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


                                   FORM 10-QSB



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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001


[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

FOR THE TRANSITION PERIOD FROM ____________ TO _____________

Commission File Number:

                         CALIFORNIA SOFTWARE CORPORATION
                         -------------------------------
        (Exact name of small business issuer as specified in its charter)

            Nevada                                         88-0408446
            ------                                         ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                    2485 McCabe Way, Irvine, California 92614
                    -----------------------------------------
                    (Address of principal executive offices)

                                 (949) 553-8900
                                 --------------
                           (Issuer's telephone number)


          ------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]


    APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS


Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 12,567,771 as of June 30, 2001.


                  TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT

Yes [ ] No [X]

<PAGE>


                         California Software Corporation

                                Quarterly Report
                           Period Ending June 30, 2001

                                Table of Contents
                                -----------------


PART I - FINANCIAL INFORMATION


Item 1.  Consolidated Financial Statements

         Consolidated Balance Sheet                                           1

         Consolidated Statements of Operations and Comprehensive Income       2

         Consolidated Statements of Cash Flows                                3

         Notes to Consolidated Financial Statements                           4

 Item 2. Management's Discussion and Analysis                                 6


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings                                                   14

Item 2.  Changes in Securities                                               15

Item 3.  Defaults Upon Senior Securities                                     15

Item 4.  Submission of Matters to a Vote of Security Holders                 16

Item 5.  Other Information                                                   16

Item 6.  Exhibits and Reports on Form 8-K                                    16


SIGNATURES                                                                   17


                                       -i-
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PART I - FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements

                         California Software Corporation
                           CONSOLIDATED BALANCE SHEET
                                   (unaudited)

                                                                    June 30, 2001
                                                                    -------------
ASSETS
<S>                                                                  <C>
Current assets:
     Cash and cash equivalents ...................................   $    73,780
     Accounts receivable, net of allowance for doubtful
          accounts of $1,033,768 .................................     2,419,421
     Prepaids and other current assets ...........................       216,570
                                                                     -----------

         Total current assets ....................................     2,709,771

Property and equipment, net ......................................       409,316
Goodwill, net ....................................................     4,187,573
Other assets .....................................................        25,213
                                                                     -----------

TOTAL ASSETS .....................................................   $ 7,331,873
                                                                     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable and accrued expenses .......................   $ 2,127,844
     Accrued payroll and related expenses ........................       709,367
     Current portion long-term-debt ..............................       549,749
     Deferred revenue ............................................       789,457
                                                                     -----------

         Total current liabilities ...............................     4,176,417

Long-term liabilities ............................................     1,665,503
                                                                     -----------

Total liabilities ................................................     5,841,920


Stockholders' Equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no
     shares issued and outstanding ...............................          --
Common stock, $0.001 par value; 20,000,000 shares authorized;
     12,567,771 shares issued and outstanding ....................        12,568
Additional paid-in capital .......................................     8,964,895
Foreign currency translation adjustments .........................        15,711
Accumulated deficit ..............................................    (7,503,221)
                                                                     -----------

Total stockholders' equity .......................................     1,489,953
                                                                     -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................   $ 7,331,873
                                                                     ===========


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

                                       1
<PAGE>

                                           California Software Corporation
                           CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                                     (Unaudited)


                                                               Three months ended               Six months ended
                                                                    June 30,                        June 30,
                                                           ---------------------------    ----------------------------
                                                               2001           2000            2001            2000
                                                           ------------   ------------    ------------    ------------
Revenues:
     Software sales ....................................   $    798,393   $    433,759    $  1,504,593    $    765,137
     Maintenance and other revenue .....................      1,248,090         41,371       1,792,386          81,800
                                                           ------------   ------------    ------------    ------------
         Total revenues ................................      2,046,483        475,130       3,296,979         846,937

Costs and expenses:
Research and development ...............................        370,392        122,190         810,576         239,225
Selling, general, and administrative ...................      1,057,104      1,584,806       2,621,602       2,490,678
Depreciation and amortization ..........................        317,113         85,971         644,192          15,221
                                                           ------------   ------------    ------------    ------------
         Total costs and expenses ......................      1,744,609      1,792,967       4,076,370       2,745,124
                                                           ------------   ------------    ------------    ------------

Income (loss) from operations ..........................        301,874     (1,317,837)       (779,391)     (1,898,187)

Other income (expense), net ............................          7,659         61,626           5,837          61,947
Foreign Currency exchange gain (loss) ..................          2,914           --              (245)           --
                                                           ------------   ------------    ------------    ------------

Income (loss) before provision for income
     taxes and extraordinary item ......................        312,447     (1,256,211)       (773,799)     (1,836,240)

Provision for income taxes .............................           --             --              --              --
                                                           ------------   ------------    ------------    ------------

Income (loss) before extraordinary item ................        312,447     (1,256,211)           --        (1,836,240)

Extraordinary items ....................................           --             --         1,000,000            --
                                                           ------------   ------------    ------------    ------------

Net income (loss) ......................................   $    312,447   $ (1,256,211)   $    226,201    $ (1,836,240)
                                                           ============   ============    ============    ============

Other Comprehensive income (loss):
    Foreign currency translation .......................         15,711           --                              --
                                                           ============   ============    ============    ============

Comprehensive income (loss) ............................   $    328,158   $ (1,256,211)   $    226,201    $ (1,836,240)
                                                           ============   ============    ============    ============

Income (loss) per common share, basic and fully diluted:
    Income (loss) before extraordinary item ............   $        .02   $       (.11)   $       (.06)   $       (.20)
    Extraordinary item .................................           --             --               .08            --
                                                           ------------   ------------    ------------    ------------
    Net income (loss) ..................................   $        .02   $       (.11)   $        .02    $       (.20)
                                                           ============   ============    ============    ============

Weighted-average shares outstanding ....................     12,567,771     11,014,754      12,568,949       9,089,523
                                                           ============   ============    ============    ============


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

                                                         2
<PAGE>


                         California Software Corporation
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)


                                                      Six months ended June 30,
                                                      --------------------------
                                                          2001           2000
                                                      -----------    -----------

NET CASH (USED IN) OPERATING ACTIVITIES ...........    (1,922,841)    (1,406,995)


NET CASH (USED IN)  INVESTING ACTIVITIES ..........       (30,775)       (82,359)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES      (407,183)     8,427,486
                                                      -----------    -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS ...........    (2,360,799)     6,938,132

CASH AT BEGINNING OF THE PERIOD ...................     2,434,579        402,782
                                                      -----------    -----------
CASH AT END OF PERIOD .............................   $    73,780    $ 7,340,914
                                                      -----------    -----------



SUPPLEMENTAL DISCLOSURE OF NONCASH
   INVESTING AND FINANCING ACTIVITIES

Forgiveness of note receivable ....................   $    74,032    $      --
                                                      -----------    -----------

conversion of common stock subscription into common
   stock ..........................................   $      --      $   700,840
                                                      -----------    -----------

Issuance of stock in exchange for note receivable .   $      --      $    64,018
                                                      -----------    -----------


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

                                       3
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<PAGE>

                        California Software Corporation
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2001


1. BASIS OF PRESENTATION

The consolidated financial statements included herein have been prepared by
California Software Corporation (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC"). These
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2000.

In the opinion of management, the unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the Company's financial position and
results of operations. The results for the three and six-month periods ended
June 30, 2001 are not necessarily indicative of the results expected for the
full fiscal year.

The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During the periods presented, there were no common stock
equivalents.


2. ACQUISITION OF UNIBOL

On November 8, 2000, the Company signed a letter of intent to merge with
Unicomp, Inc. ("Unicomp"), a Georgia corporation. On that same date, and two
days thereafter, the Company entered into various agreements with Unicomp
through which the Company acquired, Unibol, Ltd., a United Kingdom corporation,
and through which the Company contends it also acquired Unibol, Inc., a Georgia
corporation ("Unibol U.S.") (collectively, "Unibol"). In the Stock Purchase
Agreement ("Purchase Agreement"), Amendment to the Stock Purchase Agreement
("Amendment"), and related documents, the Company agreed to pay cash of
$1,000,000, an additional $500,000 due in four monthly installments commencing
on the first of the month beginning with the second month after the Closing
Date, and $1,500,000 of the Company's Common Stock due and valued on the six
month anniversary of the Closing Date. On November 13, 2000, the Company paid
the $1,000,000 in cash due under the Purchase Agreement. Subsequent to the cash
payment, a dispute arose between the Company and Unicomp about Unicomp's
providing of financial information, the identity of the companies included under
the acquisition documents, as well as the intent of certain provisions contained
in the Amendment purporting to grant sole operational and voting control over
the Unibol entities to the Chief Executive Officer of Unicomp for a six month
period. As a result, the Company did not make any of the installment payments
due under the Purchase Agreement, and merger discussions were terminated. The
Company thereafter filed a lawsuit in California against Unicomp, several of its
officers and directors, and a third party alleging fraudulent misrepresentation
and various other charges in connection with the acquisition of Unibol, Ltd. and
Unibol, Inc. Unicomp also filed a lawsuit in Georgia against the Company seeking
to preserve Unicomp's interest in one of the Unibol companies, Unibol, Inc., as
well as to uphold the original terms and conditions of the Purchase Agreement
and Amendment, although that lawsuit subsequently was dismissed by the Georgia
court. The claims previously asserted by Unicomp in the Georgia action are
asserted by Unicomp in a cross-complaint to the action in California filed by
the Company. On January 22, 2001, at a meeting of Unibol UK's sole shareholders,
the Company elected to revoke certain terms in the Amendment giving control over
the Unibol entities to the Chief Executive Officer of Unicomp and the Company
asserted its physical and operational control over Unibol UK on or about January
29, 2001. At December 31, 2000, however, due to legal obstacles, the Company was
not able to ascertain what assets and liabilities it purchased in connection
with this acquisition, nor could the outcome of the litigation be predicted. As
a result, the Company established a valuation reserve at December 31, 2000
against its $1,000,000 cash investment in Unibol.

On May 1, 2001, the Company and Unicomp signed a Settlement Agreement (the
"Settlement Agreement") to resolve the issues pertaining to the litigation
between the two companies. The Settlement Agreement was to have been effective
as of May 15, 2001 or at such other time as agreed to by Unicomp and California
Software, but not later than June 1, 2001. The Company and Unicomp also had
agreed to suspend all currently filed litigation between the two companies until
July 1, 2001 or the closing of the Settlement Agreement, whichever occurs first.
Subsequent to the July 1 date, Unicomp filed a cross complaint in California.
California Software is in the process of filing a Motion to Compel based upon
the May 1 Settlement Agreement. The company believes it will prevail in this
matter.

                                       4
<PAGE>


After reviewing the facts and circumstances surrounding the acquisition as well
as the terms of the aforementioned Settlement Agreement, the Company has
determined that the effective date of the Unibol acquisition is January 29,
2001, the date over which the Company obtained voting and operational control of
Unibol. Assets and liabilities of Unibol assumed by the Company at January 29,
2001 were valued at $420,627 and $1,809,274, respectively. In addition, the
Company recorded purchase price adjustments subsequent to the acquisition
totaling $67,622. The Company accounted for the acquisition as a purchase as of
January 29, 2001 and, accordingly, the operating results of Unibol have been
included in the consolidated financial statements of the Company since that
date. The results of operations form January 1, 2001 through June 30, 2001 would
not be materially different than the results reported. The excess of the
aggregate purchase price over the fair market value of net assets acquired at
January 29, 2001 is being amortized over five years. In addition, the Company
reversed the $1,000,000 reserve established at December 31, 2000 and presented
this item as an extraordinary gain in the consolidated financial statements for
the six months ended June 30, 2001.

During June of 2001, the Company, upon further review of the composition of the
assets and liabilities discussed above, made adjustments to the liabilities and
goodwill account to more appropriately reflect the true value of these items
assumed by the Company. Both goodwill and net liabilities (primarily accounts
payable) were reduced by $1,263,377.


3. SETTLEMENT WITH SHAREHOLDERS

On February 13, 2001, the Company entered into a Settlement and Release
Agreement (the "Settlement and Release Agreement") with certain shareholders
that participated in the Company's private placement of Common Stock in the year
2000 (the "Participating Subscribers"). Under the terms of the Settlement and
Release Agreement, the Participating Subscribers have released the Company, two
of its officers and directors and an unrelated party (the "Released Parties")
from any and all claims against the Released Parties in connection with the
Company's private placement of Common Stock in the year 2000 in exchange for a
cash payment of $0.565 per share purchased, a note payable over 36 months
bearing no interest equal to $0.365 per share purchased, and one warrant
exercisable into one share of the Company's Common Stock for each share
purchased. The warrants have an exercise price of $2.00 and must be exercised
within 24 months. In addition, the two officers and directors of the Company
agreed to give up a portion of their individual Common Stock holdings to the
Participating Subscribers, totalling approximately 600,000 shares.

A summary of the amounts payable by the Company under the Settlement and Release
Agreement are as follows:

                  Cash                              $  821,212
                  Notes payable                        530,517
                                                    ----------
                  Total cash and notes payable      $1,351,729
                                                    ==========
                  Number of common stock warrants    1,453,472
                                                    ==========


On March 30, 2001, the Company entered into an agreement with NevWest Securities
Corporation ("NevWest") and one of its officers to borrow cash of $450,000 to
assist it in paying the cash amounts due under the Settlement and Release
Agreement. Under the terms of the notes, the Company agreed to repay the notes
beginning April 10, 2001 over a 36-month period at an interest rate of prime
plus 2% (8.75% as of June 30, 2001). The notes are secured by all of the
tangible and intangible assets of the Company; furthermore, the Company's Chief
Executive Officer agreed to personally guarantee one-half of the loan amount. As
of June 30, 2001, the principal balance remaining on the notes was $412,500. In
addition, the Company agreed to forgive a promissory note of $74,032 owed to it
by NevWest. After receiving the loan proceeds, on or about March 30, 2001, the
Company delivered initial cash proceeds of $792,962 along with the notes
payable, Common Stock warrants, and the shares of Common Stock to the
Participating Subscribers. One shareholder voluntarily agreed to indefinitely
defer a cash payment of $28,250 owed to him until a later date.

                                       5
<PAGE>


4. STOCK TRANSACTIONS

During the six months ended June 30, 2001, the Company issued to unrelated non
employees 2,000 shares of common stock valued at $0.25 per share for investor
relations services. In addition, the Company repurchased 20,000 shares of its
common stock at prices ranging from $0.625 to $0.75 per share.


5. CONTINGENCIES

Litigation

Refer to Part II, Item 1 for a description of legal proceedings.


6. SUBSEQUENT EVENTS

In July of 2001, the Company responded to the lawsuit filed by the Chief
Executive Officer of Software Connections (the former parent company of ALE
Systems ("ALE"), which was acquired by the Company in October, 2000) and his
wife, the sole shareholder of Software Connections by filing a fraud action
against both individuals in Superior Court in Orange County, California. The
company has also filed a demurrer in the Virginia case based upon the fact that
there is a forum clause in the contract.


Item 2. Management's Discussion and Analysis

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-QSB
contains forward-looking statements. The forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those reflected in such forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's opinions only as of the date hereof. The Company undertakes
no obligation to revise or publicly release the results of any revision to these
forward-looking statements. Readers should carefully review the risk factors
described herein and in other documents the Company files from time to time with
the SEC, including its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000 and the Quarterly Reports on Form 10-QSB, as amended, filed by
the Company in fiscal 2000.

GENERAL

The Company markets a family of software products under the brand names BABY and
Unibol. The products provide (a) software solutions that allow business
customers to migrate IBM Midrange applications to the PC environment and to
execute such applications on a PC network without a complete rewrite of the
application's source code; (b) GUI software that allows a developer of an AS/400
or iSeries/400 text-based application to present screens with WindowsTM
point-and-click functionality; and (c) software that internet-enables AS/400 and
iSeries/400 applications. Once the application runs on a BABY or Unibol system,
the developer deploys his application by purchasing a BABY or Unibol runtime
license for every user of the software. In addition, the Company markets a
software product under the brand name MLPS that supports the processing of
mortgage loans in the banking and financial industries.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
-----------------------------------------------------------------------------

Software Sales. Software sales consist of sales of the Company's BABY, Unibol,
and MLPS software products. Software sales for the three months ended June 30,
2001 and 2000 were $798,393 and $433,759, respectively, a 84.1% increase. The
increase in software sales during the three months ended June 30, 2001 was
primarily due to the inclusion of revenues derived from the Company's ALE and
Unibol subsidiaries during that period. The Company anticipates that the
continuing integration of these subsidiaries will result in increased revenues
over future periods.

                                       6
<PAGE>


Maintenance and Other Revenue. Maintenance and other revenue consists of annual
maintenance contracts sold to the Company's customers for technical support on
its products, business partner agreements which entitle the Company's customers
to unlimited annual technical support as well as increased discounts on software
purchases, shipping revenue billed to customers, and other miscellaneous
revenue. Revenue from annual maintenance contracts and business partner
agreements are deferred and recognized proportionately over the term of the
related contract or agreement. Maintenance and other revenue for the three
months ended June 30, 2001 and 2000 was $1,248,090 and $41,371, respectively, a
2,917% increase primarily due to the Company's acquisition of the ALE and Unibol
customer base and accompanying maintenance revenue stream. It is anticipated
that revenue from these sources will continue to increase over the next twelve
months as the Company continues to expand its customer base.

Research and Development Costs. The Company has adopted the provisions of
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed", which requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Since the Company does not incur any costs between the
completion of the working model and the point at which the product is ready for
general release, all research and development costs are charged to expense as
incurred. For the three months ended June 30, 2001 and 2000, the Company
incurred research and development costs of $370,392 and $122,190, respectively,
a 203.1% increase that was primarily the result of the Company's acquisition of
ALE in October 2000 as well as from the Company's continuing investment in its
development of future products. As a percentage of revenue, research and
development costs for the three months ended June 30, 2001 and 2000 were 18.1%
and 25.7%, respectively. The Company believes that research and development
expenditures are essential to maintaining a competitive position due to rapid
changes in technology and customer demands and expects that these costs will be
maintained at or near current levels in the future.

Selling, General and Administrative Expense. Selling, general and administrative
expenses include sales and marketing expenses, employee compensation, corporate
overhead, legal and accounting expenses, and bad debt expenses. For the three
months ended June 30, 2001 and 2000, selling, general and administrative
expenses were $1,056,801 and $1,584,806, respectively, a 33.3% decrease. As a
percentage of revenue, selling general and administrative expenses for the three
months ended June 30, 2001 and 2000 were 51.6% and 333.6%, respectively. The
decrease in selling, general and administrative expenses were primarily a result
of the company implementing its new operating plan which calls for cost
reduction. In addition, selling, general and administrative expenses for the
three months ending June 30, 2000 were unusually high due to various marketing
and advertising campaigns launched by the company, and due to increased
professional services (legal and accounting) relating to acquisition due
diligence and the costs associated with the private placements which were
completed during that period.

Depreciation and Amortization. Depreciation and amortization consists of
recurring depreciation charges recorded against the Company's property and
equipment. Depreciation and amortization for the three months ended June 30,
2001 and 2000 was $317,113 and $85,971, respectively, a 268.9% increase
primarily due to the amortization of goodwill resulting from the Company's ALE
and Unibol acquisitions. As a percentage of revenue, depreciation and
amortization for the three-month period ended June 30, 2001 was 15.5% compared
to 18.1% for the three-month period ended June 30, 2000. The Company expects
that depreciation and amortization will continue to increase in terms of actual
dollars in the future as the Company increases its property and equipment base
in connection with its continued expansion efforts or as a result of any
possible future acquisitions made by the Company.

Other Income/Expense, Net. Net other income/expense primarily consists of
interest expense on the Company's debt balances, offset by interest income
received from investments of the Company's excess cash balances. Net other
income for the three months ended June 30, 2001 was $7,659 as compared to net
other income of $61,626 for the three months ended June 30, 2000, a 87.6%
decrease. The decrease primarily relates to having higher available cash
balances in the three month period ending June 30, 2000 for investment purposes,
as compared to the balances available for investment during the three month
period ending June 30, 2001.

Income Taxes. As a result of incurring a year to date loss from operations, the
Company did not record any income tax provision or benefit for the three months
ended June 30, 2001 and 2000.

Net Income / (Loss). For the three months ended June 30, 2001, the Company
recorded net income of $312,447 or $0.02 per common share as compared to a net
loss of ($1,256,211) or ($0.11) per common share for the three months ended June
30, 2000. The increase in earnings is primarily related to increased levels of

                                       7
<PAGE>


revenue associated with the ALE and Unibol acquisitions, as well as cost
containment measures (such as the consolidation of Unibol's development function
into the Irvine Headquarters) implemented by the Company as part of their new
operating plan.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
-------------------------------------------------------------------------

Software Sales. Software sales consist of sales of the Company's BABY, Unibol,
and MLPS software products. Software sales for the six months ended June 30,
2001 and 2000 were $1,504,593 and $765,137, respectively, a 96.6% increase. The
increase in software sales during the six months ended June 30, 2001 was
primarily due to the inclusion of revenues derived from the Company's ALE and
Unibol subsidiaries during that period. The Company anticipates that the
continuing integration of these subsidiaries will result in increased revenues
over future periods.

Maintenance and Other Revenue. Maintenance and other revenue consists of annual
maintenance contracts sold to the Company's customers for technical support on
its products, business partner agreements which entitle the Company's customers
to unlimited annual technical support as well as increased discounts on software
purchases, shipping revenue billed to customers, and other miscellaneous
revenue. Revenue from annual maintenance contracts and business partner
agreements are deferred and recognized proportionately over the term of the
related contract or agreement. Maintenance and other revenue for the six months
ended June 30, 2001 and 2000 was $1,792,386 and $81,800 respectively, a 2,091%
increase primarily due to the Company's acquisition of the ALE and Unibol
customer base and accompanying maintenance revenue stream. It is anticipated
that revenue from these sources will continue to increase over the next twelve
months as the Company continues to expand its customer base.

Research and Development Costs. For the six months ended June 30, 2001 and 2000,
the Company incurred research and development costs of $810,576 and $239,225
respectively, a 238.8% increase that was primarily the result of the Company's
acquisition of ALE in October 2000 as well as from the Company's continuing
investment in its development of future products. As a percentage of revenue,
research and development costs for the six months ended June 30, 2001 and 2000
were 24.6% and 28.2% respectively. The Company believes that research and
development expenditures are essential to maintaining a competitive position due
to rapid changes in technology and customer demands and expects that these costs
will be maintained at or near current levels in the future.

Selling, General and Administrative Expense. Selling, general and administrative
expenses include sales and marketing expenses, employee compensation, corporate
overhead, legal and accounting expenses, and bad debt expenses. For the six
months ended June 30, 2001 and 2000, selling, general and administrative
expenses were $2,621,602 and $2,490,678 respectively, a 5.3% increase. As a
percentage of revenue, selling general and administrative expenses for the six
months ended June 30, 2001 and 2000 were 79.5% and 99.1%, respectively. The
decrease in selling, general and administrative expenses as a percentage of
revenue is consistent with the Company's new operating plan which calls for cost
reduction.

Depreciation and Amortization. Depreciation and amortization consists of
recurring depreciation charges recorded against the Company's property and
equipment. Depreciation and amortization for the six months ended June 30, 2001
and 2000 was $644,192 and $15,221 respectively, a 413.2% increase primarily due
to the amortization of goodwill resulting from the Company's ALE and Unibol
acquisitions. The Company expects that depreciation and amortization will
continue to increase in terms of actual dollars in the future as the Company
increases its property and equipment base in connection with its continued
expansion efforts or as a result of any possible future acquisitions made by the
Company.

                                       8
<PAGE>


Other Income/Expense, Net. Net other income/expense primarily consists of
interest expense on the Company's debt balances, offset by interest income
received from investments of the Company's excess cash balances. Net other
income for the six months ended June 30, 2001 was $5,837 as compared to net
other income of $61,947 for the six months ended June 30, 2000, a 90.5%
decrease. The decrease primarily relates to having higher available cash
balances in the six month period ending June 30, 2000 for investment purposes,
as compared to the balances available for investment during the six month period
ending June 30, 2001.

Income Taxes. As a result of incurring a year to date loss from operations, the
Company did not record any income tax provision or benefit for the six months
ended June 30, 2001 and 2000.

Net Income / (Loss). For the six months ended June 30, 2001, the Company
recorded net income of $226,201 or $0.02 per common share as compared to a net
loss of ($1,836,240) or ($.20) per common share for the six months ended June
30, 2000. The increase in earnings is primarily related to increased levels of
revenue associated with the ALE and Unibol acquisitions, as well as cost
containment measures (such as the consolidation of Unibol's development function
into the Irvine Headquarters) implemented by the Company as part of their new
operating plan.

LIQUIDITY AND CAPITAL RESOURCES

Since the Company's inception in October 1998, the Company has financed its
operations primarily through the sale of its Common Stock.

Net cash used in operations for the six months ended June 30, 2001 was
$1,922,841, while net cash used in operations for the six months ended June 30,
2000 was $1,406,995. The negative cash flows generated from operations for the
six months ended June 30, 2001 were primarily related to increases in accounts
receivable associated with increased revenues during the period and the impact
of the $1,000,000 extraordinary gain recorded during March of 2001. The negative
cash flow generated from operations for the six months ending June 30, 2000 was
primarily due to operating losses incurred during the period.

Net cash used in investing activities for the six months ended June 30, 2001 was
$30,775, primarily as the result of the Company's acquisition of Unibol Ltd. on
January 29, 2001. Net cash used in investing activities for the six months ended
June 30, 2000 was $82,359 due almost entirely to purchases of property and
equipment. The Company expects to continue to invest in capital and other assets
as well as utilize mergers and acquisitions as a means to expand and support its
growth.

Net cash used in financing activities for the six months ended June 30, 2001 was
$407,183, due primarily to proceeds of $792,962 paid to certain of the Company's
shareholders pursuant to a settlement agreement, offset by proceeds received
from long-term borrowings of $450,000. Net cash provided by financing activities
for the six months ended June 30, 2000 was $8,427,486 due primarily to proceeds
received from the Company's private placement of its Common Stock. The Company
anticipates that it may seek additional capital in the future to support its
operating and business plans.

At June 30, 2001, cash and cash equivalents totaled $73,780. In addition, at
June 30, 2001, the Company had a working deficiency of $1,466,646 and an
accumulated deficit of $7,503,221.

Depending on the outcome of the securities litigation currently filed against
the Company (see Part II, Item 1 hereof), as well as the Company's ability to
meet its operating goals, the Company may be required to raise additional funds
to meet the Company's working capital and capital expenditure needs at least
through the next twelve months.

RISK FACTORS

The Company does not provide forecasts of its future financial performance.
However, from time to time, information provided by the Company or statements
made by its employees may contain "forward-looking" information that involves
risks and uncertainties. In particular, statements contained in this Report on
Form 10-QSB that are not historical facts (including, but not limited to
statements contained in "Item 2 - Management's Discussion and Analysis" of Part
I of this Report on Form 10-QSB relating to liquidity and capital resources) may

                                       9
<PAGE>


constitute forward-looking statements and are made under the safe harbor
provisions of The Private Securities Litigation Reform Act of 1995. The
Company's actual results of operations and financial condition have varied and
may in the future vary significantly from those stated in any forward looking
statements. Factors that may cause such differences include, without limitation,
the risks, uncertainties and other information discussed below and within this
Quarterly Report on Form 10-QSB, as well as the accuracy of the Company's
internal estimates of revenue and operating expense levels. The following
discussion of the Company's risk factors should be read in conjunction with the
financial statements contained herein and related notes thereto. Such factors,
among others, may have a material adverse effect upon the Company's business,
results of operations and financial condition.

Financial Condition and Going Concern Qualification. In early 2001, the Company
implemented a new operating plan designed to accelerate the Company's ability to
achieve positive operating cash flow. As part of the new operating plan, the
Company reduced the size of its workforce and made further expense reductions in
the areas of technical support, product development and general and
administrative expenses. To successfully execute this plan, the Company must
adhere to its expense reductions and work to achieve the revenue targets
incorporated as underlying assumptions to its operating plan. If the Company is
unable to manage its operating expenses and increase revenues, the Company may
be unable to achieve and sustain a positive operating cash flow. The Company's
ability to achieve its annual and quarterly revenue goals could also be
negatively impacted by the softening consumer demand for technology products, as
well as the weakening general economic conditions and decreasing consumer
confidence.

The Company's new operating plan reflects management's expectations as of the
date of this quarterly report, and is based on currently available information
as well as significant assumptions made by management regarding various revenue
and operating expense items. The Company cannot guarantee that the assumptions
that it relied upon in developing its operating plan will be accurate, or that
future events or results will conform to the Company's expectations or
assumptions. As a result, if the Company's assumptions are inaccurate, or its
expectations prove to be erroneous in light of future events, or if it is unable
to maintain the support of its customers, vendors, and other key corporate
relationships regardless of the success of its new operating plan, it may need
to raise additional working capital. In order to obtain this capital, the
Company may seek to sell additional equity securities, obtain a line of credit
or seek other ways to fund its operations in the event it requires additional
working capital to operate its business. The Company currently does not have any
commitments for additional financing and it cannot be certain that additional
financing will be available when and to the extent required, or that, if
available, it will be on acceptable terms. If adequate funds are not available
on acceptable terms, the Company may not be able to fund its operations.
Further, if the Company raises additional funds by issuing equity or convertible
debt securities, the percentage ownership of its stockholders will be diluted.
Also, any new securities could have rights, preferences and privileges senior to
that of the Company's Common Stock.

The Company's ability to become profitable and continue its operations depends
on its ability to generate and sustain higher revenue levels and maintain
reasonable operating expense levels consistent with the assumptions underlying
the Company's new operating plan. If the Company is unable to increase its
revenues or manage and reduce its operating expenses and costs compared to the
year ended December 31, 2000, it may be unable to sustain positive operating
cash flow.

Exposure to Damages as a Result of Litigation. On August 17, 2000, a shareholder
class action was commenced in the United States District Court for the Central
District of California against the Company as well as two of its officers and
directors, Bruce Acacio and Carol Conway DeWees. The class action was brought on
behalf of purchasers of the stock of the Company during the period February 9,
2000 through August 6, 2000. In October 2000, the shareholder class action was
consolidated with three other nearly identical lawsuits filed in the same court
against the Company, Mr. Acacio, and Ms. DeWees. The plaintiffs in the
consolidated class action allege that the defendants made false and misleading
statements about the Company's actual and expected financial performance to
inflate the value of the Company's stock to defraud investors, in violation of
federal securities laws. The plaintiffs seek damages, interest, costs and such
other equitable or injunctive relief as the Court may deem just and proper.

                                       10
<PAGE>


On December 4, 2000, an action was commenced in the United States District Court
for the District of Nevada against the Company and two of its officers and
directors, Bruce Acacio and Carol Conway DeWees by three shareholders of the
Company who acquired their stock through a Private Placement conducted by the
Company. The plaintiffs in the action contend that the defendants made false and
misleading statements about the Company's actual and expected financial
performance to defraud investors, in violation of federal securities laws. The
plaintiffs seek damages, interest, costs and other equitable and injunctive
relief.

The Company believes that it has meritorious defenses to the above actions and
intends to vigorously defend them. The actions are in the early stages.
Consequently, at this time it is not reasonably possible to estimate the damage,
or the range of damages, if any, that the Company might incur in connection with
such actions.

On December 5, 2000, the Company filed a lawsuit in Orange County, California
against Unicomp, Inc. and others, claiming fraudulent misrepresentation and
other causes of action. The complaint concerns the extent and scope of various
agreements entered into between the Company, on the one hand, and Unicomp, Inc.,
and other related entities, on the other hand, through which the Company
acquired Unibol, Ltd., a United Kingdom corporation, and through which the
Company contends it also acquired Unibol, Inc., a Georgia corporation ("Unibol
U.S."). The complaint includes causes of action for fraud, breach of oral and
written contract, promissory estoppel, reformation, specific performance, and
unjust enrichment, among others. The complaint demands, among other things, that
title to Unibol U.S. be conveyed to the Company and that damages be paid in an
unspecified amount for defendants' fraudulent misrepresentations to the Company
in entering into the Acquisition Documents.

In response to the above-described complaint, on or about January 3, 2001, the
defendants filed an answer to the complaint and a cross-complaint for
declaratory relief, breach of contract, and interference with contract against
the Company. The thrust of the cross-complaint is defendants' assertion that the
Company acquired Unibol, Ltd., but not Unibol U.S. Defendants also assert that
the Company has breached its contractual obligations to defendants by failing to
make installments required for the Company to acquire Unibol, Ltd., by
unilaterally issuing press releases not approved by Unicomp, and by other action
alleged to be inconsistent with defendants' rights under the Acquisition
Documents. A separate lawsuit was brought in Georgia by Unicomp, Inc. and
related parties against the Company, asserting many of the same claims asserted
in the above-described cross-complaint. On or about March 23, 2001, the court
dismissed the Georgia action based on a forum selection clause in the agreements
between the Company and Unicomp, Inc.

On May 1, 2001, the Company and Unicomp signed a Settlement Agreement (the
"Settlement Agreement") to resolve the issues pertaining to the litigation
between the two companies. According to the terms of the Settlement Agreement,
the Chief Executive Officer of Unicomp has agreed to relinquish his voting and
operating control of Unibol, Ltd. to the Company, while granting the Company the
rights to market Unibol products worldwide. In addition, Unicomp has agreed to
forgive the remaining cash and stock amounts due under the Purchase Agreement.
The Settlement Agreement was to have been effective as of May 15, 2001 or at
such other time as agreed to by Unicomp and California Software, but not later
than June 1, 2001. The Company and Unicomp had also agreed to suspend all
currently filed litigation between the two companies until July 1, 2001 or the
closing of the Settlement Agreement, whichever occurs first.

Subsequent to July 1, Unicomp filed a cross complaint in California. The company
has answered the complaint and filed a Motion to Compel with the court based
upon the May 1 Settlement Agreement.

On or about April 12, 2001, a lawsuit was filed against the Company and its
officers and directors in the Circuit Court of the City of Richmond, Virginia.
The lawsuit, filed by the Chief Executive Officer of Software Connections (the
former parent company of ALE Systems ("ALE"), which was acquired by the Company
in October, 2000) and his wife, the sole shareholder of Software Connections,
alleges breach of contract, fraud, and tortuous interference against the Company
and its officers and directors in connection with actions taken by the Company
subsequent to its acquisition of ALE. The lawsuit seeks compensatory damages of
$2,500,000, punitive damages of $350,000, and other equitable and injunctive
relief.

The Company has responded by filing a fraud action against Software Connection's
previous sole shareholder, Gayle Goodrich and her husband, the former President
of Software Connections C. Wesley Lucas in Superior Court in Orange County,
California. The company has also filed a demurrer in the Virginia case based
upon the fact that there is a forum clause in the contract.

                                       11
<PAGE>


The uncertainty associated with substantial unresolved litigation may have an
adverse impact on the Company's business. In particular, such litigation could
impair the Company's relationships with existing customers and its ability to
obtain new customers. Defending such litigation may result in a diversion of
management's time and attention away from business operations, which could have
a material adverse effect on the Company's business, results of operations and
financial condition.

Dependence on Principal Products. For the six months ended June 30, 2001, the
Company's core of BABY, Unibol, and MLPS products accounted for substantially
all of the Company's net sales. The Company is wholly dependent on these
products. As a result, any factor adversely affecting sales of any of these
products could have a material adverse effect on the Company. The Company's
future financial performance will depend in part on the successful introduction
of enhanced versions of these products and development of new versions of these
and other products and subsequent acceptance of such new and enhanced products.
There can be no assurance that the Company's new and enhanced products will
achieve significant market acceptance or will generate significant revenue. In
addition, competitive pressures or other factors may result in significant price
erosion that could have a material adverse effect on the Company's business,
financial condition and results of operations.

Product Concentration. As previously noted, the Company derives most of its
revenues from products that run on or replicate the AS/400 and iSeries 400
environment on a personal computer platform and provides a GUI for those
text-screen applications.

Potential for Software Defects. Software products as complex as the BABY,
Unibol, and MLPS products offered by the Company may contain undetected errors
or failures when first introduced or as new versions are released. Despite
testing by the Company and by current and potential customers, any of the
Company's products may contain errors after their commercial shipment. Such
errors may cause loss of or delay in market acceptance of the Company's
products, damage to the Company's reputation, and increased service and warranty
costs. The possibility of the Company being unable to correct such errors in a
timely manner could have a material adverse effect on the Company's results of
operations and its cash flows. In addition, technical problems with the current
release of the platforms on which the Company's products operate could impact
sales of these products, which could have a material adverse effect on the
Company's business, financial condition and results of operations.

Uneven Patterns of Quarterly Operating Results. The Company's revenues in
general are relatively difficult to forecast and vary from quarter to quarter
due to various factors, including the (i) relatively long sales cycles for the
Company's products, (ii) size and timing of individual transactions, the closing
of which tend to be delayed by customers until the end of a fiscal quarter as a
negotiating tactic, (iii) introduction of new products or product enhancements
by the Company or its competitors, (iv) potential for delay or deferral of
customer implementations of the Company's software, (v) changes in customer
budgets, (vi) seasonality of technology purchases and other general economic
conditions, and (vii) changes in the pricing policies of the Company or its
competitors. Accordingly, the Company's quarterly results are difficult to
predict until the end of the quarter, and delays in product delivery or closing
of sales near the end of a quarter have historically caused and could, in the
future, cause quarterly revenues and net income to fall significantly short of
anticipated levels.

The Company's revenues in any quarter are substantially dependent on orders
booked and shipped in that quarter. Because the Company's operating expenses are
based on anticipated revenue levels and because a high percentage of the
Company's expenses are relatively fixed, a delay in the recognition of revenue
from even a limited number of sales transactions could cause significant
variations in operating results from quarter to quarter and could cause net
income to fall significantly short of anticipated levels.

Effects of Electronic Commerce. There can be no assurance that the Company will
be able to provide a product offering that will satisfy new customer demands in
the Internet, online services, e-business applications, and electronic commerce
areas. In addition, standards for web-enabled and e-business applications, as
well as other industry adopted and de facto standards for the Internet are
evolving rapidly. There can be no assurance that standards chosen by the Company
will position its products to compete effectively for business opportunities as
they arise on the Internet and other emerging areas. The success of the
Company's product offerings depends, in part, on its ability to continue
developing products which are compatible with the Internet. The increased
commercial use of the Internet may require substantial modification and
customization of the Company's products and the introduction of new products.
The Company may not be able to effectively compete in the Internet-related
products and services market.

                                       12
<PAGE>


Competition. The Company encounters intense competition in some aspects of its
business and competes directly with other software firms, many of which have
greater financial resources than the Company. There can be no assurance that the
Company will be able to compete successfully in the future or that competition
will not have a material adverse affect on the Company's business, financial
condition and results of operations.

Acquisition Strategy. The Company has addressed and may continue to address the
need to develop new products, in part through the acquisition of other
companies. Acquisitions involve numerous risks including difficulties in the
assimilation of the operations, technologies and products of the acquired
companies, the diversion of management's attention from other business concerns,
risks of entering markets in which the Company has no or limited direct prior
experience and where competitors in such markets have stronger market positions,
and the potential loss of key employees of the acquired company. Achieving and
maintaining the anticipated benefits of an acquisition will depend in part upon
whether the integration of a target company's business is accomplished in an
efficient and effective manner, and there can be no assurance that this will
occur. The successful combination of companies in the high technology industry
may be more difficult to accomplish than in other industries.

Hiring and Retention of Employees. The Company's continued growth and success
depend to a significant extent on the continued service of its senior management
and other key employees and the hiring of new qualified employees. Competition
for highly-skilled business, product development, technical and other personnel
is becoming more intense due to lower overall unemployment rates as well as the
boom in information technology spending. Accordingly, the Company expects to
experience increased compensation costs that may not be offset through either
improved productivity or higher prices. There can be no assurances that the
Company will be successful in continuously recruiting new personnel and in
retaining existing personnel. In general, the Company does not have long-term
employment or non-competition agreements with its employees. The loss of one or
more key employees, or the Company's inability to attract additional qualified
employees or retain other employees, could have a material adverse effect on the
continued growth of the Company.

Sales Force Restructuring. The Company historically has relied heavily on its
direct sales force. In the past, the Company has restructured or made other
periodic adjustments to its sales force. These changes have generally resulted
in a temporarily lack of focus and reduced productivity by the Company's sales
force that may have affected revenues in a quarter. There can be no assurances
that the Company will not continue to restructure its sales force or that the
related transition issues associated with restructuring the sales force will not
recur.

Possible Necessity for Additional Capital. The Company may require additional
capital to fund its capital expenditures, product development and working
capital requirements through 2001. In addition, any significant change in the
Company's product development plans or marketing and distribution methods may
require additional capital. If the Company is required in the future to seek
additional capital through a new line of credit, asset-based lending or the sale
of equity, no assurance can be given that such capital will be available on
terms favorable to the Company, or at all. The sale of equity interests would
dilute the ownership of current shareholders.

Enforcement of the Company's Intellectual Property Rights. The Company relies on
a combination of copyright, patent, trademark, trade secrets, confidentiality
procedures and contractual procedures to protect its intellectual property
rights. Despite the Company's efforts to protect its intellectual property
rights, it may be possible for unauthorized third parties to copy certain
portions of the Company's products or to reverse engineer or obtain and use
technology or other information that the Company regards as proprietary. There
can also be no assurances that the Company's intellectual property rights would
survive a legal challenge to their validity or provide significant protection
for the Company. In addition, the laws of certain countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States. Accordingly, there can be no assurance that the Company will be able to
protect its proprietary technology against unauthorized third party copying or
use, which could adversely affect the Company's competitive position.

                                       13
<PAGE>


Possibility of Infringement Claims. The Company may, in the future, receive
notices from third parties claiming infringement by the Company's products of
third party patent and other intellectual property rights. The Company expects
that software products will increasingly be subject to such claims as the number
of products and competitors in the Company's industry segment grow and the
functionality of products overlaps. Regardless of its merit, responding to any
such claim could be time-consuming, result in costly litigation and require the
Company to enter into royalty and licensing agreements which may not be offered
or available on terms acceptable to the Company. If a successful claim is made
against the Company and the Company fails to develop or license a substitute
technology, the Company's business, results of operations or financial position
could be materially adversely affected.

Possible Volatility of Stock Price. The market price of the Company's Common
Stock has experienced significant fluctuations and may continue to fluctuate
significantly. The market price of the Common Stock may be significantly
affected by factors such as the announcement of new products or product
enhancements by the Company or its competitors, technological innovation by the
Company or its competitors, quarterly variations in the Company's or its
competitors' results of operations, changes in prices of the Company's or its
competitors' products and services, changes in revenue and revenue growth rates
for the Company as a whole or for specific geographic areas, business units,
products or product categories, changes in earnings estimates by market
analysts, speculation in the press or analyst community and general market
conditions or market conditions specific to particular industries. The stock
prices for many companies in the technology sector have experienced wide
fluctuations which often have been unrelated to their operating performance.
Such fluctuations may adversely affect the market price of the Company's Common
Stock.

Limited Market for Common Stock; Absence of Dividends. The Common Stock of the
Company is currently quoted on the Over-the-Counter Bulletin Board ("OTCBB")
under the symbol "CAWC". As a result, the market for the Company's stock is
limited. There can be no assurance that a meaningful trading market will
develop.


PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On August 17, 2000, a shareholder class action was commenced in the United
States District Court for the Central District of California against the Company
and two of its officers and directors, Bruce Acacio and Carol Conway DeWees. The
class action was brought on behalf of purchasers of the stock of the Company
during the period February 9, 2000 through August 6, 2000. In October 2000, the
shareholder class action was consolidated with three other nearly identical
lawsuits filed in the same court against the Company, Mr. Acacio, and Ms.
DeWees. The plaintiffs in the consolidated class action allege that the
defendants made false and misleading statements about the Company's actual and
expected financial performance to inflate the value of the Company's stock to
defraud investors, in violation of federal securities laws. The plaintiffs seek
damages, interest, costs and such other equitable or injunctive relief as the
Court may deem just and proper.

On December 4, 2000, an action was commenced in the United States District Court
for the District of Nevada against the Company and two of its officers and
directors, Bruce Acacio and Carol Conway DeWees by three shareholders of the
Company who acquired their stock through a Private Placement conducted by the
Company. The plaintiffs in the action contend that the defendants made false and
misleading statements about the Company's actual and expected financial
performance to defraud investors, in violation of federal securities laws. The
plaintiffs seek damages, interest, costs and other equitable and injunctive
relief.

The Company believes that it has meritorious defenses to above actions and
intends to vigorously defend them. The actions are in the early stages.
Consequently, at this time it is not reasonably possible to estimate the damage,
or the range of damages, if any, that the Company might incur in connection with
such actions.

On December 5, 2000, the Company filed a lawsuit in Orange County, California
against Unicomp, Inc. and others, claiming fraudulent misrepresentation and
other causes of action. The complaint concerns the extent and scope of various
agreements entered into between the Company, on the one hand, and Unicomp, Inc.
and other related entities, on the other hand, through which the Company
acquired Unibol, Ltd., a United Kingdom corporation, and through which the
Company contends it also acquired Unibol, Inc., a Georgia corporation ("Unibol
U.S."). The complaint includes causes of action for fraud, breach of oral and
written contract, promissory estoppel, reformation, specific performance, and
unjust enrichment, among others. The complaint demands, among other things, that
title to Unibol U.S. be conveyed to the Company and that damages be paid in an
unspecified amount for defendants' fraudulent misrepresentations to the Company
in entering into the Acquisition Documents.

                                       14
<PAGE>


In response to the above-described complaint, on or about January 3, 2001, the
defendants filed an answer to the complaint and a cross-complaint for
declaratory relief, breach of contract, and interference with contract against
the Company. The thrust of the cross-complaint is defendants' assertion that the
Company acquired Unibol, Ltd., but not Unibol U.S. Defendants also assert that
the Company has breached its contractual obligations to defendants by failing to
make installments required for the Company to acquire Unibol, Ltd., by
unilaterally issuing press releases not approved by Unicomp, and by other action
alleged to be inconsistent with defendants' rights under the Acquisition
Documents. A separate lawsuit was brought in Georgia by Unicomp, Inc. and
related parties against the Company, asserting many of the same claims asserted
in the above-described cross-complaint. On or about March 23, 2001, the court
dismissed the Georgia action based on a forum selection clause in the agreements
between the Company and Unicomp, Inc.

On May 1, 2001, the Company and Unicomp signed a Settlement Agreement (the
"Settlement Agreement") to resolve the issues pertaining to the litigation
between the two companies. According to the terms of the Settlement Agreement,
the Chief Executive Officer of Unicomp agreed to relinquish his voting and
operating control of Unibol, Ltd. to the Company, while granting the Company the
rights to market Unibol products worldwide. In addition, Unicomp agreed to
forgive the remaining cash and stock amounts due under the Purchase Agreement.
The Settlement Agreement shall be effective as of May 15, 2001 or at such other
time as agreed to by Unicomp and California Software, but not later than June 1,
2001. The Company and Unicomp also agreed to suspend all currently filed
litigation between the two companies until July 1, 2001 or the closing of the
Settlement Agreement, whichever occurs first. Subsequent to July 1, Unicomp
filed a cross complaint in California. The company has answered the complaint
and filed a Motion to Compel with the court based upon the May 1 Settlement
Agreement.

On or about April 12, 2001, a lawsuit was filed against the Company and its
officers and directors in the Circuit Court of the City of Richmond, Virginia.
The lawsuit, filed by the Chief Executive Officer of Software Connections (the
former parent company of ALE Systems ("ALE"), which was acquired by the Company
in October, 2000) and his wife, the sole shareholder of Software Connections,
alleges breach of contract, fraud, and tortuous interference against the Company
and its officers and directors in connection with actions taken by the Company
subsequent to its acquisition of ALE. The lawsuit seeks compensatory damages of
$2,500,000, punitive damages of $350,000, and other equitable and injunctive
relief.

The Company has responded by filing a fraud suit against Software Connection's
former sole shareholder, Gayle Goodrich and its former President, C. Wesley
Lucas in Orange County Superior Court. The company has also filed a demurrer on
the Virginia action based upon a forum clause in the Acquisition Agreement.

The uncertainty associated with substantial unresolved litigation may be
expected to have an adverse impact on the Company's business. In particular,
such litigation could impair the Company's relationships with existing customers
and its ability to obtain new customers. Defending such litigation will likely
result in a diversion of management's time and attention away from business
operations, which could have a material adverse effect on the Company's
business, results of operations and financial condition. Such litigation may
also have the effect of discouraging potential acquirors from bidding for the
Company or reducing the consideration such acquirors would otherwise be willing
to pay in connection with an acquisition.


Item 2. Changes in Securities

None.


Item 3. Defaults Upon Senior Securities

None.


                                       15
<PAGE>


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

The Company is considering setting forth a proposal to amend the Company's
Articles of Incorporation to increase the number of shares of Common Stock
authorized to be issued by the Company from 20,000,000 shares to 40,000,000
shares.


Item 5. Other Information

None.


Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

          None

     (b)  Reports on Form 8-K

          None.



                                       16
<PAGE>



                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                        CALIFORNIA SOFTWARE CORPORATION



Date: August 8, 2001                    By: /s/ R. Bruce Acacio
--------------------                    -----------------------
                                        R. Bruce Acacio, Chief Executive Officer



Date: August 8, 2001                    By: /s/ Kevin J. Gadawski
--------------------                    -------------------------
                                        Kevin J. Gadawski
                                        Vice President - Finance and
                                        Principal Accounting Officer





                                       17