**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549**

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**FORM 10-Q**

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(Mark One)

**[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
             SECURITIES EXCHANGE ACT OF 1934**

**For the Quarterly Period Ended March 31, 2001**

**OR**

**[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934**

**For the transition period from ________to _________**

**Commission file number 0-21010**

**Centura Software Corporation**
(Exact name of Registrant as specified in its Charter)



|**Delaware**                                                   | **94-2874178**                         
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

**975 Island DriveRedwood Shores, California     94065**(Address of Principal Executive Offices including Zip Code)

**(650) 596-3400**(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:**NONE**

Securities registered pursuant to section 12(g) of the Act:**Common Stock, $.01 par value per share**



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days.    YES [X]    NO [  ]


As of April 27, 2001, there were 43,105,789 shares of the Registrant's
Common Stock outstanding.



**CENTURA SOFTWARE CORPORATION
             FORM 10-Q for the Quarter Ended March 31, 2001
                                TABLE OF CONTENTS**


**PART I.   FINANCIAL INFORMATION**

**Page No.**Item 1.      Financial Statements and Supplementary DataCondensed Consolidated Balance Sheets at March 31, 2001 and
     December 31, 2000

1Condensed Consolidated Statements of Operations for the
          
    three months ended March 31, 2001 and 2000

2Condensed Consolidated Statements of Cash Flows for the
          
    three months ended March 31, 2001 and 2000

3Notes to condensed consolidated financial statements

4Item 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

9Item 3.   Quantitative and Qualitative Disclosures About Market Risk

18**PART II.  OTHER INFORMATION**Item 1.   Legal Proceedings

20Item 2.   Changes in Securities and Use of Proceeds

20Item 3.   Defaults Upon Senior Securities

20Item 4.   Submission of Matters to a Vote of Security Holders

20Item 5.   Other Information

20Item 6.   Exhibits and Reports on Form 8-K

20**Signature**

21**PART I -- FINANCIAL INFORMATION**
Item 1. Financial Statements
**CENTURA SOFTWARE CORPORATION

                   CONDENSED CONSOLIDATED BALANCE SHEETS

                                (Unaudited)

                               (IN THOUSANDS)**March 31       December 31,
                                                        2001          2000
                                                     ------------  ------------
                            ASSETS
Current assets:
   Cash and cash equivalents........................      $3,261        $5,685
   Accounts receivable, less allowances
     of $1,578 and $1,404...........................       2,341        12,681
   Other current assets.............................       3,284         5,339
                                                     ------------  ------------
     Total current assets...........................       8,886        23,705
Property and equipment, net.........................       3,235         3,581
Capitalized software, net...........................         882         1,921
Goodwill, net.......................................       1,863         2,011
Other intangible assets, net........................       1,952         2,771
Other assets........................................         840           861
                                                     ------------  ------------
Total assets .......................................     $17,658       $34,850
                                                     ============  ============

   LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
     PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term obligations.........        $390          $465
   Accounts payable.................................       4,099         4,963
   Accrued compensation and related expenses........         854         2,147
   Short-term borrowings............................       1,997         2,500
   Other accrued liabilities........................       1,771         3,624
   Deferred revenue.................................       1,397        14,582
                                                     ------------  ------------
     Total current liabilities......................      10,508        28,281
Other long-term liabilities.........................         --             84
                                                     ------------  ------------
Total liabilities ..................................      10,508        28,365
                                                     ------------  ------------
Mandatorily redeemable convertible preferred
   stock............................................       1,830           --
                                                     ------------  ------------

Stockholders' Equity:
   Common stock.....................................         431           429
   Additional paid-in capital.......................     112,262       112,167
   Accumulated other comprehensive income (loss)....          42           (93)
   Accumulated deficit..............................    (107,415)     (106,018)
                                                     ------------  ------------
     Total stockholders' equity ....................       5,320         6,485
                                                     ------------  ------------
Total liabilities, mandatorily redeemable convertible
  preferred stock and stockholders' equity .........     $17,658       $34,850
                                                     ============  ============

The accompanying notes are an integral part of these condensed
consolidated financial statements.
**CENTURA SOFTWARE CORPORATION

              CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                                (Unaudited)

                   (IN THOUSANDS, EXCEPT PER SHARE DATA)**Three Months Ended
                                                March 31,
                                           -------------------
                                              2001      2000
                                           --------- ---------
Net revenues:
   Product................................   $1,512    $5,973
   Service................................    2,344     6,431
                                           --------- ---------
     Total net revenues...................    3,856    12,404
                                           --------- ---------
Cost of revenues:
   Product................................      179       428
   Service................................      386       753
   Amortization of acquired technology....      133       133
                                           --------- ---------
     Total cost of revenues...............      698     1,314
                                           --------- ---------
     Gross profit.........................    3,158    11,090
                                           --------- ---------
Operating expenses:
   Sales and marketing....................    7,054     7,768
   Engineering and product development....    2,668     2,043
   General and administrative.............    2,252     2,194
   Amortization of goodwill and
     workforce intangible.................      203       208
                                           --------- ---------
     Total operating expenses.............   12,177    12,213
                                           --------- ---------
      Operating loss......................   (9,019)   (1,123)
Other income (expense):
   Interest income, (expense) and other...       68        99
   Foreign currency gain (loss)...........     (386)       24
   Gain on divestiture ...................    7,940       --
                                           --------- ---------
Loss before income taxes..................   (1,397)   (1,000)
Provision for income taxes................      --         15
                                           --------- ---------
Net loss..................................   (1,397)   (1,015)
                                           ========= =========
Cost of beneficial conversion feature,
  dividends, and accretion of preferred
  stock...................................     (312)   (4,266)
                                           --------- ---------

Net loss available to common stockholders   ($1,709)  ($5,281)
                                           ========= =========

Net loss per share - basic and diluted....   ($0.04)   ($0.14)
                                           ========= =========
Basic and diluted weighted average
  common shares...........................   42,997    38,440
                                           ========= =========

The accompanying notes are an integral part of these condensed
consolidated financial statements.
**CENTURA SOFTWARE CORPORATION

           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                             (Unaudited)

                            (IN THOUSANDS)**Three Months Ended
                                                                     March 31,
                                                               ---------------------
                                                                  2001       2000
                                                               ---------- ----------
Cash flows from operating activities:
  Net loss....................................................   ($1,397)   ($1,015)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
    Gain on divesiture........................................    (7,940)        --
    Depreciation and amortization.............................       899        980
    Provision for doubtful accounts, sales returns
     and allowances...........................................        40       (127)
    Issuance of stock options for services....................        --         55
  Changes in assets and liabilities:
    Accounts receivable.......................................     7,829      1,749
    Other current assets......................................     1,761       (175)
    Other assets..............................................        --          7
    Accounts payable and accrued liabilities..................    (5,183)    (1,004)
    Deferred revenue..........................................    (2,348)      (252)
                                                               ---------- ----------
      Net cash provided by (used in) operating activities.....    (6,339)       218
                                                               ---------- ----------
Cash flows from investing activities:
  Net cash from divestiture ..................................     3,060         --
  Acquisition of property and equipment.......................      (379)      (549)
  Capitalization of software costs............................      (146)      (701)
  Other long-term assets .....................................        82         --
  Proceeds from payment on note receivable....................        --        513
                                                               ---------- ----------
      Net cash provided by (used in) investing activities.....     2,617       (737)
                                                               ---------- ----------
Cash flows from financing activities:
  Proceeds from short-term borrowings ........................     2,500         --
  Repayment of short-term borrowings .........................    (3,003)      (780)
  Repayment of capital lease obligation.......................       (75)      (121)
  Proceeds from the issuance of preferred stock, net .........     1,824
  Proceeds from issuance of common stock, net.................        97      2,641
                                                               ---------- ----------
      Net cash provided by financing activities...............     1,343      1,740
                                                               ---------- ----------
Effect of exchange rate changes on cash and cash
 equivalents..................................................       (45)       (65)
                                                               ---------- ----------
Net increase (decrease) in cash and cash equivalents..........    (2,424)     1,156
Cash and cash equivalents at beginning of period..............     5,685     20,614
                                                               ---------- ----------
Cash and cash equivalents at end of period....................    $3,261    $21,770
                                                               ========== ==========


Supplemental disclosure of non cash financing activities:

  Accretion of Series A preferred stock to redemption value ..        --     $4,125

  Accretion of Series B preferred stock to redemption value ..      $146        --

  Accretion of dividend on beneficial converstion feature ....        $7        --

  Beneficial converstion feature on Series B preferred stock .      $151        --

  Accretion of dividend on Series B preferred stock ..........        $7        --

  Accretion of dividend on Series A preferred stock ..........        --       $141
                                                               ========== ==========

The accompanying notes are an integral part of these
condensed consolidated financial statements.
**CENTURA SOFTWARE CORPORATION

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                      (Unaudited)**1. Summary of significant accounting policies
Method of preparation
The accompanying condensed consolidated balance sheet as of March 31, 2001,
the condensed consolidated statements of operations, and cash flows for the
three month periods ended March 31, 2001 and March 31, 2000 are unaudited and
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for interim financial statements. In
management's opinion, all adjustments that are normal and recurring, necessary
for a fair statement of the financial position, results of operations, and of
cash flows have been made for all periods presented.
The balance sheet as of December 31, 2000 has been derived from our audited
consolidated financial statements but does not include all disclosures required
by generally accepted accounting principles. Such disclosures are contained in
our Annual Report on Form 10-K filed with the Securities and Exchange Commission
on April 2, 2001.
The results of operations for the three-month period ended March 31, 2001 are
not necessarily indicative of the operating results to be expected for the full
year. This financial data should be reviewed in conjunction with management's
discussion and analysis of financial condition and results of operation and the
audited consolidated financial statements and accompanying notes included in our
Annual Report on Form 10-K for the year ended December 31, 2000.
The preparation of financial statements in accordance with generally accepted
accounting principles requires us to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.

Net loss per share
Basic and diluted net loss per share is calculated by dividing loss
available to common stockholders by the weighted average number of shares of
common stock outstanding during each respective period.
The following is a reconciliation of the computation for basic and diluted
net loss per share:


Three Months Ended
                                                   March 31,
                                             -------------------
                                               2001      2000
                                             --------- ---------
  (in thousands, except per share data)

Net loss available to
  common stockholders.......................  ($1,709)  ($5,281)
                                             ========= =========

Weighted average basic shares outstanding...   42,997    38,440
                                             ========= =========

Basic net loss per share....................   ($0.04)   ($0.14)
                                             ========= =========

Weighted average diluted shares outstanding.   42,997    38,440
                                             ========= =========

Diluted net loss per share..................   ($0.04)   ($0.14)
                                             ========= =========


                                                   March 31,
                                             -------------------
                                               2001      2000
                                             --------- ---------
                                             (in thousands)
Antidilutive potential shares of
 common stock at period end:
  Warrants..................................    1,774       952
  Options...................................   10,350     7,703
  Mandatorily redeemable convertible
   preferred stock:
     Series A ..............................      --      2,148
     Series B ..............................    1,143       --
                                             --------- ---------
                                               13,267    10,803
                                             ========= =========

Dilutive potential shares of common stock could consist of mandatorily
redeemable convertible preferred stock, common stock options and warrants. In
periods where we have a reported loss or in cases where stock options, warrants
and mandatorily redeemable convertible preferred stock have an exercise price
greater than the market price of the common shares for the period, they are
excluded from the per share calculation as they are antidilutive. The number of
shares of common stock into which the preferred stock converts is subject to
change based upon the change in the Company's stock price.

Comprehensive loss
We report components of comprehensive loss in our annual consolidated
statement of stockholders' equity. Other comprehensive loss consists of net
income and foreign currency translation adjustments. Our total comprehensive
loss was:

Three Months Ended
                                                   March 31,
                                             -------------------
                                               2001      2000
                                             --------- ---------
                                               (in thousands)
Net loss....................................  ($1,397)  ($1,015)
Foreign currency translation                      135       (65)
                                             --------- ---------
Total comprehensive loss....................  ($1,262)  ($1,080)
                                             ========= =========


Recent Accounting Pronouncements

In December 1999, the Securities and Exchange Commission, or SEC, issued
Staff Accounting Bulletin No. 101, or SAB 101 "Revenue Recognition in Financial
Statements". This pronouncement summarizes certain of the SEC staff's views on
applying generally accepted accounting principles to revenue recognition. SAB
101 was required to be implemented in the fourth quarter of fiscal 2000. The
adoption of SAB 101 has not had a material impact on our financial position or
results of operations.
In June 1998, FASB issued FAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended in June 2000 by FAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", which requires
the recognition of all derivatives as assets or liabilities on the balance sheet
and measurement of those instruments at fair value. Changes in fair value of
derivatives are recorded in earnings or other comprehensive income depending
upon the intended use of the derivative and the resulting designation. The
effective date of this statement has been delayed to fiscal years beginning
after June 15, 2000 and we adopted SFAS No. 133 effective January 1, 2001. The
impact of adopting this statement did not have a material impact on our
consolidated results of operations, financial position, or cash flows.
2. Segment information

We completed the sale of our client/server business in February 2001, as a
result we are focused on our mobile, wireless, and embedded business. As a
result, the segments in which we now base our management reporting are the
mobile, wireless and embedded business, and the divested client/server business.
The following table presents information based on our method of internal
reporting and on how we organize our revenue into groups of similar products:

Three Months Ended March 31,
                                      ---------------------------------------
                                              2001                2000
                                      ------------------- -------------------
                                        (in       % of      (in       % of
                                      thousands)  total   thousands)  total
Mobile and embedded products.........     $735        49 %  $1,674        28 %
Divested products....................      777        51     4,299        72
                                      --------- --------- --------- ---------
  Total net product revenue..........   $1,512       100 %  $5,973       100 %
                                      ========= ========= ========= =========

3. Divestiture of client/server businessOn January 15, 2001, the Company signed an agreement with Gupta
Holdings, LLC a Delaware limited liability company, wholly owned by Platinum
Equity, LLC (Gupta Holdings, LLC and Platinum Equity, LLC being collectively
referred to as "Platinum") whereby the Company sold certain of its assets and
liabilities to Platinum. The assets sold collectively comprise the Company's
client/server database software business (the "Business"). The transaction
formally closed on February 22, 2001, and was structured to reflect economic
effectiveness as of January 1, 2001.

In consideration of the sale of the business described above, the Company
received, or will receive a combination of cash, royalties on future revenue
streams generated by the business being sold, and the assumption by Platinum of
obligations to perform services related to deferred revenue associated with the
business being sold. The Company received net cash proceeds of $3.1 million, and
Platinum assumed approximately $10.7 million in obligations to perform services
related to the deferred revenue, and agreed to pay up to $6.3 million in royalty
payments over the next five years based on future revenue streams generated by
the business being sold. The table below summarizes the gain recorded on the
transaction:

Summary of  Gain on Divestiture of
                                               Client/Server Business
                                                   (in thousands)

Cash received from purchaser ............          $   3,060

Deferred revenue obligation assumed
  by purchaser ..........................             10,746

Assets sold to purchaser
  Accounts receivable ...................   (2,397)
  Capitalized software, net of
    amortization ........................   (1,104)
  Trademarks ............................     (630)
  Fixed assets, net of depreciation .....     (191)
  Deferred commissions and other assets .     (931)
Total assets sold to purchaser ..........             (5,253)

Effect of foreign exchange and
  other expenses ........................               (613)

Gain on divestiture of client/server                ----------
  business ..............................              7,940
                                                    ==========

The assets sold by the Company include equipment, certain intellectual
property rights and goodwill associated with the business. Products obtained by
Platinum include SQLBase, Centura Team Developer, and other related
client/server database products. Products retained include Touchpoint Mobile
Companion, Touch Point Embedded Companion (including RDM),
Touchpoint Server Partner, and Mbrane Velocis.

Additionally, as part of the sale, Platinum is allowed to use the name
"Centura" in its products and advertising. On February 13, 2001, the board of
directors approved the name change of the Company to Mbrane, and on February 28, 2001, Centura
Software Corporation began using the names "Mbrane" and "Mbrane, Inc." in its
advertising and product promotion. The Company intends to ask the Company's
stockholders to approve an amendment of the corporate charter to change the name
of the Company to "Mbrane" at its June 19, 2001 stockholder meeting. On April 2,
2001 the Company began using the Nasdaq trading symbol "MBRN", replacing the
previous symbol "CNTR."

4. Asset based loan facility
In February 2001, we entered into an asset based loan facility with
Pacific Business Funding, a division of Cupertino National Bank. This loan
facility allows us to borrow up to $2.5 million at an annual interest rate of
9.6%. Under the terms of the loan we are allowed to borrow the lesser of up to
80% of our accounts receivable that are under 90 days old, or $2.5 million. The
facility has an initial term of one year, and is renewable annually thereafter
unless terminated by either party. As of March 31, 2001 the loan amount
outstanding was $1,997,000, and the total amount available to borrow against
future receivables was $503,000. Additionally, as part of the loan agreement,
the lender has a lien on all of the Company's assets, including, but not limited
to, accounts receivable, letters of credit, customer lists, copyrights, patents,
trademarks licenses, intellectual property, inventory, equipment and machinery,
investment securities, and books and records, including computer programs.

5. Private placement of equity securities
On March 12, 2001, the Company completed a private placement of equity
securities in the first of up to three issuances. The equity securities issued
are Series B Cumulative Convertible Preferred Stock (the "Preferred Stock"), as
designated in the Company's Certificate of Designation, Preferences and Rights
of Series B Cumulative Convertible Preferred Stock (the "Certificate of
Designation") filed with the Secretary of State of the State of Delaware on
March 9, 2001. The first issuance of Preferred Stock, in the amount of $2
million, is convertible into shares of common stock at the lesser of an average
market price of shares of our common stock immediately preceding conversion, or
$1.75 per share. The second issuance of Preferred Stock is subject to the
satisfaction of certain conditions (including stockholder approval) and is
expected, subject to the satisfaction of those conditions, to close in the third
quarter of 2001. If the conditions are satisfied, the amount of the second
issuance will be between $2 million and $3 million. The conversion price of the
Preferred Stock involved in the second issuance is dependent on the price of the
Company's common stock prior to the second issuance. The third issuance, if
consummated, would be based on a call option held by the first issuance investor
under which the investor would acquire up to an additional $6 million of
Preferred Stock. The conversion price of the Preferred Stock purchased in the
third issuance would be at the lesser of an average market price of shares of
our common stock immediately preceding conversion, or $2.00 per share. Warrants
to purchase up to an aggregate of 114,286 shares of common stock at an exercise
price of $2.01 per share, which expire in March 2006, were also issued to the
purchaser in the private placement. Additional warrants could be issued in
connection with the second and third issuances.
Each share of Preferred Stock, upon issuance, is entitled to receive
cumulative annual dividends at the rate of 4.5% per annum. Such dividends are
due and payable quarterly in arrears on the last day of March, June, September,
and December of each year commencing on March 31, 2001. Dividends accumulate
daily on each share of Preferred Stock, whether or not declared, until each such
share of Preferred Stock has been converted or redeemed. To the extent dividends
are not paid on the applicable dividend payment date, such dividends shall be
cumulative and shall compound quarterly until the date of payment of such
dividend. We are prohibited from declaring a dividend of any kind as long as the
total stated value of all outstanding shares of Preferred Stock is in excess of
$500,000.
The Preferred Stock is redeemable at the option of the holder at a premium,
upon the occurrence of events defined in the Certificate of Designation.
Examples of such events are: a change in ownership or voting control of the
Company, a delisting of the Company's common stock from the Nasdaq National
Market or the inability to register the underlying common stock using Form S-3.
The redemption amount differs depending on the nature of the event. For example,
in the event of a change in control, or a delisting from the Nasdaq Small Cap or
National Market, the redemption amount is 125% of the cumulative face value of
the Preferred Stock, outstanding at the time of the event. In the event of the
Company's inability to register the underlying common stock within 100 days from
the initial issuance date, the redemption amount is 130% of the cumulative face
value of the Preferred Stock, outstanding at the time of the event.
The Company may, at its option, at any time, redeem the outstanding shares of
Preferred Stock at a redemption price equal to 121% of the cumulative face value
of the Preferred Stock, provided that if the Company chooses to do this it must
redeem all of the shares of Preferred Stock then outstanding, including the
payment of earned but unpaid dividends.
The holder of the Preferred Stock can convert shares of Preferred Stock into
common stock in whole or in part at any time, subject to certain restrictions
that are described in the Certificate of Designation. The number of shares of
common stock available to the holders of the Preferred Stock is determined by
dividing the face value of any Preferred Stock to be converted by various
prices. The denominator used in determining the number of such shares is the
lesser of the volume-weighted average price of the 10 days prior to the Holder
Conversion Date, or the ceiling price established for each issuance of the
Preferred Stock. For Preferred Stock issued in the first issuance, the ceiling
is $1.75, for Preferred Stock issued in the second issuance, the ceiling is
$1.75 plus 50% of the 10 day weighted average price above $1.75. For Preferred
Stock issued in the third issuance, the ceiling is $2.00.
The Preferred Stock has no voting rights although, if converted into common
stock, those shares of common stock would have voting rights.
We will accrete the recorded value of the Preferred Stock to 130% of the face
value of the Preferred Stock over 150 days, the shortest period for which an
event that is out of our control could trigger redemption by the holders of the
Preferred Stock.
The Company received cash of $1,824,000 from the issuance of the
Preferred Stock and allocated an additional $74,000 to issue costs which represents
the fair value of warrants granted to the placement agent. The remaining $1,750,000
was allocated
to the Preferred Stock, the
warrants to purchase 114,286 shares of common stock, and the option of the
purchaser to purchase additional shares of Preferred Stock upon certain
circumstances, based upon their fair values on the date of the purchase. The
relative value allocated to the common stock warrants was $80,817 based on an
independent valuation using the Black Scholes method and the following
assumptions; exercise price $2.01, no dividends, term of 5 years, risk free rate
of 4.65% and a volatility of 90%. The relative fair value allocated to the
option to purchase additional shares of Preferred Stock was determined to be
$551,637 based on an independent valuation using the Black Scholes model and the
following assumptions; exercise price $2.00, no dividends, term of 9 months,
risk free rate of 4.65% and a volatility of 90%. Based upon the closing price of
the Company's common stock on the date of the commitment ($1.25), the relative
fair value allocated to the Preferred Stock on an as-converted basis, exceeded
the amount assigned to the Preferred Stock by approximately $151,000. The
Company recorded the $151,000 excess, representing the value of the beneficial
conversion feature as an increase to additional paid in capital and a decrease
in Series B Preferred Stock. The beneficial conversion feature is recognized as
a deemed dividend to the Series B Preferred Stock over the over the minimum
period in which preferred holders realize their return. Because the Preferred
shares are immediately convertible, the estimated fair value of the beneficial
conversion feature associated with the Preferred Stock is realizable upon the
closing of the investment. Accordingly, a $151,000 deemed dividend was
recognized as a charge to additional paid in capital, and for loss per share
computations, net loss applicable to common stockholders and an increase in the
carrying value of the Preferred Stock.

6. Subsequent event
On April 19, 2001 Mbrane signed a definitive agreement to acquire the
primary assets of Veriprise Corporation in a purchase business combination for
1,500 shares of Convertible Junior Preferred Stock, convertible into 1,500,000
shares of our common stock. The transaction is expected to be completed in May
2001.
Veriprise delivers wireless Business-to-Employee (B2E) solutions, connecting
mobile workers to the business data and systems they need to do their jobs.
Atlanta-based Veriprise partners with device manufacturers, wireless carriers,
application vendors, systems integrators, and hosting partners to deliver secure
and flexible wireless solutions to customers. These products range from
software-only solutions that reside behind the corporate firewall to outsourced
solutions that couple devices, airtime and hosting services in one package.
Beginning in April 2001 the Company implemented a reduction
in force program to reduce the number of employees by approximately 40. This
action coupled with wage and salary reductions implemented in mid-April will
have the effect of reducing future payroll expenditures by approximately 40%.
The wage and salary reductions affected all employees worldwide. The pay
reductions ranged from 10% for individual contributors up to 30% for vice
presidents. Six of the Company's senior executives are being paid at $1.00 per year,
with stock incentives.Item 2. Management's discussion and analysis of financial condition and
results of operations
This quarterly report on Form 10-Q contains certain forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Actual results
could differ materially from those projected in the forward-looking statements
as a result of certain of the risk factors set forth below and elsewhere in this
Quarterly Report on Form 10-Q. In evaluating the Company's business, prospective
investors should carefully consider the following factors in addition to the
other information presented in this report.
You should read the following discussion in conjunction with the unaudited
condensed consolidated financial statements and accompanying notes included in
Part I-Item 1 of this quarterly report, and the audited consolidated financial
statements and accompanying notes, and management's discussion and analysis of
financial condition and results of operations included in our Annual Report on
Form 10-K for the year ended December 31, 2000.
Our goal is to become the leader in enabling the secure extension of
enterprise class information, on a wireless basis, to Information Appliances
(used by people) and Intelligent Devices (machines) through our Touchpoint
software membrane. To accentuate this focus, on February 22, 2001, we completed
the divestiture of our client/server business. The divestiture provides
management the ability to devote its complete attention and resources to
developing new products and services related to mobile, wireless, and embedded
computing. Management believes that the mobile and embedded markets provide
greater growth potential than our divested client/server business.


For the year ended December 31, 2000, net revenue related to the divested
business represented approximately $33 million or approximately 80% of our net
revenue, and the divestiture is anticipated to result in annualized cost savings
of approximately $35 million.
As the name of the Company, "Centura Software Corporation", was developed and
used in our client/server business, which has now been sold, management has
begun the process to rename the Company "Mbrane, Inc." and to develop the name
"Mbrane" as the brand for its products. Subject to approval by the Company's
stockholders, the Company's board of directors has approved changing the name of
the Company to "Mbrane, Inc." At its annual meeting of stockholders, scheduled to be held
June 19, 2001, the Company will seek stockholder approval of the name change.
The Company's stock symbol on the Nasdaq National Market was changed to MBRN,
effective April 2, 2001. References to "we", "us", "our", "Mbrane", "Centura" or
the "Company" means Centura Software Corporation and its subsidiaries and
divisions (which now conduct business as Mbrane), and their predecessor
companies and subsidiaries.

Results of Operations:
Net product revenues
The following table presents our net product revenues by product line and
approximate percentage of total net product revenues for the three months ended
March 31, 2001 and March 31, 2000:


Three Months Ended March 31,
                                      ---------------------------------------
                                              2001                2000
                                      ------------------- -------------------
                                        (in       % of      (in       % of
                                      thousands)  total   thousands)  total
Mobile and embedded products.........     $735        49 %  $1,674        28 %
Divested products....................      777        51     4,299        72
                                      --------- --------- --------- ---------
  Total net product revenue..........   $1,512       100 %  $5,973       100 %
                                      ========= ========= ========= =========

Net product revenues decreased $4,461,000, or 75%, for the three months ended
March 31, 2001 compared with the three months ended March 31, 2000. The decrease
was primarily due to the divestiture of our client server business and its
related products. Among the products the Company retained, there was a $939,000,
or 56% decrease from the year ago quarter. This decrease was due to two large
multi-year embedded database contracts that closed in 2000.
Net service revenues
Net service revenues primarily comprises fees that entitle our customers
to the right to receive product revision upgrades and updates as and when they
become available, telephone support and consulting services. The following table
presents our net service revenues by product line and approximate percentage of
total net service revenues for the three months ended March 31, 2001 and March
31, 2000:

Three Months Ended March 31,
                                          ---------------------------------------
                                                   2001                2000
                                          ------------------- -------------------
                                            (in       % of      (in       % of
                                          thousands)  total   thousands)  total
Mobile and embedded product services ....     $618        26 %    $978        15 %
Divested product services ...............    1,726        74     5,453        85
                                          --------- --------- --------- ---------
  Total net service revenue..............   $2,344       100 %  $6,431       100 %
                                          ========= ========= ========= =========

Net service revenues decreased 64% to $2,344,000 for the three months ended
March 31, 2001, from $6,431,000 for the three months ended March 31, 2000. The
decrease is primarily due to the divestiture of the client/server business.
Service revenue related to divested products decreased $3,727,000 or 68%.
Service revenue related to retained products declined by $360,000 or 37%. This
decline is due to a decrease in consulting revenues relating to porting software
to different operating systems, and a decline in support contracts consistent
with declines in our product revenue.
Total net revenues by geographic region
Following our divestiture of our client/server business, we believe
previous geographic comparisons are not indicative of our on-going business. For
the three months ended March 31, 2001 our net revenues related to our retained
mobile and embedded products, including services, were $1,353,000. Of these net
revenues $1,131,000 or 84% were from North America. The remaining $222,000, or
16% were from Europe. Revenues have been allocated to geographic regions based
primarily upon destination of product shipment.
The Company plans to market and sell its products globally in the future, and
views global sales as an important component of its strategy. We have sales
offices in North America, the United Kingdom, and Australia, and intend to serve
our customers from these offices on a global basis.
Cost of net product revenues
Cost of product revenues includes the cost of production and the
amortization of capitalized software. Cost of production includes the cost of
subcontracted production and royalties for third party software.
The cost of product revenues for the three months ended March 31, 2001 was
$179,000. This includes $81,000 in amortization of capitalized software
development costs. Cost of product revenues for the three months ending March
31, 2000 were $428,000, including $156,000 in amortization of capitalized
software development costs. The cost of product revenues decreased $249,000, or
58%, from the year-ago period. The decrease is primarily due to the divestiture
of our client/server business and the resulting decrease in volume of shipments
resulting from the divestiture.
We capitalize internal software development costs eligible for capitalization
from the time that a project reaches technological feasibility until the time
that the products derived from the project are released for sale. Software
purchased from third parties and included in our products is also capitalized if
technological feasibility for the project has been reached at the time of
purchase. These capitalized costs are then amortized ratably over the useful
life of the products, which is generally estimated to be two to three years.

Cost of net service revenues
Cost of service consists primarily of personnel costs related to product
license maintenance, training and technical support. For the quarter ended March
31, 2001 cost of service revenues was $386,000. For the quarter ended March 31,
2000 the cost of service revenues was $753,000. The decrease of $367,000, or
49%, is primarily the result of personnel reductions in the technical support
and consulting services areas.

Amortization of acquired products
In June 1999, we capitalized $2,670,000 of acquired technology, as part
of the acquisition of Raima Corporation. In the three months ended March 31,
2001 and March 31, 2000, the associated amortization expense was $133,000.
Sales and marketing expenses
Sales and marketing expenses consist principally of salaries, sales
commissions and costs of advertising and marketing campaigns. For the three-
month periods ending March 31, 2001 and 2000, sales and marketing expenses were
$7,054,000 and $7,768,000 respectively. The decrease in expenses of $714,000, or
9%, is caused by decreased commission expense on lower revenues, and decreases
in advertising and promotion programs.
Engineering and product development expenses
Engineering and product development costs before reductions for internal
development costs that are capitalized were $2,814,000 and $2,744,000 for the
respective quarters ending March 31, 2001 and 2000. This represents an increase
of $70,000. After reducing for capitalized internal development costs, net
engineering and development costs were $2,668,000 and $2,043,000 for each of the
quarters ending March 31, 2001 and 2000, respectively.
The increase in gross engineering and product development expenses was due to
the addition of a new subsidiary in the fourth quarter of 2000. This new
subsidiary, which is focused on the development of new software products,
accounted for $607,000 of engineering and product development expenses in the
first quarter. Without the new subsidiary engineering and product development
expenses were lower when compared to the three-month period ending March 31,
2000 by $537,000. This reduction is mostly due to decreases in headcount.

Capitalized software development costs decreased from $701,000 to $146,000
for the three months ended March 31, 2001, compared with the three months ended
March 31, 2000, due to a reduction in the number of products that were in the
development lifecycle stage that permits capitalization of development costs.
That is the stage between establishment of technological feasibility and release
to product manufacturing.

We believe that the development of new products and the enhancement of
existing products are essential to our continued success, and we intend to
continue to devote substantial resources to new product development.
General and administrative expenses
General and administrative expenses consist primarily of staffing and
related expenses, rent and facilities expense, depreciation, and outside
services. These costs for the three months ended March 31, 2001 and March 31,
2000 were $2,252,000 and $2,194,000, respectively. The increase of $58,000, or
3%, in the first quarter of 2001 over the first quarter of 2000 is due to
expenses related to employee retention that were paid to certain employees to
cause them to stay with the Company through the transition period during which
the sale of the client/server business was being completed. The one-time costs
were partially offset with lower personnel costs after the completion of the
sale.
Amortization of goodwill and workforce intangible

As part of the June 1999 acquisition of Raima, we capitalized $3,266,000 of
goodwill, which is being amortized over its estimated period of benefit of five
years, and $670,000 of workforce intangible, which is being amortized over its
estimated period of benefit of three years. For the three months ended March 31,
2001, goodwill amortization expense was $147,000 and the workforce intangible
amortization expense was $56,000.
Other income (expense), net
Other income (expense), net is comprised of interest income, interest
expense and gains or losses on foreign currency transactions. For the three
months ended March 31, 2001 other income (expense) increased to net other
expense of $318,000 from a net other income of $123,000 in the same three months
of the prior year. This increase in expense is due to lower interest income, as
a result of smaller cash balances on deposit, in addition to unfavorable foreign
exchange rates in the first quarter of 2001 as compared with the first quarter
of 2000.

Gain on divestiture
On February 22, 2001 the Company completed the sale of its client server
business. The transaction provided for the purchaser, Gupta Holdings, LLC to pay
Mbrane approximately $3.1 million, and take over deferred revenue obligations of
approximately $10.7 million. In exchange the purchaser acquired certain assets,
subsidiaries, and subsidiaries' assets. The table below summarizes the gain
recorded on the transaction:

Summary of  Gain on Divestiture of
                                               Client/Server Business
                                                   (in thousands)

Cash received from purchaser ............          $   3,060

Deferred revenue obligation assumed
  by purchaser ..........................             10,746

Assets sold to purchaser
  Accounts receivable ...................   (2,397)
  Capitalized software, net of
    amortization ........................   (1,104)
  Trademarks ............................     (630)
  Fixed assets, net of depreciation .....     (191)
  Deferred commissions and other assets .     (931)
Total assets sold to purchaser ..........             (5,253)

Effect of foreign exchange and
  other expenses ........................               (613)

Gain on divestiture of client/server                ----------
  business ..............................              7,940
                                                    ==========

Provision for income taxes
The provision for income taxes in the first quarter of 2000 primarily
relates to foreign withholding taxes. Due to our net losses, no provision for
income taxes was made for the three-month periods ended March 31, 2001.
Accretion of Series A preferred stock to redemption value and
dividends
The prorated accretion adjustment of $4,125,000, booked in the three
months ended March 31, 2000, reflects the theoretical charge that would have
resulted had we been unable to register the shares of common stock underlying
the preferred stock within the required period for registration of 150 days. In
the event that the shares had not been registered within the required timeframe,
the preferred stockholders would then have been entitled to redeem the preferred
stock at 125% of face value. Our liability would therefore have increased to
125% of the face value of the preferred stock. Even though the registration of
the shares of common stock became effective on April 3, 2000, and we have no
obligation to pay 125% of the face value, application of generally accepted
accounting principles required us to accrete to this potential redemption
value.
The preferred stock cumulative dividend of $141,000 for the three months
ended March 31, 2000 was accrued at the rate of 4.5% per annum, and was paid in
the form of incremental preferred stock on March 31, 2000.
Accretion of Series B preferred stock to redemption value, beneficial
conversion feature, and dividends.
If at any time after 150 days from the commitment date (March 9, 2001)
the registration statement is not declared effective, the Company must redeem
all or any unspecified portion of the Series B preferred stock at a redemption
price equal to 130% of the aggregate value of $2,000,000. The amount reflected
as accretion of Series B preferred stock to redemption value represents a
prorating of the total accretion of $1,482,000 over the 22 days of the 150 day
accretion period that fell in the first quarter of 2001.

The Company received cash of $1,824,000 from the issuance of the
Preferred Stock and allocated an additional $74,000 to issue costs which represents
the fair value of warrants granted to the placement agent. The remaining $1,750,000
was allocated
to the Preferred Stock, the
warrants to purchase 114,286 shares of common stock, and the option of the
purchaser to purchase additional shares of Preferred Stock upon certain
circumstances, based upon their fair values on the date of the purchase. The
relative value allocated to the common stock warrants was $80,817 based on an
independent valuation using the Black Scholes method and the following
assumptions; exercise price $2.01, no dividends, term of 5 years, risk free rate
of 4.65% and a volatility of 90%. The relative fair value allocated to the
option to purchase additional shares of Preferred Stock was determined to be
$551,637 based on an independent valuation using the Black Scholes model and the
following assumptions; exercise price $2.00, no dividends, term of 9 months,
risk free rate of 4.65% and a volatility of 90%. Based upon the closing price of
the Company's common stock on the date of the commitment ($1.25), the relative
fair value allocated to the Preferred Stock on an as-converted basis, exceeded
the amount assigned to the Preferred Stock by approximately $151,000. The
Company recorded the $151,000 excess, representing the value of the beneficial
conversion feature as an increase to additional paid in capital and a decrease
in Series B Preferred Stock. The beneficial conversion feature is recognized as
a deemed dividend to the Series B Preferred Stock over the over the minimum
period in which preferred holders realize their return. Because the Preferred
shares are immediately convertible, the estimated fair value of the beneficial
conversion feature associated with the Preferred Stock is realizable upon the
closing of the investment. Accordingly, a $151,000 deemed dividend was
recognized as a charge to additional paid in capital, and for loss per share
computations, net loss applicable to common stockholders and an increase in the
carrying value of the Preferred Stock.
In the three-month period ending March 31, 2001 we accreted dividends at 4.5%
on Series B preferred stock in the amount of $7,500. In the three-month period
ending March 31, 2001 we also accreted dividends at 4.5% on the contingent
beneficial conversion feature of the Series B preferred stock in the amount of
$7,500.

Liquidity and Capital Resources:

Cash flows

Three Months Ended
                                                   March 31,
                                             -------------------
                                               2001      2000
                                             --------- ---------
                                                 (in thousands)
Cash and cash equivalents at
  beginning of period.......................$   5,685 $  20,614
Net cash (used in) provided by:
  Operating activites.......................   (6,339)      218
  Investing activities......................    2,617      (737)
  Financing activities......................    1,343     1,740
Effect of exchange rate changes
 on cash and cash equivalents...............      (45)      (65)
                                             --------- ---------
Cash and cash equivalents at
  end of period.............................$   3,261 $  21,770
                                             ========= =========

Net cash from operating activities decreased $6,557,000 in the three months
ended March 31, 2001 compared with the same period in 2000. This decrease is
primarily due to the operating loss incurred in the first quarter of 2001and
larger reduction in accounts payable and accrued liabilities in the three months
ended March 31, 2001 compared with the same period in 2000.
Net cash generated from investing activities increased $3,354,000 in the
three months ended March 31, 2001 compared with the three months ended March 31,
2000. This increase is primarily attributed to the result of the $3,060,000
raised in the divestiture of the client/server business, and lower investments
in equipment and capitalized software than in the same period in 2000.
Net cash from financing activities decreased $397,000 in the three months
ended March 31, 2001 compared with the three months ended March 31, 2000. This
decrease is primarily due to cash proceeds from the issuance of common stock in
the first quarter of 2000 being higher than the proceeds of the issuance of
Series B Preferred Stock in the first quarter of 2001.
The Company is actively taking steps to reduce its expenses and cash out
flows, and is making efforts to increase revenues and generate cash by other
means. Given the current market conditions for the Company's products,
particularly slower adoption of wireless technology and longer sales cycles, we
believe it is likely that expected cash flows from operations and existing cash balances will
be insufficient to meet our anticipated working capital and capital expenditure
requirements for continuing operations. Therefore, we are actively seeking new
sources of capital in order to have adequate financial resources for operational
or other needs. There can be no assurance that new capital will be available on
reasonable terms or at all. Any additional equity financing may result in significant
dilution to our stockholders.

Beginning in April 2001 the Company implemented a reduction in force program
to reduce the number of employees by approximately 40. This action coupled with
wage and salary reductions implemented in mid-April will have the effect of
reducing future payroll expenditures by approximately 40%. The wage and salary
reductions affected all employees worldwide. The pay reductions ranged from 10%
for individual contributors up to 30% for vice presidents. Six of the Company's
senior executives are being paid at $1.00 per year, with stock incentives.

Working capital
At March 31, 2001, our working capital, defined as current assets less
current liabilities, was at a deficit of $1,622,000. This was an improvement of
$2,954,000 from our working capital deficit of $4,576,000 at December 31, 2000.
This is largely a result of the divestiture of the client/server business, which
resulted in cash proceeds of $3,060,000 and a reduction in the deferred revenue
current liability of $10,746,000. Working capital was also improved by the cash
proceeds of $1,824,000 from the issuance of Series B preferred stock. These
improvements were partially offset by continued operating losses of the Company,
and the resulting payments made to employees and vendors.Our capital requirements also may be affected by
acquisitions of businesses, products and technologies that are complementary to
our business, which we may consider from time to time. We regularly evaluate
such opportunities. Any such transaction, if consummated, may further reduce our
working capital or require the issuance of our common stock and/or preferred
stock.

Foreign currency forward contracts
At March 31, 2001 we had $4,855,000 in unsecured foreign currency forward
contracts denominated in four European currencies, including German
Deutschemarks, British Pounds Sterling, Dutch Guilders and Italian Lire, as well
as Australian Dollars, as part of a program to reduce the financial exposure
arising from foreign denominated monetary assets and liabilities.

Current assets and liabilities presented in the accompanying March 31, 2001
balance sheet are $4,727,000 less than as presented in our press release
issued on April 23, 2001. This is because after further review by the
Company and our external accountants, it was determined that the value of
foreign exchange contracts should be shown at their net value of $128,000,
and not at their gross values of a current asset of $4,855,000 and a current
liability of $4,727,000. This occurred as the Company was in the initial
adoption of SFAS 133 in the first quarter of 2001.



Debt financing
In February 2001, we entered into an asset-based loan facility with
Pacific Business Funding, a division of Cupertino National Bank. This loan
facility allows us to borrow up to $2.5 million at an annual interest rate of
9.6%. Under the terms of the loan we are allowed to borrow up to the lesser of
80% of our accounts receivable that are under 90 days old, or $2.5 million. The
facility has an initial term of one year, and is renewable annually thereafter
unless terminated by either party. As of March 31, 2001 the loan amount
outstanding was $1,997,000, and total amount available to borrow against future
receivables was $503,000. Additionally, as part of the Cupertino loan agreement,
the lender has a lien on all of the Company's assets, including, but not limited
to, accounts receivable, letters of credit, customer lists, copyrights, patents,
trademarks licenses, intellectual property, inventory, equipment and machinery,
investment securities, and books and records, including computer programs.

Factors That May Affect Future Results:Our current business is not profitable and
may not become profitable.
To date, our mobile, wireless and embedded business has not been profitable
and we do not expect it to become profitable during 2001. Although it is
management's objective to minimize cash losses in the remainder of 2001 and to
become profitable in 2002, there can be no assurance that this objective will be
achieved.
We have incurred losses from operations during the fiscal
years ended December 31, 2000 and December 31, 1999 and have been dependent upon
raising money from issuances of our preferred stock and common stock in order to
fund these losses and our investment in assets needed to establish our business.
We currently plan to increase our revenues to a level that will finance expected
expenditures and result in at least neutral cash flows from operations. However
until we reach this stage we will continue to use our current cash and cash
equivalent balances to meet the shortfall. We are also actively seeking to raise
additional capital in the financial markets. There can be no assurance that such
financing will be available, or available on terms that are acceptable. Any
additional issuance of equity or equity-related securities will be dilutive to
our stockholders. Management has developed and executed cost reduction plans to
reduce expenses to levels that could be financed by revenues generated as the
market develops for our products. However, there can be no assurance that cost
cutting exercises will be successful in completely eliminating the difference
between expenditures and revenues or that such actions would not have a harmful
effect on our business and results of operations.The market for mobile,
embedded and wireless devices may grow more slowly than anticipated.

Although we believe the market for utilizing mobile, wireless
and embedded technology will grow quickly, we cannot predict the rate at which
such technology will be adopted. If the rate of adoption of such technology is
slower than anticipated, the growth of our revenue will likely be slowed, which
will negatively affect our financial position.

The volatility of our common
stock price may harm our growth and ability to raise capital.

Our common stock has a history of high volatility and
our stock price may vary in response to quarterly variations in operating and
financial results, as highlighted below, announcements of new products or
customer contracts by us or our competitors, litigation and other factors,
including sales of substantial blocks of our common stock. In addition, the
extreme price fluctuations of the stock market in general, and technology stocks
in particular (including ours), may affect the price of our stock, independent
of whether we have experienced changes in our business, operating results, or
financial condition. Fluctuations in the trading price or liquidity of our
common stock may adversely affect our ability to raise capital through future
equity financings, or to negotiate successful stock based acquisitions of other
companies.

Fluctuations in our quarterly and
annual results may adversely affect our stock price

Our quarterly and annual operating results have fluctuated significantly in
the past and may continue to do so in the future. On an annual basis
historically, including the results of our client server business which was sold
in February 2001, we reported a loss of $30.0 million in 2000, a loss of $3.2
million in 1999, and a profit of $2.1 million in 1998. Our future operating
results may be below the expectations of public market analysts or investors. We
also may not learn of, or be able to confirm, revenue or earnings shortfalls
until late in, or after, the fiscal quarter; consequently we may not be able to
adjust spending in a timely manner to compensate for the shortfalls.
Accordingly, any significant shortfall in sales of our products or services in
relation to our expectations, or those of analysts or investors, could have an
immediate adverse impact on the price of our common stock. A number of factors
are likely to cause variations in our quarterly and annual results. From time to
time, new technologies may be announced, developed, or delivered by us or our
competition that have the potential to replace or shorten the life cycles of our
existing products. The announcement of new products may also cause customers to
delay their purchasing decisions in anticipation of such products. We may
therefore occasionally experience a reduction in demand, and decreased sales,
for our existing products. In addition, in some cases our revenue recognition is
dependent upon the business activities of our customers, and the timely and
accurate reporting of their activities to us, making predictability of the
related revenue extremely uncertain. For example, many of our product licensing
arrangements are subject to revenue recognition on a per-unit deployed basis,
including cases where a deferred obligation to such customers is gradually
extinguished. Delays in the introduction or availability of new hardware and
software products from third parties may also negatively affect sales of our
products.

Cyclical factors, including year and quarter end purchasing and the timing of
marketing activities, such as industry conventions and tradeshows, may cause our
operating results to fluctuate. Although we have operated historically with
little or no backlog, we have experienced cyclical patterns of product revenue,
contributing to variation in quarterly worldwide product revenues and operating
results. We have generally realized lower revenues in the first quarter as
compared with the immediately preceding fourth quarter of any given year and
lower European revenues in the third quarter as compared to the rest of the
year. We have also experienced a pattern of recording a substantial portion of
our revenues in the third month of a quarter. As a result, product revenues in
any quarter are dependent on orders booked in the last month. Our staffing and
other operating expenses are based in part on anticipated net revenues, a
substantial portion of which may not be generated until the end of each quarter.
Delays in the receipt or shipment of orders, or the actual loss of product
orders, can cause significant variations in operating results from quarter to
quarter.

Our restructuring efforts may not improve
our operational performance

We have restructured our operations and announced changes in strategic
direction in the past:

- In June 1999, we extended our offering of embedded database products by
acquiring Raima Corporation, a Seattle-based vendor of cross-platform micro-databases and data
management tools. Through this acquisition we were further
able to focus our efforts throughout 1999 and 2000 on the Information Appliance
and Intelligent Device markets.
- In February 2001 we completed a divestiture of our client/server product and
services business. The divestiture provides management the ability to devote its
complete attention and resources to developing new products and services related
to mobile, wireless, and embedded computing. Management believes that the mobile
and embedded markets provide greater growth potential than the client/server
business.
- In April 2001 we instituted a reduction in force program of approximately 40 and wage and salary
decreases for all employees worldwide in an effort to conserve cash and reduce expenses.
The pay decreases ranged from 10% for individual contributors up to 30% for vice presidents.
Six of the Company's senior executives are being paid at $1.00 per year, with stock incentives.

We may possibly undertake other major restructuring efforts or changes in
strategic direction in the future. It is uncertain whether our past or future
strategic changes will improve our operational results.

Our inability to retain or attract key personnelmay prevent our business from growing.

We are highly dependent on our executive officers and
other key personnel, and the loss of these employees may harm our competitive
position. Our future success will also depend largely on our ability to continue
to attract highly skilled personnel. Competition is intense for employees with
highly technical, management, and other skills in the software industry, and it
may be difficult to attract or retain qualified key employees. Without strong
management and talented employees we may not continue to develop successful new
products or to obtain important strategic alliances.

In April 2001 we instituted wage and salary decreases for all employees
worldwide in an effort to conserve cash and reduce expenses. The pay decreases
ranged from 10% for individual contributors up to 30% for vice presidents. Six of the
Company's senior executives are being paid at $1.00 per year, with stock incentives.
These wage and salary decreases may reduce the company's ability to attract and
retain personnel.

The
lack of timely market delivery of our products and services or the inability to
achieve market acceptance may result in negative publicity and
losses

The markets for our software products and services are characterized by rapid
technological developments, evolving industry standards, swift changes in
customer requirements, computer operating environments, and frequent new product
introductions and enhancements. If one or more competitors introduce products
that better address customer needs we may lose our market positioning and
momentum, and as a consequence our revenues may decrease.

Our success depends on the ability of our primary products, including
Mbrane's Touchpoint Mobile Companion; Touchpoint Embedded Companion (including
RDM); Touchpoint Server Partner; and Velocis to perform well in various business
hardware and software application environments, and on the ability of our
consulting organization to successfully assist customers in their solutions
development. Any failure to deliver these products and services as scheduled,
their failure to achieve market acceptance, rapid technological change, or
failure to timely release new versions or upgrades, could result in negative
publicity and decreased sales. Like many software companies, we have experienced
delays in the development of new products and product versions, resulting in
loss or delays of product revenues. There can be no assurance that we will not
experience further delays in connection with our current product development or
future development activities. We are also increasingly dependent on the efforts
of third-party "partners," including system integrators, independent software
vendors and distributors, to develop, implement, service and support our
products. These third parties increasingly have opportunities to select from a
very broad range of products from our competitors, many of whom have greater
resources and market acceptance than ours. In order for our products and
services to succeed in the market we must actively recruit and sustain
relationships with these third parties.

Software errors in some of our products may cause our
future sales to decrease

Software products as complex as those offered by us may contain undetected
errors when first introduced, or as new versions are released. Although we have
not experienced material adverse effects resulting from any such errors to date,
errors could be found in new products or releases after commencement of
commercial shipments, resulting in adverse product reviews and a loss of or
delay in market acceptance.

If
our target customers shift requirements away from mobile, wireless, and embedded
systems software applications, demand for our products may decrease
significantly

To date, substantially all of our revenues have been derived from the
licensing of our embedded database products for PC client/server systems and
other embedded software environments. Licensing of products for use in mobile,
wireless, embedded systems, and related consulting and support services, is
expected to account for substantially all of our revenues for the foreseeable
future. The market for mobile, wireless and embedded systems in general, and the
segments of such market addressed by our products in particular, are relatively
new. Our future financial performance will depend in part on the continued
expansion of this market and these market segments, the growth in the demand for
our other products, as well as increased acceptance of our products by
information technology professionals. We cannot assure you that the market for
mobile, wireless and embedded systems software in general, and the relevant
segments of the market addressed by our products in particular, will continue to
grow. Neither can we assure that we will be able to respond effectively to the
evolving requirements of the market and market segments, or that information
technology professionals will accept our products. If we are not successful in
developing, marketing, localizing and selling applications that gain commercial
acceptance on a timely basis, our competitive position may suffer and our
revenues may decrease.

The market for mobile, wireless, and embedded systems
software is highly competitive, and we risk losing our market share to other
companies

The mobile, wireless, and embedded systems software market is
intensely competitive and rapidly changing. Our current and prospective
competitors offer a variety of solutions to address this market segment.
Competitors range from providers of connectivity and synchronization solutions,
such as Abaco, Aether Systems, Broadbeam, Brience, Palm, Everypath, Fusion One,
Odyssey, and Pumatech to providers of both connectivity-synchronization and
small footprint embeddable databases such as IBM, Microsoft, Object Store,
Oracle, Point Base and Sybase. Our competitors could introduce products with
more features and lower prices than our offerings. These companies could also
form partnerships with established companies to compete with us. As our market
expands, it becomes more attractive to any number of companies. Companies with
significantly greater resources than ours could attempt to enter the market, or
increase their presence in the market, by acquisition, forming strategic
alliances with our competitors, or by introducing products specifically designed
for these markets.



Our inability to compete successfully in
international markets may reduce our revenues.

For the year ended December 31, 2000 our international
sales were 56% of our net revenues, for the year ended December 31, 1999 our
international sales were 55% of our net revenues, and for the year ended
December 31, 1998 our international sales were 54% of our net revenues. A key
component of our strategy is continued expansion into international markets
particularly as the international market for mobile, wireless and embedded
systems software has in many instances developed ahead of domestic markets. We
currently anticipate that international sales, particularly in new and emerging
markets, will continue to account for a significant percentage of total
revenues. We will need to retain effective VARs, and hire, retain and motivate
qualified personnel internationally to maintain and/or expand our international
presence. However, we cannot assure you that we will be able to successfully
market, sell, localize, and deliver our products in international markets. There
are also risks inherent in doing business internationally; unexpected changes in
regulatory requirements and government controls, problems and delays in
collecting accounts receivable, tariffs, export license requirements and other
trade barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, political and economic instability, fluctuations in currency
exchange rates, seasonal reductions in business activity during summer months in
Europe and other parts of the world, restrictions on the export of critical
technology, and potentially adverse tax consequences, could adversely impact the
success of international operations. In addition, effective copyright and trade
secret protection may be limited or unavailable under the laws of some foreign
jurisdictions. Also, sales of our products are denominated either in the local
currency of the respective geographic region or in US dollars, depending upon
the economic stability of that region and locally accepted business practices.
Any increase in the value of the US dollar, relative to local currencies in
those markets, may negatively impact our competitive position and our
revenues.

Our inability to adequately protect our proprietary
technology may result in losing our competitive position

We currently have two patents pending with respect to our proprietary
encryption methodology and four patents pending with respect to our Touchpoint
Companion and Server architecture. The source code for our proprietary software
is protected both as a trade secret and as a copyrighted work. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use our products or technology without authorization, or to develop similar
technology independently. In addition, effective copyright and trade secret
protection may be unavailable or limited in some foreign countries. We generally
enter into confidentiality or license agreements with our employees,
consultants, and vendors, and generally control access to and distribution of
our software, documentation, and other proprietary information. Despite efforts
to protect proprietary rights, unauthorized parties may attempt to copy aspects
of our products or to obtain and use information that is regarded as
proprietary. Policing such unauthorized use is difficult. There can be no
assurance that the steps taken by us will prevent misappropriation of our
technology or that such agreements will be enforceable. In addition, litigation
may be necessary in the future to enforce intellectual property rights, to
protect trade secrets, or to determine the validity and scope of the proprietary
rights of others. Such litigation could result in substantial costs and
diversion of our resources. Third parties may also claim infringement by us with
respect to current or future products. We expect that we will increasingly be
subject to such claims as the number of products and competitors in the mobile,
wireless, and embedded system software markets grow and the functionality of
such products overlaps with other industry segments. In the past, we have
received notices alleging that our products infringe trademarks of third
parties. We have historically dealt with and will in the future continue to deal
with such claims in the ordinary course of business, evaluating the merits of
each claim on an individual basis. There are currently no material pending legal
proceedings against us regarding trademark infringement.

Any third party infringement claims, whether or not they are meritorious,
could result in costly litigation or require us to enter into royalty or
licensing agreements. If such agreements are required, they may be unavailable
or only available on unacceptable terms. If we were found to have infringed upon
the proprietary rights of third parties we could be required to pay damages,
cease sales of the infringing products, and redesign or discontinue such
products.

Our
inability to obtain additional financing on favorable terms may substantially
harm the future growth of our business.

We are seeking additional capital
to finance continuing operations and the acquisition of new products,
technologies, and capital equipment. There is no assurance regarding the
availability or terms of this financing. Additional capital in the form of equity financing may also
result in significant dilution to our existing stockholders.

Future issuance of shares of
our common stock under existing option plans and outstanding warrants, will
dilute the ownership of our existing stockholders and the sale of such shares
could negatively affect our stock price.

As of March 31, 2001, we had outstanding
warrants to purchase 1,774,000 shares of our common stock and outstanding
options to purchase 10,350,000 shares of our common stock. Future issuance of
such shares of our common stock under these outstanding warrants and options,
will dilute the ownership of our stockholders. In addition, sales, including
block sales, of a significant number of shares of common stock, or the potential
for such sales, could adversely affect the prevailing stock market price for our
common stock.

Conversion of the Series B
Cumulative Convertible Preferred Stock and exercise of the related warrants will
dilute the interests of existing stockholders.

On March 9, 2001 we issued 2,000 shares of Series B
Cumulative Convertible Preferred Stock, for a price of $1,000 per share, and
entered into an agreement to issue and sell an additional 3,000 shares of Series
B Cumulative Convertible Preferred Stock, subject to certain conditions, and
extended an option to purchase an additional 6,000 shares of Series B Cumulative
Convertible Preferred Stock, together with warrants to purchase 114,000 shares
of common stock. Should any of these securities be converted or exercised, the
interests of our existing stockholders will be diluted proportionately.

Our failure to obtain
stockholder approval of certain proposals in connection with the sale of our
Series B Cumulative Convertible Preferred Stock would have adverse financial
effects on the Company.

Our agreement to sell our Series B Cumulative Convertible
Preferred Stock requires that we seek stockholder approval to increase our total
number of authorized shares and approval to sell and issue to the investor
securities representing more than 20% of our outstanding common stock, which may
occur under certain circumstances. The failure of our stockholders to approve
either of these proposals will result in material financial penalties to us,
including the requirement that we redeem shares of the Series B Cumulative
Convertible Preferred Stock at 130% of their purchase price, plus accumulated
unpaid dividends.

The failure of our stockholders to approve a proposal to increase the number
of authorized shares of common stock would have a significant adverse effect on
our business.

At our next stockholder meeting, we intend to seek stockholder approval to
increase the number of authorized shares of common stock available for issuance
from 60,000,000 to 90,000,000 shares. If we are unable to obtain such approval,
we will be unable to complete our existing agreement to sell 3,000 shares of our
Series B Cumulative Convertible Preferred Stock for an aggregate gross purchase
price of $3,000,000 and unable to raise additional capital through the issuance
of other equity securities, to consummate strategic acquisitions, or to issue
stock for other purposes.

Item 3. Quantitative and qualitative disclosure
about market risk

We are exposed to market risk from changes
in foreign currency exchange rates and interest rates that could impact our
results of operations and financial condition.

We have managed our exposure to foreign currency exchange risk using
derivative financial instruments (forward contracts) as a risk management tool
and not for speculative or trading purposes

We have used these foreign exchange contracts to reduce significant exposure
to the risk that the eventual net cash flows resulting largely from the sale of
products and services to non-U.S. customers will be adversely affected by
changes in exchange rates. These instruments allow us to reduce our overall
exposure to exchange rates as the gains and losses on the contracts offset the
losses and gains on the assets, liabilities and assets being hedged.

However, annual gains and losses may differ materially from this analysis,
based on the changes in the timing and amount of foreign currency exchange rate
movements and our actual exposures and hedges.

At March 31, 2001, we had a total of $4.9 million in 30-day forward
contracts. The forward contracts are comprised of: German Deutsche Marks ($1.6
million), British Pounds Sterling ($2.0 million), Netherlands Guilders ($0.5
million), Italian Lire ($0.1 million) and Australian Dollar ($0.7 million). The
carrying value of these of these financial instruments approximates their
respective fair values.

In May 2001 the Company ceased using derivative financial instruments
(forward contracts) to hedge foreign currency exposure. While forward contracts
can reduce the risk of exchange rates on the operations of the company, they
also involve risk in that any realized losses on forward contracts must be paid
when the contract comes due. Given the liquidity position of the Company,
management decided to eliminate the risk of incurring realized losses on forward
contracts. The Company will continue to hedge specific substantial individual foreign
denominated receivables from time to time.

Additionally, the decline in value of non-U.S. dollar currencies may
adversely impact our ability to contract for sales in U.S. dollars and our
products and services may become more expensive to purchase in U.S. dollars for
local customers doing business in the countries of the affected currencies.

Our international business is also subject to risks customarily encountered
in foreign operations, including changes in a specific country's or region's
political or economic conditions, trade protection measures, import or export
licensing requirements, unexpected changes in regulatory requirements and
natural disasters.

We are subject to interest rate risk on our investment portfolio. However,
our portfolio consists of only cash and cash equivalents at March 31, 2001, and
thus our interest rate risk is not material.

We are further subject to interest rate risk on our asset based loan
facility. However, we believe that the adverse movements of interest rates would
not have a material effect on our consolidated financial position, results of
operations or cash flows.

PART II

OTHER INFORMATION

Item 1. 	Legal proceedings

As of March 31, 2001, to the best of our knowledge there
were no pending actions, potential actions, claims or proceedings against us
that could reasonably be expected to result in damages to us which would have a
material adverse effect on our business, results of operations or financial
condition. We exist in a volatile legal and regulatory environment and it is not
possible to anticipate or estimate the potential adverse impact of unknown
claims or liabilities against us, our officers and directors, and as such no
estimate is made in our financial statements for such unknown claims or
liabilities.



Item 2.		Changes in securities and use of proceeds

On March 12, 2001, the Company completed a private placement
of equity securities in the first of up to three issuances. The equity
securities issued are Series B Cumulative Convertible Preferred Stock (the
"Preferred Stock"), as designated in the Company's Certificate of Designation,
Preferences and Rights of Series B Cumulative Convertible Preferred Stock (the
"Certificate of Designation") filed with the Secretary of State of the State of
Delaware on March 9, 2001. The first issuance of Preferred Stock, in the amount
of $2 million, is convertible into shares of common stock at the lesser of an
average market price of shares of our common stock immediately preceding
conversion, or $1.75 per share. The second issuance of Preferred Stock is
subject to the satisfaction of certain conditions (including stockholder
approval) and is expected, subject to the satisfaction those conditions, to
close in the third quarter of 2001. If the conditions are satisfied, the amount
of the second issuance will be between $2 million and $3 million. The conversion
price of the Preferred Stock involved in the second issuance is dependent on the
price of the Company's common stock prior to the second issuance. The third
issuance, if consummated, would be based on a call option held by first issuance
investors under which the investors would acquire up to an additional $6 million
of Preferred Stock. The conversion price of the Preferred Stock purchased in the
third issuance would be at the lesser of an average market price of shares of
our common stock immediately preceding conversion, or $2.00 per share. Warrants
to purchase up to an aggregate of 114,286 shares of common stock at an exercise
price of $2.01 per share, which expire in March 2006, were also issued to
purchasers in the private placement. Additional warrants could be issued in
connection with the second and third issuances.

Each share of Preferred Stock, upon issuance, is entitled to receive
cumulative annual dividends at the rate of 4.5% per annum. Such dividends are
due and payable quarterly in arrears on the last day of March, June, September,
and December of each year commencing on March 31, 2001. Dividends accumulate
daily on each share of Preferred Stock, whether or not declared, until each such
share of Preferred Stock has been converted or redeemed. To the extent dividends
are not paid on the applicable dividend payment date, such dividends shall be
cumulative and shall compound quarterly until the date of payment of such
dividend. We are prohibited from declaring a dividend of any kind as long as the
total stated value of all outstanding shares of Preferred Stock is in excess of
$500,000.

The Preferred Stock is redeemable at the option of the holders at a premium,
upon the occurrence of events defined in the Certificate of Designation.
Examples of such events are: a change in ownership or voting control of the
Company, a delisting of the Company's common stock from the Nasdaq National
Market or the inability to register the underlying common stock using Form S-3.
The redemption amount differs depending on the nature of the event. For example,
in the event of a change in control, or a delisting from the Nasdaq Small Cap or
National Market, the redemption amount is 125% of the cumulative face value of
the Preferred Stock, outstanding at the time of the event. In the event of the
Company's inability to register the underlying common stock within 100 days from
the initial issuance date, the redemption amount is 130% of the cumulative face
value of the Preferred Stock, outstanding at the time of the event.

The Company may, at its option, at any time, redeem the outstanding shares of
Preferred Stock at a redemption price equal to 121% of the cumulative face value
of the Preferred Stock, provided that if the Company chooses to do this it must
redeem all of the shares of Preferred Stock then outstanding, including earned
but unpaid dividends.

The holder of the Preferred Stock can convert shares of Preferred Stock into
common stock in whole or in part at any time, subject to certain restrictions
that are described in the Certificate of Designation. The number of shares of
common stock available to the holders of the Preferred Stock is determined by
dividing the face value of any Preferred Stock to be converted by various
prices. The denominator used in determining the number of such shares is the
lesser of the volume-weighted average price of the 10 days prior to the Holder
Conversion Date, or the ceiling price established for each issuance of the
Preferred Stock. For Preferred Stock issued in the first issuance, the ceiling
is $1.75, for Preferred Stock issued in the second issuance, the ceiling is
$1.75 plus 50% of the 10 day weighted average price above $1.75. For Preferred
Stock issued in the third issuance, the ceiling is $2.00.

The Preferred Stock has no voting rights although, if converted into common
stock, those shares of common stock would have voting rights.

We will accrete to 130% of the face value of the Preferred Stock over 150
days, the shortest period for which an event that is out of our control could
trigger redemption by the holders of the Preferred Stock.

The purchaser of the Preferred Stock also received warrants to purchase up to
114,286 shares of common stock at $2.01 per share. The warrants expire in March
2006.

The Preferred Stock was purchased by Peconic Fund, Ltd.

This transaction was a private placement pursuant to the exemption provided
by Section 4 (2) of the Securities Act of 1933.

Item 3. 	Defaults in senior securities

Not applicable

Item 4. 	Submission of matters to a vote of security holders

Not applicable

Item 5. 	Other information

Not applicable

Item 6. 	Exhibits and reports on Form 8-K

1. Exhibits:
2. Reports on Form 8-K

Current report on Form 8-K, dated January 15, 2001 and filed on January 26,
2001 reported that we had sold our client/server business to Platinum Equity
Holdings, LLC.

Current report on Form 8-K, February 22, 2001 and filed on March 9, 2001
reported that we had closed the sale of our client/server business to Platinum
Equity Holdings, LLC.

Current report on Form 8-K, dated March 9, 2001 and filed on March 13, 2001
reported that we had closed on a private placement of equity
securities.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

May 15, 2001



| |                             
| | ----------------------------
| | CENTURA SOFTWARE CORPORATION

| |             
| | ------------
| | (Registrant)



| |     |                
| | --- | ---------------
| | By: | /s/ John Bowman

| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| |                                                                                                       
| | John Bowman                                                                                           
| | Chief Operating and
                Chief Financial Officer
(Principal Finance and Accounting Officer)

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