair value of the common shares
as determined under SFAS 123 aggregating approximately $1.7 million will
be recorded as stock-based compensation expense in the month of
March 2000.

(c) On May 26, 2000, the Company issued 2,873,696 Class B redeemable
convertible preferred shares (the "Class B Shares") for proceeds, net of
issue costs, of approximately $24.8 million. The holders of the Class B
Shares are entitled to receive cumulative dividends, at a rate per annum
of $0.90 per share. The Class B Shares are convertible into common shares
at the option of the holder, on a one-for-one basis. If by May 31, 2001,
the Company has not completed an initial public offering, the conversion
rate shall be automatically adjusted such that each Class B Share shall
be convertible into 1.2 common shares for each Class B Share converted
after May 31, 2001. Class B Shares automatically convert into common
shares at the then applicable conversion rate upon a public offering of
the Company's common shares. Such a public offering must be at a price
per share of not less than $9.00 and must be for aggregate

F-25
<PAGE>
CHANGEPOINT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF JANUARY 31, 2000 AND FOR THE
SIX MONTHS ENDED JANUARY 31, 1999 AND 2000 IS UNAUDITED)

NOTE 16--SUBSEQUENT EVENTS (CONTINUED)

proceeds in excess of $20,000,000. Each holder of Class B Shares is
entitled to that number of votes equal to the number of common shares
into which the Class B Shares are convertible.

All the Class B Shares are required to be redeemed on or after June 1,
2005 if such redemption is approved by a majority of the then outstanding
Class B Shares. The redemption price for the Class B Shares is an amount
equal to the greater of (i) the Liquidation Preference Payment, or (ii)
the fair market value of the Class B Shares. The Liquidation Preference
Payment is the amount equal to the greater of (i) $9.00 per Class B Share
plus all accrued dividends unpaid thereon (whether or not declared) and
any other dividends declared but unpaid thereon, computed to the date
payment thereof is made available, or (ii) such amount per Class B Share
as would have been payable had each such Class B Share been converted to
common shares based on a formula immediately prior to the liquidation,
dissolution or winding up of the Company. Accordingly, such shares have
been classified outside of equity and are being adjusted to fair value at
each reporting period, with periodic adjustments recorded as preferred
share accretion.

F-26
<PAGE>
[DESCRIPTION OF BACK COVER ARTWORK]

The following statement appears in a shaded rectangular box at the top of
the page : "The Professional Services Business Cycle"

In the center of the page is a large circle containing symbols, such as a
telephone and an alarm clock, that bear the following titles: (1) Engagement
(2) Projects, (3) Resources, (4) Time & Expense, (5) Invoicing, and
(6) Support. The symbols are linked by arrows.

Above the circle appears a line graph and the words "Faster Technology
Results".

To the upper-left of the circle appears the following:

Demand: Enabling corporate IT departments to complete IT projects faster to
meet business objectives

To the lower-left of the circle are geometric symbols, above which are the
words: "IT Department Work Requests."

To the lower-right of the circle are hands shaking, above which are the
words: "Sales Opportunities for IT Services Companies."

At the bottom of the page appears the following:

"Supply: Increasing revenue and improving customer satisfaction for
professional services organizations."
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

, 2000

[LOGO]

5,000,000 COMMON SHARES

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

P R O S P E C T U S
-------------------

DONALDSON, LUFKIN & JENRETTE
U.S. BANCORP PIPER JAFFRAY
CIBC WORLD MARKETS
DLJDIRECT INC.

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

We have not authorized any dealer, sales person or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Changepoint
have not changed since the date hereof. We are under no duty to update any
information contained herein after the date of this prospectus, other than as
required by law.

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

Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these common shares 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 their unsold
allotments or subscriptions.
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONS

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

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 19,800
NASD filing fee............................................. 8,000
Nasdaq National Market Fee.................................. 95,000
Blue Sky fees and expenses.................................. 15,000
Printing and engraving expenses............................. 175,000
Legal fees and expenses..................................... 400,000
Transfer Agent and Registrar fees........................... 10,000
Accounting fees and expenses................................ 250,000
Miscellaneous............................................... 27,200
----------
Total....................................................... $1,000,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

In accordance with the BUSINESS CORPORATIONS ACT (Ontario), the By-laws of
the Registrant provide that the Registrant shall indemnify a present or former
director or officer, or a person who acts or acted at the Registrant's request
as a director or officer of another company of which the Registrant is or was a
shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Registrant or such other
company, provided that the director or officer acted honestly and in good faith
with a view to the best interests of the Registrant and, in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, had reasonable grounds for believing that his conduct was lawful. Such
indemnification may, with the approval of the court, be made in connection with
the procuring of a judgment in favor of the Registrant or such other company if
the conditions set forth above have been fulfilled. Notwithstanding the
foregoing, a director or officer is entitled to indemnification from the
Registrant as a matter of right if he was substantially successful on the merits
in the defense of the action or proceeding and fulfilled the conditions set
forth above.

A policy of directors' and officers' liability insurance is maintained by
the Registrant which insures directors and officers of the Registrant and its
subsidiaries against liability incurred by, arising from or against them for
certain of their acts, errors or omissions.

The form of Underwriting Agreement filed herewith as Exhibit 1.1 contains
provisions by which the Underwriters agree to indemnify the Registrant, each
person who controls the Registrant within the meaning of the Securities Act, as
amended, and each officer and director of the Registrant, with respect to
information furnished by the Underwriters for use in this Registration
Statement.

Reference is made to Item 17 for the undertakings of the Registrant with
respect to indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act").

II-1
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Securities sold:

1. On September 12, 1996, the Registrant issued 1,767,352 special
warrants and 1,767,352 options to buy common shares for cash
consideration of Cdn$2,750,000, less issue costs of Cdn$232,128, for
net proceeds of Cdn$2,517,872. Each special warrant entitled the
holder to acquire one common share for no additional consideration
five business days after the issuance of a receipt by the Ontario
Securities Commission for a prospectus covering the Registrant's
initial public offering and the common shares issuable upon exercise
of the special warrants. If the Registrant did not file a prospectus
with the Ontario Securities Commission by September 1, 1997, the
special warrants would be exercised into 1.1 common shares. The
holders of these common shares have the right to sell the common
shares back to the Registrant on September 1, 2004 for fair market
value if the Registrant does not complete a public offering of its
common shares by that time. The options entitle their holders to
acquire, without further payment, 0.14 common shares if the price of
common shares in the Registrant's initial public offering does not
result in an effective yield of 25% per year from Cdn$1.556.

Trinity Capital Securities Ltd. acted as agent in connection with the
offering and was paid an aggregate commission of Cdn$165,000. In
addition, Trinity Capital received a broker warrant entitling it to
acquire 35,347 special warrants. All of the special warrants and
options were sold to persons in Canada. The transaction was exempt
under Regulation S under the Securities Act.

2. On February 10, 1997, the Registrant issued 27,639 common shares to
employees or their designees, all of whom were Canadian, as part of
annual bonuses. The purchase price of these shares was Cdn$1.40,
approximately 10% below the fair market value of the shares on that
date. The transaction was exempt under Regulation S under the
Securities Act.

3. On July 31, 1997, the Registrant issued options to purchase 82,134
common shares to two employees, both of whom were Canadian. The
exercise price of the options was Cdn$1.556. The transaction was
exempt under Regulation S under the Securities Act.

4. On September 30, 1997, each outstanding special warrant was converted
to 1.1 common shares without further consideration for a total of
1,944,085 common shares. The transaction was exempt under
Section 3(a)(9) of the Securities Act.

5. On November 3, 1997, the Registrant issued 2,000,000 units for cash
consideration of Cdn$4,000,000, less issue costs of Cdn$49,018, for
net proceeds of Cdn$3,950,982. Each unit consisted of one common
share of the Registrant and one option to purchase 0.1765 additional
common shares without further payment, exercisable if the Registrant
did not complete its initial public offering by November 3, 1999. The
holders of these common shares have the right to sell the common
shares back to the Registrant on September 1, 2004 for fair market
value if the Registrant does not complete a public offering of its
common shares by that time. The units were issued to Canadian
institutional investors and one U.S. accredited investor. The
transaction was exempt under Regulation S under the Securities Act
and Section 4(2) of the Securities Act.

6. On November 19, 1997, the Registrant issued 7,500 common shares to
one Canadian employee as an annual bonus at an assigned value of
Cdn$13,500. The transaction was exempt under Regulation S under the
Securities Act.

7. On August 17, 1998, the Registrant issued 41,000 common shares to
three Canadian employees, who exercised options acquired as part of
an early investment in the Registrant. The aggregate exercise price
of the options was Cdn$3.00. The transaction was exempt under
Regulation S of the Securities Act.

II-2
<PAGE>
8. On July 31, 1999, the Registrant amalgamated with five related
Canadian holding companies whose principals represented and warranted
to the Registrant that the sole asset was their common shareholdings
in the Registrant. As a consequence of the amalgamation, all the
outstanding shares of the holders of the amalgamating companies were
replaced by 6,523,204 common shares and 1,389,796 Class A preferred
shares. The transactions were exempt under Regulation S under the
Securities Act.

9. On July 31, 1999, the Registrant issued 2,632,654 Class A preferred
shares for cash consideration of Cdn$6,450,000, less issue costs of
Cdn$69,840, for net proceeds of Cdn$6,380,160. All of the Class A
preferred shares were sold to persons in Canada. The transaction was
exempt under Regulation S under the Securities Act.

10. On July 31, 1999, the Registrant issued 32,134 common shares to one
Canadian employee, who exercised options with an exercise price of
Cdn$1.556. The transaction was exempt under Regulation S under the
Securities Act.

11. On September 8, 1999, Trinity Capital exercised its broker warrant
for the 35,347 special warrants, which were then exercised at a price
of Cdn$1.556 entitling Trinity to 1.1 common shares per warrant for a
total of 38,882 common shares. The transaction was exempt under
Regulation S under the Securities Act.

12. On October 8, 1999, the Registrant issued 1,961,512 Class A preferred
shares for cash consideration of Cdn$4,805,704, less issue costs of
Cdn$236,133, for net proceeds of Cdn$4,569,571. The Class A preferred
shares were sold to five accredited investors in the U.S. and one
person in Barbados. The transaction was exempt under Regulation S
under the Securities Act and Section 4(2) of the Securities Act.

13. On November 3, 1999, the Registrant issued 249,265 common shares to
the purchasers of the 2,000,000 units issued by the Registrant on
November 3, 1997, who exercised options issued on November 3, 1997.
The transaction was exempt under Regulation S under the Securities
Act and Section 4(2) of the Securities Act.

14. On December 30, 1999, the Registrant entered into an agreement with
Protege Virtual Management Limited, a corporation organized under the
laws of England, pursuant to which it granted Protege the right to
purchase 25,000 common shares in the Registrant's initial public
offering at the initial public offering price. The transaction was
exempt under Regulation S under the Securities Act. This right to
purchase was terminated in connection with the March 31, 2000
amendment to the agreement with Protege as described in paragraph 19
below.

15. On February 7, 2000, the Registrant issued 40,000 common shares to
two U.S. option holders, who exercised options with an exercise price
of Cdn$2.50. The transaction was exempt under Rule 701 under the
Securities Act.

16. On March 2, 2000, the Registrant issued 20,000 common shares to a
U.S. option holder, who exercised options with an exercise price of
Cdn$2.00. The transaction was exempt under Rule 701 under the
Securities Act.

17. On March 8, 2000, the Registrant issued 20,000 common shares to a
U.S. option holder, who exercised options with an exercise price of
Cdn$1.556. The transaction was exempt under Rule 701 under the
Securities Act.

18. On March 31, 2000, the Registrant issued 23,667 common shares to one
Canadian employee, who exercised 20,000 options with an exercise
price of Cdn$2.50 and 3,667 options with an exercise price of
Cdn$2.00. The transaction was exempt under Regulation S under the
Securities Act.

II-3
<PAGE>

19. On March 31, 2000, the Registrant amended its agreement with Protege
described in paragraph 14 above to grant Protege a right to purchase
120,000 common shares of the Registrant at an exercise price of
Cdn$2.45. The transaction was exempt under Regulation S under the
Securities Act.

20. On April 10, 2000, the Registrant issued 120,000 common shares to
Protege who exercised the options described in paragraph 20 above.
The transaction was exempt under Regulation S under the Securities
Act.

21. On April 11, 2000, the Registrant issued 20,000 common shares to a
U.S. option holder, who exercised options with an exercise price of
Cdn$1.556. The transaction was exempt under Rule 701 under the
Securities Act.

22. On May 26, 2000, the Registrant issued 2,873,696 Class B preferred
shares for cash consideration of Cdn$38,507,533 less issue costs of
Cdn$1,502,436 for net proceeds of Cdn$37,005,097. All of the Class B
preferred shares were sold to persons in Canada. The transaction was
exempt under Regulation S under the Securities Act.

(b) Underwriters and Other Purchasers.

See (a) above.

(d) Exemption from Registration Claimed.

See (a) above.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A. EXHIBITS

The following exhibits are attached hereto:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
1.1* Form of Underwriting Agreement

3.1+ Articles of Amalgamation of the Registrant

3.2+ Articles of Amendment of the Registrant

3.3+ By-laws of the Registrant

3.4 Second Articles of Amendment of the Registrant

4.1 Specimen Common Share certificate

5.1 Opinion of Goldman, Spring, Schwartz & Kichler as to the
legality of the securities offered hereby

8.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain U.S. Federal tax matters

8.2* Opinion of Goldman, Spring, Schwartz & Kichler as to certain
Canadian Federal tax matters

10.1 Second Amended and Restated Registration Rights Agreement,
dated May 26, 2000, between the Registrant and certain
shareholders of the Registrant

10.2+ Credit Facility, dated March 3, 1999, between the Registrant
and the Royal Bank of Canada

10.3+ 1997 Stock Option Plan
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------- -----
<C> <S>
10.4+ 1999 Stock Option Plan

10.5+ Agreement, dated February 5, 2000, between the Registrant
and SkillsVillage(1)

10.6+ License and Hosting Agreement, dated December 13, 1999,
between the Registrant and Corio, Inc.(1)

10.7+ OEM Agreement, dated December 30, 1999, between the
Registrant and Softrax Corp.(1)

10.8+ Lease, dated May 18, 1995, between the Registrant and Menkes
Office Parks and Investors Group Trust

10.9+ Lease, dated February 24, 2000, between Menkes Office Parks
Ltd., Denburn Investments Inc. and the Registrant.

10.10+ Employee Stock Purchase Plan

10.11+ Agreement, dated December 30, 1999, between the Registrant
and Protege Virtual Management Limited

10.12+ Amending Agreement, dated March 31, 2000, between the
Registrant and Protege Virtual Management Limited

10.13+ Form of Amalgamation Agreement

23.1 Consent of Goldman, Spring, Schwartz & Kichler (included in
Exhibit 5.1)

23.3 Consent of KPMG LLP

24.1+ Powers of Attorney
</TABLE>

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

* To be supplied by amendment.

+ Filed previously.

(1) Confidential treatment has been requested from the Commission for portions
of Exhibit 10.5, Exhibit 10.6 and Exhibit 10.7. The marked portions of
Exhibit 10.5, Exhibit 10.6 and Exhibit 10.7 indicate text that has been
omitted and a separate filing of such omitted text has been made with the
Commission.

B. FINANCIAL STATEMENT SCHEDULES

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

ITEM 17. UNDERTAKINGS.

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.

(3) 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

II-5
<PAGE>
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.

(4) 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.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-1 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Toronto, Province of Ontario, Canada, on
June 29, 2000.

<TABLE>
<S> <C> <C>
CHANGEPOINT CORPORATION

By: /s/ GERALD W. SMITH
---------------------------------------------
Gerald W. Smith
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by or on behalf of the
following persons in the capacities indicated on June 29, 2000:

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
Chairman, President and Chief
/s/ GERALD W. SMITH Executive Officer
------------------------------------------------ (Principal Executive
Gerald W. Smith Officer)

Chief Financial Officer
* (Principal Financial
------------------------------------------------ Officer and Principal
John A. Anhang Accounting Officer)

*
------------------------------------------------ Director
Bernard M. Goldsmith

*
------------------------------------------------ Director
David C. Wetmore

*
------------------------------------------------ Director
Robert J. Sywolski

*
------------------------------------------------ Director
J. Ian Giffen

*
------------------------------------------------ Director
David W. Ferguson

*
------------------------------------------------ Director
Howard T. Gwin
</TABLE>

<TABLE>
<S> <C> <C> <C>
* /s/ GERALD W. SMITH
---------------------------------------------
Gerald W. Smith,
ATTORNEY-IN-FACT
</TABLE>

II-7
<PAGE>
AUTHORIZED REPRESENTATIVE

Pursuant to the requirements of the Securities Act of 1933, the undersigned
certifies that it is the duly authorized United States representative of
Changepoint Corporation and has duly caused this Amendment to the Registration
Statement to be signed on behalf of each of them by the undersigned, thereunto
duly authorized, in the City of Chicago, State of Illinois, on June 29, 2000.

<TABLE>
<S> <C> <C>
CHANGEPOINT INC.
(Authorized United States Representative)

By: /s/ GERALD W. SMITH
-----------------------------------------
Gerald W. Smith
PRESIDENT AND SECRETARY
</TABLE>

II-8
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement

3.1+ Articles of Amalgamation of the Registrant

3.2+ Articles of Amendment of the Registrant

3.3+ By-laws of the Registrant

3.4 Second Articles of Amendment of the Registrant

4.1 Specimen Common Share certificate

5.1 Opinion of Goldman, Spring, Schwartz & Kichler as to the
legality of the securities offered hereby

8.1* Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain U.S. Federal tax matters

8.2* Opinion of Goldman, Spring, Schwartz & Kichler as to certain
Canadian Federal tax matters

10.1 Second Amended and Restated Registration Rights Agreement,
dated May 26, 2000, between the Registrant and certain
shareholders of the Registrant

10.2+ Credit Facility, dated March 3, 1999, between the Registrant
and the Royal Bank of Canada

10.3+ 1997 Stock Option Plan

10.4+ 1999 Stock Option Plan

10.5+ Agreement, dated February 5, 2000, between the Registrant
and SkillsVillage(1)

10.6+ License and Hosting Agreement, dated December 13, 1999,
between the Registrant and Corio, Inc.(1)

10.7+ OEM Agreement, dated December 30, 1999, between the
Registrant and Softrax Corp.(1)

10.8+ Lease, dated May 18, 1995, between the Registrant and Menkes
Office Parks and Investors Group Trust

10.9+ Lease, dated February 24, 2000, between Menkes Office
Parks Ltd., Denburn Investments Inc. and the Registrant

10.10+ Employee Stock Purchase Plan

10.11+ Agreement, dated December 30, 1999, between the Registrant
and Protege Virtual Management Limited

10.12+ Amending Agreement, dated March 31, 2000, between the
Registrant and Protege Virtual Management Limited

10.13+ Form of Amalgamation Agreement

23.1 Consent of Goldman, Spring, Schwartz & Kichler (included in
Exhibit 5.1)

23.3 Consent of KPMG LLP

24.1+ Powers of Attorney
</TABLE>

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* To be supplied by amendment.

+ Filed previously.