RIGHTNOW TECHNOLOGIES INC, S-1/A, 2000-10-02

RIGHTNOW TECHNOLOGIES INC
S-1/A, 2000-10-02
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on October 2, 2000
Registration No. 333-35290
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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

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RIGHTNOW TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
Delaware 7372 81-0503540
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

77 Discovery Drive
Bozeman, Montana 59718
(406) 522-4200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

Greg R. Gianforte
Chief Executive Officer
RightNow Technologies, Inc.
77 Discovery Drive
Bozeman, Montana 59718
(406) 522-4200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:

John W. Manning Marc M. Rossell
Lawrence T. Martinez Shearman & Sterling
Dorsey & Whitney LLP 555 California Street
507 Davidson Building San Francisco, CA 94104
8 Third Street North (415) 616-1100
Great Falls, Montana 59401
(406) 727-3632

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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration
statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED OCTOBER 2, 2000

4,000,000 Shares

[RightNow Technologies, Inc. Logo]

Common Stock

--------

Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$10.00 and $12.00 per share. Our common stock has been approved for listing on
The Nasdaq Stock Market's National Market under the symbol "RTNW."

The underwriters have an option to purchase a maximum of 600,000 additional
shares to cover over-allotments of shares.

Investing in the common stock involves risks. See "Risk Factors" on page 6.

<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and RightNow
Public Commissions Technologies
-------------- -------------- --------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total.............................. $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about , 2000.

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

Credit Suisse First Boston

Dain Rauscher Wessels

Thomas Weisel Partners LLC

Adams, Harkness & Hill, Inc.

D.A. Davidson & Co.

The date of this prospectus is , 2000.
<PAGE>

[DESCRIBE INSIDE COVER GRAPHICS]

[Our artwork portrays a representation of how our RightNow Web product
addresses questions a visitor to a business Web site may have. It will use the
words "Self-Help," "E-Mail Management," "Live Chat Interaction" and "Customer
Driven Dynamic Knowledgebase" in the depiction. It will also use our corporate
logo and the phrase "Getting Answers with RightNow Web."]
<PAGE>

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TABLE OF CONTENTS

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Page
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Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 30
Management............................................................... 44
</TABLE>
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Page
----
<S> <C>
Related Party Transactions............................................... 53
Principal Stockholders................................................... 55
Description of Capital Stock............................................. 57
Shares Eligible for Future Sale.......................................... 60
Underwriting............................................................. 62
Notice to Canadian Residents............................................. 65
Certain United States Federal Tax Consequences to Non-United States
Holders................................................................. 66
Legal Matters............................................................ 68
Experts.................................................................. 68
Where You Can Find More Information...................................... 68
Index to Consolidated Financial Statements............................... F-1
</TABLE>
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You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is legal
to sell these securities. The information in this document may be accurate only
on the date of this document.

Dealer Prospectus Delivery Obligation

Until , 2000 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
<PAGE>

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information you should consider before
buying shares in this offering. You should read the entire prospectus
carefully, including our financial statements and related notes, before making
an investment decision.

RightNow Technologies, Inc.

Businesses are increasingly using the Internet as an integral means of
communicating and interacting with their customers, business partners and
employees. As customer communication shifts to the Internet, customers expect
the capability not only to view and purchase products online, but also to
obtain answers to their product and service questions at any hour of the day.
We believe that the ability to efficiently provide fast, reliable and accurate
information to meet customer expectations has become a competitive necessity
for many organizations.

We believe a significant market opportunity exists for an integrated
Internet customer service solution that enables both effective customer self-
service and streamlined escalation to other channels of company communication.
Self-service, or the ability of customers to help themselves by accessing the
information they seek, allows businesses to rapidly respond to growing customer
needs without hiring the large numbers of additional personnel that are
required to generate responses by traditional means. When self-service is
combined with a dynamically updated knowledgebase and the ability to easily
deliver information through e-mail, live chat or other person-to-person
interaction, the resulting solution allows companies to leverage their existing
resources to achieve higher levels of customer satisfaction, increased employee
productivity and decreased cost per customer service interaction.

Our Internet customer service software solution provides businesses and
other organizations with the following benefits:

. increased customer satisfaction, which our products achieve by enabling
fast, efficient and intelligent resolution of customer service questions
and issues;

. reduced cost of customer service, which results from enabling and
encouraging customer self-service, helping customers communicate
questions they cannot answer on their own to a customer service
representative and assisting customer service representatives to answer
questions;

. dynamic knowledge capture, organization, publication and distribution,
the core features of our knowledgebase technology;

. application service provider delivery, which allows businesses to
minimize implementation requirements and reduce the cost of ownership of
our hosted products;

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. a comprehensive, rapidly deployable solution that integrates Internet-
based customer self-service, e-mail management, live interaction, issue
tracking and customer satisfaction measurement capabilities; and

. a scalable, Web-based architecture that allows businesses to meet the
growth in Internet-based communications.

Our objective is to enhance our position as a leading provider of Internet
customer service software solutions to businesses and organizations of all
sizes. As of June 30, 2000, we had 750 customers, which we believe to be more
than any other Internet customer service software company. To continue our
success in this regard, we intend to leverage the efficiency of our direct
sales channel to acquire new customers and increase penetration of our existing
customers, and to expand our indirect sales channels and strategic
relationships. In addition, we intend to extend the breadth and depth of our
product offerings, increase the availability of our application service
provider hosting services and expand our international presence.

We had no significant operations until 1997 and did not release our initial
product until November 1997. We had revenue of $2.0 million in 1999 and $3.9
million in the six months ended June 30, 2000. As of June 30, 2000, we had an
accumulated deficit of approximately $9.6 million. Substantially all of our
products are sold pursuant to multi-year term licenses. In light of our
relatively short operating history, we do not have historical information with
which to estimate the rates of renewal when these term licenses come up for
renewal. The majority of our current term licenses come up for renewal in 2001.

We were incorporated in Montana in September 1995 and reincorporated in
Delaware in August 2000. Our principal executive offices are located at 77
Discovery Drive, Bozeman, Montana 59718, and our telephone number is (406) 522-
4200. Our Web site is located at www.rightnow.com. Information contained on our
Web site does not constitute a part of this prospectus.

"Right Now" is our trademark. We have applied for federal registration of
the trademarks "RightNow" combined with the RightNow logo, and
"SmartAssistant." Other trademarks or service marks appearing in this
prospectus are the property of their respective holders.

The Offering

<TABLE>
<S> <C>
Common stock offered................ 4,000,000 shares
Common stock to be outstanding after
the offering....................... 19,866,228 shares
Use of proceeds..................... For general corporate purposes, including
working capital. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol............................. RTNW
</TABLE>

The number of shares of common stock to be outstanding after the offering is
based upon the actual number of shares outstanding as of August 31, 2000. It
does not include:

. 5,548,650 shares of common stock reserved for issuance under our stock
option plans, 4,376,813 of which were covered by outstanding options with
a weighted average exercise price of $3.47 per share and 1,098,547 of
which were available for future grants, subject to certain automatic
annual increases; and

. 600,000 additional shares of common stock reserved for issuance under our
employee stock purchase plan.

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Unless otherwise indicated, the information in this prospectus reflects the
number of shares outstanding on August 31, 2000 assuming:

. the conversion of all outstanding shares of preferred stock into common
stock upon the closing of this offering;

. a three-for-five reverse stock split, which will be effected prior to the
closing of this offering; and

. no exercise of the underwriters' over-allotment option.

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Summary Consolidated Financial Data

<TABLE>
<CAPTION>
Year Ended December Six Months
31, Ended June 30,
---------------------- ---------------
1997 1998 1999 1999 2000
------ ------ ------- ------ -------
(in thousands, except per share
data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Operations
Data:
Revenue.............................. $ 79 $ 279 $ 2,025 $ 399 $ 3,861
Cost of revenue...................... 1 3 64 7 612
Gross profit......................... 78 276 1,961 392 3,249
Total operating expenses............. 61 439 4,439 779 10,642
Income (loss) from operations........ 17 (163) (2,478) (387) (7,393)
Net income (loss).................... 26 (163) (2,445) (387) (7,039)
Basic and diluted net income (loss)
per share........................... $ -- $(0.01) $ (0.20) $(0.03) $ (0.57)
Shares used in computing basic and
diluted net income (loss) per
share............................... 12,000 12,068 12,218 12,197 12,384
Pro forma basic and diluted net loss
per share........................... $ (0.20) $ (0.45)
Shares used in computing basic and
diluted pro forma net loss per
share............................... 12,305 15,717
</TABLE>

<TABLE>
<CAPTION>
June 30, 2000
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
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(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........................ $ 9,359 $9,359 $49,279
Working capital.................................. 5,989 5,989 45,909
Total assets..................................... 17,446 17,446 57,366
Deferred revenue................................. 10,129 10,129 10,129
Redeemable convertible preferred stock........... 16,120 -- --
Total stockholders' equity (deficit)............. (10,929) 5,191 45,111
</TABLE>

The pro forma information in the above tables assumes conversion of all
outstanding shares of our preferred stock into common stock. The pro forma as
adjusted information in the above balance sheet data table is adjusted to
reflect the sale of 4,000,000 shares of common stock offered by us in this
offering at an assumed initial public offering price of $11.00 per share, after
deduction of the estimated underwriting discounts and commissions and estimated
offering expenses.

See note 1 of the notes to our consolidated financial statements for an
explanation of the determination of the number of weighted average shares used
to compute basic and diluted net income (loss) per share and pro forma basic
and diluted net loss per share data.

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RISK FACTORS

Before investing in our common stock, you should be aware that various risks
are involved, including those described below. The occurrence of any of the
following risks could have a material adverse effect on our business, financial
condition and results of operations. In that case, the trading price of our
common stock could decline, and you may lose all or part of your investment.
Before making a decision to buy our common stock, you should carefully consider
the risks described below as well as the other information in this prospectus,
including our financial statements and the related notes.

Risks Related to Our Business

Our limited operating history makes it difficult to evaluate our business and
future prospects.

We first recorded revenue from subscriptions for our software in November
1997. Due to our limited operating history, we have limited financial data that
you can use to evaluate our business. In addition, our products address a new
and emerging market for Internet-based customer service software solutions.
Because of the new and rapidly evolving nature of the market in which we
operate combined with our limited operating history, our prospects are
difficult to predict and may change rapidly and without warning.

If we fail to properly manage and support the expansion of our business, our
financial results will be adversely affected.

We have substantially expanded our business and operations since June 30,
1999. We have increased our number of employees to 258 at June 30, 2000 from 36
at June 30, 1999. We have recently expanded our operations by opening sales
offices in Dallas and in the United Kingdom, and we plan to open other sales
offices. In addition, the majority of our senior management team has been hired
since August 1999. This expansion has placed, and is expected to continue to
place, a significant strain on our managerial, administrative, operational,
financial and other resources. If we are unable to successfully implement and
improve our financial systems, procedures and controls, hire, train and
integrate new personnel, manage expanded operations and integrate our
management team, our business and financial results will be adversely affected.

We have incurred and expect to incur substantial operating losses, and
consequently we may not be profitable in the future.

We incurred losses from operations of approximately $2.5 million for the
year ended December 31, 1999 and $7.4 million for the six months ended June 30,
2000. As of June 30, 2000, we had an accumulated deficit of approximately $9.6
million. We expect to continue to incur significant sales and marketing,
product development and general and administrative expenses and, as a result,
we will need to generate significant revenues to achieve and maintain
profitability. We cannot be certain that we will generate sufficient revenues
to achieve profitability in the future or at all.

Substantially all of our revenue to date has been derived from subscriptions
for RightNow Web, and if we fail to successfully upgrade or enhance RightNow
Web and introduce new products, our ability to grow our business will be
adversely affected.

Substantially all of our revenue to date has been derived from subscriptions
for RightNow Web. Our future financial performance will depend, in significant
part, on our successful development and sale of new and enhanced versions of
RightNow Web and other new products. We may not be able to successfully develop
new products and our new products may not achieve market acceptance, in which
case we will be unable to adequately grow our business.

6
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We face intense competition in our market, and our failure to compete
successfully could make it difficult for us to acquire and retain customers.

The market for our products is new and intensely competitive. We expect the
intensity of competition to increase in the future. If we are unable to compete
effectively, it will be difficult for us to acquire and retain customers.
Increased competition could result in pricing pressures, reduced margins or the
failure of our products to achieve or maintain market acceptance.

Our products compete with systems that were developed and maintained
internally by businesses. We also compete directly with companies that provide
licensed software products for customer service solutions. Our competitors
include a number of companies offering one or more products for the electronic
customer relationship management software market, some of which compete
directly with our products. Our competitors include companies providing similar
solutions, including eGain Communications Corporation, Kana Communications,
Inc. and Servicesoft Technologies, Inc. In addition, we face competition from
other companies that provide customer relationship management, e-commerce and
communications and knowledgebase management solutions.

Many of our current and potential competitors have longer operating
histories, greater name recognition and substantially greater financial,
technical, marketing, management, service, support and other resources than we
have. In addition, many of our competitors have well-established relationships
with our current or potential customers and potential alliance partners and
have an extensive knowledge of our industry. Therefore, they may be able to
respond more quickly than we can to new or changing opportunities,
technologies, standards or customer requirements.

A significant number of companies are entering the electronic customer
relationship management software market. We expect that new competitors will
continue to enter the market with competing products as the size and visibility
of the market opportunity increase. We also expect that competition will
increase as a result of software industry consolidations and formations of
alliances among industry participants. For example, in April 2000, Kana
acquired Silknet Software, Inc. Competitors with large market capitalizations
or cash reserves would be better positioned than we are to acquire
complementary businesses, new technologies or products.

We may not be able to compete successfully against current and future
competitors, and competitive pressures may seriously harm our business.

Substantially all of our products are sold pursuant to single- or multi-year
subscriptions, and if our existing customers elect not to renew their
subscriptions, our reputation and financial results will be adversely affected.

Customers who desire to continue to use our products at the end of their
software subscription term will have to renew their subscriptions. To date,
only a few subscriptions have come up for renewal. Between June 30 and December
31, 2000, approximately 4% of our current subscriptions will come up for
renewal and, in 2001, a significant portion of our current subscriptions will
come up for renewal. Given our limited operating history, we do not have
historical information with which to estimate the rates of renewal or the terms
on which renewals will be made. If large numbers of existing customers decide
not to renew their subscriptions, our reputation will suffer and our financial
results will be adversely affected.

If we fail to respond effectively to rapidly changing technology and evolving
industry standards, our products may become obsolete.

The market for our products is characterized by rapid technological change,
changes in customer requirements, frequent new product and service
introductions and enhancements and evolving industry

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standards. Competing products based on new technologies or new industry
standards may perform better or cost less than our products and could render
our products obsolete or unmarketable. If we are unable on a timely basis to
develop new and enhanced products that respond to changing technology and
satisfy the needs of our customers, our business and financial results could
suffer. Our future success depends on our ability to satisfy diverse and
evolving customer requirements and achieve market acceptance. We cannot be
certain that we will be successful in developing and marketing product
enhancements or new products in a timely or cost-effective manner, or that
these products, if developed, will achieve market acceptance.

Failure to develop and expand our marketing capabilities will limit our growth
and prevent us from increasing our revenue.

We need to expand our marketing operations in order to increase market
awareness of our products, market our products to a greater number of
organizations and generate increased revenue. Competition in the market for
Internet-based customer service solutions is intense, and if we fail to
differentiate our products from those of our competitors and acquire greater
market share, we will be unable to grow our business or increase our revenue.
Furthermore, we have limited experience marketing our products broadly to a
large number of customers and may be unable to do so successfully.

A failure to expand our direct sales force will impede our growth.

To date, we have sold our products primarily through our direct sales force,
which has grown to 73 at June 30, 2000 from eight at December 31, 1998. Our
ability to achieve significant revenue growth in the future will depend, in
large part, on our success in recruiting, training and retaining sufficient
direct sales personnel. New hires require training and take time to achieve
full productivity. Our recent hires and planned hires may not become as
productive as necessary, and we may be unable to hire sufficient numbers of
qualified individuals in the future. In addition, we plan to use international
direct sales personnel and therefore must hire sales personnel outside of the
United States, where we have no significant experience in hiring and managing
sales personnel and may be unsuccessful in doing so. If we are unable to hire
and develop sufficient numbers of productive sales personnel, sales of our
products will suffer.

A failure to develop indirect sales channels will impede our growth.

To execute our business strategy, we must increase the number of our
marketing and distribution partners, including system integrators, application
service providers, hosting companies, technology providers and outsourced call
centers. In addition, we intend to pursue strategic alliances with technology
providers to enhance the marketing and distribution of our products. We will
rely on these indirect sales channels to increase our customer base. At times,
we will rely on these third parties to recommend our products to their
customers and to implement and support our products for their customers. Our
existing or future distribution partners may choose to devote greater resources
to marketing and supporting the products of our competitors than they do to
marketing and supporting our products, which would impede our revenue growth.
Further, if these third parties fail to implement or support our products
successfully, our reputation may be harmed and sales will be adversely
affected.

Our application service provider delivery model relies on third parties to
provide hosting services, and if we are unable to contract with third-party
hosting providers, our products may become less desirable.

Approximately 50% of our current customers have selected our hosting
services. We currently have relationships with third-party hosting providers to
maintain data centers. If our current hosting arrangements were to be
terminated, we could experience delays in arranging new third-party hosting
services, which could harm our relationships with customers and our reputation,
resulting in decreased revenue. Our operations depend on our current hosting
providers' ability to protect their and our systems in their data center
against damage or interruption. Our third-party hosting providers do not
guarantee that our customers' access to hosted

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solutions will be uninterrupted, error-free or secure. We have no formal
disaster recovery plan in the event of damage or interruption, and our
insurance policies may not adequately compensate us for any losses that we may
incur. Any system failure that causes an interruption in our service or a
decrease in responsiveness could harm our relationships with our customers and
result in reduced revenue. In addition, our business and customer relationships
could suffer or we could be subject to costly litigation if the security of our
customers' confidential information contained in our data centers is breached.

Variations in quarterly revenue and operating results due to factors such as
changes in demand for our products may cause our stock price to decline.

Our quarterly revenue and operating results may fluctuate significantly as a
result of a variety of factors, including those listed below, many of which are
outside of our control. If our quarterly revenue or operating results fall
below the expectations of investors or securities analysts, the price of our
common stock could decline substantially. Factors that might cause fluctuations
in our quarterly revenue and operating results include the following:

. variations in and difficulty predicting demand for our products;

. the timing and success of new product introductions or upgrades by us or
our competitors;

. our practice of expensing sales commissions at the time of invoice, while
the related revenue is recognized ratably over the term of the
subscription;

. the renewal rate of customers whose subscriptions have expired and the
terms upon which they renew;

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

. changes in the mix of term software subscriptions and perpetual licenses
sold in a particular quarter due to the different methods of revenue
recognition;

. our ability to expand our operations, and the amount and timing of
expenditures related to this expansion;

. the purchasing and budgeting cycles of our customers;

. the rate of success of our international expansion;

. general economic conditions as well as those specific to our customers
and markets; and

. costs related to possible acquisitions of technology or businesses.

Most of our expenses, such as salaries and third-party hosting costs, are
relatively fixed in the short term, and our expense levels are based in part on
our expectations regarding future revenue levels. As a result, if revenue for a
particular quarter is below our expectations, we will not be able to
proportionally reduce operating expenses for that quarter. A revenue shortfall
will have a disproportionate effect on our expected operating results for that
quarter.

For the foregoing reasons, we believe that quarter-to-quarter comparisons of
our operating results are not necessarily meaningful, and you should not rely
on them as an indication of our future performance.

Our business operations could be significantly disrupted if we lose members of,
or fail to properly integrate, our management team.

Our success depends to a significant degree upon the skills, experience and
performance of our senior management, engineering, sales, marketing, service,
support and other key personnel. Specifically, we believe that our future
success is highly dependent on Greg R. Gianforte, our founder, Chairman and
Chief Executive Officer. If we lose the services of Mr. Gianforte or other key
personnel, our business will be severely disrupted and we may be unable to
operate effectively. We do not maintain "key person" life insurance policies
except on Mr. Gianforte. This life insurance policy may not be sufficient to
compensate us for the loss of his services.

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Almost all of the members of our senior management team joined us since
August 1999. Most of these individuals have not previously worked together and
are currently being integrated as a management team. If our senior management
is unable to work effectively as a team, our business operations could be
significantly disrupted.

Our failure to attract and retain qualified personnel may prevent us from
effectively developing, marketing and supporting our products.

Our business success depends in large part upon our ability to attract,
train, motivate and retain highly skilled employees, particularly sales and
marketing personnel, software engineers and other senior personnel. Qualified
personnel are in great demand throughout the software industry, and we may be
unable to attract and retain sufficient numbers of qualified personnel to our
company. If we fail to recruit and retain necessary sales and marketing,
engineering, customer support or other personnel, we will be unable to develop
new products and services in a timely manner or to provide acceptable levels of
customer support.

Our market share will decrease and our reputation will suffer if our products
fail to perform properly.

Our software products may contain undetected errors, or bugs, that may
result in product failures or otherwise fail to perform in accordance with
customer expectations. Product performance problems could result in loss of or
delay in revenue, loss of market share, failure to achieve market acceptance,
the diversion of development resources or injury to our reputation.

We intend to expand our international sales efforts but do not have substantial
experience in international markets, and therefore may be unable to
successfully expand internationally.

Although our international sales have not been material to date, we intend
to expand our international sales efforts, including the development of direct
and indirect sales channels. We have limited experience in marketing, selling
and supporting our products and services abroad. If we are unable to grow our
international operations successfully and in a timely manner, we will be unable
to grow our business successfully. Expanding internationally subjects us to a
number of risks, including:

. greater difficulty in staffing and managing foreign operations;

. changes in a specific country's or region's political or economic
conditions;

. expenses associated with localizing products for foreign countries;

. differing intellectual property rights;

. protectionist laws and business practices that favor local competitors;

. longer sales cycles and collection periods or seasonal reductions in
business activity;

. multiple, conflicting and changing governmental laws and regulations; and

. foreign currency exchange rate fluctuations.

We are starting to implement our international expansion, have had sales
professionals located in the United Kingdom since June 2000 and expect to have
sales and marketing professionals located in Germany by the end of 2000 and in
the Pacific Rim in 2001. We also may explore other regions for future
expansion. Expanding our international operations will require a significant
amount of attention from our management and significant financial resources,
and may take needed attention and resources away from our domestic operations,
which could harm our business and financial results.

We may face increased competition if we are unable to protect our intellectual
property rights.

Our success depends to a significant degree upon the protection of our
software and other proprietary technology rights. We rely on trade secret,
copyright and trademark laws, patents and confidentiality

10
<PAGE>

agreements with employees and third parties, all of which offer only limited
protection. We currently have four U.S. patent applications pending relating to
our software. Our pending patent applications may not result in the issuance of
patents and, if issued, may not be broad enough to protect our proprietary
rights or could be successfully challenged by one or more third parties, which
could result in our loss of the right to prevent others from exploiting the
inventions claimed in those patents. None of our technology is patented outside
of the United States, nor do we currently have any international patent
applications pending. The laws of other countries in which we market our
products may afford little or no effective protection of our proprietary
technology. Consequently, we may be unable to prevent our proprietary
technology from being exploited abroad, which could diminish international
sales revenue or require costly efforts to protect our technology.

Both domestically and internationally, the reverse engineering, unauthorized
copying or other misappropriation of our proprietary technology could enable
third parties to benefit from our technology without paying us for it. This
could have a material adverse effect on our business and financial results.
Policing the unauthorized use of our products is difficult. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others. Such litigation could result in substantial costs and
diversion of management resources, either of which could harm our business.

We may become subject to claims of intellectual property infringement, which
could be costly and time-consuming.

If any of our products violate third-party proprietary rights, we may be
required to reengineer our products or seek to obtain licenses from third
parties to continue offering our products without substantial reengineering. We
generally do not conduct comprehensive patent searches to determine whether the
technology used in our products infringes patents held by third parties. Third
parties might make a claim of infringement against us or our customers. Many of
our license agreements require us to indemnify our customers from any claim or
finding of intellectual property infringement. In addition, product development
is inherently uncertain in a rapidly evolving technological environment in
which there may be numerous patent applications pending, many of which are
confidential when filed, with regard to similar technologies. Any efforts to
reengineer our products or obtain licenses from third parties may not be
successful and, in any case, would substantially increase our costs and harm
our business and financial results.

We could incur substantial costs as a result of product liability claims
relating to our customers' business operations.

If one of our products fails, a customer may assert a claim for substantial
damages against us, whether or not we are responsible for the product failure.
Our license agreements generally contain provisions designed to limit our
exposure to potential product liability claims, such as disclaimers of
warranties and limitations on liability for special, consequential and
incidental damages. However, these contractual limitations on liability may not
be enforceable, and we may be subject to claims based on errors in our
software. Product liability claims could require us to spend significant time
and money in litigation or to pay significant damages. Although we maintain
general liability insurance, including coverage for errors and omissions, we
cannot assure you that this coverage will continue to be available on
reasonable terms or will be available in amounts sufficient to cover one or
more large claims, or that the insurer will not disclaim coverage as to any
future claim.

Future acquisitions could disrupt our business and harm our financial
condition.

In order to remain competitive, we may find it necessary to acquire
additional businesses, products and technologies. In the event that we do
complete an acquisition, we could be required to do one or more of the
following:

. issue equity securities, which would dilute current stockholders;

. incur substantial debt;

11
<PAGE>

. assume contingent liabilities;

. incur a one-time charge; or

. amortize goodwill and other intangible assets.

Any of these actions would adversely affect our financial results and could
result in decreased profitability. Additionally, we may not be able to
successfully integrate any technologies, products, personnel or operations of
companies that we acquire. These difficulties could disrupt our business,
divert management resources and increase our expenses.

Risks Related to Our Industry

Our business depends on the continued growth of Internet usage and the
continued growth of business being conducted over the Web.

Our products are designed to serve the customer service needs of businesses
that use the Internet for marketing, sales and customer service. Our future
success depends substantially upon the widespread adoption of the Internet as a
primary medium for commerce, communication and business applications. Because
our business is Internet-based, the failure of this market to develop, or a
delay in the development of this market, would impact our ability to grow our
business. Our business growth also would be impeded if Internet usage does not
continue to grow or grows more slowly than we currently anticipate. The
continued growth of the Internet depends on various factors, all of which are
outside of our control. Moreover, the Web has experienced, and is expected to
continue to experience, significant user and traffic growth, which has, at
times, caused user frustration with slow access and download times. If Web
infrastructure is unable to support the demands placed on it, our market may
grow more slowly than expected and our revenue growth may suffer.

Additionally, critical issues concerning the commercial use of the Web, such
as security, reliability, cost, accessibility and quality of service, remain
unresolved and may negatively affect the growth of Web use or the
attractiveness of commerce and business communication over the Web. The Web
could lose its viability due to delays in the development or adoption of new
standards and protocols to handle increased activity or due to increased
government regulation and taxation of Internet commerce. Because our business
is Internet-based, any of these results would significantly limit the market
for our products.

Finally, our products address a new and emerging market for Internet-based,
interactive electronic business solutions. Because of the new and rapidly
evolving nature of the market in which we operate combined with our limited
operating history, our prospects are difficult to predict and may change
rapidly and without warning.

Increasing government regulation of the Internet could slow our growth or
impede our ability to be profitable.

Federal, state or foreign government bodies or agencies may adopt laws or
regulations affecting the use of the Internet as a commercial medium. If
enacted, these laws or regulations could limit the market for our products,
which could slow our growth and reduce our revenue. Even if they do not apply
to our business directly, we expect that laws and regulations relating to user
privacy, pricing, content and quality of products and services could indirectly
affect our business. It is possible that these types of laws or regulations
could expose companies involved in Internet commerce to liability or could
limit the growth of Internet commerce generally. Either of these results would
slow our growth and impede our ability to be profitable.

The imposition of sales and other taxes on products sold by our customers over
the Internet could limit online commerce and, as a result, reduce the demand
for our products.

The imposition of new sales or other taxes could limit the growth of
Internet commerce generally and, as a result, the demand for our products and
services. Current federal legislation limits the imposition of state and

12
<PAGE>

local taxes on Internet access and also prohibits "multiple or discriminatory"
taxes on e-commerce. Congress may choose not to renew this legislation when it
expires in 2001. Moreover, the current legislation does not prevent states from
imposing taxes on Internet access if the taxes were in existence as of the time
of enactment of the legislation in October 1998, or from imposing otherwise
valid sales and use taxes on e-commerce.

Under current federal Constitutional law, companies that sell products over
the Internet are not required to collect sales or other taxes on shipments of
their products into states or foreign countries where they are not physically
present. However, one or more states or foreign countries may seek to impose
sales or other tax collection obligations on companies that engage in e-
commerce outside of the state or foreign jurisdiction. A successful assertion
by one or more states or foreign countries that companies that engage in e-
commerce should collect sales or other taxes on the sale of their products over
the Internet, even though not physically present in the state or country, could
indirectly reduce demand for our products.

Privacy concerns relating to the Internet are increasing, which could result in
legislation that adversely affects our business or reduces sales of our
products.

Businesses using our software capture information regarding their customers
when those customers contact them online with customer service inquiries.
Privacy concerns may cause visitors to resist providing the personal data
necessary to allow our customers to use our software products most effectively.
Also, even the perception of privacy concerns, whether or not valid, may
indirectly inhibit market acceptance of our products. In addition, legislative
or regulatory requirements may heighten these concerns if businesses must
notify visitors to their Web sites that the data captured after visiting some
Web sites may be used by marketing entities to direct product promotion and
advertising to that user. Proposed privacy legislation is pending now in
several states and in Congress, and Congress already has passed the Children's
Online Privacy Protection Act of 1998, which governs the online collection and
use of personal information from children under the age of 13 and empowers the
Federal Trade Commission to issue new regulations. Although we are not aware of
any other statute or regulatory requirement in effect in the United States that
would directly require a business to notify visitors to its Web site that the
data captured in visiting the site may be used by marketing entities for direct
promotion, some local governmental authorities have broadly construed consumer
protection statutes to prohibit data collection without notice to Web site
visitors and have threatened action under consumer protection statutes. Other
countries and political entities, including the European Union, already have
adopted this type of "notice" legislation or regulatory requirements, and the
United States may do so as well.

Risks Related to This Offering

Our common stock is particularly subject to volatility because our industry is
newly emerging and rapidly growing.

The stock market has recently experienced extreme price and volume
fluctuations. In particular, the market prices of securities of technology
companies, especially Internet-related companies, have been extremely volatile
and have experienced fluctuations that often have been unrelated or
disproportionate to the operating performance of companies. These broad market
fluctuations could reduce the market price of our common stock.

The significant control over stockholder voting matters that may be exercised
by our founder and Chief Executive Officer will deprive you of the ability to
influence corporate actions.

After this offering, Greg R. Gianforte, our founder and Chief Executive
Officer, will control approximately 60.5% of the outstanding common stock and,
together with our other officers and directors, will control approximately
76.8% of the outstanding stock. As a result, Mr. Gianforte, acting alone, will
be able to control all matters requiring stockholder approval, including the
election of directors and approval of significant

13
<PAGE>

corporate transactions. This concentration of ownership may have the effect of
delaying, preventing or deterring a change in control of RightNow, could
deprive our stockholders of an opportunity to receive a premium for their
common stock as part of a sale of RightNow and might reduce the market price of
our common stock.

The price of our common stock after this offering may be lower than the price
you pay.

The price of our common stock that will prevail in the market after this
offering may be higher or lower than the price you pay. After this offering, an
active trading market in our stock might not develop or continue. If you
purchase shares of our common stock in this offering, you will pay a price that
was not established in a
competitive market. Rather, you will pay a price that we negotiated with the
representatives of the underwriters based upon several factors. See
"Underwriting" for a description of these factors.

Our broad discretion in using the proceeds from this offering may negatively
impact our financial results.

Our decisions regarding the use of the proceeds of this offering could harm
our business, operating results and financial condition. We have not identified
specific uses for the proceeds from this offering, and we will have broad
discretion in how we use them. You will not have the opportunity to evaluate
the economic, financial or other information on which we base our decisions on
how to use the proceeds.

Our prospects for obtaining additional financing, if required, are uncertain,
and failure to obtain needed financing could diminish our ability to pursue
future growth.

We may need to raise additional funds to develop or enhance our products, to
fund expansion, to respond to competitive pressures or to acquire complementary
products, businesses or technologies. If required, additional financing may not
be available on terms that are acceptable to us. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders will be reduced and these securities might have
rights, preferences and privileges senior to those of our current stockholders.
If adequate funds are not available on acceptable terms, our ability to fund
our expansion, develop or enhance products, take advantage of unanticipated
opportunities or otherwise respond to competitive pressures will be
significantly limited.

Investors will experience immediate and substantial dilution in the book value
of their investment.

If you purchase shares of our common stock in this offering, you will
experience immediate and substantial dilution, in that the price you pay will
be substantially greater than the net tangible book value per share of the
shares you acquire. This dilution is due in large part to the fact that our
earlier investors paid substantially less than the public offering price when
they purchased their shares of common stock. You will experience additional
dilution upon our optionees' exercise of outstanding stock options to purchase
our common stock.

Anti-takeover provisions in our charter documents and Delaware law could
prevent or delay a change in control of our company.

Provisions of our certificate of incorporation and bylaws and Delaware law
may discourage, delay or prevent a merger or acquisition that a stockholder may
consider favorable and may limit the market price of our common stock. These
provisions include the following:

. establishing a classified board in which only a portion of the total
board members will be elected at each annual meeting;

. authorizing the board to issue preferred stock;

. prohibiting cumulative voting in the election of directors;

14
<PAGE>

. limiting the persons who may call special meetings of stockholders; and

. prohibiting stockholder action by written consent.

Future sales by existing stockholders could depress the market price of our
common stock.

If our existing stockholders sell a large number of shares of our common
stock after this offering, the market price of the common stock could decline
significantly. Moreover, a perception in the public market that our existing
stockholders might sell shares of common stock could depress the market price
of our common stock. Immediately after this offering, approximately 15,866,228
shares held by our existing stockholders will be outstanding. Substantially all
of these shares are subject to lock-up agreements restricting the sale of
common stock for 180 days after the date of this prospectus.

Some of our existing stockholders have the right to require us to register
with the Securities and Exchange Commission up to 3,332,912 shares of our
common stock that they own. If we register these shares of common stock, the
stockholders can freely sell those shares in the public market. All of these
shares are subject to lock-up agreements restricting their sale for 180 days
after the date of this prospectus.

After this offering, we intend to register approximately 8,000,000 shares of
our common stock that we have issued or may issue under our stock plans. Once
we register these shares, they can be freely sold in the public market upon
issuance, subject to the lock-up agreements, if applicable, described above.

15
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements in "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and elsewhere. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue" or the negative of these terms, or other comparable
terminology. These statements are only predictions and involve known and
unknown risks, uncertainties and other factors, including the risks outlined
under "Risk Factors," that may cause our or our industry's actual results,
level of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed
or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assume responsibility for the accuracy and completeness of these
statements. Except as otherwise required by the federal securities laws, we are
under no duty to update any of the forward-looking statements after the date of
this prospectus to conform these statements to actual results.

In this prospectus, we use market data and industry forecasts that we have
obtained from publicly available information and industry publications by
International Data Corporation and Jupiter Communications, Inc. IDC is a
provider of information technology industry analysis and market data and
Jupiter is a provider of research on Internet commerce. Neither we nor any of
the underwriters represent that any such information is accurate. Each of these
sources may have its own definitions for a particular market or market segment
and, accordingly, the information obtained from one source might not be
comparable with information obtained from other sources. Industry publications
generally state that the information they provide has been obtained from
sources believed to be reliable, but that the accuracy and completeness of such
information is not guaranteed. We have not independently verified any of this
information. In particular, we do not know what rate of general economic growth
was assumed in preparing forecasts. Forecasts of developing industries such as
ours are not based upon sophisticated analyses of substantial amounts of
historical data, as in the case of more mature industries. Thus, forecasts of
developing industries like ours are much less likely to be accurate.

16
<PAGE>

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the 4,000,000 shares of
common stock we are offering will be approximately $39.9 million, assuming an
initial public offering price of $11.00 per share and after deducting the
estimated underwriting discounts and commissions and estimated offering
expenses. If the underwriters' over-allotment option is exercised in full, we
estimate that our net proceeds will be approximately $46.1 million.

The principal purposes of this offering are to obtain additional working
capital, to create a public market for our common stock and to facilitate
future access by us to public markets. In addition, we may use a portion of the
net proceeds to acquire complementary products, technologies or businesses.
However, we currently have no commitments or agreements and are not involved in
any negotiations to make any acquisitions. Pending use of the net proceeds of
this offering, we intend to invest the net proceeds in interest-bearing,
investment-grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock,
except for the S corporation distribution discussed below. We currently intend
to retain any future earnings to finance the growth and development of our
business and therefore do not anticipate paying any cash dividends in the
foreseeable future.

Prior to the issuance of shares of our preferred stock in December 1999, we
were a corporation subject to taxation under Subchapter S of the Internal
Revenue Code of 1986, as amended. As a result, our net earnings were taxed, for
federal and state income tax purposes, as income of our stockholders. In
December 1999, we terminated our S corporation status. At that time, we
authorized the payment of a distribution to our S corporation stockholders in
an amount approximating their individual income tax liability resulting from
S corporation taxable earnings up to the date of termination. For further
discussion of our S corporation distribution, see "Related Party Transactions."

17
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2000:

. on an actual basis;

. on a pro forma basis, giving effect to the conversion of all outstanding
shares of our preferred stock into a total of 3,332,912 shares of common
stock upon the closing of this offering; and

. on a pro forma as adjusted basis after giving effect to our receipt of
the net proceeds from the sale of 4,000,000 shares of common stock in
this offering at an assumed initial public offering price of $11.00 per
share.

This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the related notes that appear elsewhere in this prospectus.

<TABLE>
<CAPTION>
As of June 30, 2000
------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
(in thousands, except share
data)
<S> <C> <C> <C>
Long-term capitalized lease obligations, less
current portion................................ $ 3 $ 3 $ 3
Redeemable convertible Series A preferred stock,
$.001 par value per share, 5,554,853 shares
authorized and designated, 3,332,912 shares
outstanding actual, no shares outstanding pro
forma and pro forma as adjusted................ 16,120 -- --
Stockholders' equity (deficit):
Preferred stock, $.001 par value, 9,445,147
shares authorized and undesignated, no shares
issued or outstanding actual, pro forma or
pro forma as adjusted........................ -- -- --
Common stock, $.001 par value, 150,000,000
shares authorized, 12,465,651 shares
outstanding actual, 15,798,563 shares
outstanding pro forma, 19,798,563 shares
outstanding pro forma as adjusted............ 12 16 20
Additional paid-in capital.................... (1,329) 14,787 54,703
Accumulated other comprehensive loss.......... (1) (1) (1)
Accumulated deficit........................... (9,611) (9,611) (9,611)
------- ------- -------
Total stockholders' equity (deficit)........ (10,929) 5,191 45,111
------- ------- -------
Total capitalization...................... $ 5,194 $ 5,194 $45,114
======= ======= =======
</TABLE>

This table excludes, as of June 30, 2000, the following shares:

. 4,061,190 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $2.03
per share;

. 1,487,460 shares of common stock available for future grant under our
stock option plans, subject to certain automatic annual increases; and

. 600,000 shares of common stock available for issuance under our employee
stock purchase plan.

18
<PAGE>

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding.

Our pro forma net tangible book value as of June 30, 2000, after giving
effect to the conversion of our outstanding preferred stock into common stock
in connection with this offering, was $5.2 million, or approximately $0.33 per
share. After giving effect to our sale of the 4,000,000 shares of common stock
in this offering at an assumed initial public offering price of $11.00 per
share, less estimated underwriting discounts and commissions and estimated
offering expenses, our pro forma net tangible book value at June 30, 2000 would
have been approximately $45.1 million, or $2.28 per share. This represents an
immediate increase in pro forma net tangible book value of $1.95 per share to
existing stockholders and an immediate dilution in pro forma net tangible book
value of $8.72 per share to purchasers of common stock in this offering. The
following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $11.00
Pro forma net tangible book value per share at June 30,
2000...................................................... $ 0.33
Increase per share attributable to new investors........... 1.95
------
Pro forma as adjusted net tangible book value per share after
the offering................................................ 2.28
------
Dilution per share to new investors.......................... $ 8.72
======
</TABLE>

The following table sets forth, on a pro forma basis as of June 30, 2000,
the differences between the number of shares of common stock purchased from us,
the total consideration paid and the average price per share paid by existing
stockholders and by new investors:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 15,798,563 79.8% $15,104,925 25.6% $ 0.96
New public investors........... 4,000,000 20.2% 44,000,000 74.4% 11.00
---------- ---- ----------- ----
Total........................ 19,798,563 100% $59,104,925 100%
========== ==== =========== ====
</TABLE>

The above tables exclude, as of June 30, 2000, the following shares:

. 4,061,190 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $2.03 per share;

. 1,487,460 shares of common stock available for future grant under our
stock option plans, subject to certain automatic annual increases; and

. 600,000 shares of common stock available for issuance under our employee
stock purchase plan.

To the extent that any of these options are exercised or shares are issued,
there will be further dilution to new investors. See "Capitalization,"
"Management--Benefit Plans" and "Description of Capital Stock."

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
financial statements and related notes and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
data included elsewhere in this prospectus. The statement of operations data
for the years ended December 31, 1997, 1998 and 1999 and the six months ended
June 30, 2000, and the balance sheet data as of December 31, 1998 and 1999 and
June 30, 2000, are derived from our audited financial statements included
elsewhere in this prospectus. The statements of operations data for the period
from our inception on September 18, 1995 to December 31, 1995 and for the year
ended December 31, 1996, and the balance sheet data as of December 31, 1995,
are derived from our unaudited financial information not included in this
prospectus. The balance sheet data as of December 31, 1996 and 1997 are derived
from our audited financial statements not included in this prospectus. The
selected financial data for the six months ended June 30, 1999 have been
derived from our unaudited financial statements also included elsewhere in this
prospectus and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the data for the unaudited periods. Historical results are not necessarily
indicative of results to be expected in any future period, and results of
interim periods are not necessarily indicative of results that may be expected
for the entire year.

<TABLE>
<CAPTION>
Period from Six Months
Inception Year Ended December 31, Ended June 30,
(September 18, 1995) ----------------------------- ----------------
to December 31, 1995 1996 1997 1998 1999 1999 2000
-------------------- ------ ------ ------ ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenue................. $ 1 $ 63 $ 79 $ 279 $ 2,025 $ 399 $ 3,861
Cost of revenue......... -- -- 1 3 64 7 612
------ ------ ------ ------ ------- ------- -------
Gross profit............ 1 63 78 276 1,961 392 3,249
Operating expenses:
Sales and marketing.... 7 4 -- 279 3,343 532 8,172
Research and
development........... 1 35 43 74 603 159 1,429
General and
administrative........ 6 13 18 86 493 88 1,041
------ ------ ------ ------ ------- ------- -------
Total operating
expenses.............. 14 52 61 439 4,439 779 10,642
------ ------ ------ ------ ------- ------- -------
Income (loss) from
operations............. (13) 11 17 (163) (2,478) (387) (7,393)
Interest and other
income, net............ -- 12 9 -- 33 -- 354
------ ------ ------ ------ ------- ------- -------
Net income (loss)....... $ (13) $ 23 $ 26 $ (163) $(2,445) $ (387) $(7,039)
====== ====== ====== ====== ======= ======= =======
Basic and diluted net
loss per share......... -- -- -- $(0.01) $ (0.20) $ (0.03) $ (0.57)
Shares used in computing
basic and diluted net
loss per share......... 12,000 12,000 12,000 12,068 12,218 12,197 12,384
Pro forma basic and
diluted net loss per
share.................. $ (0.20) $ (0.45)
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 12,305 15,717
</TABLE>

<TABLE>
<CAPTION>
December 31, June 30, 2000
----------------------------- ------------------------------
Pro Forma
1995 1996 1997 1998 1999 Actual Pro Forma As Adjusted
---- ---- ---- ---- ------- ------- --------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents............ $ 2 $ 5 $19 $ 86 $14,183 $ 9,359 $9,359 $49,279
Working capital
(deficit).............. (31) 11 33 (64) 13,113 5,989 5,989 45,909
Total assets............ 21 20 37 264 17,348 17,446 17,446 57,366
Deferred revenue........ -- -- -- 171 4,165 10,129 10,129 10,129
Long-term capital lease
obligations, less
current portion........ -- -- -- -- 7 3 3 3
Redeemable convertible
preferred stock........ -- -- -- -- 16,120 16,120 -- --
Total stockholders'
equity (deficit)....... (12) 11 37 (96) (3,981) (10,929) 5,191 45,111
</TABLE>

20
<PAGE>

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

The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our financial statements and related notes appearing
elsewhere in this document.

Overview

We provide a comprehensive Internet-based customer service software solution
that integrates customer self-service, e-mail management, live interaction,
issue tracking and customer satisfaction measurement capabilities. We were
incorporated in September 1995 but had no significant operations until 1997. In
the second half of 1997, we began to conduct research and development relating
to our initial product.

In November 1997, we released the initial version of RightNow Web on a
hosted and non-hosted basis. Since that time, we have released upgrades,
including enhancements to existing product features and additional
functionality, at least twice a year. In the second half of 1999, we
significantly expanded the functionality and features of RightNow Web to
include e-mail management, live interaction and service contract management
capabilities. In April 2000, we introduced RightNow Metrics, a customer
satisfaction survey and measurement tool.

As we have expanded our business, we have increased our direct sales force
to 73 at June 30, 2000 from eight at December 31, 1998. In October 1999, we
opened a sales office in Dallas, Texas and in June, 2000, we opened a sales
office in the United Kingdom. To date, virtually all of our sales activity has
taken place over the telephone and via the Web, rather than through face-to-
face meetings. The average sales cycle for our products is less than 100 days.
In cases where our sales force has been provided leads generated through our
marketing activities described below, the sales cycle has generally been
shorter than the average. In the fourth quarter of 1999, we also began to
develop our indirect sales channels. Our customer base has increased to 750 at
June 30, 2000 from 106 at December 31, 1998. We intend to continue to develop
and expand our direct and indirect sales channels, initially focusing on system
integrators, application service providers, hosting companies, technology
providers and outsourced call centers. We also plan to establish sales offices
in Germany in 2000 and in the Pacific Rim in 2001.

As of June 30, 2000, we had an accumulated deficit of $9.6 million. This
deficit and our losses are the result of costs incurred in the development and
sales and marketing of our products. We intend to continue to invest heavily in
our product development, sales and marketing strategies and administrative
infrastructure. As a result, we anticipate that we will incur additional
operating losses for the foreseeable future.

Revenue

Our revenue is comprised of fees from term and perpetual licenses of our
software, maintenance related to perpetual licenses, hosting and professional
services. The majority of our business is derived from two-year software
subscriptions, although terms can range from six months to three years. These
subscriptions are sold for a single price, which includes maintenance and
upgrades over the term of the subscription for which we do not have vendor
specific objective evidence, or VSOE, to determine fair value. We therefore
recognize revenue ratably over the term of the arrangement, which is typically
two years.

For perpetual licensing arrangements, revenue is recognized when persuasive
evidence of an agreement exists, delivery of the product has occurred, no
obligations remain, the fee is fixed and determinable and collectibility is
probable. Revenue from arrangements with resellers is recognized upon delivery
limited by sell through activity.

Maintenance revenue related to perpetual licenses of our products is
deferred and recognized on a straight-line basis over the life of the
maintenance arrangement, which is typically one year.

21
<PAGE>

We provide hosting services, which include data connections, equipment and
the service related to upgrading our products acquired by the customer either
through a term license or perpetual license maintenance arrangement. Revenue
from hosting is deferred and recognized on a straight-line basis over the life
of the hosting arrangement, which is typically one year. A customer may elect
at any time to discontinue hosting and, to the extent the customer has prepaid
for this service, the fees paid will be refunded without penalty.

We offer training and professional services and the related revenue is
recognized when the services are performed and the collectibility is reasonably
certain.

Upon receipt of a purchase order from a customer, we make our software
available over the Internet and provide access to the customer through an
access code. Our standard payment terms are net 30 days from the date of
invoice. This practice of billing the customer at the beginning of the term
contributes to the funding of our operations. Upon qualification and credit
review, we may also offer customers a one-year financing option. Amounts billed
to customers in excess of revenue recognized are recorded as deferred revenue.

Through May 2000 we offered our subscription and perpetual software with a
60-day right-of-return warranty. As of June 30, 2000, less than 7% of our
products sold have been returned. Customers who desire to use our products at
the end of their software subscription term will have to renew their license.
To date, only a few subscriptions have come up for renewal. Between June 30 and
December 31, 2000, approximately 4% of our current subscriptions will come up
for renewal and, in 2001, a significant portion of our current subscriptions
will come up for renewal. Given our limited operating history, we do not have
historical information with which to estimate the rates of renewal or the terms
on which renewals will be made.

Cost of Revenue

Cost of revenue consists primarily of costs relating to our hosting
services, including maintaining data centers for our hosted customers. Cost of
revenue also includes payroll and travel expenses related to providing training
and professional support to our customers. We do not pay royalties to any third
parties for technology included in our products. Since our products are
delivered via the Internet, we do not incur significant product delivery costs.
We plan to expand our application hosting services by developing an
international network of application hosting services through internal and
external resources. As our customer base grows, we intend to continue to invest
additional resources in our application hosting services.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses consist primarily
of payroll related to the sales, marketing and customer support functions,
advertising and promotion of our products and telecommunications costs for
sales activities. As we hire more employees in sales and customer service and
further develop our indirect sales channels, we expect these costs to continue
to increase significantly. We also expect significant increases in advertising
expenses as we more fully implement our marketing plan. We are also expanding
our sales office in Texas and in the United Kingdom and are currently
evaluating other locations both in the United States and abroad. We expect our
sales and marketing expenses to increase significantly in the foreseeable
future as we continue to expand our sales force, implement our marketing
strategy and increase our customer service group to support our business
expansion. As our business grows, we also expect sales commissions to increase.
These commissions are expensed in the month that the related sale is invoiced,
and are generally paid to our sales force in the month following the date of
invoice. The revenue associated with the sale is recognized ratably over the
term of the subscription.

Research and development expenses. Research and development expenses consist
primarily of payroll for development personnel and costs related to the
development of new products, enhancement of existing products and quality
assurance and testing. To date, we have not capitalized any of our software
development costs

22
<PAGE>

because the timing of the commercial release of our products has substantially
coincided with the attainment of technological feasibility. As a result,
research and development costs have been expensed as incurred. We intend to
continue to expand and enhance our product offerings. To accomplish this we are
hiring additional personnel and, to a lesser extent, contracting with external
resources. Accordingly, we expect our research and development expenses will
continue to increase significantly for the foreseeable future.

General and administrative expenses. General and administrative expenses
consist primarily of payroll associated with executive management and corporate
administrative personnel as well as professional fees. We expect general and
administrative expenses will continue to increase significantly as we expand
our business.

We allocate most general expenses such as office supplies, computer
supplies, utilities, rent, depreciation for furniture and equipment, bad debt
expense, payroll taxes, and employee benefits to sales and marketing, research
and development and general and administrative based on the relative headcount
of our respective departments. We recorded bad debt expense of $727,000 for the
six months ended June 30, 2000, $83,000 for the six months ended June 30, 1999,
$372,000 for the year ended December 31, 1999 and $700 for the year ended
December 31, 1998.

Provision for income taxes. At the time of our incorporation, we elected to
be treated as an S corporation under Subchapter S of the Internal Revenue Code
of 1986, as amended. As an S corporation, our stockholders were liable for any
federal and state income tax liabilities resulting from our operations.
Effective December 13, 1999, we terminated our status as an S corporation and
have been liable for federal and state income taxes subsequent to that date.
Immediately prior to the termination of our S corporation status, we authorized
a cash distribution payable to our S corporation stockholders in an amount
approximating their individual income tax liability resulting from S
corporation taxable earnings up to the date of termination. If we had been a C
corporation for all of 1999, we would have recorded income tax expense of
approximately $266,000. At June 30, 2000, we had a deferred tax asset of
approximately $4.5 million, all of which has been reserved for by a valuation
allowance. In the future, if available evidence indicates it is more likely
than not that we will be able to utilize this deferred tax asset, we will
record an income tax benefit in the amount of the asset recognized.

Results of Operations

The following table lists, for the periods indicated, each line item as a
percentage of revenue:

<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30,
--------------------- --------------
1997 1998 1999 1999 2000
----- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
As a Percentage of Revenue:
Revenue..................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue............. 1.0 1.3 3.1 1.8 15.9
----- ----- ------ ----- ------
Gross profit.............. 99.0 98.7 96.9 98.2 84.1
Operating expenses:
Sales and marketing....... 1.0 99.9 165.1 133.3 211.6
Research and development.. 54.0 26.5 29.8 39.9 37.0
General and
administrative........... 23.0 30.7 24.3 22.0 27.0
----- ----- ------ ----- ------
Total operating
expenses............... 78.0 157.1 219.2 195.2 275.6
----- ----- ------ ----- ------
Income (loss) from
operations................. 21.0 (58.4) (122.3) (97.0) (191.5)
Interest and other income,
net........................ 11.8 -- 1.6 -- 9.2
----- ----- ------ ----- ------
Net income (loss)........... 32.8% (58.4)% (120.7)% (97.0)% (182.3)%
===== ===== ====== ===== ======
</TABLE>

23
<PAGE>

Six Months Ended June 30, 2000 and 1999

Revenue

Revenue increased to $3.9 million for the six months ended June 30, 2000
from $399,000 for the six months ended June 30, 1999. This increase was the
result of increased sales of RightNow Web, an increase in the average selling
price of our products due, in part, to increased functionality of RightNow Web
and the introduction of RightNow Metrics. We added 381 customers in the six
months ended June 30, 2000, compared to 131 in the six months ended June 30,
1999. We recorded $503,000 for product returns allowance in the six months
ended June 30, 2000.

Cost of Revenue

Cost of revenue increased to $612,000 for the six months ended June 30, 2000
from $7,000 for the six months ended June 30, 1999. Cost of revenue increased
to 15.9% of revenue in the six months ended June 30, 2000 from 1.8% of revenue
in the six months ended June 30, 1999. The increase was due primarily to the
increase of our application hosting costs. We increased the number of personnel
in our application hosting services group beginning in late 1999 and entered
into two contracts with third parties to provide our application hosting
equipment and facilities. Hosting costs under these contracts increased as the
activity of our hosted customers increased. We also increased the number of our
professional services and training personnel to support our increasing customer
base.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses increased to $8.2
million for the six months ended June 30, 2000 from $532,000 for the six months
ended June 30, 1999. This increase was due primarily to the addition of sales,
marketing and customer service personnel, which represented 30.8% of the
overall increase, and an increase in sales commissions to $1.2 million for the
six months ended June 30, 2000 from $116,000 for the six months ended June 30,
1999, which represented approximately 14.1% of the overall increase in sales
and marketing expense. The increase was also due to higher marketing costs due
to expanded advertising and promotional activities, and higher bad debt
expense. The number of sales, marketing and customer service personnel
increased to 183 as of June 30, 2000 from 27 as of June 30, 1999. As a
percentage of revenue, sales and marketing expenses increased to 211.6% in the
six months ended June 30, 2000 from 133.3% in the six months ended June 30,
1999.

Research and development expenses. Research and development expenses
increased to $1.4 million for the six months ended June 30, 2000 from $159,000
for the six months ended June 30, 1999. This increase was due primarily to the
increase in personnel for development of new products, enhancement of existing
products, quality assurance and testing. As a percentage of revenue, research
and development expenses decreased to 37.0% in the six months ended June 30,
2000 from 39.9% of revenue in the six months ended June 30, 1999.

General and administrative expenses. General and administrative expenses
increased to $1.0 million for the six months ended June 30, 2000 from $88,000
for the six months ended June 30, 1999. The increase was due to the addition of
senior management and other administrative personnel and professional services
expenses. General and administrative expenses increased to 27.0% of revenue in
the six months ended June 30, 2000 from 22.0% of revenue in the six months
ended June 30, 1999.

Interest and other income, net. Interest and other income, net consists
primarily of interest earned on cash and cash equivalents. Interest and other
income, net was $354,000 for the six months ended June 30, 2000. The increase
in interest income was due to increased cash balances resulting from the sale
of our preferred stock in December 1999.

24
<PAGE>

Years Ended December 31, 1999 and 1998

Revenue

Revenue increased to $2.0 million in 1999 from $279,000 in 1998. The
increase in revenue was due primarily to increased sales of RightNow Web and
also to a higher average sales price due, in part, to increased functionality
of the product. Our number of customers increased to 422 at December 31, 1999
from 106 at December 31, 1998.

Cost of Revenue

Cost of revenue increased to $63,000 in 1999 from $4,000 in 1998. Cost of
revenue increased to 3.1% of revenue for the year ended December 31, 1999 from
1.3% of revenue for the year ended December 31, 1998. The increase in cost of
revenue in 1999 was primarily due to the expansion of our application hosting
costs. We increased the number of personnel in our application hosting services
group in 1999 and entered into a contract with a third party in December 1999
to provide our application hosting equipment and facilities.

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses increased to $3.3
million in 1999 from $279,000 in 1998. This increase was due primarily to the
addition of sales, marketing and customer service personnel, an increase in
sales commissions to $405,000 in 1999 from $40,000 in 1998, and higher
marketing costs due to expanded advertising and promotional activities. The
number of sales, marketing and customer service personnel increased to 107 as
of December 31, 1999 from 13 as of December 31, 1998. Sales and marketing
expenses increased to 165.1% of revenue in 1999 from 99.9% of revenue in 1998.

Research and development expenses. Research and development expenses
increased to $603,000 in 1999 from $74,000 in 1998. This increase was due
primarily to the increase of personnel for product development and enhancement.
As a percentage of revenue, research and development expenses were 29.8% in
1999 and 26.5% in 1998.

General and administrative expenses. General and administrative expenses
increased to $493,000 in 1999 from $86,000 in 1998. The increase was due to the
addition of senior management and other administrative personnel. General and
administrative expenses decreased to 24.3% of revenue in 1999 from 30.7% of
revenue in 1998, primarily as a result of increased revenue in 1999.

Interest and other income, net. In 1999 we recorded net interest income of
$33,000 due to increased cash balances resulting from the sale of our preferred
stock in December 1999.

Years Ended December 31, 1998 and 1997

Revenue

Revenue increased to $279,000 in 1998 from $79,000 in 1997. We began selling
our initial product in November 1997. Our number of customers increased to 106
at December 31, 1998, from seven at December 31, 1997. Until September 1998,
our products were sold primarily through hosting arrangements and perpetual
licenses. Revenue from consulting services unrelated to our current operations
was $68,000 in 1997.

Cost of Revenue

Cost of revenue was $4,000 in 1998 related to application hosting costs when
our product was initially released in November 1997. In 1997, cost of revenue
was immaterial.

25
<PAGE>

Operating Expenses

Sales and marketing expenses. Sales and marketing expenses were $279,000 in
1998. In 1998, sales and marketing expenses increased as we hired sales and
marketing personnel, incurred sales commission expense of $40,000 and incurred
public relations expenses in connection with the release of our initial product
at the end of 1997. We also created our customer service group in October 1998
to support new installations and maintenance of our product. Sales and
marketing expenses were 99.9% of revenue in 1998. Until January 1998, we did
not expend any material resources on sales and marketing.

Research and development expenses. Research and development expenses
increased to $74,000 in 1998 from $43,000 in 1997. The increase was due
primarily to the addition of personnel for continued development and
enhancement of our products. Research and development expense decreased to
26.5% of revenue in 1998 from 54.0% of revenue in 1997. This decrease in the
percentage of revenue in 1998 was a result of increased revenue from the
introduction of our initial product in 1997.

General and administrative expenses. General and administrative expenses
increased to $86,000 in 1998 from $18,000 in 1997. The increase was primarily
the result of increasing our personnel. In addition, our founder and Chief
Executive Officer began receiving a salary, which he had not received prior to
1998.

Interest and other income, net. We had no material interest income in 1998
or 1997. Other income in 1997 was the result of a gain on the sale of assets
unrelated to our current operations.

Quarterly Results of Operations

The following table sets forth a summary of our unaudited quarterly
operating results for each of the six quarters ended June 30, 2000. In
management's opinion, this unaudited quarterly information has been prepared on
the same basis as the audited financial statements and related notes and
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for the quarters
presented. This information should be read in conjunction with the audited
financial statements and related notes included elsewhere in this prospectus.
We believe that quarter-to-quarter comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.

26
<PAGE>

<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------
March 31, June 30, September 30, December 31, March 31, June 30,
1999 1999 1999 1999 2000 2000
--------- -------- ------------- ------------ --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue................. $ 135 $ 264 $ 714 $ 912 $ 1,443 $ 2,418
Cost of revenue......... 3 4 17 40 166 446
------ ----- ------ ------- ------- -------
Gross profit........ 132 260 697 872 1,277 1,972
Operating expenses:
Sales and marketing... 206 326 875 1,936 3,479 4,693
Research and
development.......... 72 87 143 301 633 796
General and
administrative....... 38 50 95 310 361 680
------ ----- ------ ------- ------- -------
Total operating
expenses........... 316 463 1,113 2,547 4,473 6,169
------ ----- ------ ------- ------- -------
Loss from operations.... (184) (203) (416) (1,675) (3,196) (4,197)
Interest and other
income, net............ -- -- -- 33 168 186
------ ----- ------ ------- ------- -------
Net loss................ $ (184) $(203) $ (416) $(1,642) $(3,028) $(4,011)
====== ===== ====== ======= ======= =======
As a Percentage of
Revenue:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 2.2 1.5 2.4 4.4 11.5 18.4
------ ----- ------ ------- ------- -------
Gross profit.......... 97.8 98.5 97.6 95.6 88.5 81.6
Operating expenses:
Sales and marketing... 152.6 123.5 122.5 212.3 241.1 194.1
Research and
development.......... 53.3 33.0 20.0 33.0 43.9 32.9
General and
administrative....... 28.1 18.9 13.3 34.0 25.0 28.1
------ ----- ------ ------- ------- -------
Total operating
expenses........... 234.0 175.4 155.8 279.3 310.0 255.1
------ ----- ------ ------- ------- -------
Loss from operations.... (136.2) (76.9) (58.2) (183.7) (221.5) (173.5)
Interest and other
income, net............ -- -- -- 3.6 11.6 7.7
------ ----- ------ ------- ------- -------
Net loss................ (136.2)% (76.9)% (58.2)% (180.1)% (209.9)% (165.8)%
====== ===== ====== ======= ======= =======
</TABLE>

We do not consider our business to be seasonal. Our revenue is impacted by
the mix of term software subscriptions and perpetual licenses sold in a
particular quarter. In the three months ended September 30, 1999, perpetual
licenses represented a higher proportion of our revenue than in other periods.
Accordingly, total operating expenses in the quarter, as a percentage of
revenue, were lower. The trend over the past six quarters represents the
expansion in all areas of our business. In the fourth quarter of 1999, we began
to significantly expand our sales force and marketing activities, released an
upgrade to RightNow Web, which included e-mail management and live interaction
capabilities, and increased our research and development and administrative
personnel. This expansion continued in the three months ended June 30, 2000, as
we continued to grow our customer base.

The amount and timing of our operating results generally will vary from
quarter to quarter depending on our level of actual and anticipated business
activities. Factors affecting quarterly operating results can include, but are
not limited to:

. variations in and difficulty predicting demand for our products;

. the timing and success of new product introductions or upgrades by us or
our competitors;

. our practice of expensing sales commissions at the time of invoice, while
the related revenue is recognized ratably over the term of the
subscription;

. the renewal rate of customers whose subscriptions have expired and the
terms upon which they renew;

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

27
<PAGE>

. changes in the mix of term software subscriptions and perpetual licenses
sold in a particular quarter due to the different methods of revenue
recognition;

. our ability to expand our operations, and the amount and timing of
expenditures related to this expansion;

. the purchasing and budgeting cycles of our customers;

. the rate of success of our international expansion;

. general economic conditions, as well as those specific to our customers
and markets; and

. costs related to possible acquisitions of technology or businesses.

Our revenues and operating results are difficult to forecast and will
fluctuate, and we believe that quarter-to-quarter comparisons of our operating
results will not necessarily be meaningful. As a result, you should not rely
upon them as an indication of our future performance.

Liquidity and Capital Resources

From our inception through December 1999, we funded our operations primarily
through cash from operations, with additional funding from private borrowings,
including loans from our founder and Chief Executive Officer, and bank
borrowings. Our practice of billing the entire subscription price on net 30-day
terms at the beginning of the subscription period also contributed to the
funding of our operations. In December 1999, we raised approximately
$16.1 million from a private placement of our preferred stock to fund our
significant business expansion.

As of June 30, 2000, we had $9.4 million in cash and cash equivalents and a
secured bank line of credit of $500,000. The line of credit expires on August
1, 2001, and the borrowings under the line of credit bear interest at prime
plus 1.5%. There were no borrowings under the line of credit at June 30, 2000.

Our operating activities used cash of $3.0 million during the six months
ended June 30, 2000. Cash provided from operating activities was $64,000 for
the year ended December 31, 1999, $5,000 for the year ended December 31, 1998
and $19,000 for the year ended December 31, 1997. As we continue to expand our
sales and marketing, product development and support organizations, we
anticipate the growth in these activities will use cash resources in excess of
cash received. Our deferred revenue was $10.1 million at June 30, 2000 and $4.2
million at December 31, 1999. We expect our deferred revenue and accounts
receivable balances to increase significantly if we continue to increase sales
at current rates. Our practice of billing the entire subscription price on net
30-day terms at the beginning of the subscription period will continue to
contribute to the funding of our operations.

Our investing activities used cash of $1.5 million during the six months
ended June 30, 2000. Cash used for investing activities was $514,000 for the
year ended December 31, 1999, $37,000 for the year ended December 31, 1998 and
$5,000 for the year ended December 31, 1997. Our investing activities have
consisted primarily of purchases of computer equipment, software for internal
use, furniture and equipment to support our operations. We expect to continue
to use cash for purchases of furniture and equipment to support our expanding
workforce and application service provider hosting infrastructure.

Our financing activities used $318,000 for the six months ended June 30,
2000 for costs related to this offering and for final payment on the
stockholder distribution declared in 1999. Prior to the termination of our S
corporation status in December 1999, a stockholder distribution of $330,000 was
declared to fund S corporation income taxes payable by our stockholders. Total
financing activities for the year ended December 31, 1999 generated $14.5
million compared to $100,000 during 1998. In December 1999, we issued shares of
preferred stock generating $16.1 million of net proceeds. Of the proceeds, $1.2
million was used to repurchase stock. In 1998, cash from financing activities
was generated through loans totaling $100,000 from our founder and Chief
Executive Officer and an affiliated entity.

28
<PAGE>

Our capital requirements depend on numerous factors. We expect to devote
substantial resources to continue research and development efforts, expand our
sales, support and marketing organizations, establish additional offices
worldwide and build the infrastructure necessary to support our growth. Since
the introduction of our initial product in November 1997, we have experienced
increases in our expenditures consistent with the growth in our operations and
personnel, and we anticipate that our expenditures will continue to increase in
the future. We believe that the proceeds of this offering, together with our
current cash and cash equivalents and our borrowing capacity, will be
sufficient to fund our activities for at least the next 12 months. Thereafter
we may need to raise additional funds to develop or enhance products, to fund
expansion, to respond to competitive pressures or to acquire complementary
products, businesses or technologies. If required, additional financing may not
be available on terms that are acceptable to us. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage
ownership of our stockholders will be reduced and these securities might have
rights, preferences and privileges senior to those of our current stockholders.

Qualitative and Quantitative Disclosures About Market Risk

We develop products in the United States and sell them primarily in North
America and to a lesser extent internationally. Our sales to date have all been
priced and payable in U.S. dollars. Consequently, we are not subject to
significant market risk from foreign exchange rates at this time. However,
fluctuations in the U.S. dollar or foreign currencies could affect the
competitiveness of our products in foreign markets. Interest income and expense
are sensitive to changes in the general level of U.S. interest rates,
particularly since our investments are in short-term instruments. However,
based on the nature and current level of our investments and obligations, we
have concluded that there is no material risk of exposure.

29
<PAGE>

BUSINESS

Overview

We are a leading provider of Internet customer service software solutions.
Our products are designed to enable businesses and other organizations
operating on or utilizing the Web to enhance customer interactions and
anticipate customer needs, thereby producing higher levels of customer
satisfaction. Our comprehensive solution uses a dynamically updated, self-
learning knowledgebase to deliver customer self-service, e-mail management,
live interaction, issue tracking and customer satisfaction measurement
capabilities. The content of each individual knowledgebase is customer-driven,
meaning that the knowledgebase "learns" as customers communicate and interact
with the business. This allows businesses to efficiently capture, organize,
publish and distribute valuable product and service information both to
customers and throughout the rest of the extended enterprise. Our objective is
to enhance our position as a leading provider of Internet customer service
software solutions to businesses and organizations of all sizes. As of June 30,
2000, we had 750 customers, which we believe to be more than any other Internet
customer service software company. To continue our success in this regard, we
intend to leverage the efficiency of our direct sales channel to acquire new
customers and increase penetration of our existing customers, and to expand our
indirect sales channels and strategic relationships. In addition, we intend to
extend the breadth and depth of our product offerings, increase the
availability of our application service provider hosting services and expand
our international presence.

Industry Background

The use of the Internet to communicate and conduct business is growing
rapidly. Businesses and other organizations are increasingly using the Internet
as an integral means of communicating and interacting with their customers,
business partners and employees. International Data Corporation, or IDC,
estimates that the worldwide number of customers buying goods and services over
the Web will grow from approximately 33.8 million in 1998 to 229.7 million in
2003. This growth has led to a dramatic transformation in the manner in which
companies communicate and interact with their customers. As Internet-based
customer communication continues to grow, we believe that the ability to
efficiently provide fast, reliable and accurate information to meet customer
expectations has become a competitive necessity for many organizations.

As customer communication shifts to the Internet, customers increasingly
expect the capability not only to view and purchase products online, but also
to obtain answers to their product and service questions 24 hours a day, seven
days a week. We believe that, to remain competitive in this environment, every
organization, whether a traditional bricks-and-mortar company with a Web
presence or a completely Internet-based business, must be able to provide a
significant level of service and interaction electronically and in real-time.
The low cost of switching vendors or services on the Internet heightens the
importance of providing superior customer service and communication. Moreover,
Internet-based customer service also applies to other parts of the extended
enterprise that generate product and support-related questions, such as
internal support personnel, human resources departments and suppliers.

The initial Web presence for many companies consisted only of an
infrastructure that supported general marketing and transaction capabilities.
However, in many cases both companies that conduct their business over the
Internet and those that simply have a Web presence have been unprepared for the
significant increase in volume of customer service inquiries that Internet-
based communications channels generate. According to Jupiter Communications,
customer satisfaction with shopping on the Internet is decreasing, and the
proportion of customers who were highly satisfied with their experiences
purchasing from online businesses decreased from 62% in 1998 to 42% in 1999. We
believe that the primary cause of this dissatisfaction is the combination of
increased customer expectations and the inability of many businesses on the Web
to efficiently respond to

30
<PAGE>

customer needs. We also believe that customers expect a quicker response when
they communicate with businesses via the Internet than when traditional modes
of communication such as direct mail and the telephone are used. To effectively
respond to customer inquires on this scale, we believe businesses need to
enable their customers to easily find answers on their own.

E-mail, in particular, illustrates the customer service problems that
businesses on the Internet currently face. E-mail, like a telephone call,
requires a prompt, accurate response in order to be effective. Many businesses
have been unable to cost-effectively manage the volume of e-mail inquiries that
a presence on the Internet generates. According to a Jupiter Communications
survey, 43% of Web sites surveyed did not respond to a customer's e-mail within
24 hours, and 19% of sites did not respond at all. As a result, we believe many
customers prefer to have the ability to resolve questions on their own by
reference to the company's Web site. In situations like these, an increasing
volume of e-mails from customers is often symptomatic of a larger customer
service problem that the business has not addressed, namely, the inability of
customers to find the information they are seeking on a company's Web site. We
believe that businesses that subject their customers to this experience are
driving a significant proportion of their customers to do business elsewhere.
Internet self-service can provide an attractive alternative to this frustrating
end-user experience.

When companies first began to move their businesses to the Internet,
customer service solutions were often designed and developed by internal
information technology personnel. However, in response to rapidly changing
technology, the expansion of Internet-based business activities, time-to-market
pressures and the lack of information technology personnel, many companies have
sought external solutions for their customer service automation needs. Current
Internet customer service products generally take one of two approaches. The
first approach is to provide highly customized products to large businesses
that can afford the relatively high prices and long implementation cycles of
the traditional enterprise software model. This approach, by virtue of its cost
and complexity of implementation, is effectively unavailable to anyone other
than large companies. The second approach is to address only a portion of the
larger customer service problem through point solutions such as e-mail
management or live chat. This second approach fails to provide the
functionality and scalability needed to address current customer service needs
and, because it is not a comprehensive solution, requires integration with
other point products. We believe these approaches are not effective because
neither provides an integrated customer service solution that begins with self-
service and includes a dynamically updated, self-learning and customer-driven
knowledgebase.

Most self-service solutions currently available rely on knowledge experts to
collect, compile and publish information. There are three problems with these
solutions. First, a manual approach is time-consuming and expensive, as the
knowledge expert must often spend a great deal of time to compile, document and
organize the information. Second, the resulting knowledgebase quickly becomes
obsolete because there is no automatic method for adding or deleting
information. Finally, and perhaps most significantly, this approach relies on
the knowledge expert to know what information customers are seeking.

We believe a significant market opportunity exists for an integrated
Internet customer service solution that enables both effective customer self-
service and streamlined escalation to other channels of company communication.
IDC estimates that demand for Internet customer service-related software and
services will grow from $11 billion in 1998 to $43 billion by 2003. We believe
an integrated, cost-effective solution that enables customer self-service by
drawing on a dynamically updated, self-learning knowledgebase is required to
meet this demand. Self-service, or the ability of customers to help determine
the type of interaction and information they seek, allows businesses to rapidly
respond to changes in customer needs without hiring the large numbers of
additional personnel that are required to generate accurate responses by
telephone, mail or other traditional means. When self-service is combined with
a dynamically updated knowledgebase and the ability to easily deliver
information through e-mail, live chat or other person-to-person interaction,
the resulting solution allows companies to leverage their existing resources to
achieve higher levels of customer satisfaction and revenue.

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Solution

We provide an Internet customer service software solution for businesses and
other organizations that operate on or utilize the Web. Our products are
designed to enable businesses to enhance customer interactions and anticipate
customer needs, thereby producing higher levels of customer satisfaction. Our
comprehensive solution uses a dynamically updated, self-learning knowledgebase
to deliver customer self-service, e-mail management, live interaction, issue
tracking and customer satisfaction measurement capabilities. The content of
each individual knowledgebase is customer-driven, meaning that the
knowledgebase "learns" as customers communicate and interact with the business.
This allows businesses to efficiently capture, organize, publish and distribute
valuable product and service information both to customers and throughout the
rest of the extended enterprise. In addition, because each knowledgebase is
self-learning, it does not require businesses to invest significant resources
in the manual processes traditionally associated with knowledgebase creation
and maintenance. Our products are available on both a hosted and non-hosted
basis.

Our products offer customers the following important benefits:

Increased customer satisfaction. Our products are designed to increase
customer satisfaction by enabling fast, efficient and intelligent resolution of
customer service questions and issues. Our automated Internet-based self-
service solutions enable a greater number of customers to answer their own
questions on a 24x7 basis. Additionally, our products allow customers to choose
other forms of interaction with a customer support representative, including e-
mail and live chat. When a customer elects one of these options, our solution
automatically accesses the knowledgebase to suggest answers to the customer
service representative handling the inquiry. This allows a company's customer
service representatives to more effectively address customer inquiries that
require person-to-person assistance. The result is enhanced customer
interactions and improved customer loyalty.

Reduced cost of customer service. Our products reduce the costs of customer
service inquiries by enabling and encouraging customer self-service, helping
customers communicate questions they cannot resolve on their own to customer
service representatives and assisting customer service representatives to
answer questions. Costs are also reduced by automating the expansion and
organization of the business's knowledgebase, which replaces the process of
manually collecting and organizing the information needed to answer customer
questions. As a result, businesses that use our solution can focus customer
service representatives on servicing the more complex issues and providing an
integrated, personalized customer interaction experience. These same features
allow businesses to cost-effectively scale their customer support
infrastructure to the higher volume of customer communications that an Internet
presence generates, increase employee productivity and decrease cost per
customer service interaction.

Dynamic knowledge capture, management and distribution. Our solution enables
a dynamically developed company-specific knowledgebase that provides customers,
business partners and employees with a single point of access for customer
service information. The content that our solution generates is customer-driven
and reflects both customer communications that are explicit, such as e-mails,
and those that are implicit, such as a customer's navigation patterns within
the knowledgebase. This knowledgebase also allows businesses to collaborate
with customers, partners, vendors and suppliers to solve support problems,
share information and conduct e-commerce. Businesses and other organizations
can use our solution not only to address current customer questions, but also
to capture the information generated in answering questions and automatically
add it to the knowledgebase to enable customer self-resolution of similar
questions in the future. Customers benefit from the company's experience in
resolving prior customers' issues, and the information developed in the
knowledgebase becomes a valuable internal marketing and training tool. In
addition, customers, business partners and employees can elect to receive
selected information from the knowledgebase as that information develops and is
updated.

Application service provider delivery. We have designed our products to be
installed in a hosted fashion in order to minimize implementation requirements
and reduce cost of ownership. As a result, hosted solutions

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can be implemented in a matter of days and work together as a comprehensive
product suite as soon as they are installed. Our application service provider
design reduces total cost of ownership of our solutions and eliminates the need
for our customers to purchase hardware, obtain additional Internet connections
or hire additional systems administration personnel. This delivery model also
allows us to install and rapidly upgrade our software with minimal customer
involvement or commitment of resources.

Comprehensive, rapidly deployable, scalable solution. Our product suite is a
comprehensive solution for Internet-based customer service, which integrates
self-service, e-mail management, live interaction, issue tracking and customer
satisfaction measurement capabilities. The ability of our solutions to work
together facilitates rapid deployment and eliminates the need for companies to
try to customize multiple vendors' software tools. When desired, our customers
also can integrate our software solutions with external systems such as call
centers and other customer databases. We work together with our alliance
partners to provide the professional services necessary to perform such
integrations. In addition, our products are built on a scalable Web-based
architecture which allows our customers to scale their customer service
infrastructure to meet levels of customer service activity significantly
greater than any of our customers are currently experiencing.

Strategy

Leverage highly efficient direct sales channel. To date, our sales model has
allowed us to rapidly scale our business in terms of the number of potential
customers contacted, the number of customers acquired and the number of
solutions actually implemented. In contrast to the traditional methods of on-
site sales and implementation used by most other enterprise software companies,
we conduct the vast majority of our sales and implementation processes through
the telephone and over the Internet. We believe that this gives us significant
operating efficiencies relative to many of our competitors. We intend to
continue to leverage the efficiency and scalability of our sales model by
targeting those companies with a strong need for Internet-based customer
service capabilities. Additionally, we intend to increase our sales and
marketing efforts to broaden our customer base and to achieve expanded use of
our products by our existing customers.

Expand indirect sales channels and strategic relationships. We currently
have strategic alliances with more than 50 system integrators, application
service providers, hosting companies, technology providers and outsourced call
centers. We intend to continue to enter into and expand our strategic
relationships to assist in the marketing and distribution of our products and
services. By expanding existing alliances and aggressively developing new ones,
we can leverage the sales and services organizations of much larger firms to
increase our market penetration and target the needs of specific market
segments.

Extend the breadth and depth of our product offerings. We believe that
maintaining and enhancing our products is important to our ability to expand
our market share, differentiate ourselves from our competitors and acquire and
retain customers. We intend to continue to invest in research and development
to broaden the range of solutions our products offer. In particular, we intend
to leverage our current base of more than 750 customers and our strategic
partners to determine desired features and product extensions, and to develop,
license or acquire new products that would complement our current products. We
recently introduced RightNow Metrics to provide businesses the ability to
survey and measure customer satisfaction.

Expand application service provider hosting services. Companies that conduct
business over the Internet usually desire rapid implementation and integrated
delivery of software, which makes software products hosted by application
service providers an attractive alternative to products that reside locally on
the company's network. We intend to continue to expand our application service
provider hosting infrastructure. In addition,

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we intend to make our application service provider hosting services
increasingly available through third-party application service providers.

Expand international presence. As Web usage accelerates abroad, we believe
that significant international market demand will exist for Internet-based
customer service solutions, especially in Europe and the Pacific Rim. We intend
to devote significant resources toward making our products and services the
leading solution for Internet customer service internationally. We opened a
sales office in the United Kingdom in June 2000 and expect to establish sales
offices in Germany by the end of 2000 and in the Pacific Rim in 2001. Our
flagship product RightNow Web is currently available in eight languages, and we
intend to continue to adapt our products to additional languages to facilitate
the penetration of international markets.

Products and Technology

Our products provide an Internet customer service solution for businesses
and other organizations that operate on or utilize the Web. Our comprehensive
solution uses a dynamically updated, self-learning knowledgebase to deliver
customer self-service, e-mail management, live interaction, issue tracking and
customer satisfaction measurement capabilities. The content of each individual
knowledgebase is customer-driven, meaning that the knowledgebase "learns" as
customers communicate and interact with the business. This allows businesses to
efficiently capture, organize, publish and distribute valuable product and
service information both to customers and throughout the rest of the extended
enterprise. In addition, because each knowledgebase is self-learning, it does
not require a business to invest significant resources in the manual processes
traditionally associated with knowledgebase creation and maintenance. Our
products are available both in hosted form, in which case we act as an
application service provider, and in local form, in which case our software is
installed directly on the customer's systems. RightNow Web is currently
available in English, French, German, Italian, Spanish, Portuguese, Dutch and
Finnish. In addition, we are in the process of developing RightNow Web's
capability to support all major languages by the end of 2000.

All of our products have been designed using industry standards for the
Internet. Our software is written in C/C++ and Java, two widely accepted
development languages for developing applications. Our products can be deployed
by any business using the Web through a Web browser. Our products operate on a
number of operating systems and hardware platforms. Currently, both UNIX
(Solaris, Linux, FreeBSD) and Microsoft Windows Server (NT, 2000) are supported
operating systems. Industry standard relational databases (such as Oracle8 and
Microsoft SQL Server) are used to store data.

[A diagram is presented illustrating how customer e-mail and Web inquiries
seeking an answer to a question interact with the self-help, e-mail management
and live chat interaction capabilities of RightNow Web. The diagram also
illustrates the individual knowledgebase and workflow routing between the
customer and a company's customer service representative. The diagram also
presents boxes to note the external system integration and system reporting
capabilities of our solution. Finally, the diagram contains a box noting the
automated survey capability of RightNow Metrics.]

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RightNow Web

RightNow Web was first released commercially in November 1997. The initial
release was designed to allow businesses to provide their customers the ability
to answer questions themselves. Since the initial release, we have upgraded
RightNow Web frequently to include additional capabilities, such as e-mail
management, live interaction, management reporting, issue tracking and service
contract management capabilities. The current release, RightNow Web 3.2,
integrates all of these capabilities.

Knowledgebase technology. Our self-learning knowledgebase incorporates
proprietary technology that is designed to minimize the amount of
administrative time necessary for a business to compile, organize and publish
information on their Web site. We have developed several proprietary approaches
to knowledge management that enable our solution to learn what information is
important and related without requiring the intervention of a knowledge expert.
In this way, the knowledge structure and content is customer-driven and grows
automatically as our products are used. For example, each time a piece of
information is accessed by a customer, its usefulness is recorded and ranked so
that future Web site visitors benefit from prior searches for that information.

We currently have four patent applications pending relating to our
knowledgebase technology, including processes relating to the relative
usefulness ranking and the order of display of retrieved information in the
knowledgebase; the ability of the knowledgebase to suggest related information
to a customer accessing the knowledgebase based on the keyword search and
navigation patterns of the customer; and the ability of the knowledgebase to
produce a relational map of help information items based on the historical
usage patterns of customers accessing the knowledgebase.

RightNow Web's self-learning knowledgebase provides a comprehensive,
Internet customer service solution for a business's external customers, and
valuable information by which business partners, vendors and suppliers may
collaborate to solve problems, share information and conduct e-commerce. For
example, this allows sharing of customer records, support activity or common
marketing documents. In addition, customer service representative, or CSR,
performance is made more efficient and effective by utilizing the knowledgebase
for internal training and educational purposes.

Customer self-service. RightNow Web is designed around the principle that
most customer questions are repetitive in nature and can be predicted. Our
self-service capability works by enabling businesses to offer to their
customers a dynamically updated selection of frequently asked questions via the
Web. Customers are able to search for answers to their questions, which are
organized according to a particular business's requirements. For example, the
questions may be organized by product, service or other individual category.
Customers are also able to use keyword searches to find the answers to their
questions. As customers interact with our solution, our proprietary
knowledgebase technology automatically prioritizes answers in the knowledgebase
to anticipate future customer questions. Using the knowledge gained from a
customer's previous sessions, our products have the functionality to allow a
customer to view answers that are related to the information that they viewed
during a prior search.

If customers are unable to answer their questions on their own, our solution
includes functionality that allows them to submit their questions via the Web,
e-mail their questions, initiate a live chat with a CSR or request a telephone
callback from a CSR.

E-mail management. The e-mail management capability of RightNow Web provides
businesses a full range of options for handling incoming e-mail inquiries. Our
SmartAssistant technology performs natural language processing on the submitted
question and searches the knowledgebase for appropriate answers. After this
processing, the SmartAssistant automatically suggests answers to questions
submitted via the Web either to the customer or to the CSR depending on the
business rules established by the company. In the event that the answer is not
available in the knowledgebase, the CSR can publish and distribute the question
and the answer into the knowledgebase, thereby making the solution easily
accessible to future customers. We believe our

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SmartAssistant technology increases the accuracy of and speed with which CSRs
can respond to e-mail inquiries, making CSRs more efficient and enhancing the
overall level of customer service a business provides.

Live interaction. Although we believe that the majority of customer
questions may be answered through the self-service capability of RightNow Web,
live chat interaction or a telephone call with a CSR may be the best method of
addressing some customer questions. We implement the live interaction
capability of RightNow Web using a Java applet. Based on established customer
service guidelines, our products allow customers who have not found the answers
to their questions to initiate live text chat or request a telephone call from
a CSR. Our SmartAssistant technology can assist the CSR in handling the
customer inquiry in a consistent, fast and efficient manner by allowing the CSR
to access the knowledgebase for potential answers.

Two-way chat (via pop-up browser windows) allows a business's customers and
CSRs to converse through typed conversation, enabling interactive problem
resolution. Web pages and additional product information or installation
instruction and diagrams can be "pushed" to the customer's computer screen
during live interaction, providing a visual, multimedia response. In addition,
at any time during a live chat session, customers can request a callback for
live phone conversation. Each CSR can handle a number of concurrent live chat
sessions to maximize the CSR's productivity.

Workflow routing and issue escalation. RightNow Web incorporates
sophisticated workflow routing and issue escalation capabilities. Although
self-service may be a preferred choice for many customers, organizations may
want to direct a certain portion of their customers to CSRs for personal
attention. In these cases, RightNow Web allows business rules to be easily
implemented to automatically assign incoming e-mails or Web requests to
specific customer service areas. An organization may also establish business
rules to provide that incoming questions be assigned, acted on or even
automatically responded to based on the question's content, customer status,
service contract status and other business rules. Our products also allow
businesses to establish escalation rules for monitoring CSR performance. If a
customer issue is not addressed in a timely manner, escalation rules can be
established to automatically re-assign the issue to another CSR or to notify a
supervisor.

Integration with external systems. RightNow Web incorporates a number of
features that facilitate integration with external systems, including data
import and export utilities to allow for event-driven transactions between the
RightNow Web knowledgebase and a company's internal database. RightNow Web also
has the capability to provide linkage with a customer's other systems so that
when an e-mail or Web request is made through RightNow Web, a notification
automatically can be generated in the customer's call center application.
RightNow Web allows direct database programming when extremely tight system
integration is required. An Application Programming Interface to RightNow Web
provides our alliance partners, customers requiring complex integrations and
our professional services group with additional flexibility in building tight
integration bridges with external systems. Prepackaged connectors are available
for integration with other third-party applications.

Flexible reporting. RightNow Web incorporates a sophisticated Web-based
management report capability, including a report designer function that allows
an organization to create the reports its business needs may require. Once a
report is created, RightNow Web allows the organization to establish a schedule
for delivery via e-mail for daily, weekly or monthly automatic reporting.
Reports can be generated at any time using a Web browser to allow for real-time
report viewing and analysis.

Contract management. The contract management component of RightNow Web
automates the administration of service contracts of the customer. This feature
assists businesses that sell service contracts in managing the contracts based
on the term of the contract or the number of service interactions covered by
the contract.

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RightNow Metrics

In April 2000, we introduced the initial version of RightNow Metrics.
RightNow Metrics is a survey and measurement tool that allows businesses to
design and disseminate custom surveys to external and internal parties to
gather information for business decisions. RightNow Metrics can be used as a
stand alone product or can be fully integrated with RightNow Web. When
integrated with RightNow Web, surveys are automatically generated after
customers have submitted questions to a CSR. Survey responses are automatically
tabulated and graphed and can then be used by businesses to measure the
performance of their customer service staff or any individual CSR. This product
is designed to allow businesses to measure reaction to new products and
programs; identify product and service enhancements; evaluate and improve Web
sites; evaluate training locations, content and instruction quality; and
collect market intelligence on customer demographics, brand identification and
company positioning. In August 2000, we introduced version 2.0 of RightNow
Metrics, which includes the ability to distribute surveys via email or a Web
site link.

Application Service Provider Hosting Services

Our products are available on a hosted basis or can be implemented and
maintained by our customers in their own facilities. Our products have been
specifically designed to be installed in a hosted fashion in order to minimize
implementation requirements and reduce cost of ownership. As a result, our
hosted solutions can be implemented in a matter of days and work together as a
comprehensive product suite as soon as they are installed. In addition,
upgrades to our products can be made quickly and efficiently without the need
for a customer's systems group to be involved.

We believe providing our solutions on a hosted basis will be an important
factor in growing our customer base and making our comprehensive Internet-based
customer service solutions available to any business interacting with its
customers over the Web. Approximately 50% of our current customers are hosted
and an increasing percentage of our new customers since January 1, 2000 have
elected to be hosted.

We have contracted with Exodus Communications, Inc. and Up2 Technologies, a
subsidiary of Teleglobe, Inc., leading providers of Internet server hosting and
management solutions, to provide hosting services to support our product
solutions. We believe both Exodus and Up2 are equipped to provide the security,
reliability and performance required for hosting our products through their
network of operating centers and high-speed wide area network backbone.

Sales and Marketing

We sell our products primarily through our direct sales force. Our sales
force consists of sales development personnel who make initial calls to
potential customers and qualify potential customer leads and direct sales
representatives who close sales with customers and assist our customer support
group in implementing our products. We are in the process of expanding our
direct sales force to also include named account representatives who will focus
on penetrating existing customer accounts where our solution is deployed in
only a portion of the larger organization.

To date, virtually all of our sales activity has taken place over the
telephone and via the Web, rather than through face-to-face meetings. The
average sales cycle for our products is less than 100 days. In cases where our
sales force has been provided leads generated through our marketing activities
described below, the sales cycle has generally been shorter than the average.

As of June 30, 2000, we had 67 North American direct sales employees, 16
sales development employees and 10 international sales employees together with
a group of 10 sales engineers. We typically recruit people for our sales force
with a four-year college degree and at least three years' experience in
corporate field sales. We currently have sales offices in Bozeman, Montana,
Dallas, Texas and London, England.

Our marketing department coordinates customer interaction, conducts market
and competitive research and develops strategies to evaluate new product
direction, enhancements and product specifications. The product

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marketing function is an integral part of customer beta testing, product
packaging, pricing and deployment. Our marketing department consisted of 18
full-time employees as of June 30, 2000.

As an important part of our strategy to expand our customer base, we intend
to continue to expand both our direct and indirect sales channels. We are
actively pursuing alliances with system integrators, application service
providers, hosting companies, technology providers and outsourced call centers.
In addition, we intend to pursue strategic alliances with other technology
providers to enhance the marketing and distribution of our products and to
offer our customers additional products that complement our products. At June
30, 2000, we had relationships with more than 50 indirect channel distributors.
In September 2000, we entered into a three year strategic alliance with
Convergys Corporation, a provider of outsourced information and customer
management products and services. Under the arrangement, Convergys acquired a
license to use our products. In addition, we and Convergys agreed to implement
a number of joint development, marketing and sales initiatives. In addition, as
we introduce new products and enhance the functionality of our existing
products, we intend to market and sell additional products to our existing
customer base.

We use an assortment of marketing programs to create market awareness of our
products and to generate sales leads. Our marketing activities include:

. conducting educational and product seminars;

. participating in trade shows and industry conferences;

. developing and placing Internet and traditional advertising;

. conducting ongoing media and public relations campaigns;

. developing and maintaining our Web site;

. developing customer reference programs, such as customer case studies;

. developing sales tools, including product brochures; and

. publishing white papers relating to customer relationship management
issues.

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Customers

As of June 30, 2000, we had 750 customers, including Internet, software and
hardware, consumer products, financial and travel-related companies as well as
governmental agencies and educational institutions. The following is a
representative list of our customers by industry as of June 30, 2000. No
customer accounted for more than 3% of our revenue in the year ended December
31, 1999. We do not intend the identification of these customers to imply that
these customers are actively endorsing or promoting our products.

Associations

American Chemical
Society
American Simmental
Association
San Diego Regional
Chamber of Commerce

Communications

Power Net Global
Communications
Smith Micro Software,
Inc.
Up2 Technologies

Consumer

Freelife International,
Inc.
Nike, Inc.
Rockford Corporation

Education

Azusa Pacific University
Johns Hopkins University
University of South
Florida

Financial Services

Deutsche Bank
Union Bank & Trust Co.
Women's Financial
Network, Inc.

Government

Air Reserve Personnel
Center
Social Security
Administration
Wayne County GIS
Management Unit

Hardware

CABLEExpress
Technologies
Quantum
Seanix Technology

International

Aeronaut Industries Pty
Ltd.
Dolphin Communication
Technologies GmbH
Securicomm Italia S.r.l.

Internet

product2store.com, Inc.
ValueClick, Inc.
virgin.com

Manufacturing

Black and Decker
Corporation
Briggs & Stratton
Corporation
Dana Corporation

Media

Echostar Communications
Corporation
Investor Business
Network
Rocket Network, Inc.

Medical & Science

Ambion, Inc.
Aventis Pharmaceuticals
Transcend Services, Inc.

Services

CA4IT Inc.
Digital Paper
Corporation
IT Utility

Software

DataCore Software Corp
Eagle Software
UTM systems corp

Solution Providers

Fullscope, Inc.
Starr Seigle
Communications
Xerox Europe Ltd.

Travel

Air Canada
Frontier Airlines
Lufthansa German
Airlines

The following case studies illustrate the benefits some companies have
realized by using our products either to deliver Internet-based customer
solutions to their customers or to deliver information necessary to support
their internal customer service personnel.

Air Canada (www.aircanada.ca)
Routing Customer E-Mail Inquiries to the Web

Air Canada is an international airline serving over 800 destinations in more
than 130 countries. Prior to installing RightNow Web, Air Canada's volume of e-
mail inquiries was growing rapidly. RightNow Web provided Air Canada with a
hosted self-help solution to alleviate its growing e-mail load.

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RightNow Web allows Air Canada to offer its customers quick and easy access
to the information that has historically been most useful, including questions
regarding its frequent flier program. In the months following the installation
of RightNow Web, Air Canada's e-mail load continued to grow, but at a reduced
rate. During the same period, Air Canada experienced significant traffic to the
self-help section of its Web site. With RightNow Web as service option, Air
Canada's customers were seeking answers to questions themselves and, Air Canada
believes, were less likely to contact Air Canada via e-mail. To accommodate Air
Canada's bilingual customer base, RightNow Web was implemented in both French
and English.

Big Planet, Inc. (www.bigplanet.com)
Big Savings through Deployment of Self-Help Solutions

Big Planet is a nationwide provider of Internet services, including e-
commerce and Web appliances, with over 100 support employees. Big Planet chose
RightNow Web to deal with its high volume of telephone and e-mail inquiries,
many of which were repetitive in nature and were not being responded to in a
timely fashion. Prior to installing RightNow Web, Big Planet's Web site offered
little assistance to customer questions. After evaluating other solutions,
RightNow Web was purchased for, among other things, its ease of administration
and the support included with the product.

Big Planet estimates that, since implementation of RightNow Web, they have
experienced a 10-20% reduction in telephone inquires and currently save
approximately $100,000 in monthly telephone support costs. This allows Big
Planet to recoup its entire investment in RightNow Web approximately every
three weeks.

Sanyo Corporation (www.sanyo.com)
Providing Product Support via Self-Help Solutions

Sanyo is a leading developer and manufacturer of consumer electronics, home
appliances and other commercial products. Sanyo's service support organization
for North America chose RightNow Web to alleviate pressure on its call center
and to enable its customers to find answers to their more frequently asked
product and service questions.

Prior to implementing RightNow Web in November 1999, Sanyo's North American
service organization was receiving approximately 1,000 incoming customer
service calls per day. These calls typically involved repetitive questions
about product features and specifications, requests for operation manuals,
repair requests and general product troubleshooting. After deploying our
solution and creating a phone message directing "on hold" customers to their
support site, Sanyo's incoming customer service calls were reduced by
approximately 27% within 40 days of implementation.

Specialized Bicycle Company (www.specialized.com)
Creating Sales with Service

Specialized, a customer since June 1999, is a premier manufacturer of
bicycles and bicycle accessories. As consumer awareness and interest in its Web
site grew, Specialized needed a fast, cost-effective way to answer customer
questions. Specialized chose RightNow Web's self-service capabilities to allow
its customers to obtain quick, consistent and accurate answers to their
questions about the company's bikes and accessories. By using our hosted
service, Specialized was able to deploy RightNow Web in less than 30 days.

Specialized believes that the information RightNow Web delivers to Web
visitors helps it to win sales over its competitors by providing superior
customer service. According to Specialized, RightNow Web allowed the company to
fully recoup its investment within one month of implementation by reducing
costs and increasing sales. In addition, the area of Specialized's Web site
where RightNow Web has been implemented is now the most heavily trafficked area
of the company's Web site.

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University of South Florida--Information and Technology Department
(www.acomp.usf.edu)
Online Self-Help for Students, Faculty and Staff

The University of South Florida serves 36,000 students and 5,000 employees
in four campus locations. The University's Information and Technology
Department provides computer services and manages computer equipment for all
students and faculty. The IT Department was experiencing a growing number of
repetitive e-mail inquiries and phone calls at its help desk, with topics
ranging from simple to complex. After unsuccessfully trying to implement a
competing solution, the IT Department purchased and implemented RightNow Web.

According to the IT Department, RightNow Web provides a cost-effective
online self-help solution for its students, faculty and support staff, which
has allowed it to reduce its support staff. The IT Department estimates that
calls and e-mails were reduced by 20% within a month of deploying RightNow Web
in November 1999. The University of South Florida recently purchased two
additional licenses of RightNow Web for its Financial Aid and Student Computing
Departments.

Customer Service and Support

We believe we must provide a high level of support services to our customers
in order to increase and maintain our customer base. We use RightNow Web and
RightNow Metrics as an integral part of managing our customer support staff's
performance and measuring our customers' satisfaction level.

All of our products are designed to be installed easily and administered
without requiring any significant amount of professional services or special
programming. In order for our customers to have the most up-to-date version of
our software, we have made it easy to upgrade the software. Included in our
normal installation utility is the intelligence to determine the version of
software installed and then automatically perform the actions required to
upgrade the installed version to the most recent version.

Our Customer Services Group consists of an Implementation and Technical
Support Group, Application Service Provider Management Group and Professional
Services Group. As of June 30, 2000, our Customer Services Group consisted of
43 full-time employees.

Our Implementation and Technical Support Group assists our customers in
implementing our products and promoting customer self-sufficiency. To date,
virtually all of our product implementations have been done on a remote basis
through the Internet and telephone. The level of our implementation services
vary depending on the individual customer's requirements. As we increase our
indirect sales channel, these implementation services will increasingly be
provided by third parties who are marketing and selling our products. We also
provide our customers with 24x7 Web and telephone support, software update
support and other product maintenance services.

Our Application Service Provider Management Group manages our data centers.
As of June 30, 2000, approximately 50% of our customers were hosted.

Our Professional Services Group's technical and product specialists help
customers achieve business benefits through a process of Web site prototyping,
testing and deployment. Our professional services personnel allow companies to
use their staff more efficiently, reduce strain on their own internal resources
and efficiently integrate our products into their existing operations. Our
professional services personnel also provide consulting services relating to
specific tasks, including analysis of a customer's business processes,
customization, configuration and integration of our products with a customer's
existing systems and designing custom reports.

Research and Development

We believe that strong product development capabilities are essential to our
strategy of enhancing our core technology, developing new products and
maintaining the competitiveness of our product offerings. Our

41
<PAGE>

research and development expenses totaled approximately $1.4 million, or 37.0%
of revenue in the six months ended June 30, 2000, $603,000, or 29.8% of revenue
in 1999, $74,000, or 26.5% of revenue in 1998 and $43,000, or 54.0% of revenue
in 1997. As of June 30, 2000, 40 of our employees were engaged in research and
development activities. In addition, we supplement our internal research and
development activities with outside development resources.

Competition

Our products compete with systems that were developed and maintained
internally by businesses. We also compete directly with companies that provide
licensed software products for customer service solutions. Our competitors
include a number of companies offering one or more products for the electronic
customer relationship management software market, some of which compete
directly with our products. Our competitors include companies providing similar
solutions, including eGain Communications Corporation, Kana Communications,
Inc. and Servicesoft Technologies, Inc. In addition, we face competition from
other companies providing customer relationship management, e-commerce and
communications and knowledgebase management solutions.

Many of our current and potential competitors have longer operating
histories, greater name recognition and substantially greater financial,
technical, marketing, management, service, support and other resources than we
have. Therefore, they may be able to respond more quickly than we can to new or
changing opportunities, technologies, standards or customer requirements. In
addition, many of our competitors have well-established relationships with our
current or potential customers and potential alliance partners and have an
extensive knowledge of our industry.

We may not be able to compete successfully against current and future
competitors, and competitive pressures may seriously harm our business.

Intellectual Property

Our success depends on our ability to maintain the proprietary aspects of
our technology and operate without infringing the property rights of others. We
rely on a combination of patent, copyright, trade secret and trademark laws to
protect our intellectual property.

We currently have pending four U.S. patent applications covering the
following aspects of our knowledgebase technology:

. processes relating to an information search and retrieval system via a
network, such as the Internet, in which the relative usefulness ranking
and the order of display of the retrieved information in the
knowledgebase is adjusted based on actions taken by a user and the amount
of time elapsed since the particular information was last accessed;

. processes allowing the knowledgebase to suggest related information to a
customer based on the keyword search and navigation patterns of a
customer; and

42
<PAGE>

. processes allowing the knowledgebase to produce a relational map of help
information items based on the strengths of the relationship between
information in the knowledgebase, which are determined based on
historical usage behaviors of customers accessing the knowledgebase.

We also enter into confidentiality or license agreements with our employees,
consultants and alliance partners, and generally control access to and
distribution of our software, documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use our products or technology or to
develop products with the same functionality as our products. Policing
unauthorized use of our products is difficult, and we cannot be certain that
the steps we have taken will prevent misappropriation of our technology,
particularly in foreign countries where the laws may not protect proprietary
rights as fully as do the laws of the United States.

In addition, we have one U.S. trademark registration and two pending U.S.
trademark applications. Our trademark applications may not be allowed and even
if allowed, may not provide us a competitive advantage. Competitors may
successfully challenge the validity and scope of our patents and trademarks.
Although we rely on patent, copyright, trade secret and trademark law to
protect our technology, we believe that factors such as the technological and
creative skills of our personnel, new product developments, frequent product
enhancements and reliable product maintenance are more essential to
establishing and maintaining a technology leadership position. We can give no
assurance that others will not develop technologies that are similar or
superior to our technology.

If any of our products violate third-party proprietary rights, we may be
required to reengineer our products or seek to obtain licenses from third
parties to continue offering our products without substantial reengineering.
Any efforts to reengineer our products or obtain licenses from third parties
may not be successful and, in any case, would substantially increase our costs
and have a material adverse effect on our business, operating results and
financial condition. We generally do not conduct comprehensive patent searches
to determine whether the technology used in our products infringes patents held
by third parties. In addition, product development is inherently uncertain in a
rapidly evolving technological environment in which there may be numerous
patent applications pending, many of which are confidential when filed, with
regard to similar technologies.

Employees

As of June 30, 2000, we had 258 full-time employees, of which 182 were at
our headquarters in Bozeman, Montana, 67 were at our Dallas, Texas sales office
and nine were at our London, England sales office. Of the total employees, 153
were in sales and marketing, 40 were in research and development, 43 were in
customer service and 22 were in finance and administration.

None of our employees is represented by a labor union. We believe that our
relations with our employees are good.

Facilities

Our corporate headquarters are located in Bozeman, Montana, where we lease
approximately 20,000 square feet with terms that expire in March 2005, and
approximately 10,000 square feet under multiple leases with terms that expire
within one year. In July 2000 we entered into a 10-year lease for approximately
30,000 additional square feet of space in Bozeman, Montana, that will be
available in approximately one year. We also lease approximately 13,500 square
feet in Dallas, Texas with a term that expires in August 2005, and
approximately 2,000 square feet in London, England with a term that expires in
January 2001. We believe that these existing and planned facilities are
adequate to meet our current, foreseeable requirements or that suitable
additional or substitute space will be available on commercially reasonable
terms.

Legal Proceedings

We currently are not subject to any material legal proceedings; however, we
may from time to time become a party to various legal proceedings arising in
the ordinary course of our business.

43
<PAGE>

MANAGEMENT

Executive Officers, Directors and Key Employees

Our executive officers, directors and other key employees and their ages as
of July 31, 2000, are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Greg R. Gianforte....... 39 Chairman and Chief Executive Officer

Jeffrey W. Honeycomb.... 45 President and Chief Operating Officer

Susan J. Carstensen..... 38 Chief Financial Officer, Treasurer and Secretary

Charles J. Dourlet...... 37 Vice President of Marketing

Michael A. Myer......... 33 Vice President of Development

Alan Rassaby............ 44 Vice President of Legal and Risk Management

Roger L. Evans(1)....... 55 Director

William J. Lansing(1)... 42 Director

Robert J. Ryan(2)....... 52 Director

Margaret L.
Taylor(1)(2)........... 49 Director

Steve Daines............ 37 Vice President of Customer Support

Didier Guibal........... 37 Vice President, International

Cynthia A. Taylor....... 52 Vice President of Alliances
</TABLE>
--------
(1) Member of audit committee.
(2) Member of compensation committee.

Greg R. Gianforte is our founder, Chairman and Chief Executive Officer.
Prior to founding RightNow in September 1995, he was the Vice President of
North American Sales of Network Associates, Inc. (formerly McAfee Associates,
Inc.), a provider of network security and tools to small and medium-sized
businesses, during 1994. Before joining McAfee Associates, Mr. Gianforte
founded Brightwork Development, a developer of network management applications,
in 1986, and served as President of Brightwork until 1994. Mr. Gianforte holds
a B.E. degree in electrical engineering and an M.S. degree in computer science
from Stevens Institute of Technology.

Jeffrey W. Honeycomb has been our President and Chief Operating Officer
since August 1999. He served as a director from October 1999 to April 2000.
From 1994 to 1999, Mr. Honeycomb served as Vice President of Business Direct
Sales at Network Associates, Inc., a provider of network security and
management tools to small and medium-sized companies. Mr. Honeycomb also served
as Vice President Europe and Vice President of Eastern Sales for Network
Associates. Prior to joining Network Associates, Mr. Honeycomb served in sales
and management positions with Brightwork Development, Central Point Software
and Lanier Business Products. Mr. Honeycomb holds a B.S. degree in business
administration from the University of Maine.

Susan J. Carstensen has been our Chief Financial Officer, Treasurer and
Secretary since October 1999. She served as a director from October 1999 to
April 2000. From 1995 to October 1999, Ms. Carstensen held various positions in
finance and audit at Powerhouse Technologies, Inc., a diversified gaming
technology company. She served as Chief Financial Officer of Powerhouse from
1997 until June 1999. Prior to joining Powerhouse in 1995, Ms. Carstensen spent
three years in financial management for Martin Marietta Astronautics Group and
six years at Ernst & Young LLP. Ms. Carstensen holds B.S and B.A degrees in
business and political science from Montana State University.

44
<PAGE>

Charles J. Dourlet has been our Vice President of Marketing since July 2000.
Prior to joining RightNow, Mr. Dourlet served for six years as Vice President
of Marketing for the Portable PC Division of Compaq Computer Corporation. He
previously worked for AT&T-NCR, GTE Communications Systems and Raytheon
Company. Mr. Dourlet has a B.S. degree in electrical engineering from the
University of Illinois, an M.S. degree in electrical engineering from
Northeastern University and an M.B.A. in marketing from Indiana University.

Michael A. Myer has been our Vice President of Development since March 2000
and prior to that served as our Director of Development from August 1998. From
1987 through August 1998, Mr. Myer held various positions in computer research
and product development with Lucent Technologies (previously a subsidiary of
AT&T Corp.). Mr. Myer holds M.S. and B.S. degrees in computer science from
Rutgers University and an A.S. degree in computer science from Penn State
University.

Alan Rassaby has been our Vice President of Legal and Risk Management since
June 2000. From December 1998 to February 2000, Mr. Rassaby was the Senior
Vice-President, Legal and Risk Management for Powerhouse Technologies, Inc., a
diversified gaming technology company, and Senior Vice-President & General
Counsel of Anchor Gaming after Anchor's acquisition of Powerhouse. Prior to
joining Powerhouse, Mr. Rassaby was an Australian-based partner in the law firm
of Phillips Fox Lawyers from 1994 to 1998. Mr. Rassaby has Arts and Law degrees
from the University of New South Wales in Australia, and a Master of Laws from
the London School of Economics and Political Science of London University.

Roger L. Evans has served on our board of directors since December 1999. Mr.
Evans has been associated with Greylock Management Corporation, a Boston-based
venture capital firm, since 1989, serving as a general partner of Greylock
since January 1991. From 1985 to 1988, he served as President and Chief
Executive Officer of Micom Systems, Inc., a data communications equipment
manufacturer, which he co-founded in 1979. Mr. Evans also serves as a director
of Copper Mountain Networks, Phone.com Inc. and several privately held
companies. Mr. Evans holds an M.A. degree in economics from Cambridge
University, England.

William J. Lansing has served on our board of directors since April 2000.
Mr. Lansing is the Chief Executive Officer of NBC Internet, Inc. From May 1998
to March 2000, Mr. Lansing served in various positions for Fingerhut Companies
Inc., a direct marketing company, including Chairman, President and Chief
Executive Officer. From November 1996 to May 1998, Mr. Lansing served as Vice
President of Corporate Development for General Electric Corp. From January 1996
to October 1996, he served as Chief Operating Officer of Prodigy, Inc., an
online service company. From 1986 through 1995, Mr. Lansing was a principal at
McKinsey & Co., a management consulting company. Mr. Lansing also serves as a
director of Digital River, Inc., an electronic commerce solutions provider,
Select Comfort Corp., a specialty retailer and direct marketer of air beds, Net
Perceptions, Inc., a developer of Internet marketing solutions, FreeShop.com,
Inc., a provider of online direct marketing services, and BigStar
Entertainment, Inc., an online film and entertainment superstore. Mr. Lansing
holds a B.A. degree in English from Wesleyan University and a J.D. degree from
Georgetown University.

Robert J. Ryan has served on our board of directors since May 1999. Since
1995, Mr. Ryan has served as Chairman of Entrepreneur America Mentors, LLC, a
business consulting company. Prior to founding Entrepreneur America in 1995,
Mr. Ryan founded and served as Chief Executive Officer and Chairman of Ascend
Communications, Inc., a networking company, from 1989 to 1995. Mr. Ryan also
serves as a director of Looksmart Ltd. and several privately held companies.
Mr. Ryan holds a B.S. degree in mathematics and physics from Cornell University
and an M.A. in mathematics from the University of Wisconsin.

Margaret L. Taylor has served on our board of directors since April 2000.
Since 1999, she has served as the Chief Executive Officer of Venture Builders,
LLC, a consulting company for start-up businesses. From 1989 to 1999, Ms.
Taylor was the Senior Vice President of PeopleSoft, Inc., a provider of
enterprise application software. Prior to joining PeopleSoft, she served in
various management positions for The Hibernia Bank of San Francisco, California
and the Bank of California. Ms. Taylor also serves as a director of Fair, Isaac
and Co., Inc. and OnDisplay, Inc. She has a B.A. degree in communications and
psychology from Lone Mountain College.

45
<PAGE>

Steve Daines has been our Vice President of Customer Service since June
2000. Mr. Daines served as Vice President of a family construction/development
business in Bozeman, Montana from July 1997 until June 2000. Prior to that, Mr.
Daines spent 13 years at Procter & Gamble, where he managed supply and
manufacturing operations in the United States for seven years, followed by six
years in Asia leading the company's expansion in mainland China. Mr. Daines
holds a B.S. degree in chemical engineering from Montana State University.

Didier Guibal has been our Vice President, International since May 2000.
From 1996 to May 2000, Mr. Guibal held various positions in sales and marketing
at Network Associates, Inc., a provider of network security and management
tools to small and medium-sized companies, including most recently the Vice
President of Sales and Alliances for North America, McAfee division, and Vice
President of Sales for Europe, Middle East, Africa and Latin America. Prior to
joining to Network Associates, Mr. Guibal was the Marketing Manager for SunSoft
Southern Europe, the software division of Sun Microsystems, a provider of
products, services and support solutions for building and maintaining network
computing environments. Mr. Guibal has a Master of Business Administration
degree from the Montpellier Business School in France.

Cynthia A. Taylor has been our Vice President of Alliances since March 2000.
In January 1998, Ms. Taylor founded and served as President of The Improved
Performance Group, a consulting company, until joining us in March 2000. Prior
to founding Improved Performance, she was the Senior Director of the New Media
Division for Oracle Corporation from June 1995 through December 1997, Vice
President of Sales for Avistar Systems Corporation from August 1994 through May
1995, and Vice President for Sales and Marketing of Servio Corporation (now
known as Gemstone Corporation) from 1990 through 1994. She holds B.S. and M.S.
degrees in mathematics from Georgia Southern University.

In connection with its investment in us in December 1999, Greylock
Management Corporation was given the right to elect one person to be a member
of our board of directors. Mr. Evans was appointed to our board of directors by
Greylock Management Corporation in December 1999. At the closing of this
offering, Greylock's right to appoint a member of our board of directors will
cease.

Board Composition

Our certificate of incorporation provides for a classified board of
directors consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of our board of directors will be
elected each year. To implement the classified structure, prior to the
consummation of the offering, one of the nominees to the board will be elected
to a one-year term, two will be elected to two-year terms, and two will be
elected to three-year terms. Thereafter, directors will be elected for three-
year terms. Mr. Gianforte has been designated a Class I director whose term
expires at the 2001 annual meeting of stockholders. Mr. Evans and Mr. Lansing
have been designated Class II directors whose terms expire at the 2002 annual
meeting of stockholders. Mr. Ryan and Ms. Margaret Taylor have been designated
Class III directors whose terms expire at the 2003 annual meeting of
stockholders. For more information on the classified board, see "Description of
Capital Stock--Anti-Takeover Effects of Our Certificate of Incorporation and
Bylaws and Delaware Law."

Board Committees

Our board of directors has established an audit committee and a compensation
committee. The audit committee consists of Messrs. Evans and Lansing and Ms.
Margaret Taylor. The audit committee makes recommendations to the board of
directors regarding the selection of independent auditors, reviews the results
and scope of audit and other services provided by our independent auditors and
reviews and evaluates our audit and control functions.

The compensation committee consists of Mr. Ryan and Ms. Margaret Taylor. The
compensation committee administers our stock plans and makes recommendations to
the board of directors regarding executive compensation matters.

46
<PAGE>

Compensation Committee Interlocks and Insider Participation

The members of our compensation committee currently are Mr. Ryan and Ms.
Margaret Taylor, neither of whom has at any time been an officer or employee of
RightNow.

Director Compensation

We currently do not provide our directors with cash compensation for their
services as members of the board of directors or any committee of the board,
but we may reimburse directors for some expenses in connection with their
attendance at board and committee meetings. Under our 2000 stock plan, outside
directors will be granted an option to purchase 12,000 shares of our common
stock upon appointment to our board of directors, vesting quarterly over two
years. At each annual stockholders' meeting, non-employee directors will
receive automatic option grants for 3,000 shares of common stock, which options
will be vested immediately. In April 2000, in connection with the adoption of a
compensation plan for non-employee directors, the board granted options to
purchase 12,000 shares of our common stock to each of Messrs. Evans, Lansing
and Ryan and Ms. Margaret Taylor under our 1998 stock option plan. The options,
which vest quarterly over two years, have an exercise price of $11.67 per
share. During 1999, the board of directors also granted options to purchase
360,000 shares to Mr. Ryan in connection with his initial appointment to the
board, at an exercise price of $.17 per share, under our 1998 stock plan. After
this offering, future grants will be made under our 2000 stock plan. See "--
Benefit Plans."

Executive Compensation

The following table provides information regarding compensation paid or
earned for services rendered to us in all capacities during the year ended
December 31, 1999 by our Chief Executive Officer and each of our other two most
highly compensated executive officers who earned more than $100,000 in 1999.
These individuals are referred to in this prospectus as the "named executive
officers."

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------- ------------
Number of
Shares
Other Annual Underlying
Name and Principal Position Salary Bonus Compensation Options
--------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C>
Greg R. Gianforte
Chief Executive Officer and
Chairman....................... $116,200(3) -- -- --

Jeffrey W. Honeycomb(1)
President and Chief Operating
Officer........................ 36,711(3) $24,471 $7,000(4) 1,320,000

Susan J. Carstensen(2)
Chief Financial Officer,
Treasurer and Secretary........ 21,627 -- -- 180,000
</TABLE>
--------
(1) Mr. Honeycomb became our President and Chief Operating Officer in August
1999. Mr. Honeycomb's salary in 1999 on an annualized basis was $100,000.

(2) Ms. Carstensen became our Chief Financial Officer in October 1999. Ms.
Carstensen's salary in 1999 on an annualized basis was $100,000.

(3) Includes matching contributions by us under our 401(k) plan as follows: Mr.
Gianforte, $1,200; and Mr. Honeycomb, $1,484. Employees vest in the
employer matching contribution in four equal installments over a four-year
period.

(4) Reflects expenses paid by us for Mr. Honeycomb's relocation to Bozeman,
Montana.

47
<PAGE>

In the year ended December 31, 1999, we granted options to purchase up to an
aggregate of 3,227,820 shares to employees, directors and consultants. No stock
appreciation rights were granted during this period. All options were granted
under our 1998 stock plan at exercise prices at or above the fair market value
of our common stock on the date of grant, as determined in good faith by the
board of directors. All options granted under the plan have a term of 10 years.
However, in the event of the optionee's death, disability or termination of
employment with us, the option will terminate 90 days after the optionee's
death, disability or termination. Optionees may pay the exercise price by cash,
check, cancellation of any outstanding indebtedness of the optionee to us or
delivery of already owned shares of our common stock. All options granted to
executive officers vest over four years in equal installments every six months
from the date of grant, except that Mr. Honeycomb's options vested 25% upon his
relocation to Bozeman, Montana, and his remaining options vest over four years
in equal installments every six months from the date of grant.

The following table provides information concerning the stock option grants
we made in 1999 to each of the named executive officers, including the
potential realizable value over the 10-year term of the options, based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of our common stock.

Option Grants in 1999

<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Number of Price
Securities % of Total Appreciation for
Underlying Options Option Term
Options Granted Exercise Price Expiration -----------------
Name Granted in 1999 Per Share Date 5% 10%
---- ---------- ---------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Greg R. Gianforte....... -- -- -- -- -- --
Jeffrey W. Honeycomb.... 1,320,000 40.9% $ .25 8/25/09 $207,535 $525,935
Susan J. Carstensen..... 180,000 5.6 0.50 10/14/09 56,601 143,437
</TABLE>

The following table provides information concerning shares of common stock
represented by the number and value of unexercised stock options held by the
named executive officers as of December 31, 1999. No options were exercised by
the named executive officers during the year ended December 31, 1999. There was
no public trading market for the common stock as of December 31, 1999. The
value of unexercised in-the-money options has been calculated by determining
the difference between the exercise price per share payable upon exercise of
the options and the fair value price, $4.85, at December 31, 1999.

Aggregated 1999 Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1999 December 31, 1999
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Greg R. Gianforte........... -- -- -- --
Jeffrey W. Honeycomb........ 330,000 990,000 $1,518,000 $4,554,000
Susan J. Carstensen......... -- 180,000 -- 783,000
</TABLE>

Employment and Change-in-Control Arrangements

In August 1999 we entered into an employment agreement with Jeffrey W.
Honeycomb, our President and Chief Operating Officer. Under Mr. Honeycomb's
agreement, he will serve as President and Chief Operating Officer for a one-
year term, which will automatically be extended for two successive one-year
periods if not

48
<PAGE>

terminated earlier by us or Mr. Honeycomb. The agreement provides for an annual
base salary of $100,000, and Mr. Honeycomb also is eligible for a quarterly
incentive bonus of up to $25,000 per quarter based on quarterly goals related
to revenue and profit. Additionally, we granted Mr. Honeycomb an option to
purchase 1,320,000 shares of common stock, 25% of which vested upon Mr.
Honeycomb's establishment of a residence in Montana in September 1999. The
remaining shares vest in equal installments every six months from the date of
grant for a period of four years. If Mr. Honeycomb is terminated by us without
cause (as defined in the agreement), he will receive 12 months' salary, and his
option shares will continue to vest during that time as if he were still
employed by us, but all unexercised options will terminate on the third
anniversary of his termination without cause. Upon the occurrence of a change-
in-control transaction, the vesting of all of Mr. Honeycomb's options will be
automatically accelerated so that they become completely vested.

Ms. Carstensen's offer letter provides that if she is terminated after the
occurrence of a change in control, she will be entitled to receive six months'
salary as severance.

Messrs. Dourlet's and Rassaby's offer letters each provide that if they are
terminated other than for cause, they will be entitled to receive six months'
salary as severance and an additional 12.5% of any then unvested options will
be accelerated and be fully vested as of their date of termination.

The option agreements with our executive officers, other than Mr. Honeycomb,
and key employees provide that if the officer's or key employee's employment is
terminated involuntarily other than for cause within 12 months following a
change-in-control transaction, then, subject to limitations, the vesting of any
stock option held by the officer or key employee will be automatically
accelerated so that the option becomes completely vested.

Benefit Plans

1998 Long-Term Incentive and Stock Option Plan

Our 1998 Long-Term Incentive and Stock Option Plan, or "1998 Option Plan,"
was adopted by the board of directors and received stockholder approval in
February 1998. A total of 10,000,000 shares of common stock have been reserved
for issuance under the 1998 Option Plan. Under the 1998 Option Plan, we were
authorized to grant to officers and other employees options to purchase shares
of common stock intended to qualify as incentive stock options, as defined
under Section 422 of the Internal Revenue Code of 1986, and options that do not
qualify as incentive stock options under the Internal Revenue Code. Incentive
stock options granted under the 1998 Option Plan are exercisable within 10
years and non-incentive stock options are exercisable within 15 years of the
original grant date and generally become exercisable pro rata every six months
over a period of four years from the date of grant. Options granted under the
1998 Option Plan are not transferable by the recipient except by will or by the
laws of descent and distribution. As of August 31, 2000, options to purchase
6,501,780 shares of our common stock had been granted under the 1998 Option
Plan. Of that amount, options to purchase 4,376,813 shares of our common stock
remain outstanding as of August 31, 2000, and are exercisable at prices ranging
from $0.04 per share to $11.67 per share.

2000 Stock Incentive Plan

Our 2000 Stock Incentive Plan was approved by our board of directors in May
2000 and by our stockholders in July 2000. The 2000 Stock Incentive Plan
provides for the granting of:

. stock options, including incentive stock options and non-qualified stock
options;

. stock appreciation rights, or "SARs";

. restricted stock and restricted stock units;

. performance awards; and

. other stock-based awards.

49
<PAGE>

We have reserved 2,100,000 shares of common stock for issuance under the
2000 Stock Incentive Plan. In addition, the number of shares reserved under the
2000 Stock Incentive Plan will automatically be increased each year, beginning
on January 1, 2001, in an amount equal to the lesser of (a) 300,000 shares or
(b) three percent of the shares outstanding on the last day of the preceding
fiscal year. The 2000 Stock Incentive Plan will be administered by our
compensation committee. The compensation committee will have the authority:

. to establish rules for the administration of the 2000 Incentive Plan;

. to select the persons to whom awards are granted;

. to determine the types of awards to be granted and the number of shares
of common stock covered by awards; and

. to set the terms and conditions of awards.

The compensation committee also may determine whether the payment of any
amounts received under any award shall be deferred. Awards may provide that
upon grant or exercise, the holder will receive shares of common stock, cash or
any combination, as the compensation committee will determine.

In order to meet the requirements of Section 162(m) of the Internal Revenue
Code, the 2000 Stock Incentive Plan limits the number of options that may be
granted to any single person in any one calendar year.

The exercise price per share under any incentive stock option or the grant
price of any SAR cannot be less than 100% of the fair market value of our
common stock on the date of grant of that incentive stock option or SAR. In the
event that a proposed optionee owns more than 10% of our common stock, any
incentive stock option granted to that optionee must have an exercise price not
less than 110% of the fair market value of our common stock on the grant date
and may not have a term longer than five years. Options may be exercised by
payment in full of the exercise price, either in cash or, at the discretion of
the compensation committee, in whole or in part by the tendering of shares of
common stock or other consideration having a fair market value on the date the
option is exercised equal to the exercise price. Determinations of fair market
value under the 2000 Stock Incentive Plan are made in accordance with methods
and procedures established by the compensation committee.

The holder of an SAR is entitled to receive the excess of the fair market
value on the date of exercise of a specified number of shares over the grant
price of the SAR.

The holder of restricted stock may have all of the rights of a stockholder
of our company, including the right to vote the shares subject to the
restricted stock award and to receive any dividends, or these rights may be
restricted. Restricted stock may not be transferred by the holder until the
restrictions established by the compensation committee lapse. Holders of
restricted stock units have the right, subject to any restrictions imposed by
the compensation committee, to receive shares of common stock, or a cash
payment equal to the fair market value of such shares, at some future date.
Upon termination of the holder's employment during the restriction period,
restricted stock and restricted stock units will be forfeited, unless the
compensation committee determines otherwise.

If any shares of common stock subject to any award or to which an award
relates are not purchased or are forfeited, or if any award terminates without
the delivery of shares or other consideration, the shares previously used for
these awards will become available for future awards under the 2000 Stock
Incentive Plan. Except as otherwise provided under the procedures adopted by
the compensation committee to avoid double-counting with respect to awards
granted in tandem with or in substitution for other awards, all shares relating
to awards granted are counted against the aggregate number of shares available
for granting awards under the 2000 Stock Incentive Plan.

50
<PAGE>

Our board of directors may amend, alter or discontinue the 2000 Stock
Incentive Plan at any time, except that stockholder approval must be obtained
for any change that, absent stockholder approval:

. would cause Rule 16b-3 of the Exchange Act or Section 162(m) of the
Internal Revenue Code to become unavailable with respect to the 2000
Stock Incentive Plan;

. would violate any rules or regulations of the National Association of
Securities Dealers, Inc., The Nasdaq National Market or any securities
exchange applicable to us; or

. would cause us to be unable under the Internal Revenue Code to grant
incentive stock options under the 2000 Stock Incentive Plan.

Under the 2000 Stock Incentive Plan, the compensation committee may permit
participants receiving or exercising awards to surrender shares of common stock
to us to satisfy federal and state withholding tax obligations. In addition,
the compensation committee may grant a bonus to a participant in order to
provide funds to pay all or a portion of federal and state taxes due as a
result of the receipt, exercise or lapse of restrictions relating to an award.

Employee Stock Purchase Plan

Our board of directors adopted our 2000 Employee Stock Purchase Plan, or the
"Stock Purchase Plan," in May 2000, and our stockholders approved the Stock
Purchase Plan in July 2000. The Stock Purchase Plan is intended to qualify as
an employee stock purchase plan within the meaning of Section 423 of the
Internal Revenue Code of 1986. The Stock Purchase Plan covers an aggregate of
600,000 shares of common stock. In order to participate in the Stock Purchase
Plan, employees must meet certain eligibility requirements. Participating
employees will be able to direct the company to make payroll deductions of up
to 15% of their compensation during a purchase period for the purchase of
shares of common stock. The maximum amount that an employee may deduct during
any one year is $25,000. Each purchase period, with the exception of the
initial offering period, will be six months. The Stock Purchase Plan will
provide participating employees with the right, subject to some limitations, to
purchase our common stock at a price equal to 85% of the lesser of the fair
market value of our common stock on the first day or the last day of the
applicable purchase period, except that the price on the first day of the
initial purchase period will be the initial public offering price of the shares
of the common stock offered by this prospectus. The Stock Purchase Plan will
terminate on a date that our board of directors may determine, or automatically
as of the date on which all of the shares of common stock reserved for purchase
under the Stock Purchase Plan have been sold.

401(k) Plan

We have established a tax-qualified employee savings and retirement plan, or
"401(k) Plan," for all of our employees who satisfy eligibility requirements,
including requirements relating to age and length of service. Pursuant to the
401(k) Plan, employees may elect to reduce their current compensation by up to
the lower of 12% or the statutorily prescribed limit and have the amount of the
reduction contributed to the 401(k) Plan. The 401(k) Plan permits us to make
additional discretionary matching contributions, and we currently match 100% of
employees' contributions up to a maximum of 3% of their annual compensation.
The employer contribution vests annually over a four-year period in four equal
installments. The 401(k) Plan is intended to qualify under Section 401 of the
Internal Revenue Code so that contributions by employees or by us to the 401(k)
Plan, and income earned on plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that our contributions, if any,
will be deductible by us when made.

Limited Liability and Indemnification Matters

We have entered into indemnification agreements with each of our directors
and executive officers. The form of agreement provides that we will indemnify
against any and all expenses of the director or executive officer who incurred
the expenses because of his or her status as a director or executive officer of
RightNow, to the fullest extent permitted by Delaware law, our certificate of
incorporation and our bylaws.

51
<PAGE>

Our certificate of incorporation and bylaws contain provisions relating to
the limitation of liability and indemnification of directors and officers. The
certificate of incorporation provides that our directors will not be personally
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability:

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

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

. in respect of unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law; or

. for any transaction from which the director derives any improper personal
benefit.

Our certificate of incorporation also provides that if Delaware law is
amended after the approval by our stockholders of the certificate of
incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of our directors will be
eliminated or limited to the fullest extent permitted by Delaware law. The
foregoing provisions of the certificate of incorporation are not intended to
limit the liability of directors or officers for any violation of applicable
federal securities laws. In addition, as permitted by Section 145 of the
Delaware General Corporation Law, our bylaws provide that:

. we are required to indemnify our directors and executive officers to the
fullest extent permitted by Delaware law;

. we may, in our discretion, indemnify other officers, employees and agents
as provided by Delaware law;

. to the fullest extent permitted by Delaware law, but subject to various
exceptions, we are required to advance all expenses incurred by our
directors and executive officers in connection with a legal proceeding;

. the rights conferred in the bylaws are not exclusive;

. we are authorized to enter into indemnification agreements with our
directors, officers, employees and agents; and

. we may not retroactively amend the bylaw provisions relating to
indemnity.

52
<PAGE>

RELATED PARTY TRANSACTIONS

Share Issuances

In December 1999, we received proceeds of approximately $16.1 million from
the sale of 3,332,912 shares of our preferred stock in a private placement to
several investors, including Greg R. Gianforte and Susan J. Carstensen, our
Chief Executive Officer and Chief Financial Officer, respectively, Robert J.
Ryan, a director, Summit Accelerator Fund, L.P., Greylock IX Limited
Partnership, the general partner of which is Greylock IX GP Limited
Partnership, and Greylock X Limited Partnership and Greylock X-A Limited
Partnership, the general partner of each of which is Greylock X GP Limited
Partnership. Roger L. Evans, a member of our board of directors, is a general
partner of Greylock IX GP Limited Partnership and Greylock X GP Limited
Partnership. In connection with this sale of stock, Greylock was given the
right to designate one person to serve on our board of directors, and Mr. Evans
was elected to the board in December 1999 as Greylock's designee. At the
closing of this offering, Greylock's right to designate a member of our board
of directors will cease. The shares of preferred stock will be converted into
an equal number of shares of our common stock upon the closing of this
offering.

We have granted options to two of our named executive officers (Mr.
Honeycomb and Ms. Carstensen) and to our directors, other than Mr. Gianforte.
See "Management--Executive Compensation" and "Principal Stockholders."

Subchapter S Corporation Distribution

Prior to the issuance of shares of our Series A preferred stock in December
1999, we were a corporation subject to taxation under Subchapter S of the
Internal Revenue Code of 1986. As a result, our net earnings were taxed, for
federal and state income tax purposes, as income of our stockholders. In
December 1999, we terminated our S corporation status. At that time, we
authorized the payment of a distribution to our S corporation stockholders in
an amount approximating their individual income tax liability resulting from
taxable earnings up to the date of termination. As a part of this distribution,
Mr. Gianforte received a distribution of $351,292, representing his pro rata
ownership of our outstanding common stock at the time our S corporation status
was terminated.

Transactions with our Chief Executive Officer

Office Leases with Genesis

We have entered into three leases with Genesis Partners, LLC, under which we
lease 9,184 square feet of office space for our principal executive offices at
77 Discovery Drive, Bozeman, Montana, 9,184 square feet of office space at 45
Discovery Drive, Bozeman, Montana, and we will lease another 29,724 square feet
of office space at 40 Enterprise Boulevard, Bozeman, Montana, when this
building is completed in 2001. Mr. Gianforte and Mr. Daines, our Vice President
of Customer Service, have 50% and 25% membership interests in Genesis Partners,
LLC, respectively. The Discovery Drive leases have 60-month terms starting
April 1, 2000 and May 1, 2000, with options to extend for three additional 60-
month periods upon the same terms and conditions except for renegotiated rent.
The Enterprise Boulevard lease has a 120-month term starting on the day a
temporary occupancy permit is obtained from the City of Bozeman, which
currently is estimated to be on or about April 1, 2001, with an option to
extend for one additional 120-month period upon the same terms and conditions
except for renegotiated rent. Under each lease, our rent for the first year of
the lease term is $13.50 per square foot, or $10,332 per month for the
Discovery Drive leases and $33,477.83 per month for the Enterprise Boulevard
lease, including insurance, taxes and common area maintenance, but excluding
utilities. We believe that the terms of these leases are no less favorable to
us than they would have been if obtained from unaffiliated third parties.

53
<PAGE>

Loans to RightNow

In 1998, Mr. Gianforte and an affiliated entity made loans totaling $100,000
to us to provide working capital. We repaid the full amount of these loans in
1999.

Pledge of Collateral to Secure Line of Credit to RightNow

In October 1999, we established a line of credit with Big Sky Western Bank
under which we may borrow up to $500,000 pursuant to a promissory note due July
29, 2000. Mr. Gianforte and his spouse pledged securities to secure the line of
credit in accordance with the terms of a pledge agreement between Big Sky
Western Bank and Mr. Gianforte and his spouse. This pledge was terminated in
December 1999.

54
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table provides information concerning beneficial ownership of
our common stock as of August 31, 2000, by:

. each stockholder that we know owns more than 5% of our outstanding common
stock;

. each of our named executive officers;

. each of our directors; and

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

The following table lists the applicable percentage of beneficial ownership
based on 15,866,228 shares of common stock outstanding as of August 31, 2000,
as adjusted to reflect the conversion of the outstanding shares of preferred
stock upon completion of this offering. The table also lists the applicable
percentage beneficial ownership based on 19,866,228 shares of common stock
outstanding upon completion of this offering, assuming no exercise of the
underwriters' over-allotment option.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and generally includes voting power and/or
investment power with respect to the securities held. Shares of common stock
subject to options currently exercisable or exercisable within 60 days of
August 31, 2000, are deemed outstanding for purposes of computing the
percentage beneficially owned by the person holding the options but are not
deemed outstanding for purposes of computing the percentage beneficially owned
by any other person. Except as otherwise noted, the persons or entities named
have sole voting and investment power with respect to all shares shown as
beneficially owned by them.

55
<PAGE>

Unless otherwise indicated, the principal address of each of the
stockholders below is c/o RightNow Technologies, Inc., 77 Discovery Drive,
Bozeman, Montana 59718.

<TABLE>
<CAPTION>
Percentage of Common
Number of Stock Owned
Shares -------------------------
Beneficially Before After
Name and Address of Beneficial Owner Owned(1) the Offering the Offering
------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Greg R. Gianforte(2)................... 12,020,620 75.8% 60.5%
Roger L. Evans(3)...................... 2,858,790 18.0 14.4
c/o Greylock Management Corporation
One Federal Street
Boston, MA 02110
Greylock IX Limited Partnership........ 1,427,895 9.0 7.2
c/o Greylock Management Corporation
One Federal Street
Boston, MA 02110
Greylock X Limited Partnership......... 1,325,972 8.4 6.7
c/o Greylock Management Corporation
One Federal Street
Boston, MA 02110
Jeffrey W. Honeycomb................... 577,500 3.5 2.8
Robert J. Ryan......................... 227,026 1.4 1.1
Roaring Lion Ranch, LLC
77 Storm King Road
Hamilton, MT 59840
Susan J. Carstensen.................... 65,429 * *
William J. Lansing..................... 3,000 * *
NBC Internet
300 Montgomery Street
San Francisco, CA 94104
Margaret L. Taylor..................... 3,000 * *
P.O. Box 7546
Incline Village, NV 89452
All directors and executive officers as
a group (10 persons)(4)............... 15,995,366 95.0 76.8
</TABLE>
--------
* Less than 1% of the outstanding shares of common stock.
(1) Includes the following shares underlying options exercisable as of or
within 60 days of August 31, 2000: Mr. Evans, 3,000 shares; Mr. Ryan,
93,000 shares; Mr. Honeycomb, 577,500 shares; Ms. Carstensen, 45,000
shares; Mr. Lansing, 3,000 shares; and Ms. Margaret Taylor, 3,000 shares.

(2) Includes 450,000 shares held by the Greg Gianforte Irrevocable Trust.
Excludes 24,000 shares held by Mr. Gianforte's spouse, as to which he has
no voting or investment power and disclaims beneficial ownership.
(3) Consists of 1,427,895 shares held by Greylock IX Limited Partnership,
1,325,972 shares held by Greylock X Limited Partnership and 101,923 shares
held by Greylock X-A Limited Partnership. Mr. Evans is a director of
RightNow and a general partner of Greylock IX GP Limited Partnership, which
is the general partner of Greylock IX Limited Partnership, and Mr. Evans
also is the general partner of Greylock X GP Limited Partnership, which is
the general partner of Greylock X Limited Partnership and Greylock X-A
Limited Partnership. Mr. Evans disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein. Mr. Evans
shares voting and dispositive powers over the shares held by Greylock IX
Limited Partnership with the following natural persons: Aneel Bhusri,
Howard E. Cox, Jr., Charles M. Hazard, Jr., William W. Helman, William S.
Kaiser and David N. Strohm. Mr. Evans shares voting and dispositive powers
over the shares held by Greylock X and X-A Limited Partnerships with the
following natural persons: David B. Aronoff, Aneel Bhusri, Charles Chi,
Howard E. Cox, Jr., Charles M. Hazard, Jr., William W. Helman, William S.
Kaiser, Henry F. McCance, David N. Strohm and David Sze.

(4) Includes 962,700 shares underlying options exercisable as of or within 60
days of August 31, 2000.

56
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Following the closing of this offering, our authorized capital stock will
consist of 150,000,000 shares of common stock, par value $.001 per share, and
15,000,000 shares of preferred stock, par value $.001 per share.

Common Stock

As of August 31, 2000, there were 12,533,316 shares of common stock
outstanding, held by approximately 52 stockholders of record.

Holders of our common stock do not have cumulative voting rights and are
entitled to one vote for each share held of record on all matters submitted to
a vote of the stockholders, including the election of directors. Holders of our
common stock are entitled to receive ratably dividends declared by the board of
directors out of funds legally available therefor, subject to the prior rights
of any preferred stock then outstanding. See "Dividend Policy."

Upon a liquidation, dissolution or winding up of RightNow, the holders of
our common stock will be entitled to share ratably in the net assets legally
available for distribution to stockholders after the payment of all debts and
other liabilities of RightNow, subject to the prior rights of any preferred
stock then outstanding. Holders of our common stock have no preemptive or
conversion rights or other subscription rights, and there are no redemption or
sinking funds provisions applicable to the common stock. All outstanding shares
of common stock are, and the common stock outstanding upon completion of this
offering will be, fully paid and nonassessable.

Preferred Stock

Our board of directors has the authority, without further action by the
stockholders, to issue from time to time up to 15,000,000 shares of preferred
stock in one or more series and to fix for each series the number of shares,
designations, preferences, powers and relative, participating, optional or
other special rights and the qualifications or restrictions thereof. The
preferences, powers, rights and restrictions of different series of preferred
stock may differ with respect to dividend rates, amounts payable on
liquidation, voting rights, conversion rights, redemption provisions, sinking
fund provisions, purchase funds and other matters.

The issuance of preferred stock could decrease the amount of earnings and
assets available for distribution to holders of common stock or adversely
affect the rights and powers, including voting rights, of the holders of common
stock. It may have the effect of delaying, deferring or preventing a change in
control of RightNow. We currently do not plan to issue any additional shares of
preferred stock.

Registration Rights

After this offering, the holders of 3,332,912 shares of common stock or
their transferees will be entitled to rights with respect to the registration
of these shares under the Securities Act as follows:

Demand registration rights. At any time after six months following the
closing of this offering, the holders of at least 50% of these shares of common
stock may request that we register all or a portion of their shares with an
aggregate offering price of at least $7,500,000. Upon their request, we must,
subject to some restrictions and limitations, use our best efforts to cause a
registration statement covering the number of shares of common stock that are
subject to the request to become effective. The holders may only require us to
file a maximum of two registration statements in response to their demand
registration rights.

Piggyback registration rights. The holders of these shares may request that
we register their shares whenever we file a registration statement to register
securities for our own account. These registration

57
<PAGE>

opportunities are unlimited, but the number of shares that may be registered
may be cut back in limited situations by the underwriters.

Form S-3 registration rights. The holders of these shares may request that
we register their shares if we are eligible to file a registration statement on
Form S-3 and if the aggregate price of the shares offered to the public is at
least $1,000,000. The holders may only require us to file one registration
statement on Form S-3 per calendar year.

These registration rights terminate when all of these shares may be sold
under Rule 144 under the Securities Act during any 90-day period. All holders
of these registration rights have waived their registration rights in
connection with this offering.

Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws and
Delaware Law

Some provisions of Delaware law and our certificate of incorporation and
bylaws could make the following transactions more difficult:

. acquisition of RightNow by means of a tender offer;

. acquisition of RightNow by means of a proxy contest or otherwise; or

. removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive
takeover practices and inadequate takeover bids. These provisions are designed
to encourage persons seeking to acquire control of us first to negotiate with
our board of directors, and also are intended to provide management with
flexibility to enhance the likelihood of continuity and stability in the
composition of RightNow if our board of directors determines that a takeover is
not in the best interests of us and our stockholders. However, these provisions
could have the effect of discouraging attempts to acquire us, which could
deprive our stockholders of opportunities to sell their shares of common stock
at prices higher than prevailing market prices. We believe that the benefits of
these provisions, including increased protection of our potential ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure us, outweigh the disadvantages of discouraging takeover
proposals because negotiation of takeover proposals could result in an
improvement of their terms.

Election and Removal of Directors

Our board of directors is divided into three classes serving staggered
three-year terms. This system of electing directors may tend to discourage a
third party from making a tender offer or otherwise attempting to obtain
control of us because generally at least two stockholders' meetings will be
required for stockholders to effect a change in control of the board of
directors. In addition, our bylaws contain provisions that establish specific
procedures for appointing and removing members of the board of directors. Under
our bylaws, vacancies and newly created directorships on the board of directors
may be filled only by a majority of the directors then serving on the board,
and directors may be removed by the stockholders only for cause.

Stockholder Meetings

Under our bylaws, only the board of directors, the Chairman of the Board,
our Chief Executive Officer or stockholders holding 15% of the outstanding
voting power may call special meetings of stockholders.

Requirements for Advance Notification of Stockholder Nominations and
Proposals

Our bylaws establish advance notice procedures with respect to stockholder
proposals and the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board of directors.

58
<PAGE>

Delaware Anti-Takeover Law

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

Elimination of Stockholder Action by Written Consent

Our certificate of incorporation eliminates the right of stockholders to act
by written consent without a meeting.

No Cumulative Voting

Our certificate of incorporation and bylaws do not provide for cumulative
voting in the election of directors. Cumulative voting allows a minority
stockholder to vote a portion or all of its shares for one or more candidates
for seats on the board of directors. Without cumulative voting, a minority
stockholder will not be able to gain as many seats on our board of directors
based on the number of shares of our stock the stockholder holds as the
stockholder would be able to gain if cumulative voting were permitted. The
elimination of cumulative voting makes it more difficult for a minority
stockholder to gain a seat on our board of directors to influence the board's
decision regarding a takeover.

Undesignated Preferred Stock

The authorization of undesignated preferred stock makes it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
RightNow. These and other provisions may have the effect of deferring hostile
takeovers or delaying changes in control or management of RightNow.

Amendment of Charter Provisions

The amendment of any of the above provisions requires approval by holders of
at least two-thirds of the outstanding common stock.

Listing on The Nasdaq Stock Market's National Market

Our common stock has been approved for listing on The Nasdaq Stock Market's
National Market under the symbol "RTNW."

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be the American
Stock Transfer and Trust Company.

59
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock, and we cannot assure you that a significant public market for our common
stock will develop or be sustained after this offering. As described below, no
shares currently outstanding will be available for sale immediately after this
offering due to certain contractual and securities law restrictions on resale.
Sales of substantial amounts of our common stock in the public market after the
restrictions lapse could cause the prevailing market price to decline and limit
our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding 19,866,228 shares
of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of options to purchase common stock that were
outstanding as of August 31, 2000. Of these shares, the shares offered for sale
through the underwriters will be freely tradeable without restriction under the
Securities Act unless purchased by our affiliates or covered by a separate
lock-up agreement.

The remaining 15,866,228 shares of common stock held by existing
stockholders are restricted securities. Restricted securities may be sold in
the public market only if registered or if they qualify for an exemption from
registration described below under Rule 144, 144(k) or 701 under the Securities
Act. These provisions are described below.

As a result of the lock-up agreements and the provisions of Rules 144,
144(k) and 701, these restricted shares will be available for sale in the
public market as follows:

. beginning 91 days after the date of this prospectus, 60,000 shares held
by a person who is not our affiliate will have been held long enough to
be sold under Rule 144 or Rule 701, subject to the limitations described
below;

. beginning 181 days after the date of this prospectus, 784,962 shares held
by persons who are not our affiliates will have been held long enough to
be sold under Rule 701, Rule 144(k) or Rule 144, subject to the
limitations described below;

. beginning 181 days after the date of this prospectus, 15,081,266 shares
held by our affiliates will have been held long enough to be sold under
Rule 144, subject to volume and other limitations described below; and

. the remaining shares may be sold under Rule 144 or 144(k) once they have
been held for the required time.

Lock-up agreements. Our officers, directors and substantially all of our
stockholders have agreed not to transfer or dispose of, directly or indirectly,
any shares of our common stock, or any securities convertible into or
exercisable or exchangeable for shares of our common stock, for a period of 180
days after the date of this prospectus, without the prior written consent of
Credit Suisse First Boston Corporation.

Rule 144. In general, under Rule 144, a person who has beneficially owned
restricted securities for at least one year would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:

. 1% of the number of shares of our common stock then outstanding, which,
immediately after this offering, will equal approximately 198,662 shares;
or

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

60
<PAGE>

Sales under Rule 144 also are limited by manner-of-sale provisions, notice
requirements and requirements relating to the availability of current public
information about us.

Rule 144(k). Under Rule 144(k), a person who is not deemed to have been one
of our affiliates at any time during the 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 these shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144
discussed above.

Rule 701. In general, under Rule 701, our employees, consultants or advisors
who purchase or receive shares from us under a compensatory stock purchase plan
or option plan or other written agreement will be eligible to resell their
shares beginning 90 days after the date of this prospectus. Nonaffiliates will
be able to sell their shares subject only to the manner-of-sale provisions of
Rule 144. Affiliates will be able to sell their shares without compliance with
the holding period requirements of Rule 144.

Registration rights. Upon completion of this offering, the holders of
3,332,912 shares of our common stock have rights to have their shares
registered under the Securities Act. All shares are covered by lock-up
agreements; following the expiration of the lock-up period, registration of
these shares under the Securities Act would result in the shares becoming
freely tradeable without restriction under the Securities Act immediately upon
the effectiveness of the registration.

Stock options. Prior to the expiration of the lock-up period, we intend to
file a registration statement under the Securities Act covering approximately
8,000,000 shares of common stock reserved for issuance upon exercise of
outstanding options under the 2000 Plan, the 1998 Option Plan and the Stock
Purchase Plan. See "Management--Benefit Plans." Subject to the lock-up
agreements, shares registered under that registration statement will be
available for resale in the open market immediately upon the effectiveness of
that registration statement, except with respect to Rule 144 volume limitations
that apply to our affiliates.

61
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Dain Rauscher
Incorporated, Thomas Weisel Partners LLC, Adams Harkness & Hill, Inc. and D.A.
Davidson & Co. are acting as representatives, the following respective numbers
of shares of common stock:

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
Dain Rauscher Incorporated.........................................
Thomas Weisel Partners LLC.........................................
Adams, Harkness & Hill, Inc. ......................................
D.A. Davidson & Co.................................................
---------
Total............................................................ 4,000,000
=========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering, if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 600,000 additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

The following table summarizes the compensation and expenses we will pay.

<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-Allotment Over-Allotment Over-Allotment Over-Allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge,

62
<PAGE>

disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
except issuances pursuant to the exercise of employee stock options outstanding
on the date hereof.

Our officers, directors and virtually all of stockholders, including holders
of shares of our common stock and preferred stock, have agreed that they will
not offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, enter into a
transaction that would have the same effect, or enter into a swap, hedge or
other arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of our common stock, whether any of the above
transactions is to be settled by delivery of our common stock or other
securities, in cash or otherwise, or publicly disclose the intention to make
any offer, sale, pledge or disposition, or to enter into any transaction, swap,
hedge or other arrangement, without, in each case, the prior written consent of
Credit Suisse First Boston Corporation for a period of 180 days after the date
of this prospectus.

The underwriters have reserved for sale, at the initial public offering
price, up to 200,000 shares of the common stock for employees, directors and
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not purchased will be offered
by the underwriters to the general public on the same terms as the other
shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.

Our common stock has been approved for listing on The Nasdaq Stock Market's
National Market under the symbol "RTNW."

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the representatives of the underwriters. The principal factors
to be considered in determining the initial public offering price include the
following:

. the information set forth in this prospectus and otherwise available to
the representatives;

. market conditions for initial public offerings;

. the history of and the prospects for the industry in which we will
compete;

. the ability of our management;

. our prospects for future earnings;

. the present state of our development and current financial condition;

. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies; and

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

In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions, and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

. Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may

63
<PAGE>

be either a covered short position or a naked short position. In a covered
short position, the number of shares over-allotted by the underwriters is
not greater than the number of shares that they may purchase in the over-
allotment option. In a naked short position, the number of shares involved
is greater than the number of shares in the over-allotment option. The
underwriters may close out any short position by either exercising their
over-allotment option and/or purchasing shares in the open market.

. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the over-
allotment option. If the underwriters sell more shares than could be
covered by the over-allotment option--a naked short position--that
position can only be closed out by buying shares in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the shares
in the open market after pricing that could adversely affect investors
who purchase in the offering.

. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of the
common stock or preventing or retarding a decline in the market price of the
common stock. As a result the price of the common stock may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has acted as a lead or co-manager on
numerous public offerings of equity securities. Thomas Weisel Partners does
not have any material relationship with us or any of our officers, directors
or other controlling persons, except with respect to its contractual
relationship with us under the underwriting agreement entered into in
connection with this offering.

A prospectus in electronic format may be made available on the Web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions
will be allocated by the underwriters that will make Internet distributions on
the same basis as other allocations.

64
<PAGE>

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws,
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.

Representations of Purchasers

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under these securities laws, (ii) where
required by law, the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."

Rights of Action (Ontario Purchasers)

The securities being offered are those of a foreign issuer, and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside of Canada and, as a result, it may not
be possible for Canadian purchasers to effect service of process within Canada
upon the issuer or these persons. All or a substantial portion of the assets of
the issuer and these persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or these
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or these persons outside of Canada.

Notice to British Columbia Residents

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within 10 days of the sale of any
common stock acquired by the purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.

Taxation and Eligibility for Investment

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to tax consequences of an investment in the common stock
in their particular circumstances and with respect to the eligibility of the
common stock for investment by the purchaser under relevant Canadian
legislation.

65
<PAGE>

CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

The following discussion is a summary of the material United States federal
income and estate tax consequences of the ownership and disposition of our
common stock by non-United States holders. This discussion does not deal with
all aspects of United States federal income and estate taxation and does not
deal with foreign, state and local tax consequences. This discussion does not
address all tax considerations that may be relevant to non-United States
holders in light of their personal circumstances, or to certain non-United
States holders that may be subject to special treatment under United States
federal income or estate tax laws. Furthermore, this discussion is based on the
Internal Revenue Code of 1986, as amended, Treasury Department regulations,
published positions of the Internal Revenue Service and court decisions now in
effect, all of which are subject to change, possibly with retroactive effect.
You are urged to consult your own tax advisor regarding the United States
federal tax consequences of owning and disposing of our common stock, as well
as the applicability and effect of any state, local or foreign tax laws.

In this section we use the term "United States holder" to refer to a
beneficial owner of stock that is:

. a citizen or resident of the United States;

. a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision of the
United States;

. an estate the income of which is subject to United States federal income
taxation regardless of its source; or

. a trust that:

. is subject to the supervision of a court within the United States
and the control of one or more United States persons; or

. has a valid election in effect under applicable United States
Treasury regulations to be treated as a United States person.

We use the term "non-United States holder" to refer to a beneficial owner of
stock that is not a United States holder.

Dividends

Generally, any dividend paid to a non-United States holder will be subject
to United States withholding tax either at a rate of 30% of the gross amount of
the dividend or at a lesser applicable treaty rate. However, dividends that are
effectively connected with the conduct of a trade or business of the non-United
States holder within the United States and, where a tax treaty applies, that
are attributable to a United States permanent establishment of the non-United
States holder are not subject to the withholding tax but instead are subject to
United States federal income tax on a net income basis at applicable graduated
individual or corporate rates.

In order for dividends paid to a non-United States holder to be exempt from
withholding under the effectively connected income exemption, the holder must
comply with certification and disclosure requirements. In some circumstances, a
foreign corporation that receives effectively connected dividends may be
subject to an additional branch profits tax at a 30% rate or a lesser
applicable treaty rate.

Until January 1, 2001, dividends paid to an address outside the United
States are presumed to be paid to a resident of that country, unless the payor
has knowledge to the contrary, for purposes of the withholding tax discussed
above and under the current regulations, and for purposes of determining the
applicability of a reduced rate of withholding under the terms of a tax treaty.
If you wish to claim the benefit of an applicable treaty rate and avoid backup
withholding, as discussed below, for dividends paid after December 31, 2000,
final regulations effective after that date will require you to satisfy
applicable certification and other requirements.

If you are eligible for a reduced treaty rate of United States withholding
tax pursuant to an income tax treaty, you may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the Internal
Revenue Service.

66
<PAGE>

Gain on Disposition of Common Stock

If you are a non-United States holder, you generally will not be subject to
United States federal income tax with respect to gain recognized on a sale or
other disposition of our common stock unless:

. the gain is effectively connected with a trade or business of yours in
the United States or, where a tax treaty so provides, the gain is
attributable to a United States permanent establishment of yours;

. you are an individual and hold our common stock as a capital asset, you
are present in the United States for 183 or more days in the taxable
year of the sale or other disposition and certain other conditions are
met;

. you are subject to tax pursuant to the provisions of the United States
federal income tax laws applicable to certain United States expatriates;
or

. we are or have been a United States real property holding corporation
for United States federal income tax purposes.

We believe that we are not, and do not anticipate becoming, a United States
real property holding corporation for United States federal income tax
purposes. If we were to become a United States real property holding
corporation, so long as our common stock continues to be regularly traded on an
established securities market, you would be subject to federal income tax on
any gain from the sale or other disposition of the stock only if you actually
or constructively owned, during the five-year period preceding the disposition,
more than 5% of our common stock.

Special rules may apply to non-United States holders, such as controlled
foreign corporations, passive foreign investment companies, foreign personal
holding companies and corporations that accumulate earnings to avoid federal
income tax, that are subject to special treatment under the Internal Revenue
Code. These entities should consult their own tax advisors to determine the
United States federal, state, local and other tax consequences that may be
relevant to them.

Backup Withholding and Information Reporting

We must report annually to the Internal Revenue Service and to you the
amount of dividends paid to you and the tax withheld with respect to these
dividends, regardless of whether withholding was required. Copies of the
information returns reporting the dividends and withholdings may also be made
available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty.

Under current law, backup withholding at the rate of 31% generally will not
apply to dividends paid to you at an address outside the United States, unless
the payor has knowledge that you are a United States person. However, under the
final regulations effective for dividends paid on or after January 1, 2000, you
will be subject to backup withholding unless applicable certification
requirements are met.

Payment of the proceeds of a sale of our common stock within the United
States or conducted through certain United States related financial
intermediaries is subject to both backup withholding and information reporting
unless you certify under penalties of perjury that you are a non-United States
holder and the payor does not have actual knowledge that you are a United
States person, or you otherwise establish an exemption.

Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against your United States federal income tax liability
provided you furnish the required information to the Internal Revenue Service.

Estate Tax

Common stock held by an individual non-United States holder at the time of
death will be included in that holder's gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise,
and may be subject to United States federal estate tax.

67
<PAGE>

LEGAL MATTERS

Dorsey & Whitney LLP, Great Falls, Montana and Minneapolis, Minnesota, will
pass upon the validity of the shares of common stock offered by this prospectus
for us. Shearman & Sterling, San Francisco, California, will pass upon certain
legal matters in connection with this offering for the underwriters.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements as of December 31, 1998 and 1999 and as of June 30, 2000
and for each of the three years in the period ended December 31, 1999 and for
the six months ended June 30, 2000, as set forth in their reports. We have
included our consolidated financial statements in this prospectus and elsewhere
in the registration statement in reliance on the report of Ernst & Young LLP,
which was given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the
common stock offered by this prospectus. As permitted by the rules and
regulations of the Commission, this prospectus, which is a part of the
registration statement, omits certain information, exhibits, schedules and
undertakings set forth in the registration statement. For further information
about us and the common stock offered by this prospectus, you should review the
registration statement and the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents or provisions of any contract
or other document referred to in this prospectus are not necessarily complete,
and in each instance reference is made to the copy of the contract or other
document filed as an exhibit to the registration statement. All statements made
in this prospectus concerning these contracts or documents are qualified in all
respects by this reference. A copy of the registration statement, as well as
other documents we file with the Commission, may be inspected without charge in
the Commission's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Please call the Commission at 1-800-SEC-0330 for further information
about its public reference rooms. Copies of all or any part of the registration
statement and other documents we file may be taken from the public reference
rooms upon the payment of fees prescribed by the Commission. In addition, the
registration statement and other documents we file with the Commission through
its Electronic Data Gathering, Analysis and Retrieval, or "EDGAR," system are
available to the public through the Commission's Web site at
http://www.sec.gov.

Upon completion of this offering, we will be required to file periodic
reports, proxy statements and other information with the Commission. These
periodic reports, proxy statements and other information will be available for
inspection and copying at the Commission's public reference rooms and through
the Web site of the Commission referred to above.

68
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
RightNow Technologies, Inc.

We have audited the accompanying consolidated balance sheets of RightNow
Technologies, Inc. as of December 31, 1998 and 1999 and June 30, 2000 and the
related consolidated statements of operations, stockholders' deficit and cash
flows for each of the three years in the period ended December 31, 1999 and for
the six month period ended June 30, 2000. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of RightNow
Technologies, Inc. at December 31, 1998 and 1999 and June 30, 2000, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999 and for the six month period ended June 30,
2000, in conformity with accounting principles generally accepted in the United
States.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
July 20, 2000

F-2
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31 Equity
---------------------- June 30 June 30,
1998 1999 2000 2000
--------- ----------- ----------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents.............. $ 86,436 $14,182,845 $ 9,359,353
Accounts receivable, net
of allowance for doubtful
accounts and returns
reserve of $7,025 and
$229,150 at December 31,
1998 and 1999 and
$752,116 at June 30,
2000..................... 133,500 2,585,610 4,286,443
Notes receivable.......... -- -- 1,136,144
Prepaid expenses.......... 6,422 46,754 373,680
--------- ----------- -----------
Total current assets..... 226,358 16,815,209 15,155,620
Property and equipment...... 42,271 571,041 2,051,345
Less accumulated
depreciation............... (4,305) (43,908) (187,546)
--------- ----------- -----------
37,966 527,133 1,863,799
Other assets................ -- 5,788 426,516
--------- ----------- -----------
Total assets................ $ 264,324 $17,348,130 $17,445,935
========= =========== ===========
Liabilities and
stockholders' equity
(deficit)
Current liabilities:
Accounts payable.......... $ 13,775 $ 235,302 $ 511,228
Stockholder
distributions............ -- 330,000 --
Commissions payable....... 11,513 234,007 574,338
Other accrued
liabilities.............. 3,589 205,419 1,029,164
Officer wages payable..... 60,000 25,000 --
Due to stockholder........ 100,000 -- --
Current portion of capital
lease obligation......... -- 7,859 7,615
Current portion of
deferred revenue......... 101,142 2,664,824 7,044,611
--------- ----------- -----------
Total current
liabilities............. 290,019 3,702,411 9,166,956
Long-term capital lease
obligation, net of current
portion.................... -- 7,272 3,380
Deferred revenue, net of
current portion............ 69,946 1,499,841 3,084,501
--------- ----------- -----------
Total liabilities........ 359,965 5,209,524 12,254,837
Redeemable convertible
preferred stock:
Series A, $.001 par value:
Authorized and designated
shares--5,554,853
Issued and outstanding
shares--3,332,912........ -- 16,119,622 16,119,622 $ --
Stockholders' equity
(deficit):
Preferred stock, $.001 par
value:
Authorized and
undesignated shares--
9,445,147
Issued and outstanding
shares--None
Common stock, $.001 par
value:
Authorized shares--
150,000,000
Issued and outstanding
shares--1998--12,182,160;
1999--12,312,801; 2000--
12,465,651; pro forma
issued and outstanding
shares--15,798,563....... 12,182 12,313 12,466 15,799
Additional paid-in
capital.................. 19,408 (1,421,104) (1,329,135) 14,787,154
Accumulated other
comprehensive loss....... -- -- (1,066) (1,066)
Accumulated deficit....... (127,231) (2,572,225) (9,610,789) (9,610,789)
--------- ----------- ----------- -----------
Total stockholders'
equity (deficit)........ (95,641) (3,981,016) (10,928,524) $ 5,191,098
--------- ----------- ----------- ===========
Total liabilities and
stockholders' equity
(deficit)............... $ 264,324 $17,348,130 $17,445,935
========= =========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Six months ended
Year ended December 31 June 30
---------------------------------- ------------------------
1997 1998 1999 1999 2000
---------- ---------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue
Revenue................. $ 79,064 $ 279,428 $ 2,024,541 $ 399,009 $ 3,861,555
Cost of revenue......... 797 3,756 63,418 6,829 612,357
---------- ---------- ----------- ---------- -----------
Gross profit.......... 78,267 275,672 1,961,123 392,180 3,249,198
Operating expenses
Sales and marketing..... 746 279,162 3,342,748 532,369 8,171,699
Research and
development............ 42,656 74,098 603,283 158,978 1,429,331
General and
administrative......... 18,208 85,772 492,752 88,281 1,041,614
---------- ---------- ----------- ---------- -----------
Total operating
expenses............. 61,610 439,032 4,438,783 779,628 10,642,644
---------- ---------- ----------- ---------- -----------
Income (loss) from
operations............. 16,657 (163,360) (2,477,660) (387,448) (7,393,446)
Interest and other
income, net............ 9,274 29 32,666 -- 354,882
---------- ---------- ----------- ---------- -----------
Net income (loss)....... $ 25,931 $ (163,331) $(2,444,994) $ (387,448) $(7,038,564)
========== ========== =========== ========== ===========
Net income (loss) per
common share--basic and
diluted................ $ -- $ (.01) $ (.20) $ (.03) $ (.57)
========== ========== =========== ========== ===========
Shares used in computing
basic and diluted net
income (loss) per
common share........... 12,000,000 12,068,118 12,218,186 12,196,685 12,383,861
========== ========== =========== ========== ===========
Pro forma net loss per
share--basic and
diluted................ $ (.20) $ (.45)
=========== ===========
Shares used in computing
basic and diluted pro
forma net loss per
share.................. 12,305,316 15,716,773
=========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
Accumulated Total
Common Stock Additional Accumulated Other Stockholders'
------------------- Paid-In Equity Comprehensive Equity
Shares Amount Capital (Deficit) Loss (Deficit)
---------- ------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 12,000,000 $12,000 $ (11,000) $ 10,169 $ -- $ 11,169
Net income............. -- -- -- 25,931 -- 25,931
---------- ------- ----------- ----------- ------- ------------
Balance at December 31,
1997................... 12,000,000 12,000 (11,000) 36,100 -- 37,100
Issuance of common
stock ................ 182,160 182 10,408 -- -- 10,590
Value of stock options
granted for services
rendered.............. -- -- 20,000 -- -- 20,000
Net loss............... -- -- -- (163,331) -- (163,331)
---------- ------- ----------- ----------- ------- ------------
Balance at December 31,
1998................... 12,182,160 12,182 19,408 (127,231) -- (95,641)
Exercise of stock
options............... 313,500 314 15,843 -- -- 16,157
Issuance of common
stock for services
rendered.............. 9,141 9 3,778 -- -- 3,787
Issuance of common
stock................. 48,000 48 3,952 -- -- 4,000
Repurchase of common
stock................. (240,000) (240) (1,163,760) -- -- (1,164,000)
Value of stock options
granted for services
rendered.............. -- -- 29,675 -- -- 29,675
Stockholder
distributions......... -- -- (330,000) -- -- (330,000)
Net loss............... -- -- -- (2,444,994) -- (2,444,994)
---------- ------- ----------- ----------- ------- ------------
Balance at December 31,
1999................... 12,312,801 12,313 (1,421,104) (2,572,225) -- (3,981,016)
Exercise of stock
options............... 137,850 138 26,131 -- -- 26,269
Issuance of common
stock for services
rendered.............. 15,000 15 87,485 -- -- 87,500
Value of stock options
granted for services
rendered.............. -- -- 6,980 -- -- 6,980
Stockholder
distributions......... -- -- (28,627) -- -- (28,627)
Comprehensive loss:
Net loss.............. -- -- -- (7,038,564) -- (7,038,564)
Foreign currency
translation
adjustment........... -- -- -- -- (1,066) (1,066)
------------
Total comprehensive
loss.................. (7,039,630)
---------- ------- ----------- ----------- ------- ------------
Balance at June 30,
2000................... 12,465,651 $12,466 $(1,329,135) $(9,610,789) $(1,066) $(10,928,524)
========== ======= =========== =========== ======= ============
</TABLE>

See accompanying notes.

F-5
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Six months ended
Year ended December 31 June 30
------------------------------- -----------------------
1997 1998 1999 1999 2000
------- --------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)....... $25,931 $(163,331) $(2,444,994) $(387,448) $(7,038,564)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation........... 981 3,324 39,603 7,619 143,673
Gain on sale of
assets................ (7,961) -- -- -- --
Value of stock options
granted for services
rendered.............. -- 20,000 29,675 -- 6,980
Issuance of common
stock in lieu of cash
compensation.......... -- 10,590 3,787 -- 87,500
Changes in operating
assets and
liabilities:
Accounts receivable... 1,190 (119,480) (2,452,110) (286,360) (1,699,975)
Notes receivable...... -- -- -- -- (1,136,144)
Prepaid expenses...... -- (6,422) (40,332) (2,836) (326,834)
Accounts payable...... -- 13,775 221,527 (8,807) 275,877
Commissions payable... -- 11,513 222,494 22,469 340,229
Officer wages
payable.............. -- 60,000 (35,000) (5,000) (25,000)
Accrued liabilities... (269) 3,587 531,830 2,259 493,410
Deferred revenue...... (1,055) 171,090 3,993,577 725,037 5,964,324
Other................. -- 500 (5,788) -- (111,348)
------- --------- ----------- --------- -----------
Net cash provided by
(used in) operating
activities............. 18,817 5,146 64,269 66,933 (3,025,872)
Investing activities
Purchases of property
and equipment.......... (4,902) (37,369) (513,639) (77,351) (1,480,265)
------- --------- ----------- --------- -----------
Net cash used in
investing activities... (4,902) (37,369) (513,639) (77,351) (1,480,265)
Financing activities
Proceeds (payment) on
borrowings............. -- 100,000 (100,000) (70,000) --
Proceeds from issuance
of common stock........ -- -- 20,157 4,000 26,269
Proceeds from issuance
of preferred stock..... -- -- 16,119,622 -- --
Payments on capital
lease obligations...... -- -- -- -- (4,136)
Stockholder
distributions.......... -- -- (330,000) -- (28,627)
Deferred offering
costs.................. -- -- -- -- (311,369)
Repurchase of common
stock.................. -- -- (1,164,000) -- --
------- --------- ----------- --------- -----------
Net cash provided by
(used in) financing
activities............. -- 100,000 14,545,779 (66,000) (317,863)
Effect of foreign
currency exchange...... -- -- -- -- 508
------- --------- ----------- --------- -----------
Net increase (decrease)
in cash and cash
equivalents............ 13,915 67,777 14,096,409 (76,418) (4,823,492)
Cash and cash
equivalents at
beginning of period.... 4,744 18,659 86,436 86,436 14,182,845
------- --------- ----------- --------- -----------
Cash and cash
equivalents at end of
period................. $18,659 $ 86,436 $14,182,845 $ 10,018 $ 9,359,353
======= ========= =========== ========= ===========
</TABLE>

See accompanying notes.

F-6
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2000

1. Business Description and Summary of Significant Accounting Policies

Business Description

RightNow Technologies, Inc. (the Company) provides a comprehensive,
Internet-based customer service software solution that integrates customer
self-help, e-mail management, live interaction, issue tracking and customer
satisfaction measurement capabilities. The Company was incorporated in Montana
in September 1995 (and reincorporated in Delaware in August 2000) but had no
significant operations until 1997. The Company considers its business
activities as a single segment.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, RightNow Technologies UK Ltd. All significant
intercompany accounts and transactions have been eliminated in consolidation.

The functional currency of the Company's foreign subsidiary is considered to
be its local currency. Translation gains or losses, net of applicable deferred
taxes, are accumulated as a separate component of stockholders' equity
(deficit).

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are considered to be available for sale. Cash equivalents are
carried at cost which approximates market value.

Property and Equipment

Property and equipment, including software purchased for internal use, are
stated at cost less accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, generally three to seven years. Leasehold improvements are amortized
over the estimated life of the assets or the related lease term, whichever is
less, on a straight-line basis.

The Company evaluates long-lived assets for impairment whenever changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable.

Income Taxes

In December 1999, as a result of the issuance of its Redeemable Convertible
Series A Preferred Stock, the Company's legal status changed from an S
corporation to a C corporation for U.S. federal and state income tax purposes.

Income taxes for 1999 and for the six months ended June 30, 2000 related to
the period of time when the Company was a C corporation are recorded under the
liability method, whereby deferred tax asset and liability account balances are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse.

Revenue Recognition

Revenue is comprised of fees from term and perpetual licenses of the
Company's software, maintenance related to perpetual licenses, hosting and
professional services. Each of these revenue components is considered

F-7
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

an element within a software arrangement, which can be accounted for in
accordance with Statement of Position (SOP) 97-2. The Company's products do not
require significant production, modification or customization of software that
would dictate accounting in accordance with Accounting Research Bulletin (ARB)
No. 45, "Long-Term Construction- Type Contracts."

Revenue is recognized when persuasive evidence of an arrangement exists,
delivery has occurred, the fee is fixed and determinable, no obligations remain
and collectibility is probable. Upon receipt of a purchase order from a
customer, the Company makes its software available over the Internet and
provides access to the customer through an access code. The Company's standard
payment terms are net 30 days from the date of invoice. Upon qualification and
credit review, the Company may also offer a one-year financing option. If the
Company can not determine fees to be fixed or determinable, such as when the
Company finances the arrangement, revenue is recognized as the payments become
due, or ratably over the relevant license or service period, whichever is less.
If collectibility is not considered probable, revenue is recognized when the
fee is collected, or ratably over the relevant license or service period,
whichever is less.

Through May 31, 2000 the Company offered its term and perpetual software
licenses with a 60-day right-of-return warranty. This right of return is
accounted for in accordance with Financial and Accounting Standards Board
(FASB) 48, with returns estimated based on historical activity, and reflected
as a reduction in revenues. Revenue from arrangements with resellers is
recognized upon delivery limited by sell through activity.

Substantially all of the Company's business is derived from two-year
software licenses, although terms can range from six months to three years. The
licenses are sold for a single price, which includes maintenance for which the
Company does not have vendor specific objective evidence (VSOE) to determine
fair value. The Company has concluded that it does not have VSOE of fair value
on the maintenance element of its term license as maintenance is not ever
priced or offered separately in term licensing arrangements. The Company
therefore recognizes revenue ratably over the term of the arrangement,
typically two years, in accordance with paragraph 12 of SOP 97-2.

For perpetual licensing arrangements, VSOE of fair value for maintenance is
determined by reference to the price the customer pays when it is sold
separately. Maintenance revenue is deferred and recognized on a straight-line
basis over the life of the agreement, which is typically one year. To date, the
Company has not entered into arrangements solely for the license of software
and, therefore, the Company has not demonstrated VSOE of fair value for the
license element. In those instances where perpetual licenses are bundled with
other elements, the Company has used the residual method following the guidance
in SOP 98-9. The Company accounts for such license fees when VSOE exists for
all undelivered elements in the arrangement and when the fair value of all the
undelivered elements is less than the arrangement fee. The Company defers the
total fair value of the undelivered elements, until such time as they are
delivered, and recognizes as revenue the difference between the total
arrangement and the amount deferred for the undelivered elements.

The Company provides hosting services, which include data connections,
equipment and the service related to upgrading the products acquired by the
customer either through a term or perpetual license. The Company has
established VSOE for this element, as this is sold separately from both the
term license and perpetual license. Revenue from hosting is deferred and
recognized on a straight-line basis in accordance with paragraph 12 of SOP 97-
2. Customer's may elect at any time to discontinue hosting and, to the extent
the customer has prepaid for this service, the fees paid will be refunded
without penalty.

F-8
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company offers training and professional services, which are not
considered essential to the other elements of the arrangement. VSOE of fair
value of services in multiple element arrangements is based upon hourly or
package rates that the Company has charged in stand alone contracts for these
services. Revenue is recognized when the services are performed.

Billed amounts due from customers in excess of revenue recognized is
recorded as deferred revenue.

In 1997, the Company recorded $67,749 of revenue relating to consulting
services unrelated to its current product offerings.

Research and Development

Research and development expenditures are expensed as incurred. Statement of
Financial Accounting Standards No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, requires capitalization of
certain software development costs subsequent to the establishment of
technological feasibility. Based on the Company's product development process,
technological feasibility is established upon completion of a working model. To
date, the period between achieving technological feasibility and general
availability of such software has been short and software development costs
qualifying for capitalization have been immaterial. Accordingly, the Company
has not capitalized any software development costs.

Use of Estimates

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

Stock-Based Compensation

The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, but applies Accounting Principles Board Opinion No. 25 (APB 25)
and related interpretations in accounting for its stock plans. Under APB 25,
when the exercise price of an employee stock option equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized.

Net Income (Loss) Per Share

The Company follows the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share (SFAS 128). Basic net income (loss) per
share is computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted net income (loss) per share is computed using the weighted
average number of outstanding shares of common stock and, when dilutive,
potential common shares from options and convertible securities using the as-if
converted basis. All potential common shares have been excluded from the
computation of diluted net income (loss) per share for the applicable periods
presented because the effect would have been anti-dilutive.

Pro Forma Stockholders' Equity

Upon the closing of the Company's planned initial public offering, all
outstanding shares of Series A preferred stock will automatically convert into
3,332,912 shares of common stock. The pro forma effects of these transactions
are unaudited and have been reflected in the accompanying pro forma
stockholders' equity section at June 30, 2000.

F-9
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Pro Forma Net Loss Per Share

Pro forma net loss per share for the year ended December 31, 1999 and the
six months ended June 30, 2000 is computed using the weighted average number of
common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's Redeemable Convertible Series A Preferred Stock
into shares of the Company's common stock as if such conversion occurred at the
date of original issuance. The resulting pro forma adjustments includes an
increase in the weighted average shares used to compute basic and diluted net
loss per share of 87,130 shares for the year ended December 31, 1999 and
3,332,912 shares for the six months ended June 30, 2000. The pro forma effects
of these transactions are unaudited.

Interim Financial Statements

The interim financial statements for the six months ended June 30, 1999 are
unaudited and have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles.
In the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments, consisting of normal recurring adjustments,
considered necessary for a fair presentation.

Reverse Stock Split

The Company intends to effect a three-for-five reverse stock split
immediately prior to the Company's planned initial public offering.
Accordingly, all share, per share, weighted average share information and
convertible preferred stock information has been restated to reflect the split.

2. Property and Equipment

Property and equipment as of December 31 are as follows:

<TABLE>
<CAPTION>
June 30,
1998 1999 2000
------- -------- ----------
<S> <C> <C> <C>
Equipment................................... $ -- $ 45,333 $ 356,920
Computer equipment.......................... 38,658 303,982 879,937
Furniture and fixtures...................... -- 162,559 334,285
Purchased software.......................... 3,613 59,167 480,203
------- -------- ----------
42,271 571,041 2,051,345
Less accumulated depreciation............... (4,305) (43,908) (187,546)
------- -------- ----------
$37,966 $527,133 $1,863,799
======= ======== ==========
</TABLE>

3. Long-Term Debt

The Company has a line of credit with a bank under which it can borrow up to
$500,000 at an interest rate of prime plus 1.5%. Any borrowings on the line of
credit are secured by substantially all of the Company's assets. The line of
credit expires on August 1, 2001. At December 31, 1999 and June 30, 2000, there
were no outstanding borrowings on this line of credit.

F-10
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

Redeemable Convertible Preferred Stock

In December 1999, the Company authorized and issued Redeemable Convertible
Series A Preferred Stock to two private investor groups and three members of
the Board of Directors.

As of December 31, 1999, there were 15,000,000 shares authorized to be
designated as preferred stock. The Company issued 3,332,912 shares as
Redeemable Convertible Series A Preferred Stock at a price of $4.85 per share.

Under the provision of the stock purchase agreements, the holders of the
Company's Series A Preferred Stock are entitled to:

. Liquidation preference of $4.85 per share plus all declared but unpaid
dividends on the Series A Preferred. After payment of this preference
amount, remaining assets and funds of the Company legally available for
distribution shall be distributed among the holders of the then
outstanding common stock pro rata, in proportion to the full amount each
such holder is otherwise entitled to receive.

. Non-accruing, non-cumulative, right to dividends in an amount equal to
$0.43 per annum for each share of Series A Preferred, if declared by the
Board of Directors.

. Voting rights equal to common stockholders.

. Voting rights to elect one member of the Board of Directors.

Each holder of Series A Preferred may at any time, convert any or all of
such Series A Preferred into fully-paid and nonassessable shares of common
stock at the applicable conversion price. Each share of Series A Preferred
shall be convertible into the number of shares of common stock that results
from dividing $4.85 by the Conversion Price in effect at the time of
conversion. In addition, each share of Series A Preferred shall automatically
be converted into common stock at the then effective conversion price in the
event that holders of a majority of the shares consent to such conversion, or
upon the closing of an underwritten public offering at a per share public
offering price of not less than $14.55 and aggregate offering proceeds of at
least $10,000,000.

No dividends have been declared or paid on the Company's preferred stock.

Common Stock

Prior to 1999, the Company's common stock carried no par value. In
conjunction with the preferred stock issuance, the Company's Board of Directors
approved a par value for the Company's common stock of $.001 per share. Each
share of common stock has one vote. In December 1999, in connection with the
termination of the Company's S corporation status, the Company declared a
distribution to its stockholders in an amount necessary solely to cover their
income tax liabilities as a result of the prior S corporation status.

Stock Splits

In 1999, the Company's Board of Directors declared a 2-for-1 stock split and
a 20-for-1 stock split payable in the form of a stock dividend. Accordingly,
all share, per share, weighted average share and stock option information for
periods prior to the splits has been restated to reflect the splits.

F-11
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock Option Plan

The Company's 1998 Long-Term Incentive and Stock Option Plan provides for
stock options to be granted to employees, consultants, independent contractors,
officers and directors. Options are generally granted at an exercise price
equivalent to the estimated fair market value per share at the date of grant,
as determined by the Company's Board of Directors. All options are granted at
the discretion of the Company's Board of Directors, with the term determined by
the Board of Directors. Incentive Stock Options have a term not greater than 10
years from the date of grant and options not qualifying as incentive stock
options have a term not greater than 15 years from the date of grant. Options
generally vest over a period of four years in increments of 12.5% every six
months, and are exercisable upon vesting. Options are generally granted to all
full-time employees at the time of hire.

<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
Available Outstanding Per
for Grant Options Share
---------- ----------- --------
<S> <C> <C> <C>
Balance at December 31, 1997.............. -- -- $ --
Shares authorized....................... 6,000,000 -- --
Granted................................. (1,992,000) 1,992,000 .07
Exercised............................... -- -- --
Canceled................................ 606,000 (606,000) .05
---------- ---------
Balance at December 31, 1998.............. 4,614,000 1,386,000 .07
Granted................................. (3,227,820) 3,227,820 .55
Exercised............................... -- (313,500) .05
Canceled................................ 458,850 (458,850) .08
---------- ---------
Balance at December 31, 1999.............. 1,845,030 3,841,470 .48
Granted................................. (650,460) 650,460 10.22
Exercised............................... -- (137,850) .18
Canceled................................ 292,890 (292,890) .67
---------- ---------
Balance at June 30, 2000.................. 1,487,460 4,061,190 $ 2.03
========== =========
</TABLE>

The weighted average fair value of options granted in 1998, 1999 and the six
month period ended June 30, 2000 was $.02, $.13 and $2.45 per share,
respectively, At December 31, 1998 and 1999 and June 30, 2000, options to
purchase 151,500, 627,000 and 933,887 shares of common stock are exercisable,
respectively, at weighted average exercise prices of $.04, $.27 and $.37,
respectively. The following table summarizes information about the stock
options outstanding at June 30, 2000:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- --------------------------
Weighted- Number Weighted-
Exercise Number average Weighted-average currently average
Price Range Outstanding Exercise Price Remaining contractual life exercisable Exercise Price
----------- ----------- -------------- -------------------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.04 18,000 $0.04 7.67 18,000 $0.04
0.08 494,700 0.08 8.25 209,700 0.08
0.17-0.25 2,148,450 0.23 9.08 591,900 0.24
0.50 361,410 0.50 9.25 45,045 0.50
1.00 19,800 1.00 9.33 2,475 1.00
2.00 314,220 2.00 9.42 59,229 2.00
4.85-7.08 186,900 5.89 9.67 7,538 4.85
10.00-11.67 517,710 11.16 9.88 -- --
--------- -------
4,061,190 $2.03 9.14 933,887 $0.37
========= =======
</TABLE>

F-12
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In 1998, the Company issued 170,160 shares of common stock, with a fair
value of $9,590 for public relations services and research and development
activities provided by outside parties. In 1999, the Company issued 9,141
shares of common stock with a fair value of $3,787 for marketing consulting
services provided by an outside party. In the six months ended June 30, 2000,
the Company issued 15,000 shares of common stock, with a fair value of $87,500
for employee recruiting services provided by an outside party. For all periods
discussed, the common stock issuances were recorded at the fair value of the
services received.

In 1998, the Company granted options to purchase 600,000 shares of common
stock at an exercise price of $.04 per share and 120,000 shares at $.08 per
share to outside business consultants. These options were determined to have a
fair value of $20,000, which was expensed during 1998. In 1999, the Company
granted options to purchase 24,000 shares of common stock at an exercise price
of $.50 related to outside bookkeeping services, options to purchase 12,000
shares of common stock at an exercise price of $.50 related to public relations
activities and an option to purchase 600 shares of common stock at an exercise
price of $2.00 to an international reseller in lieu of paying a cash commission
to the reseller. The option grants related to the bookkeeping services, the
public relations services and the reseller were deemed to have fair values of
$12,675, $15,000 and $2,000, respectively. These amounts were expensed during
1999. In the six months ended June 30, 2000, the Company granted an option to
purchase 1,560 shares of common stock with an exercise price of $11.67 to an
international reseller in lieu of paying a cash commission to the reseller. The
option grant was deemed to have a fair value of $6,980, which was expensed in
the six months ended June 30, 2000. For all periods discussed, the common stock
issuances and stock options granted were recorded at the fair value of the
services received.

In December 1999, in response to a request by a former consultant to the
Company, the Company repurchased 240,000 shares of common stock at a price of
$4.85 per share. Prior to the repurchase, the Company and the stockholder had
no agreement in place to provide for the repurchase, nor was the Company
obligated to repurchase the shares.

Pro forma information regarding net income (loss) and related per share data
is required by Statement 123, and has been determined as if the Company had
accounted for its stock options under the fair value method of Statement 123.
The fair value for these options was estimated at the date of grant using the
minimum value option pricing model with the following weighted average
assumptions for 1998, 1999 and the six months ended June 30, 2000: risk-free
interest rate of 5.5%, dividend yield of 0% and a weighted average expected
life of the option of five years.

Had the Company recorded compensation cost in accordance with Statement 123,
the net loss and loss per share would have been:

<TABLE>
<CAPTION>
June 30,
1998 1999 2000
--------- ----------- -----------
<S> <C> <C> <C>
Net loss as reported................. $(163,331) $(2,444,994) $(7,038,564)
Pro forma net loss................... $(164,293) $(2,462,889) $(7,172,719)

Net loss per share as reported....... $ (.01) $ (.12) $ (.57)
Pro forma net loss per share......... $ (.01) $ (.12) $ (.58)
</TABLE>

F-13
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. Operating Lease Commitments

The Company leases its office facilities and certain office equipment under
various non-cancelable operating lease agreements with various expiration dates
through March 31, 2011. Future minimum payments as of June 30, 2000, under
these leases, are as follows:

<TABLE>
<S> <C>
Six month period ending December 31, 2000.................... $ 341,924
2001......................................................... 743,491
2002......................................................... 843,925
2003......................................................... 842,800
2004......................................................... 831,622
Thereafter................................................... 2,702,070
----------
$6,305,832
==========
</TABLE>

Rent expense was $200, $10,594, $99,720, $18,082 and $174,750 in 1997, 1998,
1999 and the six month periods ended June 30, 1999 and 2000, respectively.

The Company leases its office facilities from a development group, of which
the Company's chief executive officer is a 50% partner.

Hosting Services

The Company has agreements with third parties to provide application hosting
services. The agreements require payment of a minimum amount per month for a
fixed period of time in return for which the hosting service provider provides
certain guarantees of system availability.

Future minimum payments as of June 30, 2000 under these arrangements are as
follows:

6. Income Taxes

Prior to December 1999, the Company was an S corporation and as such was not
subject to corporate federal or state income taxes. As a result of the issuance
of preferred stock in December 1999, the Company became a C corporation and as
such is subject to state and federal income tax in 1999 and the six months
ended June 30, 2000. At June 30, 2000, the Company has net operating loss
carryforwards of approximately $1,554,000 that begin to expire in 2020.

F-14
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Upon conversion to C corporation status, the Company recorded deferred
taxes for which it will be responsible resulting from the termination of S
corporation status. The components of the deferred tax assets as of December
31, 1999 and June 30, 2000 are as follows:

<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
------------ -----------
<S> <C> <C>
Deferred tax assets:
Deferred revenue.............................. $ 1,576,600 $ 3,508,000
Net operating loss carryforwards.............. -- 591,000
Accounts receivable allowance................. 87,000 286,000
Other......................................... 30,300 65,000
----------- -----------
1,693,900 4,450,000
Valuation allowance........................... (1,693,900) (4,450,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>

The Company has established a valuation allowance equal to the net deferred
tax asset due to uncertainties regarding the realization of deferred tax
assets based on the Company's lack of earnings and expected lack of near term
future taxable earnings on which to recover these deferred tax assets.

Components of the Company's income tax expense for the six months ended
June 30, 2000 are as follows:

<TABLE>
<CAPTION>
June 30,
2000
-----------
<S> <C>
Current:
Federal..................................................... $ --
State....................................................... --
Deferred:
Federal..................................................... (2,453,000)
State....................................................... (303,100)
Valuation allowance......................................... 2,756,100
-----------
$ --
===========
</TABLE>

The following summarizes the components of the pro forma income tax expense
(benefit) assuming the Company had been a C corporation for all periods
presented for the years ended December 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>
1997 1998 1999
------ -------- -----------
<S> <C> <C> <C>
Current:
Federal.................................... $8,800 $ -- $ 228,300
State...................................... 700 -- 37,500
Deferred:
Federal.................................... -- (55,500) (1,425,000)
State...................................... -- (4,300) (233,900)
Valuation allowance........................ -- 59,800 1,658,900
------ -------- -----------
$9,500 $ -- $ 265,800
====== ======== ===========
</TABLE>

F-15
<PAGE>

RIGHTNOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A reconciliation from the federal statutory rate to the recorded income tax
expense (benefit) for the six month period ended June 30, 2000 is as follows:

<TABLE>
<CAPTION>
June 30,
2000
--------
<S> <C>
Statutory federal tax rate....................................... (34.0)%
State income taxes, net of federal benefit....................... (2.6)
Valuation allowance.............................................. 36.6
-----
--%
=====
</TABLE>

A reconciliation from the federal statutory rate to the pro forma tax
expense (benefit) for the years ended December 31, 1997, 1998 and 1999 is as
follows:

<TABLE>
<CAPTION>
1997 1998 1999
---- ----- -----
<S> <C> <C> <C>
Statutory federal tax rate........................... 34.0% (34.0)% (34.0)%
State income taxes, net of federal benefit........... 2.6 (2.6) (2.6)
Effect of S corporation termination.................. -- -- 10.9
Valuation allowance.................................. -- 36.6 36.6
---- ----- -----
36.6% --% 10.9%
==== ===== =====
</TABLE>

7. Employee 401(k) Plan

In October 1999, the Company established a voluntary defined contribution
retirement plan qualifying under Section 401(k) of the Internal Revenue Code of
1986. The plan covers substantially all full-time employees. Under the terms of
the plan, participants may contribute up to 12% of their salary to the plan.
Employees are eligible after 90 days of service. At its discretion, the Company
may make matching contributions. The Company made matching contributions during
1999 and the six months ended June 30, 2000 of $16,171 and $36,464,
respectively.

8. Subsequent Event

The Company's 2000 Stock Incentive Plan was approved by its stockholders in
July 2000. The 2000 Stock Incentive Plan provides for the granting of stock
options, including incentive stock options and non-qualified stock options;
stock appreciation rights, or "SARs": restricted stock and restricted stock
units; performance awards; and other stock-based awards. Under the 2000 Stock
Incentive Plan, 2,100,000 shares of common stock have been reserved. In
addition, the number of shares reserved under the 2000 Stock Incentive Plan
will automatically be increased each year, beginning on January 1, 2001, in an
amount equal to the lesser of (a) 300,000 shares or (b) three percent of the
shares outstanding on the last day of the preceding fiscal year. The exercise
price per share under any incentive stock option or the grant price of any SAR
cannot be less than 100% of the fair market value of the Company's common stock
on the date of grant of that incentive stock option or SAR. Options may be
exercised by payment in full of the exercise price, either in cash or, at the
discretion of the compensation committee, in whole or in part by the tendering
of shares of common stock or other consideration having a fair market value on
the date the option is exercised equal to the exercise price. If shares
tendered for the exercise of a stock option are deemed to be "immature" shares,
as defined by the applicable accounting guidance, the Company will record
expense for the difference between the then current market value of the
Company's stock and the exercise price of the stock option. Determinations of
fair market value under the 2000 Stock Incentive Plan are made in accordance
with methods and procedures established by the compensation committee.

F-16
<PAGE>

[Inside Back Cover]

[Our artwork displays screens that a business's customer would see if the
customer were using the self-service capability of RightNow Web, or if the
customer elected to submit a question via e-mail or initiate a live interaction
with a customer service representative. The screens depict a hypothetical Web
site for Acme Washing Machines.]

<PAGE>

[RightNow Technologies, Inc. Logo]

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

Except as set forth below, the following fees and expenses will be paid by
us in connection with the issuance and distribution of the securities
registered hereby and do not include underwriting commissions and discounts.
All expenses, except for the SEC registration, NASD filing and Nasdaq listing
fees, are estimated.

<TABLE>
<S> <C>
SEC registration fee............................................ $ 14,573
NASD filing fee................................................. $ 6,020
Nasdaq National Market listing fee.............................. $ 95,000
Legal fees and expenses......................................... $ 400,000
Accounting fees and expenses.................................... $ 300,000
Transfer Agent's and Registrar's fees........................... $ 3,500
Printing and engraving expenses................................. $ 150,000
Miscellaneous................................................... $ 44,107
-----------
Total......................................................... $ 1,000,000
===========
</TABLE>

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify directors, officers and corporate agents under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933, as amended. Section 3.14
of our bylaws provides for mandatory indemnification of our directors and
executive officers and permissible indemnification of employees and other
agents to the maximum extent and under the circumstances permitted by the
Delaware General Corporation Law. Article IX of our certificate of
incorporation provides that, subject to Delaware law, our directors will not
be personally liable to us or our stockholders for monetary damages for
breaches of their fiduciary duties as directors. This provision in the
certificate of incorporation does not eliminate the directors' fiduciary
duties, and in appropriate circumstances equitable remedies, such as
injunctive or other forms of nonmonetary relief, will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to us or our
stockholders, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental
laws.

In addition to these provisions in our certificate of incorporation and
bylaws, we have entered into indemnification agreements with each of our
executive officers and directors, a form of which has been filed with the
Securities and Exchange Commission as an exhibit to this registration
statement. The indemnification agreements provide our directors and executive
officers with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law.

The Underwriting Agreement contained in Exhibit 1.1 to this registration
statement provides that the underwriters are obligated, under certain
circumstances, to indemnify our directors and officers against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. In addition, Section 2.7 of the Investors' Rights Agreement contained
in Exhibit 4.2 to this registration statement provides for indemnification of
certain of our stockholders against liabilities described in the Investors'
Rights Agreement.

II-1
<PAGE>

Item 15. Recent Sales of Unregistered Securities

Since March 31, 1997, we have issued and sold the following securities that
were not registered under the Securities Act and our proposed three for five
reverse stock split, which will occur prior to the closing of our initial
public offering. All share numbers and per share prices are adjusted to
reflect stock splits that occured prior to June 30, 2000.

. On March 23, 1998, we issued 110,160 shares of our common stock to an
employee at a price of $.04 per share.

. On October 1, 1998, we issued 60,000 shares of common stock valued at
$5,000 to a consultant in exchange for media relations services provided
to us.

. On December 1, 1998, we issued 12,000 shares of common stock to an
employee at a price of $.08 per share.

. On January 10, 1999, we issued 12,000 shares of our common stock to an
employee at a price of $.08 per share.

. On March 31, 1999, we issued 36,000 shares of our common stock to an
employee at $.08 per share.

. On November 15, 1999, we issued 9,141 shares of common stock valued at
$3,787.50 to a consultant in exchange for consulting services provided to
us.

. In February 2000, we issued 15,000 shares of common stock valued at
$87,500 to an executive search firm in exchange for services provided to
us.

. On December 13, 1999, we issued and sold 3,332,912 shares of Series A
preferred stock for an aggregate of $16,164,622.23. The shares were sold
to three of our officers and directors and to two venture capital firms.
Each share of our Series A preferred stock automatically will convert
into one share of common stock upon the closing of this offering.

. From February 1998 through July 2000, we granted stock options to our
employees, directors and consultants under our 1998 stock option plan
pursuant to which the optionees may purchase up to an aggregate of
6,410,880 shares of our common stock at exercise prices ranging from $.04
to $11.67 per share. Of the options we granted during this period,
options to purchase a total of 1,558,140 shares of our common stock have
been canceled, and options to purchase a total of 501,000 shares of
common stock have been exercised, for an aggregate cash consideration of
$74,413.

The sale and issuance of these securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or (1) Regulation D promulgated thereunder as transactions by
an issuer not involving a public offering, where the purchasers represented
their intention to acquire securities for investment purposes only and not
with a view to or for sale in connection with any distribution thereof, and
where the purchasers received or had access to adequate information about us,
or (2) Rule 701 promulgated thereunder in that the securities were offered and
sold either pursuant to written compensatory benefit plans or pursuant to a
written contract relating to compensation.

II-2
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1 Form of Underwriting Agreement.

3.1 Certificate of Incorporation of the Company.

3.2 Bylaws of the Company.

4.1 Specimen of Common Stock Certificate.

4.2 Investors' Rights Agreement dated December 13, 1999, between RightNow
Technologies, Inc. and the investors listed on Exhibit A thereto.

5 Opinion of Dorsey & Whitney LLP.

10.1 2000 Employee Stock Purchase Plan.

10.2 1998 Long-Term Incentive and Stock Option Plan.

10.3 2000 Stock Incentive Plan.

10.4 Lease Agreement dated April 4, 2000, between Genesis Partners, LLC
and RightNow Technologies, Inc. (relating to property at 77 Discovery
Drive, Bozeman, Montana).

10.5 Lease Agreement dated April 4, 2000, between Genesis Partners, LLC
and RightNow Technologies, Inc. (relating to property at 45 Discovery
Drive, Bozeman, Montana).

10.6 Lease Agreement dated July 10, 2000, between Genesis Partners, LLC
and RightNow Technologies, Inc. (relating to property at 40
Enterprise Boulevard, Bozeman, Montana).

10.7 Employment Agreement dated August 15, 1999 between RightNow
Technologies, Inc. and Jeffrey W. Honeycomb.

10.8 Form of Indemnification Agreement.

10.9 Series A Preferred Stock Purchase Agreement dated December 13, 1999,
among RightNow Technologies, Inc., Greylock IX Limited Partnership,
Summit Accelerator Partners, L.L.C., Greg R. Gianforte, Robert J.
Ryan and Susan J. Carstensen.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Ernst & Young LLP.

23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5 to the
Registration Statement).

24.1 Powers of Attorney (included on signature page).

27.1 Financial Data Schedule.
</TABLE>
--------
(b) Financial Statement Schedules

Report of Independent Auditors on Schedules

Schedule II Valuation and Qualifying Accounts

Item 17. Undertakings

The undersigned registrant hereby undertakes that:

The registrant will provide to the underwriters at the closing specified
in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful

II-3
<PAGE>

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.

For purposes of determining any liability under the Securities Act of
1933, the registrant will treat 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 as
part of this registration statement as of the time the Securities and
Exchange Commission declared it effective.

For the purpose of determining any liability under the Securities Act of
1933, the registrant will treat each post-effective amendment that contains
a form of prospectus as a new registration statement for the securities
offered in the registration statement, and will treat that offering of the
securities at that time as the initial bona fide offering of those
securities.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
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
Bozeman, State of Montana, on October 2, 2000.

RightNow Technologies, Inc.

/s/ Greg R. Gianforte
By: _________________________________
Greg R. Gianforte
Chairman and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the registration statement has been signed by the following persons in the
capacities indicated on October 2, 2000.

<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
/s/ Greg R. Gianforte Chairman and Chief Executive Officer
____________________________________ (principal executive officer)
Greg R. Gianforte

/s/ Susan J. Carstensen Chief Financial Officer (principal
____________________________________ financial officer and principal
Susan J. Carstensen accounting officer)

* Director
____________________________________
Robert J. Ryan

* Director
____________________________________
Roger L. Evans

* Director
____________________________________
William J. Lansing

* Director
____________________________________
Margaret L. Taylor
</TABLE>

/s/ Susan J. Carstensen
* By: _______________________________
Susan J. Carstensen
Attorney-in-fact

II-5
<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
RightNow Technologies, Inc.

We have audited the consolidated financial statements of RightNow
Technologies, Inc. as of December 31, 1998 and 1999 and June 30, 2000 and for
each of the three years in the period ended December 31, 1999 and for the six
month period ended June 30, 2000, and have issued our report thereon dated July
20, 2000 (included elsewhere in this Registration Statement). Our audit also
included the financial statement schedule listed in Item 16(b) of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audit. In
our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
July 20, 2000

II-6
<PAGE>

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------------------------ ----------- --------------------------- ---------- -----------
Additions
---------------------------
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts Deductions End of
Description of Period Expenses Described Described Period
----------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Six Months Ended June
30, 2000
Allowance for accounts
receivable
Doubtful accounts... $ 197,975 $ 726,917(/1/) $ -- $433,773(/2/) $ 491,119
Returns reserve..... 31,175 502,948(/3/) -- 273,126(/4/) 260,997
----------- ----------- ----- -------- -----------
Total allowance for
accounts receivable.. 229,150 1,229,865 -- 706,899 752,116
Deferred tax valuation
allowance............ (1,693,900) (2,756,100) -- -- (4,450,000)

Year Ended December 31,
1999
Allowance for accounts
receivable
Doubtful accounts... 700 372,000(/1/) -- 174,725(/2/) 197,975
Returns reserve..... 6,325 79,850(/3/) -- 55,000(/4/) 31,175
----------- ----------- ----- -------- -----------
Total allowance for
accounts receivable.. 7,025 451,850 -- 229,725 229,150
Deferred tax valuation
allowance............ -- (1,693,900) -- -- (1,693,900)
Year Ended December 31,
1998
Allowance for accounts
receivable
Doubtful accounts... -- 700(/1/) -- -- 700
Returns reserve..... -- 6,325(/3/) -- -- 6,325
----------- ----------- ----- -------- -----------
Total allowance for
accounts receivable.. -- 7,025 -- -- 7,025
</TABLE>

--------

(1) Amounts charged to bad debt expense

(2) Accounts written off as deemed uncollectable

(3) Amounts charged to revenues

(4) Accounts written off when product returned pursuant to 60 day warranty

II-7
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
23.1 Consent of Ernst & Young LLP.

</TABLE>