UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


(Mark One)

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

For the quarterly period ended SEPTEMBER 30, 2000
                               ------------------

                                       or

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

For the transition period from __________________ to __________________

Commission file number  0-19377
                        -------

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


                    NEVADA                               68-0140975
        -------------------------------     ------------------------------------
        (State or other jurisdiction of     (I.R.S. Employer Identification No.)
        incorporation or organization)

                 1080 Marina Village Parkway, Alameda, CA 94501
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (510) 749-8500

              (Registrant's telephone number, including area code)

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



    23,144,219 shares of Common Stock of the Registrant were outstanding as of
    November 10, 2000.


<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

        Consolidated Balance Sheets as of
           September 30, 2000 (UNAUDITED) and December 31, 1999                3

        Consolidated Statements of Operations for the three and nine
           months ended September 30, 2000 and 1999 (UNAUDITED)                4

        Consolidated Statements of Cash Flows for the
           nine months ended September 30, 2000 and 1999 (UNAUDITED)           5

        Notes to Consolidated Financial Statements (UNAUDITED)                 6

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations                                    9

Item 3.  Quantitative and Qualitative Disclosures about Market Risk           18

PART II - OTHER INFORMATION

Item 1. Legal Proceedings                                                    N/A

Item 2. Changes in Securities                                                N/A

Item 3. Defaults Upon Senior Securities                                      N/A

Item 4. Submission of Matters to a Vote of Security Holders                  N/A

Item 5. Other Information                                                    N/A

Item 6. Exhibits and Reports on Form 8-K                                      19

Signature                                                                     20


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                                TCSI CORPORATION
                           CONSOLIDATED BALANCE SHEETS

               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                   SEPTEMBER 30,      DECEMBER 31,
                                                                        2000              1999
                                                                   -------------------------------
                                                                    (UNAUDITED)
<S>                                                                  <C>               <C>
ASSETS
Current assets:

    Cash and equivalents                                             $ 23,487          $   8,788
    Marketable securities                                              12,158             22,926
    Receivables, net                                                    2,722             12,134
    Other receivables                                                     174                879
    Other current assets                                                1,344              1,314
                                                                   --------------   --------------
        Total current assets                                           39,885             46,041
Equipment, furniture and leasehold improvements, net                    6,330              8,457
Other assets                                                            3,134              3,665
                                                                   --------------   --------------
                  Total assets                                       $ 49,349          $  58,163
                                                                   ==============   ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable and accrued liabilities                         $  2,027          $   3,449
    Accrued compensation and related costs                              3,055              3,157
    Deferred revenue                                                      229              1,029
    Income taxes payable                                                1,377              1,046
                                                                   --------------   --------------
        Total current liabilities                                       6,688              8,681

Shareholders' equity:
    Preferred shares, par value $0.01 per share; 5,000,000 shares
        authorized; none issued and outstanding
                                                                            -                  -
    Common shares,  par value $0.10 per share;  75,000,000  shares
        authorized;  23,144,219 and  22,686,724  shares issued and
        outstanding,  as of  September  30, 2000 and  December 31,
        1999, respectively                                              2,314              2,268
    Additional paid-in capital                                         52,594             51,265
    Accumulated other comprehensive income                                 17                 25
    Accumulated deficit                                               (12,264)            (4,076)
                                                                   --------------   --------------
        Total shareholders' equity                                     42,661             49,482
                                                                   --------------   --------------
                  Total liabilities and shareholders' equity         $ 49,349          $  58,163
                                                                   ==============   ==============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                                         TCSI CORPORATION
                              CONSOLIDATED STATEMENTS OF OPERATIONS
                             (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                           (UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED           NINE MONTHS ENDED
                                                           SEPTEMBER 30,                SEPTEMBER 30,
                                                     ------------------------      ------------------------
                                                        2000           1999           2000          1999
                                                     ---------      ---------      ---------      ---------
<S>                                                    <C>            <C>          <C>              <C>
Revenues:
    Services                                         $  2,655       $  4,010       $  8,959       $ 18,643
    Software licensing fees                             1,193          3,276          5,675          8,867
                                                     ---------      ---------      ---------      ---------
          Total revenues                                3,848          7,286         14,634         27,510

Costs, expenses, and special items:

    Services                                            1,795          4,762          6,558         14,713
    Product development                                 1,863          3,070          7,433         10,932
    Selling, general and administrative                 3,443          4,795         10,175         12,402
    Nonrecurring special items                             --             --            364             --
                                                     ---------      ---------      ---------      ---------
          Total costs, expenses, and special            7,101         12,627         24,530         38,047
                                                     ---------      ---------      ---------      ---------

Loss from operations                                   (3,253)        (5,341)        (9,896)       (10,537)

Interest income and other income (expense), net           660            576          1,708          1,735
                                                     ---------      ---------      ---------      ---------
Loss before income tax provision                       (2,593)        (4,765)        (8,188)        (8,802)

Income tax provision                                       --             58             --            445
                                                     ---------      ---------      ---------      ---------
Net loss                                             $ (2,593)      $ (4,823)      $ (8,188)      $ (9,247)
                                                     =========      =========      =========      =========

Net loss per share-basic and diluted                 $  (0.11)      $  (0.21)      $  (0.36)      $  (0.41)
                                                     ---------      ---------      ---------      ---------
Shares used in computing net loss per share -
   basic and diluted                                   23,117         22,652         23,016         22,589
                                                     =========      =========      =========      =========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                        4
<PAGE>

                                         TCSI CORPORATION
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (IN THOUSANDS)
                                           (UNAUDITED)
<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED
                                                                                SEPTEMBER 30,
                                                                       ----------------------------
                                                                          2000               1999
                                                                       ---------          ---------
<S>                                                                    <C>                <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                          $ (8,188)          $ (9,247)
     Adjustments to reconcile net loss to net cash provided by
         operating activities:
             Depreciation and amortization                                3,372              4,016
             Gain on disposal of fixed assets                               (10)              --
             Compensation expense related to grants of stock
              options and warrants                                           90               --
             Net changes in operating assets and liabilities:
                    Receivables, net                                      9,412             (1,933)
                    Other receivables                                       705               (812)
                    Other assets                                           (271)            (1,975)
                    Accounts payable and accrued liabilities              1,524)            (2,674)
                    Deferred revenue                                       (800)              (559)
                    Income taxes payable                                    331                527
                                                                       ---------          ---------
                Net cash provided by (used in) operating activities       3,117            (12,657)

 CASH FLOWS FROM INVESTING ACTIVITIES:
     Equipment, furniture and leasehold improvement expenditures, net      (464)            (1,716)
     Purchases of marketable securities                                  (4,469)           (26,837)
     Redemptions and sales of marketable securities                      15,229             37,636
                                                                       ---------          ---------
                Net cash provided by investing activities                10,296              9,083

 CASH FLOWS FROM FINANCING ACTIVITY:
     Proceeds from issuance of common stock                               1,286                552
                                                                       ---------          ---------
                Net cash provided by investing activities                 1,286                552
 Effect of exchange rate changes on cash and equivalents                   --                 (264)
                                                                       ---------          ---------
 Net increase (decrease) in cash and equivalents                         14,699             (3,286)
 Cash and equivalents at the beginning of the period                      8,788             22,308
                                                                       ---------          ---------
 Cash and equivalents at the end of the period                         $ 23,487           $ 19,022
                                                                       =========          =========
 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
     ACTIVITIES:
     Cash refunds received for income taxes, net                       $   (326)          $   (156)
                                                                       =========          =========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                        5
<PAGE>

                                TCSI CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION

        The unaudited consolidated interim financial statements of TCSI
Corporation ("TCSI" or the "Company"), included herein, have been prepared on
the same basis as the December 31, 1999 audited consolidated financial
statements and include all adjustments, consisting of normal recurring
adjustments, necessary to present a fair statement of the results for the
interim periods presented. The results of operations for current interim periods
are not necessarily indicative of results to be expected for the current year or
for any other period. These consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
notes thereto for the year ended December 31, 1999 included in the Company's
Annual Report on Form 10-K (File No. 0-19377).

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

NOTE 2 - RECEIVABLES AND CREDIT RISK

        Receivable balances are primarily from large, credit-worthy customers in
the telecommunications industry. The Company performs ongoing credit evaluations
of its customers and does not require collateral. The Company does not
anticipate any significant default from a customer's inability to make a payment
for products received and/or for services rendered. Allowances are maintained
for potential credit losses.

Receivables consist of the following:

                                                 SEPTEMBER 30,      DECEMBER 31,
                                                     2000               1999
                                                 -------------      ------------
                                                         (IN THOUSANDS)

    Billed receivables                           $  3,130          $ 11,763
    Unbilled receivables                              451             1,579
    Allowance for doubtful accounts                  (859)           (1,208)
                                                 -------------      ------------
                                                 $  2,722          $ 12,134
                                                 =============      ============

NOTE 3 - EQUIPMENT, FURNITURE  AND LEASEHOLD IMPROVEMENTS, NET

        Equipment, furniture and leasehold improvements are stated at cost.
Amortization is provided for leasehold improvements over the life of the lease
utilizing the straight-line method. Straight-line depreciation is provided for
equipment and furniture in amounts sufficient to relate the cost of depreciable
assets to operations over their estimated service lives of three to five years.


                                       6
<PAGE>

                                TCSI CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  (CONTINUED)

Equipment,   furniture  and  leasehold   improvement  balances  consist  of  the
following:

                                                  SEPTEMBER 30,     DECEMBER 31,
                                                      2000              1999
                                                  -------------     ------------
                                                         (IN THOUSANDS)

Computer and lab equipment                         $ 19,994          $ 19,672
Furniture and fixtures                                4,253             4,206
Leasehold improvements                                7,090             6,995
                                                  -------------     ------------
                                                     31,337            30,873
Accumulated depreciation and amortization           (25,007)          (22,416)
                                                  -------------     ------------
                                                   $  6,330          $  8,457
                                                  =============     ============


NOTE 4 - INCOME TAXES

        Due to uncertainties regarding the amount and timing of future taxable
income, the Company, as of September 30, 2000, had no net deferred tax assets
due to the establishment of a full valuation allowance against its deferred tax
assets.

NOTE 5 - NET LOSS PER SHARE

Per Share Information

        Basic net loss per share is computed using the weighted-average number
of common shares outstanding. Diluted net loss per share is computed using the
weighted-average number of shares outstanding and dilutive common stock
equivalents from the Company's stock option plans, calculated using the treasury
stock method. The following table sets forth the computation of basic and
diluted net loss per share:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED        NINE MONTHS ENDED
                                                         SEPTEMBER 30,             SEPTEMBER 30,
                                                       ------------------       -------------------
                                                         2000       1999         2000        1999
                                                       --------    ------       -------    --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                     <C>         <C>         <C>         <C>
NUMERATOR
   Numerator for basic net loss per share               (2,593)     (4,823)     (8,188)     (9,247)
                                                       ========    ========    ========    ========

DENOMINATOR
  Denominator for basic net loss per share
     - weighted-average common shares                   23,117      22,652      23,016      22,589

  Effect of dilutive securities-employee stock
   options                                                   -           -           -           -
                                                       --------    --------    --------    --------
  Denominator for diluted net loss per share
                                                        23,117      22,652      23,016      22,589
                                                       ========    ========    ========    ========
  Net loss per share-basic and diluted                 $ (0.11)    $ (0.21)    $ (0.36)    $ (0.41)
                                                       ========    ========    ========    ========
</TABLE>


        Since the Company had net losses during the three and nine months ended
September 30, 2000, weighted-average common shares (with an exercise price less
than the average market price of the Company's stock) were not included in the
computations because their effect would be antidilutive.


                                        7
<PAGE>

                                TCSI CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  (CONTINUED)

NOTE 6 - COMPREHENSIVE LOSS

        The following is a summary of comprehensive loss for the three and nine
months ended September 30, 2000 and 1999, respectively:

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED        NINE MONTHS ENDED
                                                    SEPTEMBER 30,             SEPTEMBER 30,
                                                 -------------------        ------------------
                                                   2000       1999           2000       1999
                                                 -------    --------        ------    --------
                                                               (IN THOUSANDS)
<S>                                             <C>         <C>            <C>        <C>
Net loss                                        $(2,593)    $(4,823)       $(8,188)   $(9,247)
Translation gains                                     -           8              -         38
Unrealized losses on marketable securities          (39)       (313)            (8)      (302)
                                                --------    --------       --------   --------
Comprehensive loss                              $(2,632)    $(5,128)       $(8,196)   $(9,511)
                                                ========    ========       ========   ========
</TABLE>


                                        8
<PAGE>

                                TCSI CORPORATION

        IN ADDITION TO HISTORICAL INFORMATION CONTAINED HEREIN, THIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN ARE SUBJECT TO CERTAIN FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS.
SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN THE
COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999.

OVERVIEW

        TCSI currently operates in one segment, which is providing integrated
software products and services for the global telecommunications ("telecom")
industry. The Company's two product lines are: (1) Catalant(R), which offers
carrier-class network management application and platform capabilities,
targeting next generation voice, data and wireless networks and (2) WorldWin(R),
which offers integrated Operations Support System ("OSS") solutions, including
provisioning, service assurance, mediation and billing functionality for
emerging service providers worldwide.

        The Company provides services to customers under time-and-material and
fixed-price contracts. The Company recognizes revenues under time-and-material
contracts as the services are performed. For fixed-price contracts, the Company
recognizes revenues using the percentage-of-completion method, which is based on
the percentage of contract costs incurred in relation to total estimated
contract costs. The scope and size of the Company's system solutions can be
large and complex, often requiring delivery over several quarters. From time to
time, customers have established payment milestones, which can be achieved only
after completion of the related services. In limited cases, some customers have
disputed fees charged for services provided. Although the Company has been, and
is, under no obligation to compromise its billed amounts, the Company has
periodically reduced its accounts receivable when such disputes could not be
amicably resolved and may do so in the future. Additionally, a portion of the
Company's revenues has been, and is expected to continue to be, derived from
software licensing fees from a limited number of customers. The Company also
licenses software to customers under contracts, which do not require significant
production, modification or customization of software. The Company recognizes
revenues under these contracts when a non-cancelable license agreement has been
signed, the product has been shipped, the fees are fixed and determinable,
collectibility is probable and vendor-specific objective evidence of fair value
exists to allocate the total fee to the elements of the arrangement.

        The licensing and implementation of the Company's software products
generally involve a significant commitment of resources by prospective
customers. As a result, the Company's sales process is subject to delays
associated with lengthy approval processes typically accompanying such
significant capital expenditures. Accordingly, the Company is substantially
dependent on its customers' decisions as to the timing and level of expenditures
and resource commitments. The variability in the timing of such expenditures
could cause material fluctuations in the Company's business, operating results
and financial condition. As a result, the Company's 2000 and 1999 quarterly
results for the three and nine months ended September 30, have been adversely
affected by delays in decisions to purchase software licenses and related
services.

        A substantial portion of the Company's revenues is derived from the sale
of the Company's software products and services to major telecom service
providers and equipment manufacturers. Due to the complex nature of the element,
network, and service management systems being developed, successful deployment
of these systems can contain significant technological risks. The Company has in
the past relied, and will in the future rely, on its development and
implementation expertise. Development and implementation of these systems often
occurs over several quarters.

        Management believes that revenue growth is highly dependent upon the
development and enhancement of software products that meet market needs.
Management intends to target Company-funded product development spending at
levels consistent with the Company's growth objectives and improving its
competitive position. Furthermore, management expects that, from time to time,
it may periodically acquire businesses, products, or technologies to enhance the
Company's current product offerings.


                                        9
<PAGE>

                                TCSI CORPORATION


RESULTS OF OPERATIONS

        REVENUES. The Company generates revenues from licensing its software
products and providing related services to the telecom industry. Total revenues
for the three months ended September 30, 2000 decreased 48% to $3.8 million,
from $7.3 million for the comparable 1999 period. Total revenues for the nine
months ended September 30, 2000 decreased 47% to $14.6 million, from $27.5
million for the comparable 1999 period. The decline in revenues was due to the
completion of several major projects in 1999, which were not replaced during
2000.

        Revenues from services for the three months ended September 30, 2000
decreased 33% to $2.6 million, from $4.0 million for the comparable 1999 period.
Revenues from services for the nine months ended September 30, 2000 decreased
52% to $8.9 million, from $18.6 million for the comparable 1999 period. The
decreases resulted primarily from the completion of several major projects in
1999, which were not replaced during 2000. Revenue from software licensing fees
for the three months ended September 30, 2000 decreased 64% to $1.2 million,
from $3.3 million for the comparable 1999 period. The decrease resulted
primarily from the inclusion of revenues for one-time licenses from primarily
two customers in the third quarter of 1999. Revenue from software licensing fees
for the nine months ended September 30, 2000 decreased 36% to $5.7 million, from
$8.9 million for the comparable 1999 period. The decrease resulted primarily
from the inclusion in the first and third quarters of 1999 of revenues for
certain one-time licenses.

        Revenues outside of the United States accounted for 49% of the Company's
total revenues for the three months ended September 30, 2000 compared to 62% for
the comparable 1999 period. Revenues outside of the United States accounted for
57% of the Company's total revenues for the nine months ended September 30, 2000
compared to 67% for the comparable 1999 period. Revenues from the Asia-Pacific
region for the three months ended September 30, 2000 decreased 50% to $0.7
million, from $1.4 million for the comparable 1999 period. Revenues from the
Asia-Pacific region for the nine months ended September 30, 2000 decreased 54%
to $4.3 million, from $9.4 million for the comparable 1999 period. Revenues from
the Americas region for the three months ended September 30, 2000 decreased 27%
to $1.9 million, from $2.6 million for the comparable 1999 period. Revenues from
the Americas region for the nine months ended September 30, 2000 decreased 29%
to $6.2 million, from $8.7 million for the comparable 1999 period. Revenues from
the European region for the three months ended September 30, 2000 decreased 64%
to $1.2 million, from $3.3 million for the comparable 1999 period. Revenues from
the European region for the nine months ended September 30, 2000 decreased 56%
to $4.1 million, from $9.4 million for the comparable 1999 period. The Company
expects the geographical mix of revenues to vary from period to period as it
responds to global buying habits and develops relationships with new and
existing partners and channels.

        To date, a portion of revenues has been concentrated among a limited
number of customers. Two customers accounted for more than 10% of the Company's
revenue during the three months ended September 30, 2000, with Italtel and
Zaffire, Inc. contributing 17% and 11% of total revenues, respectively. For the
three and nine months ended September 30, 2000, the concentration of revenues
from the Company's five largest customers was 55% and 56%, respectively,
compared to 60% and 59%, for the comparable 1999 periods. The revenues from
these customers represent many separate and distinct projects that are
geographically dispersed throughout the world. (See "Certain Factors That May
Affect Future Results and Market Price of Stock-Customer Concentration")

        COSTS OF SERVICES. The Company incurs direct costs in the development
and deployment of its customers' software solutions. The major components of
direct costs are employee compensation, subcontractor fees, training costs, and
other billable direct costs, including travel expenses. Direct costs also
include an allocation for benefits, facilities, telephone expenses, information
systems support, depreciation, and amortization of intangibles. Costs of
services for the three months ended September 30, 2000 decreased 63% to $1.8
million, from $4.8 million for the comparable 1999 period. Costs of services for
the nine months ended September 30, 2000 decreased 55% to $6.6 million, from
$14.7 million for the comparable 1999 period. The decrease in costs of services
in 2000 is primarily due to reduced headcount and related expenses. As a
percentage of service revenues, costs of services for the three months ended
September 30, 2000 were 68% of service revenues compared to 119% for the
comparable 1999 period. As a percentage of service revenues, costs of services
for the nine months ended September 30, 2000 were 73% of service revenues
compared to


                                        10
<PAGE>

                                TCSI CORPORATION


79% for the comparable 1999 period. The decrease in the cost of service
percentages in the current year periods compared to the comparable prior year
perods is mainly attributable to the Company's cost reduction efforts in 2000.
The cost of service percentage may remain at or increase from the third quarter
2000 level until existing and future customers increase their development
efforts.

        PRODUCT DEVELOPMENT. Product development expenses include employee
compensation, subcontractor fees, training costs and other product development
costs for existing and potential new products, along with an allocation for
benefits, facilities, telephone expenses, information systems support,
depreciation and amortization of intangibles. For the three months ended
September 30, 2000, the Company invested $1.9 million, or 48% of revenues, in
internally funded product development compared to $3.1 million, or 42% of
revenues for the three months ended September 30, 1999. For the nine months
ended September 30, 2000, the Company invested $7.4 million, or 51% of revenues,
in internally funded product development compared to $10.9 million, or 40% of
revenues for the nine months ended September 30, 1999. The decrease in product
development expenses in 2000 is due to the Company's expense reduction efforts,
including reductions in employee headcount and related costs. The Company
expects to continue to invest in its new component-based applications. There can
be no assurance, however, that the Company's product development spending will
result in the successful introduction of new products.

        SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling expenses include
sales and marketing, employee compensation, promotional material, trade shows,
travel, and facilities expenses. General and administrative expenses include
compensation costs related to executive management, finance and administrative
personnel, along with the other administrative costs including recruiting, legal
and accounting fees, insurance and bad debt expense. Selling, general and
administrative expenses for the three months ended September 30, 2000 decreased
29% to $3.4 million, from $4.8 million for the comparable 1999 period. Selling,
general and administrative expenses for the nine months ended September 30, 2000
decreased 18% to $10.2 million, from $12.4 million for the comparable 1999
period. The decrease in such expenses in 2000 is primarily due to reductions in
employee headcount and related costs and lower rent expense resulting primarily
from the consolidation of the Company's operations. Selling, general and
administrative expenses as a percentage of revenues for the three months ended
September 30, 2000 were 89% of revenues, compared to 66% of revenues for the
comparable 1999 period. Selling, general and administrative expenses as a
percentage of revenues for the nine months ended September 30, 2000 were 70% of
revenues, compared to 45% of revenues for the comparable 1999 period. The
increase in selling, general and administrative expenses as a percentage of
revenues in 2000 resulted primarily from the reduction of such costs at a rate
less than that of the reduction in revenues.

        NONRECURRING SPECIAL ITEMS. For the three months ended September 30,
2000, the Company did not record any nonrecurring special items. For the nine
months ended September 30, 2000, $0.4 million of nonrecurring special charges
were recorded and were related primarily to severance costs associated with the
Company's reorganization of its operations.

        INCOME TAX PROVISION. Due to uncertainties regarding the amount and
timing of future taxable income, the Company, as of September 30, 2000, had no
net deferred tax assets due to the establishment of a full valuation allowance
against its deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES

        Net cash provided by operating activities was $3.1 million for the nine
months ended September 30, 2000 compared to net cash used in operating
activities of $12.7 million for the comparable 1999 period. The increase in cash
provided by operations was primarily the result of the increased collection of
outstanding accounts receivable, partially offset by a reduction in accounts
payable and accrued liabilities.


                                       11
<PAGE>

                                TCSI CORPORATION


INVESTING ACTIVITIES

        Net cash provided by investing activities was $10.3 million for the nine
months ended September 30, 2000 compared to net cash provided by investing
activities of $9.1 million for the comparable 1999 period. During the nine
months ended September 30, 2000, the purchases of marketable securities were
$4.5 million, compared to $26.8 million of marketable securities for the
comparable 1999 period and the redemptions and sales of marketable securities
during the nine months ended September 30, 2000 were $15.2 million compared to
$37.6 million of marketable securities for the comparable 1999 period.

FINANCING ACTIVITIES

        Net cash provided by financing activities was $1.3 million for the nine
months ended September 30, 2000 compared to $0.6 million for the comparable 1999
period. The increase was primarily the result of increased stock option
exercises and stock purchases pursuant to the Company's Employee Stock Purchase
Plan ("ESPP"), which is a function of market conditions and investment decisions
made by employees. The proceeds from stock option exercises and ESPP purchases
for the nine months ended September 30, 2000 were $1.0 million and $0.3 million,
respectively.

ADDITIONAL INFORMATION ON LIQUIDITY AND CAPITAL RESOURCES

        As of September 30, 2000, the Company had cash and equivalents and
marketable securities of $35.6 million, a $3.9 million, or 12% increase, from
December 31, 1999. The Company believes that existing cash balances (including
equivalents and marketable securities), together with other potential sources of
liquidity, including cash flows from operating activities, will provide adequate
cash to fund its operations for at least the next twelve months.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

        STATEMENTS IN THIS REPORT WHICH ARE PREFACED WITH WORDS SUCH AS
"EXPECTS," "ANTICIPATES," "BELIEVES" AND SIMILAR WORDS AND OTHER STATEMENTS OF
SIMILAR SENSE, ARE FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE BASED ON THE
COMPANY'S CURRENT EXPECTATIONS AND ESTIMATES AS TO PROSPECTIVE EVENTS AND
CIRCUMSTANCES WHICH MAY OR MAY NOT BE WITHIN THE COMPANY'S CONTROL AND AS TO
WHICH NO FIRM ASSURANCES CAN BE GIVEN. THESE FORWARD-LOOKING STATEMENTS, LIKE
ANY OTHER FORWARD-LOOKING STATEMENTS, INVOLVE RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED OR ANTICIPATED.
THE FOLLOWING DISCUSSION HIGHLIGHTS SOME OF THE RISKS THE COMPANY FACES.

POTENTIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS

        The Company has experienced and expects to continue to experience
significant fluctuations in revenues and operating results on a quarterly and/or
an annual basis as a result of a number of factors, many of which are beyond the
control of the Company. These factors include the cancellation, modification, or
non-renewal of service, license, or maintenance agreements; the size and timing
of significant customer engagements and license fees; the relative proportion of
services and software licensing fees; personnel changes; capital spending
patterns of the Company's customers; concentration of the Company's customers;
the lengthy sales cycles of the Company's products and services; industry
acceptance of the Company's products and services; changes in operating
expenses; new product introductions and product enhancements by the Company or
its competitors; the ability of the Company to develop, introduce, and market
new products and product enhancements on a timely basis; changes in pricing
policies by the Company or its competitors; regulatory changes, currency
fluctuations, and general economic factors. These factors are difficult to
forecast, and these or other factors could have a material adverse effect on the
Company's business, operating results, and financial condition.

        Historically, a portion of the Company's revenue has been derived from
software licensing fees from a limited number of customers. Variability in the
timing of such license fees has caused, and may continue to cause, material
fluctuations in the Company's business, operating results, and financial
condition. The Company's products and services generally require significant
capital expenditures by customers as well as the commitment of resources to
implement,


                                       12
<PAGE>

                                TCSI CORPORATION


monitor, and test the Company's enhancements to such systems. Accordingly, the
Company is substantially dependent on its customers' decisions as to the timing
and level of such expenditures and resource commitments.

        In addition, the Company typically realizes a significant portion of
license revenues in the last weeks or even days of a quarter. As a result, the
magnitude of quarterly fluctuations may not become evident until late in, or
after the close of, a particular quarter. The Company's expenses are based in
part on the Company's expectations as to future revenue levels and to a large
extent are fixed in the short-term. If revenues do not meet expectations, the
Company's business, operating results, and financial condition are likely to be
materially adversely affected. In particular, because only a small portion of
the Company's expenses varies with revenues, results of operations may be
disproportionately affected by a reduction in revenues. As a result, the Company
believes that period-to-period comparisons of its operating results are not
necessarily meaningful and should not be relied upon as indications of future
performance.

 LENGTHY SALES AND IMPLEMENTATION CYCLES

        The Company's products are typically intended for use in applications
that may be critical to a customer's business. The licensing and implementation
of the Company's software products generally involve a significant commitment of
resources by prospective customers. Historically, the Company's sales process
has been subject to delays associated with lengthy approval processes that
typically accompany significant capital expenditures. However, the Company's
latest products are intended to reduce the time and resources required for
delivery to customers, and, therefore reduce the sales cycle. Still, the time
required to implement the Company's products can vary significantly with the
needs of its customers and is generally a process that extends for several
months. Because of their complexity, larger implementations may take multiple
quarters to complete. From time to time, the Company has provided services to
implement certain large projects, and, although no contractual basis exists for
the customer to do so, certain customers have delayed payment of a portion of
service fees and in some cases have disputed the fees charged. There can be no
assurance the Company will not experience additional delays or disputes
regarding payment in the future, particularly if the Company receives orders for
large, complex installations. There exists the risk that a change in a
customer's technology or business strategy during such lengthy development and
implementation periods may cause early termination of a project or
discontinuance of future phases. In this regard, the Company, in limited cases,
has experienced, and may continue to experience, significant fluctuations in
revenues and operating results on a quarterly and annual basis due to
termination, cancellation, or non-renewal of agreements.

ACCEPTANCE OF THE COMPANY'S PRODUCTS; PRODUCT DEVELOPMENT RISKS

        A substantial portion of the Company's revenue is derived from the sale
of the Company's products and services which provide software solutions to major
corporations in the worldwide telecom services and equipment industries.
Although many telecom companies currently seek to integrate their business
operation systems and network operation systems, there can be no assurance that
these or other service providers will continue to seek the integration of such
systems or that such companies will use the Company's products. Due to the
complex nature of the OSS software developed by the Company, the Company has in
the past relied, and will in the future continue to rely, on its development and
implementation expertise. The Company continues to develop software products
that reduce the customization necessary to fully integrate customers' systems.
There can be no assurance, however, that the Company will continue to
successfully develop and market such products or, even if successful, that the
revenue from such products will compensate for any concurrent loss of
development and implementation service revenues. The failure by the Company to
successfully develop and market such products and technologies would have a
material adverse effect on its business, operating results, and financial
condition.

        The Company's future business, operating results, and financial
condition are significantly dependent upon the continued market acceptance of
its portfolio of products and services. There can be no assurance that the
Company's technology will continue to achieve market acceptance or that the
Company will be successful in developing, introducing, or marketing improvements
to its products. Moreover, the life cycle of component-based products is
difficult to estimate due in large part to the recent changes in the telecom
market, the effect of future product enhancements, and competition. A decline in
the demand for the Company's software as a result of new or existing competing
technologies or other factors would have a material adverse effect on the
Company's business, operating results, and financial condition.


                                       13
<PAGE>

                                TCSI CORPORATION


CUSTOMER CONCENTRATION

        To date, a significant portion of the Company's revenues has been
concentrated among a limited number of customers. The Company anticipates that
it will continue to experience significant customer concentration. There can be
no assurance that such customers or any other customers will in the future
continue to place orders with the Company which equal or exceed the comparable
levels for prior periods. In addition, the Company's customers typically
designate one individual to procure network management software. If any of these
individuals were terminated, transferred, or replaced, the Company would be
vulnerable to cancellation of an order if, for example, the Company's
competitors had existing relationships with the individual's replacement. As a
result of these factors, the Company's business, operating results, and
financial condition could be materially adversely affected.

PRODUCT DEFECTS

        The Company provides complex software products for major telecom
equipment manufacturers, systems integrators, and service providers. The
development and enhancement of such complex software entails substantial risks
of product defects. The Company has in the past identified software defects in
certain of its products. There can be no assurance that errors will not be found
in existing or new products or releases after commencement of commercial
licensing, which may result in delay or loss of revenues, loss of market share,
failure to achieve market acceptance, or may otherwise adversely impact the
Company's business, operating results, and financial condition.

IMPLEMENTATION RISKS

        As is characteristic of companies providing software solutions to the
telecom industry, the complexities involved in implementing the Company's
software solutions entail risks of performance shortfalls. In some cases, the
Company has agreed to accept some financial responsibility, in the form of
negotiated penalty amounts, if the Company's products did not meet
specifications or caused customer system downtime. There can be no assurance
that the Company will not encounter delays or other difficulties due to such
implementation complexities. Because the Company's customer base consists of a
relatively limited number of customers, the product defects or implementation
errors would be potentially damaging to the Company's reputation. Any such
occurrence could have a material adverse effect upon the Company's business,
operating results, and financial condition.

INTERNATIONAL SALES

        To date, a significant portion of the Company's revenues has been
generated outside of the United States. The Company expects that international
revenues will continue to account for a significant portion of its total
revenues in future periods. The Company intends to penetrate additional
international markets and to further expand its existing international
operations. The Company's international business involves a number of inherent
risks, including greater difficulty in accounts receivable collection and,
therefore, longer accounts receivable collection periods; difficulty in staffing
and managing foreign operations; a longer sales cycle than with domestic
customers; potentially unstable political and economic conditions; language
barriers; cultural differences in the conduct of business; seasonality;
unexpected changes in regulatory requirements, including a slowdown in the rate
of privatization of telecom service providers; reduced protection for
intellectual property rights in some countries; potentially adverse tax
consequences; tariffs and other trade barriers. Access to foreign markets is
often difficult due to the established relationships between government owned or
controlled communications companies and local suppliers of communications
products. There can be no assurance that the Company will be able to
successfully penetrate such foreign markets. In addition, there can be no
assurance that the Company will be able to sustain or increase revenues derived
from international licensing and services or that the foregoing factors will not
have a material adverse effect on the Company's future international business,
and consequently, on the Company's business, operating results, and financial
condition.

        International sales also entail risks associated with currency
fluctuations. The Company has attempted to reduce the risk of fluctuations in
currency exchange rates associated with international revenues by pricing its
products and services in United States dollars whenever possible. The Company,
however, generally pays the expenses of its international operations in local
currencies and generally does not engage in hedging transactions with respect to
such


                                       14
<PAGE>

                                TCSI CORPORATION


obligations. Upward fluctuations in currency exchange rates could cause the
Company's products to become relatively more expensive to foreign customers,
leading to a reduction in sales or profitability. Furthermore, future
international activity may result in foreign currency denominated sales, and, in
such event, gains and losses on the conversion to U.S. dollars of accounts
receivable and accounts payable arising from international operations may
contribute to fluctuations in the Company's operating results. In order to
reduce the risk of exchange rate losses from foreign currency denominated sales,
which historically have not been material, the Company has engaged in a limited
quantity of hedging transactions. There can be no assurance that such hedging
transactions will not have a material adverse effect on the Company's business,
operating results, and financial condition.

DEPENDENCE ON TELECOMMUNICATIONS CARRIERS; GOVERNMENT REGULATION

        Many of the Company's principal customers are major telecom carriers.
Such companies operate within the telecom industry, which has recently been
characterized by intense competition in the development of new technology,
equipment, and customer services. The Company believes that large telecom
carriers have become increasingly cautious in making significant capital
expenditures, due in part to increased competition from smaller, rapidly
developing alternative carriers, decreasing prices for telecom services and
equipment, and regulatory rate structures that have become less dependent on the
level of carriers' capital expenditures. These and other factors have in the
past and may in the future cause such customers to experience significant
fluctuations in capital expenditures for network management software solutions.

        The telecom industry is subject to extensive regulation in the United
States and other countries, and the Company's customers generally must receive
regulatory approvals in conducting their businesses. Although the telecom
industry has been characterized by government deregulation, there can be no
assurance that deregulatory trends will continue or that reregulation will not
occur. Government regulatory policies are likely to continue to have a major
impact on the Company's ability to attract and retain customers. For example,
regulatory authorities may continue to oversee the pricing of new and existing
telecom services, which, in turn impact carriers' ability to make significant
capital expenditures. The enactment by federal, state, or foreign governments of
new laws or regulations or change in the interpretation of existing regulations
could adversely affect the Company's customers, and thereby affect the Company's
business, operating results, and financial condition.

COMPETITION

        The Company offers products and services in the evolving market for
telecom software. The telecom industry is intensely competitive, subject to
extremely rapid technological change and is characterized by evolving industry
standards, changing regulatory requirements, frequent product introductions and
rapid changes in customer requirements. These market factors represent both an
opportunity and a competitive threat to TCSI. The rapid pace of technological
change continually creates new opportunities for existing and new competitors.

        The Catalant product line competes in the equipment manufacturer and
service provider markets, offering solutions for next generation telecom
applications and platforms, while the WorldWin product line competes in the
emerging service provider market, by offering integrated OSS and billing data
mediation solutions. The Company competes with numerous vendors in each product
category. TCSI expects that the overall number of competitors providing next
generation network solutions will increase due to the market's attractive
growth. On the other hand, the Company expects the number of vendors supplying
OSS solutions for basic telephone services solutions will decrease, due to
maturity of this market and the rapid introduction of more cost-effective
technologies.

        TCSI's competitors include Dorado Software, Objective Systems
Integrators, AdventNet and Lumos for the Catalant product line, and AceComm, AP
Engines, Comptel, Openet Telecom and Xacct for the WorldWin product line.
Several of the Company's current and potential competitors have greater
financial, marketing and technical resources than the Company. The principal
competitive factors in the markets in which the Company presently competes and
may compete in the future are quality, price, performance, customer support,
corporate reputation, and product features such as scalability,
interoperability, functionality, customizability, and ease of use.


                                       15
<PAGE>

                                TCSI CORPORATION


        The Company also faces competition in each of the three functional areas
that the Company believes are necessary for the delivery of network management
software solutions: development environments, turnkey applications, and custom
services. The Company's Catalant and WorldWin product lines enable the Company
to provide its customers with development environments and turnkey applications.
Because certain of the Company's competitors focus only on one functional area,
such competitors may be in a position to develop competitive products targeted
solely at the segment they serve.

        There can be no assurance that the Company's current or potential
competitors will not develop products comparable or superior to those developed
by the Company or adapt more quickly than the Company to new technologies,
evolving industry standards, new product introductions or changing customer
requirements.

RAPID TECHNOLOGICAL CHANGE; NEED TO MANAGE PRODUCT TRANSITIONS

        The market for the Company's products is characterized by rapidly
changing technologies, evolving industry standards, changing regulatory
environments, frequent new product introductions, and rapid changes in customer
requirements. The introduction of products embodying new technologies and the
emergence of new industry standards and practices can render existing products
obsolete and unmarketable. As a result, the life cycles of the Company's
products are difficult to estimate. This poses substantial risks for the Company
because the Company's products and software solutions typically have lengthy
development and sales cycles. The Company's future success will depend on its
ability to enhance its existing products and to develop and introduce, on a
timely and cost-effective basis, new products and product features that keep
pace with technological developments and emerging industry standards and address
the evolving needs of its customers. There can be no assurance that the Company
will be successful in developing and marketing new products or product features
that respond to technological change or evolving industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction, and marketing of these new products and
features, or that its new products or product features will adequately meet the
requirements of the marketplace and achieve market acceptance. If the Company is
unable, for technological or other reasons, to develop and introduce
enhancements of existing products or new products in a timely manner, the
Company's business, operating results, and financial condition will be
materially adversely affected.

        The Company's products are designed to operate on a variety of hardware
and software platforms and with a variety of databases employed by its customers
in their networks. The Company must continually modify and enhance its products
to keep pace with changes in hardware and software platforms and database
technology. As a result, uncertainties related to the timing and nature of new
product announcements, and introductions or modifications by systems vendors and
by vendors of relational database software could materially adversely impact the
Company's business, operating results, and financial condition. In addition, the
failure of the Company's products to operate across the various existing and
evolving versions of hardware and software platforms and database environments
employed by consumers would have a material adverse effect on the Company's
business, operating results, and financial condition.

        The introduction or announcement of products by the Company or one or
more of its competitors embodying new technologies, or changes in industry
standards or customer requirements, could render the Company's software products
and solutions obsolete or unmarketable. The introduction of new or enhanced
versions of its products requires the Company to manage the transition from
older products in order to minimize disruption in customer ordering. There can
be no assurance that the introduction or announcement of new product offerings
by the Company or one or more of its competitors will not cause customers to
defer licensing of existing Company products or engaging the Company's services.
Any deferral of license or service revenues could have a material adverse effect
on the Company's business, operating results, and financial condition.


                                       16
<PAGE>

                                TCSI CORPORATION


PROTECTION OF INTELLECTUAL PROPERTY

        The Company's success and ability to compete is dependent in part upon
its proprietary software technology. The Company relies on a combination of
patent, trade secret, copyright and trademark laws, nondisclosure and other
contractual agreements, and technical measures to protect its proprietary
rights. To date, the Company has eight patents. The Company expects to continue
to file patent applications where it believes it is appropriate to protect its
proprietary technologies. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or to obtain and use information that the Company regards as
proprietary. There can be no assurance that the steps taken by the Company to
protect its proprietary technology will prevent misappropriation of such
technology, and such steps may not preclude competitors from developing products
with functionality or features similar to the Company's products. In addition,
effective patent, copyright, trademark, and trade secret protection may be
unavailable or limited in certain foreign countries. The failure of the Company
to protect its proprietary information could have a material adverse effect on
the Company's business, operating results, and financial condition.

        While the Company believes that its products and trademarks and their
use by customers does not infringe upon the proprietary rights of third parties,
there can be no assurance that the Company will not receive future
communications from third parties asserting that the Company's products or their
use by customers infringe, or may infringe, the proprietary rights of such third
parties. The Company expects that software product developers will be
increasingly subject to infringement claims as the number of products and
competitors in the Company's industry segment grows and the functionality of
products in different industry segments overlaps. Any such claims, including
meritless claims, could result in costly, time-consuming litigation, and
diversion of technical and management personnel. In the event any third party
was to make a valid claim and a license was not made available on commercially
reasonable terms, or if the Company was unable to develop non-infringing
alternative technology, the Company's business, operating results, and financial
condition could be materially adversely affected.

        In addition, certain of the Company's customers regard the solutions
provided by the Company to be proprietary to such customers and may attempt to
prohibit the Company from using or otherwise benefiting from certain of the
advances made in developing such solutions. Although the Company intends to
increasingly standardize its integration solutions through the use of
component-based software products, there can be no assurance that the
prohibition or restrictions imposed by certain customers on the use of certain
intellectual property will not adversely affect the Company's business,
operating results, and financial condition.

        The Company relies on certain software that it licenses from third
parties, including software that is integrated with internally developed
software and used in the Company's products to perform key functions. There can
be no assurance that these third party software licenses will continue to be
available to the Company on commercially reasonable terms or that such licenses
will not be terminated. Although the Company believes that alternative software
is available from other third-party suppliers, the loss of or inability to
maintain any of these software licenses or the inability of the third parties to
enhance their products in a timely and cost-effective manner could result in
delays or reductions in product shipments by the Company until equivalent
software could be developed internally or identified, licensed, and integrated,
which would have a material adverse effect on the Company's business, operating
results, and financial condition.

DEPENDENCE ON KEY PERSONNEL

        The Company's future growth and success depends to a significant extent
on its ability to attract and retain qualified managerial, sales, and software
engineering personnel. The Company has at times experienced and continues to
experience difficulty in attracting and retaining qualified personnel. The
Company's future success will also depend on the ability of its current and
future management personnel to operate effectively, both independently and as a
group. The Company has experienced changes in its executive management. For
example, the vacant position, created by the resignation, in December 1999, of
the President and Chief Executive Officer, was filled in August, 2000 by the
hiring of Yasushi Furukawa as the Company's new President and Chief Executive
Officer. In addition, in October, 2000, Arthur H.


                                       17
<PAGE>

                                TCSI CORPORATION


Wilder resigned as Chief Financial Officer, Secretary, and Treasurer and Ellen
Ahearn was promoted to Vice President - Finance and Administration, Secretary,
and Treasurer. Competition for the hiring of personnel in the software industry
is intense, and there can be no assurance that the Company will be successful in
locating candidates with appropriate qualifications. Failure to attract and
retain key personnel could have a material adverse effect on the Company's
business, operating results, and financial condition.

RISKS ASSOCIATED WITH ACQUISITIONS

        The Company periodically evaluates potential acquisitions of
complementary businesses, products, and technologies. To support its growth
plans, the Company may acquire companies that have a significant installed base
of products not yet offered by the Company, have strategic distribution channels
or customer relationships, or otherwise present opportunities which management
believes enhance the Company's competitive position.

        Such acquisitions could subject the Company to numerous risks, including
risks associated with the integration into the Company of new employees and
technology. Moreover, the negotiation and acquisition of such transactions
involves the diversion of substantial management resources and the evaluation of
such opportunities requires substantial diversion of engineering and
technological resources. In addition, transactions involving the issuance by the
Company of common stock or other securities could result in immediate and
substantial dilution to the Company's existing shareholders, large one-time
write-offs, or the creation of goodwill or other intangible assets that could
result in amortization expenses. The failure to successfully evaluate, negotiate
and effect acquisition transactions could have a material adverse effect on the
Company's business, operating results and financial condition.

VOLATILITY OF STOCK PRICE

        The market price of the shares of the Company's Common Stock has been
and is likely to continue to be highly volatile and may be significantly
affected by factors such as actual or anticipated fluctuations in the Company's
business, operating results and financial condition, announcements of
technological innovations, new products, or new contracts by the Company or its
competitors, developments with respect to proprietary rights, adoption of new
accounting standards affecting the software industry, general market conditions
and other factors. Due to the foregoing factors, it is likely that the Company's
revenues or operating results will be below the expectations of public market
analysts and investors in some future period. In such event, the price of the
Company's Common Stock could be materially adversely affected. In addition, the
stock market from time to time has experienced significant price and volume
fluctuations that have particularly affected the market prices of technology
company stocks. These types of broad market fluctuations may adversely affect
the market price of the Company's Common Stock. In the past, following periods
of volatility in the market price of a company's securities, securities class
action litigation has often been initiated against such company. Such litigation
could result in substantial costs and a diversion of management's attention and
resources, which could have a material adverse effect upon the Company's
business, operating results, and financial condition.

YEAR 2000 COMPLIANCE

        The Company has experienced no disruptions in its information systems or
products for the nine months ended September 30, 2000, and believes those
systems and products successfully responded to the Year 2000 date change.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        INTEREST RATE RISK. As of September 30, 2000, the Company's cash and
investment portfolio includes only fixed-income securities. These securities are
subject to interest rate risk and will decline in value if interest rates
increase. Due to the short duration of the Company's investment portfolio, an
immediate 100 basis point increase or decrease in interest rates would not have
a material effect on the fair market value of the Company's portfolio. The
Company has the ability to hold its fixed income investments until maturity, and
therefore the Company would not expect its operating results or cash flows to be
affected to any significant degree by the effect of a sudden change in market
interest rates in its investment portfolio.


                                       18
<PAGE>

                                TCSI CORPORATION


        FOREIGN CURRENCY EXCHANGE RISK. The majority of the Company's revenues
are denominated in U.S. dollars and, as a result, the Company has relatively
little exposure to foreign currency exchange risk. The Company does not use
derivative financial instruments for trading or speculative purposes.

PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)     The following exhibits are filed herewith:

EXHIBIT NO.      DESCRIPTION

     10.36       Arrangement for Employment with President and Chief Executive
                   Officer, dated August 7, 2000
     10.37       Arrangements with Executive Officer, Separation Agreement and
                   Release, dated October 6, 2000
     27.1        Financial Data Schedule

See Exhibit Index on page 21.

(b)     Reports on Form 8-K.

        During the quarter ended September 30, 2000, the Company filed a current
report on Form 8-K, dated August 21, 2000, reporting the appointment of Yasushi
Furukawa as President and Chief Executive Officer of the Company, and a member
of its Board of Directors. Mr. Furukawa replaced Norman E. Friedmann, Ph.D., who
served as interim President and Chief Executive Officer since December, 1999.

        On October 19, 2000, the Company filed a current report on Form 8-K,
dated October 17, 2000, reporting both the resignation of Arthur H. Wilder as
Chief Financial Officer, Secretary, and Treasurer of the Company, and the
promotion of Ellen Ahearn to Vice President - Finance and Administration,
Secretary, and Treasurer.


                                       19
<PAGE>

                                TCSI CORPORATION


SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 10, 2000.

                                 TCSI CORPORATION
                                 (Registrant)


                                 By   /S/ ELLEN AHEARN
                                 ---------------------
                                 Ellen Ahearn
                                 Vice President - Finance and Administration,
                                 Secretary, and Treasurer  (Principal Financial
                                 Officer and Principal Accounting Officer)


                                       20
<PAGE>

                                TCSI CORPORATION

                                INDEX OF EXHIBITS

 EXHIBIT NO.                             DESCRIPTION
 -----------      -------------------------------------------------------------
       10.36      Arrangement for Employment with President and Chief Executive
                  Officer, dated August 7, 2000.
       10.37      Arrangements with Executive Officer, Separation Agreement and
                  Release, dated October 6, 2000.
       27.1       Financial Data Schedule


                                       21