<PAGE>   1
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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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<S>  <C>
[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period
     ended July 31, 2001.

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period
     from ______ to ______.
</TABLE>

                         Commission File Number: 0-25185

                      MOMENTUM BUSINESS APPLICATIONS, INC.
             (Exact name of registrant as specified in its charter)

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<S>                                                                                <C>
                              DELAWARE                                                          94-3313175
   (State or other jurisdiction of Incorporation or organization)                  (I.R.S. Employer Identification No.)

           4301 Hacienda Drive, Suite 410, Pleasanton, CA                                          94588
              (Address of principal executive officers)                                         (Zip Code)
</TABLE>

               Registrant's telephone number, including area code:
                                 (925) 469-6621

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 [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

<TABLE>
<CAPTION>
====================================================================================================================================
                                             CLASS                                                  OUTSTANDING AT AUGUST 31, 2001
------------------------------------------------------------------------------------------------ -----------------------------------
<S>                                                                                                           <C>
Class A Common Stock, par value $.001                                                                         4,693,826
Class B Common Stock, par value $.001                                                                           1,000
================================================================================================ ===================================
</TABLE>

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                      MOMENTUM BUSINESS APPLICATIONS, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE NO.
                                                                                                              --------
<S>          <C>                                                                                                 <C>
PART I       FINANCIAL INFORMATION
             ITEM 1-- Financial Statements (unaudited)
             Condensed Balance Sheets                                                                             3
             Condensed Statements of Operations                                                                   4
             Condensed Statements of Cash Flows                                                                   5
             Notes to Condensed Financial Statements                                                              6
             ITEM 2-- Management's Discussion and Analysis of Financial Condition and Results of Operations      10
             ITEM 3-- Quantitative and Qualitative Disclosure about Market Risk                                  13
PART II      OTHER INFORMATION
             ITEM 1--  Legal Proceedings                                                                         14
             ITEM 2--  Changes in Securities and Use of Proceeds                                                 14
             ITEM 3--  Defaults upon Senior Securities                                                           14
             ITEM 4--  Submission of Matters to a Vote of Security Holders                                       14
             ITEM 5--  Other Information                                                                         14
             ITEM 6--  Exhibits and Reports on Form 8-K                                                          14
SIGNATURES                                                                                                       15
</TABLE>




                                       2
<PAGE>   3



                         PART 1 -- FINANCIAL INFORMATION

                         ITEM 1 -- FINANCIAL STATEMENTS

                      MOMENTUM BUSINESS APPLICATIONS, INC.

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

                            CONDENSED BALANCE SHEETS
                                   (UNAUDITED)
               (IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                            JULY 31,       APRIL 30,
                                                                              2001           2001
                                                                            ---------      ---------
<S>                                                                         <C>            <C>
                                               ASSETS

Current assets:
  Cash and cash equivalents ...........................................     $  49,726      $  63,283
  Short term investments ..............................................         6,624         13,768
  Accounts receivable from PeopleSoft .................................            --          1,973
                                                                            ---------      ---------
          Total current assets ........................................        56,350         79,024
Long term investments .................................................         3,581         10,313
Capitalized software, net .............................................        11,303         12,478
                                                                            ---------      ---------
                                                                            $  71,234      $ 101,815
                                                                            =========      =========

                               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Payable to PeopleSoft ...............................................     $   6,478      $   8,946
  Accounts payable ....................................................           389            283
  Accrued liabilities .................................................           322            333
  Accrued compensation and related expenses ...........................             9              8
                                                                            ---------      ---------
          Total current liabilities ...................................         7,198          9,570
Stockholders' equity:
  Class A Common stock, $0.001 par value, 10,000,000
     shares authorized, 4,693,826 issued and outstanding ..............             5              5
  Class B Common stock, $0.001 par value, 1,000 shares
     authorized, issued and outstanding ...............................            --             --
  Additional paid-in capital ..........................................       250,903        249,996
  Accumulated other comprehensive income ..............................            32            156
  Accumulated deficit .................................................      (186,904)      (157,912)
                                                                            ---------      ---------
                                                                               64,036         92,245
                                                                            ---------      ---------
                                                                            $  71,234      $ 101,815
                                                                            =========      =========
</TABLE>

             See notes to condensed unaudited financial statements.


                                       3
<PAGE>   4

                      MOMENTUM BUSINESS APPLICATIONS, INC.

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

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED
                                                          JULY 31,
                                                  ----------------------
                                                    2001          2000
                                                  --------      --------
<S>                                               <C>           <C>
Revenues from PeopleSoft ....................     $    448      $    286
Costs and expenses primarily from PeopleSoft:
  Cost of revenues ..........................        1,175            61
  Product development .......................       27,960        30,510
  General and administrative ................        1,227           236
                                                  --------      --------
          Total costs and expenses ..........       30,362        30,807
                                                  --------      --------
Operating loss ..............................      (29,914)      (30,521)
Interest income .............................          923         3,369
                                                  --------      --------
Net loss before income taxes ................      (28,991)      (27,152)
Provision for income taxes ..................            1            --
                                                  --------      --------
Net loss ....................................     $(28,992)     $(27,152)
                                                  ========      ========
Basic and diluted loss per share ............     $  (6.18)     $  (5.78)
                                                  ========      ========
Shares used in basic and diluted
  loss per share computation ................        4,695         4,695
                                                  ========      ========
</TABLE>


             See notes to condensed unaudited financial statements.



                                       4
<PAGE>   5


                      MOMENTUM BUSINESS APPLICATIONS, INC.

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

                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                             JULY 31,
                                                     -----------------------
                                                       2001           2000
                                                     --------      ---------
<S>                                                  <C>           <C>
OPERATING ACTIVITIES
Net loss .......................................     $(28,992)     $ (27,152)
Amortization of capitalized software ...........        1,175             61
Non-cash stock compensation ....................          907             --
Adjustments to reconcile net loss to net cash
used by operating activities:
  Changes in operating assets and liabilities:
     Accounts receivable from PeopleSoft .......        1,973            277
     Short term investments ....................        7,144             --
     Payable to PeopleSoft .....................       (2,468)         3,254
     Accounts payable ..........................          106            (36)
     Accrued liabilities .......................          (11)            34
     Accrued compensation and related expenses .            1             (2)
     Income taxes payable ......................           --             --
                                                     --------      ---------
Net cash used by operating activities ..........      (20,165)       (23,564)
INVESTING ACTIVITIES
Net maturities of available-for-sale investments        6,608             --
Capitalized software development costs .........           --           (879)
Purchase of developed technology ...............           --         (8,592)
                                                     --------      ---------
Net cash provided (used) by investing activities        6,608         (9,471)
                                                     --------      ---------
Net decrease in cash and cash equivalents ......      (13,557)       (33,035)
Cash and cash equivalents at beginning of period       63,283        228,218
                                                     --------      ---------
Cash and cash equivalents at end of period .....     $ 49,726      $ 195,183
                                                     ========      =========
</TABLE>


             See notes to condensed unaudited financial statements.


                                       5
<PAGE>   6

                      MOMENTUM BUSINESS APPLICATIONS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  JULY 31, 2001
                                   (UNAUDITED)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

    Momentum Business Applications, Inc., (the "Company" or "Momentum") was
incorporated in Delaware on November 9, 1998 and commenced operations on January
4, 1999. Momentum was formed and has organized its business in one operating
segment for the purpose of selecting and developing software application
products and commercializing such products (the "Momentum Products"), most
likely through licensing to PeopleSoft, Inc., ("PeopleSoft"). Since its
formation, Momentum's principal activity has been conducting product development
under its agreements with PeopleSoft.

    The information at July 31, 2001 and for the three months ended July 31,
2001 and 2000, is unaudited, and includes all adjustments (consisting only of
normal recurring adjustments) that the management of Momentum believes necessary
for fair presentation of the results for the periods presented. Interim results
are not necessarily indicative of results to be expected for the full year. The
balance sheet for April 30, 2001 was derived from the audited balance sheet. The
condensed financial statements should be read in conjunction with the audited
financial statements and accompanying notes for the fiscal year ended April 30,
2001 included in Momentum's 2001 Annual Report on Form 10-K.

Accounting for Revenues and Expenses

    Through July 31, 2001, Momentum's revenue consisted entirely of royalty
revenue derived from PeopleSoft's sales and licensing of certain software
products developed under the Development and License Agreement (the "Development
Agreement") between Momentum and PeopleSoft. Royalty and other product revenue
is recorded as earned and reported by PeopleSoft to Momentum on a quarterly
basis. Development costs paid to PeopleSoft under a software development
agreement are recorded as research and development expenses when incurred except
for amounts capitalized pursuant to SFAS 86. Amounts paid to PeopleSoft under a
services agreement are recorded as administrative expenses when incurred. (See
Note 3 for a description of the agreements between Momentum and PeopleSoft).

Investment Risk

    Momentum invests excess cash in money market funds and financial instruments
with financial institutions with strong credit ratings. These funds and
investments typically bear minimal risk. The Company has not experienced any
losses on its investments due to institutional failure or bankruptcy.

Use of estimates

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

Cash equivalents

    Momentum considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. At July 31, 2001, cash and cash
equivalents (approximately $49.7 million) consisted primarily of taxable
investments in money market funds at two financial institutions. The Company's
aggregate cash, cash equivalents and investments balance as of July 31, 2001 was
approximately $59.9 million of which $52.3 million is required to be used under
the Development Agreement (see Note 3).

Accounts Receivable

    Accounts receivable are comprised of billed receivables arising from
recognized royalty revenue, entirely from PeopleSoft. The Company does not
maintain an allowance for uncollectible accounts receivable since it does not
expect to experience losses that could have a material impact on the Company's
future results of operations. Upon collection of the receivables, these funds
will not be restricted.



                                       6
<PAGE>   7

Capitalized Software

    Momentum accounts for its purchases of software from third parties and
internal software development costs of computer software to be sold, leased or
otherwise marketed under Statement of Financial Accounting Standard No. 86
("SFAS 86"). SFAS 86, "Accounting for Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed" establishes standards of financial accounting and
reporting for the costs of computer software to be sold, leased, or otherwise
marketed as a separate product or as part of a product or process, whether
internally developed and produced or purchased. It identifies the costs incurred
in the process of creating a software product that are research and development
costs and those that are production costs to be capitalized, and it specifies
amortization, disclosure, and other requirements. The Company capitalizes
software costs if the related software product under development has reached
technological feasibility or if there are alternative future uses for the
software product provided that capitalized amounts will be realized over a
period not exceeding five years. Technological feasibility is attained when
software products reach Beta release. Costs incurred prior to the establishment
of technological feasibility are charged to product development expense. The
establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized software development costs require considerable
judgement by management with respect to certain external factors, including, but
not limited to, anticipated future revenues, estimated economic life and changes
in software and hardware technologies. Upon the general release of the software
product to customers, capitalization ceases and such costs are amortized (using
the straight-line method) on a product-by-product basis over the estimated life,
which is generally three years. All product development expenditures are charged
to product development expense in the period incurred.

    In June 2000, Momentum purchased developed technology (the "Assets") from
PeopleSoft. The purchased Assets are being utilized by the Company in advancing
the development of certain Momentum Products including the Analytic Applications
Suite and Budgets for Education and Government. The total purchase price is
comprised of an initial payment of approximately $8.6 million plus earn-out
payments of approximately $1.1 million. The cost of this purchased technology is
being amortized to cost of revenue over its estimated useful life of three
years.

Income Taxes

    Momentum accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
statement provides for a liability approach under which deferred income taxes
are provided based upon enacted tax laws and rates applicable to the periods in
which the taxes become payable. The Company expects to have a net loss for
fiscal year 2002, and thus no taxes, other than the California minimum tax, were
provided for in the three month period ended July 31, 2001.

Common Stock

    Momentum's Articles of Incorporation provide for two classes of common
stock, Class A Common Stock and Class B Common Stock. In December 1998,
PeopleSoft declared a stock dividend of one share of Momentum's Class A Common
Stock for every fifty shares of PeopleSoft stock held as of December 31, 1998,
resulting in the distribution of approximately 4.7 million shares. The shares of
Momentum Common Stock held by PeopleSoft on the record date were converted into
1,000 shares of Momentum Class B Common Stock. The holder or holders of the
Momentum Class B Common Stock are entitled to vote separately as a class with
respect to any merger or liquidation of Momentum, the sale, lease, exchange,
transfer or other disposition of any substantial asset of Momentum, and any
amendments to the Certificate of Incorporation of Momentum that would alter the
Purchase Option, Momentum's authorized capitalization, or the provisions of the
Certificate of Incorporation governing Momentum's Board of Directors.
Accordingly, PeopleSoft could preclude the holders of the Momentum Class A
Common Stock from taking any of the foregoing actions at any time prior to the
expiration of the Purchase Option. Prior to the exercise of the Purchase Option,
the holders of the Momentum Common B Stock, voting as a separate class, are
entitled to elect one director, and the holder or holders of the Momentum Class
A Common Stock are entitled to elect up to four directors. Upon exercise of the
Purchase Option, PeopleSoft, as the sole holder of the Momentum Class B Common
Stock, has the right to elect all of the Momentum directors and to remove
incumbent directors with or without cause. (See Note 3 -- "Purchase Option"). On
all other matters, holders of the Momentum Class A Common Stock and Momentum
Class B Common Stock are entitled to vote together as a single class. Holders of
Momentum Common Stock are allowed one vote for each share of Momentum Common
Stock held by them. Subject to compliance with securities laws, the Momentum
Class B Common Stock is freely transferable.



                                       7
<PAGE>   8

2. LOSS PER SHARE DATA

    The Company's loss per share amounts are calculated in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 requires calculation of both a basic loss per share and a
diluted loss per share. The basic loss per share excludes the dilutive effect of
common stock equivalents such as stock options and warrants, while the diluted
loss per share includes such dilutive effects. Although Momentum has 208,333
outstanding stock options with an exercise price of $12 per share, they are not
currently considered dilutive common stock equivalents and thus diluted loss per
share equals basic loss per share. Importantly, such stock options, if
exercised, would most likely reduce the per share proceeds available to holders
of the Momentum Class A Common Stock if the Purchase Option were to be exercised
by PeopleSoft. (See Note 3 -- "Purchase Option").

3. ARRANGEMENTS WITH PEOPLESOFT

    In late December 1998, PeopleSoft contributed $250 million in cash to
Momentum. On December 31, 1998, PeopleSoft transferred 4,693,826 shares,
representing all of the outstanding shares, of Momentum Class A Common Stock
(the "Momentum Shares"), to a custodian who distributed the shares to the
holders of PeopleSoft common stock in mid January 1999 (the "Distribution").
Momentum Shares are traded on the Nasdaq National Market under the symbol
"MMTM". PeopleSoft continues to hold all 1,000 shares of the Momentum Class B
Common Stock. In connection with PeopleSoft's contribution to Momentum and the
distribution of Momentum Shares, Momentum and PeopleSoft entered into a number
of agreements, including a Development Agreement, Marketing and Distribution
Agreement and a Services Agreement, all of which are discussed below.

    Momentum and PeopleSoft have entered into a Development Agreement pursuant
to which PeopleSoft conducts product development and related activities on
behalf of Momentum under work plans and cost estimates which have been proposed
by PeopleSoft and approved by Momentum. Momentum is required to utilize the cash
initially contributed to Momentum by PeopleSoft plus interest earned thereon,
less administrative expenses and reserves of up to $2 million (the "Available
Funds") to conduct activities under the Development Agreement. It is expected
that the products to be developed under the Development Agreement will include
electronic business applications ("e-commerce"), analytic applications, and
industry specific applications. PeopleSoft has granted to Momentum a perpetual,
worldwide, non-exclusive license to use certain of PeopleSoft's proprietary
technology solely for internal use in conjunction with the Development
Agreement.

    Under the terms of the Marketing and Distribution Agreement entered into by
Momentum and PeopleSoft, Momentum has granted PeopleSoft an option to acquire a
license to each product developed under the Development Agreement. The license
option for any such Momentum product is exercisable on a world-wide, exclusive
basis at any time from the date Momentum agrees to develop the product until the
earlier of a) thirty days after the product becomes Generally Available (as
defined in the agreements); or b) the expiration of the purchase option. The
license option will expire, to the extent not previously exercised, 30 days
after the expiration of PeopleSoft's option to purchase all of the outstanding
Momentum Shares as described below. If and to the extent the license option is
exercised as to any Momentum product, PeopleSoft will acquire a perpetual,
exclusive license (with the right to sublicense) to develop, make, have made and
use the licensed product, and to sell and have sold the licensed product. Upon
exercising the license option, PeopleSoft will assume responsibility for all
ongoing development and sustaining engineering expenses for the related product.
Under the License Agreement for each licensed product, PeopleSoft will make
payments to Momentum with respect to the licensed product by multiplying a
formula derived royalty rate by the quarterly net sales of the licensed product
achieved by PeopleSoft and its sublicensees, distributors and marketing
partners. The royalty rate is determined for each licensed product by taking the
sum of one percent plus an additional 0.1 percent for each full $1 million of
development costs of the licensed product that have been paid by Momentum, up to
a maximum 6 percent royalty. PeopleSoft has the right to buyout Momentum's right
to receive payments for individual licensed products in accordance with a
formula set forth in the Marketing and Distribution Agreement.

    Under the terms of the Services Agreement, PeopleSoft provides office
facilities for and performs accounting, finance, human resources, information
systems and legal services on behalf of, Momentum. PeopleSoft receives $100,000
per quarter as compensation for the provision of these services.

    Pursuant to Momentum's Restated Certificate of Incorporation, PeopleSoft has
the right to purchase all (but not less than all) of the Momentum Shares (the
"Purchase Option"). The Purchase Option will be exercisable by written notice to
Momentum at any time until December 31, 2002, provided that such date will be
extended for successive six month periods if, as of any June 30 or December 31
beginning with June 30, 2002, Momentum has not paid (or accrued expenses) for
all but $15 million of Available Funds as of such date. In any event, the
Purchase Option will terminate on the 60th day after Momentum provides
PeopleSoft with a statement that, as of the end of any calendar month, there are
less than $2.5 million of Available Funds remaining.



                                       8
<PAGE>   9

    Except in instances in which Momentum's liabilities exceed its assets, if
the purchase option is exercised, the exercise price will be the greatest of:

(1) 15 times the sum of (i) the actual worldwide payments made by or due from
    PeopleSoft to Momentum with respect to all Licensed Products and Developed
    Technology for the four calendar quarters immediately preceding the quarter
    in which the Purchase Option is exercised (the "Base Period"); plus (ii)
    such payments as would have been made during the Base Period by, or due
    from, PeopleSoft to Momentum if PeopleSoft had not previously exercised its
    Product Payment Buy-Out Option with respect to any Momentum Product (for
    purposes of the calculations in (i) and (ii), payments will be annualized
    for any product that has not been a Licensed Product for all of each of the
    four calendar quarters in the Base Period);

    minus any amounts previously paid to exercise any Product Payment Buy-Out
    Option for such Momentum Product;

(2) the fair market value of six hundred thousand (600,000) shares of PeopleSoft
    Common Stock, adjusted in the event of a stock split or dividend, as of the
    date PeopleSoft exercises its Purchase Option;

(3) three hundred million dollars ($300,000,000) plus any additional funds
    contributed to Momentum by PeopleSoft, less the aggregate of all amounts
    paid or incurred to develop the Momentum Products or pursuant to the
    Services Agreement as of the date the Purchase Option is exercised; or

(4) seventy-five million dollars ($75,000,000).

    In the event Momentum's liabilities (other than liabilities under the
Development Agreement, the Marketing Agreement and the Services Agreement)
exceed Momentum's assets, the Purchase Option Exercise Price described above
will be reduced by the amount such liabilities at the time of exercise are in
excess of Momentum's cash and cash equivalents, and short term and long term
investments. The Purchase Option exercise price is payable in cash.

Proposed Business Agreement Amendment

    On July 23, 2001, Momentum and PeopleSoft entered into the Business
Agreement Amendment, which amends the terms of the Development Agreement and the
Marketing Agreement. The primary purpose of the Business Agreement Amendment is
to restructure the royalty payments PeopleSoft must make to the Company to
license Momentum Products. The Business Agreement Amendment would essentially i)
decrease the Pre-Release Royalty for any Momentum Product to one percent (1%) of
Net License Fees from six percent (6%) of Net Revenues, ii) establish a uniform
Pre-Release term for all Momentum Products currently under development which
will end upon the earlier to occur of the substantial exhaustion of the
Available Funds or July 1, 2002; iii) change the definition of Net Revenues such
that they will now include both Net License Fees and Annual Maintenance Fees,
and with no reduction for PeopleSoft's subsequent sustaining engineering
expenses related to each product; and iv) increase Product Payments to Momentum
subsequent to the Pre-Release Term from a formula driven rate previously capped
at 6% of Net Revenues under the old definition to a flat 10% of Net Revenues as
redefined. Six products which were licensed by PeopleSoft prior to the execution
of this amendment have been grandfathered under the original terms.

    In conjunction with the Business Agreement Amendment, the Company proposes
to amend its Restated Certificate of Incorporation to change the exercise price
of PeopleSoft's Purchase Option. The effectiveness of the Business Agreement
Amendment is contingent upon the Company obtaining stockholder approval of the
amendment to the Restated Certificate of Incorporation. The amendment to the
Company's Restated Certificate of Incorporation will be voted on by holders of
shares of Momentum at its 2001 Annual Meeting of Stockholders to be held on
September 19, 2001. If stockholder approval is not obtained on or prior to
September 30, 2001, then the Business Agreement Amendment will not be effective
and the Development Agreement and the Marketing Agreement will continue as in
effect prior to the execution of the Business Agreement Amendment.

    PeopleSoft currently has a right to purchase all but not less than all, of
the issued and outstanding shares of Class A Common Stock of Momentum. The
aggregate exercise price of the Purchase Option is the highest value determined
by reference to four formulas, summarized as follows: 1) a multiple of certain
royalties earned by Momentum, 2) the fair market value of 600,000 shares of
PeopleSoft stock, 3) $300 million less the amounts paid or incurred to develop
Momentum Products or pursuant to the Services Agreement between Momentum and
PeopleSoft, or 4) $75 million.


                                       9
<PAGE>   10

    The proposed amendment to the Restated Certificate of Incorporation relates
specifically to the first and fourth formulas to be utilized in the
determination of PeopleSoft's Purchase Option Price. The first formula has been
modified to clarify the royalty base on which the multiple is calculated. The
formula is essentially fifteen times the sum of all pre-release royalties or
product payments paid by PeopleSoft to Momentum during the four quarters prior
to an exercise of the Purchase Option. The fourth formula has been changed from
a flat amount of $75 million to: i) $90 million provided the option is exercised
no later than February 15, 2002, ii) $92.5 million if exercised on or between
February 16, 2002 and May 15, 2002, or iii) $95 million if exercised on or after
May 16, 2002. The timing of the expiration of the Purchase Option remains
unchanged.

                ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The Discussion and Analysis of Financial Condition and Results of Operations
contains descriptions of the Company's expectations regarding future trends
affecting its business. These forward-looking statements and other
forward-looking statements made elsewhere in this document are made in reliance
upon safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The following discussion sets forth certain factors the Company believes
could cause actual results to differ materially from those contemplated by the
forward-looking statements. Forward-looking statements include, but are not
limited to, those items identified with a footnote 1 symbol. The Company
undertakes no obligation to update the information contained herein.

Results of Operations

    Revenues, consisting entirely of royalty revenue from PeopleSoft, were
$448,000 in the first fiscal quarter of 2002 compared to $286,000 in the first
fiscal quarter of 2001. Royalty revenue is derived from PeopleSoft's end user
licensing and shipment of certain software products developed under the
Development Agreement and Marketing Agreement. Momentum initially realized
royalty revenue in the third fiscal quarter of 2000. Upon the release of
PeopleSoft 8 in the second fiscal quarter of 2001, the volume of shipments by
PeopleSoft of Momentum products increased significantly. Royalties for the first
fiscal quarter of 2002 were earned on over 45 products. However, the royalties
for the current quarter were computed based on the recently executed Business
Agreement Amendment between Momentum and PeopleSoft and reflect the lower
pre-release royalty rate of 1% on Momentum Products (See Note 3 -- "Proposed
Business Agreement Amendment"). Had the royalties been computed under the
original agreements and the previously established pre-release royalty rate of
6%, total revenues from royalties for the quarter ended July 31, 2001 would have
been approximately $2.1 million. There can be no assurance that Momentum will
continue to realize significant royalty revenues from its development
efforts.(1)

     Cost of revenues consists entirely of amortization of capitalized
development costs of software developed for sale under SFAS 86. (See Note 1 --
"Capitalized Software"). Cost of revenues was $1.1 million for the first fiscal
quarter of 2002 compared with $0.1 million for the first fiscal quarter of 2001.

    The Company incurred development expenses of $28.0 million during the first
fiscal quarter of 2002 compared with $30.5 million for the first fiscal quarter
of 2001. These expenses were incurred pursuant to the Development Agreement.
Under this agreement, Momentum can engage PeopleSoft to perform research and
development work, and PeopleSoft will charge Momentum 110% of its fully burdened
cost of performing such activities. Fully burdened costs include salary,
benefits and overhead allocations, but do not include certain other costs, such
as the human resources costs associated with recruiting development personnel
and other indirect costs and expenses of establishing and maintaining a
development environment. Momentum also incurs certain direct costs associated
with developing its products that may include payments to other third parties
for development, royalties, or costs associated with acquiring or investing in
complementary companies, products or technology. Development expenditures for
the first fiscal quarter decreased approximately 8% over the same period of the
prior year, and decreased approximately 10% over the quarter ended April 30,
2001. The decrease in development expenditures in the current quarter is
primarily attributable to the completion of five development projects during the
third quarter of Fiscal 2001. The quarterly rate of development expenditures is
expected to continue to decrease in the quarter ending October 31, 2001 based on
existing development plans and budgets.(1)


------------
(1) Forward-Looking Statements

                                       10
<PAGE>   11


    General and administrative expenses were $1.2 million during the first
fiscal quarter of 2002 compared with $0.2 million for the first fiscal quarter
of 2001. The expenses for the current period include a non-cash charge of $0.9
million related to variable plan accounting for all of the outstanding stock
options as a result of a recent change made to the 1999 Incentive Stock Plan to
incorporate a net exercise feature. Under the Services Agreement, PeopleSoft
provides Momentum certain administrative services including accounting, finance,
human resources and legal services, and maintains office facilities for
Momentum. Momentum pays PeopleSoft a fee of $100,000 per quarter for such
services. The amount of this fee was determined using PeopleSoft's internal
projections of the incremental costs that it would incur to provide these
services to Momentum. Momentum is required to separately pay for direct costs
such as professional services, insurance, taxes, director and officer
compensation, listing fees and regulatory fees. It is anticipated that general
and administrative expenses, exclusive of non-cash compensation charges, if any,
will remain at approximately current levels during Fiscal 2002.(1)

    Because of the restrictions on the use of Available Funds under the
Development Agreement, Momentum is not expected, for the indefinite future, to
spend any funds on sales, marketing, or distribution activities. As such, it
will not be able to effectively establish a brand, corporate image or identity
in the overall marketplace. Such anonymity may make it more difficult for
Momentum to pursue alternate exit strategies, should PeopleSoft not exercise its
purchase option in the future.

    Interest income earned on invested funds was $0.9 million during the first
fiscal quarter of 2002 compared with $3.4 million for the first fiscal quarter
of 2001. The decline in interest and investment income was primarily due to the
significant reduction in the cash balances of Momentum over the past year, a
direct consequence of the aggressive product development spending over the same
period. As Momentum's Available Funds are used under the Development Agreement
and the Services Agreement, lower cash balances will be available for
investment. Furthermore, due to the relatively short maturities of Momentum's
cash investments and the declining interest rate environment, the rate of
interest earnings on cash investments will continue to decline in the near term.
As a consequence of these two factors, interest income is expected to continue
to decrease.(1)

    The results of operations of Momentum currently reflect primarily
development expenses related to development of Momentum products. Momentum's net
loss was $29.0 million or $6.18 per share for the quarter ended July 31, 2001 as
compared with a net loss of $27.2 million or $5.78 per share for the quarter
ended July 31, 2000. The Company is expected to record significant net losses in
future periods, as product development expenses under its agreements with
PeopleSoft are expected to continue to exceed income from royalties and
investments.(1)

Liquidity and Capital Resources

    Momentum was formed on November 9, 1998. PeopleSoft contributed a total of
$250 million in cash to Momentum in late December 1998 prior to the
Distribution. PeopleSoft's contribution (together with interest earned thereon)
is expected to fund research and development activities for approximately three
to four years from Momentum's inception.1 Including such interest income earned
from inception through July 31, 2001, Momentum's gross Available Funds (before
deducting development and administrative expenses incurred from inception to the
same date) totaled $277.6 million. Momentum's funds are expected to be used
primarily to fund activities to be conducted under the Development Agreement
with PeopleSoft. Momentum expects to engage PeopleSoft or other third parties to
perform the development activities on Momentum's behalf. Momentum is not
expected to require significant facilities or capital equipment of its own
during the term of the Development Agreement. At July 31, 2001, cash and cash
equivalents were approximately $59.9 million of which $52.3 million are
restricted for use under the Development Agreement and consist primarily of
investments in money market funds with maturities of three months or less (See
Note 3 -- "Development Agreement").

    In addition to the Available Funds, Momentum generates additional funds
through successfully licensing its products to PeopleSoft or other parties.
Momentum also has the option to obtain additional financing through either debt
or equity financing, as long as the terms of such financings do not alter
PeopleSoft's rights as a Class B Common Stock holder. Funds raised through
licensing of products or financings are not considered Available Funds and thus
their use by Momentum is not restricted by PeopleSoft. During the quarter ended
July 31, 2001, the Company earned $0.5 million in royalties from the licensing
of products developed under the Development Agreement.

    Since the spin-out of Momentum, it has not attempted to raise any additional
capital. Furthermore, there can be no assurances, particularly given the
existence of the Development Agreement, the Marketing Agreement and PeopleSoft's
Purchase Option, that Momentum would be able to raise any additional capital if
it were deemed desirable. Such additional capital, if raised, would most likely
reduce the per share proceeds available to holders of the Momentum Class A
Common Stock if the Purchase Option were to be exercised by PeopleSoft. (See
Note 3 -- "Purchase Option").


------------
(1) Forward-Looking Statements


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<PAGE>   12

    As of July 31, 2001, Momentum had committed over $240 million of the
Available Funds to various development projects as follows: i) approximately $50
million for the development of a suite of Analytic Applications and workbenches
(EPM products), ii) approximately $124 million for new eBusiness applications,
iii) approximately $51 million for new industry specific applications, and iv)
approximately $15 million for two technology development and acquisition
projects. From inception to date, Momentum has incurred $228.7 million of
development expenditures (including purchased technology) on the above
referenced projects, and has incurred $3.4 million on general and administrative
expenses (excluding the one time, non-cash stock compensation charge this
quarter). Based on the projects committed to date and their associated current
staffing levels, Momentum presently has an estimated second fiscal quarter
development expenditure run rate of approximately $19 million. However, such run
rate is subject to rapid change due to a variety of factors including changes in
project stages, the possible addition of new projects, the completion or
termination of one or more existing projects, and increases or decreases in the
level of resources assigned to each respective project. Based on current
spending projections and presently committed projects, the Available Funds are
expected to be substantially exhausted by February 2002.1 Upon exhausting the
Available Funds, Momentum is under no obligation, contractual or otherwise, to
continue to provide funding for any remaining active development projects. It is
presently the intention of Momentum to cease funding any and all development
projects upon exhausting its Available Funds.

Risks and Uncertainties

    Momentum's actual results could differ materially from those anticipated in
these forward-looking statements due to certain factors. Such risks and
uncertainties include, but are not limited to the following:

o    Momentum may not successfully select or develop a sufficient number of
     products to economically justify the aggregate purchase price implied by
     some or all of the exercise price formulas. The development projects
     referenced herein are characterized by many inherent risks, including but
     not limited to: 1) existing PeopleSoft technology may not be suitable as a
     foundation for the application software functionality, and 2) constantly
     changing and evolving customer demands for products, product functionality,
     and the underlying technology may cause products to meet with limited
     market acceptance. Consequently, such development efforts may not result in
     a product that is embraced by the market.

o    Demand for Momentum's products may be highly sensitive to time to market
     and/or first mover advantages. Any material delays in the development
     project schedule may adversely affect demand for the product, even if the
     development project is otherwise successfully completed. Furthermore,
     competitors of PeopleSoft, and even PeopleSoft, may offer products that
     compete directly with Momentum's products. Weakness in demand for a product
     will translate into limited royalty income to Momentum, associated limited
     product payment buy out proceeds, if any, and may ultimately reduce
     PeopleSoft's interest in exercising its purchase option.

o    Momentum and PeopleSoft are parties to various agreements which limit
     Momentum's ability to take certain actions, establish alternate channels of
     distribution for its products, market its products to or through certain
     competitors of PeopleSoft, or use Available Funds for other than designated
     product development and administrative activities. Consequently, Momentum
     has few degrees of freedom with which to generate revenues or otherwise
     commercialize developed technology or products should PeopleSoft elect not
     to utilize some or all of the developed products. As of July 31, 2001,
     Momentum had approximately $7.6 million of unrestricted funds.

o    Momentum or PeopleSoft may cancel a development project at anytime and for
     any reason or no reason at all. Accordingly, it is possible that Momentum
     could incur significant expenditures toward the development of a particular
     product, only to have the project cancelled in the later stages of the
     schedule. There is no recourse to PeopleSoft in the event of this
     occurrence. Since inception, a total of four projects have been cancelled
     after Momentum had incurred material expenditures associated with such
     projects.



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<PAGE>   13

o    If Momentum were not successful with a number of development projects,
     PeopleSoft would be unlikely to exercise its option to purchase the stock
     of Momentum. Even if Momentum is successful in developing certain products,
     PeopleSoft may not exercise its option to purchase the Common Stock of
     Momentum. For example, PeopleSoft has the right to buy out the ownership of
     selected products under its product payment buy out option. Consequently,
     it could purchase the rights to certain products, thereby obviating any
     need to exercise the purchase option on the Company's Common Stock.
     Alternatively, PeopleSoft could elect to continue to pay royalties for the
     term of their license (generally ten years) after which time they would
     have a paid up license for the products. It is not clear whether a
     royalty-based annuity would provide a reasonable return to Momentum
     shareholders.

o    Royalty results for the first quarter are not necessarily indicative of
     results to be expected going forward. If the proposed amendment to
     Momentum's Restated Certificate of Incorporation is approved by
     shareholders, the royalty rate will increase to 10% on both license fees
     and maintenance fees at the conclusion of the pre-release term (which by
     agreement will occur on the earlier of July 1, 2002 or the exhaustion of
     Momentum's Available Funds). Until such time, royalties during the interim
     pre-release periods will fluctuate primarily in relationship to
     PeopleSoft's net license fees earned on Momentum Products. The royalty rate
     applied to the majority of the licensing activity during the first fiscal
     quarter was one percent, which is the revised contractual rate for products
     licensed to customers prior to PeopleSoft's exercise of its license option
     on a product.

o    If Momentum's proposed amendment to the Restated Certificate of
     Incorporation is not approved by shareholders, the Business Agreement
     Amendment will not become effective and the royalty arrangements between
     PeopleSoft and Momentum will revert to the original arrangement. Under the
     original arrangement, PeopleSoft has some control over the timing of its
     exercise of an option to license a Momentum Product. Prior to such
     exercise, the pre-release rate is six percent under the original
     arrangement. Subsequent to any exercise of a license option, the royalty
     rate for the subject product will revert to a formula based rate, which may
     be substantially less than six percent, and which in no case can exceed six
     percent. To date, PeopleSoft has exercised its option to license a total of
     six products, thereby effectively reducing the rates on these products from
     six percent to between approximately one and five percent. Nothing in the
     press release should be construed to provide any assurance that additional
     products will be successfully developed, or that development successes will
     result in additional royalties, or that PeopleSoft will exercise any
     further license options. However, to the extent that products are
     successfully developed, it is likely that PeopleSoft will exercise its
     license option as to those products because such exercise can result in a
     net reduction in their related royalty costs

o    The recent successful release of products which have generated royalties
     should not be construed to provide any assurance that additional products
     will be successfully developed, or that development successes will result
     in additional royalties, or that PeopleSoft will exercise any further
     license options. Furthermore, Momentum's ability to generate royalty income
     is directly dependent on the overall effectiveness of PeopleSoft's
     marketing and sales activities.

                     ITEM 3 -- QUANTITATIVE AND QUALITATIVE
                          DISCLOSURE ABOUT MARKET RISK

    In the normal course of business, our financial position is routinely
subject to a variety of risks, including market risk associated with interest
rate movement. We regularly assess these risks and have established policies and
business practices to protect against these and other exposures. As a result, we
do not anticipate material potential losses in these areas.

    As of July 31, 2001, we had cash, cash equivalents and investments of
approximately $59.9 million consisting of cash and highly liquid short term and
long term investments. Our investments will decline by an immaterial amount if
market interest rates increase, and therefore, our exposure to interest rate
changes has been immaterial. Declines of interest rates over time will, however,
reduce our interest income from our investments.

    Other risks which are detailed in the Company's filings with the Securities
and Exchange Commission, including, but not limited to, the December 31, 1998
Second Amendment to the Information Statement (Form 10) and the 2001 Annual
Report to Shareholders (Form 10-K) filed July 30, 2001.



                                       13
<PAGE>   14

                          PART II -- OTHER INFORMATION

    Item 1. Legal Proceedings

    None

    Item 2. Changes in Securities and Use of Proceeds

    None

    Item 3. Defaults Upon Senior Securities

    None

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

    None

    Item 5. Other Information

    None

    Item 6. Exhibits and Reports on Form 8-K

    (a) Exhibits

    None

    (b) Reports on Form 8-K

    No reports on Form 8-K were filed during the quarter ended July 31, 2001.



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<PAGE>   15

                                   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.

Dated: September 14, 2001

MOMENTUM BUSINESS APPLICATIONS, INC.

                                        By:  /s/ Ronald E. F. Codd
                                           -----------------------------------
                                           Ronald E. F. Codd
                                           President and Chief Executive Officer
                                           (Principal Executive, Financial and
                                           Accounting Officer)



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