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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

[ ]  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: 0-25185

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

<TABLE>
<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 FEBRUARY 28, 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          9
                 ITEM 3-- Quantitative and Qualitative Disclosure about Market Risk                                     13
PART II          OTHER INFORMATION
                 ITEM 1--  Legal Proceedings                                                                            13
                 ITEM 2--  Changes in Securities and Use of Proceeds                                                    13
                 ITEM 3--  Defaults upon Senior Securities                                                              13
                 ITEM 4--  Submission of Matters to a Vote of Security Holders                                          13
                 ITEM 5--  Other Information                                                                            13
                 ITEM 6--  Exhibits and Reports on Form 8-K                                                             13
SIGNATURES                                                                                                              14
</TABLE>

                                       2

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                         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>
                                                                                JANUARY 31,     APRIL 30,
                                                                                   2001           2000
                                                                              --------------  -----------
<S>                                                                             <C>           <C>
                         ASSETS
Current assets:
  Cash and cash equivalents (Note 1).....................................       $  114,071    $   228,218
  Accounts receivable from PeopleSoft....................................            2,611            563
  Income taxes receivable................................................              224            224
                                                                                ----------    -----------
          Total current assets...........................................          116,906        229,005
Capitalized software, less accumulated amortization......................            3,735            432
Purchased technology from PeopleSoft.....................................            9,164             --
                                                                                ----------    -----------
                                                                                $  129,805    $   229,437
                                                                                ==========    ===========

          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Payable to PeopleSoft..................................................       $    8,146    $    20,677
  Accounts payable.......................................................                3             36
  Accrued liabilities....................................................              233            264
  Accrued compensation and related expenses..............................               26             29
                                                                                ----------    -----------
          Total current liabilities......................................            8,408         21,006
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.............................................          249,996        249,996
  Accumulated deficit....................................................         (128,604)       (41,570)
                                                                                ----------    -----------
                                                                                   121,397        208,431
                                                                                ----------    -----------
                                                                                $  129,805    $   229,437
                                                                                ==========    ===========
</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               NINE MONTHS ENDED
                                                                 JANUARY 31,                     JANUARY 31,
                                                    --------------------------------------------------------------
                                                          2001            2000            2001             2000
                                                    --------------------------------------------------------------
<S>                                                    <C>              <C>            <C>               <C>
Revenues from PeopleSoft...........................    $    2,611       $     249      $    4,339        $     249
Costs and expenses primarily from PeopleSoft:
  Cost of revenues.................................           307              --             531               --
  Product development..............................        31,388          13,869          98,529           28,504
  General and administrative.......................           339             377             894            1,067
                                                       ----------       ---------      ----------        ---------
          Total costs and expenses.................        32,034          14,246          99,954           29,571
                                                       ----------       ---------      ----------        ---------
Operating loss.....................................       (29,423)        (13,997)        (95,615)         (29,322)
Interest income....................................         2,386           3,276           8,582            9,447
                                                       ----------       ---------      ----------        ---------
Net loss before income taxes.......................       (27,037)        (10,721)        (87,033)         (19,875)
Provision for (benefit from) income taxes..........            --              --               1             (173)
                                                       ----------       ---------      ----------        ---------

Net loss...........................................    $  (27,037)      $ (10,721)     $  (87,034)       $ (19,702)
                                                       ===========      =========      ===========       =========
Basic and diluted loss per share...................    $    (5.76)      $   (2.28)     $   (18.54)       $   (4.20)
                                                       ==========       =========      ==========        =========
Shares used in basic and diluted
  loss per share computation.......................         4,695           4,695           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>
                                                                     NINE MONTHS ENDED
                                                                        JANUARY 31,
                                                               ----------------------------
                                                                   2001             2000
                                                               -----------      -----------
<S>                                                            <C>              <C>
OPERATING ACTIVITIES
Net loss................................................       $  (87,034)      $  (19,702)
Amortization of capitalized software....................              531               --
Adjustments to reconcile net loss to net cash
used by operating activities:
  Provision for deferred income taxes...................               --               64
  Changes in operating assets and liabilities:
     Accounts receivable from PeopleSoft................           (2,048)            (249)
     Payable to PeopleSoft..............................          (12,531)           7,765
     Accounts payable...................................              (33)              16
     Accrued liabilities................................              (31)             124
     Accrued compensation and related expenses..........               (3)               5
     Income taxes payable...............................               --             (716)
                                                               ----------       ----------
Net cash used by operating activities...................         (101,149)         (12,693)
INVESTING ACTIVITIES
Capitalization of software development costs............           (3,834)              --
Purchase of technology assets...........................           (9,164)              --
                                                               ----------       ----------
Net cash used by investing activities...................          (12,998)              --
                                                               ----------       ----------
Net (decrease) increase in cash and cash equivalents             (114,147)         (12,693)
Cash and cash equivalents at beginning of period                  228,218          253,867
                                                               ----------       ----------
Cash and cash equivalents at end of period..............       $  114,071       $  241,174
                                                               ==========       ==========
</TABLE>

             See notes to condensed unaudited financial statements.

                                       5

<PAGE>   6


                      MOMENTUM BUSINESS APPLICATIONS, INC.
                NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
                                JANUARY 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 January 31, 2001 and for the three and nine months ended
January 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, 2000 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, 2000 included in Momentum's 2000 Annual
Report on Form 10-K.

Accounting for Revenues and Expenses

     Through January 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 monthly lag.
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 markets 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 maturities of three
months or less when purchased to be cash equivalents. At January 31, 2001, cash
equivalents were approximately $114.1 million of which approximately $111.7
million are restricted for use under the Development Agreement (See Note 3 --
"Development Agreement"). The Company's cash and cash equivalents consist
primarily of taxable investments in money market funds at three financial
institutions. All other cash is held in a bank demand deposit.

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 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 development costs of software developed for sale
when it has reached technological feasibility. 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) and charged to cost of revenues, 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.

Purchased Technology from PeopleSoft

     In June 2000, Momentum purchased from PeopleSoft all of the intangible
assets and intellectual property (the "Assets") acquired by PeopleSoft via an
acquisition of a company during the first half of 2000. The Assets were
purchased by Momentum for the purpose of advancing the development of at least
two Momentum Products. The total purchase price is comprised of an initial base
price payment of approximately $8.6 million plus a contingent amount of not less
than zero and not more than approximately $1.4 million. Installment payments of
the contingent amount are subject to the full satisfaction of certain conditions
set forth in the purchase agreement between Momentum and PeopleSoft. The Assets
acquired are considered Developed Technology as defined in the Development
Agreement, and as such, PeopleSoft shall pay to Momentum a royalty of 1% of net
revenues on any product other than Momentum Products that incorporate all or any
part of the Assets. As of January 31, 2001, $0.6 million of the contingent
amount had been charged by PeopleSoft to Momentum.

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 2001, and thus only minimum taxes were provided for in the nine
month period ended January 31, 2001.

Common Stock

     Momentum's Articles of Incorporation provides 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

                                       7

<PAGE>   8

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.

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". This
method 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, they are not currently dilutive common stock equivalents and thus
diluted loss per share equals basic loss per share.

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 0.1 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.


                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 $2.6
million in the third quarter of 2001 compared to $0.2 million in the third
quarter of 2000. For the year-to-date period, revenues were $4.3 million in 2001
compared to $0.2 million in 2000. Momentum has realized increasing royalty
revenues for the past several quarters as a result of the shipment of several
Momentum Products developed under the Development Agreement. In September, 2000,
PeopleSoft commenced shipments of PeopleSoft 8, a family of pure internet
eBusiness software products that encompasses a new version of PeopleSoft's
previously existing commercial enterprise products, and approximately 60 new
application products, a substantial number of which have been, and/or are being
developed under various Momentum projects. The increase in the Company's royalty
revenue is attributable to the following factors: 1) the benefit of a full
quarter of shipments of many of these new application software products, 2) a
significant increase in PeopleSoft's overall license revenue and shipment
activity in its fourth calendar quarter of 2000, and 3) an increase in the
number of products on which royalties were generated. Specifically, shipments of
the following Momentum products commenced in late September 2000: Time and
Labor, Stock Administration, Deductions, Contracts, eProcurement, Resource
Management, Portal Applications and several new eBusiness products. The new
eBusiness products being developed under Momentum's Collaborative Human
Resources Applications Project and previously released Enterprise Performance
Management products accounted for

                                       9

<PAGE>   10

approximately half of the royalty revenue for the third fiscal quarter. Under
the terms of PeopleSoft's Marketing Agreement with Momentum for products that
have not yet reached a generally available status, the applicable royalty rate
was 6% of net sales. Following PeopleSoft's exercise of its license option for a
product, Momentum will earn a royalty for each product licensed by PeopleSoft,
or another distributor, based on a contractually determined royalty rate which
is a function of the amount of development costs incurred on each developed
product. (See Note 3 -- "Marketing and Distribution Agreement"). During the
quarter, PeopleSoft exercised its option to license the following five products
effective January 1, 2001: Deductions Management, eBenefits, Mobile Time and
Expense, Stock Administration, and Time and Labor. As a result, the royalty
rates on these products beginning with the first calendar quarter of 2001 will
be reduced from 6% percent to formula based rates that were determined based on
the amounts incurred by Momentum to develop these products. Such rates vary from
a minimum of slightly over 1% to a maximum of 5% of PeopleSoft's net license
revenue. 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 $0.3 million in the third quarter
of 2001 and $0.5 million for the year-to-date period.

     The Company incurred development expenses of $31.4 million during the third
quarter of 2001 compared with $13.9 million for the third quarter of 2000. For
the nine months ended January 31, 2001, development expenses amounted to $98.5
million in 2001 compared to $28.5 million in 2000. 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.
The substantial increase in development expenditures in the current year was
driven by four factors i) the addition of new projects to Momentum's development
project portfolio, ii) certain expenses associated with product translation and
non-recurring release management and testing activities which were incurred in
advance of PeopleSoft 8 initial shipments of Momentum Products, iii) increases
in project staffing and the associated expense run rates on several previously
committed projects, and iv) the funding of retroactive project costs on certain
of the projects recently undertaken by Momentum. The quarterly rate of
development expenditures is expected to decrease in the quarter ending April 30,
2001 for two reasons: 1) The completion of the development effort and associated
exercise of the aforementioned license options on the five projects previously
noted, and 2) potential additional development projects may be concluded in the
next several months.(1)

     General and administrative expenses was $0.3 million during the third
quarter of 2001 compared with $0.4 million for the third quarter of 2000. For
the year-to-date period, general and administrative expenses were $0.9 million
in 2001 compared to $1.1 million in 2000. 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 will remain at approximately current levels during
Fiscal 2001.(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 $2.4 million during the third
quarter of 2001 compared with $3.3 million for the third quarter of 2000. For
the year-to-date period, interest income earned on invested funds was $8.6
million in 2001 compared to $9.4 million in 2000. As Momentum's Available Funds
are used under the Development Agreement and the Services Agreement, lower cash
balances will be available for investment and therefore interest income is
expected to decrease.(1)

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

(1)  Forward-Looking Statement.

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<PAGE>   11

     The results of operations of Momentum currently reflect primarily
development expenses related to development of Momentum products and interest
income earned on the funds contributed by PeopleSoft. Momentum's net loss was
$27.0 million or $5.76 per share for the quarter ended January 31, 2001 as
compared with a net loss of $10.7 million or $2.28 per share for the quarter
ended January 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.(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.1 Including such interest income earned from inception through
January 31, 2001, Momentum's gross Available Funds (before deducting development
and administrative expenses incurred from inception to the same date) totaled
$275.2 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 January 31, 2001, cash and cash equivalents were
approximately $114.1 million of which $111.7 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
January 31, 2001, the Company earned $2.6 million in royalties from the
licensing of products developed under the Development Agreement, however, the
actual payment for such royalties was not due until after the quarter end. Such
funds, upon their receipt, shall be without restriction as to their use.

     There can be no assurances, particularly given the existence of the
Development Agreement, the Marketing Agreement and the Services Agreement, that
Momentum will be able to raise any additional capital. 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").

     As of January 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 $169 million of
development expenditures (including purchased technology) on the above
referenced projects, and has incurred $2.7 million on general and administrative
expenses. Based on the projects committed to date and their associated current
staffing levels, Momentum presently has an estimated fourth fiscal quarter
development expenditure run rate of approximately $25 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 in the range of between $25 to $40 million by the end of December
2001.(1)


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:

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

(1)  Forward-Looking Statement.

                                       11

<PAGE>   12

o    Momentum may not successfully select or develop a sufficient number of
     products to economically justify the aggregate purchase price implied by
     certain of the exercise price formulas. The development projects referenced
     herein are characterized by many inherent risks, including but not limited
     to 1) it may be difficult to staff such projects with qualified development
     personnel who have sufficient domain expertise, 2) existing PeopleSoft
     technology may not be suitable as a foundation for the application software
     functionality, 3) development efforts in general are complex, and such
     complexities create a risk that the products may not be technologically
     feasible, and 4) constantly changing and evolving customer demands for
     products and product functionality may cause products to meet with limited
     market acceptance. Consequently, such development efforts may not be
     successful or result in a product that is accepted 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 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, and use funds for purposes 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.

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.

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 royalty buy out rights. Consequently,
     it could purchase the rights to certain products, thereby obviating any
     need to exercise the purchase option on the Company's Common Stock.

o    Royalty results for the third quarter are not necessarily indicative of
     results to be expected going forward. The royalty rate applicable to the
     licensing activity through the third fiscal quarter was six percent, which
     is the contractual rate for products licensed to customers prior to
     PeopleSoft's exercise of its license option on a product. 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. During the third
     quarter, PeopleSoft exercised its option to license five products, thereby
     effectively reducing the rates on these products from six percent to
     between approximately one and five percent.

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 license
     options.

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

(1)  Forward-Looking Statement.

                                       12

<PAGE>   13


                     ITEM 3 -- QUANTITATIVE AND QUALITATIVE
                          DISCLOSURE ABOUT MARKET RISK

     The Company's exposure to market risk for changes in interest rates relates
to the Company's investment portfolio, which consists of short-term money market
instruments. The Company has no investments in equity securities nor does the
Company use derivative financial instruments in its investment portfolio. The
Company has no cash flow exposure due to rate changes for cash and cash
equivalents as all these instruments are at fixed interest rates.

    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 2000 Annual
Report to Shareholders (Form 10-K) filed July 28, 2000.


                          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 filing.

(b) Reports on Form 8-K

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


                                       13

<PAGE>   14


                                   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: March 16, 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)

                                       14