<PAGE>

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


                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON D.C.   20549
                           --------------------------------



                                      FORM 10-Q


(MARK ONE)
                [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the quarterly period ended March 28, 1997

                                          OR

                [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the transition period from     to
                                                    ----   -----

                           Commission File Number  0-19640
--------------------------------------------------------------------------------



                                        RETIX
                (Exact name of Registrant as specified in its charter)


              CALIFORNIA                             95-3948704
    (State or other jurisdiction of              ( I.R.S. Employer
     incorporation or organization)            Identification Number)


                               4640 ADMIRALTY WAY, #600
                          MARINA DEL REY, CALIFORNIA  90292
                       (Address of principal executive offices)

          Registrant's telephone number, including area code: (310) 828-3400


         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 as the Registrant was required to file such reports),
         and (2) has been subject to such filing requirements for the past
         ninety days.

                                  YES  X    NO
                                     -----    ------


         As of April 30, 1997 there were 22,606,815 shares of common
         stock outstanding.


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



                                          1
<PAGE>

                            PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
                                       RETIX
                            CONSOLIDATED BALANCE SHEETS
                                    (in thousands)

                                        ASSETS
<TABLE>
<CAPTION>
                                                            MARCH 31,   DECEMBER 31,
                                                              1997          1996
                                                              ----          ----
                                                          (unaudited)
<S>                                                       <C>           <C>
Current assets:
  Cash and short-term investments. . . . . . . . . . .        $14,067        $16,696
  Trade accounts receivable (net of allowances of
    $1,456 as of March 31, 1997 and $1,543 as of
    December 31, 1996) . . . . . . . . . . . . . . . .          3,610          5,161
  Inventories. . . . . . . . . . . . . . . . . . . . .          1,265          1,744
  Prepaid expenses and other current assets. . . . . .          1,802          1,566
                                                                -----          -----

Total current assets . . . . . . . . . . . . . . . . .         20,744         25,167

Property and equipment, net. . . . . . . . . . . . . .          1,257          1,252
Other assets . . . . . . . . . . . . . . . . . . . . .          1,254          1,654
                                                                -----          -----

                                                              $23,255        $28,073
                                                              -------        -------
                                                              -------        -------

                        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable . . . . . . . . . . . . . . . . . .        $ 2,351        $ 2,138
  Accrued wages and related liabilities. . . . . . . .          1,321          1,282
  Accrued restructuring expenses . . . . . . . . . . .          1,136          1,223
  Other accrued liabilities. . . . . . . . . . . . . .          4,092          4,310
  Deferred revenue . . . . . . . . . . . . . . . . . .            536          1,242
                                                                -----          -----

     Total current liabilities . . . . . . . . . . . .          9,436         10,195

Long-term obligations, less current portion. . . . . .            206            276
                                                                -----          -----

     Total liabilities . . . . . . . . . . . . . . . .          9,642         10,471
                                                                -----         ------

Shareholders' equity:
  Preferred stock, par value $.01, 2,000,000 shares
   authorized;  none issued and outstanding
  Common stock, par value $.01, 50,000,000 shares
   authorized; shares issued and outstanding
   1997, 22,606,815; 1996, 22,597,427. . . . . . . . .            226            226
  Additional paid-in capital . . . . . . . . . . . . .         78,165         78,089
  Accumulated deficit. . . . . . . . . . . . . . . . .        (57,905)       (53,850)
  Cumulative translation adjustment. . . . . . . . . .         (1,971)        (1,961)
                                                               ------         ------
   Total . . . . . . . . . . . . . . . . . . . . . . .         18,515         22,504
  Less notes receivable from issuance of common stock          (4,902)        (4,902)
                                                               ------         ------

   Total shareholders' equity. . . . . . . . . . . . .         13,613         17,602
                                                               ------         ------
                                                              $23,255        $28,073
                                                              -------        -------
                                                              -------        -------
</TABLE>

             See accompanying notes to consolidated financial statements


                                          2
<PAGE>

                                       RETIX
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share amounts)
                                    (unaudited)



                                                   THREE MONTHS ENDED MARCH 31,
                                                         1997      1996
                                                         ----      ----


Revenues:
  Product. . . . . . . . . . . . . . . . . . . .      $  5,229  $  6,560
  Service. . . . . . . . . . . . . . . . . . . .         1,248     1,021
                                                       -------   -------
   Net revenues. . . . . . . . . . . . . . . . .         6,477     7,581
                                                       -------   -------

Cost of revenues:
  Product. . . . . . . . . . . . . . . . . . . .         1,724     2,331
  Service. . . . . . . . . . . . . . . . . . . .           651       447
                                                       -------   -------
   Total cost of revenues. . . . . . . . . . . .         2,375     2,778
                                                       -------   -------

Gross profit . . . . . . . . . . . . . . . . . .         4,102     4,803
                                                       -------   -------

Operating expenses:
  Research and development . . . . . . . . . . .         3,082     2,533
  Sales and marketing. . . . . . . . . . . . . .         3,439     2,552
  General and administrative . . . . . . . . . .         1,600     1,228
                                                       -------   -------
   Total . . . . . . . . . . . . . . . . . . . .         8,121     6,313
                                                       -------   -------

Loss from operations . . . . . . . . . . . . . .        (4,019)   (1,510)
Other income (expense), net. . . . . . . . . . .           (36)      101
                                                       -------   -------

Loss before provision for income taxes . . . . .        (4,055)   (1,409)
Provision for income taxes . . . . . . . . . . .           --        --
                                                       -------   -------

Net loss . . . . . . . . . . . . . . . . . . . .       $(4,055)  $(1,409)
                                                       -------   -------
                                                       -------   -------



Net loss per common and
  common equivalent share. . . . . . . . . . . .        $(0.19)   $(0.07)
                                                        ------    ------

Common and common equivalent shares used
  in computing per share amount. . . . . . . . .        20,809   19,423
                                                        ------   -------




    See accompanying notes to consolidated financial statements.


                                          3


<PAGE>

                                       RETIX
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (in thousands)
                                    (unaudited)

<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED MARCH 31,
                                                          1997          1996
                                                          ----          ----
<S>                                                    <C>           <C>
Cash flows from operating activities:
  Net loss . . . . . . . . . . . . . . . . . . . . .   $(4,055)      $(1,409)
  Adjustments to reconcile net loss to net cash
   provided by (used for) operating activities:
    Depreciation and amortization. . . . . . . . . .       372           566
    Reserve for returns and bad debts. . . . . . . .       (87)         (100)
    Changes in operating assets and
     liabilities  (Note 4) . . . . . . . . . . . . .       980          (793)
                                                        ------         ------
   Net cash (used for) operating activities . . . .     (2,790)       (1,736)
                                                        ------         ------

Cash flows from investing activities:
   Decrease (increase) in short-term investments. .        (58)          (74)
   Additions to property and equipment. . . . . . .       (172)         (245)
   Decrease (increase) in other assets. . . . . . .        267          (124)
                                                        ------         ------
   Net cash provided by (used for) investing activities     37          (443)
                                                        ------         ------

Cash flows from financing activities:
  Repayment of long term obligations . . . . . . . .        --           (84)
  Proceeds from issuance of common stock . . . . . .        76         4,317
                                                        ------        ------
   Net cash provided by financing activities. . . .         76         4,233
                                                        ------        ------

Effect of exchange rate changes on cash. . . . . . .       (10)          (28)
                                                        ------         ------

Net increase (decrease) in cash and cash equivalents    (2,687)        2,026

Cash and cash equivalents, beginning of period . . .     8,948         5,518
                                                        ------        ------

Cash and cash equivalents, end of period . . . . . .   $ 6,261       $ 7,544
                                                       -------       -------
                                                       -------       -------

</TABLE>


             See accompanying notes to consolidated financial statements.


                                          4


<PAGE>

                                        RETIX
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (UNAUDITED)


1.  GENERAL

    The consolidated financial statements include the accounts of Retix and its
wholly-owned subsidiaries (the "Company").  All significant intercompany
balances and transactions have been eliminated in consolidation.  The interim
consolidated financial statements are unaudited.  In the opinion of management,
the interim financial statements include all adjustments, consisting of only
normal, recurring adjustments, necessary for a fair presentation of the
Company's financial position, results of operations and cash flows.  The
Company's fiscal year ends on the Saturday nearest to December 31. For
simplicity of presentation, the Company has described the fiscal year ended
December 28, 1996 as December 31, 1996 and has described the thirteen weeks
ended March 30, 1996 and March 29, 1997 as the three months ended March 31, 1996
and 1997, respectively.


    It is suggested that these consolidated financial statements and the
accompanying notes be read in conjunction with the audited consolidated
financial statements and the accompanying notes for the year ended December 28,
1996 included in the Company's Annual Report.  The results of operations for the
three month period ended March 29, 1997 are not necessarily indicative of
results that may be expected for the full year.

2.  CASH AND SHORT-TERM INVESTMENTS

Cash and short term investments consist of the following (in thousands):


                                                  March 31,     December 31,
                                                    1997             1996
                                                    ----             ----
                                                 (unaudited)

Cash and cash equivalents. . . . . . . . . . . . $  6,261         $  8,948
Short-term investments . . . . . . . . . . . . .    7,806            7,748
                                                  -------          -------
                                                  $14,067          $16,696
                                                  -------          -------
                                                  -------          -------

Cash equivalents consist of short term investments with original maturities of
three months or less.

3.  INVENTORIES

Inventories consist of the following (in thousands):

                                                  March 31,     December 31,
                                                    1997             1996
                                                    ----             ----
                                                 (unaudited)

  Raw materials and component parts. . . . . . .   $  425           $  136
  Work-in-process. . . . . . . . . . . . . . . .      346            1,196
  Finished goods . . . . . . . . . . . . . . . .      494              412
                                                   ------           ------
                                                   $1,265           $1,744
                                                   ------           ------
                                                   ------           ------

Work-in-process and finished goods inventories consist of material, direct labor
and overhead associated with the manufacturing process.



                                          5


<PAGE>
                                        RETIX
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                    (UNAUDITED)


4.  STATEMENT OF CASH FLOWS

Increases (decreases) in operating cash flows arising from changes in operating
assets and liabilities consist of the following (in thousands):

                                                 Three Months Ended March 31,
                                                    1997              1996
                                                    ----              ----

Trade accounts receivable. . . . . . . . . . . .   $1,123           $  276
Inventories. . . . . . . . . . . . . . . . . . .      479             (495)
Prepaid expenses and other current assets. . . .     (236)              42
Accounts payable . . . . . . . . . . . . . . . .      213              455
Accrued wages and related liabilities. . . . . .       39               21
Accrued restructuring expenses . . . . . . . . .      (87)          (1,224)
Other accrued liabilities. . . . . . . . . . . .     (622)             107
Deferred revenue . . . . . . . . . . . . . . . .       71               25
                                                   ------           ------
    Increase (decrease) in operating
      assets and liabilities . . . . . . . . . .   $  980           $ (793)
                                                   ------           ------
                                                   ------           ------

Financing and investing activities during the three months ended March 31, 1997
which affected recognized assets or liabilities but that did not result in cash
receipts or cash payments were not significant.


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

    "SAFE HARBOR" Statements under the Private Securities Litigation Reform Act
of 1995:  Except for the historical information presented, the matters discussed
in this Quarterly Report on Form 10-Q are forward looking statements that
involve risks and uncertainties, including the size and timing of license fees
closed during the quarter, the likely continued significant percentage of
quarterly revenues recorded in the last month of the quarter which makes
forecasting difficult and subject to a substantial risk of variance with actual
results, the timely development and acceptance of new and enhanced TMN-based,
ATM-access and wireless software products in existing and new markets, the
acceptance of new technologies like TMN and ATM, the impact of competitive
products and pricing, the dependence on key partners and alliances, the ability
to attract and retain qualified key personnel and the other risks detailed from
time to time in the Company's public disclosure filings with the U.S. Securities
and Exchange Commission (SEC).  Copies of the most recent Forms 10K and 10Q are
available upon request from Retix's Investor Relations Department.

    The following discussion should be read in conjunction with the unaudited
consolidated financial statements and accompanying notes, included in Part I -
Item 1 of this Quarterly Report, and the audited consolidated financial
statements and accompanying notes and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 28,
1996 contained in the Company's Annual Report.

RESULTS OF OPERATIONS

    NET REVENUES.   Net revenues decreased 14.6% to $6,477,000 for the three
months ended March 31, 1997 as compared to $7,581,000 for the three months ended
March 31, 1996.  Revenues generated by the Company's TMN software business
increased to $3,472,000 representing 53.6% of net revenues, during the first
quarter of 1997 from $3,380,000, or 44.6% of net revenues, during the comparable
period of 1996.  Sales of internetworking products totaled $2,703,000 accounting
for 41.7% of net revenues for the three months ended March 31, 1997 as compared
to $3,804,000, or 50.2% of net revenues, for the same period of 1996.  Wireless
data product revenues totaled $302,000 for the three months ended March 31, 1997
as compared to $397,000 in revenues for the same period of 1996.



                                          6
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

    Sales generated by the Company's TMN software business consist of network
management software and service revenues primarily from source license fees,
royalties and services, including professional services, technical support and
maintenance. Source license fees consist primarily of licenses of the Company's
TMN-based software solutions and development platforms and typically have
accounted for a substantial portion of total revenue in each quarter.  Source
license revenue is recognized upon transfer of the source code to the customer,
provided there are no significant remaining obligations and collectibility is
deemed probable by management in accordance with Statement of Position 91-1.
The increase in revenues during the first quarter of 1997 as compared to the
same period of the prior year included a 20.4% increase in TMN-based source
license fees and a 78% increase in professional services, offset by a decline in
legacy OSI workgroup products revenues.  The Company believes such increases in
revenues reflect the broadening demand for TMN-based solutions in markets
associated with leading-edge telecommunications technologies such as digital
cellular, Sonet/SDH and broadband networks (i.e.: ATM). The Company believes
continued increases in revenue in the future will be primarily dependent upon
the further acceptance of new technologies like ATM, the timely deployment and
acceptance of standards-based solutions such as TMN and alliances with key
partners to develop compelling solutions for the management of public
telecommunications networks.

    Internetworking revenues consist primarily of the Company's new high speed
multi-service broadband access products that enable telecommunications service
providers to extend broadband services to corporate users as well as sales of
legacy multi-protocol router, local and remote LAN bridge and Ethernet switch
products to private enterprises.  Broadband access product revenues increased
47.3% during the three months ended March 31, 1997 as compared to the same 
period of 1996, while legacy product sales declined by 62.3% during the same 
period. As disclosed previously, this decline in legacy product revenues is 
attributable to several factors, including the successful completion of certain
large end-user programs in the United States, the closure of unprofitable sales
channels and narrowing of internetworking product lines in 1996 and the
marketing and distribution resources of larger competitors affecting the
Company's ability to gain or retain market share in the general distribution
enterprise networking market.

    Further decreases in quarterly internetworking revenues are anticipated
during 1997 as the Company migrates to its new generation of broadband access
products.  The Company believes increased internetworking revenues in the future
will be primarily dependent on expansion of distribution channels as well as the
success of the Company with regard to enhancing its presence in the broadband
services market through the development of its next generation of multi-service
broadband access products.  The Company has planned new product introductions to
its broadband access product-line in the first half of 1997, primarily targeted
at the transparent multimedia services (TMS) and internet access markets, with
subsequent upgrades and volume production projected for the second half of 1997
and beyond.

    Wireless data revenues of $302,000 in the first quarter of 1997,
representing a decrease of 23.9% from $397,000 for the same period in 1996,
reflects the impact of AT&T's decision to abandon the deployment of its
pACT-based acknowledgment paging network.

    The Company intends to introduce several new products during 1997 to expand
its position in the internetworking, TMN and wireless data markets; however, net
revenues and operating results of future periods may be adversely affected if
the Company experiences additional delays in releasing new products, if such new
products are not accepted by the marketplace, or if the Company experiences
unanticipated decreases in other product revenues.

    Sales to third party customers outside of North America comprised
approximately 49.1% of net revenues for the three months ended March 31, 1997 as
compared to 61.2% for the same period in 1996.  The Company's high percentage of
sales to customers outside of North America has historically been due primarily
to relatively strong demand for internetworking products within Europe and Asia
Pacific and to strong international demand for its TMN and OSI technology
software.


                                          7
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

    GROSS MARGIN.  Cost of revenues consists primarily of manufacturing costs
(material, labor, packaging, documentation and overhead) and, to a lesser
extent, royalties paid under licensing agreements and warranty costs. Gross
margin for the three months ended March 31, 1997 was 63.3% of net revenues as
compared to 63.4% for the same period of 1996. Favorable trends in gross margins
during the first quarter of 1997 include a five margin point increase associated
with internetworking product shipments and a shift in the Company's revenue mix
to 58.2% of net revenues from software-based products and services as compared
to approximately 50% during the three months ended March 31, 1996.  Offsetting
these factors was an increase in the mix of professional services and
nonrecurring engineering project revenues, which have significantly lower gross
margins than software products, to 11.3% of the Company's net revenues during
1997 as compared to 5.0% during the same period of 1996. Gross margins on
internetworking hardware product shipments improved in the first quarter of 1997
as compared to the same period of 1996 as substantial operating efficiencies,
including elimination of excess production capacity related to internetworking
products, were achieved as a result of the restructuring efforts announced in
late 1995.  The Company anticipates continued pricing pressures in the
internetworking product areas and, although the Company is responding with a
shift to outsourced manufacturing production and reductions in product costing
as well as changes to pricing structures and distribution strategies, margins
may fluctuate and could decline in future periods.


    RESEARCH AND DEVELOPMENT.  The Company continues to make significant
investments in research and development to develop new enterprise and broadband
access internetworking products, as well as to expand its expertise in TMN and
wireless data technologies and to continue sustaining support of its product
offerings.  The major components of research and development expenses are
engineering salaries, employee benefits and associated overhead, purchased
software, fees to outside contractors, the cost of facilities and depreciation
of capital equipment.  For the three months ended March 31, 1997, the Company's
research and development expenses increased 21.7% to $3,082,000 from $2,533,000
for the same period in 1996.  As a percentage of revenue, research and
development expenses were 47.6% for the three months ended March 31, 1997 as
compared to 33.4% for the same period in 1996.  The increase in research and
development expense for the three months ended March 31, 1997 as compared to the
same period in 1996 is primarily due to a decision at Vertel, the Company's TMN
software business, to adopt and invest in a strategy to expand its emphasis on
the development of integrated platform solutions and generic network management
applications.  These charges included $516,000 in costs associated with software
technology purchases during the first quarter of 1997.  The Company expects to
continue to make significant investments in the development of new products and
feature enhancement to existing product lines, although such expenses may
fluctuate from quarter to quarter both in absolute dollars and as a percentage
of revenue depending on the status of various development projects and the level
of custom engineering services that are reallocated to costs of revenue.

    SALES AND MARKETING.  Sales and marketing expenses increased 34.8% to
$3,439,000 for the three months ended March 31, 1997 as compared to $2,552,000
for the same period in 1996.  Sales and marketing expenses as a percentage of
net revenues increased to 53.1% for the three months ended March 31, 1997 as
compared to 33.7% for the same period in 1996. The significant increase in the
absolute amount of sales and marketing expenses in the first quarter of 1997 as
compared to the same period of 1996 reflected increased sales and marketing
activities at Vertel during the three months ended March 31, 1997, as compared
to the first quarter of 1996.  These activities were aimed at increasing the
industry wide adoption rate of TMN-based solutions and broadening market
development opportunities through activities like the Global TMN Summit
co-sponsored by Vertel in February 1997 as well as growth in offices and sales
activities around the world.  Vertel intends to continue to expand its sales and
marketing functions to support anticipated broader market adoption of TMN.

    Sales and marketing expenses consist primarily of personnel and related
costs relative to the selling, sales support and marketing activities, including
marketing programs such as trade shows and other promotional costs.  The Company
believes that substantial sales and marketing expenditures are essential to
developing opportunities for revenue growth and to renewing the Company's
competitive position.  Sales and marketing expenses are expected to continue to
comprise a significant percentage of the Company's total expenses because of
costs associated with supporting a worldwide organization of sales and service
functions necessary to meet the needs of the Company's customer base and to
respond to the opportunities in the rapidly growing telecommunications
networking marketplace.  The Company anticipates that sales and marketing
expenses will increase in absolute dollars, although such expenses may fluctuate
from quarter to quarter both in absolute dollars and as a percentage of revenue.

                                          8
<PAGE>

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

    GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased
30.3% to $1,600,000 for the three months ended March 31, 1997 as compared to
$1,228,000 for the same period in 1996.  General and administrative expenses as
a percentage of net revenues increased to 24.7% for the three months ended March
31, 1997 as compared to 16.2% for the same period in 1996.  The increase in
absolute spending for general and administrative costs in the first quarter of
1997 as compared to the same period of 1996 is primarily due to $499,000 in
redeployment and consolidation charges for Vertel in support of its acceleration
in development of integrated network management solutions.

    LOSS FROM OPERATIONS.  The Company incurred a loss from operations of
$4,019,000 for the three months ended March 31, 1997 as compared to $1,510,000
for the same period of 1996.  The losses from operations are attributable to
declines in net revenues and gross profit, increases in operating expenses for
Vertel, offset by an increase in gross margin percentages.

    In 1996 and the first quarter of 1997, the Company has experienced
continuing operating losses.  There can be no assurance that the Company will be
able to regain profitability or resume revenue growth on a quarterly or annual
basis.  The Company's expense levels are based in part on its expectation of
future revenues.  As a result of failure to meet these expectations, the Company
has had to undertake several reorganizations to date.  Delays in new product
introductions or product enhancements or the introduction of unsuccessful
products could adversely affect the Company. If revenues are below expectations,
results of operations may be adversely affected.

    OTHER INCOME.  For the three months ended March 31, 1997 other income,
consisting of interest income, net of interest expense, currency gains and
losses, and various other items decreased by $137,000, or 135.6% as compared to
the same period in 1996.  The decrease is primarily due to the increases in
foreign tax withholdings on international sales and decreases in interest income
as a result of declining cash balances during the corresponding periods.

    PROVISION FOR INCOME TAXES.  The Company recorded no provision for income
taxes on a pre-tax loss of $4,055,000 in the first quarter of 1997.  A valuation
allowance against the total amount of net deferred tax assets has been
established.  As a result of the increase in the valuation allowance, the
Company has net deferred tax assets of approximately $27 million for which no
benefit has been provided at March 31, 1997.  These net deferred tax assets will
be realized to the extent that the Company operates profitably in the future
during the respective carryforward periods.

LIQUIDITY AND CAPITAL RESOURCES

    At March 31, 1997 the Company's principal sources of liquidity consisted of
$14,067,000 in cash, cash equivalents and short-term investments.  The Company's
cash management system includes a sweep account which enables the Company to
consolidate its operating cash into a central account daily and advance cash to
the Company's subsidiaries to fund operating cash requirements.

    Cash, cash equivalents and short-term investments decreased $2,629,000 or
15.7% during the three months ended March 31, 1997.  The decrease in cash is
primarily attributable to the operating loss of $4,055,000 in the same period.
The operating losses were offset by, among other things, $1,123,000 in cash flow
increases from the collection of accounts receivable during the quarter.

    The Company believes that existing sources of liquidity, capital resources
and funds from operations will satisfy the Company's anticipated cash needs
through the end of the year.  From time to time, the Company may also consider
the acquisition of, or evaluate investments in, certain products and businesses
complementary to the Company's business.  Any such acquisition or investment may
require additional capital resources.


                                          9
<PAGE>

                             PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

              Neither the Company nor any of its subsidiaries is a party to,
nor is their property the subject of, any material pending legal proceedings.

ITEM 2.  CHANGES IN SECURITIES

              Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

              Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              (a)  The Registrant's annual meeting of shareholders was held on
                   April 15, 1997.

              (b)  The following Class I directors were elected at the meeting:
                   Jeff Drazan, Joe Stephan and Gil Williamson.  Voting results
                   for the election of all Director   nominees were as follows:

                                     FOR         WITHHELD   BROKER NON-VOTES
                                  ----------     --------  -----------------
                   Jeff Drazan    20,637,271     225,230     not applicable
                   Joe Stephan    20,637,271     225,230     not applicable
                   Gil Williamson 20,637,271     225,230     not applicable

                   Only Class I directors were elected at the meeting.  The
                   current term for Class II directors, including Neil Hynes
                   and Craig Johnson, will continue until the 1998 annual
                   meeting of  shareholders.

              (c)  The other matters voted upon at the meeting and results of
                   those votes were as follows:
                   (i)  Proposal to approve the appointment of Deloitte and
                   Touche LLP as the independent auditors of the corporation
                   for the fiscal year ended December 31, 1997.

                       FOR       OPPOSED     ABSTAINED         BROKER NON-VOTES
                    ----------   -------    ----------         ----------------
                    20,682,417   118,745      61,339                 0

ITEM 5.  OTHER INFORMATION

              None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)       EXHIBITS

              4.1  Preferred Shares Rights Agreement, dated as of 
                   April 29, 1997, between Retix and ChaseMellon Shareholder
                   Services, L.L.C., including the Certificate of Determination
                   of Rights, Preferences and Privileges of Series A 
                   Participating Preferred Stock, the form of Rights Certificate
                   and the Summary of Rights attached thereto as Exhibits A, B 
                   and C, respectively.  Incorporated by reference from  
                   Registrant's Registration Statement on Form 8-A as filed with
                   the Securities and Exchange Commission on April 30, 1997.

    (b)       REPORTS ON FORM 8-K

              None.



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                                      SIGNATURES


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


                                  RETIX
                                  (Registrant)



Date:  May 9, 1997                /S/  Steven M. Waszak
                                  ---------------------------------
                                  Steven M. Waszak
                                  Vice President of Finance and Administration
                                  and Chief Financial Officer
                                  (Principal Financial and Accounting Officer)


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