SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  Form 10-K
(Mark one)
[X]   ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF  THE  SECURITIES
      EXCHANGE ACT OF 1934

                 For the fiscal year ended December 31, 1999

                                      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 0-28672

                                 Optika Inc.
            (Exact name of registrant as specified in its charter)

              Delaware                           95-4154552
   (State or other jurisdiction of            (I.R.S. Employer
   incorporation or organization)            Identification No.)

    7450 Campus Drive, 2nd Floor                    80920
     Colorado Springs, Colorado                  (Zip Code)
    (Address of principal executive offices)

      Registrant's telephone number, including area code: (719) 548-9800

       Securities registered pursuant to Section 12(b) of the Act: None

         Securities registered pursuant to Section 12(g) of the Act:

                   Common Stock, par value $.001 per share.
                               (Title of Class)

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

    Indicate by check mark if  disclosure  of  delinquent  filers  pursuant to
Item  405  of  Regulation  S-K  is  not  contained  herein,  and  will  not be
contained,  to the best of  registrant's  knowledge,  in  definitive  proxy or
information  statements  incorporated  by  reference  in Part III of this Form
10-K or any amendment to this Form 10-K. ___

    The aggregate market value of the voting stock held by  non-affiliates  of
the  registrant,  based upon the  closing  sale  price of the Common  Stock on
March 3, 2000 as reported on the Nasdaq  National  Market,  was  approximately
$185,958,432.  Shares of Common Stock held by each officer and director and by
each  person  who owns 5% or more of the  outstanding  Common  Stock have been
excluded  in  that  such  persons  may  be  deemed  to  be  affiliates.   This
determination   of   affiliate   status  is  not   necessarily   a  conclusive
determination  for  other  purposes.  As of  March  3,  2000,  registrant  had
outstanding  7,743,864  shares of Common Stock and 731,851 shares of Preferred
Stock.

                     DOCUMENTS INCORPORATED BY REFERENCE

Portions  of the  registrant's  definitive  Proxy  Statement  for  the  Annual
Meeting of Stockholders  scheduled to be held on May 10, 2000 are incorporated
by reference in Part III of this Form 10-K to the extent stated herein.

<PAGE>
                                 OPTIKA INC.
                       1999 ANNUAL REPORT ON FORM 10-K
                              TABLE OF CONTENTS

                                                                           PAGE
PART I
   Item 1.  Business..........................................................2
   Item 2.  Properties.......................................................14
   Item 3.  Legal Proceedings................................................14
   Item 4.  Submission of Matters to a Vote of Security Holders..............14

PART II
   Item 5.  Market for the Registrant's Common Equity and Related
             Stockholder Matters.............................................15
   Item 6.  Selected Financial Data..........................................16
   Item 7.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations.............................17
   Item 7A. Quantitative and Qualitative Disclosures About
             Market Risk.....................................................22
   Item 8.  Financial Statements and Supplementary Data......................22
   Item 9.  Changes In and Disagreements with Accountants on
             Accounting and Financial Disclosure.............................22

PART III
   Item 10. Directors and Executive Officers of Registrant...................23
   Item 11. Executive Compensation...........................................23
   Item 12. Security Ownership of Certain Beneficial Owners and Management...23
   Item 13. Certain Relationships and Related Transactions...................23

PART IV
   Item 14. Exhibits, Financial Statement Schedules and Reports on
             Form 8-K........................................................24
            Signatures.......................................................42

<PAGE>
                                    PART I

    This annual report of Form 10-K contains forward-looking statements that
involve risks and uncertainties.  Our actual results may differ materially
from the results discussed in the forward-looking statements.  Factors that
might cause such a difference include, but are not limited to those discussed
under the caption "Business Risks" contained herein.

ITEM 1.  BUSINESS

INTRODUCTION

    Optika Inc. is a leading provider of business-to-business Internet
solutions.  By leveraging the technology of the Internet, our software
bridges the gap between paper and e-business across the enterprise and
throughout supply chains.  In February 2000, we announced our strategy to
create Trading Partner Resolution Networks, or TPRNs, which are interactive
communities designed to help Optika's customers and their trading partners
resolve business-to-business, or B2B, transaction issues over the Internet.
Optika's products and solutions used to establish TPRNs, which we expect to
launch commencing in the second quarter of 2000, are intended to allow
companies and their trading partners to collaborate over the Internet in a
way that reduces operating costs, builds trading partner loyalty, and
improves customer and vendor service.  Our products and solutions will
integrate interactive resolution technologies with image/document management,
enterprise report management, workflow, and leading XML, EDI and ERP
technologies.  We will enable customers to build TPRNs which will include our
new products to be announced during the year 2000, as well as our current
flagship product, Optika eMedia.

    In February 2000, we also announced our strategy to distribute our
products through an Application Service Provider, or ASP.  With this
distribution strategy, we will offer a new co-managed ASP option for our
application solutions, with NaviSite (Nasdaq: NAVI) providing all systems
infrastructure and systems maintenance from their facilities across the U.S.
Through the partnership with NaviSite, we will provide businesses with a
unique approach to implementing and maintaining both internal and
extranet-based applications.  Our Optika eMedia product, as well as products
to support TPRNs, will be offered through both this ASP option and a
traditional software license model.

    First distributed in the third quarter of 1998, Optika eMedia is a 32-bit
Internet-based software solution that enables organizations with high
transaction volumes to efficiently and inexpensively manage the high-volume
flow of paper and electronic data associated with running today's businesses.

INDUSTRY BACKGROUND

    We believe the migration of businesses to e-business is being driven by
several trends.  The first trend is the increasing importance of the
Internet, which provides a widely used, inexpensive and established
infrastructure for the relaying of communications and data to customers,
suppliers and business partners. According to industry analyst firm META
Group, the applications and business opportunities that fall under the broad,
embryonic heading of e-business will fundamentally change the way many
businesses and organizations operate.

    The second trend driving e-business is the increasing focus on
integrating an organization's key business partners, such as vendors and
customers, into its traditional business processes. An organization's set of
business partners is normally referred to as its "value chain" or "supply
chain."  Although e-business was initially thought of as a revolutionary way
to market, sell and purchase goods and services, the industry is now
realizing the even greater potential of e-business in changing the way
businesses manage their supply chain partners.  The ubiquitous access and low
costs associated with the Internet make it possible for businesses to
leverage it as an infrastructure to develop more efficient methods of
interacting with each other.

    A third trend, which has recently emerged as more and more businesses
make e-business a central part of their business model, is that so-called
"out-of-tolerance" transactions, continue to be resolved through traditional
paper-intensive means, which increases costs and reduces efficiency.  We
believe that as businesses continue to automate their paper-intensive
processes and as e-business assumes a central role in their business models,
they will increasingly seek technology-based solutions transactions that
leverage the Internet to solve transaction problems real-time and within the
transaction process.

    E-business offers a way for businesses to eliminate paper at its source,
making it particularly important for customers in paper-intensive industry
sectors such as financial services, insurance and retail. However, the high
volumes of paper associated with business transactions will not be replaced
easily or immediately. The transition from paper-based transactions to
electronic transactions over the Internet will likely be gradual and
sometimes difficult, varying greatly from company to company.  For this
reason we believe that companies will need to maintain dual systems to handle
both paper and electronic transactions over the next few years.

OPTIKA TRADING PARTNER RESOLUTION NETWORKS

    We believe that TPRNs address a significant organizational obstacle to
B2B e-business, resolving transaction problems real-time using the Internet.
We expect to begin launching products and related services to establish and
support TPRNs throughout 2000, commencing in the second quarter.

    TPRNs, which are interactive communities designed to help Optika's
customers and their trading partners resolve B2B transaction processing
issues over the Internet, are intended to allow companies and their trading
partners to collaborate over the Internet in a way that reduces operating
costs, builds trading partner loyalty, and improves customer and vendor
service. Our products and solutions will integrate interactive resolution
technologies with image/document management, enterprise report management,
workflow, and leading XML, EDI and ERP technologies.

OPTIKA EMEDIA

    Optika eMedia is a 32-bit Internet-based software suite that manages the
full range of documents supporting business transactions within an
organization, across the Internet and throughout the supply chain.  These
products provide businesses with an Internet-based electronic infrastructure
for conducting business with its suppliers and customers. The Optika software
solution supplies on-demand access to the entire context of
business-to-business relationships, including the ability to find and view
all electronic data (such as electronic data interchange or "EDI" and
XML-based electronic forms), documents, images and electronic communications
and negotiations associated with a business transaction. With Optika eMedia,
a company can manage all of its interactions within its supply chain in an
efficient and context-rich manner.

    With Optika's component-based architecture, end-user solutions are
constructed from a set of modular components.  Because Optika eMedia is
designed to work with industry-standard technologies and platforms, such as
Windows NT and Internet browsers, we believe that Optika eMedia lowers the
cost for businesses to implement information management solutions and enables
businesses to achieve the highest possible return on investment by extending
the benefits of technology to their partners. Optika eMedia uses standard
TCP/IP protocols to deliver a fully functional 32-bit product accessible to
any Internet user.

FILEPOWER SUITE

    Prior to the introduction of Optika eMedia, we developed a fully
integrated 16-bit client/server imaging software suite called FilePower,
which provided the following components: server software with core imaging
functions; COLD; automated workflow transaction processing; and associated
development tools. We plan to cease new sales of the FilePower suite in the
first quarter of 2000.

SALES & MARKETING

Sales

    We employ a blended sales model, consisting of a worldwide network of
Advantage Partners, or APs, and Original Equipment Manufacturers, or OEMs, in
addition to a direct sales force that covers North American territories and
territories in South America and Europe. We also use a Solution Services team
of system architects and program managers to support our account executives
and APs in enterprise system design, planning, implementation, and rollout.
License revenues from APs and OEMs accounted for 71% and 3%, respectively, of
our license revenues for the year ended December 31, 1999.

Advantage Partner

    APs are value added resellers responsible for identifying potential
end-users, selling our products to the end-users as part of a complete
hardware and software solution, customizing and integrating our products at
the end-users sites, and providing support and maintenance to the end-users
following the sale. Our APs currently include large organizations selling a
wide variety of products, smaller organizations focused on imaging,
application-oriented organizations and geographically-focused organizations.
We establish relationships with APs through written agreements.  These
agreements establish a price at which the AP is eligible to purchase our
software for resale to end-users, the maintenance fee revenues which must be
remitted back to us, and other material terms and conditions. Such agreements
generally do not grant exclusivity to APs, do not prevent APs from carrying
competing product lines and do not require APs to sell any particular dollar
amount of our software. However, contracts may be terminated at our election
if specified sales targets are not attained. Actual sales contracts are
between the APs and the end-users, although we directly license our software
to end-users through their acceptance of a standard shrink-wrapped license
agreement. We support our APs through dedicated personnel at our headquarters
in Colorado Springs and a network of field offices. Services range from joint
marketing efforts to assistance with pricing and proposals to technical
product support.

    Our strategy is to target our marketing activities toward our most
productive APs, and to recruit additional APs in key geographical and
vertical markets. Our AP program is a crucial element of this strategy. The
Eye on Partnership program is designed to promote long-term relationships
with our APs by awarding bronze, silver, gold and platinum status to APs,
based on their sales, training and customer service achievements. This
program includes extended support and free training, as well as marketing
assistance with seminars, programs and co-op marketing funds.

OEMs

    We have established relationships with certain OEMs who resell our
software under their names to their end-user customers as part of their own
imaging software solution. Unlike our AP relationships, the OEMs actively
compete with our APs and us. Optika's OEM agreements establish a price at
which the OEM is eligible to purchase our software for resale to the OEM's
customers, and the maintenance fees received by the OEM to be remitted back
to Optika. OEMs generally have a higher sales volume and require considerably
less post-sale support than our APs. Our strategy is to continue to recruit
OEMs in key vertical markets such as healthcare, transportation and financial
services.

Solution Services

    Our Solution Services team focuses on developing relationships with large
corporate end-users. The Solution Services team initiates contact directly
with the end-user, but often works with our APs to provide installation and
integration services at the end-user's site and provides end-user support and
maintenance following sales.

International Sales

    For the years ended December 31, 1998 and 1999, we generated
approximately 24% and 17%, respectively, of our total revenues from
international sales.  The decrease in international sales between 1998 and
1999 is due to the closure of several Asian offices in late 1998.  We
currently maintain offices in London and Munich to support our European APs
and an office in Brazil to support our Latin American APs. We are actively
seeking to expand and strengthen our network of foreign APs.

Marketing

    We integrate our marketing program so it supports our sales strategy.
Marketing efforts are organized into marketing communications, product
marketing, strategic alliances, marketing programs, channel marketing and
Internet marketing. We support these efforts by issuing frequent
announcements to the press, advertising in industry periodicals and
magazines, communicating with key industry analysts, participating in
tradeshows, telemarketing and direct mailing to prospective customers and
developing and maintaining Internet services.  We also participate with
channel partners in joint marketing efforts. The targeted audience is Fortune
1000 and Global 2000 companies in the retail, financial services (mortgage
lending and banking) and insurance sectors.

Customers

    We have already  established,  as of December 31, 1999, a base of over 200
Optika eMedia customers through our blended sales model of APs and direct
sales force. Set forth below is a partial list of end-users that have
generated revenues for us by purchasing Optika eMedia:


     ARVEST Bank Group                Kuwait Stock Exchange
     AT&T Cable Services              Lawrence Livermore National Lab
     Australian Passport Office       Merrill Lynch
     Automatic Data Processing        Mitsubishi Corporation
     Bell Atlantic Mobile             National Bank Commerce
     BMC West                         Pepperdine University
     Boston Edison                    Proctor & Gamble
     Burlington Insurance Group       Promea Ausgleichakasse
     Caterpillar, Inc.                Pulte Mortgage Corporation
     Ceridian Tax Service             ReliaStar
     Clear Channel Communications     Southwest Airlines
     Coca-Cola Bottling Company       The Home Depot
     CompuNet Clinical Laboratories   Thomson Newspapers
     Focus on the Family              Turner Broadcasting Systems
     Food Lion, Inc.                  University of Colorado
     Greenlee Textron                 Veterans Administration-Philadelphia
     Hyatt Regency                    Warner-Lambert Company
     J.D. Edwards                     Washington State University
     J.R. Simplot


As of December 31, 1999, we have licensed our Filepower products to
approximately 1,450 end-users worldwide that are currently on maintenance
with us. No AP, OEM or end-user accounted for more than 10% of our total
revenues for the year ended December 31, 1999.

SERVICE & SUPPORT

    We believe that a high level of customer service and support is critical
to our performance. We provide technical support, maintenance, training and
consulting to our APs, who are in turn primarily responsible for providing
technical support services directly to end-users.  We also provide such
support directly to our end-users on an as-needed basis. These services are
designed to increase end-user satisfaction, provide feedback to us as to
end-users' demands and requirements, and generate recurring revenue.  We plan
to continue to expand our services and support programs as the depth and
breadth of our products increases.

AP Support

    We maintain pre-sales technical support personnel who work directly with
the APs to provide technical responses to sales inquiries. We offer
educational and training programs, as well as customized consulting services,
to our APs. Fees for training and consulting services are generally charged
on a per diem basis. We also provide product information bulletins on an
ongoing basis, including bulletins posted on our Internet site and through
periodic informational updates about the products installed. These bulletins
generally answer frequently asked questions and provide information about new
product features.

Technical Support & Software Maintenance

    In conjunction with our APs, we offer end-users a software maintenance
program. The maintenance program includes software updates provided by us to
the end-user, and technical support provided by the AP. Telephone
consultation services are provided by us to the AP to respond to end-user
technical questions that the AP is unable to answer. Internet support
services are also available that provide access to important technical
support information, streamline the process of interacting with the support
organization and provide access to the technical support knowledge base.  An
AP typically charges the end-user a fee for maintenance and support of the
entire system, including software and hardware. In turn we charge the AP a
fee of between 8% and 12% on an annual basis of the then-current list prices
of the licensed software.

Warranty

    We generally  include a 90-day limited warranty with the software license.
During the  warranty  period,  the  end-user is entitled  to  corrections  for
documented program errors.

RESEARCH & DEVELOPMENT

    We have committed, and expect to continue to commit, substantial
resources to research and development. Our research and development
organization is organized along the product team concept. Each product team
has an engineering team leader, a product manager, development engineers and
quality assurance engineers. The team is entirely responsible for the design,
implementation and quality of our products. Product development efforts are
directed at increasing product functionality, improving product performance,
and expanding the capabilities of the products to interoperate with
third-party software and hardware. In particular, we devote substantial
development resources to develop additional functionality for our products,
and the capability to support additional platforms, databases, graphical user
interfaces, toolsets and emerging technologies. We believe that the modular
architecture of Optika eMedia will provide the foundation for future
enhancements to our TPRN products and solutions.

    As of December 31, 1999, our research and development organization
consisted of 53 full-time employees in Colorado Springs, Colorado.  During
1999, research and development expenses were $5.6 million. As of December 31,
1999, we had expensed all of our software development costs as incurred.

COMPETITION

    The market for Optika's eMedia product is intensely competitive and can
be significantly affected by new product introductions and other market
activities of industry participants. We believe that the principal
competitive factors affecting our market include product features such as
adaptability, scalability, ability to integrate with third-party products,
functionality, ease of use, product reputation, quality, performance, price,
customer service and support, effectiveness of sales and marketing efforts,
and company reputation. Although we believe that we currently compete
favorably with respect to such factors, we cannot assure you that we can
maintain our competitive position against current and potential competitors.
Our principal direct competitors for our eMedia and Filepower products
include FileNet Corporation, International Business Machines Corporation, and
Eastman Software. We also compete with industry-specific application vendors.
Numerous other software vendors also compete in each product area. Potential
competitors include, without limitation, providers of document management
software products, providers of document archiving products, and Relational
Database Management System, or RDBMS, vendors. In addition, we may face
competition from other established and emerging companies in new market
segments, such as e-business, resulting from the introduction of Optika
eMedia.

    We anticipate that the market for TPRNs will also be highly competitive.
As we enter and develop this market, we expect to face a variety of new
competitors who will enter this new and evolving market.  We may experience
competition from our principal direct competitors of the Optika eMedia
product and other established or emerging companies in this new market.

    Many of our current and potential competitors have longer operating
histories, greater resources and name recognition, and a larger installed
base of customers than we do. As a result, these competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, promotion
and sale of their products, than we can. We also face indirect competition
from value added resellers, OEMs, distributors and system integrators. We
rely on a number of these resellers for implementation and other customer
support services, as well as recommendations of our products during the
evaluation stage of the purchase process. Although we seek to maintain close
relationships with these resellers, many of these third parties have similar,
and often more established, relationships with our principal competitors.

PROPRIETARY RIGHTS

    We rely upon a combination of trade secret, copyright and trademark laws,
software licenses and nondisclosure agreements, to establish and protect its
proprietary rights in its products. We enter into confidentiality and/or
license agreements with all of our employees and distributors, as well as
with our customers and potential customers seeking proprietary information,
and limit access to and distribution of, our software, documentation and
other proprietary information. Despite these precautions, it may be possible
for unauthorized third parties to copy aspects of our products or to obtain
and use information that we regard as proprietary. We have certain registered
and other trademarks. We believe that our products, trademarks and other
proprietary rights do not infringe the proprietary rights of third parties.
There can be no assurance, however, that third parties will not assert
infringement claims in the future.

EMPLOYEES

    At December 31, 1999, we had 180 full-time employees in 21 cities. Of
these employees, 53 were involved in research and development, 80 in sales
and marketing, 30 in technical support and training, and 17 in administration
and finance. No employees are covered by any collective bargaining
agreements. We believe that our relationship with our employees is good.

EXECUTIVE OFFICERS

    Optika's  executive  officers  and key  employees,  and  their  ages as of
February 15, 2000 are:

      Name                      Age                     Position
      ---------------------     ---         -----------------------------------
      Mark K. Ruport.......      47         President, Chief Executive Officer
                                            & Chairman of the Board of Directors
      Steven M. Johnson....      38         Vice President-Finance &
                                            Administration, Chief Financial
                                            Officer & Secretary
      Marc R. Fey..........      44         Senior  Vice  President-Engineering
                                            & Customer Support Services
      Jeanne C. Logozzo....      36         Vice President-Marketing
      Thomas M. Rafferty...      54         Vice President-Research and
                                            Development
      James M. Hale........      46         Vice President-North American
                                            Operations

    Mark K. Ruport has been our President and Chief Executive Officer and a
Director since February 1995. He has served as Chairman of the Board of
Directors since May 1996. From June 1990 to July 1994, Mr. Ruport was
President and Chief Operating Officer, and most recently Chief Executive
Officer, of Interleaf, Inc., a publicly held software and services company
that develops and markets document management, distribution and related
software. From July 1994 to February 1995, Mr. Ruport pursued personal
interests. From 1989 to 1990, Mr. Ruport was Senior Vice President of
Worldwide Sales of Informix Software, where he was responsible for direct and
indirect sales and OEMs.  From 1985 to 1989, Mr. Ruport was Vice President of
North American Operations for Cullinet Software, where he oversaw North
American sales, customer support and systems integration.

    Steven M. Johnson has served as our Vice President-Finance and
Administration and Chief Financial Officer since September 1992, and as our
Secretary since May 1996. He also served as our interim Chief Executive
Officer from October 1994 to February 1995 and as interim Vice President of
North American Channel Sales from July 1998 through December 1998. Prior to
joining us, from February 1988 to September 1992, Mr. Johnson was Vice
President-Finance, and Chief Financial Officer, of Insurance Auto Auctions,
Inc., a publicly held company.

    Marc R. Fey has served as our Senior Vice President-Engineering and
Customer Support Services since February 1996. Mr. Fey previously held the
position of Vice President-Development from July 1994 to February 1996. Prior
to joining us, from September 1991 to June 1994, Mr. Fey was President of The
Fey Company, which provided consulting services for software companies and
venture investors on technology, acquisitions, strategic planning and general
operations. Mr. Fey co-founded XA Systems Corporation, where from 1982 to
1991 he served in various capacities, including President, Chairman and Chief
Technology Officer. Prior to 1982, Mr. Fey was a manager with Andersen
Consulting.

    Jeanne C. Logozzo has served as our Vice President-Marketing since
October 1997. Prior to joining us, Ms. Logozzo served as an independent
consultant from May 1997 to October 1997. Ms. Logozzo was Senior Director of
Marketing at Open Text Corporation from May 1996 to May 1997, where she was
responsible for marketing that company's intranet collaborative product
suite. From June 1994 to May 1996, Ms. Logozzo was Manager of Strategic
Marketing for Ciros, a subsidiary of R.R. Donnelley & Sons. Ms. Logozzo held
various marketing positions at Interleaf Corporation from 1986 to 1994.

    Thomas M. Rafferty has served as our Vice President-Research and
Development since March 1999. Prior to joining us, Mr. Rafferty was Vice
President of Engineering at Regenisys Corporation from August 1997 to March
1999, a Phoenix software company specializing in rules-finding products. From
August 1994 to July 1997 Mr. Rafferty was Vice President of Engineering for
Data Research Associates, a leading vendor of library automation software.
From October 1991 to July 1994 Mr. Rafferty was a founder of Integrated
Technologies, Inc. in Denver; a software company that built a framework
development architecture based on object-oriented technology providing for
rapid integration of new technologies and applications. Mr. Rafferty spent
the early part of his career in various engineering management positions at
Eastman Kodak from 1968 to 1978, McDonnell Douglas from 1978 to 1987 and
Prime from 1987 to 1991.

    James M. Hale has served as our Vice President-North American Operations
since July 1999. Prior to joining us, Mr. Hale was a regional vice president
at Vantive Corporation from August 1997 to July 1999.  From September 1995 to
July 1997, Mr. Hale served as both business development manager and regional
sales manager at Oracle Corporation.  From May 1994 to August 1995, Mr. Hale
was director of sales and marketing at Ernst & Young LLP.  From April 1992 to
April 1994 Mr. Hale was vice president of sales at Reply Corporation.  From
August 1990 to March 1992 Mr. Hale was director of sales at ComputerLand
Corporation and from 1976 to 1990, he held a variety of sales and sales
management positions at IBM Corporation.

BUSINESS RISKS

    In evaluating  our business,  you should  carefully  consider the business
risks  discussed  in  this  section,  in  addition  to the  other  information
presented in this annual report on Form 10-K.

    OUR OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND MAY
ADVERSELY AFFECT THE TRADING PRICES OF OUR COMMON STOCK.  Our sales and other
operating results have varied significantly in the past and will likely vary
significantly in the future as a result of factors such as:

o   The size and timing of significant orders and their fulfillment

o   Customer acceptance of Application Service Provider, or ASP, operations
    and our ability to successfully create and profitably operate an ASP
    operation, with which we have very limited prior experience

o   Rate of rollout, demand and customer adoption of our product offerings,
    including, in particular, our products and solutions used to establish
    TPRNs

o   Ability of third party products embedded or to be embedded in our
    products and our ability to negotiate license agreements with such third
    parties on favorable terms

o   Changes in pricing policies by us or our competitors

o   The number, timing and significance of product enhancements and new
    product announcements by us and our competitors

o   Changes in the level of our operating expenses

o   Warranty and customer support expenses

o   Changes in our end-users' financial condition and budgetary processes

o   Changes in our sales, marketing and distribution channels including the
    extent to which we are able to establish a direct sales force

o   Product life cycles

o   Software bugs and other product quality problems

o   The cancellation of licenses during the warranty period or nonrenewal of
    maintenance agreements

o   Customization and integration problems with the end-user's legacy system

o   Changes in our business strategy

o   Changes in accounting pronouncements

o   The level of international expansion and foreign currency exchange rates

o   Seasonal trends

    A significant portion of our revenues have been, and we believe will
continue to be, derived from a limited number of orders, and the timing of
such orders and their fulfillment have caused, and are expected to continue
to cause, material fluctuations in our operating results.  Revenues are also
difficult to forecast because the markets for our products are rapidly
evolving, and our sales cycle and the sales cycle of our APs and OEMs, from
initial evaluation to purchase, is lengthy and varies substantially from
end-user to end-user.  To achieve our quarterly revenue objectives, we depend
upon obtaining orders in any given quarter for shipment in that quarter.
Product orders are typically shipped shortly after receipt; consequently,
order backlog at the beginning of any quarter has in the past represented
only a small portion of that quarter's revenues.  Furthermore, we have often
recognized most of our revenues in the last month, or even in the last weeks
or days, of a quarter.  Accordingly, a delay in shipment near the end of a
particular quarter may cause revenues in a particular quarter to fall
significantly below our expectations and may materially adversely affect our
operating results for such quarter.  Conversely, to the extent that
significant revenues occur earlier than expected, operating results for
subsequent quarters may fail to keep pace with results of previous quarters
or even decline.  We also have recorded generally lower sales in the first
quarter than in the immediately preceding fourth quarter, as a result of,
among other factors, end-users' purchasing and budgeting practices and our
sales commission practices.  To the extent that future international
operations constitute a higher percentage of total revenues, we anticipate
that we may also experience relatively weaker demand in the third quarter as
a result of reduced sales in Europe during the summer months.  Significant
portions of our expenses are relatively fixed in the short term.
Accordingly, if revenue levels fall below expectations, operating results are
likely to be disproportionately and adversely affected.  As a result of these
and other factors, we believe that our quarterly operating results will vary
in the future, and that period-to-period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance.  Furthermore, due to all of the foregoing
factors, it is likely that in some future quarter our operating results will
be below the expectations of public market analysts and investors.  In such
event, the price of our Common Stock would likely decline and such decline
could be significant.

    WE RECENTLY ANNOUNCED OUR INTENTION TO DISTRIBUTE OUR PRODUCTS VIA AN ASP
DELIVERY MODEL.  OUR BUSINESS WILL SUFFER IF WE FAIL TO SUCCESSFULLY ADAPT
OUR PRODUCT OFFERINGS TO THE ASP DELIVERY MODEL.  In February 2000, we
announced our intentions to distribute our product through an ASP delivery
model, as well as our traditional distribution channels.  We have limited
experience in developing, selling and delivering products for an ASP delivery
model.  Further, we cannot assure you that customers will accept the ASP
model of distribution. Our inability, for technological or other reasons, to
architect and to configure, in a timely manner, the products that allows
their profitable use in an ASP model or customers failure to accept the ASP
delivery model, would have a material adverse effect on our business and
results of operations.

    THE SUCCESS OF OUR BUSINESS DEPENDS UPON OUR ABILITY TO HIRE, RETAIN AND
INTEGRATE HIGHLY SKILLED PERSONNEL.  Most of our senior management team has
joined us within the last five years.  We cannot assure you that these
individuals will be able to achieve and manage growth, if any, or build an
infrastructure necessary for us to operate.  Our ability to compete
effectively and to manage any future growth will require that we continue to
assimilate new personnel and to expand, train and manage its work force. Our
future performance depends to a significant degree upon the continuing
contributions of our key management, sales, marketing, customer support, and
product development personnel.  We have at times experienced, and continue to
experience, difficulty in recruiting qualified personnel, particularly in
sales, software development and customer support.  We believe that there may
be only a limited number of persons with the requisite skills to serve in
those positions, and that it may become increasingly difficult to hire such
persons.  Competitors and others have in the past, and may in the future,
attempt to recruit our employees.  We have from time to time experienced
turnover of key management, sales and technical personnel.  The loss of key
management, sales or technical personnel, or the failure to attract and
retain key personnel, could have a material adverse effect on our business,
results of operations, and financial condition.

    WE RELY SIGNIFICANTLY UPON APS AND OEMS FOR SALES, INSTALLATION AND
SUPPORT OF OUR PRODUCTS AND ANY DISCONTINUATION OR DISRUPTION OF OUR
RELATIONSHIPS WITH APS AND OEMS OR COMPETITION FROM THEM COULD ADVERSELY
AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Our
future results of operations will depend on the success of our marketing and
distribution strategy, which has relied, to a significant degree, upon APs
and OEMs to sell and install our software, and provide post-sales support.
These relationships are usually established through formal agreements that
generally do not grant exclusivity, do not prevent the distributor from
carrying competing product lines and do not require the distributor to
purchase any minimum dollar amount of our software.  We cannot assure you
that any APs will continue to represent Optika or sell our products.
Furthermore, we cannot assure you that other APs, some of which have
significantly greater financial marketing and other resources than us, will
not develop or market software products that compete with our products or
will not otherwise discontinue their relationship with, or support of, the
Company.  Some of our APs are small companies that have limited financial and
other resources that could impair their ability to pay us.  We cannot assure
you that our strategy will be successful and our strategy may adversely
impact sales through our APs and OEMs.  Our OEMs occasionally compete with
our APs and us.  Selling through indirect channels may also hinder our
ability to forecast sales accurately, evaluate customer satisfaction, provide
quality service and support or recognize emerging customer requirements.

    WE RECENTLY ALTERED OUR SALES STRATEGY AND CANNOT ASSURE YOU THAT THE NEW
SALES STRATEGY WILL BE SUCCESSFUL.  During 1998, we altered our sales
strategy with the introduction of a direct sales team.  Although we recruited
a direct sales staff, we had limited experience in marketing and selling our
products on a direct sales basis.  Consequently, we cannot assure you that we
will be successful in achieving a significant level of direct sales on a
timely basis, or at all.  Our strategy of marketing our products directly and
indirectly (through APs and OEMs) may result in distribution channel
conflicts.  To the extent that Optika, APs and OEMs target the same
customers, they may come into conflict with each other.  We cannot assure you
that channel conflict will not materially and adversely affect our
relationship with existing APs and OEMs, or adversely affect our ability to
attract new APs and OEMs.  Our loss of a number of our more significant APs
or OEMs, our inability to obtain qualified new APs or OEMs, or to obtain
access to the channels of distribution offering software products to our
targeted markets, or the failure of APs or OEMs to pay us for our software,
could have a material adverse effect on our business and results of
operations.

    OUR BUSINESS WILL SUFFER IF WE FAIL TO DEVELOP AND SUCCESSFULLY INTRODUCE
NEW AND ENHANCED PRODUCTS TO MEET THE CHANGING NEEDS OF OUR CUSTOMERS. The
markets for our products are characterized by rapid technological change,
changes in customer requirements, frequent new product introductions and
enhancements, and emerging industry standards. Our future performance will
depend in significant part upon our ability to respond effectively to these
developments. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete,
unmarketable or noncompetitive. We are unable to predict the future impact of
such technology changes on our products.  Moreover, the life cycles of our
products are difficult to estimate. Our future performance will depend in
significant part upon our ability to enhance current products, and to develop
and introduce new products and enhancements that respond to evolving customer
requirements.  We have in the recent past experienced delays in the
development and commencement of commercial shipments of new products and
enhancements, resulting in customer frustration and delay or loss of
revenues.  Our inability, for technological or other reasons, to develop and
introduce new products or enhancements in a timely manner in response to
changing customer requirements, technological change or emerging industry
standards, or maintain compatibility with heterogeneous computing
environments, would have a material adverse effect on our business and
results of operations.

    WE RELY ON THIRD PARTY LICENSES OF SOFTWARE WE INCORPORATE INTO OUR
PRODUCTS.  The unavailability of  such licenses would adversely affect our
business and results of operations.  We license software from third parties,
which is incorporated into our products.  These licenses expire from time to
time.  We cannot assure you that these third-party software licenses will
continue to be available to us on commercially reasonable terms.  The loss
of, or inability to maintain, any such software licenses could result in
shipment delays or reductions until equivalent software could be developed,
identified, licensed and integrated, which in turn could materially and
adversely affect our business, results of operations, and financial
condition.  In addition, we generally do not have access to source code for
the software supplied by these third parties.  Certain of these third parties
are small companies that do not have extensive financial and technical
resources.  If any of these relationships were terminated or if any of these
third parties were to cease doing business, we may be forced to expend
significant time and development resources to replace the licensed software.
Such an event would have a material adverse effect upon our business and
results of operations.

    WE HAVE LIMITED PRODUCT OFFERINGS AND OUR BUSINESS WILL SUFFER IF DEMAND
FOR OUR PRODUCTS DECLINES OR FAILS TO DEVELOP AS WE EXPECT. Optika eMedia
accounts for substantially all of our current license revenue.  Our future
financial performance will depend in general on the continued transition from
imaging software to e-business, and in particular on the successful
development, introduction and customer acceptance of new and enhanced
versions of our existing software product offerings, particularly our
recently announced TPRN products.  We cannot assure you that such markets,
primarily the market for our TPRN products, will grow or continue to grow or
that we will be successful in developing and marketing these or any other
products, or that any of these products will achieve widespread customer
acceptance.  If the e-business software market grows more slowly than we
currently anticipate, our business, results of operations, and financial
condition would be materially and adversely affected.  In addition, when TPRN
products constitute a greater share of our revenues, we will become
increasingly subject to many of the risks faced by companies that are
dependent on the growth of the Internet.  These risks include, but are not
limited to, the possibility that the Internet will fail to achieve broad
acceptance as a B2B commerce medium, a relatively new and unproven business
model, our ability to anticipate and adapt to a rapidly developing market,
and that many well-financed Internet companies may seek to enter our market
niche.  The rollout of the TPRN products will require us to become proficient
in areas such as becoming an application service provider, which are
unfamiliar to us. We cannot assure you that we will be successful in
launching our TPRN products, or that we will not encounter unexpected delays
or costs in such rollout, and any such failures could have a material adverse
effect on our business and results or operations.

    DELAYS IN THE LENGTHY AND COMPLEX SALES AND IMPLEMENTATION CYCLES OF OUR
CUSTOMERS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND OUR BUSINESS.
The license of our software products is typically an executive-level decision
by prospective end-users, and generally requires us and our APs and OEMs to
engage in a lengthy and complex sales cycle (typically between six and twelve
months from the initial contact date).  In addition, the implementation by
customers of our products may involve a significant commitment of resources
by such customers over an extended period of time.  For these and other
reasons, the sales and customer implementation cycles are subject to a number
of significant delays over which we have little or no control.  Our future
performance also depends upon the capital expenditure budgets of our
customers and the demand by such customers for our products.  Certain
industries, to which we sell our products, such as the financial services
industry, are highly cyclical.  Our operations may in the future be subject
to substantial period-to-period fluctuations as a consequence of such
industry patterns, domestic and foreign economic and other conditions, and
other factors affecting capital spending.  We cannot assure you that such
factors will not have a material adverse effect on our business and results
of operations.

    INTENSE COMPETITION FOR OUR PRODUCT OFFERINGS CAN HAVE AN ADVERSE AFFECT
ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.  The market
for our product offerings is intensely competitive and can be significantly
affected by new product introductions and other market activities of industry
participants.  We anticipate that the TPRN market for will also be highly
competitive and subject to competitive forces that do not currently exist.
Our competitors offer a variety of products and services to address the
emerging market for e-business solutions. Because our products are designed
to operate in non-proprietary computing environments and because of low
barriers to entry in the e-business market, we expect additional competition
from established and emerging companies, as the market for e-business
continues to evolve.  Current and potential competitors have established or
may establish cooperative relationships among themselves or with third
parties, to increase the ability of their products to address the needs of
our prospective customers.  In addition, several competitors have recently
made, or attempted to make, acquisitions to enter the market or increase
their market presence.  Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share.  Increased competition is likely to result in price reductions,
reduced gross margins and loss of market share, any of which would have a
material adverse effect on our business and results of operations.  We cannot
assure you that we will be able to compete successfully against current or
future competitors.

    OUR COMPETITORS HAVE SIGNIFICANTLY GREATER RESOURCES THAN WE DO.  WE MAY
NOT HAVE THE RESOURCES NECESSARY TO SUCCESSFULLY COMPETE IN OUR MARKET.  Many
of our current and potential competitors are substantially larger than we
are, have significantly greater financial, technical and marketing resources
and have established more extensive channels of distribution.  As a result,
such competitors may be able to respond more rapidly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products than we
can. We expect our competitors to continue to improve the performance of
their current products and to introduce new products or new technologies that
provide added functionality and other features.  Successful new product
introductions or enhancements by our competitors could cause a significant
decline in sales or loss of market acceptance of our products and services,
result in continued intense price competition, or make our products and
services or technologies obsolete or noncompetitive.  To be competitive, we
will be required to continue to invest significant resources in research and
development, and in sales and marketing.  We cannot assure you that we will
have sufficient resources to make such investments or that we will be able to
make the technological advances necessary to be competitive.

    EXPANSION OF OUR OPERATIONS HAS RESULTED AND WILL CONTINUE TO RESULT IN
SIGNIFICANT EXPENDITURES AND STRAINS ON OUR RESOURCES, WHICH MAY ADVERSELY
AFFECT OUR RESULTS.  We have increased and intend to continue to increase the
scale of our operations, which creates significant expenditures.  The
increased scale of operations has resulted and will result in significantly
higher operating expenses, which are expected to continue to increase
significantly in the future.  If our revenues do not correspondingly
increase, our results of operations would be materially and adversely
affected.  Expansion of our operations may impose a significant strain on our
management, financial and other resources.  In this regard, any significant
revenue growth will depend in significant part upon expansion of our
marketing, sales and AP support capabilities.  This expansion will continue
to require significant expenditures to build the necessary infrastructure.
We cannot assure you that our efforts to expand our marketing, sales and
customer support will be successful or will result in additional revenues or
profitability in any future period.

    WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY AND WE
MAY BE EXPOSED TO INFRINGEMENT CLAIMS BY THIRD PARTIES.  Our performance
depends in part on our ability to protect our proprietary rights to the
technologies used in our principal products.  We rely on a combination of
copyright and trademark laws, trade secrets, confidentiality provisions and
other contractual provisions to protect our proprietary rights, which are
measures that afford only limited protection.  Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to copy aspects of
our products, or to obtain and use information that we regard as
proprietary.  In addition, the laws of some foreign countries do not protect
our proprietary rights as fully as do the laws of the United States.  We
cannot assure you that our means of protecting our proprietary rights in the
United States or abroad will be adequate, or that competitors will not
independently develop similar technologies. We cannot assure you that third
parties will not claim infringement by our products of their intellectual
property rights.  We expect that software product developers will
increasingly be subject to infringement claims if the number of products and
competitors in our industry segment grows and the functionality of products
in different industry segments overlaps. Any such claims, with or without
merit, and regardless of the outcome of any litigation, will be time
consuming to defend, result in costly litigation, divert management's
attention and resources, cause product shipment delays, or require us to
enter into royalty or licensing agreements.  Such royalty or licensing
agreements, if required, may not be available on terms acceptable to us, if
at all.  A successful claim of infringement against our products and failure
or inability to license the infringed or similar technology may adversely
affect our business and results of operations.

    WE RELY UPON AND INTEND TO INCREASE OUR INTERNATIONAL SALES ACTIVITIES,
WHICH SUBJECTS US TO ADDITIONAL BUSINESS RISKS.  Sales outside the United
States accounted for approximately 23%, 24% and 17% of our revenues in 1997,
1998 and 1999, respectively.  We intend to expand our international
operations, third-party distributor relationships and hiring of additional
sales representatives, each of which involves a significant investment of
time and resources.  We cannot assure you that we will be successful in
expanding our international operations.  In addition, we have only limited
experience in developing localized versions of our products and cannot assure
you that we will be able to successfully localize, market, sell and deliver
our products internationally.  Our inability to successfully expand our
international operations in a timely manner, or at all, could materially and
adversely affect our business and results of operations.  Our international
revenues may be denominated in foreign or the U.S. dollar currency.  We do
not currently engage in foreign currency hedging transactions; as a result, a
decrease in the value of foreign currencies relative to the U.S. dollar could
result in losses from transactions denominated in foreign currencies, could
make our software less price-competitive, and could have a material adverse
effect upon our business, results of operations, and financial condition.

    OUR PRODUCTS ARE COMPLEX AND MAY CONTAIN DEFECTS THAT WOULD LEAD TO
INCREASED COSTS, REDUCTION OF NET REVENUES AND DAMAGE TO OUR REPUTATION.  Our
license agreements typically contain provisions designed to limit our
exposure to potential product liability claims.  These limitations of
liability provisions may not be effective under the laws of certain
jurisdictions.  The sale and support of our products may entail the risk of
such claims, and we cannot assure you that we will not be subject to such
claims in the future.  A successful product liability claim against us could
have a material adverse effect upon our business and results of operations.
Software products such as those we offer frequently contain errors or
failures, especially when first introduced or when new versions are released.
We have in the past released products that contained defects, and have
discovered software errors in certain of our new products and enhancements
after introduction.  We could in the future lose or delay recognition of
revenues as a result of software errors or defects, the failure of our
products to meet customer specifications or otherwise.  Our products are
typically intended for use in applications that may be critical to a
customer's business.  As a result, we expect that our customers and potential
customers have a greater sensitivity to product defects than the market for
general software products. We cannot assure you that, despite our testing and
testing by current and potential customers, errors or defects will not be
found in new products or releases after commencement of commercial shipments,
or that our products will meet customer specifications, resulting in loss or
deferral of revenues, diversion of resources, damage to our reputation, or
increased service and warranty and other costs, any of which could have a
material adverse effect upon our business and operating results.

     THE PRICE OF OUR COMMON STOCK HAS BEEN AND IS LIKELY TO CONTINUE TO BE
HIGHLY VOLATILE.  The market price of our shares of Common Stock is likely to
be highly volatile and may be significantly affected by factors such as:

o   Actual or anticipated fluctuations in our operating results

o   Announcements of technological innovations

o   New products or new contracts by us or our competitors

o   Sales of Common Stock by management

o   Sales of significant amounts of Common Stock into the market

o   Developments with respect to proprietary rights

o   Conditions and trends in the software and other technology industries

o   Adoption of new accounting standards affecting the software industry

o   Changes in financial estimates by securities analysts and others

o   General market conditions

o   Other factors that may be unrelated to us or our performance

In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market
prices for the common stock of technology companies.  These broad market
fluctuations may adversely affect the market price of our Common Stock.  In
the past, following periods of volatility in the market price of a particular
company's securities, securities class action litigation has often been
brought against such company.  We cannot assure you that such litigation will
not be brought against us in the future.  Such litigation, regardless of its
outcome, would result in substantial costs and a diversion of management's
attention and resources that could have a material adverse effect upon our
business and results of operations.

    OUR EXISTING STOCKHOLDERS COULD TAKE ACTIONS THAT ARE NOT IN YOUR BEST
INTEREST.  Members of our Board of Directors and our executive officers,
together with members of their families and entities that may be deemed
affiliates of, or related to, such persons or entities, beneficially own, as
of March 3, 2000, approximately 25% of the outstanding shares of our Common
Stock.  Accordingly, these stockholders could, if acting in concert, be able
to substantially influence the election of all members of our Board of
Directors and determine the outcome of corporate actions requiring
stockholder approval, such as mergers and acquisitions.

    PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW WOULD PREVENT OR
DELAY A CHANGE IN CONTROL OF OUR COMPANY AND MAY REDUCE THE MARKET PRICE OF
OUR COMMON STOCK.  Certain provisions of our Certificate of Incorporation,
equity incentive plans, Bylaws, and Delaware law may discourage certain
transactions involving a change in control of our company.  Our classified
Board of Directors and the ability of the Board of Directors to issue "blank
check" preferred stock without further stockholder approval, may have the
effect of delaying, deferring or preventing a change in our control and may
also affect the market price of our stock.

    RISKS ASSOCIATED WITH RECENTLY COMPLETED FINANCING.  On February 23, 2000
we completed the sale of $15,000,000 of Series A Convertible Preferred Stock
and Warrants to an investor group consisting principally of Thomas Weisel
Capital Partners and affiliated entities, or TWCP. The Preferred Stock can
only be redeemed if, after one year, our stock trades above a specified price
level for a period of time.  Until then, it accrues a cumulative dividend of
eight percent (8%) per annum.  In connection with the financing, we were also
required to make various representations and warranties to TWCP and are
obligated to indemnify them in connection with any breach of such
representations and warranties up to a maximum of $15 million for a period of
one year, with certain exceptions and limitations.  We also assumed an
obligation to register the shares of our Common Stock underlying the
Preferred Stock and the Warrants.

ITEM 2.     PROPERTIES

    Our principal administrative, sales and marketing, research and
development and support facilities consist of approximately 39,000 square
feet of office space in Colorado Springs, Colorado. We occupy these premises
under a lease expiring March 2007.  In support of our field sales and support
organization, we also lease several facilities in the United States and an
office in the United Kingdom, Germany, and Brazil.

ITEM 3.     LEGAL PROCEEDINGS

    We are currently not a party to any material litigation, and are
currently not aware of any pending or threatened litigation that we believe
would or is reasonably likely to have a material adverse effect upon our
business, operating results, or financial condition.

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

    None.

<PAGE>
                                   PART II

ITEM 5.  MARKET FOR THE  REGISTRANT'S  COMMON  EQUITY AND RELATED  STOCKHOLDER
         MATTERS

    Our Common Stock is traded over-the-counter on the Nasdaq Stock Market's
National Market under the symbol "OPTK."  We commenced our initial public
offering of Common Stock on July 25, 1996 at a price of $6 per share. Prior
to such date, there was no public market for the Common Stock. The following
table sets forth the high and low closing sale prices for the Common Stock
for the periods indicated, as reported on the Nasdaq Stock Market's National
Market.

                                                         HIGH        LOW
Quarter ended December 31, 1999.................       $ 16.50     $  3.75
Quarter ended September 30, 1999................       $  5.75     $  3.31
Quarter ended June 30, 1999.....................       $  6.50     $  3.13
Quarter ended March 31, 1999....................       $  6.00     $  3.38
Quarter ended December 31, 1998.................       $  3.88     $  2.00
Quarter ended September 30, 1998................       $  3.69     $  2.50
Quarter ended June 30, 1998.....................       $  3.88     $  2.44
Quarter ended March 31, 1998....................       $  4.25     $  2.81

    As of March 22, 2000 we estimate there were approximately 60 holders of
record of our common stock.  This does not include the number of persons
whose stock is in nominee or "street" name accounts through brokers.

    We have not paid any cash dividends on our capital stock since our
inception, and do not expect to pay cash dividends on our Common Stock in the
foreseeable future. Our bank line of credit currently prohibits the payment
of cash dividends without the consent of the bank.

<PAGE>

ITEM 6.     SELECTED FINANCIAL DATA

    The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and related notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7.  The consolidated statement of
operations data for each of the three years in the period ended December 31,
1999 and the consolidated balance sheet data at December 31, 1998 and 1999,
are derived from the audited consolidated financial statements included in
Item 8.  The consolidated statement of operations data for the two years
ended December 31, 1996 and 1995, and the consolidated balance sheet data at
December 31, 1995, 1996 and 1997, are derived from audited consolidated
financial statements not included in this Annual Report on Form 10-K.

                                              Year Ended December 31,
                                     ------------------------------------------

                                       1999    1998     1997    1996    1995
                                      -----------------------------------------
Consolidated Statement of              (in thousands, except per share amounts)
Operations Data:
Revenues:
  Licenses........................    $11,457 $11,128  $15,912 $13,406 $ 8,333
  Maintenance and other...........     10,308   7,419    5,751   3,297   2,135
                                      -----------------------------------------
    Total revenues................     21,765  18,547   21,663  16,703  10,468
Cost of revenues:
  Licenses........................        821     434      737     585     316
  Maintenance and other...........      3,947   3,274    2,845   1,930   1,823
                                      -----------------------------------------
    Total cost of revenues........      4,768   3,708    3,582   2,515   2,139
                                      -----------------------------------------
Gross profit......................     16,997  14,839   18,081  14,188   8,329
Operating expenses:
  Sales and marketing.............     10,963  12,972   10,666   7,332   3,732
  Research and development........      5,635   5,332    4,978   4,624   3,658
  General and administrative......      1,997   2,714    1,829   1,367   1,461
  Restructuring and other
   non-recurring charges (1)......         --     425      885      --      --
                                      -----------------------------------------
    Total operating expenses......     18,595  21,443   18,358  13,323   8,851
                                      -----------------------------------------
Income (loss) from operations.....     (1,598) (6,604)    (277)    865    (522)
Other (income) expense............       (300)   (218)    (442)   (229)    411
                                      -----------------------------------------
Income (loss) before provision
 (benefit) for income taxes.......     (1,298) (6,386)     165   1,094    (933)
Provision (benefit)for income taxes      (454) (1,276)      --    (813)     29
                                      -----------------------------------------
Net income (loss).................    $  (844)$(5,110) $   165 $ 1,907 $  (962)
                                      =========================================

Net income (loss) per common
 share (2)........................    $ (0.12)$ (0.73) $  0.02 $  0.45 $ (0.37)
Weighted average number of common
 shares outstanding (2)...........      7,192   6,989    6,782   4,246   2,620
Diluted net income (loss) per
 common share (2).................    $ (0.12)$ (0.73) $  0.02 $  0.30 $ (0.37)
Diluted weighted average number of
 common shares outstanding (2)....      7,192   6,989    7,661   6,349   2,620


                                                     December 31,
                                      -----------------------------------------
                                       1999     1998    1997    1996    1995
                                      -----------------------------------------
Consolidated Balance Sheet Data:                   (in thousands)
Cash, cash equivalents and
 short-term investments...........    $ 7,182 $ 7,811  $ 8,600 $11,499 $ 1,415
Working capital...................      5,737   6,176   12,747  13,817   1,841
Total assets......................     18,097  18,537   21,886  20,258   6,182
Long-term debt, excluding current
portion...........................         --      --       --     136     266
Convertible preferred stock.......         --       --      --      --   4,804
Total stockholders' equity
 (deficit)........................     11,356   11,820  16,492  15,849  (1,967)

(1) See Note 8 of Notes to Consolidated Financial Statements.
(2) See Note 1 of Notes to Consolidated Financial Statements.

<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

    This management's discussion and analysis of financial condition and
results of operations includes a number of forward looking statements which
reflect our current views with respect to future events and financial
performance.  These forward looking statements are subject to certain risks
and uncertainties, including those discussed below and those under the
caption "Business Risks" in Item 1, that could cause actual results to differ
materially from historical results or those anticipated.

OVERVIEW

    Optika is a leading provider of business-to-business electronic commerce
solutions.  By leveraging the technology of the Internet, our software
bridges the gap between paper and electronic commerce across the enterprise
and throughout supply chains.

    The license of our software products is typically an executive-level
decision by prospective end-users and generally requires us and our APs or
OEMs to engage in a lengthy and complex sales cycle (typically between six
and twelve months from the initial contact date). We distribute our products
through a direct sales force and a network of APs and OEMs.  For 1999,
approximately 71% of our license revenues were derived from our APs,
approximately 3% of our license revenues were derived from sales by OEMs and
the remaining license fees were derived from direct sales. However, no
individual AP accounted for more than 10% of our total revenues. For the
years ended December 31, 1997, 1998 and 1999, we generated approximately 23%,
24% and 17%, respectively, of our total revenues from international sales.
Our revenues consist primarily of license revenues, which are comprised of
one-time fees for the license of our products; service revenues; and
maintenance revenues, which are comprised of fees for upgrades and technical
support. Our APs and OEMs, which are responsible for the installation and
integration of the software for their customers, enter into sales agreements
with the end-user, and purchase software directly from us.  We license
software directly to the end-user through software license agreements. Annual
maintenance agreements are also entered into between the APs and OEMs and the
end-user, and the APs and OEMs then purchase maintenance services directly
from us. For 1998 and 1999, approximately 60% and 53%, respectively of our
total revenues were derived from software licenses and approximately 28% and
33%, respectively, of our total revenues were derived from maintenance
agreements. For 1998 and 1999, other revenues, which are comprised of
training, consulting and implementation services, and third-party hardware
and software products, accounted for 12% and 14%, respectively, of our total
revenues.

    We adopted the provisions of Statement of Position 97-2, Software Revenue
Recognition (SOP 97-2), for transactions entered into after January 1, 1998.
Under SOP 97-2, we will generally recognize license revenue upon shipment
when a non-cancelable license agreement has been signed or a purchase order
has been received, delivery has occurred, the fee is fixed or determinable
and collectibility is probable.  Where applicable, fees from multiple element
arrangements are unbundled and recorded as revenue as the elements are
delivered to the extent that vendor specific objective evidence of fair value
exists for the delivered and undelivered elements.  Maintenance revenues are
deferred and recognized ratably over the maintenance period, which is
generally one year.  Other revenues are recognized as services are performed.

    We generally do not grant rights to return products, except for defects
in the performance of the products relative to specifications and pursuant to
standard industry shrink-wrapped license agreements which provide for 30-day
rights of return if an end-user does not accept the terms of the
shrink-wrapped license agreements.  Our software license agreements generally
do not provide price adjustments or rotation rights.  We generally include a
90-day limited warranty with the software license, which entitles the
end-user to corrections for documented program errors.

    Based on our research and development process, costs incurred between the
establishment of technological feasibility and general release of the
software products are immaterial and therefore have not been capitalized in
accordance with Statement of Financial Accounting Standards No. 86.  All
research and development costs have been expensed as incurred.

RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 TO DECEMBER 31, 1998

Revenues

    Total revenues increased 17% from $18.5 million for the year ended
December 31, 1998 to $21.8 million for the year ended December 31, 1999.

    Licenses.  License revenues increased 3% from $11.1 million for the year
ended December 31, 1998 to $11.5 million for the year ended December 31,
1999, representing approximately 60% and 53%, respectively of total revenues
in both periods.  Although the year over year increase is minimal, the change
in composition of license revenue is significant. For the year ended December
31, 1998 licenses of our Optika eMedia software generated 18% of our license
revenue.  For the year ended December 31, 1999 licenses of our Optika eMedia
software generated 72% of our total license revenue. Management believes that
the increase is primarily a result of continued customer acceptance of Optika
eMedia, which became commercially available in late September 1998.  Licenses
of our Filepower software product to new customers will cease effective March
2000.  License revenues generated outside of the United States decreased from
approximately 32% of license revenues for the year ended December 31, 1998 to
approximately 19% of license revenues for the year ended December 31, 1999.
This decrease is attributable to the closure of several Asian offices in
1998.

    Maintenance and Other.  Maintenance revenues, exclusive of other
revenues, increased 36%, from approximately $5.2 million during the year
ended December 31, 1998, to $7.1 million for the year ended December 31,
1999, representing approximately 28% of total revenues for the year ended
December 31, 1998 and 33% of total revenues for the year ended December 31,
1999.  This increase was primarily a result of an increase in the number of
installed systems.  Other revenue, consisting primarily of consulting
services and training, represented 12% and 14% of total revenue for the years
ended December 31, 1998 and 1999, respectively.  The increase in other
revenues as a percentage of total revenues was primarily due to increased
consulting, project management and implementation services resulting from our
direct sales effort which began in April 1998.

Cost of Revenues

    Licenses.  Cost of licenses consist primarily of royalty payments to
third-party software vendors and costs of product media, duplication,
packaging and fulfillment.  Cost of licenses increased from $434,000, or 4%
of license revenues, for the year ended December 31, 1998, to $821,000, or 7%
of license revenues, for the year ended December 31, 1999, primarily as a
result of the increased license revenue during the period and increased
amount of third party components sold by our direct sales staff.

    Maintenance and Other.  Cost of maintenance and other consists of the
direct and indirect costs of providing software maintenance and support,
training and consulting services, to our APs, OEMs and end-users.  Cost of
maintenance and other increased from $3.3 million, or 44% of maintenance and
other revenues, for the year ended December 31, 1998, to $3.9 million, or 38%
of maintenance and other revenues, for the year ended December 31, 1999.  The
decrease as a percentage of maintenance and other revenues is primarily a
result of the leverage received from utilizing existing resources to service
our increased maintenance base.

Operating Expenses

    Sales and Marketing.  Sales and marketing expenses consist primarily of
salaries; commissions and other related expenses for sales and marketing
personnel; marketing; advertising; and promotional expenses.  Sales and
marketing expenses decreased from $13.0 million, or 70% of total revenues,
for the year ended December 31, 1998, to $11.0 million, or 50% of total
revenues, for the year ended December 31, 1999.  This decrease in sales and
marketing is primarily attributable to the closure of several Asian sales
offices in late 1998.  We anticipate that sales and marketing expenses will
increase in absolute dollars in future quarters as we increase our current
sales force.

    Research and Development.  Research and development expenses consist
primarily of salaries and other related expenses for research and development
personnel, and of the cost of facilities and equipment.  Research and
development expenses increased in absolute dollars from $5.3 million, or 29%
of total revenues, for the year ended December 31, 1998, to $5.6 million, or
26% of total revenues, for the year ended December 31, 1999.  We expect
research and development expenses to continue to increase in absolute dollars
in 2000 to fund the development of new products and product enhancements.

    General and Administrative.  General and administrative expenses consist
primarily of salaries and other related expenses of administrative, executive
and financial personnel, and outside professional fees.  General and
administrative expenses decreased from $2.7 million, or 15% of total
revenues, for the year ended December 31, 1998, to $2.0 million, or 9% of
total revenues, for the year ended December 31, 1999.  The decrease was
primarily due to writing off or reserving Asian accounts receivable during
1998.  General and administrative expenses are expected to remain constant in
2000.

    Restructuring charges and other non-recurring charges. Due to the
economic status and instability in the Asian markets, we made the decision to
shut down two of our four Asian offices in the third quarter of 1998, thus
reducing future operational risks and cash outflows into the region. This
restructuring resulted in a $425,000 one-time write-off including $125,000 of
goodwill, $200,000 of severance costs and $100,000 of lease termination and
other costs.  All actions relating to the restructuring plan were completed
during 1998 and no restructuring accruals remain as all cash payments had
been made as of December 31, 1998.

    Other income, net.  Other income, net consists primarily of interest due
to our investing activities offset by interest expense on our capitalized
lease obligations, and other debt and foreign currency translation
adjustments and transaction losses.  We incurred other income, net of
$218,000 during the year ended December 31, 1998, compared to other income,
net of $300,000 during the year ended December 31, 1999.  Other income for
1998 and 1999 was primarily a result of interest income derived from our
investment of our initial public offering proceeds offset by foreign currency
transaction and translation losses.

    Benefit from Income Taxes. We have recorded a partial valuation allowance
against our carryforward tax benefits to the extent that we believe that it
is more likely than not all of such benefits will not be realized in the near
term.  Our assessment of this valuation allowance was made using all
available evidence, both positive and negative.  In particular we considered
both our historical results and our projections of profitability for only
reasonably foreseeable future periods.  Our realization of the recorded net
deferred tax assets is dependent on future taxable income and therefore, we
cannot assure you that such benefits will be realized.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 TO DECEMBER 31, 1997

Revenues

    Total revenues decreased 14% from $21.7 million for the year ended
December 31, 1997 to $18.5 million for the year ended December 31, 1998.

    Licenses.  License revenues decreased 30% from $15.9 million for the year
ended December 31, 1997 to $11.1 million for the year ended December 31,
1998, representing approximately 73% and 60%, respectively of total revenues
in both periods. Management believes that the decrease is primarily a result
of customers choosing to delay purchase decisions of the Company's product
until the general release of Optika eMedia, which became commercially
available in late September 1998.  License revenues generated outside of the
United States increased from approximately 23% of license revenues for the
year ended December 31, 1997 to approximately 32% of license revenues for the
year ended December 31, 1998.

    Maintenance and Other. Maintenance revenues, exclusive of other revenues,
increased 40%, from approximately $3.7 million during the year ended December
31, 1997, to $5.2 million for the year ended December 31, 1998, representing
approximately 18% of total revenues for the year ended December 31, 1997 and
28% of total revenues for the year ended December 31, 1998.  This increase
was primarily a result of an increase in the number of installed systems.
Other revenue, consisting primarily of consulting services and training,
represented 9% and 12% of total revenue for the years ended December 31, 1997
and 1998, respectively.  The increase in other revenues as a percentage of
total revenues was primarily due to increased consulting, project management
and implementation services resulting from our direct sales effort which
began in April 1998.

Cost of Revenues

    Licenses.   Cost of licenses consist primarily of royalty payments to
third-party software vendors and costs of product media, duplication,
packaging and fulfillment.  Cost of licenses decreased from $737,000, or 5%
of license revenues, for the year ended December 31, 1997, to $434,000, or 4%
of license revenues, for the year ended December 31, 1998, primarily as a
result of the decreased license revenue during the period.

    Maintenance and Other. Cost of maintenance and other consists of the
direct and indirect costs of providing software maintenance and support,
training and consulting services, to our APs, OEMs and end-users, and the
cost of third-party software products.  Cost of maintenance and other
increased from $2.8 million, or 49% of maintenance and other revenues, for
the year ended December 31, 1997, to $3.3 million, or 44% of maintenance and
other revenues, for the year ended December 31, 1998.  The decrease as a
percentage of maintenance and other revenues is primarily a result of the
leverage received from utilizing existing resources to service our increased
maintenance base.

Operating Expenses

    Sales and Marketing. Sales and marketing expenses consist primarily of
salaries; commissions and other related expenses for sales and marketing
personnel; marketing; advertising; and promotional expenses.  Sales and
marketing expenses increased from $10.7 million, or 49% of total revenues,
for the year ended December 31, 1997, to $13.0 million, or 70% of total
revenues, for the year ended December 31, 1998.  This increase was primarily
attributable to additional costs resulting from the launch of eMedia, the
expansion of the North American sales staff and the further expansion of
staff during the year in sales offices in Brazil and Germany. In addition,
during 1998, we began paying commissions to APs on direct sales.

    Research and Development.  Research and development expenses consist
primarily of salaries and other related expenses for research and development
personnel, and of the cost of facilities and equipment.  Research and
development expenses increased from $5.0 million, or 23% of total revenues,
for the year ended December 31, 1997, to $5.3 million, or 29% of total
revenues, for the year ended December 31, 1998.

    General and Administrative. General and administrative expenses consist
primarily of salaries and other related expenses of administrative, executive
and financial personnel, and outside professional fees.  General and
administrative expenses increased from $1.8 million, or 8% of total revenues,
for the year ended December 31, 1997, to $2.7 million, or 15% of total
revenues, for the year ended December 31, 1998.  The increase was primarily
due to writing off or reserving Asian accounts receivable during 1998.

    Restructuring charges and other non-recurring charges.  During the fourth
quarter of 1997, we made the decision to exit the vertical healthcare
market.  The restructuring plan involved the closure of our Boston facility,
and the termination of approximately 14 employees.  We incurred a 1997
restructuring charge of $885,000 related to this restructuring consisting of
$422,000 of severance and benefits for terminated employees, $312,000 of
asset write-downs and leased facility executory costs, and $151,000 of other
costs related to the restructuring consisting principally of legal and other
miscellaneous costs.  All actions relating to the restructuring plan were
completed during 1998 and no restructuring accruals remain as all cash
payments had been made as of December 31, 1998.

    Due to the economic status and instability in the Asian markets, we made
the decision to shut down two of our four Asian offices in the third quarter
of 1998, thus reducing future operational risks and cash outflows into the
region. This restructuring resulted in a $425,000 one-time write-off
including $125,000 of goodwill, $200,000 of severance costs and $100,000 of
lease termination and other costs.  All actions relating to the restructuring
plan were completed during 1998 and no restructuring accruals remain as all
cash payments had been made as of December 31, 1998.

    Other income, net.   Other income, net consists primarily of interest
earned on our investing activities offset by interest expense on our
capitalized lease obligations, and other debt, and foreign currency
translation adjustments and transaction losses.  We incurred other income,
net of $442,000 during the year ended December 31, 1997, compared to other
income, net of $218,000 during the year ended December 31, 1998.  Other
income, net for 1997 and 1998 was primarily a result of interest income
derived from the investment of our initial public offering proceeds offset by
foreign currency transaction and translation losses.

    Benefit from Income Taxes. We have recorded a partial valuation allowance
against our carryforward tax benefits to the extent that we believe that it
is more likely than not all of such benefits will not be realized in the near
term.  Our assessment of this valuation allowance was made using all
available evidence, both positive and negative.  In particular we considered
both our historical results and our projections of profitability for only
reasonably foreseeable future periods.  Our realization of the recorded net
deferred tax assets is dependent on future taxable income and therefore, we
cannot assure you that such benefits will be realized.

LIQUIDITY AND CAPITAL RESOURCES

    Cash, cash equivalents and short-term investments at December 31, 1999
were $7.2 million, decreasing approximately $629,000 from December 31, 1998.
The decrease in cash, cash equivalents and short-term investments is
primarily due to our net loss for the year and capital expenditures
associated with computer equipment.  For the year ended December 31, 1998,
net cash provided in operating activities was $106,000, compared to net cash
used of $365,000 for the year ended December 31, 1999.  The increase in cash
used from operating activities was due to a decrease in accounts receivable
collections.

    Cash provided by investing activities was $3.1 million for the year ended
December 31, 1998 compared to cash used of $3.6 million for the year ended
December 31, 1999. The increase in cash used by investing activities
consisted primarily of the purchase of short-term securities. Cash provided
from financing activities was $423,000 for the year ended December 31, 1998
compared to cash provided from financing activities of $484,000 for the year
ended December 31, 1999.  Cash provided from financing activities resulted
primarily from proceeds of our issuance of common stock under our employee
stock purchase plan and stock option exercises.

    At December 31, 1999, our principal sources of liquidity included cash,
cash equivalents and short-term investments of $7.2 million.  In addition, we
have a secured credit facility through October 2000 for up to $3.0 million,
bearing interest at the bank's prime rate  (which was 8.5% at December 31,
1999).  As of December 31, 1999, we had $2.8 million available for
borrowing.   Pursuant to the terms of the credit facility, any loans under
said facility are secured by all of our assets, with the exception of
intellectual property, and would be subject to certain covenants.  We had no
other debt outstanding at December 31, 1999.

    On February 23, 2000, pursuant to a Securities Purchase Agreement, we
completed the sale of an aggregate of 731,851 shares of our Series A
Convertible Preferred Stock and warrant to purchase an aggregate of 307,298
shares of our common stock for the aggregate purchase price of $15.0 million.

    We believe that our current cash, cash equivalents and short-term
investments, together with anticipated cash flow from operations and our bank
credit facility, will be sufficient to meet our working capital and capital
expenditure requirements for at least the next 12 months.  Thereafter, we may
require additional funds to support such activity through public or private
equity financing or from other sources.  We cannot assure you that additional
financing will be available at all or that if available, such financing will
be obtainable on terms favorable to us and would not be dilutive.

YEAR 2000

    We have experienced no  significant  "Year 2000" issues in either our own
products or internal  systems.  We are not aware of any "Year 2000"  issues,
now or in the future, which could have a material adverse effect on us.

RECENT ACCOUNTING PRONOUNCEMENTS

    We adopted Statement of Position 97-2, "Software Revenue Recognition"
(SOP 97-2) for transactions entered into beginning in 1998.  On December 31,
1998 Statement of Position 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, with respect to certain transactions" (SOP 98-9), was issued
superseding SOP 98-4 and is effective for transactions entered into in fiscal
years beginning after March 15, 1999.  SOP 97-2 has not had a material affect
on our current business practices or recognition of revenues.  If our future
business practices involve the granting of specified upgrade rights to future
releases, extended payment terms, rights to additional products, subscription
licensing arrangements or other provisions impacted by SOP 97-2, as amended
by SOP 98-4 and SOP 98-9, the SOP may have a material impact on the timing of
our revenue recognition and could result in the deferral of significant
amounts of revenues.

    In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivatives and
Hedging Activities,"(SFAS No. 133) as amended by Statement of Financial
Accounting Standards No. 137, "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133,"
which establishes accounting and reporting standards of derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities.  SFAS No. 133, as amended, is
effective for fiscal years beginning after June 15, 2000.  The adoption of
Statements of Financial Accounting Standards No. 133 is not expected to have
a material effect on our results of operations, financial position or cash
flows as we do not currently hold derivative instruments or engage in hedging
activities.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    As of December 31, 1999 we had $3.8 million in short-term investments
that are sensitive to market risks.  Our investment portfolio is used to
preserve our capital until it is required to fund operations, including our
research and development activities.  We do not own any derivative financial
instruments.  Due to the nature of our investment portfolio we are primarily
subject to interest rate risk.

    Our investment portfolio includes fixed rate debt instruments that are
primarily United States government and agency bonds of duration ranging from
one to five years.  The market value of these bonds is subject to interest
rate risk, and could decline in value if interest rates decrease.  Any
material change in the interest rates would have a material change in the
market value of our debt instruments.  A hypothetical increase or decrease in
market interest rates by 10% from December 31, 1999 would cause the fair
market value of these short-term investments to change by an insignificant
amount.  Although the market value of these short-term investments would
change due to the interest rate fluctuation, we have the ability to hold the
investments to maturity, which would reduce overall market risk.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    See Item 14(a) for an index to the financial statements and supplementary
financial information that is attached hereto.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.

    We engaged KPMG LLP as independent accountants on April 1, 1999 replacing
PricewaterhouseCoopers LLP.  There were no disagreements or reportable events
with PricewaterhouseCoopers LLP.

<PAGE>
                               PART III

    Certain information required by Part III is omitted from this Annual
Report on Form 10-K in that the Registrant will file a definitive proxy
statement pursuant to Regulation 14A no later than 120 days after the end of
the fiscal year covered by this Report, and certain information included
therein is incorporated herein by reference. Only those sections of the Proxy
Statement specified below are incorporated by reference.

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

    The information required by this item relating to our directors and
nominees and disclosure relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is included under the captions "Election of
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act
of 1934" in our Proxy Statement for the 2000 Annual Meeting of Stockholders
and is incorporated herein by reference.  The information required by this
item relating to the Company's executive officers and key employees is
included under the caption "Executive Officers" in Part I of this Report on
Form 10-K and is incorporated herein by reference.

ITEM 11.    EXECUTIVE COMPENSATION.

    The information required by this item is included under the caption
"Executive Compensation and Related Information" in our Proxy Statement for
the 2000 Annual Meeting of the Stockholders and is incorporated herein by
reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The information required by this item is included under the caption
"Ownership of Securities" in our Proxy Statement for the 2000 Annual Meeting
of Stockholders and is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    The information required by this item is included under the caption
"Certain Transactions" in our Proxy Statement for the 2000 Annual Meeting of
Stockholders and is incorporated herein by reference.

<PAGE>
                                  PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)   The following  documents are filed as part of this Annual Report on Form
      10-K:

                                                                    Page
   1. Financial Statements:                                         ----
      Report of Independent Auditors KPMG LLP.........................25
      Report of Independent Accountants PricewaterhouseCoopers LLP....26
      Consolidated Balance Sheets as of December 31, 1999 and 1998....27
      Consolidated Statements of Operations for each of the three
       years in the period ended December 31, 1999....................28
      Consolidated Statements of Stockholders' Equity and
       Comprehensive Income (Loss)for each of the three years in
       the period ended December 31, 1999.............................29
      Consolidated Statements of Cash Flows for each of the three
       years in the period ended December 31, 1999....................30
      Notes to Consolidated Financial Statements......................31

   2. Financial Statement Schedule:
      Schedule II - Valuation and Qualifying Accounts for the
       three years in the period ended December 31, 1999..............41

      Schedules not listed above have been omitted  because they are not
      required, not applicable,  or the required information is shown in
      the financial statements and related notes thereto.

   3. Exhibits - See Item 14 (c) below.

(b)   Reports on Form 8-K

  None

(c)   See Exhibit Index on page 44

<PAGE>

                        Report of Independent Auditors


To the Board of Directors and
Stockholders of Optika Inc. and subsidiaries:

We have audited the accompanying consolidated balance sheet of Optika Inc. as
of December 31, 1999, and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss), and cash flows for the
year then ended.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with general accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 1999 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Optika
Inc. and subsidiaries as December 31, 1999, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

                                              /s/ KPMG LLP

Denver, Colorado
January 21, 2000, except for Note 10
which is as of February 23, 2000


<PAGE>
                      Report of Independent Accountants


To the Board of Directors and
 Stockholders of Optika Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and
comprehensive income (loss) and of cash flows present fairly, in all material
respects, the financial position of Optika Inc. and its subsidiaries at
December 31, 1998, and the results of their operations and their cash flows
for each of the two years in the period ended December 31, 1998, in
conformity with accounting principles generally accepted in the United
States.  These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits.  We conducted our audits of these statements
in accordance with auditing standards generally accepted in the United States
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for the opinion expressed above.



/s/ PRICEWATERHOUSECOOPERS LLP

January 25, 1999
Broomfield, Colorado

<PAGE>

                                    OPTIKA INC.

                            CONSOLIDATED BALANCE SHEETS

                (In thousands, except share and per share amounts)

                                                   December 31,     December 31,
                                                       1999             1998
                                                   ------------     ------------
Assets
Current assets:
 Cash and cash equivalents......................... $    3,359       $    6,811
 Short-term investments............................      3,823            1,000
 Accounts receivable, net of allowance for
  doubtful accounts of $90 and $443 at December
  31, 1999 and 1998, respectively..................      4,741            4,571
 Other current assets..............................        555              511
                                                   ------------     ------------
    Total current assets ..........................     12,478           12,893
                                                   ------------     ------------
Fixed assets, net..................................      2,618            3,136
Deferred tax asset, net............................      2,946            2,438
Other assets.......................................         55               70
                                                   ------------     ------------
                                                    $   18,097       $   18,537
                                                   ============     ============

Liabilities and Stockholders' Equity
Current liabilities:
 Accounts payable ................................. $      869       $      710
 Accrued expenses..................................      1,135            1,446
 Accrued compensation expense......................        910            1,206
 Deferred revenue .................................      3,827            3,355
                                                   ------------     ------------
    Total current liabilities .....................      6,741            6,717
                                                   ------------     ------------
Commitments and contingencies (Notes 4 and 9)

Common stockholders' equity:
 Common stock; $.001 par value; 25,000,000 shares
  authorized; 7,307,678 and 7,114,573 shares issued
  and outstanding at December 31, 1999 and 1998,
  respectively.....................................          7                7
 Additional paid-in capital........................     18,101           17,617
 Accumulated deficit...............................     (6,648)          (5,804)
 Accumulated other comprehensive loss..............       (104)              --
                                                   ------------     ------------
    Total stockholders' equity ....................     11,356           11,820
                                                   ------------     ------------
                                                    $   18,097       $   18,537
                                                   ============     ============

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

<PAGE>
                                 OPTIKA INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                     (In thousands, except per share amounts)

                                                 Year Ended December 31,
                                               1999        1998        1997
                                            --------    --------    --------
Revenues:
 Licenses................................   $ 11,457    $ 11,128    $ 15,912
 Maintenance and other...................     10,308       7,419       5,751
                                            --------    --------    --------
   Total revenues........................     21,765      18,547      21,663

Cost of revenues:
 Licenses................................        821         434         737
 Maintenance and other...................      3,947       3,274       2,845
                                            --------    --------    --------
   Total cost of revenues................      4,768       3,708       3,582
                                            --------    --------    --------

Gross profit.............................     16,997      14,839      18,081

Operating expenses:
 Sales and marketing.....................     10,963      12,972      10,666
 Research and development................      5,635       5,332       4,978
 General and administrative..............      1,997       2,714       1,829
 Restructuring and other non-recurring
  charges................................         --         425         885
                                            --------    --------    --------
    Total operating expenses.............     18,595      21,443      18,358
                                            --------    --------    --------

Loss from operations.....................     (1,598)     (6,604)       (277)
Other income, net........................       (300)       (218)       (442)
                                            --------    --------    --------
Income (loss) before benefit from
 income taxes............................     (1,298)     (6,386)        165
Benefit from income taxes................       (454)     (1,276)         --
                                            --------    --------    --------
Net income (loss)........................   $   (844)   $ (5,110)   $    165
                                            ========    ========    ========

Basic net income (loss) per share........   $  (0.12)   $  (0.73)   $   0.02

Basic weighted average number of
 common shares outstanding...............      7,192       6,989       6,782

Diluted net income (loss) per share......   $  (0.12)   $  (0.73)   $   0.02

Diluted weighted average number of
 common shares outstanding...............      7,192       6,989       7,661


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

<PAGE>
<TABLE>
<CAPTION>
                                   OPTIKA INC.

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)

                        (In thousands except share amounts)



                                                                              Accumulated     Total
                                                    Additional                   Other        Common
                                     Common Stock     Paid-in   Accumulated  Comprehensive Stockholders'
                                   Shares    Amount   Capital     Deficit    Income (Loss)    Equity
                                 ---------- ------- ----------- ------------ ------------- -------------
<S>                              <C>        <C>     <C>         <C>          <C>           <C>
Balances at December 31, 1996..   6,670,319  $    7  $   16,701  $      (859) $         --  $     15,849
 Common stock issued upon
  exercise of stock options....     115,445                 172                                      172
 Common stock issued pursuant
  to employee stock purchase
  plan.........................      70,760                 306                                      306
 Common  stock issued upon
  exercise of warrants ........      34,200
 Net income....................                                          165                         165
                                 ---------- ------- ----------- ------------ ------------- -------------
Balances at December 31, 1997..   6,890,724       7      17,179         (694)           --        16,492
 Common stock issued upon
  exercise of stock options....     151,961                 266                                      266
 Common stock issued pursuant
  to employee stock purchase
  plan.........................      71,888                 172                                      172
 Net loss......................                                       (5,110)                     (5,110)
                                 ---------- ------- ----------- ------------ ------------- -------------
Balances at December 31, 1998..   7,114,573       7      17,617       (5,804)           --        11,820
 Common stock issued upon
  exercise of stock options....     111,316                 301                                      301
 Common stock issued pursuant
  to employee stock purchase
  plan.........................      67,923                 183                                      183
 Common  stock issued upon
  exercise of warrants ........      13,866
 Comprehensive incom (loss):
   Gross unrealized loss on
    investments................                                                       (104)
   Net loss....................                                         (844)
 Total comprehensive income
  (loss).......................                                                                     (948)
                                 ---------- ------- ----------- ------------ ------------- -------------
Balances at December 31, 1999..   7,307,678  $    7  $   18,101  $    (6,648) $       (104) $     11,356
                                 ========== ======= =========== ============ ============= =============
<FN>
  The accompanying notes are an integral part of these financial statements.
</FN>
<PAGE>
</TABLE>

                                   OPTIKA INC.

                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (In thousands)


                                               Year Ended December 31,
                                               1999        1998        1997
                                            --------    --------    --------
Cash Flows from Operating Activities
Net income (loss)........................   $   (844)   $ (5,110)   $    165
Adjustments to reconcile net income
 (loss) to net cash provided by (used)
 in operating activities:
 Depreciation and amortization...........      1,005       1,018         599
 Loss on disposal of assets..............        157          75          16
 Deferred tax benefit....................       (508)     (1,403)        (90)
 Change in assets and liabilities:
   Accounts receivable, net..............       (170)      3,984      (2,789)
   Other assets..........................        (29)        204         (20)
   Accounts payable......................        159         (32)        (66)
   Accrued expenses and accrued
    compensation expense.................       (607)        460         866
   Deferred revenue......................        472         910         586
                                            --------    --------    --------
Net cash provided by (used) in operations       (365)        106        (733)
                                            --------    --------    --------

Cash Flows from Investing Activities
Capital expenditures.....................       (644)     (1,318)     (2,243)
Sale (purchase) of short-term investments     (2,927)      4,398       2,627
                                            --------    --------    --------
Net cash provided by (used) in investing
 activities..............................     (3,571)      3,080         384
                                            --------    --------    --------

Cash Flows from Financing Activities
Principal payments on long-term debt.....         --         (15)       (401)
Proceeds from issuance of common stock...        484         438         478
                                            --------    --------    --------
Net cash provided by financing activities        484         423          77
                                            --------    --------    --------

Net increase (decrease) in cash and cash
 equivalents.............................     (3,452)      3,609        (272)
Cash and cash equivalents at beginning
 of period...............................      6,811       3,202       3,474
                                            --------    --------    --------
Cash and cash equivalents at end of
 period..................................   $  3,359    $  6,811    $  3,202
                                            ========    ========    ========

Supplemental Disclosure of Cash Flow
 Information
Interest paid............................   $     --    $     --    $     30
Income taxes paid........................         --          --          37

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

<PAGE>
                                  OPTIKA  INC.

                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Optika Inc. (formerly Optika Imaging Systems, Inc.), a Delaware
corporation, and its subsidiaries ("Optika" or the "Company") was formed in
1988 and is a leading provider of business-to-business electronic commerce
solutions.  By leveraging the technology of the  Internet, the Company's
software bridges the gap between paper and electronic commerce across the
enterprise and throughout supply chains. The Company licenses its software
under license agreements and provides services including maintenance,
training and implementation.

Summary of Significant Accounting Policies

Principles of Consolidation

    The accompanying consolidated financial statements include the accounts
of Optika Inc. and its wholly owned subsidiaries Optika Imaging Systems
Europe, Ltd., Optika Information Systems, LTDA, Optika Imaging Systems, GmbH
and Optika Asia, Inc.  All significant intercompany accounts and transactions
have been eliminated.

Revenue Recognition

    The Company adopted the provisions of Statement of Position 97-2,
"Software Revenue Recognition" (SOP 97-2), for transactions entered into
after January 1, 1998.  Under SOP 97-2, the Company generally recognizes
license revenue when a non-cancelable license agreement has been signed or a
purchase order has been received, delivery has occurred, the fee is fixed and
determinable and collectibility is probable.  Where applicable, fees from
multiple element arrangements are unbundled and recorded as revenue as the
elements are delivered to the extent that vendor specific objective evidence
of fair value exists for each element.   Maintenance revenues are deferred
and recognized ratably over the maintenance period, which is generally one
year.  Other revenues are recognized as services are performed. The Company
generally does not grant rights to return products, except for defects in the
performance of the products relative to specifications and pursuant to
standard industry shrink-wrapped license agreements which provide for 30-day
rights of return if an end-user does not accept the terms of the software
license, nor does it provide provisions for price adjustments or stock
rotation rights.

    For transactions entered into prior to January 1, 1998 the Company
recognized revenue in accordance with Statement of Position 91-1, "Software
Revenue Recognition".  The Company recognized license revenues generally upon
shipment when no significant vendor obligations remained and collectibility
was probable.  License revenues related to contracts with significant
post-delivery performance obligations were recognized when the Company's
obligations were no longer significant or when the customer accepted the
product, as applicable.

Cash Equivalents and Short-term Investments

    The Company classifies short-term investments with original maturities of
three months or less as cash equivalents. Short-term investments consist of
Corporate and U.S. Government obligations maturing within one year. Such
short-term investments are classified as available-for-sale as defined by
Statement of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115) and accordingly are
recorded at fair value.  Increases or decreases in the fair value of
investments classified as available-for-sale are recorded in other
comprehensive income.  Our gross unrealized loss on short-term investments
was $104,000 as of December 31, 1999. In 1998, the Company's short-term
investments were classified as held-to-maturity by SFAS 115.  As of December
31, 1999, the carrying value of the short-term investments in U.S. Government
obligations approximated fair value.

Depreciation and Amortization

    Computer equipment, office equipment and furniture are recorded at cost
and depreciated using the straight-line method over estimated useful lives
ranging from three to five years.  Leasehold improvements are amortized over
the lesser of the estimated useful life of the improvement or lease term.

Software Development Costs

    Research and development costs are expensed as incurred.  Statement of
Financial Accounting Standards No. 86 (SFAS No. 86) requires the
capitalization of certain software development costs once technological
feasibility is established. To date, the period between achieving
technological feasibility and the general availability of such software has
been short.  Consequently, software development costs qualifying for
capitalization have been insignificant and therefore, the Company has not
capitalized any software development costs.

Foreign Currency Translation

    The U.S. dollar is the functional currency of the consolidated
corporation.  For the Company's foreign subsidiaries, monetary assets and
liabilities are translated into U.S. dollars using the exchange rates in
effect at the balance sheet date and non-monetary assets are translated at
historical rates.  Results of operations are translated using the average
exchange rates during the period.  Foreign currency translation and
transaction gains or losses included in the consolidated statements of
operations were not material in any period presented.

Estimates

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities as well as the reported amounts of
revenue and expenses.  Significant estimates have been made by management in
several areas, including the collectibility of accounts receivable and the
ability to realize deferred tax benefits.  Actual results could differ from
these estimates, making it reasonably possible that a change in these
estimates could occur in the near term.

Fair Value of Financial Instruments

    The carrying amounts of the Company's financial instruments including
cash, short-term investments, trade receivables and payables and long-term
debt, approximate their fair values.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

    The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of".  This statement requires
that long-lived assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.  Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset.  If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeded the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount of
fair value less costs to sell.

Stock Compensation Plans

    The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", in accounting for its stock option and employee stock purchase
plans. The Company has adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation".

Net Income (Loss) Per Common Share

    The Company adopted the provisions of SFAS No. 128 "Earning per Share" as
of January 1, 1998. This pronouncement establishes new standards for
computing and presenting earnings per share (EPS) on a basis that is more
comparable to international standards and provides for the presentation of
basic and diluted EPS.  Basic EPS is computed by dividing net income by the
weighted average number of shares outstanding during the period.  Diluted EPS
is computed using the weighted average number of shares outstanding plus all
dilutive potential common shares outstanding.  Prior period EPS have been
restated to conform to the new statement.

    The following is the  reconciliation of the numerators and denominators of
the basic and diluted EPS computations (in thousands, except per share data):

                                                         Year Ended
                                                        December 31,
                                                ---------------------------
                                                  1999      1998      1997
                                                  ----      ----      ----
      Earnings Per Share:
       Net income (loss)...................     $  (844)  $(5,110)  $   165
       Weighted average common shares
        outstanding........................       7,192     6,989     6,782
       Net income (loss) per common share..     $ (0.12)  $ (0.73)  $  0.02
      Effect of Dilutive Securities:
       Options and warrants................          --        --       879
      Diluted weighted average common
       shares outstanding..................       7,192     6,989     7,661
      Diluted net income (loss) per common
       share...............................     $ (0.12)  $ (0.73)  $  0.02


    In 1999 and 1998, all options were excluded from the dilutive stock
calculation because of their antidilutive effect on net loss per share.
Options of 753,000 were excluded from dilutive stock option calculations for
1997 because their exercise prices were greater than the average fair market
value of the Company's stock for the period, and as such they would be
antidilutive.

Concentration

    The Company has historically relied on a limited number of products and
has concentrated risk related to the continued and future market acceptance
of such products. The Company currently has no major customers accounting for
more than 10% of its consolidated revenues; however, the Company's accounts
receivable are heavily concentrated with resellers of the Company's products.
At December 31, 1999 no individual customer receivable accounted for greater
than 10% of the accounts receivable balance at December 31, 1999.  One AP
receivable accounted for greater than 10% of the accounts receivable balance
at December 31, 1998.  Receivables from end users are not concentrated in any
particular industry.


2.  PROPERTY AND EQUIPMENT

    Property and equipment consisted of the following (in thousands):

                                                       December 31,
                                                -------------------------
                                                     1999       1998
                                                     ----       ----
  Computer and office equipment..............      $  4,175   $  3,779
  Leasehold improvements.....................           965        898
  Furniture, fixtures and other..............           648        642
                                                   --------   --------
                                                      5,788      5,319
  Less accumulated depreciation and
   amortization..............................        (3,170)    (2,183)
                                                   --------   --------
                                                   $  2,618   $  3,136
                                                   ========   ========


3.  LINE OF CREDIT

    The Company has a line of credit through October 2000, whereby it is able
to draw up to $3.0 million bearing interest at the bank's prime rate. At
December 31, 1999, $2.8 million was available for borrowing thereunder.
Pursuant to the terms of the credit facility, any loans under said facility
are secured by all of the Company's assets, with the exception of
intellectual property and would be subject to certain covenants. The Company
has no other debt outstanding at December 31, 1999.

4.  LEASE OBLIGATIONS

    The Company has  non-cancelable  operating lease  arrangements  for office
space and certain office  equipment.  Future minimum  annual  operating  lease
payments are as follows (in thousands):

                                            Operating
                                              Lease
                                           Obligations
                                           -----------
      2000 ...............................        757
      2001 ...............................        602
      2002 ...............................        587
      2003 ...............................        597
      2004 ...............................        615
      Thereafter..........................      1,507
                                            ---------
                                            $   4,665
                                            =========

    Rent expense related to these and other operating leases approximated
$1,069,000, $1,103,000,and $1,019,000 for the years ended December 31, 1999,
1998 and 1997.

5.  INCOME TAXES

    The Company's  benefit from income taxes is comprised of the following (in
thousands):

                                                         Year Ended
                                                        December 31,
                                                ---------------------------
                                                  1999      1998      1997
                                                  ----      ----      ----
      Current:
        Federal............................     $    --   $    --   $     6
        State..............................          --        --         8
        Foreign............................          54       127        76
      Deferred:
        Federal............................        (409)   (1,131)      (68)
        State..............................         (99)     (272)      (22)
                                                --------  --------  --------
      Total benefit from income taxes......     $  (454)  $(1,276)  $    --
                                                ========  ========  ========

    The Company's net deferred income tax assets are comprised of the tax
effects of the following (in thousands):

                                               December 31,     December 31,
                                                  1999             1998
                                                  ----             ----
      Deferred Tax Assets:
      Net operating loss carryforwards.....     $   3,022        $   2,520
      Depreciation and amortization........           122              141
      Tax credit carryforwards ............         1,003              945
      Accrued expenses.....................           319              352
                                                ----------       ----------
      Deferred tax asset before valuation
       allowance...........................         4,466            3,958
      Valuation allowance..................        (1,520)          (1,520)
                                                ----------       ----------
      Net deferred tax asset...............     $   2,946        $   2,438
                                                ==========       ==========

    The  benefit  from  income  taxes  differs  from the  amount  computed  by
applying  the U.S.  federal  income tax rate of 34% to the loss before  income
taxes as follows (in thousands):

                                                         Year Ended
                                                        December 31,
                                                ---------------------------
                                                  1999      1998      1997
                                                  ----      ----      ----
      U.S. federal income tax expense
       (benefit) at statutory rate.........     $  (441)  $(2,171)  $    56
      Increases (decreases) resulting from:
      State taxes, net of federal
       benefit.............................         (45)     (224)        5
      Non-deductible items.................          22        27        38
      Increase in valuation allowance......          --     1,520        --
      Foreign tax rate differentials.......          68      (127)      (10)
      Tax credits..........................         (58)     (420)      (87)
      Other................................          --       119        (2)
                                                --------  --------  --------
      Benefit from income taxes............     $  (454)  $(1,276)  $    --
                                                ========  ========  ========

    At December 31, 1999, the Company has net operating loss  carryforwards of
approximately   $9,033,000  which  expire  beginning  in  2009  through  2019.
Additionally,  the Company has  various tax credit  carryforwards  aggregating
approximately $1,003,000 which expire beginning in 2005 through 2019.

    The Company has recorded a partial valuation allowance against its
carryforward tax benefits to the extent that it believes that it is more
likely than not all of such benefits will not be realized in the near term.
The Company's assessment of this valuation allowance was made using all
available evidence, both positive and negative.  In particular the Company
considered both its historical results and its projections of profitability
for only reasonably foreseeable future periods.  The Company's realization of
its recorded net deferred tax assets is dependent on future taxable income
and therefore, the Company is not assured that such benefits will be realized.

6.  CAPITAL STOCK AND BENEFIT PLANS

Stock Compensation Plans

    At December 31, 1999 the Company has two stock-based compensation plans.
The Company applies APB Opinion 25 and related Interpretations in accounting
for its plans.  The Company grants stock options with exercise prices equal
to the fair market value of its common stock on the date of grant.
Accordingly, no compensation cost has been recognized for its fixed stock
option plan and its employee stock purchase plan. Had compensation cost for
the Company's stock-based compensation plans been determined based on the
fair value at the grant dates for awards under those plans consistent with
the method of FASB Statement 123, the Company's pro-forma results of
operations and pro-forma net income (loss) per share would have been as
follows:

(In thousands, except per share data)
                                                 1999        1998        1997
                                               --------------------------------
    Net income (loss):
      As reported                              $  (844)    $(5,110)    $   165
      SFAS No. 123 Pro-forma                    (2,282)     (5,997)       (727)

    Net income (loss) per share:
      As reported                              $ (0.12)    $ (0.73)    $  0.02
      SFAS No. 123 Pro-forma                     (0.32)      (0.86)      (0.11)

    Diluted net income (loss) per share:
      As reported                              $ (0.12)    $ (0.73)    $  0.02
      SFAS No. 123 Pro-forma                     (0.32)      (0.86)      (0.11)


Fixed Stock Option Plan

    Under the Company's stock option plan, the Company may grant incentive
and non-qualified stock options to its employees and directors for up to
2,790,000 shares of common stock. Under the plan, options are granted at an
exercise price not less than the fair market value of the stock on the date
of grant. The options generally vest ratably over four years and expire ten
years after the date of grant. Certain options are subject to accelerated
vesting provisions.

    The fair value of each option and warrant grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions used for grants in 1999, 1998 and 1997 respectively; no estimated
dividends; expected volatility of 97% for 1999, 133% for 1998 and 83% for
1997; risk-free interest rates between 5.16% and 6.35% in 1999, 4.23% and
5.64% in 1998, 5.70% and 6.75% in 1997; and expected option terms of 5 years
for all years.

    A summary of the status of the Company's listed option plan as of
December 31, 1999, 1998, and 1997 and changes during the years then ended are
presented in the following table. Included in the summary below are 95,000
warrants issued in 1997, of which 66,262 were exercised in 1997 in exchange
for 34,200 shares of common stock.  At December 31, 1999 and 1998, 9,738 and
28,738 warrants were outstanding and exercisable. For the year ended December
31, 1998, 264,500 options to purchase common stock of the Company were
re-priced at $3.18 per option share.


                         1999                1998               1997
                   ------------------ ------------------- -------------------
                            Weighted-           Weighted-            Weighted-
                             Average             Average              Average
                    Shares  Exercise   Shares   Exercise    Shares   Exercise
                    (000's)   Price    (000's)    Price     (000's)    Price
                   ------------------ ------------------- -------------------
Outstanding at
 beginning of year   1,872  $  2.61     2,074   $  2.98      1,933   $  2.38
Granted                952     4.52       723      3.21        604      4.65
Exercised             (130)    2.58      (152)     1.75       (181)     1.63
Forfeited             (365)    3.74      (773)     4.32       (282)     3.53
                   ------------------ ------------------- -------------------
Outstanding at
 end of year         2,329  $  3.22     1,872   $  2.61      2,074   $  2.98
                   ================== =================== ===================

Options and warrants
 Exercisable at
 year end            1,168  $  2.14     1,259   $  2.28      1,385   $  2.34


Weighted average fair
 value of options
 granted during
 the year                   $  3.50             $  2.82              $  3.27



    The following table summarizes  information  about fixed stock options and
warrants outstanding at December 31, 1999:

                                                      Options and Warrants
              Options and Warrants Outstanding             Exercisable
            -------------------------------------- -------------------------
             Number       Weighted       Weighted       Number     Weighted
 Range of   Outstanding   Average         Average     Exercisable   Average
 Exercise   at 12/31/99  Contractual     Remaining    at 12/31/99  Exercise
   Price     (000'S)        Life           Price        (000's)      Price
            ---------- --------------------------- -------------------------
$0.75-1.87        830             3.7  $     1.52          830   $     1.52
$2.50-4.19        954             8.3        3.53          296         3.38
$4.50-8.44        545             9.2        5.26           42         5.54
            ---------- --------------------------- -------------------------
                2,329             6.9  $     3.22        1,168   $     2.14
            ========== =========================== =========================


Employee Stock Purchase Plan

    The Company's Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in May 1996 and approved by the Company's
stockholders in June 1996. Under the Purchase Plan, the Company is authorized
to issue up to 250,000 shares of common stock to eligible employees. Under
the terms of the Purchase Plan, employees may elect to have up to 10% of
their total cash earnings withheld by payroll deduction to purchase the
Company's common stock. The purchase price of the stock is 85% of the lower
of the market price on the participant's entry date into the Purchase Plan or
the semi-annual purchase date.

    Under the Purchase Plan, the Company sold 67,923 shares to employees in
1999 and 71,888 shares to employees in 1998.  The fair market value of each
stock purchase plan grant is estimated on the date of grant using the
Black-Scholes model with the following assumptions for 1999 and 1998,
respectively: no estimated dividends for both years; expected volatility of
97% and 133%; risk free interest rates of 5.16% and 6.35% for 1999 and 5.19%
and 5.22% for 1998; and an expected life of 0.5 years for both years.  The
weighted-average fair values of those purchase rights granted in 1999 and
1998 were $1.82 and $1.35, respectively.

401(k) Retirement Savings Plan

    Effective January 1, 1994, the Company adopted a qualified 401(k)
retirement savings plan for all employees.  Participants may contribute up to
15% of their gross pay.  The Company contributions are discretionary and vest
at 20% per year over five years.  The Company contributed $196,000 in 1999
and $163,000 in 1998 and did not contribute to this plan in 1997.

7.  SEGMENT INFORMATION

    In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 131 "Disclosures about Segments of an Enterprise and Related
Information".  The Company has only one segment under the criteria of SFAS
No. 131.  The table below presents information by geographic area as of and
for the respective fiscal periods:

(In thousands)

                                                  1999        1998       1997
                                                  ---------------------------
      Total Revenues attributable to:
       United States                           $ 18,094    $ 14,076   $ 16,670
       International                              3,671       4,471      4,993
                                               --------    --------   --------
         Total                                 $ 21,765    $ 18,547   $ 21,663
                                               ========    ========   ========

    Revenue is classified based on the country in which the Company's
Advantage Partner or customer is located.  International assets and
liabilities are immaterial to the overall presentation of segment information.

8.  RESTRUCTURING AND OTHER NON-RECURRING CHARGES

Restructuring of Asian Operations

    Due to the economic status and instability in the Asian markets, the
Company made the decision to shut down two of its four Asian offices in the
third quarter of 1998, thus reducing future operational risks and cash
outflows into the region.  This restructuring resulted in a $425,000 one-time
write-off including $125,000 of goodwill, $200,000 of severance costs and
$100,000 of lease termination and other costs.   All actions relating to the
restructuring plan were completed during 1998 and no restructuring accruals
remain as all cash payments had been made as of December 31, 1998

Restructuring of Healthcare Operations

    During the fourth quarter of 1997, the Company made the decision to exit
the vertical healthcare market. The restructuring plan involved the closure
of the Company's Boston facility, and the termination of approximately 14
employees.   The Company incurred a 1997 restructuring charge of $885,000
related to this restructuring consisting of $422,000 of severance and
benefits for terminated employees, $312,000 of asset write-downs and leased
facility executory costs, and $151,000 of other costs related to the
restructuring consisting principally of legal and other miscellaneous costs.
All actions relating to the restructuring plan were completed during 1998 and
no restructuring accruals remain as all cash payments had been made as of
December 31, 1998.

9.  CONTINGENCIES

    The Company is, from time to time, subjected to certain claims,
assertions or litigation by outside parties as part of its ongoing business
operations.  The outcomes of any such contingencies are not expected to have
a material adverse effect on the financial condition or operations of the
Company. In addition, in the ordinary course of business, the Company has
issued letters of credit as security for performance on certain contracts
and, as a result, is contingently liable in the amount of approximately
$220,000 at December 31, 1999.

10. SUBSEQUENT EVENT

    On February 23, the Company completed the sale of 731,851 shares of
Series A Convertible Preferred Stock (the "Preferred Stock") and Warrants
(the "Warrants") to purchase an aggregate of 307,298 shares of the Company's
common stock to an investor group consisting principally of Thomas Weisel
Capital Partners and affiliated entities ("TWCP") for an aggregate purchase
price of $15,000,000. The Preferred Stock can only be redeemed if, after one
year, the Company's common stock trades above a specified price level for a
period of time. Until then, it accrues a cumulative dividend of eight percent
(8%) per annum. The Preferred Stock is subject to mandatory redemption
provisions on the eighth anniversary of the issuance for cash equal to the
stated liquidation preference plus accumulated unpaid dividends. The
Preferred Stock is convertible to common stock at the holder's option based
upon the conversion formula as defined in the Preferred Stock Certificate of
Designation. In connection with the Financing, the Company was also required
to make various representations and warranties to TWCP and are obligated to
indemnify them in connection with any breach of such representations and
warranties up to a maximum of $15 million for a period of one year, with
certain exceptions and limitations.  The Company also assumed an obligation
to register the shares of its Common Stock underlying the Preferred Stock and
the Warrants.

<PAGE>
                  Independent Auditors Report on Schedule


To the Board of Directors and
Stockholders of Optika Inc. and subsidiaries:

Under date of January 21, 2000, except as to Note 10, which is as of February
23, 2000, we reported on the consolidated balance sheet of Optika Inc. and
subsidiaries as of December 31, 1999, and the related consolidated statements
of operations, stockholders' equity and comprehensive income (loss) and cash
flows for the year then ended, as contained in the Company's Annual Report on
Form 10-K for the fiscal year 1999.  In connection with our audit of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule.  This financial statement schedule
is the responsibility of the Company's management.  Our responsibility is to
express an opinion on this financial statement schedule based on our audit.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.

                                            /s/  KPMG LLP

Denver, Colorado
January 21, 2000



<PAGE>
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS





(in thousands)
                                                 Allowance
                                     Beginning   Increase               Ending
                                      Balance    (Decrease) Write-offs  Balance

                                      ------------------------------------------
Deducted from asset account-
      Allowance for doubtful accounts

Year ended
    December 31, 1999.............    $  443    $  (68)      $  285    $   90
Year ended
    December 31, 1998.............       212        746         515       443
Year ended
    December 31, 1997.............       112        167          67       212



<PAGE>



                                  SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized on
March 27, 2000.


                                    OPTIKA INC.


                                     By:   /s/   MARK  K. RUPORT
                                        -----------------------------------
                                               Mark K. Ruport
                                     President, Chief Executive Officer
                                          and Chairman of the Board


                                     By:   /s/   STEVEN M. JOHNSON
                                        -----------------------------------
                                              Steven M. Johnson
                                     Chief Financial Officer, Vice President-
                                         Finance and Administration,
                                      Secretary and Chief Accounting Officer


<PAGE>
                            POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark K. Ruport and Steven M. Johnson,
and each of them, as his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
Report on Form 10-K, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including all amendments thereto,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 27, 2000:

        Signature                                         Title
-----------------------------                   -------------------------------

By:  /s/  MARK  K. RUPORT                       Chief Executive Officer and
     ------------------------                     Chairman of the Board
          Mark K. Ruport

By:  /s/  STEVEN M. JOHNSON                     Chief Financial Officer, Vice
     ------------------------                     President, Finance &
          Steven M. Johnson                       Administration, Secretary and
                                                  Chief Accounting Officer

By:  /s/  RICHARD A. BASS                       Director
     ------------------------
          Richard A. Bass

By:  /s/  JAMES E. CRAWFORD                     Director
     ------------------------
          James E. Crawford

By:  /s/  JAMES T. ROTHE Ph.D                   Director
     ------------------------
          James T. Rothe Ph.D

By:  /s/  HARRY S. GRUNER                       Director
     ------------------------
          Harry S. Gruner

By:  /s/  GRAHAM O. KING                        Director
     ------------------------
          Graham O. King

By:                                             Director
     ------------------------
          Alan B. Menkes

<PAGE>
                                EXHIBIT INDEX

 Exhibit
   No.                                  Description
----------       -------------------------------------------------------------
3.1(1)           Certificate of Incorporation of the Registrant.
3.1.1(2)         Certificate of Ownership and Merger.
3.2(1)           First Amended and Restated  Certificate of  Incorporation
                 of the Registrant.
3.3(1)           Second Amended and Restated  Certificate of Incorporation
                 of the Registrant.
3.4              Amended and Restated Bylaws of the Registrant.
3.5(3)           Certificate  of  Designation,  designating  the  Series A
                 Convertible Preferred Stock
4.1(1)           Specimen Common Stock certificate.
4.2(1)           Amended  and  Restated  Shareholders'  Agreement,   dated
                 November 25, 1995,  by and among the  Registrant  and the
                 entities named therein.
4.3(1)           Amended  and  Restated  Registration   Agreement,   dated
                 November 22, 1995,  by and among the  Registrant  and the
                 entities  named  therein,  including the First  Amendment
                 thereto.
4.4(1)           Form of Warrant to purchase  Common Stock dated  November
                 1, 1995.
10.1(1)          Form of Indemnification  Agreement between the Registrant
                 and each of its directors and officers.*
10.2(4)          The Registrant's 1994 Stock  Option/Stock  Issuance Plan,
                 as restated and amended.
10.3(5)          The Registrant's Employee Stock Purchase Plan.
10.4(1)          Employment  Agreement by and between the  Registrant  and
                 Mr. Mark K. Ruport effective February 18, 1995.*
10.5(1)          Employment  Agreement by and between the  Registrant  and
                 Mr. Steven M. Johnson, effective May 15, 1996.*
10.6(1)          Employment  Agreement by and between the  Registrant  and
                 Mr. Marc Fey, effective May 4, 1994.*
10.12(1)         Technology  Transfer  Agreement  dated February 20, 1992,
                 by and  between the  Registrant,  Mr. Paul Carter and Mr.
                 Malcolm Thomson.
10.16(6)         Lease  Agreement  dated  October 11, 1996, by and between
                 the  Registrant  and Woodmen  Office Campus II JV LLC for
                 office space at 7450 Campus  Drive,  Suite 200,  Colorado
                 Springs, Colorado.
10.17(7)         Amendment  to Loan  and  Security  Agreement  dated as of
                 March 2, 1998, by and between the  Registrant and Silicon
                 Valley Bank.
10.18(8)         Loan  and  Security  Agreement  dated as of  October  15,
                 1998, by and between the  Registrant  and Silicon  Valley
                 Bank.
10.18.1 (9)      Loan  and  Security  Modification  Agreement  dated as of
                 October  15,  1999,  by and between  the  Registrant  and
                 Silicon Valley Bank.
10.19(3)         Securities  Purchase  Agreement  dated as of  February 9,
                 2000,  by among the  Registrant,  Thomas  Weisel  Capital
                 Partners  L.P.  and  certain  of its  affiliates  and RKB
                 Capital, L.P.
10.20(3)         Warrant  Agreement dated February 23, 2000 by and between
                 the Registrant,  Thomas Weisel Capital Partners, L.P. and
                 the other parties named therein.
10.21(3)         Registration  Rights Agreement dated February 23, 2000 by
                 and between the Registrant,  the Purchasers and the other
                 parties signatory thereto.
16.1(10)         Letter  from  PricewaterhouseCoopers  LLP dated March 23,
                 1999.
21.1(1)          Subsidiaries of the Registrant.
23.1             Consent of KPMG LLP, Independent Accountants.
23.2             Consent  of   PricewaterhouseCoopers   LLP,   Independent
                 Accountants.
24.1             Power of Attorney.  (Included on Signature Page)
27.1             Financial Data Schedule.

*Represents a management compensation arrangement.

(1) Incorporated  by reference to identically  numbered  exhibits  included in
    the Company's Registration  Statement on Form S-1 (File No. 333-04309), as
    amended.

(2) Incorporated by reference to an exhibit to the Company's  Annual Report on
    Form 10-K (File No. 0-28672) for the year ended December 31, 1998

(3) Incorporated  by reference to an exhibit to the Company's  Current  Report
    on Form 8-K (File No. 0-28672) dated February 23, 2000.

(4) Incorporated  by  reference  to an exhibit to the  Company's  Registration
    Statement on Form S-8 (File No. 333-56501).

(5) Incorporated  by  reference  to an exhibit to the  Company's  Registration
    Statement on Form S-8 (File No. 333-10769).

(6) Incorporated by reference to an exhibit to the Company's  Annual Report on
    Form 10-K (File No. 0-28672) for the year ended December 31, 1996.

(7) Incorporated by reference to an exhibit to the Company's  Annual Report on
    Form 10-K (File No.  0-28672) for the year ended December 31, 1997

(8) Incorporated by reference to an exhibit to the Company's  Quarterly Report
    on Form 10-Q (File No. 0-28672) for the quarter ended September 30, 1998.

(9) Incorporated by reference to an exhibit to the Company's  Quarterly Report
    on Form 10-Q (File No. 0-28672) for the quarter ended September 30, 1999

(10)Incorporated  by  reference  to an  exhibit to the  Company's Current
    Report on Form 8-K/A (File No. 0-28672) dated March 23, 1999.