ENLIGHTEN SOFTWARE SOLUTIONS INC, SB-2, 2000-07-28

ENLIGHTEN SOFTWARE SOLUTIONS INC
SB-2, 2000-07-28
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on ____________, 2000
Registration No. 333-

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

ENLIGHTEN SOFTWARE SOLUTIONS, INC.
(Exact name of small business issuer in its Charter)

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CALIFORNIA 7372 94-3008888
(State or Other Jurisdiction of (Primary Standard Industrial I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification Number)
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999 BAKER WAY, FIFTH FLOOR
SAN MATEO, CALIFORNIA 94404
(650) 578-0700
(Address and telephone number of principal executive offices)

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STEPHEN E. GIUSTI
CHIEF FINANCIAL OFFICER
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
999 BAKER WAY, FIFTH FLOOR
SAN MATEO, CALIFORNIA 94404
(650) 578-0700
(Name, address and telephone number of agent for service)

Copies to:
JOHN A. ANZUR, ESQ.
GRAY CARY WARE & FREIDENRICH LLP
139 TOWNSEND STREET, SUITE 400
SAN FRANCISCO, CALIFORNIA 94107
(415) 836-2500

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

Approximate date of commencement of proposed sale to the public:
From time to time as described in the prospectus after this registration
statement becomes effective.

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

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

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.(TM)

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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.(TM)

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

CALCULATION OF REGISTRATION FEE

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=======================================================================================================
PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
=======================================================================================================
<S> <C> <C> <C> <C>
common stock 1,574,948(2) $2.69 $4,232,673 $11,766
=======================================================================================================
</TABLE>

(1) Estimated, pursuant to Rule 457(c), solely for the purpose of calculating
the registration fee based on the average of the high and low prices for the
common stock, as reported on the Nasdaq National Market on July 26, 2000.

(2) Includes up to 859,063 shares issuable upon the exercise of outstanding
warrants.

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 completed and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the SEC is effective. This prospectus is not an offer to
sell these securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 27, 2000

THE RESALE OF 1,574,948 SHARES

[ENLIGHTEN SOFTWARE LOGO]

COMMON STOCK

The selling price of the shares will be determined by market factors at
the time of their resale.

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

This prospectus relates to the resale by the selling shareholders of
1,574,948 shares of our common stock. The selling shareholders may sell the
stock from time to time at the prevailing market price or in negotiated
transactions. Of the shares offered:

- 715,885 shares are currently outstanding, and

- 859,063 shares are issuable upon the exercise of warrants
currently held by the selling shareholders.

We will not receive any of the proceeds from the sale of the shares by
the selling shareholders.

Enlighten's Common Stock is quoted on the Nasdaq SmallCap Market under
the symbol "SFTW." On July 26, 2000, the last reported sale price of the Common
Stock was $2.75 per share.

Please read this prospectus carefully. It describes our company, finances
and products. Federal and state securities laws require that we include in this
prospectus all the important information that investors will need to make an
investment decision.

You should rely only on the information contained in this prospectus to
make your investment decision. We have not authorized anyone to provide you with
information that is different from what is contained in this prospectus.

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

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE
"RISK FACTORS" COMMENCING ON PAGE 7.

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

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

THE DATE OF THIS PROSPECTUS IS JULY 27, 2000.

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TABLE OF CONTENTS

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Page
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PROSPECTUS SUMMARY...................................................................5
THE OFFERING.........................................................................6
RISK FACTORS.........................................................................7
FORWARD-LOOKING STATEMENTS..........................................................12
USE OF PROCEEDS.....................................................................12
PRICE RANGE OF COMMON STOCK.........................................................13
DIVIDEND POLICY.....................................................................13
CAPITALIZATION......................................................................14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS.........................................15
RECENT ACCOUNTING PRONOUNCEMENTS....................................................22
BUSINESS............................................................................23
SELLING SHAREHOLDERS................................................................36
PLAN OF DISTRIBUTION................................................................37
PROPERTIES..........................................................................35
LEGAL PROCEEDINGS...................................................................39
MANAGEMENT..........................................................................39
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................50
PRINCIPAL SHAREHOLDERS..............................................................50
DESCRIPTION OF CAPITAL STOCK........................................................51
SHARES ELIGIBLE FOR FUTURE SALE.....................................................53
LEGAL MATTERS.......................................................................54
EXPERTS.............................................................................54
WHERE YOU CAN FIND ADDITIONAL INFORMATION...........................................54
INDEX TO FINANCIAL STATEMENTS.......................................................55
</TABLE>

Enlighten Distributed Systems Manager and Enlighten DSM are trademarks,
tradenames or service marks of Enlighten. This prospectus contains trademarks,
tradenames or service marks of other companies.

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in the common stock. You should read the entire
prospectus carefully, including "Risk Factors" and the financial statements and
notes thereto, before making an investment decision.

ENLIGHTEN SOFTWARE SOLUTIONS, INC.

We provide software products that allow the user to automate
administration and management tasks and to monitor critical performance and
operational characteristics of computer servers and workstations in the
commercial environment. Our products allow the user to manage many computers
through a single console view of their computer infrastructure. Our product is
available for multiple operating systems with three distinct categories of
computer and software architecture, including Linux, Unix and Windows. Linux is
a free, open source alternative to proprietary Unix operating systems. "Open
source" means that this software has had its internal source code made open to
the public for viewing, copying, examining, modifying and commercial purposes.
Our products enable users of computer servers and workstations that are
networked together or internet based to manage their operations across various
sites. Our core product, the Enlighten(R) Distributed Systems Manager or
EnlightenDSM(TM), allows companies to manage their mission critical computer
servers and workstations by enabling systems managers and administrators to
standardize the management of diverse computer operating systems, such as Linux,
Unix and Windows and to monitor the on-going performance and availability of
many different systems running together.

Our software manages products from vendors such as Compaq Computer
Corporation, Hewlett-Packard Company, International Business Machines
Corporation, Intel Corporation, Microsoft Corporation, The Santa Cruz Operation,
Silicon Graphics, Sun Microsystems, Red Hat, TurboLinux, Caldera Systems, and
SuSE. Our award winning EnlightenDSM product suite is a fully integrated,
cross-platform software solution.

The key elements of our strategy include:

- enabling the integration of Linux into the corporate environment;

- focusing on the mid-sized organization and departments of larger
companies;

- adding timely effective manageability to web based application
environments; and

- distributing our products through third-party relationships such
as software vendors, hardware vendors, Linux distributors, systems
management service providers, and Linux appliance manufacturers.

Our products are suited for quick, effective implementation to provide a
management infrastructure that matches today's needs for immediate, flexible
solutions in the Internet business environment. Our mission is to provide the
industry's most pervasive software solutions to help corporate enterprises
simply and inexpensively monitor, manage and administer computers that are
spread among many locations and consist of many different operating systems. We
intend to be a market leader for easy to use, out-of-the-box, broad-based
functionality for event monitoring and systems administration across major open
systems

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platforms. While numerous standards are being introduced and companies are vying
to position themselves in the open systems management market, we are positioning
our EnlightenDSM product suite as the one product that is vital and affordable
to open systems managers in mixed Linux, Unix and Windows environments.

Enlighten Software Solutions, Inc. was incorporated in California in June
1986 as LAB, Inc. In June 1986, LAB, Inc. changed its name to Software
Professionals, Inc. In May 1996, Software Professionals changed its name to
Enlighten Software Solutions, Inc. Unless the context otherwise requires, any
reference to "Enlighten," "we," "our" and "us" in this prospectus refers to
Enlighten Software Solutions, Inc., a California corporation, and its
subsidiaries and predecessors. Enlighten's principal executive offices are
located at 999 Baker Way, Fifth Floor, San Mateo, California 94404. Enlighten's
telephone number is (650) 578-0700 and its Website is located at
www.enlightendsm.com. Information on Enlighten's Website is not a part of this
prospectus.

RECENT DEVELOPMENTS

In 2000 and 1999, we added OEM partners and introduced new versions of
our product for certain distributions of the Linux open source operating system.

Mr. Bill Bradley was promoted to Chief Executive Officer in December
1999. Mr. Bradley joined Enlighten in August 1998 as Vice President of Business
Development. He became President and Chief Operating Officer in September 1999.

Mr. J. Brad Booze joined Enlighten in June 2000 as Chief Operating
Officer.

Mr. Stephen Giusti was promoted to Vice President, Finance and
Administration and Chief Financial Officer in December. Mr. Giusti joined
Enlighten in August 1999 as Controller.

THE OFFERING

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Common Stock offered by selling shareholders..................... 1,574,948 shares(1)
Common Stock to be outstanding after the offering................ 5,812,852 shares(2)
Use of Proceeds.................................................. Enlighten will receive no
proceeds from the sale of the
shares. See "Use of Proceeds."
Nasdaq SmallCap Market Symbol.................................... SFTW
</TABLE>

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(1) Includes 859,063 shares issuable upon the exercise by the selling
shareholders of outstanding warrants. This registration statement also
covers such indeterminate number of additional shares as may be held or
acquired upon exercise of the warrants as a result of any future stock
splits, stock dividends or similar transactions covered by Rule 416.
(2) Based on the number of shares outstanding at June 30, 2000, including
859,063 shares issuable upon the exercise by the selling shareholders of
outstanding warrants, but excluding (i) 1,450,432 shares reserved as of
such date for issuance upon the exercise of outstanding stock options,
(ii) 324,778 shares reserved for future grant under Enlighten's stock
plans and (iii) an additional 40,000 shares reserved for issuance on
exercise of other outstanding warrants.

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RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with our financial statements and related notes and the other information
contained in this prospectus, before you decide to buy our common stock. If any
of the following risks actually occur, our business, financial condition or
results of operations would likely suffer. In this case, the market price of our
common stock could decline, and you may lose all or part of the money you paid
to buy our common stock.

OUR FUTURE REVENUES ARE UNPREDICTABLE, OUR OPERATING RESULTS ARE LIKELY TO
FLUCTUATE FROM QUARTER TO QUARTER AND IF WE FAIL TO MEET THE EXPECTATIONS OF
INVESTORS OR ANALYSTS, OUR STOCK PRICE COULD DECLINE SIGNIFICANTLY.

We have experienced significant quarterly fluctuations in operating
results and expect that these fluctuations will continue in future periods.
These fluctuations have been caused by a number of factors, including:

- the timing of new product or product enhancement introductions by
us or our competitors,

- the development and introduction of new operating systems that
require additional development efforts,

- purchasing patterns of our customers,

- size and timing of individual orders,

- the rate of customer acceptance of new products, and

- pricing and promotion strategies undertaken by us or our
competitors.

Future operating results may fluctuate as a result of these and other
factors, including:

- our ability to continue to develop, acquire and introduce new
products on a timely basis,

- the timing and level of sales by our OEM or other third-party
licensees of computer systems or software incorporating our
products,

- technological changes in computer systems and environments,

- quality control of the products sold,

- our success in shifting our primary sales strategy from direct to
indirect channels, and

- general economic conditions.

Additionally, our operating results may be influenced by seasonality and overall
trends in the global economy. Because we operate with a relatively small
backlog, quarterly sales and operating results generally depend on the volume
and timing of orders received during the

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quarter, which are difficult to forecast. Historically, we have recognized a
substantial portion of our license revenues in the last month of the quarter,
particularly the last week. Since our staffing levels and other operating
expenses are based upon anticipated revenues, delays in the receipt of orders
can cause significant fluctuations in income from quarter to quarter.

WE NOW DERIVE ALL OF OUR REVENUES FROM THE OPEN SYSTEMS MARKET AND WE MAY NOT BE
SUCCESSFUL IN THAT MARKET

Through 1997, we derived a substantial portion of our revenue from our
Tandem-based products. However, we sold all rights to our Tandem technology in
October 1997. The future success of our business is substantially dependent on
our ability to generate significant revenue from our Linux, Unix and Windows
product offering. Although we have entered into a number of agreements with
others to bundle or integrates our products into theirs, we may not be
successful in our efforts to generate significant revenue from these agreements.

WE CONTINUE TO NEED ADDITIONAL CAPITAL, AND THERE IS NO CERTAINTY OF ADDITIONAL
FINANCING

During the last five years we have financed our operations primarily
through sales of equity securities and the sale of a prior product line. We
believe that our existing capital resources, including the private placement,
are adequate to maintain our current operations through December 2000. However,
in order to continue to fund and expand our operations and meet our other
obligations through 2001, we may be required to obtain additional financing. Our
need for additional financing depends on our future performance, which, in part,
is subject to general economic conditions and other factors beyond our control.
We may not be able to obtain such financing, or financing in the level of net
proceeds required for us to remain in business.

A SIGNIFICANT PERCENTAGE OF OUR REVENUES IS ATTRIBUTED TO SALES TO ONE OF OUR
CUSTOMERS

Our largest customer accounts for a substantial percentage of our
revenues. During 1999, approximately 60% of our revenues consisted of license
fees received under our OEM relationship with Silicon Graphics to bundle a
subset of features of the EnlightenDSM product with each Unix server and
workstation that Silicon Graphics ships. License fees from Silicon Graphics
decreased in 1999 when compared to 1998. If these license fees continue to
decline, our revenues and financial results may be harmed.

WE ARE DEPENDENT ON RESELLERS AND IF THEY ARE NOT SUCCESSFUL MARKETING OUR
TECHNOLOGY, OUR ABILITY TO MAINTAIN OR INCREASE OUR REVENUES WILL BE HARMED

We sell primarily through resellers in the United States and abroad. We
have no control over our third-party distributors, their shipping dates, or the
volumes of systems shipped by them. These companies may not license our products
in volumes anticipated by us. If they fail to do so, our revenues will be
harmed.

IF OUR RESELLERS ARE NOT SUCCESSFUL IN EXPANDING DISTRIBUTION CHANNELS, OUR
ABILITY TO MAINTAIN OR INCREASE OUR REVENUES MAY BE HARMED

Our growth depends on our ability to continue to expand our third-party
distribution channel to market, sell and support our software products. We are
currently investing, and intend to continue to invest, significant resources to
develop this channel. We may not be successful in recruiting new organizations
to represent us and our products.

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WE RELY ON THIRD PARTIES FOR TECHNICAL SUPPORT, AND IF THEY DON'T PROVIDE
ADEQUATE SERVICE, OUR BUSINESS MAY BE HARMED

We are dependent on our third-party distributors for technical support
and consultation to end users. We must educate our third-party distributors so
that they obtain technical proficiency and knowledge with respect to our
products. This may result in, among other things, an increased workload for our
internal support and engineering staff, or poor customer acceptance of our
products, or both, either of which would significantly harm our business.

OUR MARKET IS SUBJECT TO INTENSE COMPETITION AND CONTINUED COMPETITION IN OUR
MARKET MAY LEAD TO A REDUCTION IN OUR PRICES, REVENUES AND MARKET SHARE

We experience intense competition from other systems management
companies. Our ability to compete successfully depends on a number of factors,
including the performance, price and functionality of our products relative to
those of our competitors. Most of our competitors are larger and have greater
financial, technical, marketing, support and other resources than us. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer requirements than us. In addition, our industry is
characterized by low barriers to entry. Other competitors can easily enter the
market. Our current competitors or any new market entrants may develop systems
management products that offer significant performance, price, or other
advantages over our technology. In addition, we sell our products through
operating system vendors. These same operating system vendors could introduce
new or upgrade existing operating systems or environments that include systems
which perform the same functions as the products offered by us. This could
render our products obsolete and unmarketable. If we are not able to
successfully compete against current or future competitors, our revenues or
profits could be harmed.

ALL OF OUR LICENSE REVENUE IS DERIVED FROM A SINGLE PRODUCT FAMILY AND IF THOSE
PRODUCTS FAIL TO ACHIEVE AND MAINTAIN MARKET ACCEPTANCE, OUR BUSINESS WOULD BE
SIGNIFICANTLY HARMED

Our EnlightenDSM products have accounted for all of our license revenue
since October 1, 1997. We expect that the EnlightenDSM product family and its
extensions and derivatives will continue to account for a substantial majority,
if not all, of our revenue for the foreseeable future. Broad market acceptance
of EnlightenDSM is, therefore, critical to our future success. Failure to
achieve broad market acceptance of EnlightenDSM, as a result of competition,
technological change, or otherwise, would significantly harm our business. Our
future financial performance will depend in significant part on the successful
development, introduction and market acceptance of EnlightenDSM and its product
enhancements. If we are not successful in marketing EnlightenDSM or any new
products, applications or product enhancements, our revenues would be
significantly reduced.

THE MARKET FOR OUR PRODUCTS IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE, AND
IF WE ARE NOT ABLE TO DEVELOP OR MARKET NEW PRODUCTS TO RESPOND TO SUCH CHANGE,
OUR REVENUE WOULD BE SIGNIFICANTLY AFFECTED.

The market for our products is characterized by rapid technological
developments, evolving industry standards and rapid changes in customer
requirements. The introduction of products embodying new technologies, including
new operating systems, applications, hardware products, systems management
frameworks and network management platforms, the emergence of new industry
standards, or changes in customer requirements could render our existing

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products obsolete and unmarketable. As a result, our success depends upon our
ability to continue to enhance existing products, respond to changing customer
requirements and rapidly develop and introduce new products that keep pace with
technological developments and emerging industry standards. We may not be
successful in developing and marketing, on a timely basis, product enhancements
or new products that respond to technological change, evolving industry
standards or changing customer demands.

OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS COULD SERIOUSLY HARM
OUR BUSINESS

We generally rely on copyrights, trademarks, trade secret laws and
software security measures, along with employee and third-party nondisclosure
agreements, to establish and protect our proprietary intellectual property
rights, products and technology. Our products are typically licensed on a "right
to use" basis pursuant to licenses that restrict the use of the products to the
customer's internal purposes. We distribute our software under license
agreements that are signed by our end-users. We also distribute our software to
our OEM partners under similar software license and distribution agreements.
Despite our precautions taken to protect our software, unauthorized parties may
attempt to reverse engineer, copy, or obtain and use information we regard as
proprietary. Policing unauthorized use of our products is difficult and software
piracy is a persistent problem. Additionally, the laws of some foreign countries
do not protect our proprietary rights to the same extent as do the laws of the
United States. We cannot assure you that our reliance on licenses to third
parties, or copyright, trademark, trade secret protection or our software
security measures, will be enough to be successful and profitable in the
industry in which we compete.

WE MAY BE REQUIRED TO RELEASE OUR SOURCE CODE TO CERTAIN CUSTOMERS IF WE FAIL TO
FULFILL OUR CONTRACTUAL OBLIGATIONS, WHICH COULD RESULT IN THE MISUSE OF OUR
INTELLECTUAL PROPERTY

We have entered into source code escrow agreements with some of our
customers that require the release of source code to the customer in the event
there is a bankruptcy proceeding by or against us, we cease to do business, or
we are unable to fulfill our contractual support obligations. In the event of a
release of the source code, the customer is required to maintain confidentiality
of the code and, in general, to use the source code solely for the purpose of
maintaining the software's usability. Releasing source code to customers may
increase the likelihood of misappropriation or other misuse of our intellectual
property. If our source code was misused or misappropriated, it could
significantly harm our business.

INTELLECTUAL PROPERTY INFRINGEMENT BY OR AGAINST US COULD SIGNIFICANTLY HARM OUR
BUSINESS

From time to time, we receive notices from third parties asserting that
we have infringed their patents or other intellectual property rights. In
addition, we may initiate claims or litigation against third parties for
infringement of our proprietary rights or to establish the validity of our
proprietary rights. Any such claims could be time-consuming, result in costly
litigation, cause product shipment delays or lead us to enter into royalty or
licensing agreements rather than dispute the merits of such claims. As the
number of software products in the industry increases and the functionality of
such products further overlap, we believe that software developers may become
increasingly subject to infringement claims. Any such claims, with or without
merit, can be time consuming and expensive to defend. In addition, an adverse
outcome in litigation could subject us to significant liabilities to third
parties, require expenditure of significant resources to develop non-infringing
technology, require disputed rights to be licensed from others, or require

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us to cease the marketing or use of certain products. Such a result could have a
material adverse effect on our business, operating results and financial
condition.

A DECLINE IN SALES OF UNIX OR LINUX SYSTEMS WILL RESULT IN A DECREASE IN
REVENUES.

A significant portion of our revenue will be derived from Unix and Linux
based computer systems for the foreseeable future. While we have also released
versions of our products for the Windows NT platform, the product's graphical
user interface is available only on Unix and Linux based systems, and,
therefore, users must manage their environments from these types of systems. A
significant decline in sales of Unix and Linux based systems would decrease the
demand for our products and would significantly harm our business.

IF THE OPEN SYSTEMS MANAGEMENT MARKET FAILS TO GROW, OUR BUSINESS WOULD BE
SIGNIFICANTLY HARMED

For the foreseeable future, all of our business will be in the open
systems (Linux, Unix and Windows NT) management market, which is still an
emerging market. Our future financial performance will depend in large part on
continued growth in the number of companies adopting systems management
solutions for their client/server computing environments. The market for systems
management solutions may not continue to grow. If the systems management market
fails to grow or grows more slowly than we currently anticipate, our business
would be significantly harmed.

OUR SUCCESS IS TIED TO THE SUCCESS OF OTHER SEGMENTS OF THE COMPUTER INDUSTRY.

Our products are marketed to users of computer products. During recent
years, segments of the computer industry have experienced significant economic
downturns characterized by decreased product demand, production overcapacity,
price erosion, work slowdowns and layoffs. Our operations may in the future
experience substantial fluctuations from period-to-period as a consequence of
such industry patterns, general economic conditions affecting the timing of
orders from major customers and other factors affecting capital spending. Such
factors may significantly harm our business.

WE HAVE A HISTORY OF LOSSES, AND WE MAY NOT ACHIEVE PROFITABILITY

We have a history of losses and anticipate further significant losses. We
may not achieve profitability. We have incurred significant operating losses
each of the last five fiscal years and we may not realize sufficient revenue to
achieve profitability. We expect to continue to incur significant losses for the
foreseeable future and these losses may be higher than our current losses. We
may not achieve profitability. Failure to become and remain profitable may
adversely affect the market price or our common stock and our ability to raise
capital and continue operations.

OUR FAILURE TO ATTRACT, TRAIN, MOTIVATE, AND RETAIN KEY EMPLOYEES MAY HARM OUR
BUSINESS

The competition for highly skilled employees is intense. Our business
depends on the efforts and abilities of our senior management, our research and
development staff and other key sales, support, technical, and services
personnel. Our failure to attract, train, motivate, and retain such employees
would impair our development of new products, our ability to provide technical

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services and the management of our business. This would seriously harm our
business, operating results, and financial position.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward looking statements. These statements
include statements about our plans, objectives, expectations, intentions and
strategy and other statements contained in the prospectus that are not
historical facts. These statements are only projections and involve risks,
uncertainties and other factors that may cause our or our industry's actual
results, levels of activity, performance, or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by the forward-looking statements. These
factors include those listed under "Risk Factors" and elsewhere in this
prospectus. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continue" or the negative of
these terms or other comparable terminology.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. You should not place undue
reliance on these forward-looking statements. Before you invest in our common
stock, you should be aware that the occurrence of the events described in the
section entitled "Risk Factors" and elsewhere in this prospectus could
substantially harm our business, operating results or financial condition, and
that upon the occurrence of any of these events, the trading price of our common
stock could decline and you could lose all or part of your investment.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the 715,855 outstanding
shares of common stock held by the selling shareholders. If the warrants for up
to 859,063 additional shares are exercised by the selling shareholders, we will
receive proceeds in the form of the exercise price of the warrants. The warrants
issued to the selling shareholders have an aggregate exercise price of
$3,994,600 or $4.65 per share. If we receive any proceeds from the exercise of
the warrants, we expect to use them for working capital. We will not receive any
proceeds from the subsequent sale of the shares of common stock issued to the
selling shareholders upon the exercise of the warrants. All proceeds from the
sale of the shares of common stock will go to the selling shareholders to be
used for their own purposes.

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PRICE RANGE OF COMMON STOCK

Our common stock has been traded on the Nasdaq SmallCap Market under the
symbol SFTW since October 21, 1998. From our initial public offering on April
20, 1994 through October 20, 1998, our common stock traded on the Nasdaq
National Market under the symbol SFTW. Prior to such time there was no public
market for our common stock. The following table sets forth for the periods
indicated the high and low sale prices per share of our common stock as reported
on the Nasdaq National Market and the Nasdaq SmallCap Market.

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High Low
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Fiscal year ended December 31, 1998
Third Quarter ....................... $ 3.69 $ 2.13
Fourth Quarter ...................... $ 3.81 $ 1.91
Fiscal year ended December 31, 1999
First Quarter ....................... $ 4.13 $ 2.13
Second Quarter ...................... $ 4.38 $ 2.56
Third Quarter ....................... $ 4.00 $ 2.81
Fourth Quarter ...................... $12.75 $ 2.75
Fiscal year ended December 31, 2000
First Quarter ....................... $13.88 $ 5.63
Second Quarter ...................... $ 7.25 $ 2.88
</TABLE>

On July 20, 2000, the last reported sale price of the common stock on the
Nasdaq SmallCap Market was $3.0625 per share. As of June 30, 2000, there were
approximately 47 shareholders of record of the common stock.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We
currently anticipate that we will retain all future earnings, if any, to fund
the development and growth of its business and do not anticipate paying cash
dividends in the foreseeable future.

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<PAGE> 14

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000.
The as adjusted information reflects the sale and issuance on April 28, 2000 of
715,885 shares of our common stock, 715,885 warrants at a price of $4.225 and
$0.125 per share, respectively, 143,178 additional warrants at no charge to
certain service providers in connection with such issuance, and the deduction of
the underwriting discount and offering expenses associated therewith. You should
read the information presented below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
beginning on page 15 and the "Consolidated Financial Statements" and the related
"Notes to Consolidated Financial Statements" beginning on page 55.

<TABLE>
<CAPTION>
March 31, 2000
Actual As Adjusted(2)
------------ -------------
<S> <C> <C>
Shareholders' equity
Preferred Stock:
Authorized: 1,000,000;
Issued and Outstanding: none ................................. $ -- $ --
Common Stock, no par value:
Authorized 10,000,000;
Issued and Outstanding: 4,235,888 actual; 5,812,852 as ...... 8,511,500 11,340,100
adjusted(1)
Deferred stock-based compensation ................................ (101,500) (101,500)
Accumulated other comprehensive income ........................... (24,200) (24,200)
Accumulated deficit .............................................. (6,584,400) (6,584,400)
------------ ------------
Total capitalization ...................................... $ 1,801,400 $ 4,630,000
============ ============
</TABLE>

----------
(1) Based on the number of shares outstanding at March 31, 2000, plus the
715,885 currently outstanding shares issued to the selling shareholders on
April 28, 2000 and the 859,063 shares issuable upon the exercise by the
selling shareholders of outstanding warrants, but excluding (i) 1,449,476
shares reserved as of such date for issuance upon the exercise of
outstanding stock options, (ii) 272,082 shares reserved for future grant
under Enlighten's stock plans, and (iii) 40,000 shares reserved for
issuance on exercise of outstanding warrants.
(2) Adjusted to reflect the receipt by Enlighten of net proceeds of $2,828,600
from the sale on April 28, 2000 of 715,885 shares of common stock and
715,885 warrants at $4.225 and $0.125 per share, respectively, after
deduction of estimated commissions and offering expenses.

14
<PAGE> 15

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

You should read the following discussion and analysis in conjunction with
our consolidated financial statements and the notes thereto beginning on page 55
of this prospectus. Except for historical information, the discussion in this
prospectus contains forward-looking statements based on current expectations
that involve certain risks and uncertainties. Such forward-looking statements
include, among others, those statements including the words "expects'"
"anticipates," "intends," "believes," and similar language. Our actual results
could differ materially from those discussed herein. Factors that could cause
actual results or performance to differ materially or contribute to such
differences include, but are not limited to, those discussed in the section
titled "Risk Factors" beginning on page 7 of this prospectus.

OVERVIEW

We develop, market, and support event monitoring and workgroup
administration software products. Our EnlightenDSM(TM) product allows companies
to manage their computer servers and workstations by enabling systems managers
and administrators to standardize the management of diverse computer operating
systems, such as Linux, Unix, and Windows from platform vendors such as Compaq
Computers Corporation, Hewlett-Packard Company, International Business Machines
Corporation, Intel Corporation, Microsoft Corporation, The Santa Cruz Operation,
Silicon Graphics, Sun Microsystems, Red Hat and TurboLinux. Our award winning
EnlightenDSM product suite is a fully integrated, cross-platform software
solution providing computer system management covering a wide range of workgroup
administration and systems management tasks and the monitoring of critical
operating and performance metrics during computer operation. Our objective is to
become a market leader in integrated open systems workgroup administration and
systems management.

We were founded in 1986, and we were a leading provider of systems
management software for computer systems manufactured by Tandem Computers
providing a range of automated systems management products to over 400 companies
in 30 countries. In October 1997, we sold our Tandem based product line to New
Dimension Software (since purchased by BMC Software) in order to focus our
efforts on our Unix and Windows product suite. Following the disposition of our
Tandem based product line, we shifted our sales strategy to one based primarily
upon third-party distributors and restructured our sales department as a result
of this shift. We continue to build our sales, marketing, and customer support
organizations with a focus on delivery of our products to original equipment
manufacturer ("OEM") partners, resellers, system integrators, and select
end-users. An essential element of our sales and marketing strategy is the
development of indirect distribution channels, such as OEMs, independent
software vendors ("ISVs"), and value added resellers ("VARs"), as well as other
systems management and application software vendors whose products are
complementary to our products.

VARIABILITY OF QUARTERLY RESULTS

We have experienced significant quarterly fluctuations in our operating
results and expect that these fluctuations will continue in future periods.
These fluctuations have been caused by a number of factors, including the timing
of new product or product enhancement introductions by us or our competitors,
the development and introduction of new operating systems that require

15
<PAGE> 16

additional development efforts, purchasing patterns of our customers, size and
timing of individual orders, the rate of customer acceptance of new products,
and pricing and promotion strategies undertaken by us or our competitors. Future
operating results may fluctuate as a result of these and other factors,
including our ability to continue to develop, acquire, and introduce new
products on a timely basis, the timing and level of sales by our OEMs or other
third-party licensees of computer systems or software incorporating our
products, technological changes in computer systems and environments, quality
control of the products sold, our success in shifting our primary sales strategy
from direct to indirect channels, and general economic conditions. Additionally,
our operating results may be influenced by seasonality and overall trends in the
global economy. Because we operate with a relatively small backlog, quarterly
sales and operating results generally depend on the volume and timing of orders
received during the quarter, which are difficult to forecast. Historically, we
have recognized a substantial portion of our license revenues in the last month
of the quarter. Since our staffing levels and other operating expenses are based
upon anticipated revenues, delays in the receipt of orders can cause significant
fluctuations in income from quarter to quarter.

HISTORICAL RESULTS OF OPERATIONS

The following table sets forth the results of operations for Enlighten
expressed as a percentage of total revenue. The historical results are not
necessarily indicative of results to be expected for any future period.

<TABLE>
<CAPTION>
Three Months Ended March 31, Years ended December 31,
------------------------------- -----------------------------
2000 1999 1999 1998
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Product license fees ........... 41.2% 58.4% 54.9% 64.3%
Product maintenance fees ....... 39.5 13.0 19.8 17.5
Consulting services ............ 15.7 25.3 16.6 6.9
Royalties ...................... 3.6 3.4 8.7 11.3
------------- ------------- ----------- -----------
Total revenue ............... 100.0 100.0 100.0 100.0

Cost of revenue ................... 27.7 21.5 13.5 17.8
------------- ------------- ----------- -----------
Gross profit ................ 72.3 78.5 86.5 82.2
------------- ------------- ----------- -----------
Operating expenses:
Research and development ....... 140.1 40.4 54.4 45.0
Sales and marketing ............ 157.4 42.0 68.1 52.1
General and administrative ..... 67.4 18.2 29.7 24.7
Gain on sale of
Tandem product line ........... -- -- -- (13.6)
------------- ------------- ----------- -----------
Total operating expenses .... 364.9 100.6 152.2 108.2
------------- ------------- ----------- -----------
Operating loss ........... (292.6) (22.1) (65.7) (26.0)

Other income, net ................. 4.1 2.4 5.2 4.4
------------- ------------- ----------- -----------
Loss before income taxes .... (288.5) (19.6) (60.5) (21.6)

Income tax expense (benefit) ...... (0.3) (0.1) (0.3) 0.7
------------- ------------- ----------- -----------
Net loss ................. (288.8)% (19.7)% (60.2)% (20.9)%
============= ============= =========== ===========
</TABLE>

16
<PAGE> 17

FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999

Net Revenue

Net revenue decreased $829,400, or 66%, to $436,200 in the first quarter
of 2000, as compared to 1999. For the first quarter of 2000, revenues from our
relationship with Silicon Graphics were not included in operating results. In
prior quarters, Silicon Graphics provided Enlighten with revenue information
prior to the issuance of Enlighten's interim financial information and thus
revenue had been recorded in the period in which Silicon Graphics shipped its
servers and workstations. Silicon Graphics is not required to report revenue
prior to the issuance of Enlighten's interim financial information and, due to
Silicon Graphics' ongoing restructuring process, Silicon Graphics does not
expect to report earlier than required. Beginning in the second quarter of 2000,
and as a result of later reporting by Silicon Graphics, revenues from Silicon
Graphics will be recorded in the quarter in which the revenue is reported by
Silicon Graphics.

Revenue from product license fees decreased $559,300, or 76%, to $179,900
in the first quarter of 2000, as compared to 1999. The decrease was primarily
attributable to revenues from the Silicon Graphics OEM relationship not included
for the quarter. License fees from Silicon Graphics are derived from Silicon
Graphics' Unix server and workstation sales on a per unit shipped basis.

Product maintenance fees increased slightly by $7,900, or 5%, to $172,100
in the first quarter of 2000, as compared to 1999, due mainly to an increased
end user customer base.

Consulting services revenue decreased by $251,200, or 79%, to $68,400 in
the first quarter of 2000, as compared to 1999. This decrease was primarily due
to the decrease in non-recurring engineering revenues related to Enlighten's
1999 strategic relationship with IBM compared to Enlighten's 2000 OEM
relationship with Intel.

Royalties consist primarily of royalties from BMC Corporation, formerly
New Dimensions Software, from product license fees and product maintenance fees
generated by the Tandem product line sold to BMC in October 1997. Total
royalties decreased by $26,800, or 63%, to $15,800 in the first quarter of 2000,
as compared to 1999. This decrease was primarily due to a lower royalty rate
used during 2000 than 1999. Enlighten is entitled to receive royalties from BMC
through September 2000.

Cost of Revenue

Cost of license revenue consists of royalties paid to third parties,
amortization of software acquisition costs, product packaging and documentation,
and software media. Cost of license revenue decreased by $99,300, or 80%, in the
first quarter of 2000, as compared to 1999. This decrease was primarily due to a
decrease in royalties paid to third parties and a decrease in the quantity of
hardcopy product documentation shipped during the first quarter of 2000.

Cost of maintenance revenue includes customer support costs, such as
hot-line and on-site support. Cost of maintenance revenue decreased by $45,400,
or 44%, in the first quarter of 2000, as compared to 1999. This decrease was due
primarily to a decrease in customer support headcount and personnel related
costs.

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<PAGE> 18

Cost of consulting services revenue consists of the direct costs required
to provide the consulting services. Cost of consulting services revenues
decreased by $6,400, or 14%, in the first quarter of 2000, as compared to 1999.
This decrease is due primarily to a decrease in royalties paid to third party
software vendors and a decrease in packaging and documentation costs due to the
distribution of documentation in electronic format and the distribution of
software over the Internet.

Research and Development

Research and development expenses consist of personnel expenses and
associated overhead, the costs of short-term independent contractors required in
connection with product development efforts and amortization of software
development costs less amounts capitalized. Enlighten's investment in research
and development, prior to the reduction for capitalization of software
development costs, was $621,300 and $511,100, respectively, representing 142%
and 40% of total revenue for 2000 and 1999, respectively. The increase of
$110,200, or 22%, in the first quarter of 2000, as compared to 1999, was
primarily attributable to increases in employee recruiting and contract labor
costs. Enlighten capitalized approximately $10,200 of software development costs
in 2000 which represented approximately 2% of total research and development
expenditures incurred during the quarter. There were no software development
costs capitalized in the first quarter of 1999. The amount of capitalized
software development costs in any given period may vary depending on the nature
of the development performed.

Costs incurred in the research and development of new software products
are expensed as incurred until technological feasibility is established.
Enlighten expects research and development expenses to continue to increase in
absolute dollars as Enlighten continues to invest in the enhancement of existing
products and the development of new products.

Sales and Marketing

Sales and marketing expenses include costs of sales and marketing
personnel, advertising and promotion expenses, customer service and technical
support, travel and entertainment, and other selling and marketing costs. Sales
and marketing expenses increased by $154,700, or 29%, to $686,500 in the first
quarter of 2000, as compared to 1999. This increase was primarily due to
increases in recruiting and trade show expenses, offset by a decrease in
personnel related expenses.

General and Administrative

General and administrative expenses, which include personnel costs for
finance, administration, information systems, and general management, as well as
professional fees, legal expenses, and other administrative costs, increased by
$63,900, or 28%, to $294,000 in the first quarter of 2000, as compared to 1999.
The increase was primarily due to higher compensation expense on stock options
granted to consultants.

Other income, net

18
<PAGE> 19

or 42%, to $18,000 in the first quarter of 2000, as compared to 1999, primarily
due to a decrease in interest income due to a lower average balance of invested
cash and short-term investments.

Provision for income taxes

Provision for income taxes consists of the minimum state income taxes due
for 2000 and 1999, for incorporation in California and New Jersey. No tax
benefits were recognized during these quarters due to the uncertainty related to
Enlighten's ability to recognize a tax benefit for loss and credit
carryforwards.

FOR THE YEARS ENDED 1999 AND 1998

Net Revenue

Net revenue decreased $514,000, or 14%, to $3,244,400 in 1999, as
compared to 1998. This decrease was primarily due to lower license revenues from
the Silicon Graphics OEM relationship.

Revenue from product license fees decreased $635,500 or 26% to $1,781,200
in 1999, as compared to 1998. The decrease was primarily attributable to the
decrease in license fees from the Silicon Graphics OEM relationship. License
fees from Silicon Graphics are derived from server and workstation sales on a
per unit shipped basis, of which, Silicon Graphics had lower units shipped
during 1999.

Product maintenance fees remained relatively flat as compared to 1998.

Consulting services revenue increased by $279,500, or 107%, to $540,100
in 1999, as compared to 1998. This increase was primarily due to non-recurring
consulting revenues related to Enlighten's strategic relationships with IBM and
Intel.

Enlighten recognizes royalties from BMC Corporation, formerly New
Dimensions Software, from product license fees and product maintenance fees
generated by the Tandem product line sold to BMC in October 1997. Royalties were
$281,900 in 1999 and $425,600 in 1998.

Cost of Revenue

Cost of revenue consists of royalties paid to third parties, amortization
of software development and acquisition costs, product packaging and
documentation, software media, and the costs of employees and contractors
providing consulting services. Cost of revenue decreased by $230,700, or 34%, to
$438,900 in 1999, as compared to 1998. This decrease is due primarily to a
decrease in royalties paid to third party software vendors and a decrease in the
cost and quantity of the software product manuals.

Research and Development

Research and development expenses consist of personnel expenses and
associated overhead and costs of short-term independent contractors required in
connection with product development efforts, less amounts capitalized.
Enlighten's investment in research and development, prior to the reduction for
capitalization of software development costs, was $1,996,200 and $1,692,000 for
1999 and 1998, respectively, representing 62% and 45% of total

19
<PAGE> 20

revenue for 1999 and 1998, respectively. The increase of $304,200 in 1999, as
compared to 1998, was primarily attributable to higher employee related costs
due to increases in headcount and increases in costs related to development of
computer hardware and software. Enlighten capitalized approximately $231,900 of
software development costs in 1999, which represented approximately 12% of total
research and development expenditures incurred in that year. There were no
software development costs capitalized in 1998. The amount of capitalized
software development costs in any given period may vary depending on the exact
nature of the development performed.

Sales and Marketing

Sales and marketing expenses include costs of sales and marketing
personnel, advertising and promotion expenses, customer service and technical
support, travel and entertainment, and other selling and marketing costs. Sales
and marketing expenses increased by $249,900, or 13%, to $2,208,700 in 1999, as
compared to 1998. This increase was primarily due to increases in temporary
services, recruiting expenses and advertising costs. For the foreseeable future,
Enlighten expects sales and marketing costs to increase in absolute dollars as
it expands its sales and marketing force to enhance its ability to sell and
service its products through third-party resellers.

General and Administrative

General and administrative expenses, which include personnel costs for
finance, administration, information systems, and general management, as well as
professional fees, legal expenses, and other administrative costs, increased by
$35,400, or 4%, to $965,100 in 1999, as compared to 1998. The increase is
primarily due to compensation costs on stock options granted to consultants to
Enlighten, partially offset by decreases in employee related costs.

Gain on sale of Tandem product line

On October 1, 1997, Enlighten sold its Tandem product line to BMC. In
1998 and 1997, Enlighten recognized a gain on the sale of the operating assets
of the Tandem product line of approximately $515,500 and $2,157,800,
respectively. Enlighten received approximately $2.5 million in cash, of which
$1.6 million was received in 1997, and the rights to receive royalties on Tandem
related products for a period through September 2000. The sale of the Tandem
product line also included the transfer to BMC of approximately 12 employees
associated with Enlighten's Tandem operation.

Other income, net

Other income and expense includes interest income net of interest expense
and gains and losses on foreign currency transactions. Interest income is
primarily derived from short term interest-bearing securities and money market
accounts. Interest expense is comprised of interest on bank notes and capital
leases of computer equipment. Other income, net remained relatively consistent
at $169,900 in 1999, as compared to 1998.

20
<PAGE> 21

Income tax expense (benefit)

Enlighten's tax benefit recognized in 1999 is primarily due to receiving
state tax refunds on net operating loss carrybacks in excess of amounts
previously provided for by Enlighten. In 1998, Enlighten recognized a tax
benefit of $41,400 as a result of receiving Federal tax refunds on net operating
loss carrybacks in excess of amounts previously provided for by Enlighten. The
tax benefit was partially offset by a $15,200 tax expense incurred as a result
of the U.K. operations. No tax benefit, other than those stated above, were
recognized in these years due to the uncertainty related to Enlighten's ability
to recognize a tax benefit for loss and credit carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2000, our cash and cash equivalents and short-term
investments were $1,004,000, representing 41% of total assets. Cash equivalents
are highly liquid investments with original maturities of ninety days or less.
Our short-term investments are primarily highly liquid investment grade
commercial paper. Our working capital was $921,500 as of March 31, 2000. We had
no debt as of March 31, 2000, other than normal trade payables and accrued
liabilities. Shareholders equity as of March 31, 2000 was $1,801,400.

During the three months ended March 31, 2000, cash used in operating
activities decreased $519,200 to $318,700, compared to the same period of the
prior year. The change was principally caused by a decrease in accounts
receivable and was partially offset an increase in the net loss.

Our investing activities have consisted primarily of short-term
investments, capitalization of software development costs, and additions to
capital equipment, which combined represented $29,400 and $41,600 of cash used
for investing activities during the three months ended March 31, 2000 and 1999,
respectively.

Financing activities provided cash of $51,000 in the first three months
of 2000, compared with cash provided of $113,600 in the same period of 1999.
Cash provided from financing activities consisted of the exercise of employee
stock options and the employee stock purchase plan.

Our operating activities used cash of $2,075,500 in 1999, compared to
cash used by operating activities of $1,334,200 in the prior year. The increase
in cash used by operating activities was principally caused by increases in net
losses and accounts receivable and a decrease in accrued and other liabilities,
partially offset by an increase in trade accounts payable and depreciation and
amortization expense.

Our investing activities have consisted primarily of short-term
investments, capitalization of software development costs, and additions to
capital equipment. Investing activities provided cash of $668,800 in 1999,
compared with using cash of $684,000 in 1998. The increase is primarily due to
an increase in sales of short-term investments, partially offset by capitalized
software development costs and equipment acquisitions.

Financing activities provided cash of $552,300 in 1999, compared with
cash provided of $2,512,100 in the prior year. The decrease is primarily due to
cash provided by the 1998 public

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<PAGE> 22

offering of common stock, partially offset by the proceeds from the exercise of
employee stock options and the employee stock purchase plan.

We believe that our existing capital resources, including the private
placement, are adequate to maintain our current operations through January 2001.
However, in order to continue to fund and expand our operations and meet our
other obligations through 2001, we may be required to obtain additional
financing. Our need for additional financing depends on our future performance,
which, in turn, is subject to general economic conditions, and business and
other factors beyond our control. There can be no assurance that we would be
able to obtain such financing, or that any financing would result in a level of
net proceeds required.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 is effective for
all fiscal years beginning after June 15, 2000, as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133 - An Amendment of FASB Statement No.
133." SFAS No. 133 requires Enlighten to recognize all derivatives as either
assets or liabilities and measure those instruments at fair value. It further
provides criteria for derivative instruments to be designated as fair value,
cash flow and foreign currency hedges and establishes respective accounting
standards for reporting changes in the fair value of the derivative instruments.
Upon adoption, Enlighten will be required to adjust hedging instruments to fair
value in the balance sheet and recognize the offsetting gains or losses as
adjustments to be reported in net income or other comprehensive income, as
appropriate. Enlighten is evaluating its expected adoption date and currently
expects to comply with the requirements of SFAS No. 133 in fiscal year 2001.
Enlighten does not expect the adoption will be material to Enlighten's financial
position or results of operations since Enlighten does not participate in such
investments or activities.

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes certain of the SEC's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. In March 2000, the SEC issued SAB No. 101A that delayed the
implementation date of SAB No. 101. In June 2000, the SEC issued SAB No. 101B
that further delayed the implementation date of SAB No. 101. Enlighten must
adopt SAB No. 101 no later than in the fourth quarter of fiscal 2001. Enlighten
has not determined the impact that SAB No. 101 will have on its financial
statements and believes that such determination will not be meaningful until
closer to the date of initial adoption.

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<PAGE> 23

In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an interpretation of APB
Opinion No. 25." This Interpretation clarifies the application of Opinion 25 for
certain issues including: (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. In general, this Interpretation is effective July 1, 2000.
Management does not expect the adoption of Interpretation No. 44 to have a
material effect on Enlighten's consolidated financial positions or results of
operations.

BUSINESS

OVERVIEW

We provide software products that allow the user to automate
configuration and management tasks and monitor critical performance and
operational characteristics of computer servers and workstations in the
commercial environment. Our products allow the user to manage many computers
through a single console view of its computer infrastructure. Our product is
available for multiple operating systems within three distinct categories of
computer and software architecture, including Linux, Unix and Windows. Our
products enable users of computer servers and workstations that are networked or
internet based to manage their operations across various sites. Our core
product, the EnlightenDSM(TM), allows companies to manage their mission critical
computer servers and workstations by enabling system managers and administrators
to standardize the management of diverse computer operating systems, such as
Linux, Unix and Windows, and to monitor the on-going performance and
availability of many different systems running together.

The key elements of our strategy include enabling the integration of
Linux into the corporate environment, focusing on the mid-sized organization and
departments of larger companies, adding timely effective manageability to
internet based application environments and distributing our products through
third-party relationships such as software vendors, hardware vendors, Linux
distributors, systems management service providers, and Linux appliance
manufacturers.

We are a leading provider of systems management software on the Tandem
platform, providing a range of automated systems management products to over 400
companies in 30 countries. In October 1997 we sold our Tandem operations in
order to focus efforts on our UNIX/NT product suite.

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<PAGE> 24

principal executive offices are located at 999 Baker Way, Fifth Floor, San
Mateo, California 94404. Enlighten's telephone number is (650) 578-0700.

RECENT DEVELOPMENTS FOR ENLIGHTEN

In 2000 and 1999, we continued adding OEM partners and introduced
versions of our EnlightenDSM product for certain releases of the Linux open
source operating system. Linux is a free, open source alternative to proprietary
Unix operating systems. The Linux operating system is bundled with complimentary
products, packaged, sold and supported by many different companies. These
products are commonly known as Linux distributions. During 2000, we entered into
an agreement to include our system monitoring and reporting technology into the
SuSE Linux 6.4 for Intel distribution, entered into a product distribution
agreement with The LinuxStore and completed a customer licensing agreement with
Mindspring Enterprises, since merged into Earthlink. During 1999, we released
version 3.4 of our product which operates on the Linux operating systems
distributed by Red Hat and TurboLinux, entered into an agreement with Intel to
incorporate the Linux version of our technology into Intel's LANDesk(R) product
for its System Management Division, entered into an agreement with IBM for IBM
to integrate the EnlightenDSM product into IBM Suites for Solaris and AIX and
entered into an agreement with Sun to produce a seamless integration between a
unique product made up of certain administrative portions of the EnlightenDSM
product and Sun's Management Center products, (formerly Sun Enterprise SyMON).
With version 3.4, EnlightenDSM allowed event monitoring and system management
across each of the major Unix operating systems, Windows NT/98/95 and the
rapidly expanding Linux operating system.

Key Management Changes

Mr. Bill Bradley was promoted to Chief Executive Officer in December 1999
after joining Enlighten in August 1998 as Vice President of Business Development
and in September 1999 becoming President and Chief Operating Officer. Mr.
Bradley possesses over twenty years of sales, marketing and management
experience. His emphasis has been high-technology, particularly in the area of
new business development. From October 1997 through August 1998, Mr. Bradley
served as a consultant to Enlighten focusing on business development, strategic
planning and marketing. Mr. Bradley served as President of Design Technology,
Inc., a software design and consulting firm in Denver, Colorado, from July 1995
through October 1997. He started his career at IBM in the Data Processing
Division and is a graduate of Colorado College. Mr. Bradley replaced David D.
Parker as President and CEO, who held those positions since 1997. Mr. Parker, a
Director of Enlighten, was named Co-Chairman of the Board of Directors.
Additionally, Mr. Parker will continue to serve in various marketing roles with
Enlighten.

Mr. J. Brad Booze joined Enlighten in June 2000 as Chief Operating
Officer. From 1992 to 1999, Mr. Booze held various executive level positions
within Cendant Corporation including Director of Planning and Vice President of
Product Development for its RCI and WizCom Services subsidiaries. From 1987 to
1992, he worked as a consultant within Ernst & Young's Management Consulting
Services practice. Prior to Ernst & Young, he served a s systems analyst in
Procter & Gamble's Management Information Services Division. Mr. Booze holds a
BA in Computer Science and an MBA in Finance, both from Indiana University.

Mr. Stephen Giusti was promoted to Vice President, Finance and
Administration and Chief Financial Officer in December 1999 after joining
Enlighten in August 1999 as Controller. From January 1998 to August 1999, Mr.
Giusti served as Accounting and Financial Reporting

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Supervisor at Cadence Design Systems, Inc. From January 1991 to December 1997,
Mr. Giusti served various positions at the public accounting firm of Meredith,
Cardozo, and Lanz, LLP, most recently as Manager. Mr. Giusti is a Certified
Public Accountant in the State of California. Mr. Giusti replaced Michael A.
Morgan as Vice President and CFO, who held those positions since 1991. Mr.
Morgan remains a Director and Secretary of Enlighten.

OEM Bundling and Reseller Agreements

In March 2000, we entered into an agreement with SuSE in which SuSE will
bundle a single user version of our system monitoring and reporting technology
with each copy of SuSE's Linux 6.4 for Intel distribution. Under this agreement,
SuSE customers will be able to monitor critical system and operating conditions
once they have licensed the technology through our e-commerce website.

In February 2000, we entered into a product distribution agreement with
The LinuxStore, a wholly owned subsidiary of EBIZ Enterprises, to distribute our
EnlightenDSM 3.4 for Red Hat through The LinuxStore's e-commerce website.

In October 1999, we entered into an agreement with Intel Corporation to
integrate the Linux version of the EnlightenDSM product into Intel's LANDesk(R)
Server Manager product. The LANDesk(R) Server Manager can be fully integrated
into Intel's LANDesk(R) Management Suite, the industry-leading system management
tool for Microsoft and Novell networks. Under this agreement, we will receive a
certain percent of the license revenues Intel records from the sale of each copy
of LANDesk(R) Server Manager for Linux shipped by Intel or its resellers.

In August 1999, we entered into an agreement with TurboLinux, in which
TurboLinux will bundle a single user copy of the EnlightenDSM product with each
copy of TurboLinux's workstation, server and TurboCluster Linux distributions.
Under this agreement, we will receive a certain amount for each unit of
EnlightenDSM shipped with revenue-generating versions of TurboLinux's Linux
distribution, up to a certain percent of these revenues.

In January 1999, we entered into an agreement with International Business
Machines ("IBM") to integrate the EnlightenDSM product into IBM Suites for
Solaris and AIX. Under this agreement, we will receive a fixed percentage of the
total IBM Suites for Solaris and IBM Suites for AIX revenues.

Other OEM Developments

In January 1999, we entered into an agreement with Sun Microsystems to
produce a product that will seamlessly integrate into the Sun Management Center
(formerly Sun Enterprise SyMON). We sell this product directly to Sun's Sun
Management Center customers adding certain administrative tools from the
EnlightenDSM product to complement the existing event monitoring software that
is included in the Sun Management Center product. Under this agreement, we work
with Sun to cooperatively market our complementary administrative product to Sun
Management Center customers.

INDUSTRY BACKGROUND

The most dynamic changes in the industry continue to be in the market
consisting of networked computer systems comprised of servers and workstations.
These computer systems

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have traditionally been based upon Unix and Windows NT operating systems. In the
last year Linux has moved in to compete with the growth of these existing
systems. At the same time many companies are increasingly using these servers
and their associated workstations for more time sensitive or mission critical
applications that are integral to the organization's day-to-day operations. This
trend is being accelerated by the increased use of the Internet between
businesses, between businesses and customers and within companies to automate
and communicate more efficiently. In more and more cases today, the Internet,
and the web-based applications that companies build to exploit it, are the
business itself. Taken together, customers face the addition of Linux to the
already complex mix of many flavors of Unix and Windows and the increased need
for immediate, flexible and easy to use computing solutions that provide
business benefits quickly.

The Linux Operating System and the accelerated adoption of this platform
in customer IT departments are of high interest to Enlighten. Linux is an Open
Source operating system meaning that it is both free to download from the
Internet and open to modification and enhancement by users and other interested
parties. Linux is interesting because, according to International Data
Corporation, it has a growth rate twice that of traditional Unix and Windows
systems yet it lacks the sophisticated tools and utilities for management and
instrumentation that accompany traditional commercial products. Native Linux
management tools typically address the management of a single Linux machine one
at a time and do not address the management of Linux, Unix and Windows networks
that need to function collectively. Commercial adoption of Linux is being
promoted by companies such as Red Hat, SuSE, TurboLinux, VA Linux, Linuxcare,
Silicon Graphics, IBM and others.

The commercial providers of Linux fall into three primary categories. The
first is Linux Distributors. These companies take the freely available Linux
operating system and package it with enhancements that add commercial value and
make it easier to install and use. The second is Linux Service Providers. These
companies sell installation, customization, development and ongoing support
services that relate to and depend on Linux. The third is Linux Solution
Providers that combine the Linux operating system with other hardware or
software components to provide a turnkey solution. As an alternative to
traditional Unix operating systems, Linux systems have potential to provide
robust, reliable and scalable commercial computing performance at a much lower
price point.

Working in the same environment, Unix and Linux comprise the open systems
marketplace that offers several benefits to customers, such as common standards,
allowing for combinations of hardware and software from a variety of vendors.
Other benefits include lower price points than mainframes, cost effective
networking and a large pool of experienced technical personnel. However,
managing the operations of large client/server systems or massive rack mounted
servers in an Internet Service Provider ("ISP") or Application Service Provider
("ASP") environment can be difficult and labor intensive. As corporate customers
build mission critical applications and Internet based relationships on Linux,
Unix and Windows NT systems, they are demanding sophisticated yet quick and easy
to deploy management and administration tools. The diversity of systems and
applications has increased significantly in recent years. The introduction and
proliferation of the Linux operating system into existing Unix and Windows NT
environments, the increased scope of applications from core business
transactional software to decision support, groupware and Internet/Intranet
products, and the advancement of requirements of a centralized information
technology, or IT, department to manage systems in remote physical locations has
greatly expanded the systems management expertise required within IT

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organizations of these companies. Additionally, an inherent characteristic of
open systems is a lack of complete integration of the various vendors' products.
The development of standards such as Simple Network Management Protocol, or
SNMP, the leading protocol for network management and the leading standard for
information collection in multi-vendor computing environments, provide a
standard framework for systems management products in open environments, but
these standards must be integrated and managed. Many hardware manufacturers have
been slow to provide effective multi-vendor solutions to manage their own, let
alone their competitor's hardware, creating a market need for truly
heterogeneous system administration solutions.

While open systems have produced significant advantages, the management
of these widespread mixed vendor open systems presents a major challenge. Add to
that the increased demands to reduce time to deployment and time to market that
are imposed by the Internet and web based applications and businesses face the
prospect of managing increasingly complex networks of resources with less time
and skill to make them productive and keep them available. The responsibility
for managing these open systems has become the domain of technicians who
typically use limited system utilities and historically prefer "home grown"
routines and manual procedures.

The market needs of open systems customers are currently being addressed
either through manual procedures and routines of a company's internal IT
organization, or by one of three types of solutions: (i) point products, or
stand-alone products designed to address one particular function or requirement;
(ii) interfaced products, or a set of point products loosely coupled by a common
interface but not truly integrated; and (iii) enterprise systems management
frameworks, or large monolithic products designed to manage a customer's entire
computing infrastructure from mainframe systems, to Unix/NT/Linux systems, to
desktop PCs. Many products serving this market were developed by porting dated
mainframe technology and architecture to the Unix environment. These solutions
are typically expensive to acquire and implement due to the extensive efforts
associated with installing and configuring these products to a customer's
particular environment.

THE ENLIGHTEN SOFTWARE SOLUTION

Our products are suited for quick, effective installation and
implementation to provide a management infrastructure that matches today's needs
for immediate, flexible solutions in the Internet business environment. Our
mission is to provide the industry's most pervasive software solutions to help
corporate enterprises simply and inexpensively monitor, manage and administer
computers that are spread among many locations and consist of many different
operating systems. We intend to be a market leader for easy to use,
out-of-the-box, broad-based functionality for event monitoring and systems.
While numerous standards are being introduced and companies are vying to
position themselves in the open systems management market, we are positioning
our EnlightenDSM product suite as the one product that is vital and affordable
to open systems managers in mixed Linux, Unix and Windows environments.

Our systems management solution differentiates itself from other
companies' systems management approaches. We believe that systems managers
demand management tools that are simple to use, easy to install, scalable and
customizable, intuitive to learn and reasonably priced. The EnlightenDSM product
suite is targeted to the broadest segment of the open systems market: customers
with ten to 1,000 servers and workstations from a variety of the most popular
vendors. We believe the product's key strengths that address the needs of this
market niche are:

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- Ease of Use: EnlightenDSM is designed to be easily installed and
configured. The product is installed and managed from a graphical
window. Graphical templates drive the deployment and initial
configuration of the product and provide the interface for ongoing
monitoring and management once installed. This easy to use
interface standardizes complex, proprietary rules and procedures
between various server vendors. EnlightenDSM uses the native
protocols and storage schemes of each supported platform instead
of a proprietary database that cannot be accessed outside of the
product.

- Time to Deployment and ROI: EnlightenDSM installs and begins
operating in hours and can be fully configured with customized
event alarms and thresholds and integration with other third-party
products in weeks. Return On Investment associated with deployment
of systems management begins very early after installation, giving
customers immediate benefit. Customers benefit from greater
productivity of their professional IT staff because of
single-console, graphical management of the entire networked
environment. Customers also achieve higher availability of all
managed servers and workstations because EnlightenDSM monitors
critical operating parameters and will alert operators or take
automatic corrective action when necessary.

- Broad Functionality: EnlightenDSM addresses a broad range of
system monitoring and administration needs, alleviating the
customer from the need to make a series of investments in "point"
product solutions. EnlightenDSM provides a common interface for an
integrated product that addresses (i) user account configuration,
(ii) printer resource management, (iii) network services
configuration and management, (iv) security auditing, (v) disk and
file management, (vi) archive management, (vi) systems management
and (vii) event generation and monitoring.

- Price Performance: We believe our product is generally priced
below comparable point products in the market, as well as
enterprise framework products.

- Open Architecture: EnlightenDSM is based on an architecture which
is designed to be easily integrated with most existing point
solutions as well as solutions developed by customers internally.
The product is also designed to communicate "up" to the enterprise
framework products with event mechanisms or easy-to-write scripts
in the product's Programmable Event Processor or PEP. EnlightenDSM
uses Structured Query Language or SQL with any Open Database
Connectivity or ODBC databases and SNMP. The product can operate
as an integral part of an enterprise management environment in a
larger customer environment, or as the focal point of
administration and management in a smaller customer environment,
or in divisions/sites of a larger customer environment.

EnlightenDSM is scalable to large networks and supports the day-to-day
operational requirements of networked systems, such as adding users and nodes,
reconfiguring system processes, managing disk storage and managing
Internet/Intranet users. We believe our product suite is affordably priced,
scalable to match customer needs, designed to install quickly for most
configurations, and will integrate with other system console and network
administration products, such as those offered by Tivoli, CA Unicenter, Remedy
and many others.

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STRATEGY

The following discussion regarding our response to the systems management
market and our product and marketing strategy contains forward-looking
statements and actual results may vary substantially depending upon a variety of
factors, including, but not limited to, the development of emerging markets for
systems management and administration software, competition, technological
change, changing customer needs, evolving industry standards, any product
development delays and our ability to manage future growth and new distribution
channels, if any. These and other factors are more fully discussed under the
caption "Risk Factors" on page 7.

Our objective is to become a market leader in integrated open systems
event monitoring and systems administration. To achieve this objective, we have
adopted a business strategy incorporating the following elements:

The integration of Linux into the corporate environment

The management tools and utilities available for the Linux operating
system are designed for single machine management only and are typically
shareware or freeware that address only one aspect of systems management. In
addition, native Linux management tools address Linux platforms only and thus
are not beneficial to the existing Unix and Windows environments found at our
typical customers. Because our EnlightenDSM product is cross-platform and
addresses a broad range of system management and administration needs, IT
managers can easily integrate Linux servers and workstations into their
corporate environment and use the same tool for a single-console view of the
Linux, Unix and Windows systems in their enterprise. These tools enable users to
manage resources in a scalable way and enable the further commercialization of
Linux in the business environment.

Focus on the "under-served" market

We believe that most of the products in the enterprise systems management
market are currently focused toward Fortune 500 companies that possess the
resources necessary to implement a monolithic enterprise-wide systems management
solution. Mid-sized companies, and smaller sites or departments of larger
companies cannot effectively and efficiently implement these solutions.
Additionally, these customers require less intrusive, more cost-effective means
to manage their Linux, Unix and Windows systems. We believe there are very few
products to assist these organizations in managing and monitoring their open
systems networks. Our focus for our Linux, Unix and Windows products is this
under-served market, defined as sites with ten to 1,000 Linux, Unix or Windows
workstations or servers without a large mainframe presence. We feel our
low-cost, easy-to-use, non-intrusive workgroup administration and systems
monitoring solution is the most effective tool for these companies.

Penetrate the market primarily through third-party relationships

Our sales and marketing focus is primarily through indirect sales and
partner relationships. We have entered into OEM bundling or technology
agreements with Silicon Graphics, IBM, Sun, TurboLinux, SuSE and Intel. Our
product architecture and the design, price point and ease of use of the
EnlightenDSM product allow it to be effectively bundled with a hardware or
appliance manufacturer's operating system, integrated into a software vendor's
offering, or bundled with a Linux distribution. These relationships are allowing
us to penetrate

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different markets by proliferating our product and technology on thousands of
systems. We intend to continue to pursue additional partnering relationships and
intend to focus our sales and marketing efforts on the following:

- Systems Management and Other Software Application Vendors: We
believe our product suite is complementary with several software
vendors' applications. EnlightenDSM's architecture is designed to
allow integration with other third-party software products with
minimal engineering requirements. We intend to pursue
relationships with software companies providing systems
management, web monitoring and management, clustering, help desk
software and other "customer care" applications with which our
product could be integrated and sold as a combined solution.

- Linux Distributors: Linux distributors can use the same management
tools and appreciate the value that EnlightenDSM offers. All of
the distributors of Linux share the same base operating system
with its need for enhanced management and integration to the
existing Unix and Windows environment.

- Systems Management Service Providers: We believe that our product
suite can be effectively used by third party Linux and Unix
systems management consulting and outsourcing service providers to
remotely monitor and administer their customers IT infrastructure
without those customers having to use their valuable resources on
critical corrective issues or mundane administrative functions. We
intend to pursue relationships with service providers where our
product can be used to increase the quality and efficiency in
managing heterogeneous open systems environments.

- Linux Hardware and Appliance Manufacturers: We believe that Linux
hardware and appliance manufacturers lack effective systems
management solutions. A Linux appliance is a hardware device
bundled with the Linux operating system and dedicated to a
specific purpose. As the competition for this hardware increases
and price points drop, we feel these manufacturers will need to
add value through the ability to offer solutions to customers that
provide lower cost of ownership through ease of use,
administration and networked integration for their systems.

- Selected End-Users: Our primary focus is to market and distribute
our product through indirect channels. However, we maintain a
small direct sales force focused on select opportunities where we
can provide value through stronger, more dedicated customer
relationships.

PRODUCTS

We offer software products designed to automate the management and
administration of computer systems. Set forth below is a summary of our
principal product offerings.

In the fast-paced Linux/Unix/Windows environment, millions of new
computers are being deployed annually. All system administrators must learn to
manage networks in which users are added on a regular and continuous basis. The
tools these system administrators need to effectively perform their jobs should
be simple, easy to implement and intuitive; not complex, rules-based systems
management software. Our customers routinely use our products to add and

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manage users in mixed environments from a single, template driven interface to
all machines at the same time.

In December 1994, we acquired core technology for Unix systems
administration products and released two complementary Unix products in the
second quarter of 1995. The features of these two products were combined in
EnlightenDSM version 2.0, which was released in May 1996. This product was
further updated to version 3.2 in 1999 and, in October 1999, we released version
3.4 of EnlightenDSM for Linux distributed by TurboLinux and Red Hat.

EnlightenDSM is a standards-based, multi-function management system
covering the following disciplines: user administration, file system management,
Internet/Intranet management, printer management, security checking, archiving,
subsystem monitoring, event generation/tracking and other system functions.
EnlightenDSM runs on a variety of open systems computer platforms, including Red
Hat Linux, TurboLinux Linux, HP/UX, SUN/Solaris, IBM/AIX, Intel and AMD X86
families, Silicon Graphics/IRIX, Compaq True64 and Microsoft Windows
2000/NT/98/95. Cross-platform functionality enables the management of diverse
and distributed systems from a centralized console.

EnlightenDSM automatically collects and saves status, configuration,
performance and capacity information and makes it available for monitoring by
most commercial SNMP managers. The product monitors system resources including
peripheral devices, processes, resources and services. Thresholds can be set to
generate alarms that warn users of an error or problem about to occur. For
example, in some cases our customers use the product to monitor the status of
business critical Oracle database servers. The EnlightenDSM product can be
programmed to automatically take corrective action and/or provide immediate
notification to operators before critical events escalate to cause significant
problems. EnlightenDSM monitors and reports changes in system inventory and can
track the addition or removal of memory, disk drives, tape drives and other
devices, thereby reducing costly downtime and improving system performance.

SALES AND DISTRIBUTION

Our revenues are derived from three sources: product license fees,
product maintenance fees and consulting services.

Product license fees

During 1999, we marketed our products through a direct field sales force
and third-party distributors. Our products were marketed throughout North
America, Europe and parts of the Pacific Rim by our product sales organization
located at our headquarters in San Mateo, California as well as through our
regional field sales office in Denver, Colorado and through independent
distributors. Additionally, in November 1999, we launched our Internet
e-commerce site, which allows customers to purchase and download certain
EnlightenDSM products.

Product license fees in 1999 consisted primarily of revenue from the
granting of perpetual licenses and from the licensing of product upgrades
necessary when customers upgrade their system hardware. Revenue from end-user
licenses is payable in full at the commencement of the license period and is
recognized after all of the following events have occurred: (i) a product
evaluation has been shipped to the customer; (ii) the customer elects to
purchase the

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software following an evaluation period; (iii) the customer signs the related
contract; (iv) the fee is fixed and determinable; and (v) the collection of
resulting receivables is probable. Product license revenues that are contingent
upon sale to an end-user by OEM's are recognized upon receipt of quarterly
reports of shipments from OEMs. Product license fees represented 55% and 64% of
total revenue in 1999 and 1998, respectively.

We continue to build our sales, marketing and customer support
organizations with a focus on delivery of our products to OEM partners,
resellers, system integrators and select end-users. An essential element of our
sales and marketing strategy is indirect distribution channels, such as OEMs,
ISVs and VARs, as well as other systems management and application software
vendors whose products are complementary with ours.

In January 1998, we established our first OEM relationship with Silicon
Graphics to bundle a subset of features of the EnlightenDSM product with each
server and workstation that Silicon Graphics ships. Since that first agreement,
we have entered into agreements with four additional OEM's. In December 1998, we
entered into an agreement with Sun to produce a product that will seamlessly
integrate into the Sun Management Center product (formerly Sun Enterprise
SyMON). In January 1999, we agreed with IBM to integrate the EnlightenDSM
product into IBM Suites for Solaris and AIX. In August 1999, we entered into an
agreement with TurboLinux in which TurboLinux will bundle a single user copy of
the EnlightenDSM product with each copy of TurboLinux's workstation, server and
TurboCluster Linux distributions. In October 1999, we entered into an agreement
with Intel to integrate a subset of the Linux version of the EnlightenDSM
product into Intel's LANDesk(R) Server Manager product for Linux shipped by
Intel or its resellers.

We are currently investing, and intend to continue to invest, significant
resources to develop the OEM, ISV and VAR channels. Our efforts to expand our
third-party channels are intended to penetrate the market and achieve widespread
commercial acceptance of our products as a workgroup administration standard.
There can be no assurance that we will be successful in our efforts to increase
the revenues represented by this channel. We will be dependent upon these
third-party relationships for a significant portion of our revenue for the
foreseeable future. There is no assurance that our third-party distributors will
effectively distribute and exploit our products. The inability to recruit
additional third parties to distribute, market and support our products could
have a material adverse affect on our business, operating results and financial
condition. A more detailed discussion of these and other risks associated with
our business is set forth under the caption "Risk Factors" on page 7 of this
prospectus.

Product maintenance fees

All customers subscribing to our maintenance service agreements are
entitled to receive (i) technical support and consultation, primarily over the
telephone, and (ii) subsequent product enhancement and maintenance releases we
periodically produce. Product maintenance support is provided directly to
customers as well as through our authorized distributors. As part of the
business model to market through indirect channels, we provide training and
education for our third-party distributors to insure technical proficiency with
our products and technology.

Product maintenance fees consist of all maintenance revenue on new and
existing installed software products. We generally charge end users, on an
annual basis, for telephone support, product updates and product enhancements.
OEM, partner and distributor maintenance is negotiated separately. Product
maintenance revenue is recognized ratably over the maintenance contract period
(typically one year). Product maintenance fees accounted for 20% and 17% of
total revenue in 1999 and 1998, respectively.

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Consulting services

Revenue from consulting services consists of fees charged for contract
services, product training and other service activities. This division of our
technical support organization provides fee-based consulting services to our
customers throughout the United States. Consulting service revenue is recognized
when services are performed for time and material contracts and on a percentage
of completion basis for fixed price contracts. Consulting services represented
17% and 7% of total revenue in 1999 and 1998, respectively.

PRODUCT DEVELOPMENT

The computer software industry is characterized by rapid technological
change and is highly competitive in regard to timely product innovation.
Accordingly, we believe that our future success depends on our ability to
enhance current products that meet a wide range of customer needs and to develop
new products rapidly to attract new customers and provide additional solutions
to existing customers. In particular, we believe we must continue to respond
quickly to users' needs for broad functionality and open systems support.

We address the needs of current users through regularly scheduled
maintenance and enhancement releases. At the same time, we seek to acquire and
develop new products to meet the needs of a broader group of users.

We provide an integrated workgroup administration and systems management
product for open systems currently running on four different Linux
distributions, six different Unix-based systems and Microsoft Windows
2000/NT/98/95. The EnlightenDSM product consists of the following features: user
administration, file system management, Internet/Intranet management, printer
management, security checking, archiving, subsystem monitoring and event
generation/tracking.

Our strategy is to continue to enhance EnlightenDSM's functionality
through new releases and new feature development to meet the continually
advancing systems administration and management requirements of our customers,
including:

- increased scalability and performance;
- increased integration with other systems management point
solutions as well as other enterprise systems management
frameworks;
- increased levels of automation and ease of use to further reduce
administrative costs and overhead;
- increased range of supported platforms; and
- continued customization for our current and new third-party
distributors.

There can be no assurance that we will be successful in developing and
marketing new features or products that respond to technological change or
evolving industry standards, that we will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of any
new features or products, or that our new features or products will adequately
meet the requirements of the marketplace and achieve market acceptance.
Additionally, our product development staff will be under increased pressure as
our products are deployed on a significantly greater number and variety of
machines by virtue of the Silicon Graphics, IBM, TurboLinux and Intel bundling
relationships (or other additional third-party relationships, if any). Due to
the complexity of the product and the large number of network

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configurations in the market, it is extremely difficult to fully test
EnlightenDSM in all possible environments and, although we employ a continual
effort to assure a quality product, there is no assurance that errors will not
be found in the released commercial product resulting in delays of new feature
development. If we are unable, due to lack of resources or for technological or
other reasons, to develop and introduce new features and products in a timely
manner in response to changing market conditions or customer requirements, our
business, operating results and financial condition will be materially adversely
affected. See "Risk Factors" on page 35 of this memorandum.

As of February 29, 2000, we had fifteen (15) professional and technical
employees engaged in research and development. During the fiscal years ended
December 31, 1999 and 1998, our research and development expenditures were
$1,764,300 and $1,692,000, respectively.

COMPETITION

The systems management market in which we compete is intensely
competitive, highly fragmented and rapidly changing. In order to compete, we
must enhance our current products, enhance the interoperability of our products
with other products, management frameworks and operating systems through a truly
open architecture, develop new products in a timely fashion and develop key
strategic partnerships with other hardware and software vendors. Many of our
competitors in the open systems markets are larger and have greater financial,
technical, marketing and other resources than Enlighten. Because there are
relatively low barriers to entry in the software market, we expect additional
competition from other established and emerging companies. Increased competition
is likely to result in price reductions, reduced gross margins and increased
difficulty in establishing market share, any of which could have a material
adverse affect on our business, operating results and financial condition

Our principal competition in the market for open systems workgroup
administration and system management products is from enterprise systems
management vendors such as Tivoli, a wholly-owned subsidiary of IBM, and
Computer Associates, as well as point products from BMC Software, Platinum
Technologies, Veritas Software and Legato Systems. We also face competition from
internal development groups of prospective end-user customers and OEMs,
including operating system vendors, many of which have substantial internal
programming resources and are capable of developing specific operating system
level products for their own needs. In addition, certain operating systems
vendors have already incorporated systems management capabilities into their
operating system, including HP, Sun, IBM and Microsoft, which reduces such
vendors' need for our products. Additional hardware manufacturers may elect to
offer similar competitive products in the future. Given our size and the
advantages our competition enjoys with respect to size and resources, there can
be no assurances we can effectively compete in this market.

PRODUCT PROTECTION

We rely on a combination of copyright, trade secret and trademark laws
and software security measures, along with employee and third-party
nondisclosure agreements, to protect our intellectual property rights, products
and technology. Our products are typically licensed on a "right to use" basis
pursuant to perpetual licenses that restrict the use of the products to the
customer's internal purposes. We distribute our software under license
agreements that are signed by our end-users. Despite our precautions taken to
protect our software, unauthorized parties may attempt to reverse engineer,
copy, or obtain and use information we regard as

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proprietary. Policing unauthorized use of our products is difficult and software
piracy is expected to be a persistent problem. Additionally, the laws of some
foreign countries do not protect our proprietary rights to the same extent as do
the laws of the United States.

We have entered into source code escrow agreements with some of our
customers that require the release of source code to the customer in the event
there is a bankruptcy proceeding by or against us, we cease to do business, or
we are unable to fulfill our contractual obligations with respect to support. In
the event of a release of the source code, the customer is required to maintain
their confidentiality and, in general, to use the source code solely for the
purpose of maintaining the software's usability. The provision of source code
may increase the likelihood of misappropriation or other misuse of our
intellectual property.

We are not aware that our products, trademarks, or other proprietary
rights infringe the proprietary rights of third parties. However, from time to
time, we receive notices from third parties asserting that we have infringed
their patents or other intellectual property rights. In addition, we may
initiate claims or litigation against third parties for infringement of our
proprietary rights or to establish the validity of our proprietary rights. Any
such claims could be time-consuming, result in costly litigation, cause product
shipment delays or lead us to enter into royalty or licensing agreements rather
than disputing the merits of such claims. As the number of software products in
the industry increases and the functionality of such products further overlap,
we believe that software developers may become increasingly subject to
infringement claims. Any such claims, with or without merit, can be time
consuming and expensive to defend. An adverse outcome in litigation or similar
proceedings could subject us to significant liabilities to third parties,
require expenditure of significant resources to develop non-infringing
technology, require disputed rights to be licensed from others, or require us to
cease the marketing or use of certain products, any of which could have a
material adverse effect on our business, operating results and financial
condition.

EMPLOYEES

As of February 29, 2000, we employed 32 people. Of these employees, 15
were engaged in product development, 13 in sales, marketing and customer support
and 4 in finance and other administrative departments. We believe our future
success depends in large part upon the continued employment of our key technical
and senior management personnel and our ability to attract and retain highly
qualified technical and managerial personnel. Competition for such personnel is
intense, as certain of these personnel have significant prior industry
experience and are in great demand. There can be no assurance that we can retain
our key technical and managerial employees or that we can attract, assimilate or
retain other highly qualified technical and managerial personnel in the future.
None of our employees are subject to any collective bargaining agreements. Each
of our employees have executed an agreement not to disclose trade secrets or
other confidential information. We believe our employee relations are good.

PROPERTIES

We lease approximately 17,000 square feet of office space in San Mateo,
California under a lease which expires in March 2001. We also lease a sales and
support office in Denver, Colorado under a lease which expires in August 2000.
We believe that our current facilities are adequate for our needs through 2000
and for the foreseeable future. Should additional space be needed, we believe
space will be available to accommodate the expansion of our operations on
commercially reasonable terms.

35
<PAGE> 36

SELLING SHAREHOLDERS

The table below sets forth the name of each selling shareholder, the
number of shares of common stock which it owns or has the right to acquire as of
June 30, 2000, the number of shares of common stock subject to sale under this
prospectus, and the number of shares of common stock it would own assuming the
sale of all shares of common stock covered by this prospectus. Except as set
forth below, none of the selling shareholders has held a position or office or
had a material relationship with us during the past three years.

This table is based upon information supplied to us by the selling
shareholders. Except as otherwise indicated, as of June 30, 2000, we believe
that each person named in the table has sole voting and investment power with
respect to all of the shares of our common stock listed as beneficially owned by
it. The table has been prepared on the assumption that all shares offered by
this Prospectus will be sold.

<TABLE>
<CAPTION>
Shares Shares
Shares Beneficially Offered by Beneficially
Owned Prior to the this Owned After the
Selling Shareholders Offering Prospectus Offering
---------------------------- ------------------- ---------- ---------------
<S> <C> <C> <C>
Ben Joseph Partners 46,000 (1) 46,000 (1) 0
Clarion Capital Contribution 114,942 (2) 114,942 (2) 0
Clarion Offshore Fund, Ltd 36,782 (3) 36,782 (3) 0
Clarion Partners, LP 78,160 (4) 78,160 (4) 0
Columbus Capital Partners, LP 230,000 (5) 230,000 (5) 0
EDJ Limited 46,000 (6) 46,000 (6) 0
Gruber-McBain International 48,276 (7) 48,276 (7) 0
Jon D. Gruber 34,484 (8) 34,484 (8) 0
Lagunitas Partners, LP 147,126 (9) 147,126 (9) 0
Land Meets the Sea, LLC 400,000 (10) 400,000 (10) 0
Porter Partners, LP 138,000 (11) 138,000 (11) 0
Proximity Fund, LP 100,000 (12) 100,000 (12) 0
Samuel D. Skinner 47,794 (13) 47,794 (13) 0
Moors & Cabot, Inc. 71,590 (14) 71,590 (14) 0
Edgar Bierdeman 35,794 (15) 35,794 (15) 0
</TABLE>

36
<PAGE> 37

(1) Includes 23,000 shares currently outstanding and up to 23,000 shares
issuable upon exercise of warrants currently held.
(2) Includes 57,471 shares currently outstanding and up to 57,471 shares
issuable upon exercise of warrants currently held.
(3) Includes 18,391 shares currently outstanding and up to 18,391 shares
issuable upon exercise of warrants currently held.
(4) Includes 39,080 shares currently outstanding and up to 39,080 shares
issuable upon exercise of warrants currently held.
(5) Includes 115,000 shares currently outstanding and up to 115,000 shares
issuable upon exercise of warrants currently held.
(6) Includes 23,000 shares currently outstanding and up to 23,000 shares
issuable upon exercise of warrants currently held.
(7) Includes 24,138 shares currently outstanding and up to 24,138 shares
issuable upon exercise of warrants currently held.
(8) Includes 17,242 shares currently outstanding and up to 17,242 shares
issuable upon exercise of warrants currently held.
(9) Includes 73,563 shares currently outstanding and up to 73,563 shares
issuable upon exercise of warrants currently held.
(10) Includes 200,000 shares currently outstanding and up to 200,000 shares
issuable upon exercise of warrants currently held.
(11) Includes 69,000 shares currently outstanding and up to 69,000 shares
issuable upon exercise of warrants currently held.
(12) Includes 50,000 shares currently outstanding and up to 50,000 shares
issuable upon exercise of warrants currently held.
(13) Includes 6,000 shares currently outstanding and up to 41,794 shares
issuable upon exercise of warrants currently held.
(14) Includes up to 71,590 shares issuable upon exercise of warrants currently
held.
(15) Includes up to 35,794 shares issuable upon exercise of warrants currently
held.

PLAN OF DISTRIBUTION

The 1,574,948 shares of our common stock offered by this prospectus
consist of shares issued or issuable to accredited investors in connection with
a privately placed equity financing on April 28, 2000, as follows:

- 715,885 shares of common stock issued to the selling shareholders;
and

- up to 859,063 shares of common stock issuable to the selling
shareholders upon exercise of warrants, with an exercise price of
$4.65.

The warrants are exercisable until April 28, 2005.

We have been advised by the selling shareholders that they, or their
respective pledgees, donees, transferees or successors in interest, intend to
sell all or a portion of the shares from time to time on the Nasdaq SmallCap
Market (or other exchange on which the common shares are trading) at prices and
on terms prevailing at the time of sale or at prices related to the then current
market price, or in negotiated transactions. The shares may be sold by the
selling shareholders by one or more of the following methods:

- block trades in which the broker or dealer will attempt to sell
the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;

- purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;

37
<PAGE> 38

- an exchange distribution in accordance with the rules of such
exchange;

- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;

- privately negotiated transactions;

- short sales; or

- a combination of any of the above methods.

There is no assurance that any of the selling shareholders and/or their
respective distributees, donees or transferees will sell any or all of the
shares held by them. In addition, some of the selling shareholders are funds
which may in the future distribute their shares to their partners. Those shares
may later be sold by those partners or their donees or transferees.

Brokers and dealers engaged by the selling shareholders may arrange for
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from the selling shareholders. If any broker-dealer
acts as agent for a purchaser of shares, the broker-dealer may receive
commissions or discounts from the purchaser. Commissions or discounts will be
negotiated at the time of the transaction and are not expected to exceed
customary amounts.

Broker-dealers may agree with the selling shareholders to sell a
specified number of shares at a stipulated price per share. To the extent the
broker-dealer is unable to sell the specified number, it may purchase as
principal any unsold shares at the price required to fulfill the broker-dealer's
commitment to the selling shareholder. Broker-dealers who acquire shares as
principal may then resell such shares from time to time in transactions, which
may involve block transactions as described above, in the over-the-counter
market or otherwise. Resales by broker-dealers may be at prices and on terms
then prevailing at the time of sale, at prices then related to the then-current
market price or in negotiated transactions. In connection with resales,
broker-dealers may pay to or receive from purchasers of the shares commissions
as described above. The selling shareholders may also sell their shares in
accordance with Rule 144 under the Securities Act, rather than pursuant to this
prospectus.

The selling shareholders and any broker-dealers or agents that
participate with the selling shareholders in sales of the shares may be deemed
to be "underwriters" within the meaning of the Securities Act. If so, any
commissions received by such broker-dealers or agents and any profit on the
resale of shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act.

Under our agreement with the selling shareholders, we agreed to file a
registration statement covering the 715,885 currently existing shares issued in
our April 28, 2000 financing and the up to 859,063 additional shares issuable
upon exercise of warrants issued in connection with the financing within 90 days
following the closing of the financing and to use our best efforts to keep a
registration statement covering these shares effective for up to two years
following the closing.

We will pay all expenses related to the registration of the shares
covered by this prospectus, including:

38
<PAGE> 39

- filing, registration and qualification fees;

- printers' fees;

- accounting fees; and

- the fees and disbursements of our outside counsel.

We will not pay underwriters' or brokers' discounts and commissions or
the fees or disbursements of counsel for any selling shareholder.

The selling shareholders are not restricted as to the price or prices at
which they may resell the shares. Any resales may have an adverse effect on the
market price of the common stock. In addition, it is possible that a significant
number of shares could be sold at the same time, which also may have an adverse
effect on the market price of the common stock.

We have agreed to indemnify the selling shareholders against specific
civil liabilities, including liabilities under the Securities Act.

LEGAL PROCEEDINGS

We are subject to certain legal actions that have arisen in the ordinary
course of business. We believe that the ultimate outcome of these actions will
not have a material affect on our consolidated financial statements or results
of operations, although there can be no assurance as to the outcome of such
litigation.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following sets forth the executive officers and directors of
Enlighten as of June 30, 2000:

<TABLE>
<CAPTION>
Director
Name Age Position with Enlighten Since
---- ----------------------- -----
<S> <C> <C> <C>
Bill Bradley 44 President and Chief Executive Officer --
J. Brad Booze 40 Chief Operating Officer --
Stephen Giusti 33 Vice President, Finance and Administration and --
Chief Financial Officer
Michael Seashols 54 Co-Chairman of the Board of Directors 1997
David D. Parker 44 Co-Chairman of the Board of Directors 1997
Peter J. McDonald 52 Director 1986
Peter J. Sprague 61 Director 1994
Michael A. Morgan 37 Director 1991
</TABLE>

Mr. Bradley was promoted to Chief Executive Officer in December 1999
after joining Enlighten in August 1998 as Vice President of Business Development
and in September 1999 becoming President and Chief Operating Officer. From
October 1997 through August 1998, Mr. Bradley served as a consultant to
Enlighten focusing on business development, strategic planning, and marketing.
Mr. Bradley served as President of Design Technology, Inc. a software
development and consulting firm in Denver, CO, from July 1995 through October
1997. He started his career at IBM in the Data Processing Division and is a
graduate of Colorado College.

39
<PAGE> 40

Mr. Booze joined Enlighten as Chief Operating Officer in June 2000. From
1992 to 1999, Mr. Booze held various executive level positions within Cendant
Corporation including Director of Planning and Vice President of Product
Development for its RCI and WizCom Services subsidiaries. From 1987 to 1992, he
worked as a consultant within Ernst & Young's Management Consulting Services
practice. Prior to Ernst & Young, he served a s systems analyst in Procter &
Gamble's Management Information Services Division. Mr. Booze holds a BA in
Computer Science and an MBA in Finance, both from Indiana University.

Mr. Giusti was promoted to Vice President, Finance and Administration and
Chief Financial Officer in December 1999 after joining Enlighten in August 1999
as Controller. From January 1998 to August 1999, Mr. Giusti served as Accounting
and Financial Reporting Supervisor at Cadence Design Systems, Inc. From January
1991 to December 1997, Mr. Giusti served various positions at the public
accounting firm of Meredith, Cardozo, and Lanz, LLP most recently as Manager.
Mr. Giusti is a Certified Public Accountant in the State of California.

Mr. Seashols joined Enlighten in July 1997 as Chairman of the Board of
Directors and Director. From 1994 through 1997, Mr. Seashols served as Chief
Executive Officer of Usoft, Inc., a wholly-owned software subsidiary of Unysis,
Inc. that provides development and maintenance tools for client/server and
Internet based computer applications. From 1988 through 1993, he served as Chief
Executive Officer and was a founder of Versant Object Technology Corporation, a
provider of enterprise component management software systems for commercial
applications in distributed computing environments. Previously, Mr. Seashols was
a founder and the original Chief Executive Officer of Documentum, Inc., as well
as vice president of sales for several software companies, including Oracle
Corporation and Ingres. He also currently serves as an advisor to several
software companies.

Mr. Parker was elected to the Board of Directors in March 1999 and in
December 1999, became Co-Chairman of the Board of Directors. Mr. Parker served
as President and Chief Executive Officer from August 1997 through December 1999.
From November 1996 through August 1997, Mr. Parker served as President of Web
Logic, a software company developing enterprise Java server components. From
July 1993 through October 1996, Mr. Parker served in various sales management
positions, most recently as Vice President, Indirect Sales of Quintus
Corporation, which markets and develops software and services for use in call
center operations. Mr. Parker has over twenty years of experience in the
software industry, including senior sales and management positions at Versant
Object Technology Corporation and IBM.

Mr. Morgan has served as a Director since October 1991. Mr. Morgan is
currently Vice President, Finance and Administration and Chief Financial Officer
of Talarian, Inc. From October 1991 through July 1999, Mr. Morgan served as Vice
President, Finance and Administration, Chief Financial Officer, and Secretary of
Enlighten after joining in May 1991 as Controller.

Mr. McDonald founded Enlighten in June 1986 and served as Chairman of the
Board, Director, President, and Chief Executive Officer from that date through
July 1997. Since July 1997, Mr. McDonald has been employed as a strategic
advisor to Enlighten.

Mr. Sprague has served as a Director of Enlighten since February 1994.
From 1965 through 1995, Mr. Sprague served as Chairman of the Board of National
Semiconductor Corporation, a leading manufacturer of semiconductor components
and integrated circuits. In

40
<PAGE> 41

May 1988, Mr. Sprague founded Wave Systems Corp., an electronic
information company, for which he currently serves as Chairman.

BOARD OF DIRECTORS

All directors hold office until the next annual meeting of shareholders
and until their successors have been duly elected and qualified. There are no
family relationships among the directors or executive officers of Enlighten.
Officers are elected by and serve at the discretion of the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

Our Board of Directors has established an audit committee and
compensation committee. Both committees are currently composed entirely of
directors who are not officers or employees of Enlighten.

The functions of the Audit Committee include recommending to the Board
the retention of independent public accountants, reviewing and approving the
planned scope of the annual audit, proposed fee arrangements, and the results of
the annual audit, reviewing the adequacy of accounting and financial controls,
and reviewing the independence of Enlighten's independent public accountants.
The members of our Audit Committee are Mr. Seashols and Mr. Sprague.

The Compensation Committee reviews and determines compensation criteria
for executive officers, including the Chief Executive Officer, and grants all
stock options. The members of our Compensation Committee are Mr. Seashols and
Mr. Sprague. For additional information about the Compensation Committee, see
"EXECUTIVE COMPENSATION AND OTHER MATTERS," included herein.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to establishing the compensation committee, the board of directors
as a whole performed the functions delegated to the compensation committee. No
member of the board of directors or the compensation committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.

COMPENSATION OF DIRECTORS

Directors who are employees of Enlighten do not receive any compensation
for their services as directors. Directors who are not employees of Enlighten
receive between $500 and $750 for attendance at each Board Meeting.
Additionally, Enlighten's 1992 Stock Option Plan (the "Option Plan") provides
that the Board has no authority, discretion, or power to grant options to any
independent directors. Instead, each nonemployee director is automatically
granted a nonqualified stock option to purchase 5,000 shares of common stock
upon initial appointment or election and, for each year that a nonemployee
director continues to serve on the Board, options to purchase 5,000 shares of
common stock on the anniversary date of such initial appointment or election.
Such options vest quarterly over a three-year period. Options to purchase 5,000
shares at an exercise price of $3.23 per share were granted to Mr. Sprague in
February 1999 and options to purchase 5,000 shares at an exercise price of $3.13
per share were granted to Mr. Morgan in July 1999.

<PAGE> 42
EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation
paid during the years ended December 31, 1999, 1998 and 1997 of the persons who
served as Chief Executive Officer during 1999 and the other most highly
compensated executive officers of Enlighten in 1999 and two former executive
officers (including the former Chief Executive Officer) who would have been
among the most highly compensated executive officers in 1999 but who were not
executive officers at December 31, 1999 (the "Named Executive Officers"):

<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation ------------
------------------------------------- Securities
Other Annual Underlying
Year Salary Bonus Compensation Options
---- -------- -------- ------------ ------------
(shares)
<S> <C> <C> <C> <C> <C>
Bill Bradley, President and 1999 $143,900 $ 25,000 $ -- 230,000
Chief Executive Officer(1) 1998 $ 35,700 $ 7,500 $ 48,700 60,000
1997 $ -- $ -- $ 24,400 10,000

David D. Parker, Former President 1999 $180,000 $ 30,000 $ -- 100,000
and Chief Executive Officer(2) 1998 $180,000 $ 45,000 $ -- --
1997 $ 40,900 $ 20,000 $ -- 200,000

Michael A. Morgan, Former Vice 1999 $ 81,400 $ 10,000 $ -- 50,000
President, Finance and 1998 $120,000 $ 28,700 $ -- --
Administration and Chief 1997 $110,000 $ 23,800 $ -- 50,352(4)
Financial Officer(3)
</TABLE>

----------

(1) Mr. Bradley was named President and Chief Operating Officer in September
1999 and Chief Executive Officer in December 1999.

(2) Mr. Parker resigned as an executive officer of Enlighten in December
1999.

(3) Mr. Morgan resigned as an executive officer of Enlighten in July 1999.

(4) Includes options to purchase an aggregate of 15,875 shares granted on
June 19, 1997 replacing an option to purchase 3,375 shares granted on
September 15, 1993, an option to purchase 5,000 shares granted on July
15, 1994, and an option to purchase 7,500 shares granted in August 30,
1995. Options to purchase 15,875 shares were canceled in connection with
a repricing in 1997.

OPTION GRANTS IN 1999

The following table provides the specified information concerning grants
of options to purchase Enlighten's common stock made during 1999 to the Named
Executive Officers.

<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Percent
of Total
Number of Options Potential Realizable Value at
Securities Granted to Exercise Assumed Annual Rates of Stock Price
Underlying Employees or Base Appreciation for Option Term
Options In Fiscal Price Expiration -----------------------------------
Name Granted Year Per Share Date 5% 10%
---- ---------- ---------- --------- ---------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Bill Bradley............... 30,000 4% $2.8100 03/04/09 $ 53,000 $ 134,400
100,000 14% $3.1875 09/20/09 $ 200,500 $ 508,000
100,000 14% $3.5000 11/22/09 $ 220,100 $ 557,800
David D. Parker............ 100,000 14% $2.8100 03/04/09 $ 176,700 $ 447,800
Michael A. Morgan.......... 30,000 4% $2.8100 12/31/00 $ 8,600 $ 17,700
20,000 3% $3.6880 07/30/09 $ 57,500 $ 128,700
</TABLE>

<PAGE> 43
AGGREGATE OPTION EXERCISES AND 1999 YEAR-END VALUES

The following table provides the specified information concerning
exercises of options to purchase Enlighten's common stock in 1999 and
unexercised options held as of December 31, 1999 by the Named Executive
Officers.

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised Options In-the-Money Options
Shares at December 31, 1999 (shares)(1) at December 31, 1999(2)
Acquired on Value ------------------------------- -----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Bill Bradley ......... -- $ -- 40,713 259,287 $ 106,375 $ 577,875
David D. Parker ...... 9,000 $ 48,938 136,234 154,766 $ 477,895 $ 484,895
Michael A. Morgan .... 100,000 $ 436,555 35,102 18,334 $ 122,026 $ 33,221
</TABLE>

----------

(1) Enlighten stock options generally vest one-seventh six months from the
date of grant and 1/42nd per month thereafter for each full month of the
optionee's continuous employment by Enlighten. Options are exercisable
only to the extent vested. Directors stock options generally vest 1/12th
each quarter.

(2) The value of the unexercised in-the-money options is based on the
closing price of Enlighten's common stock ($5.50 per share as reported
on the Nasdaq Stock Market) on December 31, 1999, and is net of the
exercise price of such options.

BENEFIT PLANS

1992 Stock Option Plan

The Board of Directors and Enlighten's sole shareholder initially
approved the adoption of the 1992 Stock Option Plan (the "Option Plan") on
October 30, 1992 and September 10, 1993, respectively. On February 14, 1994 and
February 15, 1994, respectively, the Board of Directors and the sole shareholder
approved amendments to the Option Plan to provide for the automatic grant of
options to non-employee directors of Enlighten. On May 15, 1995, Enlighten's
shareholders approved an amendment to the Option Plan to increase the aggregate
maximum number of shares of Enlighten's common stock issuable under the Option
Plan by 590,000 shares, from 410,000 shares to 1,000,000 shares. On May 20,
1997, Enlighten's shareholders approved an amendment to the Option Plan to
increase the aggregate maximum number of shares of Enlighten's common stock
issuable under the Option Plan by 500,000 shares, from 1,000,000 shares to
1,500,000 shares, and to increase the per person share limitation (the "Employee
Option Limit") from 25,000 to 150,000 shares per fiscal year. On May 20, 1999,
Enlighten's shareholders approved an amendment to the Option Plan to increase
the aggregate maximum number of shares of Enlighten's common stock issuable
under the Option Plan by 500,000 shares, from 1,500,000 shares to 2,000,000
shares. The Option Plan provides for the grant to employees of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and for the grant to employees, non-employee directors,
and consultants of Enlighten of nonstatutory stock options. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of Enlighten,
appropriate adjustments will be made to the shares subject to the Option Plan,
to the Employee Option Limit, and to outstanding options. To the extent any
outstanding option under the Option Plan expires or terminates prior to exercise
in full, the shares for which the option has not been exercised are returned to
the Option Plan and become available for future grant. As of December 31, 1999,
575,144 options to purchase shares of

<PAGE> 44
common stock (net of cancellations) had been exercised, options to purchase
1,271,489 shares of common stock were outstanding under the Option Plan at a
weighted average exercise price of $2.97 per share, and 497,185 shares of common
stock remained available for future grants.

The Option Plan may be administered by the Board of Directors or a
committee of the Board (collectively the "Administrator"), so that options
granted thereunder shall qualify as transactions exempt from Section 16(b) of
the Securities Exchange Act of 1934, as amended, pursuant to Rule 16b-3
promulgated thereunder. Subject to the terms of the Option Plan, the
Administrator has the power to determine the terms of the options granted,
including the persons to whom options are to be granted, the number of shares to
be covered by each option, whether an option is to be an incentive stock option
or a nonstatutory stock option, the terms of vesting and exercisability of each
option, the type of consideration to be paid to Enlighten upon exercise of an
option, the duration of each option, and all other terms and conditions of the
options. The Administrator will interpret the Option Plan and options granted
under the Option Plan, and all determinations of the Administrator will be final
and binding on all persons having an interest in the Option Plan or any option.
Options granted under the Option Plan are not transferable by the holders
thereof other than by will or the laws of descent and distribution and each
option, is exercisable during the lifetime of the holder only by such holder. No
employee or contractor my be granted options to purchase more than 150,000
shares in any one fiscal year. Enlighten intends that compensation related to
options granted to employees of Enlighten ("Employee Options") granted under the
Option Plan qualify for the "performance-based compensation" exemption under
Section 162(m) of the Code. Section 162(m) generally limits the deductibility by
Enlighten for federal income tax purposes of compensation paid to certain
executive officers. The per share exercise price of an incentive stock option
must equal at least the fair market value of a share of Enlighten's common stock
on the date of grant. However, the per share exercise price of any Employee
Option granted to a person who at the time of grant owns stock possessing more
than 10% of the total combined voting power of all classes of stock of Enlighten
or any parent or subsidiary corporation of Enlighten must be at least 110% of
the fair market value of a share of Enlighten's common stock on the date of
grant, and the term of any such option cannot exceed five years. The terms of
all other options granted under the Option Plan may not exceed 10 years. The per
share exercise price of a nonstatutory stock option may be no less than 85% of
the fair market value of a share of the common stock on the date of grant.

All incentive stock option agreements under the Option Plan in effect on
December 31, 1999 provide that one-seventh (1/7) of the options become vested
six months after the initial grant date and one-forty-second (1/42) of the
options vest upon completion of each succeeding full month of continuous
employment (or service as a director) with Enlighten until fully vested 42
months after the initial grant date. Additionally, such agreements have provided
that the exercise period for any optionee who ceases to be an employee for any
reason, except death or disability, shall expire 30 days after such termination,
but in no event later than the initial option term date; and if the optionee's
employment ceases because of death or disability, the exercise period shall
expire six months after such termination, but in no event later than the initial
option term date.

Generally, Employee Options may be exercised by payment of the exercise
price in cash, by check, or in cash equivalent, by tender of shares of
Enlighten's common stock owned by the optionee having a fair market value not
less than the exercise price, by the assignment of the proceeds of a sale of
some or all of the shares of common stock being acquired upon the exercise of
the option, or by any combination of these. However, the Administrator may
restrict the

<PAGE> 45
forms of payment permitted in connection with any option grant or may grant
options permitting payment of the exercise price with a recourse promissory note
in a form approved by Enlighten.

Director Options

Only members of the Board of Directors who are not employees of
Enlighten or any parent or subsidiary corporation of Enlighten ("Outside
Directors") are eligible to receive Director Options under the Option Plan. As
of December 31, 1999, Enlighten had three Outside Directors. Director Options
are nonstatutory stock options.

The Director Option component of the Option Plan is intended to
constitute a "formula plan" within the meaning of Rule 16b-3 under the Exchange
Act. Accordingly, Director Options are granted automatically and without the
Administrator's discretion as to eligibility to receive Director Options or the
amount, price and timing of Director Options. The Option Plan provides that on
the first anniversary of the effective date (February 14, 1994) of the amendment
to the Option Plan authorizing the grant of Directors Options (the "Effective
Date"), each Outside Director who held office on the Effective Date is
automatically granted a Director Option for 5,000 shares of Enlighten's common
stock. Each new Outside Director first appointed or elected to the Board after
the Effective Date will automatically receive a Director Option for 5,000 shares
on the date of such appointment or election. In addition, each Outside Director
will automatically receive an annual grant of a Director Option for 5,000
shares. The annual grant will be made on the anniversary of the Effective Date
for each Outside Director holding office on the Effective Date or on the
anniversary of an Outside Director's initial Director Option grant for all other
Outside Directors.

Each Director Option is evidenced by a written agreement between
Enlighten and the Outside Director specifying the number of shares subject to
the option and the other terms and conditions of the option, consistent with the
requirements of the Option Plan. The per share exercise price of each Director
Option is the fair market value of a share of Enlighten's common stock on the
date of grant. Director Options may be exercised by payment of the exercise
price in cash, by check, or in cash equivalent, by tender of shares of
Enlighten's common stock owned by the optionee for at least six (6) months
having a fair market value not less than the exercise price, by the assignment
of the proceeds of a sale of some or all of the shares of common stock being
acquired upon the exercise of the option, or by any combination of these.

Director Options become exercisable in twelve approximately equal
quarterly installments, subject to the Outside Director's continued service on
the Board, and terminate ten years after the date of grant. Director Options are
nontransferable by the optionee other than by will or by the laws of descent and
distribution, and are exercisable during the optionee's lifetime only by the
optionee.

As of December 31, 1999, non-qualified options to purchase an aggregate
of 270,000 shares issued to outside directors were outstanding at an average
exercise price of $2.61, equal to 85% of the fair market value on the dates of
grant.

Transfer of Control. A "Transfer of Control" will be deemed to occur
upon any of the following events in which the shareholders of Enlighten do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of Enlighten or its successor: (i) the direct or indirect
sale or exchange by the shareholders of Enlighten of all or substantially all of
the stock of Enlighten, or (ii) a merger in which Enlighten is a party. A
Transfer of Control will

<PAGE> 46
also occur in the event of the sale, exchange or transfer (other than to a
subsidiary of Enlighten) of all or substantially all of the assets of Enlighten
or a liquidation or dissolution of Enlighten. If a Transfer of Control occurs,
the Board of Directors may arrange with the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof (the "Acquiring
Corporation") to either assume outstanding options or substitute options for the
Acquiring Corporation's stock for the outstanding options. However, if the
Acquiring Corporation does not assume or substitute for outstanding options in
connection with a Transfer of Control, the Board of Directors may provide that
any unexercisable portion of the outstanding options will be fully exercisable
as of a date prior to the Transfer of Control. Any options which are neither
assumed or substituted for by the Acquiring Corporation nor exercised as of the
date of the Transfer of Control will terminate effective as of such date.

Termination or Amendment. Unless sooner terminated, no options may be
granted under the Option Plan after February 14, 2004. The Administrator may
terminate or amend the Option Plan at any time, but, without shareholder
approval, the Administrator may not amend the Option Plan to increase the total
number of shares of common stock reserved for issuance thereunder, change the
class of persons eligible to receive incentive stock options, or expand the
class of persons eligible to receive nonstatutory stock options. No amendment
may adversely affect an outstanding option without the consent of the optionee,
unless the amendment is intended to preserve the option's status as an incentive
stock option.

1994 Employee Stock Purchase Plan

Enlighten's 1994 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors and by the shareholders in February 1994. On
April 7, 1996 and May 20, 1996, respectively, the Board of Directors and
Enlighten's shareholders approved an amendment to the Purchase Plan to provide
for a change in the eligibility requirements which reduced the continuous
employment requirement from six months to three months. A total of 200,000
shares of common stock have been reserved for issuance under this Plan. As of
December 31, 1999, 130,680 shares of common stock had been acquired under the
Purchase Plan and 69,320 shares of common stock remained available for future
purchases.

The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). The Purchase Plan provides for the grant of a right to each participant
at the beginning of each offering period under the plan to purchase shares of
the common stock of Enlighten (a "Purchase Right"). Each participant's Purchase
Right will be exercised on each purchase date under the Purchase Plan unless the
participant has withdrawn from participation in the offering or in the plan
prior to such purchase date. A maximum of 200,000 of the authorized but unissued
shares of the common stock of Enlighten may be issued under the Purchase Plan.
In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of Enlighten, or in the event of any merger, sale, or other
reorganization, appropriate adjustments will be made to the shares subject to
the Purchase Plan and to the shares subject to a Purchase Right. If any Purchase
Right expires or terminates, the shares of common stock subject to such Purchase
Right are returned to the plan and may again be subjected to a Purchase Right.

The Purchase Plan is administered by the Board of Directors or by a duly
appointed committee of the Board (the "Administrator"). The Administrator will
interpret the Purchase Plan and Purchase Rights granted under the Purchase Plan,
and all determinations of the

<PAGE> 47
Administrator will be final and binding on all persons having an interest in the
Purchase Plan or any Purchase Right. Currently, the Purchase Plan provides that
any employee of Enlighten or of any present or future parent or subsidiary
corporation of Enlighten designated by the Administrator as a corporation
included in the Purchase Plan is eligible to participate in the Purchase Plan so
long as the employee is customarily employed for at least 20 hours per week and
at least five months in any calendar year and has completed at least three
months of continuous employment. No employee who owns or holds options to
purchase, or as a result of participation in the Purchase Plan would own or hold
options to purchase, 5% or more of the total combined voting power or value of
all classes of stock of Enlighten is entitled to participate in the Purchase
Plan. As of December 31, 1999, approximately 17 employees were eligible to
participate in the Purchase Plan.

Generally, each offering of shares under the Purchase Plan (an
"Offering") is for a period of 12 months. Offerings generally commence on or
about February 1 and August 1 of each year. However, the Board of Directors may
establish a different term for one or more Offerings or different commencement
or ending dates. Generally, each Offering is comprised of two six-month purchase
periods ending on July 31 and January 31 of each year, ending on a "Purchase
Date."

Participation in the Purchase Plan is limited to eligible employees who
authorize payroll deductions, which may not exceed 10% of total compensation or
such other limit established by the Administrator. Once an employee becomes a
participant in the Purchase Plan, the employee will automatically participate in
each successive Offering until such time as the employee ceases to be an
eligible employee, withdraws from the Purchase Plan, or terminates employment.
On each Purchase Date, a participant acquires shares of Enlighten's common stock
based on the participant's accumulated payroll deductions. The purchase price
per share at which the shares are sold under the Purchase Plan generally equals
85% of the lesser of the fair market value of a share of Enlighten's common
stock on the first day of the Offering (the "Offering Date") or on the Purchase
Date.

Each participant in an Offering has a Purchase Right equal to the lesser
of that number of whole shares arrived at by dividing $25,000 by the fair market
value of a share of common stock on the first day of the Offering or 1,500
shares. The number of shares a participant purchases on each Purchase Date is
determined by dividing the total amount of payroll deductions from the
participant's compensation during the Purchase Period by the purchase price,
limited in any case by the number of shares subject to the participant's
Purchase Right for the Offering. Any payroll deductions under the Purchase Plan
not applied to the purchase of shares are returned to the participant, except
for an amount insufficient to purchase another whole on the Purchase Date, which
amount may be applied to the next Purchase Period.

A participant may withdraw from an Offering at any time without
affecting his or her eligibility to participate in future Offerings. However,
once a participant withdraws from an Offering, that participant may not again
participate in the same Offering.

<PAGE> 48
of all or substantially all of the assets of Enlighten or a liquidation or
dissolution of Enlighten. If a Transfer of Control occurs, the Board of
Directors may arrange for the acquiring or successor corporation to assume
Enlighten's rights and obligations under the Purchase Plan. All Purchase Rights
terminate effective as of the date of the Transfer of Control to the extent that
the Purchase Right is neither exercised as of the date of the Transfer of
Control nor assumed by the acquiring or successor corporation.

Termination or Amendment. The Administrator may terminate or amend the
Purchase Plan at any time, except that the approval of Enlighten's shareholders
is required within twelve months of the adoption of any amendment increasing the
number of shares authorized for issuance under the Purchase Plan or changing the
definition of the corporations that may be designated by the Administrator as
corporations the employees of which may participate in the Purchase Plan.

401(k) Plan

Effective November 1, 1991, Enlighten adopted a retirement savings plan
(the "401(k) Plan") that covers all employees of Enlighten. An employee may
elect to defer, in the form of contributions to the 401(k) Plan, up to 15% of
the total compensation that would otherwise be paid to the employee in the
applicable year, not to exceed a statutorily prescribed annual limit ($10,000 in
1999). Employee contributions are held and invested by the plan's trustees for
the benefit of plan participants. The contributions are fully vested and
nonforfeitable at all times. The 401(k) Plan permits, but does not require
(except as may be required by the Internal Revenue Code), Enlighten to make
contributions to the plan. Enlighten does not currently make contributions to
the 401(k) Plan on behalf of its employees.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS

Enlighten has entered into an agreement with its Chief Executive Officer
("CEO") providing for benefits upon termination. The agreement provides that in
the event the CEO's employment is terminated by Enlighten, other than for
"Cause," or if the CEO terminates his employment with Enlighten for "Good
Reason" (as those terms are defined in the agreement), the CEO shall be entitled
to the following: (i) a severance payment equal to six (6) months of his
then-current base salary; and (ii) accelerated vesting equal to six (6) months
of normal vesting in all stock options granted prior to the date of termination.

Enlighten has also entered into an agreement with its Chief Financial
Officer ("CFO"), providing for benefits upon termination and in the event of a
"Change of Control" (as defined in the agreement). The agreement provides that
in the event of a Change of Control, if the CFO's employment is terminated by
Enlighten or its successor within ninety (90) days of a Change of Control, other
than for cause, or if the CFO terminates his employment because of a change in
duties, or in certain other circumstances, the CFO shall be entitled to the
following: (i) a one-time payment equal to six (6) months of his then-current
base salary; (ii) full vesting in all stock options.

The Option Plan provides that in the event of certain mergers, sales of
assets, or sales by the shareholders of substantially all of their voting stock
in Enlighten constituting a "Transfer of Control," as defined in the Option
Plan, the Board may, in its sole discretion, arrange for the surviving,
continuing, successor, or purchasing corporation or a parent corporation
thereof, as the

<PAGE> 49
case may be (the "Acquiring Corporation"), to either assume Enlighten's rights
and obligations under outstanding stock option agreements under the Option Plan
(the "Options") or substitute options for the Acquiring Corporation's stock for
such outstanding Options. The Board may also provide that any options that are
not assumed or substituted for by the Acquiring Corporation will be fully vested
and exercisable as of a date prior to the Transfer of Control. An Option will
terminate effective as of the date of the Transfer of Control to the extent that
the Option is neither assumed by the Acquiring Corporation, nor exercised as of
the date of the Transfer of Control.

Enlighten's 1994 Employee Stock Purchase Plan (the "Purchase Plan")
provides that in the event of a "Transfer of Control," as defined in the
Purchase Plan, the Board may, in its sole discretion, arrange for the assumption
of Enlighten's rights and obligations under the Purchase Plan by the acquiring
or successor corporation. All purchase rights shall terminate if no assumption
occurs.

LIMITATIONS OF DIRECTORS' LIABILITY AND INDEMNIFICATION

Enlighten's Bylaws provide that Enlighten may indemnify its directors,
officers, employees and agents to the fullest extent permitted by law.

Enlighten has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in Enlighten's Amended
and Restated Articles of Incorporation and Bylaws. These agreements, among other
things, indemnify Enlighten's directors and officers for certain expenses
(including attorneys' fees), judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of Enlighten, arising out of such person's services as a director or
officer of Enlighten, any subsidiary of Enlighten or any other company or
enterprise to which the person provides services at the request of Enlighten.
Enlighten believes that these provisions and agreements are necessary to attract
and retain qualified directors and officers.

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

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires
Enlighten's executive officers, directors, and persons who beneficially own more
than 10% of Enlighten's common stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Such persons are required by SEC regulations to furnish Enlighten with
copies of all Section 16(a) forms filed by such persons.

Based solely on Enlighten's review of such forms furnished to Enlighten
and written representations from certain reporting persons, Enlighten believes
that all filing requirements applicable to Enlighten's executive officers,
directors, and persons who beneficially own more than 10% of Enlighten's common
stock were complied with in 1999.

<PAGE> 50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For transactions between Enlighten and our officers, directors and
holders of more than 5% of our outstanding common stock, see "Executive
Compensation," "Option Grants in 1999," "Aggregate Option Exercises and 1999
Year-End Values," and "Compensation of Directors."

All future transactions, other than compensation, stock options pursuant
to the plans and other benefits available to employees generally, including any
loans from us to our officers, directors, principal stockholders or affiliates,
will be approved by a majority of our board of directors, including a majority
of our independent and disinterested members of our board of directors. If
required by law, the future transactions will be approved by a majority of the
disinterested shareholders. These future transactions will be on terms no less
favorable to us than we could obtain from unaffiliated third parties.

INDEMNIFICATION AGREEMENTS

We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for expenses, judgments, fines and settlement amounts
incurred by any such person in any action or proceeding arising out of such
person's services as a director or executive officer or at our request. We
believe that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.

PRINCIPAL SHAREHOLDERS

The following table sets forth as of June 30, 2000, certain information
with respect to the beneficial ownership of Enlighten's common stock by (i) all
persons known by Enlighten to be the beneficial owners of more than 5% of the
outstanding common stock of Enlighten, (ii) each director and director-nominee
of Enlighten, (iii) each Named Executive Officer, and (iv) all executive
officers and directors of Enlighten as a group.

<TABLE>
<CAPTION>
Number of Percentage
Shares of Beneficially Owned
Common Stock -----------------------
Beneficially Before the After the
Beneficial Owner (1) Owned (1)(2) Offering Offering
-------------------- ------------ ---------- ---------
<S> <C> <C> <C>
Peter J. McDonald (3) ........................................... 465,554 9% 8%
Michael Seashols (4) ............................................ 405,910 8% 7%
David D. Parker (5) ............................................. 255,376 5% 4%
Bill Bradley (6) ................................................ 105,472 2% 2%
Peter J Sprague (7) ............................................. 46,665 1% 1%
Michael A. Morgan (8) ........................................... 40,102 1% 1%
Executive officers and directors as a group (7 persons) (10) .... 1,339,316 27% 23%
</TABLE>

----------

* Less than 1%

(1) The persons named in this table have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned
by them, subject to community property laws where applicable and to the
information contained in the footnotes to this table.

(2) Shares beneficially owned and percentage of ownership before the
offering are based on 4,953,789 shares of common stock outstanding.
Shares beneficially owned and percentage of ownership after the offering
are based on 5,812,852 shares of common stock outstanding. Beneficial
ownership is determined in accordance

<PAGE> 51
with the rules of the Securities and Exchange Commission and generally
include voting or disposition power with respect to such shares.

(3) Includes 7,500 shares subject to options which are exercisable as of
August 29, 2000. Also includes 10,800 shares held by Mr. McDonald's
children.

(4) Includes 195,910 shares subject to options which are exercisable as of
August 29, 2000.

(5) Includes 193,376 shares subject to options which are exercisable as of
August 29, 2000.

(6) Consists of shares subject to options which are exercisable as of August
29, 2000.

(7) Consists of shares subject to options which are exercisable as of August
29, 2000.

(8) Consists of shares subject to options which are exercisable as of August
29, 2000.

(9) Includes shares described in Notes 3, 4, 5, 6, 7 and 8.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of Enlighten consists of 10,000,000 shares
of common stock, no par value and 1,000,000 shares of Preferred Stock, no par
value. The following summary description relating to Enlighten's capital stock
does not purport to be complete and is qualified in its entirety by reference to
the Amended and Restated Articles of Incorporation (the "Articles") and Bylaws,
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part, and the provisions of applicable law.

COMMON STOCK

As of June 30, 2000, there were 4,953,789 shares of common stock
outstanding held by __ shareholders of record. An additional 1,762,400 shares
have been reserved for issuance upon exercise of options. Of these shares,
approximately 1,450,432 shares will be issuable upon exercise of currently
outstanding options.

Holders of common stock are entitled to cast one vote for each share on
all matters submitted to a vote of shareholders, including the election of
directors subject to the preferences that may be applicable to outstanding
shares of Preferred Stock. The holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available therefor. See "Dividend Policy." Such holders do not
have any preemptive or other rights to subscribe for additional shares subject
to the preferences that may be applicable to outstanding shares of Preferred
Stock. All holders of common stock are entitled to share ratably in any assets
for distribution to shareholders upon the liquidation, dissolution or winding up
of Enlighten. There are no conversion, redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

The authorized but unissued shares of common stock are available for
future issuance without shareholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future public offerings
to raise additional capital, corporate acquisitions and employee benefit plans.

The existence of authorized but unissued and unreserved common stock may
enable the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage an attempt to obtain
control of Enlighten by means of a proxy contest, tender offer, merger, or
otherwise, and thereby protect the continuity of Enlighten's management.

<PAGE> 52
PREFERRED STOCK

The Board of Directors has authority to issue up to 1,000,000 shares of
Preferred Stock of Enlighten, no par value ("Preferred Stock") and to fix the
rights, preferences, privileges and restrictions, including voting rights, of
these shares without any vote or action by the shareholders. The issuance of
Preferred Stock may have the effect of delaying or preventing a change in
control of Enlighten. The issuance of Preferred Stock could decrease the amount
of earnings and assets available for distributions to the holders of common
stock or could adversely affect the rights and powers, including voting rights,
of the holders of the common stock. In certain circumstances, such issuance
could have the effect of decreasing the market price of the common stock.
Enlighten has no present plan to issue shares of Preferred Stock.

WARRANTS

In connection with its initial public offering, Enlighten issued to L.H.
Alton and Company and Laidlaw Equities, Inc. and their designees warrants (the
"IPO Warrants") to purchase up to 100,000 shares of common stock (50,000 shares
each) at an exercise price of $6.60. The IPO Warrants were transferred to
several individuals and entities and were exercisable during the four-year
period commencing on April 19, 1995 (the "Warrant Exercise Term") and expiring
on April 19, 1999. On March 30, 1999, the Board of Directors amended a warrant
of 15,000 to change the expiration date to April 19, 2001. All other warrants
granted with our initial public offering expired on April 19, 1999.

In June 1995 and amended in April 1998, in connection with its facility
lease, Enlighten issued to Richard Dewey warrants to purchase 50,000 shares of
Enlighten's common stock at an exercise price of $5.50. These warrants were
exercisable during the two-year period commencing on May 1, 1995 and expiring on
June 30, 1997. In June 1997, the expiration date of these warrants was amended
to June 30, 2000. In April 1998, these warrants were further amended to allow
for a cashless exercise where the warrant holder would receive shares equal to
the value of the warrant at the time of exercise. In December 1999, these
warrants were exercised using the cashless exercise provision where 12,248
shares were issued in exchange for the surrender of 37,752 shares.

In January 1999, in connection with consulting services performed,
Enlighten issued to two consultants warrants to purchase up to 25,000 shares of
common stock (11,250 and 13,750, respectively) at an exercise price of $2.50.
These warrants are exercisable during the two-year period commencing on January
12, 1999 and expire on January 11, 2001. These warrants allow for a cashless
exercise where the warrant holder would receive shares equal to the value of the
warrant at the time of exercise.

In April 2000, Enlighten issued to the selling shareholders, warrants to
purchase up to 859,063 shares of common stock at an exercise price of $4.65. The
shares of common stock to be issued upon the exercise of these warrants are
included in the shares covered by this registration statement. These warrants
expire on April 28, 2005.

ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Certain provisions of the Articles and Bylaws could discourage potential
acquisition proposals and could delay a change of control of Enlighten not
approved by Enlighten's Board of Directors. Such provisions diminish the
opportunities for a shareholder to participate in tender

<PAGE> 53
offers, including tender offers at a price above the then current market value
of the common stock. Such provisions may also inhibit fluctuations in the market
price of the common stock that could result from takeover attempts. The Articles
provide that directors are removable only for cause. Additionally, because the
Board of Directors has the right to has authority to issue up to 1,000,000
shares of Preferred Stock of Enlighten, no par value ("Preferred Stock") and to
fix the rights, preferences, privileges and restrictions, including voting
rights, of these shares without any vote or action by the shareholders, the
rights of the holders of common stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third-party to
acquire a majority of the outstanding voting stock of Enlighten, thereby
delaying, deferring or preventing a change in control of Enlighten. Furthermore,
such Preferred Stock may have other rights, including economic rights, senior to
the common stock, and as a result, the issuance of such Preferred Stock could
have a material adverse effect on the market value of the common stock.

TRANSFER AGENT AND REGISTRAR

ChaseMellon Shareholder Services has been appointed as the transfer
agent and registrar for the common stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have outstanding approximately
5,812,852 shares of common stock. Of these shares, the 1,574,948 shares sold in
this offering (including the 859,063 shares to be issued upon the exercise of
the warrants held by the selling shareholders) and an additional outstanding
3,729,850 shares will be freely tradeable without restriction under the
Securities Act, unless purchased or held by our "affiliates," as that term is
defined in Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregate) who has beneficially owned restricted shares for at
least one year (including the holding period of any prior owner except an
affiliate) is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of (i) one percent of the number of
shares of common stock then outstanding (which will equal approximately 58,129
shares immediately after this offering) or (ii) the average weekly trading
volume of the common stock during the four calendar weeks preceding the filing
to of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements and to the
availability of current public information about Enlighten. Under Rule 144(k), a
person who is not deemed to have been an affiliate of ours at any time during
the 90 days preceding a sale, and who has beneficially owned the shares to be
sold for at least two years (including the holding period of any prior owner
except an affiliate), is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.

We have filed registration statements on Form S-8 registering 1,922,674
shares of common stock subject to outstanding options or reserved for future
issuances under its stock plans. As of June 30, 2000, options to purchase a
total of 1,450,432 shares were outstanding and 324,778 shares were reserved for
future issuance under our stock plans. Common stock issued

<PAGE> 54
upon exercise of outstanding vested options or issued pursuant to the Purchase
Plan, other than common stock issued to our affiliates are available for
immediate resale in the open market.

As of June 30, 2000, we have issued additional warrants to purchase
40,000 shares of common stock. Common stock issued upon exercise of outstanding
warrants are available for immediate resale in the open market.

No predictions can be made of the effect, if any, that the sale or
availability for the sale of shares of additional common stock will have on the
market price of the common stock. Nevertheless, sales of a substantial amount of
such shares by existing shareholder or by shareholders purchasing in the
offering could have a negative impact on the market price of the common stock.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered
hereby will be passed upon for Enlighten by Gray Cary Ware & Freidenrich LLP,
San Francisco, California.

EXPERTS

The consolidated financial statements of Enlighten as of December 31,
1999 and 1998 and for each of the years in the two-year period ended December
31, 1999, have been included herein and in the Registration Statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on form SB-2, including exhibits and schedules, under the Securities
Act with respect to the shares to be sold in this offering. This prospectus does
not contain all the information set forth in the registration statement and the
exhibits and schedules thereto. For further information about us and the shares
to be sold in this offering, please refer to the registration statement.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to, are not necessarily complete, and in
each instance please refer to the copy of the contract, agreement or other
document filed as an exhibit to the registration statement, each statement being
qualified in all respects by this reference.

We also file annual, quarterly and special reports, proxy statements and
other information with the SEC. These reports, proxy statements, the
registration statement and other information filed with the SEC may be inspected
and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549.

You may obtain information about the operation of the SEC Public
Reference Room by calling 1-800-SEC-0330. You can also inspect this material
free of charge at a Web site maintained by the SEC at http://www.sec.gov.
Finally, you can also inspect reports and other information concerning Enlighten
at the offices of the National Association of Securities Dealers, Inc., Market
Listing Section, 1735 K Street, N.W., Washington, DC 20006. Enlighten common
stock is traded on The Nasdaq Stock Market under the symbol "SFTW."

<PAGE> 55
ENLIGHTEN SOFTWARE SOLUTIONS, INC.

INDEX TO FINANCIAL STATEMENTS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
FINANCIAL INFORMATION FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND 1999

Condensed Consolidated Balance Sheets: March 31, 2000 and
December 31, 1999 ............................................. F-1

Condensed Consolidated Statements of Operations: Three months
Ended March 31, 2000 and 1999 ................................. F-2

Condensed Consolidated Statements of Cash Flows: Three Months
Ended March 31, 2000 and 1999 ................................. F-3

Notes to Condensed Consolidated Financial Statements ............ F-4

FINANCIAL STATEMENTS AS OF AND
FOR THE YEARS ENDED DECEMBER 31,
1999 AND 1998

Independent Auditors' Report .................................... F-7

Consolidated Balance Sheets: December 31, 1999 and 1998 ......... F-8

Consolidated Statements of Operations: Years Ended
December 31, 1999 and 1998 .................................... F-9

Consolidated Statements of Shareholders' Equity: Years Ended
December 31, 1999 and 1998 .................................... F-10

Consolidated Statements of Cash Flows: Years Ended
December 31, 1999 and 1998 .................................... F-11

Notes to Consolidated Financial Statements ...................... F-12
</TABLE>

<PAGE> 56
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents ..................................... $ 748,500 $ 1,045,600
Short-term investments ........................................ 255,500 247,500
Accounts receivable, less allowance for doubtful
accounts of $50,000 .......................................... 355,900 1,285,500
Prepaid expenses and other assets ............................. 207,700 60,900
----------- -----------
Total current assets ........................................ 1,567,600 2,639,500

Property and equipment, net ..................................... 361,900 402,700
Software development costs, net ................................. 193,800 208,400
Other assets .................................................... 324,200 312,100
----------- -----------
$ 2,447,500 $ 3,562,700

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Trade accounts payable ........................................ $ 166,400 $ 177,000
Accrued and other current liabilities ......................... 361,800 335,600
Deferred revenue .............................................. 117,900 81,800
----------- -----------
Total current liabilities ................................... 646,100 594,400

Commitments and contingencies

Shareholders' equity:
Preferred stock, 1,000,000 shares authorized,
none issued and outstanding .................................. -- --
Common stock, no par value, 10,000,000 shares authorized,
4,235,888 and 4,217,978 issued and outstanding at March
31, 2000 and December 31, 1999, respectively ................. 8,511,500 8,410,400
Deferred stock-based compensation ............................. (101,500) (85,000)
Accumulated other comprehensive income (loss) ................. (24,200) (32,200)
Accumulated deficit ........................................... (6,584,400) (5,324,900)
----------- -----------
Total shareholders' equity .................................. 1,801,400 2,968,300
----------- -----------
$ 2,447,500 $ 3,562,700
=========== ===========
</TABLE>

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

F-1

<PAGE> 57
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
Revenue: 2000 1999
----------- -----------
<S> <C> <C>
Product license fees .......................................... $ 179,900 $ 739,200
Product maintenance fees ...................................... 172,100 164,200
Consulting services ........................................... 68,400 319,600
Royalties ..................................................... 15,800 42,600
----------- -----------
Total revenue ............................................... 436,200 1,265,600

Cost of revenue:
Product licenses .............................................. 24,800 124,100
Product maintenance ........................................... 56,800 102,200
Consulting services ........................................... 39,200 45,600
----------- -----------
Total cost of revenue ....................................... 120,800 271,900
----------- -----------

Gross margin .............................................. 315,400 993,700

Operating expenses:
Research and development ...................................... 611,100 511,100
Sales and marketing ........................................... 686,500 531,800
General and administrative .................................... 294,000 230,100
----------- -----------
Total operating expenses .................................... 1,591,600 1,273,000
----------- -----------

Operating loss .......................................... (1,276,200) (279,300)

Other income, net ............................................... 18,000 30,800
----------- -----------

Loss before income taxes ................................ (1,258,200) (248,500)
----------- -----------

Provision for income taxes ...................................... 1,300 800
----------- -----------

Net loss ................................................ $(1,259,500) $ (249,300)
=========== ===========

Basic and diluted net loss per share ............................ $ (0.30) $ (0.06)
=========== ===========

Shares used in computing basic and diluted net loss per share ... 4,229,589 3,932,421
=========== ===========
</TABLE>

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

F-2

<PAGE> 58
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ........................................................... $(1,259,500) $ (249,300)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization .................................... 84,900 106,500
Compensation expense for stock options issued .................... 33,500 --
Changes in operating assets and liabilities:
Accounts receivable ............................................ 929,600 (599,100)
Prepaid expenses and other assets .............................. (158,900) (52,600)
Trade accounts payable ......................................... (10,600) (64,100)
Accrued and other liabilities .................................. 26,200 (6,500)
Deferred revenue ............................................... 36,100 27,200
----------- -----------
Net cash used in operating activities ........................ (318,700) (837,900)
----------- -----------

Cash Flows from Investing Activities:
Capitalization of software development costs ....................... (10,200) --
Purchases of property and equipment ................................ (19,200) (41,600)
----------- -----------
Net cash used in investing activities ........................ (29,400) (41,600)
----------- -----------

Cash flows from financing activities:
Proceeds from issuance of stock .................................... 51,000 113,600
----------- -----------
Net cash provided by financing activities .................... 51,000 113,600
----------- -----------

Net decrease in cash and cash equivalents ............................ (297,100) (765,900)

Cash and cash equivalents at beginning of periods .................... 1,045,600 1,900,000
----------- -----------

Cash and cash equivalents at end of periods .......................... $ 748,500 $ 1,134,100
=========== ===========
</TABLE>

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

F-3

<PAGE> 59
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999

1. BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have been
prepared by Enlighten Software Solutions, Inc. and Subsidiary ("Enlighten"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. These condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-QSB and therefore
certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. However, Enlighten believes that the
disclosures are adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in Enlighten's
Annual Report on Form 10-KSB for the year ended December 31, 1999.

The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) that
are, in the opinion of management, necessary to state fairly the financial
position and results as of and for the periods presented. The results for such
periods are not necessarily indicative of the results to be expected for the
full year.

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

Certain amounts in the condensed consolidated financial statements as of
December 31, 1999 and for the three months ended March 31, 1999, have been
reclassified to conform with the 2000 presentation.

2. REVENUE RECOGNITION

Product license fees are recognized after the following events have occurred: a
product evaluation has been shipped to the customer; the customer elects to
purchase the software following an evaluation period; the customer signs the
related contract; and collection of the sales price is probable. Royalty
revenues that are contingent upon sale to an end-user by original equipment
manufacturers are recognized upon receipt of a report of shipment from the
original equipment manufacturer. Product maintenance fees committed as part of
new product licenses and maintenance resulting from renewed maintenance
contracts are deferred and recognized

F-4

<PAGE> 60
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ratably over the contract period, generally one year. Consulting service revenue
is recognized when services are performed for time and material contracts and on
a percentage of completion basis for fixed price contracts.

3. CASH AND CASH EQUIVALENTS

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

Enlighten has classified its investments in commercial paper and U.S. Treasury
notes as "held-to-maturity." All such investments mature in less than one year
and are stated at amortized cost, which approximates fair value. Interest income
is recorded using an effective interest rate, with the associated discount or
premium amortized to interest income.

Additionally, Enlighten has classified its investments in preferred stock of
$255,500 as "available-for-sale." Such investments are recorded at fair value
based on quoted market prices, with unrealized gains and losses reported as a
separate component of stockholders' equity.

4. COMPREHENSIVE INCOME (LOSS)

"Comprehensive income (loss)" includes unrealized gains and losses that have
been previously excluded from net income and reflected instead in equity. A
summary of comprehensive income (loss) follows:

<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Net loss ............................... $(1,259,500) $ (249,300)
Unrealized gain (loss) on securities ... 8,000 (5,500)
----------- -----------
Comprehensive loss ..................... $(1,251,500) $ (254,800)
=========== ===========
</TABLE>

5. NET LOSS PER SHARE

Basic net loss per share is based on the weighted average number of all common
shares issued and outstanding, and is calculated by dividing net loss per share
by the weighted average shares of common stock outstanding during the period.
Diluted net loss per share is calculated by dividing net loss by the weighted
average number of common shares outstanding plus all potentially dilutive common
shares outstanding. Potentially dilutive common shares included in the dilution
calculation consist of dilutive shares issuable upon the exercise of outstanding
commons stock options computed using the treasury stock method. For the periods
in which Enlighten had losses, potential common shares from common stock options
are excluded from the computation of diluted net loss per share, as their
effects are antidilutive.

F-5

<PAGE> 61
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following is a reconciliation of the weighted average common shares used to
calculate basic net loss per share to the weighted average common and
potentially dilutive common shares used to calculate diluted net loss per share:

<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
Weighted average common shares used to calculate
basic net loss per share ....................................... 4,229,589 3,932,421
Stock options ................................................ -- --
Warrants ..................................................... -- --
--------- ---------
Weighted average common and potentially dilutive common
shares used to calculate diluted earnings (loss) per share ..... 4,229,589 3,932,421
========= =========
</TABLE>

Dilutive weighted average stock options and warrants to purchase 898,142 and
286,046 shares of common stock for the three months ended March 31, 2000 and
1999, respectively, were outstanding but not included in the computation of
diluted earnings per common share because they are anti-dilutive as a result of
Enlighten's net loss. The stock options and warrants have weighted average
exercise prices of $9.04 and $2.84, as of March 31, 2000 and 1999, respectively.

6. RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." The
objective of this SAB is to provide further guidance on revenue recognition
issues in the absence of authoritative literature addressing a specific
arrangement or a specific industry. Enlighten is required to follow the guidance
in the SAB no later than the fourth quarter of 2000. The SEC has recently
indicated it intends to issue further guidance with respect to adoption of
specific issues addressed by SAB No. 101. Until such time as this additional
guidance is issued, Enlighten is unable to assess the impact, if any, it may
have, however based on current guidance Enlighten believes adoption of the SAB
will not have a material impact on Enlighten's financial position or results of
operations.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation, an interpretation of APB Opinion No.
25." This Interpretation clarifies the application of Opinion 25 for certain
issues including: (a) the definition of employee for purposes of applying
Opinion 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. In
general, this Interpretation is effective July 1, 2000. Management does not
expect the adoption of Interpretation No. 44 to have a material effect on
Enlighten's consolidated financial positions or results of operations.

7. SUBSEQUENT EVENT

On April 28, 2000, Enlighten completed a private placement of 715,885 units each
consisting of one share of common stock and one redeemable purchase warrant to
purchase one share of common stock for gross proceeds of approximately
$3,114,100. Enlighten sold the common stock at $4.225 and the warrants at
$0.125, for an aggregate of $4.35 per unit. The price for the common stock was
determined based on the five-day average closing price of the Company's common
stock from April 17 through April 24, 2000. The private placement was completed
entirely with accredited investors as defined in Regulation D promulgated under
the Securities Act of 1933. The warrants have an exercise price of approximately
$4.65 per share and a term of five years.

F-6

<PAGE> 62
Independent Auditors' Report

The Board of Directors
Enlighten Software Solutions, Inc.:

We have audited the accompanying consolidated balance sheets of Enlighten
Software Solutions, Inc. and subsidiary as of December 31, 1999 and 1998, and
the related consolidated statements of operations, shareholders equity, and cash
flows for each of the years in the two-year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

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

/s/ KPMG LLP
Mountain View, California
February 4, 2000

F-7

<PAGE> 63
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents ..................................... $ 1,045,600 $ 1,900,000
Short-term investments ........................................ 247,500 1,285,600
Accounts receivable, less allowance for doubtful
accounts of $50,000 and $25,000, respectively ................ 1,285,500 653,400
Prepaid expenses and other assets ............................. 60,900 140,200
----------- -----------
Total current assets ........................................ 2,639,500 3,979,200

Property and equipment, net ..................................... 402,700 588,600
Software development costs, net ................................. 208,400 92,200
Other assets .................................................... 312,100 269,400
----------- -----------
$ 3,562,700 $ 4,929,400
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Trade accounts payable ........................................ $ 177,000 $ 202,500
Accrued and other current liabilities ......................... 335,600 458,600
Deferred revenue .............................................. 81,800 43,800
----------- -----------
Total current liabilities ................................... 594,400 704,900

Commitments and contingencies

Shareholders' equity:
Preferred stock, 1,000,000 shares authorized,
none issued and outstanding .................................. -- --
Common stock, no par value, 10,000,000 shares
authorized, 4,217,978 and 3,899,761 issued and
outstanding at December 31, 1999 and 1998, respectively ...... 8,410,400 7,591,500
Deferred stock-based compensation ............................. (85,000) --
Accumulated other comprehensive income (loss) ................. (32,200) 5,600
Accumulated deficit ........................................... (5,324,900) (3,372,600)
----------- -----------
Total shareholders' equity .................................. 2,968,300 4,224,500
----------- -----------
$ 3,562,700 $ 4,929,400
=========== ===========
</TABLE>

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

F-8

<PAGE> 64

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenue:
Product license fees ...................................... $ 1,781,200 $ 2,416,700
Product maintenance fees .................................. 641,200 655,500
Consulting services ....................................... 540,100 260,600
Royalties ................................................. 281,900 425,600
----------- -----------
Total revenue ........................................... 3,244,400 3,758,400

Cost of revenue:
Product licenses .......................................... 335,200 550,500
Product maintenance ....................................... 8,100 7,100
Consulting services ....................................... 95,600 112,000
----------- -----------
Total cost of revenue ................................... 438,900 669,600
----------- -----------

Gross margin .......................................... 2,805,500 3,088,800

Operating expenses:
Research and development .................................. 1,764,300 1,692,000
Sales and marketing ....................................... 2,208,700 1,958,800
General and administrative ................................ 965,100 929,700
Gain on sale of Tandem product line ....................... -- (515,500)
----------- -----------
Total operating expenses ................................ 4,938,100 4,065,000
----------- -----------

Operating loss ...................................... (2,132,600) (976,200)

Other income, net ........................................... 169,900 165,400
----------- -----------

Loss before income tax benefit ...................... (1,962,700) (810,800)

Income tax benefit .......................................... 10,400 (25,400)
----------- -----------

Net loss ............................................ $(1,952,300) $ (785,400)
=========== ===========

Basic and diluted net loss per share ........................ $ (0.49) $ (0.22)
=========== ===========

Shares used in computing basic and diluted net loss per share 4,022,600 3,508,258
=========== ===========
</TABLE>

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

F-9
<PAGE> 65

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
Accumulated
Common Stock Deferred Other Total
Comprehensive ------------------------- Stock-Based Comprehensive Accumulated Shareholders'
Loss Shares Amount Compensation Income(Loss) Deficit Equity
---------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1997... 2,963,635 $ 5,079,500 $ -- $ -- $(2,587,200) $ 2,492,300

Stock options
exercised ........ 184,449 242,100 -- -- -- 242,100

Employee stock
purchase plan
shares issued .... 51,677 52,600 -- -- -- 52,600

Stock offering, net 700,000 2,217,300 -- -- -- 2,217,300

Unrealized gain on
investments ...... $ 5,600 -- -- -- 5,600 -- 5,600

Net loss .......... (785,400) -- -- -- -- (785,400) (785,400)
---------- ----------- ----------- ----------- ----------- ----------- -----------
Comprehensive loss $ (779,800)
===========
Balance at
December 31, 1998... 3,899,761 7,591,500 -- 5,600 (3,372,600) 4,224,500

Stock options
exercised ........ 278,824 483,100 -- -- -- 483,100

Employee stock
purchase plan
shares issued .... 27,145 69,200 -- -- -- 69,200

Warrants exercised 12,248 -- -- -- -- --

Warrants issued
for services ..... -- 42,600 -- -- -- 42,600

Deferred
stock-based
compensation ..... -- 224,000 (224,000) -- -- --

Compensation
expense .......... -- -- 139,000 -- -- 139,000

Unrealized loss on
investments ...... $ (37,800) -- -- -- (37,800) -- (37,800)

Net loss .......... (1,952,300) -- -- -- -- (1,952,300) (1,952,300)
---------- ----------- ----------- ----------- ----------- ----------- -----------
Comprehensive loss $(1,990,100)
===========
Balance at
December 31, 1999 .. 4,217,978 $ 8,410,400 $ (85,000) $ (32,200) $(5,324,900) $ 2,968,300
=========== =========== =========== =========== =========== ===========
</TABLE>

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

F-10
<PAGE> 66

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ............................................................ $(1,952,300) $ (785,400)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization ..................................... 408,700 504,500
Gain on sale of Tandem product line ............................... -- (515,500)
Loss on disposal of property and equipment ........................ 2,500 --
Provision for doubtful accounts ................................... 25,000 (100,000)
Compensation expense for warrants issued .......................... 42,600 --
Compensation expense for stock options issued ..................... 139,000 --
Changes in operating assets and liabilities:
Accounts receivable ............................................. (657,100) (313,000)
Refundable income taxes ......................................... -- 127,000
Prepaid expenses and other assets ............................... 26,600 265,700
Trade accounts payable .......................................... 274,100 68,500
Accrued and other liabilities ................................... (422,600) (270,400)
Deferred revenue ................................................ 38,000 (315,600)
----------- -----------
Net cash used in operating activities ......................... (2,075,500) (1,334,200)

Cash Flows from Investing Activities:
Purchases of short-term investments ................................. -- (1,200,000)
Sales of short-term investments ..................................... 1,000,300 206,000
Proceeds from sale of Tandem product line ........................... -- 515,500
Capitalization of software development costs ........................ (232,000) --
Purchases of property and equipment ................................. (99,500) (205,500)
----------- -----------
Net cash provided by (used in) investing activities ........... 668,800 (684,000)

Cash flows from financing activities:
Proceeds from public offering of stock, net ......................... -- 2,217,400
Proceeds from issuance of stock ..................................... 552,300 294,700
----------- -----------
Net cash provided by financing activities ..................... 552,300 2,512,100
----------- -----------

Net (decrease) increase in cash and cash equivalents .................. (854,400) 493,900

Cash and cash equivalents at beginning of year ........................ 1,900,000 1,406,100
----------- -----------

Cash and cash equivalents at end of year .............................. $ 1,045,600 $ 1,900,000
=========== ===========

Supplemental cash flow information disclosure of non-cash investing and
financing activities:
Income taxes paid ................................................... $ 1,100 $ 800
=========== ===========
Warrants issued ..................................................... $ 42,600 $ --
=========== ===========
Deferred stock-based compensation ................................... $ 224,000 $ --
=========== ===========
</TABLE>

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

F-11
<PAGE> 67

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1999 AND 1998

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Enlighten Software Solutions, Inc. develops, markets, and supports
products that automate administrative tasks and monitor critical
performance and operational characteristics for commercial servers and
workstations. Our products provide a single console management view of
customers mixed technical environments consisting of Linux, Unix and
Windows. Enlighten's products enable integrated, coordinated operations
and management of networked and web based servers and workstations.
Enlighten's products are designed for distributed computing environments
in the range of ten to 1,000 servers and clients.

Founded in 1986, Enlighten was a leading provider of systems management
software on the Tandem platform, providing a range of automated systems
management products to over 400 companies in 30 countries. In 1997,
Enlighten sold its Tandem product line to BMC Corporation ("BMC")
formerly New Dimension Software, Inc., in order to focus efforts on its
EnlightenDSM product suite. Enlighten recognized a gain on the sale of
the operating assets of the Tandem product line of approximately
$515,500 and $2,158,000 in 1998 and 1997, respectively. In addition, BMC
is required to pay Enlighten royalties through September 2000 from BMC's
licensing and support of the Tandem software products.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts
of Enlighten Software Solutions, Inc. and its wholly-owned subsidiary, a
sales corporation in Europe. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior year
consolidated financial statement balances have been reclassified to
conform to the 1999 presentation.

Revenue Recognition

Enlighten recognizes product license revenue upon shipment if a signed
contract exists, the fee is fixed and determinable, collection of
resulting receivables is probable and product returns are reasonably
estimable. Product license revenues that are contingent upon sale to an
end-user by OEMs are recognized upon receipt of quarterly reports of
shipments from OEMs.

Enlighten recognizes revenue from maintenance fees for ongoing customer
support and product updates ratably over the contract period, generally
one year. Payments for maintenance fees are generally made in advance
and are non-refundable. Consulting service revenue is recognized when
services are performed for time and material contracts and on a
percentage of completion basis for fixed price contracts.

F-12
<PAGE> 68

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cash Equivalents and Short Term Investments

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

Enlighten has classified its investments in commercial paper and U.S.
Treasury notes as "held-to-maturity." All such investments mature in
less than one year and are stated at amortized cost, which approximates
fair value. Interest income is recorded using an effective interest
rate, with the associated discount or premium amortized to interest
income.

Additionally, Enlighten has classified its investments in preferred
stock and municipal bonds as "available-for-sale." Such investments are
recorded at market value based on quoted market prices, with unrealized
gains and losses reported as a component of other comprehensive loss.
The cost of securities sold is determined based on the specific
identification method.

Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets,
generally five years. Leasehold improvements are amortized on a
straight-line basis over the lease term or the estimated useful life of
the asset, whichever is less.

Enlighten reviews property and equipment for impairment whenever events
or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of property and equipment
is measured by comparison of its carrying amount to future net
undiscounted cash flows the property and equipment are expected to
generate. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount
of the property and equipment exceeds its fair value. To date, Enlighten
has made no impairment adjustments to the carrying values of its
property and equipment.

Software Development Costs

Software development costs incurred subsequent to the
determination of product technological feasibility are capitalized.
Technological feasibility is established at the completion of detail
program design and testing. The establishment of technological
feasibility and the ongoing assessment of the recoverability of these
costs requires considerable judgement by management with respect to
certain external factors including, but not limited to, anticipated
future gross product revenue, estimated economic life and changes in
software and hardware technology. Costs related to computer software
development incurred prior to establishing product technological
feasibility are expensed as incurred. Amortization of capitalized
software development costs begins when the products are available for
general release to customers and is computed on a straight-line

F-13
<PAGE> 69

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

basis over the remaining estimated economic life of the product,
generally two to three years.

Enlighten periodically assesses the recoverability of these intangible
assets by comparing their amortized cost to the net realizable value of
the related products. The amount by which the unamortized costs exceed
the net realizable value is written off.

Foreign Currency Translation

The functional currency for Enlighten's foreign subsidiary is the U.S.
dollar. Accordingly, this entity remeasures monetary assets and
liabilities at year-end exchange rates while nonmonetary items are
remeasured at historical rates. Income and expense accounts are
remeasured at the average rates in effect during the year, except for
depreciation which is remeasured at historical rates. Transaction gains
and losses are recognized in income in the period of occurrence.

Use of Estimates

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

Stock Based Compensation

Enlighten uses the intrinsic value-based method to account for all of
its employee stock-based compensation plans.

Fair Value of Financial Instruments and Concentration of Credit Risk

The fair value of Enlighten's cash, cash equivalents, accounts
receivable, and accounts payable approximate the carrying amount due to
the relatively short maturity of these items. The fair value of
Enlighten's short term investments are based on quoted market prices.
Financial instruments that potentially subject Enlighten to
concentrations of credit risk consist principally of short term
investments and trade account receivables. Enlighten has investment
policies that limit the amount of credit exposure to any one financial
institution and restrict placement of these investments to financial
institutions evaluated as credit worthy. Substantially all of
Enlighten's accounts receivable are derived from sales to large OEM
partners and select end-users. Enlighten performs ongoing credit
evaluations of its customers' financial condition and does not require
collateral. Enlighten maintains allowances for potential credit losses
and such losses have been within management's expectations.

F-14
<PAGE> 70

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other Comprehensive Loss

Unrealized gains or losses on investments represent the only component
of comprehensive loss which is excluded from net loss. Comprehensive
loss has been presented in the consolidated statement of shareholders'
equity. As of December 31, 1999 and 1998, the tax effects allocated to
the component of other comprehensive loss and accumulated other
comprehensive loss balances were not significant.

Income Taxes

Enlighten accounts for income taxes using the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Deferred tax assets are reduced by an allowance to an amount
whose realization is more likely than not. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.

Net Loss Per Share

Basic net loss per share is based on the weighted average number of all
common shares issued and outstanding, and is calculated by dividing net
loss by the weighted average shares of common stock outstanding during
the period. Diluted net loss per share is calculated by dividing net
loss by the weighted average number of common shares outstanding plus
all potentially dilutive common shares outstanding. Potentially dilutive
common shares included in the dilution calculation consist of dilutive
shares issuable upon the exercise of outstanding common stock options
computed using the treasury stock method. For the periods in which
Enlighten had losses, potential common shares from common stock options
are excluded from the computation of diluted net loss per share as their
effect would be antidilutive.

F-15
<PAGE> 71

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following is a reconciliation of the weighted average common shares
used to calculate basic net loss per share to the weighted average
common and potentially dilutive common shares used to calculate diluted
net loss per share:

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Weighted average common shares used to calculate
basic net loss per share........................ 4,022,600 3,508,258
Stock options.................................. -- --
Warrants....................................... -- --
--------- ---------
Weighted average common and potentially
dilutive common shares used to calculated
diluted net loss per share.................... 4,022,600 3,508,258
========= =========
</TABLE>

Dilutive weighted average stock options and warrants to purchase 495,108
and 474,364 shares of common stock for the years ended December 31, 1999
and 1998, respectively, were outstanding but not included in the
computation of diluted earnings per common share because they are
anti-dilutive as a result of Enlighten's net loss.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 is effective for all fiscal years beginning after June 15,
2000, as amended by SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133 - An Amendment of FASB Statement No. 133." SFAS No.
133 requires Enlighten to recognize all derivatives as either assets or
liabilities and measure those instruments at fair value. It further
provides criteria for derivative instruments to be designated as fair
value, cash flow and foreign currency hedges and establishes respective
accounting standards for reporting changes in the fair value of the
derivative instruments. Upon adoption, Enlighten will be required to
adjust hedging instruments to fair value in the balance sheet and
recognize the offsetting gains or losses as adjustments to be reported
in net income or other comprehensive income, as appropriate. Enlighten
is evaluating its expected adoption date and currently expects to comply
with the requirements of SFAS 133 in fiscal year 2001. Enlighten does
not expect the adoption will be material to Enlighten's financial
position or results of operations since Enlighten does not participate
in such investments or activities.

In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP
98-9 requires recognition of revenue using the "residual method" in a
multiple-element software arrangement when fair value does not exist for
one or more of the delivered elements in the arrangement. Under the
"residual method," the total fair value of the undelivered elements is
deferred and recognized in accordance with SOP 97-2. Enlighten will be
required to implement SOP 98-9 for the year ending December 31, 2000.
Enlighten does

F-16
<PAGE> 72

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

not expect the adoption will have a material impact on Enlighten's
financial position, results of operations or cash flows.

2. CASH, CASH EQUIVALENTS, AND SHORT TERM INVESTMENTS

Cash and cash equivalents consisted of the following:

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash and cash equivalents .... $ 87,300 $ 833,900
Money market funds ........... 958,300 1,066,100
---------- ----------
$1,045,600 $1,900,000
========== ==========
</TABLE>

Short term investments consisted of the following:

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Equity securities ............ $ 247,500 $ 285,600
Municipal bonds .............. -- 1,000,000
---------- ----------
$ 247,500 $1,285,600
========== ==========
</TABLE>

3. PROPERTY AND EQUIPMENT

A summary of property and equipment follows:

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Equipment ........................................ $1,173,700 $1,090,100
Furniture and fixtures ........................... 285,900 285,900
Leasehold improvements ........................... 142,200 142,200
---------- ----------
1,601,800 1,518,200
Less accumulated depreciation and amortization ... 1,199,100 929,600
---------- ----------
$ 402,700 $ 588,600
========== ==========
</TABLE>

4. SOFTWARE DEVELOPMENT COSTS

A summary of software development costs follows:

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Software development costs ........ $648,400 $416,400
Less accumulated amortization ..... 440,000 324,200
-------- --------
$208,400 $ 92,200
======== ========
</TABLE>

F-17
<PAGE> 73

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. INCOME TAX BENEFIT

Income tax benefit consist of:

<TABLE>
<CAPTION>
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
Year ended December 31, 1999:
Federal ......................... $(11,500) $ -- $(11,500)
State ........................... 1,100 -- 1,100
Foreign ......................... -- -- --
-------- -------- --------
$(10,400) $ -- $(10,400)
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
Current Deferred Total
-------- -------- --------
<S> <C> <C> <C>
Year ended December 31, 1998:
Federal ......................... $(40,600) $ -- $(40,600)
State ........................... 800 -- 800
Foreign ......................... 14,400 -- 14,400
-------- -------- --------
$(25,400) $ -- $(25,400)
======== ======== ========
</TABLE>

Enlighten's income tax benefit differed from the expected income tax
benefit computed by applying the statutory U.S. federal income tax rate
(34%) to loss before income tax benefit as a result of the following:

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Provision computed at federal statutory rate ..... $(667,300) $(275,700)
State income tax, net of federal tax effect ...... (114,400) 500
Change in valuation allowance .................... 835,700 229,900
Foreign taxes .................................... -- 14,400
Other ............................................ (64,400) 5,500
--------- ---------
$ (10,400) $ (25,400)
========= =========
</TABLE>

F-18
<PAGE> 74

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below:

<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Reserves not currently deductible .... $ 47,500 $ 95,300
Credit carryforward .................. 664,300 500,500
Loss carryforward .................... 1,603,000 851,100
----------- -----------
Total deferred tax assets .......... 2,314,800 1,446,900

Valuation allowance .................... (2,178,600) (1,342,900)
----------- -----------
Net deferred tax assets ............ 136,200 104,000
----------- -----------

Deferred tax liabilities:
Software development costs ........... 83,000 37,000
Depreciation and amortization ........ 53,200 67,000
----------- -----------
Total deferred tax liabilities ..... 136,200 104,000
----------- -----------
Net deferred tax assets .......... $ -- $ --
=========== ===========
</TABLE>

The net change in the total valuation allowance for the year ended
December 31, 1999 was a net increase of $835,700. Management has
determined that such portion of deferred tax assets may not be realized.

Enlighten has federal and state net operating loss carryforwards of
approximately $5,412,400 and $2,940,000, respectively, that may be used
to offset future taxable income and federal and state research tax
credits of approximately $528,600 and $295,500, respectively, that may
be used to offset future tax liabilities. The federal net operating loss
and research credit carryforwards will expire primarily in 2018 and 2019
and the state net operating loss carryforward will expire primarily in
2003 and 2004.

6. ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities consisted of the following:

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Accrued employee compensation ..... $152,600 $147,300
Deferred rent ..................... 38,300 51,600
Royalty payable ................... 16,400 45,400
Other ............................. 128,300 214,300
-------- --------
$335,600 $458,600
======== ========
</TABLE>

F-19
<PAGE> 75

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. SHAREHOLDERS' EQUITY

Preferred Stock

The Board of Directors has the authority to issue, without further
action by the shareholders, up to 1,000,000 shares of preferred stock in
one or more series and to fix the rights, preferences, privileges, and
restrictions thereof, including dividend rights, conversion rights,
voting rights, terms of redemption, liquidation preferences, sinking
fund terms, and the number of shares constituting any series or the
designation of such series.

Employee Stock Option Plan

As of December 31, 1999, Enlighten had authorized 2,000,000 shares of
Common Stock for issuance under the 1992 Employee Stock Option Plan (the
Option Plan). The Option Plan may be administered by the Board of
Directors or a committee of the Board, which determines the terms of the
options granted under the Option Plan, including exercise price, number
of shares subject to each option, and the exercisability thereof. The
vesting periods determined by the Board of Directors generally provides
for shares to vest ratably over 3.5 years and expire over 10 years.

A summary of the status of all of Enlighten's stock option plans as of
and during the years ended December 31, 1999 and 1998 follows:

<TABLE>
<CAPTION>
1999 1998
------------------------ --------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning of
year .......................... 1,066,793 $ 2.21 922,924 $ 1.87
Granted ........................ 748,750 $ 3.55 393,750 $ 2.71
Exercised ...................... (278,824) $ 1.73 (184,449) $ 1.37
Forfeited ...................... (257,230) $ 2.88 (65,432) $ 2.76
--------- ----------
Outstanding at end of year ....... 1,279,489 $ 2.97 1,066,793 $ 2.21
========= ==========

Options exercisable at year end .. 473,644 $ 2.35 468,618 $ 2.09
========= ==========

Options available for future grant.. 489,185 980,705
========= ==========
</TABLE>

F-20
<PAGE> 76

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of all Enlighten's stock option plans at
December 31, 1999 follows:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- ----------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Prices At 12/31/99 Life Price At 12/31/99 Price
------ ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$0.01 - $ 1.00 650 7.4 $1.00 650 $1.00
$1.01 - $ 2.00 378,122 7.8 $1.79 243,532 $1.79
$2.01 - $ 3.00 355,001 8.2 $2.69 146,471 $2.55
$3.01 - $ 4.00 475,716 9.1 $3.37 57,991 $3.26
$4.01 - $ 5.00 25,000 4.1 $4.68 25,000 $4.68
$5.01 - $10.00 45,000 9.9 $9.75 -- $ --
--------- -------
Total 1,279,489 473,644
========= =======
</TABLE>

Employee Stock Purchase Plan

Under Enlighten's 1994 Employee Stock Purchase Plan (the Purchase Plan)
a total of 200,000 shares of common stock remain reserved for issuance
under the Purchase Plan. The Purchase Plan permits eligible employees to
purchase common stock through payroll deductions, which may not be less
than 1% nor exceed 10% of an employee's compensation, not to exceed
shares with a fair market value of $25,000. The price of stock purchased
under the Purchase Plan must be at least 85% of the lower of the fair
market value of the common stock at the beginning of each six-month
offering period or at the end of the present purchasing period.
Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically upon
termination of employment with Enlighten.

Warrants

In April 1994, in connection with Enlighten's initial public offering,
Enlighten issued warrants to purchase up to 100,000 shares of Common
Stock at an exercise price of $6.60, of which warrants to purchase up to
85,000 shares expired on April 19, 1999. In April 1999, terms of the
warrants to purchase up to 15,000 shares were amended to extend their
expiration to April 2001. The fair value of the extension of this
warrant as determined using the Black-Scholes option pricing model was
not significant using the following assumptions: an expected life of 2
years, risk-free interest rate of 5.50%, 135.8% expected volatility, and
no dividend yield.

In June 1995, in connection with its facility lease, Enlighten issued
warrants to purchase up to 50,000 shares of Common Stock at an exercise
price of $5.50. In December 1999, Enlighten issued 12,248 shares of
Common Stock pursuant to the net exercise of warrants to purchase 50,000
shares of Common Stock at $5.50 per share.

In January 1999, in connection with product marketing consulting
performed, Enlighten issued warrants to purchase up to 25,000 shares of
Common Stock at an exercise price of

F-21
<PAGE> 77

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

$2.50. Upon notice of exercise by the holders of the warrants,
Enlighten, at the holders option, may settle such exercise by either
issuing the full amount of shares and receiving cash proceeds or issuing
a net amount of shares with no cash proceeds. The fair value of these
warrants, as determined using the Black-Scholes option pricing model,
was $42,600, using the following assumptions: an expected life of 2
years, risk-free interest rate of 5.50%, 135.8% expected volatility, and
no dividend yield. These warrants expire in January 2001.

Accounting for Stock-Based Compensation Plans

Enlighten has elected to use the intrinsic value-based method in
accounting for its Plan. Accordingly, no compensation cost has been
recognized in the accompanying consolidated financial statements for
options granted to employees. The exercise price of each option equaled
or exceeded the fair value of the underlying common stock as of the
grant date for each option. Had compensation cost for Enlighten's stock
options been determined in a manner consistent with SFAS No. 123,
Enlighten's net loss and net loss per share as reported would have been
increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Net loss (In thousands):
As reported ............................... $ (1,952) $ (785)
========= =========
Pro forma ................................. $ (2,636) $ (1,302)
========= =========

Basic and diluted net loss per share:
As reported ............................... $ (0.49) $ (0.22)
========= =========
Pro forma ................................. $ (0.66) $ (0.37)
========= =========
</TABLE>

The fair value of each option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted
average assumptions: 1999 - an expected life of 3.5 years, risk-free
interest rates of 5.50%, 135.8% expected volatility, and no dividend
yield; 1998 - an expected life of 3.5 years, risk-free interest rates of
4.62%, 117.3% expected volatility, and no dividend yield. The
weighted-average fair value of options granted during the year was $2.98
and $2.25 for the years ended December 31, 1999 and 1998, respectively.

8. COMMITMENTS

Leases

Enlighten leases office space and certain office equipment under
noncancelable leases expiring through 2003. Future minimum lease
payments under these leases aggregate approximately $522,100, $169,300,
$1,500 and $700 in 2000, 2001, 2002 and 2003. Enlighten will receive
payments totaling $124,900 in 2000 under an office space sublease
agreement. Rent expense was $311,600 and $279,300 in 1999 and 1998,
respectively.

F-22
<PAGE> 78

ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Royalties

Enlighten has license agreements with unrelated third parties covering
certain of its products requiring royalty payments ranging from 10% to
50% of product license and maintenance fees. Royalties related to these
agreements were $130,500 and $201,200 in 1999 and 1998, respectively.

Legal Proceedings

Enlighten is subject to certain legal actions that have arisen in the
ordinary course of business. Management believes that the ultimate
outcome of these actions will not have a material affect on Enlighten's
consolidated financial statements or results of operations, although
there can be no assurance as to the outcome of such litigation.

9. SEGMENT REPORTING AND MAJOR CUSTOMERS

SFAS No. 131 establishes standards for the way in which public companies
disclose certain information about operating segments in Enlighten's
financial reports. Based on the criteria of SFAS No. 131, Enlighten
operates in one segment and accordingly has provided only the required
enterprise wide disclosures.

For the years ended December 31, 1999 and 1998, sales to one customer
accounted for approximately 60% and 65% of total revenues, respectively.

Enlighten's operations outside of the United States consisted solely of
a sales corporation in the United Kingdom. Domestic operations are
responsible for the design, development, and licensing of all products.
Following are selected financial data, categorized by primary geographic
area:

<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
United States .............. $3,235,400 $3,722,800
International .............. 9,000 35,600
---------- ----------
$3,244,400 $3,758,400

Long Lived Assets:
United States .............. $ 611,100 $ 680,800
International .............. -- --
---------- ----------
$ 611,100 $ 680,800
========== ==========
</TABLE>

F-23
<PAGE> 79

================================================================================

THE RESALE OF 1,574,978 SHARES

[ENLIGHTEN SOFTWARE LOGO]

COMMON STOCK

PROSPECTUS

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

___________________, 2000

YOU SHOULD RELY ONLY ON INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.

NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES
TO PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF
THIS PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING AND
THE DISTRIBUTION OF THIS PROSPECTUS APPLICABLE TO THAT JURISDICTION.

================================================================================

-1-
<PAGE> 80

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted by Section 204(a) of the California General Corporation
Law, the Registrant's Amended and Restated Articles of Incorporation eliminate a
director's personal liability for monetary damages to the Registrant and its
shareholders arising from a breach or alleged breach of the director's fiduciary
duty, except for liability arising under Sections 310 and 316 of the California
General Corporation Law or liability for (i) acts or omissions that involve
intentional misconduct or knowing and culpable violation of law, (ii) acts or
omissions that a director believes to be contrary to the best interests of the
Registrant or its shareholders or that involve the absence of good faith on the
part of the director, (iii) any transaction from which a director derived an
improper personal benefit, (iv) acts or omissions that show a reckless disregard
for the director's duty to the Registrant or its shareholders in circumstances
in which the director was aware, or should have been aware, in the ordinary
course of performing a director's duties, of a risk of serious injury to the
Registrant or its shareholders, (v) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the Registrant or its shareholders, (vi) interested transactions between
the corporation and a director in which a director has a material financial
interest, and (vii) liability for improper distributions, loans or guarantees.
This provision does not eliminate the directors' duty of care, and in
appropriate circumstances equitable remedies such as an injunction or other
forms of non-monetary relief would remain available under California law.

Sections 204(a) and 317 of the California General Corporation Law
authorize a corporation to indemnify its directors, officers, employees and
other agents in terms sufficiently broad to permit indemnification (including
reimbursement for expenses) under certain circumstances for liabilities arising
under the Securities Act of 1933, as amended (the "Securities Act"). The
Registrant's Articles of Incorporation and Bylaws contain provisions covering
indemnification to the maximum extent permitted by the California General
Corporation Law of corporate directors, officers and other agents against
certain liabilities and expenses incurred as a result of proceedings involving
such persons in their capacities as directors, officers employees or agents,
including proceedings under the Securities Act or the Securities Exchange Act of
1934, as amended. Enlighten has entered into Indemnification Agreements with its
directors and executive officers.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.

2
<PAGE> 81

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of common stock being registered. All
amounts are estimates.

<TABLE>
<CAPTION>
Amount
--------
<S> <C>
SEC registration fee.................................................. $ 11,766
Nasdaq National Market listing fee.................................... 3,000
Printing and engraving expenses....................................... 5,000
Legal fees and expenses............................................... 40,000
Accounting fees....................................................... 20,000
Blue Sky fees and expenses............................................ 5,000
Transfer agent and registrar fees..................................... 2,500
Sales Commissions..................................................... 218,000
--------
Totals.......................................................... $305,266
========
</TABLE>

Sales commissions are the responsibility of the selling shareholders.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

On April 28, 2000 we issued to the selling shareholders 715,885 shares
of our common stock and warrants to purchase an additional 859,063 shares of
common stock in a private placement to accredited investors in reliance on
Regulation D. The shares were sold for $4.225 per share. 715,885 of the warrants
were issued for $0.125 per share. The remaining 144,178 warrants were issued to
certain of the selling shareholders in exchange for services rendered as
placement agents in connection with the private placement. In addition, the
placement agents received a commission equal to $218,000. All of the warrants
can be exercised at a price of $4.65 per share. The aggregate proceeds from such
issuance equaled $3,114,100. If all of the warrants are exercised an additional
$3,994,600 will be received, for a total of $7,108,700.

3
<PAGE> 82

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C>
3.1 The Registrant's Amended and Restated Articles of Incorporation
as filed with the Secretary of State of the State of California
on May 21, 1996 (incorporated by reference to Exhibit 3.1 to the
Registrant's Form S-1 Registration Statement (No. 33-75388)
which became effective April 19, 1994 (the 1994 Form S-1)).

3.2 The Registrant's By Laws, as currently in effect (incorporated
by reference to Exhibit 3.2 to the Registrant's Form S-1
Registration Statement (No. 33-75388) which became effective
April 19, 1994).

5.1 Opinion of Gray Cary Ware & Freidenrich LLP ("GCWF") (to be
filed by amendment).

10.01 The Registrant's Form of Indemnity Agreement for officers and
directors (incorporated by reference to Exhibit 10.1 of the 1994
Form S-1).

10.02 The Registrant's First Amended and Restated 1992 Stock Option
Plan (incorporated by reference to Exhibit 10.2 of the 1994 Form
S-1).

10.03 The Registrant's 1994 Employee Stock Purchase Plan (incorporated
by reference to Exhibit 10.3 of the 1994 Form S-1).

10.20 Lease, dated February 24, 1995, by and between Registrant and
Mariner's Island Ltd. for the Registrant's offices at 999 Baker
Way, Fifth Floor, San Mateo, California (incorporated by
reference to Exhibit 10.20 of the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1994 (the 1994 Form
10-KSB)).

10.24 Termination and Change in Control Agreement, dated April 24,
1996, by and between Enlighten Software Solutions, Inc. and
Michael A. Morgan (incorporated by reference to Exhibit 10.24 of
the Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1996 (the 1996 Form 10-KSB)).

10.26 Nonqualified Stock Option Agreement, dated December 27, 1996, by
and between Enlighten Software Solutions, Inc. and Mark
Himelstein (incorporated by reference to Exhibit 10.26 of the
Registrant's 1996 Form 10-KSB).

10.27 Agreement dated as of September 22, 1997, by and among Enlighten
Software Solutions, Inc., Peter J. McDonald, and New Dimension
Software, Inc (incorporated by reference to Exhibit 10.27 of the
Registrant's Current Report on Form 8-K dated October 1, 1997).
</TABLE>

4
<PAGE> 83

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C>
10.28 Employment letter, dated July 3, 1997, by and between Enlighten
Software Solutions, Inc. and Mike Seashols (incorporated by
reference to Exhibit 10.28 of the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1997 (the 1997 Form
10-KSB)).

10.29 Employment letter, dated August 28, 1997, by and between
Enlighten Software Solutions, Inc. and David D. Parker
(incorporated by reference to Exhibit 10.29 of the Registrant's
1997 Form 10-KSB).

10.30 Agreement dated as of January 21, 1998, by and between Enlighten
Software Solutions, Inc. and Silicon Graphics, Inc (incorporated
by reference to Exhibit 10.30 of the Registrant's 1997 Form
10-KSB).

10.31 Employment letter, dated July 15, 1998, by and between Enlighten
Software Solutions, Inc. and Bill Bradley (incorporated by
reference to Exhibit 10.31 of the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1998 (the 1998 Form
10-KSB)).

10.32 Employment letter, dated January 15, 1999, by and between
Enlighten Software Solutions, Inc. and Tim Gardner (incorporated
by reference to Exhibit 10.32 of the Registrant's 1998 Form
10-KSB).

10.33 Agreement dated as of December 31, 1998, by and between
Enlighten Software Solutions, Inc. and International Business
Machines Corporation (incorporated by reference to Exhibit 10.33
of the Registrant's 1998 Form 10-KSB).

10.34 Agreement dated as of September 28, 1999, by and between
Enlighten Software Solutions, Inc. and TurboLinux, Inc.
(incorporated by reference to Exhibit 10.33 of the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September
30, 1999).

10.35 Agreement dated as of October 21, 1999, by and between Enlighten
Software Solutions, Inc. and Intel Corporation (incorporated by
reference to Exhibit 10.35 of Registrant's 1999 Form 10-KSB).

10.36 Employment letter, dated November 24, 1999, by and between
Enlighten Software Solutions, Inc. and Bill Bradley
(incorporated by reference to Exhibit 10.36 of Registrant's 1999
Form 10-KSB).

10.37 Employment letter, dated December 8, 1999, by and between
Enlighten Software Solutions, Inc. and Stephen E. Giusti
(incorporated by reference to Exhibit 10.37 of Registrant's 1999
Form 10-KSB).

21.1 Subsidiaries of the Company (incorporated by reference to
Exhibit 21.1 of Registrant's 1994 Form 10).
</TABLE>

5
<PAGE> 84

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------ -----------------------
<S> <C>
23.1 Consent of KPMG LLP, independent certified public accountants.

23.2 Consent of GCWF (included in Exhibit 5.1)
</TABLE>

ITEM 28. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions referenced in Item 26 of this registration statement
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered hereunder, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the 1933 Act
shall be deemed to be part of this registration statement as of
the time it was declared effective.

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

6
<PAGE> 85

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of San
Mateo, State of California, on July 28, 2000.

ENLIGHTEN SOFTWARE SOLUTIONS, INC.

By: /s/ Bill Bradley
---------------------------------
Bill Bradley
President and
Chief Executive Officer

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated:

<TABLE>
<CAPTION>
Name/Title Date
---------- ----
<S> <C>
/s/ Bill Bradley July 28, 2000
-----------------------------------------------
Bill Bradley
President and Chief Executive Officer
(Principal Executive Officer)

/s/ Stephen E. Giusti July 28, 2000
-----------------------------------------------
Stephen E. Giusti
Vice President, Finance and Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ Michael Seashols July 28, 2000
-----------------------------------------------
Michael Seashols
Co-Chairman of the Board

/s/ David D. Parker July 28, 2000
-----------------------------------------------
David D. Parker
Co-Chairman of the Board

/s/ Peter J. McDonald July 28, 2000
-----------------------------------------------
Peter J. McDonald
Director

/s/ Peter J. Sprague July 28, 2000
-----------------------------------------------
Peter J. Sprague
Director

/s/ Michael A. Morgan July 28, 2000
-----------------------------------------------
Michael A. Morgan
Director
</TABLE>