SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C.
                                   FORM 10-QSB

(Mark One)

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

         FOR  THE QUARTERLY PERIOD ENDED  FEBRUARY 29, 2000
                                                                  OR

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

         For  the transition period from _______ to _______

                       COMMISSION FILE NUMBER: 0-24318

                                                         DIEHL GRAPHSOFT, INC

-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        Maryland                                       52-1407016

-------------------------------------------------------------------------------
(State or other jurisdiction of            (I.R.S. employer identification no.)
incorporation or organization)

10270 Old Columbia Road, Columbia, Maryland                      21046
-------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code: 410-290-5114

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

     Check 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 _____

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

3,070,705 SHARES OF COMMON STOCK.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)   YES ____ NO __X__

                                        1
<PAGE>





                              DIEHL GRAPHSOFT, INC.

                                   FORM 10-QSB

                                      INDEX

Number                                                                 Page

PART I      FINANCIAL INFORMATION

Item 1      Financial Statements:
            Balance Sheet (unaudited) as of

            February 29, 2000                                           3

            Statements  of  Operations  (unaudited)  for the three  months ended
            February 29, 2000 and Febrary 28, 1999 and  (unaudited) for the nine
            months ended February 29, 2000 and Febrary 28, 1999 4

            Statements of Cash Flows (unaudited) for the nine months
            ended February 29, 2000 and February 28, 1999               5

            Statements of Stockholders' Equity (unaudited) as
            of February 29, 2000 and February 28, 1999                  6

            Notes to Financial Statements                               7

Item 2      Management's Discussion and Analysis of Financial
            Condition and Results of Operations                         8

PART II     OTHER INFORMATION

Item 2      Changes in Securities and Use of Proceeds                  12

Item 6      Exhibits and Reports                                       13

            SIGNATURES                                                 14

                                        2





                              DIEHL GRAPHSOFT, INC.

                            BALANCE SHEET (Unaudited)

                                February 29, 2000

                                                                ASSETS

Current assets:

    Cash                                                       $ 1,075,441
    Marketable securities                                        8,419,788
    Accounts receivable                                            458,928
    Inventory                                                       74,286
    OTHER                                                          237,254
                                                                ----------
        TOTAL CURRENT ASSETS                                    10,265,697

Fixed assets:

    Equipment                                                      968,492
    Furnishings and fixtures                                       133,017
    LEASEHOLD IMPROVEMENTS                                          47,688
                                                                ----------
                                                                 1,149,197

    ACCUMULATED DEPRECIATION                                       819,967
        NET FIXED ASSETS                                           329,230

Other assets:

    Certificate of deposit                                          30,502
    Deferred transaction costs, net of

      accumulated amortization of $24,369                          251,119
    Software development and licensing costs, net

      of accumulated amortization of $1,793,345                  1,297,656
    OTHER                                                            9,302
                                                                ----------
        TOTAL OTHER ASSETS                                       1,588,579
                  TOTAL ASSETS                                 $12,183,506

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

    Accounts payable and accrued expenses                      $   736,211
    INCOME TAXES PAYABLE                                            35,861
                                                                ----------
        TOTAL CURRENT LIABILITIES                                  772,072

Long term liabilities:

    DEFERRED INCOME TAXES                                          442,239
        TOTAL LIABILITIES                                        1,214,311

Stockholders' equity:

    Common stock - $.01 par value; 10,000,000
       shares authorized, 3,070,705 shares

       issued and outstanding                                       30,707
    Additional paid in capital                                   3,998,900
    RETAINED EARNINGS                                            6,939,588
                                                                ----------
        TOTAL STOCKHOLDERS' EQUITY                              10,969,195
                TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $12,183,506

                 See accompanying notes to financial statements
                                          3





                                DIEHL GRAPHSOFT, INC.

                       STATEMENT OF OPERATIONS (Unaudited)

                         For the three                     For the nine
                       month period ended               month period ended
                      FEBRUARY 29,    FEBRUARY 28,    FEBRUARY 29,  FEBRUARY 28,

                             2000            1999          2000          1999
                             ----            ----          ----        --------

Sales                    $2,013,652      $2,409,580      $6,460,905   $5,470,655

COST OF SALES               598,364         721,422       1,795,853    1,663,470
                          ---------       ---------       ---------   ----------

GROSS PROFIT              1,415,288       1,688,158       4,665,052    3,807,185
                          ---------       ---------       ---------    ---------

Operating expenses:
 General &
   administrative           549,302         525,673       1,574,024    1,393,923
 Selling & marketing        691,073         566,197       1,936,217    1,540,632
 Research &

   DEVELOPMENT              118,412         145,703         383,114      367,085
                          ---------       ---------       ---------   ----------
    Total operating

      EXPENSES            1,358,787       1,237,573       3,893,355    3,301,640
                          ---------       ---------       ---------   ----------

INCOME FROM OPERATIONS       56,501         450,585         771,697      505,545
                          ---------       ---------       ---------   ----------

Other income and expenses:

  Interest income           120,936         114,044         368,683      332,748
  OTHER                        -             12,547          (5,123)      12,547
                          ---------       ---------        --------    ---------
    TOTAL OTHER INCOME      120,936         126,591         363,560      345,295
                          ---------       ---------        --------   ----------

Income before

  income taxes              177,437         577,176       1,135,257      850,840

Provision for

  INCOME TAXES               53,000         155,000         356,000      216,000
                          ---------       ---------       ---------   ----------

NET INCOME               $  124,437      $  422,176      $  779,257   $  634,840
                          =========       =========       =========    =========

Net income per
  share - basic and

  FULLY DILUTED          $      .04      $      .14     $       .25   $      .20
                          =========       =========      ==========   ==========

Weighted average number of shares outstanding:

     BASIC                3,070,705       3,092,179       3,061,844    3,117,695
                          =========       =========       =========    =========

     FULLY DILUTED        3,103,140       3,092,179       3,080,310    3,117,695
                          =========       =========       =========    =========

                 See accompanying notes to financial statements
                                        4





                              DIEHL GRAPHSOFT, INC.
                       STATEMENT OF CASH FLOWS (Unaudited)

                                                      For the nine months ended
                                                      FEBRUARY 29, FEBRUARY 28,
                                                       2000           1999

Cash flows from operating activities:

    Net income                                         $ 779,257     $ 634,840
    Adjustments to reconcile net income to net
      cash provided by operating activities:

       Amortization of bond premiums and discounts      (113,238)      (55,390)
       Deferred income taxes                              39,483        29,543
       Depreciation and other amortization               953,991       999,663
       Other                                               5,123       (12,547)
       Changes in operating assets and liabilities:

         Accounts receivable                             (88,182)     (118,022)
         Inventory                                        49,315       (65,246)
         Other current assets                             73,586       (99,304)
         Other assets                                        (50)          (50)
         Accounts payable and accrued expenses            39,565       233,310
         INCOME TAXES RECEIVABLE/PAYABLE                  88,835      (153,360)
                                                       ---------     ---------
         NET CASH PROVIDED BY OPERATING ACTIVITIES     1,827,685     1,393,437
                                                       ---------     ---------

Cash flows from investing activities:

    Purchase of certificate of deposit                   (30,502)         -
    Purchases of marketable securities                      -       (2,995,538)
    Sale and maturities of marketable securities         357,245     3,683,400
    Capitalized software and licensing costs          (1,021,412)     (964,638)
    Purchase of fixed assets                            (100,732)     (125,887)
    INVESTMENT IN TRANSACTION COSTS                     (236,896)         -
                                                       ----------    -----------
         Net cash (used in)

         INVESTING ACTIVITIES                         (1,032,297)     (402,663)
                                                       ---------     ---------

Cash flows from financing activities:

    Issuance of common stock                              99,441          -
    REDEMPTION OF COMMON STOCK                           (64,838)     (170,795)
                                                       ---------     ---------
         Net cash provided by (used in)

         FINANCING ACTIVITIES                             34,603      (170,795)
                                                       ---------     ---------

Net increase in cash                                     829,991       819,979
CASH BALANCE BEGINNING OF PERIOD                         245,450       376,754
                                                       ---------     ---------
CASH BALANCE END OF PERIOD                            $1,075,441    $1,196,733
                                                       =========     =========

Supplemental disclosure of cash flow information:

    CASH PAID FOR INCOME TAXES                        $  227,682    $  339,817
                                                       =========     =========

    Issuance of common stock                          $    9,097    $    7,500
    REDUCTION IN ACCRUED EXPENSES                         (9,097)       (7,500)
                                                       ---------     ---------
                                                      $     -       $     -
      See accompanying notes to
                                                       =========     ===========
                  See accompanying note to financial statements

                                        5






                              DIEHL GRAPHSOFT, INC.
                        STATEMENT OF STOCKHOLDER' EQUITY
                                   (Unaudited)

                                             Additional

                         Common     Common     Paid in      Retained

                         SHARES      STOCK     CAPITAL      EARNINGS       TOTAL

Balance

    May 31, 1998      3,147,637   $31,476   $4,182,812   $5,082,509  $ 9,296,797

Issuance of

     Common Stock         1,875        19        7,481         -           7,500
Redemption of
    Common Stock       (60,200)     (602)    (170,193)        -        (170,795)

NET INCOME                 -          -           -         634,840      634,840
                      ---------    ------     --------    ---------     --------

Balance

    FEBRUARY 28, 1999 3,089,312   $30,893   $4,020,100   $5,717,349  $ 9,768,342
                      =========   =======   ==========   ==========   ==========

Balance

    May 31, 1999      3,071,314   $30,713   $3,955,194   $6,160,331  $10,146,238

Issuance of

    Common Stock         16,591       166      108,372        -          108,538

Redemption of

    Common Stock       (17,200)     (172)     (64,666)       -          (64,838)

NET INCOME                 -           -           -        779,257      779,257
                      ---------   --------  -----------  ----------   ----------

Balance

    FEBRUARY 29,2000  3,070,705   $30,707   $3,998,900   $6,939,588  $10,969,195
                      =========    ======    =========    =========   ==========








                 See accompanying notes to financial statements

                                        6





                              DIEHL GRAPHSOFT, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE A - BASIS OF PRESENTATION

      The  accompanying  unaudited  financial  statements  have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and  with  the  instructions  to  Form  10-QSB  and  Article  10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  In the opinion of management,  all necessary adjustments
(consisting of normal recurring accruals) considered necessary for a fair

presentation have been included.  Operating results for the three and nine month
period ended  February 29, 2000 are not  necessarily  indicative  of the results
that may be expected for the year ended May 31, 2000.

NOTE B - WEIGHTED AVERAGE SHARES OUTSTANDING

     Weighted  average  number of  shares  outstanding  during  the  periods  is
computed as follows:

                             For the  three  months  ended  For the nine  months
                              ended  FEBRUARY  29,   FEBRUARY  28  FEBRUARY  29,
                              FEBRUARY 28,

                                2000         1999            2000         1999
                                ----         ----            ----         ----

Average outstanding shares   3,070,705    3,092,179        3,061,844   3,117,695

Diluted effect of stock

  OPTIONS AND WARRANTS          32,435        -               18,466        -
                             ---------    ---------        ---------   ---------
Weighted average number of
  SHARES OUTSTANDING         3,103,140    3,092,179        3,080,310   3,117,695
                             =========    =========        =========   =========


Note C - DEFERRED TRANSACTION COST

         On February  18,2000 the Company signed an agreement and plan of merger
with a wholly owned subsidiary of Nemetschek A.G. The agreement provides for the
conversion  of all  Company  common  stock  into cash at $9.50  per  share  upon
satisfaction  of all outstanding  conditions.  In connection with the agreement,
the Company  incurred cost totaling  $236,896,  which is reported on the balance
sheet at February 29, 2000 with deferred transaction costs.

                                        7




                              DIEHL GRAPHSOFT, INC.
                       MANAGEMENT'S DISCUSSION & ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In connection  with the Private  Securities  Litigation  Reform Act of 1995 (the
"Litigation  Reform Act"), the Company is hereby disclosing  certain  cautionary
information  to be used in connection  with written  materials  (including  this
Report on Form 10-QSB) and oral statements made by or on behalf of its employees
and  representatives  that may contain "forward looking  statements"  within the
meaning of the Litigation  Reform Act. Such statements  consist of any statement
other than a recitation of  historical  fact and can be identified by the use of
forward looking terminology such as "may," "expect," "anticipate," "estimate" or
"continue"  or the negative  thereof or other  variations  thereon or comparable
terminology.  The  listener  or reader is  cautioned  that all  forward  looking
statements  are  necessarily  speculative  and  there  are  numerous  risks  and
uncertainties  that could cause  actual  events or results to differ  materially
from those referred to in such forward looking statements.  Included  in  such
risks are (1) the  acceptance  of new  product  introductions,  (2)  quality  of
engineering in new software,  (3) delays  pertaining to planned  introduction of
new  products,  (4)  lack  of  diversified  product  portfolio,  (5)  effect  of
competitor  inroads into the Company's  markets,  (6) limited barriers to entry,
(7) reliance on  international  markets and foreign currency  fluctuations,  (8)
dependence on distributor  channels,  (9)  fluctuations in quarterly  operations
associated with the age of Company  products in their life cycles and the timing
of orders from distributors, (10) intellectual property infringements,  and (11)
attraction  and  retention of quality  employees,  among  others.  The reader or
listener is  cautioned  that the  Company  does not have a policy of updating or
revising  forward  looking  statements and thus he or she should not assume that
silence by  management  over time means that  actual  events are  bearing out as
estimated in such forward looking statements.

Results of Operations  for the three and nine months ended  February 29, 2000 as
compared to the three and nine months ended February 28, 1999.

REVENUES

     Revenues for the three months ended  February 29, 2000 were  $2,013,652  as
compared to $2,409,580 for the three months ended February 28, 1999 representing
a decrease of 16.4%.  Revenues for the nine months ended  February 29, 2000 were
$6,460,905 as compared to $5,470,655 for the nine months ended February 28, 1999
representing an increase of 18.1%. The following table sets forth the changes in
the  selective  components of revenue for the three and nine month periods ended
February  29,  2000 as  compared  with the three and nine  month  periods  ended
February 28, 1999.

                                        8






               For the three month  period ended   For  the  nine  month  period
                ended  FEBRUARY 29,  FEBRUARY 28,  FEBRUARY 29, FEBRUARY 28,

                       2000            1999              2000           1999

VectorWorks for
   Windows

    (New product)     $602,595        $660,164         $1,904,404     $1,628,128

VectorWorks for

  Windows (Upgrades)   103,364         166,926            324,423        350,618

VectorWorks for
  the Macintosh

 (New product)         699,019         910,252          2,699,993      2,407,867

VectorWorks for
  the Macintosh

  (Upgrades)           133,490         263,854            435,212        572,676

RenderWorks            109,816         319,472            319,472        608,339

Revenues  dropped in the three  months  ended  February  29, 2000 from the three
months ended February 28, 1999. The drop is largely attributable to the aging of
VectorWorks and RenderWorks as products in the marketplace.  These declines were
partly offset by the Company's introduction of VectorWorks Architect in December
1999, which carries industry specific  solutions for the  architectural  market,
and generated revenues of $180,849 for the three months ended February 29, 2000.
VectorWorks  was  introduced  in January 1999 and foreign  revenues  contributed
substantially  to the growth for the nine months  ended  February  29, 2000 when
compared with the nine months ended February 28, 1999.  Foreign revenues totaled
$1,149,699  for  the  three  months  ended  February  29,  2000 as  compared  to
$1,141,536  for the three months  ended  February  28,  1999.  Foreign  revenues
represented  57.1%  and  47.4% of total  revenues  for the  three  months  ended
February 29, 2000 and February 28, 1999  respectively.  Foreign revenues totaled
$4,102,812 for the nine months ended February 29, 2000 as compared to $3,028,044
for the nine months ended February 28, 1999. Foreign revenues  represented 63.5%
and 55.4% of total  revenues  for the nine months  ended  February  29, 2000 and
February 28, 1999  respectively.  Foreign revenues from Japan  represented 10.3%
and 13.7% of total  revenues for the three  months  ended  February 29, 2000 and
February 28, 1999  respectively.  Foreign revenues from Japan  represented 24.2%
and 23.2% of total  revenues  for the nine months  ended  February  29, 2000 and
February 28, 1999  respectively.  The decline in revenue from Japan in the three
month periods  ended  February 29, 2000 and February 28, 1999 when compared with
the nine month periods ended  February 29, 2000 and February 28, 1999 is largely
attributable  to  timing  of large  orders.  Revenues  from  European  countries
represent  the  substantial  remainder  of foreign  revenues  during the periods
presented.

                                        9





COST OF REVENUES

The cost of revenues for the three  months ended  February 29, 2000 was $598,364
as  compared  to  $721,422  for  the  three  months  ended   February  28,  1999
representing  an  decrease of 17.1%.  The cost of  revenues  for the nine months
ended  February 29, 2000 was  $1,795,853 as compared to $1,663,470  for the nine
months  ended  February  28, 1999  representing  an increase of 8.0%.  The gross
profit percentages for the three months ended February 29, 2000 and February 28,
1999 were 70.3% and 70.1%  respectively.  The gross profit  percentages  for the
nine months  ended  February 29, 2000 and February 28, 1999 were 72.2% and 69.6%
respectively. The slight improvement in gross profit percentage during the three
and nine months ended February 29, 2000 as compared to the three and nine months
ended  February  28, 1999 is largely due to the  reduction  in upgrade  revenues
which  generally  have costs equal to those of new products  and  generate  less
revenue per unit.  Additionally,  increased foreign revenues contributed to this
decrease  where  much of the  production  costs  are  passed  to  local  foreign
distributors. Increased amortization of software development and licensing costs
partly  offset the  increases in gross profit  percentages.  These costs rose to
$288,572  for the three months  ended  February  29, 2000 from  $232,242 for the
three months  ended  February 28, 1999 These costs rose to $823,688 for the nine
months ended February 29, 2000 from $$642,204 for the nine months ended February
28, 1999. These costs rose due to our increased commitment to development of new
technology.

OPERATING EXPENSES

      General and Administrative  expenses rose to $549,302 for the three months
ended  February 29, 2000 from  $525,673 for the three months ended  February 28,
1999 representing and increase of 4.5%. General and administrative expenses rose
to $1,574,024  for the nine months ended  February 29, 2000 from  $1,393,923 for
the nine months  ended  February 28,  1999,  representing  an increase of 12.9%.
Salary  expenses and overall  fringe  benefit costs declined to $278,610 for the
three  months ended  February 29, 2000 from  $280,348 for the three months ended
February 28, 1999.  Salary  expenses and overall  fringe  benefit  costs rose to
$827,023 for the nine months ended  February 29, 2000 from $727,661 for the nine
months ended  February 28, 1999.  The decline in the three months ended February
29. 2000 from  February  28, 1999  reflects  bonuses  issued in the three months
ended February 28, 1999 which were not issued in the three months ended February
29, 2000.  Expenses  rose for the nine months  ended  February 29, 2000 from the
nine months ended February 28, 1999 with an increased  commitment to other areas
of operations.

     Selling and marketing  expenses rose to $691,073 for the three months ended
February 29, 2000 from  $566,197  for the three  months ended  February 28, 1999
representing  an  increase  of 22.1%.  Selling and  marketing  expenses  rose to
$1,936,217 for the nine months ended  February 29, 2000 from  $1,540,632 for the
nine months ended February 28, 1999  representing  an increase of 25.7%.  Salary
and contract fees rose to $244,558 for the three months ended  February 29, 2000
from $188,183 for the three months ended February 28, 1999.

                                       10





Salary and contract fees rose to $789,268 for the nine months ended February 29,
2000 from  $445,034  for the nine months ended  February 28, 1999.  The increase
reflects the Company's  restructuring  in early calendar 1999 to increase market
research  for new products  and product  features.  Increases in the three month
period ended  February  29, 2000 over the three month period ended  February 28,
1999 were more modest than the increases in the nine month period ended February
29, 2000 over the nine month period  ended  February 28, 1999 because of bonuses
issued in the quarter ended February 28, 1999.

     Research and development expenses declined to $118,412 for the three months
ended  February 29, 2000 from  $145,703 for the three months ended  February 28,
1999 representing a decrease of 18.7%. Research and development expenses rose to
$383,114 for the nine months ended  February 29, 2000 from $367,085 for the nine
months ended February 28, 1999 representing an increase of 4.4%. The decrease in
the three month period ended February 29, 2000 from the three month period ended
February 28, 1999 and the modest  increase in the nine month ended  February 29,
2000 from the nine months ended February 28, 1999 reflects bonuses issued in the
three months ended February 28, 1999 to employees. The Company remains committed
to increased engineering and research for new technology.

OTHER INCOME AND EXPENSE

     Other income and  expenses  declined to $120,936 for the three months ended
February 29, 2000 from  $126,591  for the three  months ended  February 28, 1999
representing a decrease of 4.4%.  Other income and expenses rose to $363,560 for
the nine months  ended  February  29, 2000 from  $345,295  for nine months ended
February 28, 1999  representing  an increase of 5.3%.  Other income and expenses
consist principally of interest income during the periods.  Declines in interest
rates  for  invested  securities  in  calendar  1999  substantially  offset  the
increased  investment  base in the three and nine months ended February 29, 2000
as compared to the three and nine months ended February 28, 1999

NET INCOME AND INCOME TAXES

     Net income  declined to $124,437 for the three  months  ended  February 29,
2000 from $422,176 for the three months ended February 28, 1999. Net income rose
to $779,257  for the nine months  ended  February  29, 2000 from 634,840 for the
nine months ended  February 28, 1999.  The net income for the three months ended
February 29, 2000 and  February  28, 1999 is after giving  effect to a provision
for income  taxes of $53,000 and  $155,000,  respectively.  The  increase in net
income for the nine  months  ended  February  29,  2000 as  compared to the nine
months ended  February 28, 1999 is after giving effect to a provision for income
taxes of $356,000 and $216,000 respectively.  The effective income tax rates for
the three  months  ended  February 29, 2000 and February 28, 1999 were 29.9% and
26.9%,  respectively.  The effective  income tax rates for the nine months ended
February 29, 2000 and February 28, 1999 were 31.4% and 25.4%  respectively.  The
increase in effective tax rate for the three

                                       11





and nine months ended February 28, 2000 as compared to the three and nine months
ended February 28, 1999 reflects the tax benefits from a charitable  donation of
an older  version of Company  product  during  the three and nine  months  ended
February 28, 1999.

Liquidity and Capital Resources

     The  company  increased  its  working  capital  by  $715,390  or 8.1%  from
$8,778,235  at February 28, 1999 to  $9,493,625  at February  29, 2000.  Working
capital  increased  by $422,293 or 4.7% from  $9,071,332  at May 31,  1999.  The
increase  in working  capital  is  primarily  due to cash flows from  operations
during the period.  These cash flows have in part been invested  into  equipment
and software  development and in part used to repurchase  Company stock.  During
the nine  months  ended  February  28,  1999,  the  Company  used cash  flows to
repurchase  17,200  shares of  Company  stock at an  average  price of $3.77 per
share.  The  Company  continues  to  maintain  its  excess  cash  in  marketable
securities  with  maturities  of seven  years  or less.  At  February  29,  2000
marketable   securities   consisted  of  30%  corporate   bonds,  32%  municipal
obligations  and 38% U.S.  Government  obligations.  At February 29,  2000,  the
Company maintained cash and marketable securities of $3.09 per share.

     The Company's  future capital  requirements  will depend upon many factors,
including the extent,  timing and progress of the Company's  development  of new
software.  The Company  anticipates  that its  existing  capital  resources  and
earnings from  operations  will be adequate to satisfy its capital  requirements
for the next twelve  months.  The Company will continue to have working  capital
needs that will be  affected  by the  progress  of the  Company's  research  and
development  activities and capital  expenditures.  However, the Company expects
that its  current  working  capital  along with the cash  generated  from future
operations will satisfy its operating cash needs for the foreseeable future.

                                       12






PART II

                                OTHER INFORMATION

Exhibit 27 - Financial Data Schedule

                  The  Company has filed one report on Form 8-K during the three
                  months ended February 29, 2000.




                                       13



                                   SIGNATURES

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

                                        DIEHL GRAPHSOFT, INC.

DATE: April 12, 2000                By:/s/Richard Diehl
                                        Richard Diehl, President
                                        Chief Executive Officer


DATE: April 12, 2000                  /s/ Joseph Schmelzle
                                        Joseph Schmelzle, Treasurer
                                        Chief Financial and Accounting Officer






























                                       14