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

                                   FORM 10-Q
                            ------------------------

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

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

                                       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 0-25494

                               REMEDY CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  DELAWARE                                      77-0265675
       (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NUMBER)

    1505 SALADO DRIVE, MOUNTAIN VIEW, CA                           94043
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>

                                 (650) 903-5200
              (REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)

                                 WWW.REMEDY.COM
                        (REGISTRANT'S INTERNET ADDRESS)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]

     There were 30,714,235 shares of the Company's Common Stock, par value
$.00005, outstanding on April 30, 2001.

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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                       PAGE NO.
                                                                       --------
<S>      <C>                                                           <C>
                             PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements
         Condensed Consolidated Balance Sheets as of March 31, 2001
         and December 31, 2000.......................................      3
         Condensed Consolidated Statements of Operations for the
         Three Months Ended March 31, 2001 and March 31, 2000........      4
         Consolidated Statements of Cash Flows for the Three Months
         Ended March 31, 2001 and March 31, 2000.....................      5
         Notes to Condensed Consolidated Financial Statements........      6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................     10

Item 3.  Quantitative and Qualitative Disclosures About Market
         Risk........................................................     17

                               PART II. OTHER INFORMATION

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

Signature............................................................     20
</TABLE>

                                        2
<PAGE>   3

                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                               REMEDY CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                               MARCH 31,     DECEMBER 31,
                                                                 2001            2000
                                                              -----------    ------------
                                                              (UNAUDITED)        (1)
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents.................................    $ 55,178       $ 43,119
  Short-term investments....................................     163,305        164,780
  Accounts receivable, net..................................      52,500         79,326
  Prepaid expenses and other current assets.................       5,480          5,861
  Deferred tax assets.......................................       7,157          7,157
                                                                --------       --------
          Total current assets..............................     283,620        300,243
Property and equipment, net.................................      20,565         19,418
Goodwill and other intangible assets, net...................      26,115         25,439
Other non-current assets....................................         408            524
Deferred tax assets -- non-current portion..................       3,437          3,437
                                                                --------       --------
                                                                $334,145       $349,061
                                                                ========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $  2,656       $  4,036
  Accrued compensation and related liabilities..............       7,257         10,293
  Income taxes payable......................................       1,841          3,616
  Other accrued liabilities.................................      20,425         20,942
  Deferred revenue..........................................      58,129         56,915
                                                                --------       --------
          Total current liabilities.........................      90,308         95,802
Stockholders' equity:
  Common stock and additional paid-in capital...............     187,954        184,230
  Treasury Stock (4,132,300 shares and 3,872,300 shares,
     respectively)..........................................     (74,924)       (68,441)
  Accumulated other comprehensive loss......................        (835)          (396)
  Retained earnings.........................................     131,642        137,866
                                                                --------       --------
          Total stockholders' equity........................     243,837        253,259
                                                                --------       --------
                                                                $334,145       $349,061
                                                                ========       ========
</TABLE>

---------------
(1) The balance sheet at December 31, 2000 has been derived from the audited
    financial statements at that date, but does not include all the information
    and footnotes required by generally accepted accounting principles for
    complete financial statements.

                            See accompanying notes.
                                        3
<PAGE>   4

                               REMEDY CORPORATION

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

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                2001       2000
                                                              --------    -------
<S>                                                           <C>         <C>
Revenue:
  Products..................................................  $ 29,081    $35,420
  Maintenance and service...................................    35,674     26,512
                                                              --------    -------
          Total revenue.....................................    64,755     61,932
Costs and expenses:
  Cost of product revenue...................................     1,915      2,402
  Cost of maintenance and service revenue...................    14,879     11,037
  Research and development..................................    15,540     11,286
  Sales and marketing.......................................    33,753     25,772
  General and administrative................................     4,096      3,239
  Amortization of goodwill and other intangibles............     2,575      1,829
  Restructuring charge......................................     3,393         --
                                                              --------    -------
          Total costs and expenses..........................    76,151     55,565
Income (loss) from operations...............................   (11,396)     6,367
Interest income and other, net..............................     2,751      1,674
                                                              --------    -------
Income (loss) before income taxes...........................    (8,645)     8,041
Provision (benefit) for income taxes........................    (2,421)     2,573
                                                              --------    -------
Net income (loss)...........................................  $ (6,224)   $ 5,468
                                                              ========    =======
Net income (loss) per share:
  Basic.....................................................  $  (0.21)   $  0.18
                                                              ========    =======
  Diluted...................................................  $  (0.21)   $  0.16
                                                              ========    =======
Shares used in computing per share amounts:
  Basic.....................................................    30,344     30,420
                                                              ========    =======
  Diluted...................................................    30,344     34,085
                                                              ========    =======
</TABLE>

                            See accompanying notes.
                                        4
<PAGE>   5

                               REMEDY CORPORATION

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

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ---------------------
                                                                2001        2000
                                                              --------    ---------
<S>                                                           <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $ (6,224)   $   5,468
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
     Depreciation...........................................     2,508        2,155
     Amortization of goodwill and other intangibles.........     2,573        1,829
     Restructuring charge...................................     3,033           --
Changes in assets and liabilities:
  Accounts receivable.......................................    26,826       14,776
  Prepaid expenses and other current assets.................       381          442
  Accounts payable..........................................    (1,380)       1,198
  Accrued compensation and related liabilities..............    (3,036)      (5,942)
  Income taxes payable......................................    (1,775)       1,232
  Other accrued liabilities.................................    (3,550)      (1,436)
  Other non-current assets..................................       116           --
  Deferred revenue..........................................     1,214        2,982
                                                              --------    ---------
          Net cash provided by operating activities.........    20,686       22,704
                                                              --------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments.........................   (85,377)    (101,628)
Maturities of short-term investments........................    86,852       88,574
Cash paid for businesses acquired, net of cash assumed......    (3,463)     (10,280)
Capital expenditures........................................    (3,441)      (1,997)
                                                              --------    ---------
          Net cash used in investing activities.............    (5,429)     (25,331)
                                                              --------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations..........        --          (53)
Proceeds from issuance of common stock......................     3,724       10,210
Purchase of treasury stock..................................    (6,483)          --
                                                              --------    ---------
          Net cash provided by (used in) financing
            activities......................................    (2,759)      10,157
                                                              --------    ---------
Net increase in cash and cash equivalents...................    12,498        7,530
Effect of exchange rate changes on cash.....................      (439)        (154)
Cash and cash equivalents at beginning of period............    43,119       47,302
                                                              --------    ---------
Cash and cash equivalents at end of period..................  $ 55,178    $  54,678
                                                              ========    =========
</TABLE>

                            See accompanying notes.
                                        5
<PAGE>   6

                               REMEDY CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

1. BASIS OF PRESENTATION

     The condensed consolidated balance sheet as of March 31, 2001, the
condensed consolidated statements of operations for the three months ended March
31, 2001 and 2000, and the condensed consolidated statements of cash flows for
the three months ended March 31, 2001 and 2000, have been prepared by Remedy
Corporation ("Remedy" or the "Company"), without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at March 31, 2001 and for all periods presented have been made. The
condensed consolidated balance sheet at December 31, 2000 has been derived from
the audited financial statements at that date but does not include all
disclosures required by generally accepted accounting principles.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission's rules and regulations. These condensed financial statements should
be read in conjunction with the audited financial statements and notes thereto
included in the Company's 2000 Annual Report on Form 10-K filed with the
Securities and Exchange Commission in March 2001.

     The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of results that may be expected for any other interim
period or for the full fiscal year.

2. REVENUE RECOGNITION

     The Company recognizes revenue in accordance with Statement of Position
97-2 "Software Revenue Recognition", as amended. The Company derives revenue
from the sale of software licenses, post-contract support ("support") and other
services. Support includes telephone technical support, bug fixes and rights to
upgrades on a when-and-if available basis for a stated term of generally one
year. Services range from installation, training and basic consulting to
software modification to meet specific customer needs. In software arrangements
that include rights to multiple software products, support and/or other
services, the Company allocates the total arrangement fee among each deliverable
based on the relative fair value of each of the deliverables determined based on
objective evidence specific to the Company.

     Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, the fee is fixed or
determinable and collection is probable. Revenue from license fees in multiple
element contracts is recognized using the residual method when there is vendor
specific objective evidence of the fair value of all undelivered elements in an
arrangement but vendor specific objective evidence of fair value does not exist
for one or more of the delivered elements in an arrangement. Under the residual
method, the total fair value of the undelivered elements, as indicated by vendor
specific objective evidence, is deferred and the difference between the total
arrangement fee and the amount deferred for the undelivered elements is
recognized as revenue related to the delivered elements regardless of any
separate prices stated within the contract for each element. If the fee due from
the customer is not fixed or determinable due to extended payment terms, revenue
is recognized as payments become due from the customer. If collection is not
considered probable, revenue is recognized when the fee is collected.

     Revenue allocable to support is recognized on a straight-line basis over
the periods in which the support is to be provided.

     Arrangements that include consulting services are evaluated to determine
whether those services are essential to the functionality of other elements of
the arrangement. When the services are considered essential, revenue under the
arrangement is recognized in accordance with SOP 81-1, "Accounting for
Performance of Construction -- Type and Certain Production-Type Contract". When
the services are not considered essential, the revenue allocable to the software
services is recognized as the services are performed.
                                        6
<PAGE>   7
                               REMEDY CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

3. EARNINGS (LOSS) PER SHARE

     Basic earnings (loss) per share is computed using the weighted-average
number of common shares outstanding. Diluted earnings (loss) per share includes
the weighted-average number of common share equivalents outstanding during the
period. Dilutive common share equivalents consist of employee stock options and
are calculated using the treasury stock method.

     The following table sets forth the computation of basic and diluted
earnings (loss) per share:

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ----------------------
                                                                2001         2000
                                                              ---------    ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                PER SHARE AMOUNTS)
<S>                                                           <C>          <C>
Numerator:
  Net income (loss).........................................   $(6,224)     $ 5,468
                                                               =======      =======
Denominator:
  Denominator for basic earnings (loss) per
     share-weighted-average shares..........................    30,344       30,420
  Effect of dilutive securities:
Employee stock options......................................        --        3,665
                                                               -------      -------
  Denominator for diluted earnings (loss) per
     share-weighted-average shares and dilutive
     securities.............................................    30,344       34,085
                                                               =======      =======
  Basic earnings (loss) per share...........................   $ (0.21)     $  0.18
                                                               =======      =======
  Diluted earnings (loss) per share.........................   $ (0.21)     $  0.16
                                                               =======      =======
</TABLE>

4. COMPREHENSIVE INCOME (LOSS)

     Comprehensive income (loss) is comprised of net income (loss) and other
comprehensive income (loss), which includes certain changes in equity of the
company that are excluded from net income (loss). Specifically, FAS 130 requires
foreign currency translation adjustments and hedging gains (loss) to be included
in accumulated other comprehensive income (loss). Comprehensive income (loss)
for the three months ended March 31, 2001 and 2000 is as follows:

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                2001       2000
                                                              --------    -------
                                                                (IN THOUSANDS)
                                                                  (UNAUDITED)
<S>                                                           <C>         <C>
Net income (loss)...........................................  $(6,224)    $5,468
Unrealized hedging gain.....................................        6          7
Change in cumulative translation adjustment.................     (445)      (161)
                                                              -------     ------
Comprehensive net income (loss).............................  $(6,663)    $5,314
                                                              =======     ======
</TABLE>

5. RECENT PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activity",
which was subsequently amended by Statement No. 137 (SFAS 137), "Accounting for
Derivative Instruments and Hedging Activities: Deferral of Effective Date of
SFAS 133" and Statement No. 138 (SFAS 138), "Accounting for Certain Derivative
Instruments and Certain Hedging Activities: an amendment of FASB Statement No.
133". SFAS 137 requires adoption of SFAS 133 in years beginning after June 15,
2000. SFAS 138 establishes accounting and

                                        7
<PAGE>   8
                               REMEDY CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

reporting standards for derivative instruments and addresses a limited number of
issues causing implementation difficulties for numerous entities. The Statement
requires Remedy to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be recorded at fair value through earnings.
If the derivative qualifies as a hedge, depending on the nature of the exposure
being hedged, changes in the fair value of derivatives are either offset against
the change in fair value of hedged assets, liabilities, or firm commitments
through earnings or are recognized in other comprehensive income until the
hedged cash flow is recognized in earnings. The ineffective portion of a
derivative's change in fair value is recognized in earnings. The Statement
permits early adoption as of the beginning of any fiscal quarter. Remedy adopted
SFAS 133 in the quarter ended September 30, 1999 and subsequently implemented a
program to hedge a portion of its forecasted foreign currency denominated
revenue and expenses with foreign exchange forward contracts. SFAS 133 did not
have a material effect on Remedy's financial statements.

6. RESTRUCTURING OF OPERATIONS

     In January 2001, the Company approved a plan to discontinue its
eProcurement product. As part of this restructuring, the Company terminated two
employees and reassigned all others. For customers who have already purchased
the eProcurement product, Remedy will continue to provide certain support
services for up to one year.

     In the first quarter of 2001, the Company recorded a restructuring charge
of $3.4 million related to the discontinuation of the eProcurement product. The
restructuring charge includes approximately $2.9 million for future customer
settlement and support costs, $0.3 million for the write-off of prepaid assets,
and $0.2 million for other exit-related costs. During the three months ended
March 31, 2001, the Company wrote-off approximately $0.3 million of prepaid
assets, and paid approximately $0.2 million in customer settlement and support
costs and $0.2 million for other exit-related costs, leaving a total of $2.7
million as an accrued liability primarily for future customer settlement and
support costs. We expect the $2.7 million accrued liability will be paid out by
the end of the fiscal year 2001.

7. BUSINESS COMBINATIONS

     In January 2001, the Company acquired Deodis SA, a privately held European
Asset Management and CRM integrator based in Paris, France. The total purchase
price, including related expenses, was approximately $3.5 million. Approximately
$3.2 million, being the excess of the goodwill price over the fair value of the
net tangible assets acquired, was allocated to goodwill. Goodwill is amortized
on a straight-line basis over four years. The acquisition was accounted for
under the purchase method and accordingly, Deodis' operating results have been
included in the Company's consolidated financial statements since the date of
acquisition.

8. SHARE REPURCHASE

     Since 1998, the Company has repurchased a total of 4,132,300 shares of
common stock on the open market from time to time, depending on market
conditions. On July 26, 2000, the Board of Directors authorized management of
the Company to repurchase up to 3 million shares or approximately 10 percent of
the Company's outstanding shares of common stock over the next twelve months.
The repurchases have been funded by the Company's cash and short-term
investments. During the three months ended March 31, 2001, the Company
repurchased a total of 260,000 shares of the Company's stock at an average price
of $24.94, totaling approximately $6.5 million. At March 31, 2001, 870,000
shares remain authorized and available for repurchase.

                                        8
<PAGE>   9
                               REMEDY CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

9. SEGMENT INFORMATION

     Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information". SFAS 131 superseded Statement No. 14 (SFAS
14), "Financial Reporting for Segments of a Business Enterprise." SFAS 131
established standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. SFAS 131 also establishes standards for related
disclosures about products and services, geographic areas and major customers.

     Operating segments are defined as components of an enterprise for which
separate financial information is available that is evaluated regularly by the
Chief Operating Decision Maker ("CODM") in deciding how to allocate resources
and assess performance. Remedy considers itself to be in a single industry
segment, specifically the license, support, consulting and training of its
software products. Remedy markets its products in the United States and in
foreign countries through both direct and indirect sales channels and its
subsidiaries. Remedy's assets are primarily located in its offices in the United
States. Remedy's CODM reviews financial information presented on a consolidated
basis, accompanied by disaggregated revenues by geographic region for purposes
of making operating decisions and assessing financial performance.

10. SUBSEQUENT EVENT

     In April 2001, Remedy announced the undertaking of restructuring activities
to reduce future operating costs. The restructuring activities include a
reduction in workforce of approximately 7%, cancellation of certain contracts
and commitment and other cost-saving actions. Remedy expects to record a
restructuring charge of up to $2 million in the second quarter of 2001.

                                        9
<PAGE>   10

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

     This Report on Form 10-Q contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements. The Company's quarterly
operating results have in the past and may in the future vary significantly
depending on factors including, but not limited to, those discussed in the
"Factors That May Affect Future Operating Results" section on page 15 of this
report and in the Company's 2000 Form 10-K filed with the Securities and
Exchange Commission in March 2001, such as general economic factors, increased
competition, the timing of new product announcements and changes in pricing
policies by the Company and its competitors, market acceptance of new and
enhanced versions of the Company's products, the size and timing of significant
orders, the mix of direct and indirect sales, changes in operating expenses,
changes in Company strategy, the Company's ability to attract and retain highly
qualified technical, sales, marketing and managerial personnel and foreign
currency exchange rates. Furthermore, the Company has often recognized a
substantial portion of its revenue in the last month of a quarter, with this
revenue frequently concentrated in the last week of a quarter. As a result,
product revenue in any quarter is substantially dependent on orders booked and
shipped in that quarter, and revenue for any future quarter is not predictable
with any degree of certainty. Product revenue is also difficult to forecast
because the market for client/server and web-based application software products
is rapidly evolving, and the Company's sales cycle, from initial trial to
multiple copy purchases and the provision of support services, varies
substantially from customer to customer. In addition, the Company expects that
sales derived through indirect channels, which are harder to predict and have
lower margins than direct sales, may increase as a percentage of total revenue.
The Company's expense levels are based, in part, on its expectations as to
future revenues. If revenue levels are below expectations, operating results are
likely to be adversely affected. Net income may be disproportionately affected
by a reduction in revenue because a proportionately smaller amount of the
Company's expenses varies with its revenue. As a result, the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. Due to all the foregoing factors, it is likely that in some future
quarter the Company's operating results will be below the expectations of public
market analysts and investors. In such event, the price of the Company's Common
Stock would likely decline.

     Remedy Corporation ("Remedy") is the leading supplier of Information
Technology Service Management (ITSM) and Customer Relationship Management (CRM)
software applications. Remedy products have been sold to more than 10,000 sites
and more organizations use Remedy products for CRM and ITSM than any other
solution. Remedy delivers software application solutions that accelerate an
organization's move to eBusiness and that raises its ability to continually
differentiate itself from competitors. Remedy's fast deployment programs and
radical adaptability enable organizations to move more quickly to an eBusiness
model, and to do so in a differentiated way. By focusing on internal and
external service as competitive differentiators, our customers continually
improve both their customer interactions and internal operations to raise
satisfaction and lower costs.

     The Company was incorporated on November 20, 1990 in Delaware. The Company
maintains its executive offices and principal facilities at 1505 Salado Drive,
Mountain View, California 94043. Its telephone number is (650) 903-5200.

                                        10
<PAGE>   11

RESULTS OF OPERATIONS

     The following table sets forth, as a percentage of total revenue, statement
of income data for the periods indicated.

<TABLE>
<CAPTION>
                                                              THREE MONTHS
                                                                 ENDED
                                                               MARCH 31,
                                                              ------------
                                                              2001    2000
                                                              ----    ----
<S>                                                           <C>     <C>
Revenue:
  Products..................................................   45%     57%
  Maintenance and service...................................   55%     43%
                                                              ---     ---
          Total revenue.....................................  100%    100%
Costs and expenses:
  Cost of product revenue...................................    3%      4%
  Cost of maintenance and service revenue...................   23%     18%
  Research and development..................................   24%     18%
  Sales and marketing.......................................   52%     42%
  General and administrative................................    6%      5%
  Amortization of goodwill and other intangibles............    4%      3%
  Restructuring charge......................................    5%      0%
                                                              ---     ---
          Total costs and expenses..........................  117%     90%
                                                              ---     ---
Income (loss) from operations...............................  -17%     10%
Interest income, net........................................    4%      3%
                                                              ---     ---
Income (loss) before income taxes...........................  -13%     13%
Provision (benefit) for income taxes........................   -4%      4%
                                                              ---     ---
Net income (loss)...........................................   -9%      9%
                                                              ===     ===
</TABLE>

  REVENUE

     Total revenue was $64.8 million and $61.9 million for the three months
ended March 31, 2001 and 2000 respectively, representing an increase of 5%.

     Remedy distributes the majority of its products through its direct sales
organization, which is complemented by indirect sales channels, including value
added resellers (VARs), system integrators (SIs) and independent software
vendors (ISVs). Billings derived through indirect channels accounted for
approximately 45% and 46% of Remedy's total billings for the quarters ended
March 31, 2001 and March 31, 2000, respectively. Remedy expects that billings
derived through indirect channels, while growing in absolute dollar amounts,
will fluctuate as a percentage of total billings. International sales accounted
for approximately 37% and 35% of Remedy's total revenue for the quarters ended
March 31, 2001 and March 31, 2000, respectively.

     PRODUCT REVENUE. Revenue from product licenses decreased 18% to $29.1
million for the quarter ended March 31, 2001 from $35.4 million for the
comparable quarter in 2000. Product revenue represented 45% and 57% of total
revenue for the quarter ended March 31, 2001 and 2000, respectively. The
decrease of product revenue as a percentage of total revenue, as well as in
absolute dollars, is largely the result of a slow down in the U.S. and European
economies primarily as a result of customers' postponement of IT purchases. This
economic uncertainty was reflected particularly in the decrease in large
enterprise deals and the decrease in contribution of new license revenue as
compared to the same period in 2000. Although Remedy has experienced significant
absolute dollar growth in revenue in recent years, we expect that the prior
growth rates of the product revenue may not be sustainable in the future. We
anticipate that revenue from product licenses will continue to fluctuate with
market and economic conditions and the purchase pattern of its customers.

     MAINTENANCE AND SERVICE REVENUE. Revenue from maintenance and services
increased by 35% to $35.7 million for the quarter ended March 31, 2001 from
$26.5 million for the comparable quarter in 2000,

                                        11
<PAGE>   12

which represented 55% and 43% of total revenue in the respective periods. The
growth of maintenance and service revenue as percentage of total revenue and in
absolute dollars is primarily due to the renewal of existing maintenance
contracts resulting from product sales in earlier periods. Although prior years'
licensing growth has resulted in increased revenue from maintenance and support,
training and consulting services, we expect that prior growth rates of the
installed base and, consequently, in service revenue, may not be sustainable in
the future.

  COSTS AND EXPENSES

     COST OF PRODUCT REVENUE. Costs of product revenue consist primarily of
costs related to product media and duplication, manuals, packaging materials,
personnel, shipping expenses and royalties paid to third-party vendors. Cost of
product revenue decreased to $1.9 million for the quarter ended March 31, 2001
from $2.4 million for the comparable quarter in 2000, both periods representing
7% of the related product revenue. The decrease in cost of product revenue in
absolute dollars primarily relates to a decrease in royalties paid to third
party vendors as well as the lower volumes of product shipped in the quarter.
Cost of product revenue does not include amortization of capitalized software
development costs, as all development costs incurred in the research and
development of new software products and enhancements to existing software
products have been expensed as incurred. Remedy believes that cost of product
revenue will continue to fluctuate with the volume of product revenues in the
future.

     COST OF MAINTENANCE AND SERVICE REVENUE. Costs of maintenance and service
revenue consist primarily of personnel related costs incurred in providing
telephone support, consulting services and training to customers. Cost of
maintenance and service revenue increased to $14.9 million for the quarter ended
March 31, 2001 from $11.0 million for the comparable quarter in 2000, both
representing 42% of the related maintenance and service revenue in the
respective quarters. Cost of maintenance and service revenue in absolute dollars
increased, primarily due to costs from increased personnel, as Remedy continues
to invest in its customer support and consulting organizations.

     RESEARCH AND DEVELOPMENT. Research and development costs relate to the
personnel and equipment costs associated with maintaining and enhancing existing
product lines as well as developing new product lines to meet the expanding
range of customer requirements. Research and development expenses were $15.5
million and $11.3 million for the quarter ended March 31, 2001 and March 31,
2000, respectively, representing 24% and 18% of total revenue for the respective
periods. The increase in research and development expenses as a percentage of
total revenue and in absolute dollar amounts is primarily attributable to
increased staffing, outside contractors and associated support for software
engineers necessary to expand and enhance its product line.

     SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses for sales and marketing personnel, as well as
promotional expenses. Sales and marketing expenses were $33.7 million and $25.8
million for the quarter ended March 31, 2001 and March 31, 2000, respectively,
or 52% and 42% of total revenue for the respective quarters. The increase in
sales and marketing expenses as a percentage of total revenue and in absolute
dollar amounts is primarily due to an increase in number of sales and marketing
employees to promote and sell new and existing products.

     GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of the salaries and related expenses for executive and finance
personnel, professional fees and other corporate expenses. General and
administrative expenses were $4.1 million and $3.2 million, or 6% and 5% of
total revenue, for the quarters ended March 31, 2001 and March 31, 2000,
respectively. The increase as a percentage of total revenue and in absolute
dollar amounts is primarily the result of increased staffing and associated
expenses necessary to manage and support its growth.

     AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles relates to the purchase of BayStone Software, Inc. in
October 1998, Pipestream Technologies, Inc. in July 1999, Fortress Technologies,
Inc. in September 1999, Axtive Software, Inc. in February 2000, Ostream
Software, Inc. in February 2000, ESQ Systems Integrators, Inc. in June 2000, and
Deodis SA in January 2001. Goodwill and other intangibles, which consist of
$40.0 million of goodwill and $2.1 million of acquired workforce
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<PAGE>   13

valuation are being amortized on a straight-line basis over a period of four
years from the date of acquisition. Amortization expense totaled $2.6 million
and $1.8 million for the quarters ended March 31, 2001 and March 31, 2000,
respectively. Amortization expense related to these acquisitions is expected to
be approximately $10.5 million and $10.1 million, for the years ending December
31, 2001 and December 31, 2002, respectively.

     RESTRUCTURING CHARGES. In January 2001, Remedy approved a plan to
discontinue its eProcurement solution product. As part of this restructuring, it
terminated two employees and reassigned all others. For customers who have
already purchased the eProcurement solution, Remedy will continue to provide
certain support services for up to one year. Remedy recorded a restructuring
charge of $3.4 million in the first quarter of 2001, to provide for employee
separation costs, write-off of prepaid expenses, and future customer support
costs.

     INTEREST INCOME AND OTHER, NET. Interest income and other, net consists
primarily of interest income earned on cash and short-term investments and was
$2.8 million and $1.7 million for the quarters ended March 31, 2001 and March
31, 2000, respectively. The increase is primarily due to larger short-term
investment balances maintained in the quarter ended March 31, 2001 compared to
the same period in 2000, higher interest rates in 2001 compared to 2000, and
approximately $0.3 million of foreign exchange gains recognized in the quarter
ended March 31, 2001.

     PROVISION FOR INCOME TAXES. The effective tax rates for the quarters ended
March 31, 2001 and March 31, 2000 were 28% and 32%, respectively. The effective
tax rate for 2001 is lower than the effective tax rate for 2000 primarily due to
increased research and development credits, increased amounts of tax exempt
interest and lower state taxes.

LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 2001, Remedy had $55.2 million in cash and cash equivalents,
$163.3 million in short-term investments and $193.3 million of working capital.

     Net cash provided by operating activities was $20.7 million and $22.7
million during the three months ended March 31, 2001 and March 31, 2000,
respectively. The decrease in net cash provided by operations was primarily
attributable to the net loss generated from the current period.

     Net cash used in investing activities was $5.4 million and $25.3 million
during the three months ended March 31, 2001 and March 31, 2000, respectively.
The decrease in net cash used in investing activities is primarily due to net
short-term investment maturities, less cash spent on businesses acquired offset
by an increase in purchases of property and equipment.

     Maturities exceeded purchases of short-term investments by $1.5 million
while purchases exceeded maturities of short-term investments by $13.1 million
for the three months ended March 31, 2001 and March 31, 2000, respectively.

     Cash paid to acquire businesses amounted to $3.5 million and $10.3 million
for the three months ended March 31, 2001 and March 31, 2000, respectively.
Remedy acquired Deodis SA in January 2001, and Axtive Software, Inc. and Ostream
Software, Inc. in February 2000.

     Cash used to purchase property and equipment, primarily for computer
workstations, capitalized internal use software, leasehold improvements and file
servers for Remedy's growing employee base was $3.4 million and $2.0 million
during the three months ended March 31, 2001 and March 31, 2000, respectively.
Remedy's principal commitments consist primarily of operating leases on its
facilities.

     Net cash used in financing activities during the three months ended March
31, 2001 increased to $2.8 million from $10.2 million provided by financing
activities during the three months ended March 31, 2000. This comparative
decrease of approximately $13 million is primarily due to the repurchase of
approximately 0.3 million shares of common share at a cost of $6.5 million
offset by proceeds of $3.7 million from the issuance of common stock under stock
purchase and stock option plans during the three months ended March 31, 2001.
During the three months ended March 31, 2000, Remedy received $10.2 million from
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<PAGE>   14

the issuance of common stock under the stock purchase and option plans and did
not repurchase any shares of common stock.

     Remedy believes that its current cash and cash equivalents, short-term
investments and expected future cash flow from operations will be sufficient to
meet its working capital and capital expenditure requirements for at least the
next 12 months. Although operating activities may provide cash in certain
periods, to the extent it experiences growth in the future, Remedy anticipates
that its operating and investing activities may use cash. In addition, it may
utilize cash resources to fund acquisitions or investments in complementary
businesses, technologies or product lines. Consequently, significant future
growth may require Remedy to obtain additional equity or debt financing which
may not be available to us on acceptable terms, or at all.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

     GENERAL ECONOMIC AND MARKET CONDITIONS. During recent years, segments of
the personal computer industry have experienced significant economic downturns
characterized by decreased product demand, production over-capacity, price
erosion, higher overhead costs as a percentage of revenue, work slowdowns and
layoffs. The technology sector in which we operate has experienced a dramatic
slowdown in the past several months. A continuing downturn in macroeconomic
environment could harm our existing and potential customers' ability and
willingness to purchase our products, which would cause a decline in our sales.
Remedy's operations may in the future experience substantial fluctuations from
period to period as a consequence of such industry patterns, general economic
conditions affecting the timing of orders from major customers and other factors
affecting capital spending. There can be no assurance that such factors will not
have a material adverse effect on its business, operating results or financial
condition.

     POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. Remedy's quarterly operating
results have in the past, and may in the future, vary significantly depending on
factors such as increased competition, the timing of new product announcements
and changes in pricing policies by Remedy and its competitors, market acceptance
of new and enhanced versions of its products, the size and timing of significant
orders, the mix of direct and indirect sales, changes in operating expenses,
changes in company strategy, personnel changes, foreign currency exchange rate
fluctuations and general economic factors. Remedy operates with no significant
order backlog because its software products typically are shipped or
electronically downloaded over the Web shortly after orders are received.
Furthermore, Remedy has often recognized a substantial portion of its revenue in
the last month of a quarter, with this revenue frequently concentrated in the
last weeks of a quarter. As a result, product revenue in any quarter is
substantially dependent on orders booked and shipped in that quarter and revenue
for any future quarter is not predictable with any significant degree of
certainty. Product revenue is also difficult to forecast because the market for
software products is rapidly evolving, and Remedy's sales cycle, from initial
trial to multiple copy purchases and the provision of support services, varies
substantially from customer to customer. Remedy's expense levels are based, in
part, on its expectations as to future revenue. If revenue levels are below
expectations, operating results are likely to be adversely affected. Net income
may be disproportionately affected by a reduction in revenue because a
proportionately smaller amount of Remedy's expenses varies with its revenue. As
a result, Remedy believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. It is likely that in some future quarter
Remedy's operating results will be below the expectations of public market
analysts and investors. In such event, the price of Remedy's common stock would
likely decline.

     RISKS ASSOCIATED WITH SELLING TO LARGE ENTERPRISE CUSTOMERS. Remedy has
recently increased its efforts to sell its products to large enterprise
customers and has devoted significant management and financial resources to
achieving this goal. If successful, large enterprise customers are expected to
deploy Remedy's products in business critical operations, which involve
significant capital and management commitments, by such customers. Potential
large enterprise customers generally commit significant resources to an
evaluation of available enterprise software and require Remedy to expend
substantial time, effort and money educating them about the value of its
solutions. Sales of Remedy's products to such customers require an extensive
sales effort throughout a customer's organization because decisions to purchase
such products generally involve the evaluation of the software by a significant
number of customer personnel in various functional and geographic
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<PAGE>   15

areas, each often having specific and conflicting requirements. A variety of
factors, including factors over which Remedy has little or no control, may cause
potential large enterprise customers to favor a particular supplier or to delay
or forego a purchase. As a result of these or other factors, the sales cycle for
Remedy's products is relatively longer than to a mid level customer, typically
ranging between three and nine months. As a result of the length of the sales
cycle and the significant selling expenses resulting from selling into the large
enterprise, Remedy's ability to forecast the timing and amount of specific sales
is limited, and the delay or failure to complete one or more large transactions
to which Remedy has devoted significant resources could seriously harm Remedy's
business, operating results or financial condition and could cause significant
variations in its operating results from quarter to quarter. In addition, large
customers have decreased their spending because of the dramatic slowdown in the
technology sector. If reduced spending impacts our customers' decisions to
purchase our product, our sales could decline.

     DEPENDENCE ON NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT
BUGS. The client/server and web-based application software market is
characterized by rapid technological change, frequent new product introductions
and evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. The life cycles of Remedy's products are
difficult to estimate. Remedy's future success will depend upon its ability to
enhance its current products and to develop and introduce new products on a
timely basis that keep pace with technological developments and emerging
industry standards and address the increasingly sophisticated needs of its
customers. In 1999, Remedy invested significant resources into the research and
development and sales and marketing of software applications. Remedy is
continuing to invest heavily in these efforts in 2001. There can be no assurance
that Remedy will be successful in developing and marketing product enhancements
or new products that respond to technological change, evolving industry
standards and customer requirements, or that Remedy will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products, or that its new products and
product enhancements will adequately meet the requirements of the marketplace
and achieve market acceptance. If Remedy is unable, for technological or other
reasons, to develop and introduce new products or enhancements of existing
products in a timely manner in response to changing market conditions or
customer requirements, Remedy's business, operating results and financial
condition will be materially adversely affected. If the new products currently
being developed by Remedy do not achieve market acceptance or are not released
when expected, its business, operating results and financial condition will be
materially adversely affected. Software products as complex as those offered by
Remedy may contain undetected errors or failures when first introduced or when
new versions are released. Remedy has in the past discovered software errors in
certain of its new products and enhancements after their introduction and has
experienced delays or lost revenue during the period required to correct these
errors. Although Remedy has not experienced material adverse effects resulting
from any such errors to date, there can be no assurance that, despite testing by
Remedy and by current and potential customers, errors will not be found in new
products or releases after commencement of commercial shipments, resulting in
loss of or delay in market acceptance, which could seriously harm its business,
operating results and financial condition.

     INTERNATIONAL OPERATIONS. International sales represented approximately 37%
of Remedy's revenue in the three months ended March 31, 2001. Remedy currently
has seventeen international wholly owned subsidiaries, which are primarily sales
offices, and are located in the United Kingdom, Ireland, Canada, Germany,
France, Spain, Italy, The Netherlands, Sweden, Singapore, Australia, Japan, Hong
Kong, Brazil, Mexico, Argentina and Switzerland. One of Remedy's strategies is
to continue to expand its existing international operations and enter additional
international markets, which will require significant management attention and
financial resources. Traditionally, international operations are characterized
by higher operating expenses and lower operating margins. As a result, if
international revenues increase as a percentage of total revenue, operating
margins may be seriously harmed. Costs associated with international expansion
include the establishment of additional foreign offices, the hiring of
additional personnel, the localization and marketing of its products for
particular foreign markets and the development of relationships with additional
international service providers. If international revenue is not adequate to
offset the expense of expanding foreign operations, its business, operating
results or financial condition could be materially adversely affected.

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     Remedy's international operations are subject to other risks inherent in
international business activities and generally include unexpected changes in
regulatory requirements, tariffs and other trade barriers, product acceptance in
foreign countries, longer accounts receivable payment cycles, difficulties in
managing international operations, potentially adverse tax consequences
including restrictions on the repatriation of earnings, the burdens of complying
with a wide variety of foreign laws, changes in foreign currency exchange rates
and general economic conditions in such countries. There can be no assurance
that such factors will not seriously harm Remedy's future international sales
and, consequently, its results of operations. In addition, because a substantial
majority of its international sales are indirect, any material increase in its
international sales as a percentage of total revenue may adversely affect
Remedy's average selling prices and gross margins due to the lower unit prices
that it receives when selling through indirect channels.

     PRODUCT CONCENTRATION. Remedy currently derives the majority of its revenue
from licenses of the AR System, the applications Remedy provides that are built
upon the AR System foundation and related services. Broad market acceptance of
its products is critical to Remedy's future success. As a result, a decline in
demand for or failure to achieve broad market acceptance of the AR System
foundation and applications as a result of competition, technological change or
otherwise, would have a material adverse effect on the business, operating
results and financial condition of Remedy. Remedy's future financial performance
will depend in part on the successful development, introduction and customer
acceptance of new and enhanced versions of the AR System foundation and other
applications, specifically Customer Relationship Management and Information
Technology Service Management applications. There can be no assurance that
Remedy will continue to be successful in marketing the AR System or any new or
enhanced products or applications. In 2001, Remedy continues to invest
significant resources into the research and development, sales and marketing of
new software applications. However, Remedy believes that its success in
expanding its product line will depend largely on new products achieving market
acceptance and technological competitiveness.

     EXPANSION OF INDIRECT CHANNELS. An integral part of Remedy's strategy is to
continue to develop the marketing channels of value-added resellers (VARs),
system integrators (SIs) and independent software vendors (ISVs). VARs, SIs and
ISVs accounted for approximately 45% of Remedy's total billings in the
three-month period ended March 31, 2001. If these marketing channels increase as
a percentage of sales, Remedy's operating margins may be seriously harmed due to
the lower unit prices that Remedy receives when selling through indirect
channels. There can be no assurance that Remedy will be able to attract VARs,
SIs and ISVs that will be able to market Remedy's products effectively and will
be qualified to provide timely and cost-effective customer support and service.
In addition, Remedy's agreements with VARs, SIs and ISVs are not exclusive and
in many cases may be terminated by either party without cause, and many of
Remedy's VARs, SIs and ISVs carry competing product lines. Therefore, there can
be no assurance that any VAR, SI or ISV will continue to represent Remedy's
products, and the inability to recruit, or the loss of important VARs, SIs or
ISVs could seriously harm its results of operations.

     Remedy intends to rely on third-party implementation providers, including
integration consulting firms and Remedy Approved Consultants (RACs), to assist
with the implementation of its products in large enterprise customers and in the
training of personnel within such enterprises, in order to meet the demand for
implementation of its product from large enterprise customers. As it is Remedy's
strategy to increase its sales to enterprise customers and to use third party
service providers to service such customers, its operating margins may be lower
as a result of the higher expenses associated with engaging such third party
service providers.

     EURO CONVERSION. Remedy is aware of the issues associated with the changes
in Europe aimed at forming a European Economic and Monetary Union (EMU). On
January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency (the "Euro"). On that day, the Euro became a functional
legal currency within these countries and over the next three years, business in
the EMU member states will be conducted in both the existing national currency
and the Euro. As a result, companies operating in or conducting business in EMU
member states need to ensure that their financial and other software systems are
capable of processing transactions and properly handling these currencies,
including the Euro. No later than July 1, 2002, the participating countries will
withdraw all bills and coins denominated in the legacy currencies, so that the
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legacy currencies will no longer be legal tender for any transactions, making
the conversion to the Euro complete. Remedy recognizes that by January 1, 2002,
all its customers in the participating countries in Europe will need to have
converted all the values in their databases to the Euro, having previously
reflected all values in the appropriate local currencies. At this time, it is
not possible to summarize the potential costs associated with addressing any
Euro conversion issues and there can be no assurance that these issues and their
related costs will not seriously harm Remedy's business, operating results and
financial position. However, based on progress to date, Remedy believes that the
use of the Euro will not have a significant impact on the manner in which it
conducts its business.

     RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS. From time to time Remedy may
acquire or invest in companies, consulting practices, technologies or products
that complement its business or its product offerings. Any such acquisitions may
result in the use of cash, potentially dilutive issuances of equity securities,
the write-off of software development costs or other assets, incurrence of
severance liabilities, the amortization of expenses related to goodwill and
other intangible assets and/or the incurrence of debt, any of which could have a
material adverse effect on its business, financial condition, cash flows and
results of operations. Acquisitions involve numerous additional risks including
difficulties in the assimilation of operations, services, products and
personnel, the diversion of management's attention from other business concerns,
the disruption of Remedy's business and the entry into markets in which Remedy
has little or no direct prior experience. In addition, potential acquisition
candidates targeted by Remedy may not have audited financial statements,
detailed financial information or any degree of internal controls. There can be
no assurance that an audit subsequent to any successful completion of an
acquisition will not reveal matters of significance, including with respect to
revenues, expenses, liabilities, contingent or otherwise, and intellectual
property. There can be no assurance that Remedy would be successful in
overcoming these or any other significant risks encountered and the failure to
do so could seriously harm its business, operating results and financial
condition.

     ADDITIONAL RISKS. Remedy's business entails a variety of additional risks
not mentioned above, such as Management of Growth; Dependence Upon Key
Personnel; Dependence on Proprietary Technology; Risks of Infringement and
Product Liability which are set forth in the "Factors That May Affect Future
Operating Results" section of the Company's 2000 Report on Form 10-K filed with
the Securities and Exchange Commission in March 2001.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     INTEREST RATE RISK. Remedy's exposure to market risk for changes in
interest rates primarily relates to its investment portfolio. As stated in its
policy, Remedy is averse to principal loss and seeks to preserve its invested
funds by limiting issuer risk, default risk, liquidity risk and interest rate
risk. Remedy limits issuer risk by placing its investments with high credit
quality issuers and, by policy, limiting the amount of credit exposure to any
one issuer. Remedy mitigates default and liquidity risks by investing in only
high credit quality securities and by positioning its portfolio to respond
appropriately to a significant reduction in a credit rating of any investment
issuer or guarantor. The portfolio includes only marketable securities with
active secondary or resale markets to ensure portfolio liquidity. Remedy
mitigates interest rate risk by only allowing suitable investments to be made in
taxable and non-taxable U.S. as well as foreign instruments. All of Remedy's
investments in aggregate have a weighted average remaining maturity of less than
one year at any given point in time. For a tabular presentation of interest rate
risk sensitive instruments, including the carrying value, market value and
related weighted average interest rates for Remedy's investment portfolio as of
December 31, 2000 and December 31, 1999, see Remedy's 2000 Form 10-K filed with
the Securities and Exchange Commission in March 2001.

     FOREIGN CURRENCY RISK. Remedy transacts business in various foreign
currencies, primarily in Europe. As some revenues are denominated in currencies
other than U.S. dollars, Remedy will be subject to the risks associated with
foreign exchange rate fluctuations. In addition, an increase in the value of the
U.S. dollar relative to foreign currencies could make its products more
expensive and, therefore, potentially less competitive in those markets. As part
of its overall strategy to manage the level of exposure to the risk of foreign
currency exchange rate fluctuations, Remedy hedges a portion of its foreign
currency exposures
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anticipated over the ensuing twelve month period. In the fourth quarter of 1999,
Remedy began invoicing in currencies other than U.S. dollars, and as a result,
it has entered into hedging activities in order to minimize the exposure of the
United States Dollar (USD) value of foreign currency denominated sales. Remedy
does not enter into any derivative transactions for speculative purposes, and
its derivative financial instruments should not subject it to material risk due
to exchange rate movements because gains and losses on these contracts should
offset losses and gains on the transactions being hedged. In the future, more of
its revenues may be denominated in currencies other than U.S. dollars and, as a
result, Remedy's exposure in the future may fluctuate depending upon the nature
and success of the hedging activities. Accordingly, due to the substantial
volatility of foreign exchange rates, its business, operating results or
financial condition could be seriously harmed.

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                           PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits: None

     (b) Reports on Form 8-K: None

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                                   SIGNATURE

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

                                          REMEDY CORPORATION

                                          /s/         RON J. FIOR
                                          --------------------------------------
                                                       Ron J. Fior
                                          Vice President, Finance & Operations,
                                                 Chief Financial Officer
                                               (Duly Authorized Officer and
                                            Principal Financial and Accounting
                                                         Officer)

Dated: May 15, 2001

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