SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(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, 1997  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     0-18090

                                CAERE CORPORATION
             (Exact name of registrant as specified in its charter)

Delaware                                                    94-2250509
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

                 100 Cooper Court, Los Gatos, California, 95030
                    (Address of principal executive offices)

                                 (408) 395-7000
              (Registrant's telephone number, including area code)
     ----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last 
report)

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  such  reports).  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                  Yes x No_____

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock.

                                                     Outstanding
Class                                                March 31, 1997

Common Stock
$.001 par value                                      13,246,757

                           This is page 1 of 14 pages


<PAGE>




                                CAERE CORPORATION
                                      INDEX

                          PART I. Financial Information
<TABLE>
<CAPTION>
<S>               <C>                                                                 <C>             
ITEM 1.           Financial Statements                                                                                            
                                                                                      Page

                  Condensed Consolidated Balance Sheets - March 31, 1997
                      and December 31, 1996                                              3

                  Condensed Consolidated Statements of Earnings -- Three Months
                      Ended March 31, 1997 and 1996                                      4

                  Condensed Consolidated Statements of Cash Flows - Three Months
                      Ended March 31, 1997 and 1996                                      5

                  Notes to Condensed Consolidated Financial Statements                 6-7

ITEM 2.           Management's Discussion and Analysis of Financial
                      Condition and Results of Operations                             8-12

Exhibit 11        Statement Regarding Computation of Net Earnings (Loss)
                      Per Share                                                         13


                           PART II. Other Information

ITEM 2.           Changes in Securities                                                 14

ITEM 6.           Exhibits and Reports on Form 8-K                                      14

SIGNATURES                                                                              14
</TABLE>




<PAGE>




                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>


                                CAERE CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
                                   (Unaudited)
 <S>                                                                       <C>  <C>            <C>  <C>            
                                                                              March 31,          December 31,
                                                                                1997                 1996

                                     ASSETS

Cash and cash equivalents                                                  $     3,146         $    11,663
Short-term investments                                                          40,858              32,627
Receivables                                                                      7,644               6,888
Inventories (Note B)                                                             2,436               2,779
Deferred income taxes                                                            2,474               2,474
Other current assets                                                             1,301                 768
                                                                           -----------           ---------
         Total current assets                                                  57,859               57,199

Property and equipment, net                                                      4,814               4,742
Other assets                                                                     1,370               1,213
                                                                           -----------         -----------

         Total assets                                                      $    64,043         $    63,154
                                                                           ===========         ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Accrued expenses and other payables                                        $     6,627         $     7,406

Preferred stock, $.001 par value:  authorized 2,000,000
  shares; none issued or outstanding                                                 -                   -
Common stock, $.001 par value:  authorized 30,000,000
  shares; issued and outstanding 13,246,757 and 12,630,584
  shares                                                                            13                  13
Additional paid-in capital                                                      59,008              55,399
Retained earnings (deficit)                                                     (1,605)                336
                                                                           ------------        -----------

         Total stockholders' equity                                             57,416              55,748
                                                                           -----------         -----------

         Total liabilities and stockholders' equity                        $    64,043         $    63,154
                                                                           ===========         ===========

</TABLE>

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


<PAGE>



<TABLE>
<CAPTION>

                                CAERE CORPORATION
                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                      (In thousands, except per share data)
                                   (Unaudited)

<S>                                                                          <C> <C>             <C> <C>    
                                                                                     Three Months Ended
                                                                                          March 31,
                                                                                 1997                1996


Net revenues                                                                 $   12,572          $   13,556

Cost of revenues                                                                  3,716               4,315
                                                                                  -----               -----

                                                                                  8,856               9,241
                                                                                  -----               -----
Operating expenses:
  Research and development                                                        2,002               1,762
  Selling, general and administrative                                             6,312               6,518
   In-process research and development                                            2,935                   -
                                                                                  -----                  --

                                                                                 11,249               8,280
                                                                                 ------               -----

  Operating earnings (loss)                                                      (2,393)                961

Interest income, net                                                                562                 648
                                                                                   ----                ----

  Earnings (loss) before income taxes                                            (1,831)              1,609

Income tax expense                                                                  110                 309
                                                                                   ----                ----

  Net earnings (loss)                                                        $   (1,941)         $    1,300
                                                                                 =======             ======

Net earnings (loss) per common and
 common equivalent share                                                     $    (.15)          $      .10
                                                                                 ======              ======

Shares used in per share calculation                                             12,682              13,459
                                                                                 ======              ======
</TABLE>

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



<PAGE>

<TABLE>
<CAPTION>

                                CAERE CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<S>                                                                                 <C> <C>        <C> <C>   
                                                                                          Three Months Ended
                                                                                               March 31,
                                                                                          1997            1996
Cash flows from operating activities:
  Net earnings (loss)                                                               $   (1,941)    $    1,300
  Adjustments to reconcile net earnings to net cash provided
  by (used for) operating activities:
    Depreciation and amortization                                                          787            636
    In-process research and development                                                  2,935              -
    Merger related costs                                                                     -           (507)
    Amortization of capitalized software development costs                                 117            162
    Changes in operating assets and liabilities:
         Receivables, net                                                                 (756)          (198)
         Income tax receivable                                                              --          1,109
         Inventories                                                                       343            126
         Other current assets                                                             (533)           (56)
         Accrued expenses and other payables                                              (779)          (760)
                                                                                    -----------    -----------
         Net cash provided by operating activities                                         173          1,812
                                                                                    ----------     ----------
Cash flows from investing activities:
    Short-term investments, net                                                         (8,231)        (8,509)
    Capital expenditures                                                                  (738)          (325)
    Capitalized software development costs                                                (408)          (165)
    Other assets                                                                           183             37
                                                                                    ----------     ----------
         Net cash used for investing activities                                         (9,194)        (8,962)
                                                                                    -----------    -----------
Cash flows from financing activities:
  Proceeds from issuances of common stock                                                  504            214
                                                                                    ----------     ----------
Net change in cash and cash equivalents                                                 (8,517)        (6,936)

Cash and cash equivalents at beginning of period                                        11,663         10,664
                                                                                    ----------     ----------
Cash and cash equivalents at end of period                                          $    3,146     $    3,728
                                                                                    ==========     ==========
Supplemental disclosures:
  Cash paid for income taxes                                                        $      709     $       29
                                                                                    ==========     ==========
  Common stock issued for business acquisition                                      $    3,105     $        -
                                                                                    ==========     ==========
</TABLE>

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


<PAGE>


                                CAERE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

A)       Basis of Presentation

         The  accompanying  unaudited  condensed  consolidated  balance  sheets,
statements of earnings,  and  statements  of cash flows reflect all  adjustments
(consisting of only normal recurring  adjustments)  which are, in the opinion of
management,  necessary  to present the  financial  position of the Company as of
March 31,  1997,  and its results of  operations  and cash flows for the periods
indicated.

         The accompanying  unaudited  condensed  financial  statements have been
prepared in accordance  with the  instructions  for Form 10-Q,  and,  therefore,
certain  information and footnote  disclosures  normally  contained in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  The Company filed audited financial  statements
with the Securities and Exchange  Commission  which included all information and
footnotes  necessary  for a complete  presentation  of the  Company's  financial
position,  results of operations and cash flows for the years ended December 31,
1996,  1995 and 1994, in its report on Form 10-K for the year ended December 31,
1996 (the "Form 10-K").  These condensed financial  statements should be read in
conjunction with the financial  statements contained in the Company's Form 10-K.
The results of operations  for the interim  period ended March 31, 1997, are not
necessarily indicative of the results to be expected for the full year.
<TABLE>
<CAPTION>
<S>      <C>                                                         <C>                        <C>     

B)       Inventories                                                 March 31, 1997             December 31, 1996
         -----------                                                 --------------             -----------------
                                                                                  (In thousands)
          A summary of inventories follows:

               Raw materials                                            $    1,266                $  1,540
               Work in process                                                 429                     348
               Finished goods                                                  741                     891
                                                                        ----------    -           --------
                                                                        $    2,436                $  2,779
                                                                        ==========                ========
</TABLE>


C)       Net Earnings (Loss) Per Share

         Net earnings per common and common  equivalent share are computed using
the weighted  average  number of common and dilutive  common  equivalent  shares
outstanding  during the period.  Common  equivalent shares consist of options to
purchase common stock calculated using the treasury stock method.  Fully diluted
earnings per share for all periods presented were not materially  different from
primary earnings per share.

<PAGE>


D)       Business Acquisition

         On March 31, 1997, the Company acquired Formonix, Inc. ("Formonix"),  a
software  developer located in Colorado.  The total value of the acquisition was
approximately  $3,188,000.  The Company issued 550,000 shares of common stock in
exchange for all of the capital  stock of Formonix.  Using the closing  price of
the Company's stock on the closing date of the acquisition, the valuation of the
shares issued was  approximately  $3,105,000.  Acquisition costs associated with
the  transaction   totaled   approximately   $83,000  and  consisted  mainly  of
professional fees. The business combination was accounted for under the purchase
method of accounting.  Accordingly, the consolidated financial statements of the
Company will not include Formonix until after the date of acquisition.

         Acquired  technology was valued using a risk-adjusted  cash flow model,
under which future expected cash flows were discounted taking into account risks
related to existing  markets,  the technology's  life expectancy,  future target
markets and  potential  changes  thereto,  and the  competitive  outlook for the
technology.  The analysis resulted in an allocation of approximately $253,000 to
capitalized   software  development  costs  and  the  balance  of  approximately
$2,935,000  to  in-process  technology  which had not yet reached  technological
feasibility and had no alternative  future use, and accordingly,  was charged to
expense.

         The following  summarized,  pro forma results of operations  assume the
acquisition  took place at the beginning of the respective  periods and excludes
the $2,935,000 charge for acquired in-process technology.
<TABLE>
<CAPTION>
<S>                                                                             <C>             <C>    
         
Quarter ended March 31, In thousands, except per share amounts                   1997             1996
--------------------------------------------------------------                   ----             ----

Net revenues                                                                    $12,572         $13,556
Net earnings (loss)                                                             $(2,084)        $ 1,361
Earnings (loss) per share                                                       $  (.16)        $   .10
</TABLE>









<PAGE>




                                     Item 2

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

         The Company notes that, except for the historical information contained
herein, the matters discussed below contain  forward-looking  statements subject
to risks and uncertainties that may cause the Company's actual results to differ
materially.  Such  risks and  uncertainties  include,  but are not  limited  to,
various  important   competitive  and  technological  factors  such  as  pricing
pressures;  success of the "bundle and upgrade"  business  model,  including the
maintenance of the Company's  relationships with scanner manufacturers,  as well
as customers opting to upgrade to newer or more fully featured products; changes
in  customer  order  patterns,  the  maintenance  of  relationships  with retail
distributors   and  dealers;   manufacturing   considerations,   including   the
maintenance  of  margins  in a  declining-price  environment  as well as risk of
inventory   obsolescence  due  to  shifts  in  market  demand  and  new  product
introductions;  and other risk factors listed from time to time in the Company's
reports filed with the Securities and Exchange  Commission,  including,  but not
limited  to,  the  report  on Form 10-K for the year  ended  December  31,  1996
(Business, Certain Trends, and Risk Factors sections).

Results of Operations

         The following  chart  summarizes  net revenues,  cost of revenues,  and
gross  margins for the  Company's  products  categorized  between  hardware  and
software.  Software  products  consist  of  the  OmniPage,  WordScan,  OmniForm,
PageKeeper,  and  Recognita  lines of  products.  Hardware  products  consist of
transaction  processing  optical  character  recognition  ("OCR")  and bar  code
products, and the M/Series line of production OCR products.
<TABLE>
<CAPTION>

Business Line Analysis

                        
Three Months Ending:                   March 31, 1997                                March 31, 1996
<S>                       <C>             <C>             <C>            <C>            <C>             <C>
                          Software        Hardware                       Software       Hardware
                          Products        Products        Combined       Products       Products        Combined
Net revenues              $10,865          $1,707         $12,572        $11,415          $2,141          $13,556
Cost of revenues            2,777             939           3,716          3,422             893            4,315
                            -----             ---           -----          -----             ---            -----
                           $8,088            $768          $8,856         $7,993          $1,248           $9,241
Gross margin %              74.4%           45.0%           70.4%          70.0%           58.3%            68.2%
</TABLE>
                        
         Net  revenues  for  software  products  decreased  5% during  the first
quarter of 1997 to  $10,865,000  from  $11,415,000  in 1996,  due  primarily  to
decreased  bundled revenues from the Company's  scanner  manufacturer  partners.
Beginning  in the  fourth  quarter  of 1996,  the  Company  began to change  the
bundling  arrangement with certain of its partners.  Prior to the fourth quarter
of  1996,  the  Company  sold  such  bundled   product  to  partners  at  prices
approximating  cost.  Since the fourth  quarter of 1996,  certain  partners have
agreed to  manufacture  their  product  requirements  on a much reduced  royalty
basis.  The effect of this  change to the  Company  was to reduce  net  revenues
associated  with such bundled product along with reducing the cost of revenue by
a similar  amount,  creating a favorable  impact on overall gross margins.  On a
year-to-year  basis,  net revenues  from such  bundling  arrangements  were down
approximately  $600,000  in the first  quarter of 1997,  compared  with the same
period of 1996. The objective of the Company's  "bundle and upgrade" strategy is
to  increase  unit sales of bundled  product,  which,  in turn,  is  expected to
stimulate  unit sales of upgrade  products.  As more customers  acquire  bundled
products with their scanners and qualify to purchase fully featured OCR products
at upgrade  prices,  unit  shipments of fully priced,  non-upgrade  products are
expected to decline.

         Net revenues for hardware  products  decreased 20% to $1,707,000 in the
first quarter of 1997,  compared to  $2,141,000  during the same period in 1996.
Approximately  one-half of this decrease was attributable to lower unit sales of
transaction  processing OCR and bar code products.  This fluctuation in revenues
is  typical  of  quarterly  shipment  patterns  in this  line  of the  Company's
business.  The balance of the decrease in hardware revenues is associated with a
transition   of  the  M/Series   line  of   production-level   OCR  products  to
"software-only"  solutions as the computing power available on today's  personal
computers continues to increase.

         International  sales  increased  16%  to  $4,939,000,  or  39%  of  net
revenues,  during the first quarter of 1997,  compared to $4,260,000,  or 31% of
net revenues,  in the same period of 1996.  The primary reason for this increase
was  the  operation  of  the  Company's  Hungarian  subsidiary,   Recognita  Rt.
("Recognita"),  acquired  in  December  1996.  Also,  to a  lesser  extent,  the
availability of new foreign versions of certain software products contributed to
the  increase  in  international  sales as the  "bundle  and  upgrade"  strategy
continued to develop overseas.
<PAGE>

Gross Margins

         Gross  margins for software  products  improved from 70.0% in the first
quarter  of 1996 to 74.4% in the first  quarter  of 1996,  primarily  due to the
shift of the  manufacturing  of the bundled product to our scanner  manufacturer
partners as described above.

         Gross  margins for  hardware  products  decreased to 45.0% in the first
quarter of 1997 from 58.3% in the same period of 1996,  due  primarily  to lower
unit  sales  and  revenues  of both  transaction  processing  OCR  and bar  code
products,  as well as M/Series  products,  which  typically  carry  higher gross
margins than other hardware products. Also contributing to the reduced margin on
hardware  products was the fixed nature of a majority of the Company's  hardware
manufacturing  overhead.  As hardware  product  revenues  decline,  the level of
manufacturing overhead does not necessarily decline in the same proportion.

         The primary factor  affecting  gross margins in the future is likely to
be shifts in product mix between fully priced retail software, bundled software,
and upgrade products,  as well as overall shifts in product mix between software
and hardware  products.  The  microcomputer  software market has been subject to
rapid changes, including significant price competition, which can be expected to
continue.  Future  technology or market  changes may cause  certain  products to
become  obsolete  rapidly,   necessitating  increased  inventory  write-offs  or
reserves and a corresponding decrease in gross margins.

Operating Expenses

         Research and development (R&D) expenses  increased 14% to $2,002,000 in
the first quarter of 1997 from  $1,762,000  during the same period of 1996.  The
increase in spending from 1996 to 1997 was  primarily the result of  development
expenses of the Company's Hungarian subsidiary, Recognita, which was acquired in
the fourth quarter of 1996. To a lesser extent, the increase in R&D expenses was
also  attributable to increased  staffing  associated with the Company's ongoing
software development projects. As a percentage of revenue, R&D expense increased
to 16% of revenue in the first  quarter of 1997 from 13% during the same  period
in 1996.  This  increase  is  attributable  to higher R&D  expense and lower net
revenues between the comparable periods.

         The  Company is  committed  to  providing  continuing  enhancements  to
current  products as well as developing new  technologies  for the future.  This
commitment  will result in the  Company's  continuing  to invest  heavily in R&D
during 1997. In accordance with Statement of Financial  Accounting Standards No.
86, the Company  capitalized  $155,000 of software  development costs during the
first  quarter of 1997,  compared to  $165,000  in the same  period of 1996.  In
addition to this capitalization of internal R&D expenses, in connection with the
Company's acquisition of Formonix,  Inc. ("Formonix") in March 1997, the Company
capitalized  approximately  $253,000  of the  acquisition  cost during the first
quarter of 1997.  The costs  capitalized  related to the portion of the Formonix
acquisition  valuation  which  was  allocated  to  existing  products  acquired.
Amortization of capitalized software development costs was $117,000 in the first
quarter of 1997, versus $162,000 for the comparable period in 1996.

         Selling,  general and  administrative  (S,G&A) expenses decreased 3% in
the first quarter of 1997 to $6,312,000 from  $6,518,000  during the same period
of  1996.  The  decrease  in  S,G&A  spending  was  primarily  a  result  of the
streamlining  of  management  and  promotional  costs  between the  OmniPage and
OmniForm product line marketing areas. As a percentage of revenue, S,G&A expense
increased  to 50% of revenue in the first  quarter of 1997,  from 48% during the
same  period in 1996.  This  increase  is  primarily  attributable  to lower net
revenues between the comparable periods.  The Company expects that S,G&A expense
may increase in dollar  terms in 1997 as efforts to expand  sales and  marketing
activities continue in the OCR, forms, and desktop document management areas.

         During the first  quarter of 1997,  a  $2,935,000  one-time  charge for
in-process   research  and  development  was  taken  related  to  the  Company's
acquisition of Formonix in March 1997. This charge related to the portion of the
Formonix acquisition valuation represented by the present value of the estimated
cash flow expected to be generated by Formonix-related technology, which, at the
acquisition date, had not yet reached the point of technological feasibility and
did not have an alternative future use.

Interest Income

         Interest income  decreased 13% in the first quarter of 1997 to $562,000
from $648,000 during the same period of 1996. The decrease in interest income is
attributable  to a reduction in total cash and  short-term  investment  balances
between the  comparable  periods.  The Company's  one million  share  repurchase
during the third  quarter of 1996 and its  acquisition  of Recognita in December
1996 were the  primary  reasons  for the  decline in total  cash and  short-term
investment balances since the first quarter of 1996.
<PAGE>

Income Taxes

         The  Company's  effective  income  tax rate in 1997 is  expected  to be
10-20%,  which is less than  statutory  rates,  primarily  due to the use of the
Company's foreign sales  corporation and increased  utilization of net operating
loss  carryforwards  acquired  in its 1994  acquisition  of  Calera  Recognition
Systems, Inc. ("Calera"). In the first quarter of 1996, the effective income tax
rate  was  20%,  due  primarily  to  the  use  of the  Company's  foreign  sales
corporation  and to the expected  utilization  of the Calera net operating  loss
carryforwards in the 1996 fiscal year.

Net Earnings and Earnings Per Share

         Net loss for the first quarter of 1997 was $1,941,000,  compared to net
earnings of  $1,300,000  during the same period in 1996.  Net loss per share was
$.15 in the first  quarter  of 1997,  versus  earnings  per share of $.10 in the
comparable  period of 1996. The reason for the loss in the first quarter of 1997
was the $2,935,000  one-time  in-process research and development charge related
to the Formonix acquisition recorded during the quarter. Excluding this one-time
charge, net earnings for the first quarter of 1997 would have been $994,000,  or
$.08 per share,  using primary  dilutive shares  outstanding of 12,931,000 under
the treasury stock method.

Certain Trends

         The  Company's  future  operating  results  may be  affected by various
uncertain  trends and  factors  which are beyond the  Company's  control.  These
include but are not limited to adverse changes in general  economic  conditions,
rising  costs,  or the  occasional  unavailability  of  needed  components.  The
industry is characterized by rapid changes in the technologies affecting optical
character recognition, forms technology, and document management technology. The
industry  has  also  become  increasingly  competitive,  and,  accordingly,  the
Company's  results may also be adversely  affected by the actions of existing or
future  competitors,   including  the  development  of  new  technologies,   the
introduction of new products, and the reduction of prices by such competitors to
gain or retain market share.

         Bundled products  incorporating OmniPage and WordScan began shipping in
significant  quantities  in the  fourth  quarter  of 1994.  Because of the lower
per-unit revenue to the Company that results from the combined sale of a bundled
product plus an upgrade, compared to the retail sale of a fully featured version
of the  software,  the  success of the "bundle and  upgrade"  program  relies on
increasing  unit sales of upgrades  for its  success.  There can be no assurance
that  Caere's  transition  to the "bundle and  upgrade"  business  model will be
successful  and  provide  sufficient  increase  in unit  volume in the future to
offset  reduced  per-unit  revenue.  In  addition,  customers  using the bundled
product  may defer or forego  purchase  of the  Company's  more  fully  featured
versions  of  OmniPage  and  WordScan  products  if they find  that the  bundled
products satisfy their recognition needs.

         A significant  portion of the Company's net revenues is attributable to
sales through the distribution  channel.  The Company's future operating results
are  dependent  to a certain  extent on its  ability to  maintain  its  existing
relationships with such distributors.

         The  Company's  future  earnings  and stock  price  could be subject to
significant  volatility,  particularly  on  a  quarterly  basis.  The  Company's
revenues and earnings are unpredictable until the end of each quarter due to the
Company's  shipment  patterns.  As is  common  in  the  software  industry,  the
Company's  experience  has been that a  disproportionately  large  percentage of
shipments has occurred in the third month of each fiscal quarter,  and shipments
tend to be concentrated in the latter half of that month.  Because the Company's
backlog early in a quarter is not generally  large enough to assure that it will
meet its  revenue  targets for any  particular  quarter,  quarterly  results are
difficult to predict  until the end of the quarter.  A shortfall in shipments at
the end of any particular quarter may cause the results for that quarter to fall
significantly  short of anticipated  levels.  Due to analysts'  expectations  of
continued  growth,  any such shortfall in earnings could have a very significant
adverse  effect on the trading price of the Company's  common stock in any given
period.

         As a result of the foregoing  factors and other factors which may arise
in the future,  the market price of the Company's common stock may be subject to
significant  fluctuations over a short period of time. These fluctuations may be
due to  factors  specific  to the  Company,  to changes  in  analysts'  earnings
estimates,  or to factors  affecting  the  computer  industry or the  securities
markets in general.
<PAGE>

Liquidity and Capital Resources

         Caere's  financial  position remains strong at March 31, 1997.  Working
capital  increased 3% to $51,232,000  from $49,793,000 at December 31, 1996. The
Company has no long-term  debt. The Company's  cash and  short-term  investments
totaled  $44,004,000 at March 31, 1997.  The Company  believes that current cash
balances and  internally  generated  funds will be  sufficient  to meet its cash
requirements through 1997.

         Caere  generated cash from operating  activities of $173,000 during the
 three months ended March 31, 1997. Uses of cash included $8,231,000 to purchase
 additional short-term investments, in addition to $738,000 for
modest investments in capital  equipment.  During the first quarter of 1996, the
Company  generated  cash from operating  activities of $1,812,000.  Uses of cash
during that period included  $8,509,000 to purchase  short-term  investments and
$325,000 of expenditures for capital equipment.

         The Company offers credit terms to qualifying  customers and also sells
on a prepaid,  credit card and  cash-on-delivery  basis.  With respect to credit
sales, the Company attempts to control its bad debt exposure through  monitoring
of customers' creditworthiness and, where practicable,  through participation in
credit  associations that provide credit rating information about its customers.
The Company has also  purchased  credit  insurance  for certain key  accounts to
reduce the potential for catastrophic losses.


<PAGE>



                                                                      EXHIBIT 11

                                CAERE CORPORATION

                         STATEMENT REGARDING COMPUTATION
                        OF NET EARNINGS (LOSS) PER SHARE
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                                            <C>                     <C>    

                                                                                           Three Months Ended
                                                                                                March 31,
                                                                                      1997                    1996

Net earnings (loss)                                                            $  (1,941,000)          $  1,300,000
                                                                                =============           =============

Weighted average shares outstanding during the period                             12,681,795             13,349,703

Common equivalent shares using the treasury
    stock method                                                                          --                109,373
                                                                              --------------            -----------

Common and common equivalent shares outstanding
    for purposes of calculating net earnings per share                            12,681,795             13,459,076
                                                                             ===============        ===============

Net earnings (loss) per common and common
    equivalent share                                                           $       (.15)        $           .10
                                                                              ==============         ==============

</TABLE>




<PAGE>


                           PART II. OTHER INFORMATION


                                     Item 2

Changes in Securities

         On March 31,  1997,  the Company  issued  550,000  shares of its Common
Stock in connection  with the  acquisition  of Formonix,  Inc., a privately held
Colorado  corporation,  in exchange for all of the outstanding  shares of Common
Stock of Formonix,  Inc. The 550,000  shares of the Company's  Common Stock were
issued to the two shareholders of Formonix,  Inc. without registration under the
Securities  Act of 1933,  as amended  (the  "Securities  Act"),  in  reliance on
Section 4(2) under the Securities Act.


                                     Item 6

Exhibits and Reports on Form 8-K

(a)      Exhibits
                  Exhibit 11 - Statement Regarding Computation of Net Earnings 
(Loss) Per Share - page 13.
                  Exhibit 27 - Financial Data Schedule

(b)      Reports on Form 8-K
                  No reports on Form 8-K were  filed by the  Company  during the
period covered by this report.


SIGNATURES

         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.

                                    CAERE CORPORATION

Date:  May 12, 1997

                                    /S/  Blanche M. Sutter
                                    Blanche M. Sutter, Executive Vice President
                                    and Chief Financial Officer

                                    (Principal Financial and Accounting Officer
                                    and Duly Authorized Officer)