U.S. Securities and Exchange Commission
                      Washington, D.C.  20549
                     ------------------------

                            Form 10-KSB

[X]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934
             For the fiscal year ended December 31, 2000
[ ]          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: 001-155769

                  California Software Corporation
                  -------------------------------
          (Name of small business issuer in its charter)

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

      2485 McCabe Way, Irvine, CA                  92614
      ---------------------------                  -----
(Address of principal executive offices)        (Zip Code)

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

Securities registered under Section 12(b) of the Exchange Act: None
                                                               ----
  Securities registered under Section 12(g) of the Exchange Act:

    Common Stock, $.001 par value per share, 20,000,000 shares
    ----------------------------------------------------------
        authorized, 12,579,771 issued and outstanding as of
        --------------------------------------------------
                         December 31,2000.
                         ----------------

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

Check if there is no disclosure of delinquent filers in response to
Item  405 of Regulation S-B is not contained in this form,  and  no
disclosure   will  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-KSB  or  any
amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year:$1,772,480.
                                                        -----------

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the
price at which the common equity was sold, or the average bid and
asked price of such common equity, as of a specified date within
the past 60 days: $3,462,756 as of February 13, 2001.
                  -----------------------------------

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
                              YEARS)

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


            (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

<PAGE>

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
12,577,771 as of February 13, 2001.

                DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g. Part
I, Part II, etc.) into which the document is incorporated: (1) any
annual report to security holders; (2) any proxy or information
statement; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) of the Securities Act of 1933 ("Securities Act").  The list
documents should be clearly described for identification purposes
(e.g. annual report to security holders for fiscal year ended
December 24, 1990).

    Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]

<PAGE>


                         TABLE OF CONTENTS

PART I
    Item  1.Description of Business-------------------------------1
    Item  2.Description of Property------------------------------10
    Item  3.Legal Proceedings------------------------------------10
    Item  4.Submission of Matters to a Vote of Security Holders--11

PART II
   Item   5.Market for Common Equity and Related
            Stockholder Matters----------------------------------12
   Item   6.Management's Discussion and Analysis or
            Plan of Operation------------------------------------14
   Item   7.Financial Statements---------------------------------19
   Item   8.Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure------------------37

PART III
   Item   9.Directors, Executive Officers, Promoters and
            Control Persons; Compliance with Section
            16(a) of the Exchange Act----------------------------38
   Item  10.Executive Compensation-------------------------------39
   Item  11.Security Ownership of Certain Beneficial
            Owners and Management--------------------------------42
   Item  12.Certain Relationships and Related Transactions-------43
   Item  13.Exhibits and Reports on Form 8-K---------------------43

SIGNATURES-------------------------------------------------------44


<PAGE>

                             PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

OVERVIEW AND HISTORY

California Software Corporation, hereinafter referred to as the
"Company" or "CSC", was incorporated in the State of Nevada on
October 28, 1998 and markets a family of software products that
are targeted to users of the International Business Machines
("IBM") iSeries 400, formerly known as the AS/400, collectively
known as IBM Midrange systems.  These products include software
marketed under the brand name BABY that support the migration of
IBM Midrange applications to the PC-LAN business environment, as
well as software marketed under the brand name MLPS that supports
the processing of mortgage loans in the finance and banking
industries.

The Company's predecessor, California Software Products, Inc.
("CSPI"), was founded in 1975 for the purpose of writing software
programs for mainframe manufacturers.  In 1980, CSPI was
approached by the PC Division of IBM to write a program that
would compile System/32 software to run on a personal computer.
Development of these programs continued throughout the 1980s
adding new features and updating current programs as IBM
introduced newer computer systems.  When IBM disbanded the PC
Division and the AS/400 Division chose not to continue the
relationship, CSPI continued to improve its products on its own.

In the early 1980s, CSPI's founders pioneered the first personal
computer ("PC")-based Report Generation Language ("RPG")
compilers, which are a core functionality of the BABY product
line.  As the development environment expanded, the products
evolved to allow a user to execute Midrange applications on a PC
network without the need for complete redevelopment of the
application's source code.

In late 1996, CSPI was purchased by Bruce Acacio and Carol Conway
DeWees.  In January 1997, CSPI filed for Chapter 11 protection
under federal bankruptcy law due to an unresolved conflict with a
major creditor.  The reorganization plan put forth by management
was approved by the courts in October 1997.

On January 12, 1999, the Company acquired the net assets of CSPI
with a historical cost of $700,840 in exchange for shares of the
Company's Common Stock that were to be issued at a later date.
Since CSPI's line of business was substantially the same as the
Company's, and the shareholders, officers, and directors of CSPI
and CSC were substantially the same, the Company valued the net assets
acquired from CSPI at their historical cost.  On January 27,
2000, the Company issued 2,000,000 shares of its Common Stock.

On October 20, 2000, the Company acquired the stock of Software
Connections, Inc, dba ALE Systems ("ALE"), a software developer
of mortgage loan processing software, in exchange for cash of
$750,000, an earn-out payable over 60 months, bearing no interest,
valued between $625,000 and $2,500,000 depending on ALE's operating results
during that period, and a note payable in the amount of $292,500,
bearing no interest, payable in monthly installments over 36 months.
In conjunction with  this acquisition, the Company has recognized goodwill
in the amount  of $3,933,101 that is being amortized over five years.

On November 8, 2000, the Company signed a letter of intent to
merge with Unicomp, Inc. ("Unicomp"), a Georgia corporation.  On
that same date, and two days thereafter, the Company entered into
various agreements with Unicomp through which the Company acquired
Unibol, Ltd., a United Kingdom corporation, and through which the
Company contends it also acquired Unibol, Inc., a Georgia corporation
("Unibol U.S.").  In the Stock Purchase Agreement, Amendment, and
related documents, the Company agreed to pay cash of $1,000,000, an
additional $500,000 due in four monthly installments commencing
on the first of the month beginning with the second month after
the Closing Date, and $1,500,000 of the Company's Common Stock
due and valued on the six month anniversary of the Closing Date.
On November 13, 2000, the Company paid the
$1,000,000 in cash due under the agreements.  Subsequent to the
cash payment, a dispute arose between the Company and Unicomp
about Unicomp's providing of financial information, the identity
of the companies included under the acquisition documents, as well
as the intent of certain provisions contained in the Amendment
purporting to grant sole operational and voting control over the
Unibol entities to the Chief Executive Officer of Unicomp for a six
month period.  As a result, the Company did not make any of the
installment payments due under the purchase agreement, and merger
discussions were terminated.  The Company thereafter filed a
lawsuit in California against Unicomp, several of its
officers and directors, and a third party alleging fraudulent
misrepresentation and various other charges in connection with
the acquisition of Unibol, Ltd. and Unibol, Inc.  Unicomp also filed
a lawsuit in Georgia against the Company seeking to preserve Unicomp's
interest in one of the Unibol companies, Unibol, Inc., as well as
to uphold the original terms and conditions of the Agreement and
Amendment, although that lawsuit was subsequently dismissed by the
Georgia court.  The claims previously asserted by Unicomp in the
Georgia action are asserted by Unicomp in a cross-complaint to the
action in California filed by the Company.  On January 22,
2001, at a meeting of Unibol UK's shareholders, the shareholders

-1-
<PAGE>


elected to revoke the agreement giving control over the Unibol
entities to the Chief Executive Officer of Unicomp and the
Company asserted its physical and operational control over Unibol
UK on or about January 29, 2001.  Due to legal obstacles,
the Company has not been able to ascertain what assets and
liabilities it purchased in connection with this acquisition.  In
addition, the outcome of the current litigation is not known at
this time.  As a result, the Company has established a valuation
reserve at December 31, 2000 against its $1,000,000 cash
investment in Unibol.  This reserve is presented as an
extraordinary item in the Company's Consolidated Statement of
Operations for the year ended December 31, 2000.

INDUSTRY BACKGROUND

Rehosting / Graphical
---------------------
The IBM iSeries 400 and its predecessors, System/32, System/34,
System/36, System/38, and AS/400 - collectively called IBM
Midrange systems - are a class of machines substantially
different from widely familiar PCs.  The System/36, superceded by
the AS/400 (later renamed the iSeries 400), served as a popular
computing solution for business applications for many years after
IBM's introduction of these two systems in 1983 and 1988,
respectively.  Midrange systems were popular because, at the time
of their introduction, they were far more powerful than
individual PCs and were capable of supporting environments with
hundreds of users.  According to IBM, it has shipped over 700,000
AS/400 systems worldwide since the AS/400's introduction.

The wide acceptance of IBM Midrange systems fed off a large
number of available software applications, both custom and pre-
packaged, that ran on them.  Thus, in adopting IBM's Midrange
computing platforms, businesses and the independent software
vendors ("ISVs") that supported them invested substantial
resources developing application software that could perform a
wide variety of manufacturing, accounting, and other information-
management functions.  Industry sources estimate that over 28,000
business programs were written for those systems - more than for
any other platform.  Today, industry sources estimate that
approximately 8,000 ISVs assist in the development of
applications software intended for use on IBM's Midrange
computing platforms.

Despite the platform's multiple advantages, IBM Midrange users
and developers have historically been constrained by the non-
graphical and proprietary nature of IBM's operating systems.
Software applications written for the System/36 and AS/400
platforms would not run on other computing platforms, including
those using open operating systems such as Windows NT/2000(TM) or
Unix.  This factor has become increasingly important in recent
years as the cost of PCs decreased and PC networks became far
more powerful and widespread.  Today, the limitations of Midrange
systems can make them appear old-fashioned to many information
management professionals, and many companies are looking for ways
to migrate their Midrange systems to alternative systems such as
Windows NT/2000(TM) and Unix.  However, many of these companies
have made significant investments in their software applications,
and are looking for ways to extend the life of their software
without having to convert or rewrite their software to a new
operating system.  As a result, companies wanting to migrate
their System/36 and AS/400-based applications to a PC network
environment must choose one of the following approaches:

  -  Re-engineering - Re-engineering requires rewriting existing
     applications software to enable it to operate on a new computing
     platform.  Since this entails completely rewriting applications
     software to meet customer requirements, it often results in
     increased cost, risk of failure, disruption and delay.

  -  Packaged Solutions - Migrating to a new computing platform
     can sometimes be accomplished by installing an applications
     software package that has been independently developed to run on
     open or portable platforms.  While a substantial number of
     packaged software applications are available, businesses
     implementing this approach will often have to abandon their
     investment in existing databases and software and may incur
     substantial retraining costs.

  -  Rehosting - Rehosting involves migration of applications
     software to a new computing platform with minimal change to the
     source code.  Rehosting is achieved by rebuilding applications
     software to run efficiently on the new computing platform.  This
     solution often enables businesses to enjoy the continued use of
     their existing programs and databases, reduces retraining costs
     and takes full advantage of a new computing platform.

  -  Refacing - Refacing involves replacing the "green-screen"
     interface with a graphical user interface ("GUI").  The source
     code must still be run on the original computing platform or in a
     replicated environment.  This is frequently the next step after

  -2-
  <PAGE>

     rehosting an application to provide appearance and operation
     virtually identical to other Windows(TM) applications running in
     the environment.

Re-engineering custom applications or moving to a new packaged
solution poses significant financial and operational risks to a
business.  Rewriting an application is not a line-for-line
process because programming languages have different
characteristics.  As a result, businesses that elect to
reengineer their software may expect new applications to have
errors that must be corrected.  A packaged solution usually
requires extensive modifications in order to meet particular
business requirements.  During the implementation period, users
may need retraining and the incidence of user errors may
increase.  Businesses may have to deal with the risk of loss of
customer, sales, financial, and/or operations data during the
conversion.

The Company's expertise is in rehosting and refacing - the two
approaches that require minimal retraining costs and offer
continued use of existing programs and databases.  The Company's
products replicate the IBM Midrange operating environments under
Windows(TM) whereby an applications developer can take older IBM
Midrange programs that meet current business requirements and run
them on a Windows NT/2000(TM) network.  Moreover, the developer can
utilize another of the Company's products to add a GUI that does
for Midrange applications what Windows 3.x(TM) and Windows 95/98(TM)
did for DOS applications.  The Company also provided a Year-2000
compliant platform for System/3x programs, which in turn extended
the life of the Midrange applications at a relatively low cost to
the developer.

ISVs that have developed successful AS/400 applications software
are faced with the challenge of migrating their products to new
platforms while maintaining their existing customer base for
applications software running on the AS/400 platform.  The
Company's products may be used by these ISVs because BABY
development tools do not modify the RPG source code.  Moreover,
screens developed with BABY/GUI can be used for both the AS/400
and Windows NT/2000(TM) offerings.  As a result, one set of code
and screens can be maintained for a developer's Midrange and PC
platforms.

Mortgage Loan Processing
------------------------
The Company's MLPS product was originally developed in the early
1980's to serve the mortgage lending industry.  Since then, the
product has evolved to include all aspects of loan processing
including first and second mortgages, credit cards, lines of
credit, consumer, home equity, mortgage, and student loans.  The
Company targets MLPS primarily towards lenders and mortgage
brokers in the finance industry.  The software's scalability and
flexibility allows the Company to offer MLPS to customers with
loan processing volumes of less than 100 to over 5,000 per month.

COMPETITION

Competition in the rehosting end of the Company's business,
including its BABY/iSeries and BABY/36 products, is minimal, as
the Company believes that, with the exception of Unibol, there are
no other significant rehosting products available in the marketplace.
The Company's graphical and internet products, including its
BABY/GUI and baby.com products, compete primarily with established
market leaders Seagull Software and Jacada Ltd.  Competition in the
mortgage loan industry is intense, with a mix of both large and
small companies competing for customers.

PRINCIPAL PRODUCTS

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

-3-
<PAGE>

The Company currently offers the following applications:

  -  BABY/iSeries - BABY/iSeries is a PC-based application that
     allows developers to migrate IBM AS/400 and iSeries 400
     applications and data files to the Windows NT/2000(TM) environment.
     The existing source code residing on an AS/400 or iSeries 400 is
     downloaded to a PC, recompiled, and executed without the need for
     redevelopment.  BABY/iSeries also allows new programs to be
     developed, compiled, and debugged on a PC platform and allows
     subsequent program execution on either a PC or AS/400 and iSeries
     400 computers.

  -  BABY/36 - BABY/36 is a PC-based RPG II development,
     execution and operating environment that allows the migration of
     IBM System/36 applications to the Windows NT/2000(TM) environment.
     Similar in operation to BABY/iSeries, existing source code
     residing on a System/36 is downloaded to a PC, recompiled, and
     executed without the need for redevelopment.

  -  BABY/GUI - BABY/GUI is a PC-based program that allows a
     software developer to transform System/36, AS/400 and iSeries 400
     text-based applications into icon-driven Windows(TM) screens with
     point-and-click functionality.  Residing on a Windows NT/2000(TM)
     server, BABY/GUI intercepts the instructions that the application
     sends to the screen and reinterprets it into a graphical
     presentation.  This requires no redevelopment of the
     application's source code.

  -  baby.com - baby.com allows developers to Internet-enable
     AS/400-based and rehosted software applications.  Baby.com
     renders screens that have been reinterpreted by BABY/GUI into a
     web deployable DHTML format for presentation to a remote Internet
     client.  The developer can elect to use a sophisticated scripting
     capability to integrate legacy applications with PC-based
     programs.

  -  MLPS - MLPS is an IBM AS/400-based software product for
     companies that do loan processing.  The program can be adapted to
     various lending markets including retail and wholesale mortgages,
     automobile and consumer loans.

Services and Support

The Company currently supports its products with a team of
technical experts and implementation consultants that can assist
clients in migrating their applications to the PC environment.
The Company also offers services such as:

- Pre-Migration Analysis - Analysis and preparation of a
  customer's software and hardware environment for migration to the
  Company's products.

- Client-Server Consulting - Assistance in planning for and
  converting legacy application environments to client/server
  environments.

- Migration Services - Migration of RPG applications to the
  Company's PC-based operating environment.

- Implementation Service - On-site installation of migrated
  applications, technical training and configuration of the PC
  environment for program execution.

- Installation and Setup Services - Assistance in planning the
  installation of hardware and MLPS software at a customer site.

- Business Consulting Services - Consulting services designed
  to maximize loan processing efficiencies in utilizing MLPS to
  automate processing and collections.

DISTRIBUTION, MARKETING AND CUSTOMER RELATIONS

The Company sells its BABY products and services in North America
directly to end-users and through a network of business partners,
who bundle their own Midrange applications with the BABY products
into a single PC offering.  The Company also markets its products
overseas through an international distributor network of IBM
Business Partners and software houses.  MLPS is sold directly to
end-user banks and financial institutions throughout the United
States.  No single customer accounts for a material portion of
the Company's revenues.

-4-
<PAGE>

The Company is currently marketing and distributing its services
and products through a direct sales force.  The Company has also
established and will continue to establish marketing and
distribution relationships through a broad range of channels
including business partners, distributors and manufacturers
representatives, as well as direct sales representatives.  In
addition, the Company employs direct mail, advertising, seminars,
trade shows, telemarketing, and on-going customer and third-party
communications programs.

The Company has organized its information technology services
business such that each service technician maintains a direct
relationship with certain of the Company's service customers.
Specific marketing programs will vary by target customer.  The
Company believes that its direct sales approach, including having
Company service technicians serve as client-relationship
managers, has led to better account penetration and management,
better communication and long-term relationships with its clients
and greater opportunities for follow-on sales of products and
services to its client base.

PROPRIETARY RIGHTS

The Company has a registered United States trademark for its
family of BABY and MLPS software technology.  In addition to its
existing rights under law, management is currently planning to
register additional copyrights and/or trademarks to fully protect
its software.  In addition, the Company is protecting new
proprietary technological advancements as trade secrets until
appropriate measures can be taken for protection.

RESEARCH AND DEVELOPMENT ACTIVITIES

The market for business computing products has been historically
characterized by frequent technological advances, evolving
industry standards and escalating customer expectations.  As a
result, management believes that the Company's future growth and
success will be largely dependent on its ability to develop or
acquire products to meet the evolving needs of its prospective
clients.  The Company anticipates that the long-term success of
its product offering will require further product development.
The Company expects to continually evaluate its products to
determine what additional products or enhancements are required
by the marketplace.  The Company plans to develop and enhance its
products internally to meet clients' needs, but if the Company
can purchase or license proven products at reasonable costs it
will do so in order to avoid the time and expense involved in
developing products.

The Company introduced three new BABY products in 2000.  A new
version of BABY/AS2000 incorporating new functionality such as
the usage of Windows(TM) printer drivers, ODBC compliance for
transfer of data between software applications and the ability to
incorporate BABY/GUI to add a graphical user interface was
introduced in the second quarter of 2000.  In the third quarter
of 2000 a new version of BABY/36 was released with Windows(TM)
printer drivers, ODBC compliance and the ability to integrate
BABY/GUI.  Finally, in the fourth quarter of 2000, the first
version of baby.com was released.

During the years ended December 31, 2000 and 1999, the Company
incurred research and development expenses of $577,729 and
414,992, respectively, with respect to its current and future
products.  The cost of such activities were not borne by the
Company's customers.

EMPLOYEES

At December 31, 2000, the Company had sixty seven (67) full-time
employees.  The Company's employees are currently not represented
by a collective bargaining agreement, and the Company believes
that its relations with its employees are good.

-5-
<PAGE>

RISK FACTORS

The Company does not provide forecasts of its future financial
performance.  However, from time to time, information provided by
the Company or statements made by its employees may contain
"forward-looking" information that involves risks and
uncertainties.  In particular, statements contained in this
Report on Form 10-KSB that are not historical facts (including,
but not limited to statements contained in "Item 6 - Management's
Discussion and Analysis or Plan of Operations" of this Report on
Form 10-KSB relating to liquidity and capital resources) may
constitute forward-looking statements and are made under the safe
harbor provisions of The Private Securities Litigation Reform Act
of 1995.  The Company's actual results of operations and
financial condition have varied and may in the future vary
significantly from those stated in any forward looking
statements.  Factors that may cause such differences include,
without limitation, the risks, uncertainties and other
information discussed below and within this Annual Report on Form
10-KSB, as well as the accuracy of the Company's internal
estimates of revenue and operating expense levels.  The following
discussion of the Company's risk factors should be read in
conjunction with the financial statements contained herein and
related notes thereto.  Such factors, among others, may have a
material adverse effect upon the Company's business, results of
operations and financial condition.

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

The Company's new operating plan reflects management's
expectations as of the date of this annual report, and is based
on currently available information as well as significant
assumptions made by management regarding various revenue and
operating expense items.  The Company cannot guarantee that the
assumptions that it relied upon in developing its operating plan
will be accurate, or that future events or results will conform
to the Company's expectations or assumptions.  The Company's
independent accountants have issued a "going concern"
qualification to their audit opinion for the year ended December
31, 2000 that calls into question the Company's ability to
continue operations through December 31, 2001.  Furthermore, due
to potential concerns regarding the Company's going concern
qualification, financial condition and its perceived ability to
fulfill its financial and other obligations, the Company's
customers, vendors, and other corporate partners may decide not
to conduct business with it, or may conduct business with the
Company on terms that are less favorable than those customarily
extended by them.  As a result, if the Company's assumptions are
inaccurate, or its expectations prove to be erroneous in light of
future events, or if it is unable to maintain the support of its
customers, vendors, and other key corporate relationships
regardless of the success of its new operating plan, it will need
to raise additional working capital before it achieves positive
operating cash flow.  In order to obtain this capital, the
Company may seek to sell additional equity securities, obtain a
line of credit or seek other ways to fund its operations in the
event it requires additional working capital to operate its
business.  The Company currently does not have any commitments
for additional financing and it cannot be certain that additional
financing, in light of the Company's current financial condition
and going concern qualification, will be available when and to
the extent required, or that, if available, it will be on
acceptable terms.  If adequate funds are not available on
acceptable terms, the Company may not be able to fund its
operations, and its business will fail.  Further, if the Company
raises additional funds by issuing equity or convertible debt
securities, the percentage ownership of its stockholders will be
diluted.  Also, any new securities could have rights, preferences
and privileges senior to that of the Company's Common Stock.

The Company has not achieved profitability since its inception,
and it incurred net losses of $7,292,361 and $419,737 for the
years ended December 31, 2000 and 1999, respectively, and may
continue to incur losses for the foreseeable future.  Although
the Company recently initiated a restructuring of its business
designed, in part, to significantly reduce costs in a number of
areas, the Company expects to continue to incur substantial costs
and expenses related to legal fees incurred in connection with
various litigation against the Company.  The Company's ability to
become profitable and continue its operations depends on its
ability to generate and sustain higher revenue levels, maintain
reasonable operating expense levels consistent with the

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<PAGE>

assumptions underlying the Company's new operating plan, and
successfully defend itself against the litigation filed against
it.  If the Company is unable to increase its revenues or manage
and reduce its operating expenses and costs compared to the year
ended December 31, 2000, it will be unable to achieve positive
operating cash flow.  If the Company does not achieve positive
operating cash flow in a timely manner that is consistent with
its operating plan, the Company could fail.

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

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

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

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

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

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

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reducing the consideration such acquirors would otherwise be
willing to pay in connection with an acquisition.

Dependence on Principal Products.  For the year ended December
31, 2000, the Company's core of BABY and MLPS products accounted
for substantially all of the Company's net sales.  The Company is
wholly dependent on these products.  As a result, any factor
adversely affecting sales of any of these products could have a
material adverse effect on the Company.  The Company's future
financial performance will depend in part on the successful
introduction of enhanced versions of these products and
development of new versions of these and other products and
subsequent acceptance of such new and enhanced products.  There
can be no assurance that the Company's new and enhanced products
will achieve significant market acceptance or will generate
significant revenue.  In addition, competitive pressures or other
factors may result in significant price erosion that could have a
material adverse effect on the Company's business, financial
condition and results of operations.

Product Concentration.  As previously noted, the Company derives
most of its revenues from products that run on or replicate the
AS/400 and iSeries 400 environment on a personal computer
platform and provides a GUI for those text-screen applications.
As a result, the Company's future operating results are dependent
upon the continued widespread use of the AS/400 and iSeries 400.
Because there can be no assurance that the AS/400 and iSeries 400
platforms will continue to be used in the foreseeable future, a
decline in demand for AS/400 and iSeries 400 products and hence
the Company's software products could have a material adverse
effect on the Company's business, financial condition and results
of operations.

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

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

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

Effects of Electronic Commerce.  There can be no assurance that
the Company will be able to provide a product offering that will
satisfy new customer demands in the Internet, online services, e-
business applications, and electronic commerce areas.  In
addition, standards for web-enabled and e-business applications,
as well as other industry adopted and de facto standards for the
Internet are evolving rapidly.  There can be no assurance that
standards chosen by the Company will position its products to
compete effectively for business opportunities as they arise on
the Internet and other emerging areas.  The success of the
Company's product offerings depends, in part, on its ability to
continue developing products which are compatible with the

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<PAGE>

Internet.  The increased commercial use of the Internet may
require substantial modification and customization of the
Company's products and the introduction of new products.  The
Company may not be able to effectively compete in the Internet-
related products and services market.

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

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

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

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

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

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

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<PAGE>

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

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

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

Year 2000.  As of the date of this filing, the Company currently
knows of no significant Year 2000-related failures that have
occurred in either its products or its internal systems as a
result of the date change from December 31, 1999 to January 1,
2000.

ITEM 2.  PROPERTIES.

As of December 31, 2000, the Company's corporate headquarters
were located in approximately 10,668 square feet of office space
leased from McCabe Way Irvine, LLC, located at 2485 McCabe Way,
Irvine, CA  92614.  The lease is for a five year term, with one
five-year option, with monthly lease payments ranging from
$23,047 to $24,776.  In addition, the Company occupies office
space for its ALE subsidiary in approximately 18,855 square feet
of office space under an agreement with Software Connections,
Inc. and a master lease from Crow Family Holdings Industrial
Texas Limited Partnership, located at 1616 East Parham Road,
Richmond, VA  23228.  The lease term expires January 2003 and
calls for monthly lease payments ranging from $12,294 to $13,043.

ITEM 3.  LEGAL PROCEEDINGS.

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

On December 4, 2000, an action was commenced in the United States
District Court for the District of Nevada against the Company and
two of its officers and directors, Bruce Acacio and Carol Conway
DeWees by three shareholders of the Company who acquired their
stock through a Private Placement conducted by the Company.  The
plaintiffs in the action contend that the defendants made false
and misleading statements about the Company's actual and expected

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<PAGE>

financial performance to defraud investors, in violation of
federal securities laws.  The plaintiffs seek damages, interest,
costs and other equitable and injunctive relief.

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

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

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

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

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

Not applicable.

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<PAGE>

                             PART II

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

MARKET FOR COMMON STOCK

The Common Stock of the Company, par value $0.001 per share (the
"Common Stock"), is traded on the Over the Counter Bulletin Board
("OTCBB") under the symbol "CAWC".  There was no active trading
market for the Common Stock prior to November 29, 1999, the
commencement of the Company's trading on the OTCBB.

The table below reflects the high and low closing prices of the
Common Stock, as reported by the OTCBB, from January 1, 2000
through December 31, 2000.

                                        HIGH              LOW
                                        ----              ---

    First Quarter                      $14.38            $0.67
    Second Quarter                     $12.00            $4.44
    Third Quarter                       $4.50            $0.56
    Fourth Quarter                      $1.44            $0.25

HOLDERS

As of December 31, 2000, there were 175 stockholders of record of
the Company's Common Stock.

DIVIDEND POLICY

The Company has not paid cash dividends on its Common Stock and
does not intend to pay any cash dividends in the foreseeable
future.

SALES OF UNREGISTERED SECURITIES

On or about October 28, 1998, the Company completed an offering
that was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.  The Company issued 5,400,000
shares of its Common Stock to its founders for an aggregate
amount of $7,175, consisting of $2,800 cash and the forgiveness
of a loan owed to the stockholders for corporate consulting and
incorporation costs that were paid for by the stockholders in the
amount of $4,375.

On or about December 7, 1998, the Company completed an offering
that was exempt from registration pursuant to Regulation D, Rule
504, of the Securities Act of 1933, as amended.  The Company sold
1,141,800 shares of Common Stock at a price of $0.025 per share.
The Company received cash in the amount of $25,545, net of
offering costs of $3,000.

On January 12, 1999, the Company acquired the net assets of CSPI
with a historical cost of $700,840 in exchange for a Common Stock
subscription.  Since CSPI's line of business was substantially
the same as the Company's, and the shareholders, officers, and
directors of CSPI and CSC were substantially the same, the
Company valued the net assets acquired from CSPI at their
historical cost.  On January 27, 2000, the subscription was
converted into 2,000,000 shares of the Company's Common Stock.
These shares were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended.

Effective  March  15,  2000, the Company effected  a  two-for-one
stock  split.  Since the Company is incorporated in the State  of
Nevada,  where state securities laws mandate a minimum par  value
of  $0.001 (the par value of the Company's Common Stock prior  to
the  split), the Company increased its Common Stock and decreased
its additional paid-in capital accounts to account for effects of

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<PAGE>

the  stock split.  All share amounts and dollar amounts  in  this
Form 10-KSB have been adjusted to account for the effects of this
split.

On March 15, 2000, pursuant to a private placement agreement that
was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 dated November 23, 1999, the Company
issued 600,000 shares of its Common Stock in exchange for cash of
$200,000 and a note receivable in the amount of $74,032.  The
note bears no interest and matures on September 6, 2001.  This
note was subsequently forgiven in its entirety in accordance with
the terms of an agreement entered into on March 30, 2001.

During  the quarter ended June 30, 2000, the Company completed  a
private  placement of 2,654,971 shares of its Common Stock.   The
offering  price  per share was $4.00 per share  and  the  Company
received  an  aggregate  of  $8,779,898  in  proceeds  from   the
offering.   The  Company paid commissions  and  expenses  in  the
aggregate  amount  of $547,259 in connection with  the  offering.
The  offering  was  made  by  the  Company  in  reliance  on  the
provisions  of  Rule  506 of Regulation D promulgated  under  the
Securities  Act of 1933, as amended, and the shares were  offered
solely  to accredited investors as that term is defined  in  Rule
501 of such regulation.

During  the  twelve months ended December 31, 2000,  the  Company
issued to unrelated non-employees 783,000 shares of Common  Stock
at  prices  from  $0.53 to $7.20 per share for various  services.
These  shares were exempt from registration pursuant  to  Section
4(2) of the Securities Act of 1933, as amended.

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<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
         OPERATION.

FORWARD LOOKING STATEMENTS

The statements contained in this report that are not historical
facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act.  Forward-looking
statements are made based upon management's current expectations
and beliefs concerning future developments and their potential
effects upon the Company.  There can be no assurance that future
developments affecting the Company will be those anticipated by
management.  Actual results may differ materially from those
included in the forward-looking statements.

PLAN OF OPERATION

Over the next twelve months, the Company plans on continuing its
research and development activities to develop enhancements to
existing products as well as working to develop new products.  In
connection with these activities, the Company plans on launching
the following new products during 2001:

  -  The Company plans to release a new version of its BABY/GUI
     software that will feature enhancements to add new functionality
     and reduce implementation time.

  -  The Company plans to release a new version of baby.com that
     incorporates Microsoft ActiveX(TM) components that will make it
     easier for remote users to interact with the web pages baby.com
     presents.

  -  The Company plans to introduce its first release of BABY/GUI
     3270, which will make the Company's BABY/GUI product available
     to mainframe developers for the first time.

  -  MLPS (NT) - The Company plans to introduce a new version of
     MLPS that will run under Windows NT/2000(TM) through the use of
     the Company's migration, graphical, and internet products.

The Company anticipates that the development of these and other
new products may require the Company to seek alternative means of
financing.  Accordingly, the Company is exploring different
avenues of financing.  In addition, depending on the outcome of
the aforementioned lawsuits, the Company may be required to seek
additional financing to sustain its operations.  There can be no
assurance that the Company will be able to secure financing on
terms acceptable to the Company, or at all.  As a result of these
factors, the Company is presently unable to estimate how long it
can satisfy its cash requirements.

RESULTS OF OPERATIONS

Twelve Months Ended December 31, 2000 Compared to Twelve Months
Ended December 31, 1999

Software Sales.  Software sales consist of sales of the Company's
BABY and MLPS software products.  Software sales for the year
ended December 31, 2000 and 1999 were $1,026,195 and $2,571,164,
respectively.  The decrease in revenues of approximately 60.1%
during 2000 was primarily due to declines in sales of the
Company's rehosting products as compared to 1999, when the
Company upgraded its then-current rehosting customers to provide
them with Y2K-compliant versions of BABY/36 and BABY/400.
Because the Company foresaw the decline in rehosting business
during 2000, it refocused its efforts on the development of its
baby.com product which was released late in the year.  To a
lesser degree, the Company encountered significant distractions
during the third and fourth quarter from its ongoing litigation
relating to the shareholder class action and Unicomp lawsuits,
both of which negatively impacted management's ability to
maximize the benefits of its ALE acquisition as well as the
ability to focus on the Company's core business.

Hardware Sales.  Hardware sales consists of sales of IBM computer
equipment made by the Company's ALE subsidiary in connection with
sales of its MLPS software.  Hardware sales for the year ended
December 31, 2000 were $199,228.  There were no sales of hardware
for the year ended December 31, 1999, as ALE was acquired by the
Company in October 2000.  The Company does not plan
to continue to sell hardware in conjunction with sales of its
MLPS software since the costs of administration do not warrant
the revenues generated.

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<PAGE>

Maintenance and Other Revenue.  Maintenance and other revenue
consists of annual maintenance contracts sold to the Company's
customers for technical support on its products, business partner
agreements which entitle the Company's customers to unlimited
annual technical support as well as increased discounts on
software purchases, and shipping revenue billed to customers.
Revenue from annual maintenance contracts and business partner
agreements are deferred and recognized over the term of the
related contract or agreement.  Maintenance and other revenue for
the years ended December 31, 2000 and 1999 was $547,057 and
$135,834, respectively, a 302.7% increase primarily due to the
Company's acquisition of the ALE customer base and accompanying
maintenance revenue stream.  It is anticipated that revenue from
these sources will continue to increase over the next twelve
months as the Company expands its customer base.

Cost of Sales.  Cost of sales is primarily comprised of the cost
of hardware sales of IBM computer equipment made by the Company's
ALE subsidiary in connection with sales of its MLPS software, as
well as other miscellaneous revenue-related costs.  Cost of sales
for the year ended December 31, 2000 were $227,825.  There was no
cost of sales for the year ended December 31, 1999, as ALE was
acquired by the Company in October 2000.  Since the Company
expects that future sales of computer hardware will not be
significant, the Company anticipates that cost of sales will not
be a significant component of expense in the future.

Research and Development Costs.  The Company has adopted the
provisions of Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed", which requires capitalization of
certain software development costs subsequent to the
establishment of technological feasibility.  Based on the
Company's product development process, technological feasibility
is established upon completion of a working model.  Since the
Company does not incur any costs between the completion of the
working model and the point at which the product is ready for
general release, all research and development costs are charged
to expense as incurred.  For the years ended December 31, 2000
and 1999, the Company incurred research and development costs of
$577,729 and $414,992, respectively, a 39.2% increase that was
primarily the result of the Company's acquisition of ALE in
October 2000 as well as from the Company's investment in its
baby.com development.  As a percentage of revenue, research and
development costs for the years ended December 31, 2000 and 1999
were 32.6% and 15.3%, respectively.  The Company believes that
research and development expenditures are essential to
maintaining a competitive position due to rapid changes in
technology and customer demands and expects that these costs will
continue to increase in the future.

Selling, General and Administrative Expense.  Selling, general
and administrative expenses include sales and marketing expenses,
employee compensation, corporate overhead, legal and accounting
expenses, and bad debt expenses.  For the years ended December
31, 2000 and 1999, selling, general and administrative expenses
were $7,197,109 and $2,686,999, respectively, a 167.8% increase.
As a percentage of revenue, selling general and administrative
expenses for the years ended December 31, 2000 and 1999 were
406.0% and 99.3%, respectively.  The increase in selling, general
and administrative expenses were primarily due to increases in
headcount of the Company during 2000, increases in professional
fees resulting primarily from the Company's shareholder class
action and Unicomp litigation, as well as additional expenses
resulting from the Company's acquisition of ALE in October 2000.
The Company has taken steps to reduce its general and
administrative costs, including reducing headcount, but
anticipates that reductions in these expenses will be somewhat
offset by increases relating to sales and marketing efforts in
the short-term future.

Depreciation and Amortization.  Depreciation and amortization
consists of recurring depreciation charges recorded against the
Company's property and equipment.  Depreciation and amortization
for the years ended December 31, 1999 was $252,466 and $13,100,
respectively, a 1,827.2% increase.  As a percentage of revenue,
depreciation and amortization for the years ended December 31,
2000 and 1999 was 14.2% and 0.5%, respectively.  The increase in
depreciation and amortization during 2000 was primarily the
result of goodwill amortization arising from the Company's
acquisition of ALE in October 2000.  The Company expects that
depreciation and amortization will continue to increase in the
future as the Company increases its property and equipment base
in connection with its continued expansion efforts or as a result
of an increase in property and equipment or goodwill acquired as
a part of any possible future acquisitions made by the Company.

Other Income/Expense, Net.  Other income/expense primarily
consists of imputed interest expense calculated on the

-15-
<PAGE>

liabilities assumed by the Company in connection with its
acquisition of CSPI in January 1999, offset by interest income
received from investments of the Company's excess cash balances.
Net other income for the year ended December 31, 2000 was
$190,288 while net other expense for the year ended December 31,
1999 was $11,644, a 1,734.2% increase.  As a percentage of
revenue, net other income for the year ended December 31, 2000
was 10.7%, while net other expense for the year ended December
31, 1999 was 0.4%.

Income Taxes.  The Company did not record any tax benefits
arising from losses from operations for the years ended December
31, 2000 and 1999.

Extraordinary Charge.  For the year ended December 31, 2000, the
Company recorded a one-time charge of $1,000,000 as a reserve
against its investment in Unibol.

Net Income / Loss.  For the year ended December 31, 2000, the
Company recorded a net loss of $7,292,361 or $0.65 per common
share as compared to a net loss of $419,737 or $0.06 per common
share for the year ended December 31, 1999 as a result of the
factors described above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations have resulted in net losses of
$7,292,361 and $419,737 for the years ended December 31, 2000 and
1999 respectively.  Since the Company's inception in October
1998, the Company has financed its operations primarily through
the sale of its Common Stock.  On or about October 28, 1998, the
Company completed an offering that was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as
amended.  The Company issued 5,400,000 shares of its Common Stock
to its founders for an aggregate amount of $7,175, consisting of
$2,800 cash and the forgiveness of a loan owed to the
stockholders for corporate consulting and incorporation costs
that were paid for by the stockholders in the amount of $4,375.
On or about December 7, 1998, the Company completed an offering
that was exempt from registration pursuant to Regulation D, Rule
504, of the Securities Act of 1933, as amended.  The Company sold
1,141,800 shares of Common Stock at a price of $0.025 per share,
for proceeds of $25,545, net of offering costs of $3,000.
On March 15, 2000, pursuant to a private placement agreement that
was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 dated November 23, 1999, the Company
issued 600,000 shares of its Common Stock in exchange for cash of
$200,000 and a note receivable in the amount of $74,032.  The
note bears no interest and matures on September 6, 2001.  This
note was subsequently forgiven in its entirety in accordance with
the terms of an agreement entered into on March 30, 2001 (see
Note 14).
Finally, during the second quarter of 2000, the Company completed
a private placement of 2,654,971 shares of its Common Stock.  The
offering price per share was $4.00 and the Company received an
aggregate of $8,779,898 in proceeds from the offering.  The
Company paid commissions and expenses in the aggregate amount of
$547,259 in connection with the offering.  The offering was made
by the Company in reliance on the provisions of Rule 506 of
Regulation D promulgated under the Securities Act of 1933, as
amended, and the shares were offered solely to accredited
investors as that term is defined in Rule 501 of such regulation.

Net cash used in operating activities for the year ended December
31, 2000 was $4,568,481, while net cash provided by operations
for the year ended December 31, 1999 was $87,292.  The negative
cash flows generated from operations for the year ended December
31, 2000 were primarily the result of operating losses incurred
by the Company, while the positive cash flows generated from
operations for the year ended December 31, 1999 were primarily
due to the effects of non-cash charges.  In the short term
future, the Company believes that it may continue to experience
negative cash flows from operations as it restructures its sales
efforts to prepare for supporting its new graphical and Internet-
related products.

Net cash used in investing activities for the year ended December
31, 2000 was $1,824,557, while net cash provided by investing
activities for the year ended December 31, 1999 was $300,095.
The cash flows used in investing activities for the year ended
December 31, 2000 were primarily due to the Company's acquisition
of ALE Systems in October 2000, as well as the Company's
$1,000,000 investment in Unibol, Ltd., while the positive cash
flows generated from investing activities for the year ended
December 31, 1999 were primarily due to cash received from the
Company's acquisition of CSPI in January 1999.  The Company
expects to continue to invest in capital and other assets to
support its growth.

Net cash provided by financing activities for the years ended
December 31, 2000 was $8,424,835, which was derived primarily
from the Company's private offering of stock that was completed
during 2000.  There was no cash provided by or used in financing
activities for the year ended December 31, 1999.  The Company
anticipates that it may seek additional capital in the future to
support its business plan.

At December 31, 2000, cash and cash equivalents totaled
$2,434,579, up $2,031,797 from $402,782 at December 31, 1999.  In

-16-
<PAGE>

addition, at December 31, 2000, the Company had a working capital
deficiency of $1,494,819 and an accumulated deficit of
$7,729,423.

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

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

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

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

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

The Company believes that it has meritorious defenses to these
actions and intends to vigorously defend them.

-17-
<PAGE>

On February 13, 2001, the Company entered into a settlement and
release agreement (the "Settlement Agreement") with certain
shareholders that participated in the Company's private placement
of Common Stock during 2000 (the "Participating Subscribers").
Under the terms of this agreement, the Participating Subscribers
have agreed to release the Company, two of its officers and
directors and an unrelated party (the "Released Parties") from
any and all alleged claims against the Released Parties in
connection with the Company's private placement of Common Stock during
2000 in exchange for a cash payment of $0.565 per share
purchased, a note payable over 36 months, bearing no interest, equal
to $0.365 per share purchased, and one warrant exercisable into
one share of the Company's Common Stock for each share purchased.  The
warrants have an exercise price of $2.00 and must be exercised
within 24 months.  In addition, the two officers and the
unrelated party agreed to give up a portion of their individual
common share holdings to the Participating Subscribers.  All amounts
payable under the Settlement Agreement are to be paid no later than
March 30, 2001.

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


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

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

The Company is subject to various other legal proceedings and
claims, either asserted or unasserted, which arise in the
ordinary course of business.  While the outcome of these claims
cannot be predicted with certainty, management does not believe
that the outcome of any of these other legal matters will have a
material adverse effect on the Company's results of operations or
financial position.

Other than the above, the Company had no significant commitments
for capital expenditures at December 31, 2000.  Depending on the
outcome of the above-mentioned litigation currently filed against
the Company, the Company may be required to raise additional
funds to meet its working capital and capital expenditure needs
through the next twelve months.

-18-
<PAGE>

Item 7. Financial Statements.



                        TABLE OF CONTENTS

                                                            PAGE

INDEPENDENT AUDITORS' REPORT                                20

CONSOLIDATED BALANCE SHEET                                  21

CONSOLIDATED STATEMENTS OF OPERATIONS                       22

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY              23

CONSOLIDATED STATEMENTS OF CASH FLOWS                       24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                  25


-19-
<PAGE>

                  INDEPENDENT AUDITORS' REPORT
                  ----------------------------


Board of Directors and Shareholders
California Software Corporation


We  have  audited the accompanying consolidated balance sheet  of
California Software Corporation as of December 31, 2000, and  the
related  consolidated  statements  of  operations,  stockholders'
equity,  and cash flows for the years ended December 31, 2000 and
1999.    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 audits.

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

In our opinion, the consolidated financial statements referred to
above  present  fairly, in all material respects,  the  financial
position  of California Software Corporation and subsidiaries  as
of  December 31, 2000, and the results of its operations, and its
cash  flows  for the years ended December 31, 2000  and  1999, in
conformity with accounting principles generally accepted in the
United States.

The  accompanying  consolidated financial  statements  have  been
prepared  assuming  that the Company will  continue  as  a  going
concern.   As  discussed in Note 2 to the consolidated  financial
statements,  the  Company  has  suffered  recurring  losses  from
operations, has  a working  capital  deficit  and  is  a party to
shareholder  class actions.     These factors  raise  substantial
doubt  about the  Company's    ability  to continue  as  a  going
concern.    Management's plans in  regard  to these  matters  are
also discussed in Note 2. The  consolidated financial  statements
do not include any adjustments that might result from the outcome
of this uncertainty.



Stark Tinter & Associates, LLC


Denver, Colorado
April 5, 2001

-20-
<PAGE>

                 California Software Corporation
                   Consolidated Balance Sheet
                        December 31, 2000



ASSETS

Current assets:
  Cash and cash equivalents-----------------------   $2,434,579
  Accounts receivable, net of allowance for
   doubtful accounts of $125,000------------------    1,237,422
  Prepaids and other current assets---------------      591,664
                                                     -----------
     Total current assets-------------------------    4,263,665

Property and equipment, net-----------------------      285,193
Goodwill and other intangibles, net---------------    3,736,446
Other assets--------------------------------------       69,557
                                                     -----------
TOTAL ASSETS--------------------------------------   $8,354,861
                                                     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued expenses----------    $4,481,863
  Accrued payroll and related taxes--------------       870,557
  Deferred revenue-------------------------------       406,064
                                                     -----------
    Total current liabilities--------------------     5,758,484

Long-term liabilities----------------------------     1,264,431
                                                     -----------
    Total liabilities----------------------------     7,022,915

Commitments and contingencies

Stockholders' Equity
Preferred stock, $0.001 par value; 5,000,000
  shares authorized; no shares issued and
  outstanding------------------------------------             -
Common stock, $0.001 par value; 20,000,000
  shares authorized; 12,579,771 shares issued
  and outstanding--------------------------------        12,580
  Additional paid-in capital---------------------     9,048,789
Accumulated deficit------------------------------    (7,729,423)
                                                     -----------
Total stockholders' equity-----------------------     1,331,946
                                                     -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY-------    $8,354,861
                                                     ===========


     See the accompanying notes to the financial statements.


-21-
<PAGE>

                 California Software Corporation
              Consolidated Statements of Operations
         For the Years Ended December 31, 2000 and 1999


                                                2000         1999
                                            -----------   -----------
Revenues:
  Software sales-------------------------   $1,026,195    $2,571,164
  Hardware sales-------------------------      199,228             -
  Maintenance and other revenue----------      547,057       135,834
                                            -----------   -----------
    Total revenues-----------------------    1,772,480     2,706,998
                                            -----------   -----------
Costs and expenses:
  Cost of sales--------------------------      227,825             -
  Research and development---------------      577,729       414,992
  Selling, general, and administrative---    7,197,109     2,686,999
  Depreciation and amortization----------      252,466        13,100
                                            -----------   -----------
    Total costs and expenses-------------    8,255,129     3,115,091
                                            -----------   -----------
Loss from operations---------------------   (6,482,649)     (408,093)

Other income (expense), net--------------      190,288       (11,644)
                                            -----------   -----------
Loss before provision for income taxes---   (6,292,361)     (419,737)

Provision for income taxes---------------            -             -
                                            -----------   -----------
Loss before extraordinary item-----------   (6,292,361)     (419,737)

Extraordinary item - loss on
investment-------------------------------   (1,000,000)            -
                                            -----------   -----------

Net loss---------------------------------  $(7,292,361)   $ (419,737)
                                            ===========   ===========
Loss per common share, basic and fully
diluted:

Loss before extraordinary item-----------  $     (0.56)   $    (0.06)
Extraordinary item-----------------------        (0.09)            -
                                            -----------   -----------
Net loss---------------------------------  $     (0.65)   $    (0.06)
                                            ===========   ===========
Weighted-average shares outstanding -
basic and fully diluted-----------------    11,180,857     6,541,800
                                            ===========   ===========



     See the accompanying notes to the financial statements.

-22-
<PAGE>


                   California Software Corporation
                  Statement of Stockholders' Equity
           For the Years Ended December 31, 2000 and 1999


               Common Stock    Additional   Common                   Total
               --------------   Paid-In     Stock   Accumulated Stockholders'
               Shares   Amount   Capital  Subscribed  Deficit       Equity
            ---------------------------------------------------------------

Balance at
January 1,
1999          6,541,800 $ 6,542   $ 26,178 $      -   $ (17,325)  $ 15,395

Subscription
of common
stock for
acquisition
of CSPI
assets                -       -          -  700,840           -    700,840

Net loss              -       -          -        -    (419,737)  (419,737)
            ---------------------------------------------------------------
Balance at
December 31,
1999          6,541,800   6,542     26,178  700,840    (437,062)   296,498

Conversion of
common stock
subscription  2,000,000   2,000    698,840 (700,840)          -         -


Issuances of
common
stock         4,037,971   4,038  9,675,500        -           -  9,679,538

Reserve for
settlement            -       - (1,351,729)       -           - (1,351,729)

Net loss              -       -          -        -  (7,292,361)(7,292,361)
            ---------------------------------------------------------------
Balance at
December 31,
2000         12,579,771 $12,580 $9,048,789 $      - $(7,729,423)$1,331,946
            ===============================================================


     See the accompanying notes to the financial statements.

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<PAGE>

                 California Software Corporation
              Consolidated Statements of Cash Flows
         For the Years Ended December 31, 2000 and 1999

                                               2000           1999

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss--------------------------------  $(7,292,361)    $ (419,737)

Adjustments to reconcile net loss to net
  cash provided by (used in) operating
  activities:

Depreciation and amortization-----------      252,466         13,100
Allowance for doubtful accounts---------      302,864        497,214
Writedown of obsolete inventory---------            -         84,828
Issuance of common stock for services---    1,182,881              -
Loss on disposal of assets--------------        5,542              -
Provision for loss on investment--------    1,000,000              -

Changes in operating assets and
  liabilities:

  Accounts receivable-------------------      497,476         63,762
  Prepaids and other current assets-----     (485,375)       (25,291)
  Accounts payable and accrued expenses-      (65,359)      (108,847)
  Accrued payroll and related taxes-----       19,125         (5,070)
  Deferred revenue----------------------       14,260        (12,667)
                                           -----------   ------------
Net cash provided by (used in) operating
  activities----------------------------   (4,568,481)        87,292
                                           -----------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of CSPI assets,
  net of cash acquired-----------------             -        349,950
Purchase of ALE, net of cash acquired--      (713,903)             -
Purchase of Unibol---------------------    (1,000,000)             -
Acquisition of property and equipment--      (105,115)       (49,855)
Other assets---------------------------        (5,539)             -
                                           -----------   ------------
Net cash provided by (used in) investing
  activities---------------------------    (1,824,557)       300,095
                                           -----------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock---------------     8,432,639              -
Repayments under capital leases--------        (7,804)             -
                                           -----------   ------------
Net cash provided by financing activities   8,424,835              -
                                           -----------   ------------
Net increase in cash and cash equivalents   2,031,797        387,387
Cash and cash equivalents, beginning of
  year---------------------------------       402,782         15,395
                                           -----------   ------------
Cash and cash equivalents, end of year-   $ 2,434,579     $  402,782
                                           ===========   ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
Cash paid during the year for:
Interest-------------------------------   $    31,922     $   24,024
                                           ===========   ============
Income taxes---------------------------   $         -     $        -
                                           ===========   ============
NON-CASH FINANCING AND INVESTING
  ACTIVITIES:
Purchase of CSPI assets in exchange for
  common stock subscription-----------    $         -     $  700,840
                                           ===========   ============
Conversion of common stock subscription
  into common stock-------------------    $   700,840     $        -
                                           ===========   ============
Issuance of common stock in exchange
  for note receivable-----------------    $    74,032     $        -
                                           ===========   ============
Equipment acquired under capital leases   $    33,431     $        -
                                           ===========   ============
Notes payable for PPM settlement------    $ 1,351,729     $        -
                                           ===========   ============


  See the accompanying notes to the financial statements.


-24-
<PAGE>


                  California Software Corporation
              Notes to Consolidated Financial Statements
                        December 31, 2000

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

California Software Corporation (the "Company") was incorporated
in the State of Nevada on October 28, 1998.  The Company markets
a family of software products under the brand name BABY that
provide (a) software solutions that allow business customers to
migrate International Business Machines ("IBM") Midrange RPG
applications to the PC environment and to execute such
applications on a PC network without a complete rewrite of the
application's source code; (b) GUI software that allows a
developer of an AS/400 or iSeries/400 text-based application to
present screens with Windows(TM) point-and-click functionality; and
(c) software that internet-enables AS/400 and iSeries/400
applications.  In addition, the Company markets a software
product under the brand name MLPS that supports the processing of
mortgage loans in the banking and financial industries.

Through December 31, 1998, the Company had been in the
development stage.  Effective January 12, 1999, the Company
commenced operations and was no longer considered to be in the
development stage.

Consolidated Financial Statements

The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
Intercompany transactions and balances have been eliminated in
consolidation.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes.  Actual
results could differ from those estimates.  On an ongoing basis,
management reviews those estimates, including those related to
allowances for doubtful accounts, loss contingencies for
litigation, income taxes, and projection of future cash flows
used to assess the recoverability of long-lived assets.

Cash and Cash Equivalents

For purposes of balance sheet classification and the statements
of cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months
or less to be cash equivalents.

Financial Instruments

Fair value estimates discussed herein are based upon certain
market assumptions and pertinent information available to
management as of December 31, 2000.  The respective carrying
value of certain on-balance sheet financial instruments
approximated their fair values.  These financial instruments
include cash, accounts receivable, accounts payable and accrued
expenses.  Fair values were assumed to approximate carrying
values for these financial instruments because they are short-
term in nature and their carrying amounts approximate fair value
or they are receivable or payable on demand.

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash
investments and trade receivables.  The Company has cash
investment policies that limit investments to investment grade
securities.  The Company performs ongoing credit evaluations of
its customers' financial position and the risk with respect to
trade receivables is further mitigated by the fact that the
Company's customer base is highly diversified.

At December 31, 2000, the Company had cash balances on deposit
that exceeded the balance insured by the FDIC by approximately
$2.33 million at a single financial institution.

Concentrations

During the year ended December 31, 2000, one domestic customer
accounted for approximately 11.7% of the Company's consolidated
sales.  At December 31, 2000, accounts receivable from this
customer totaled $31,310.

Inventory

Inventories are stated at the lower of cost (based on the first-
in, first-out method) or market.

-25-
<PAGE>

Property and Equipment

Property and equipment is stated at cost.  Depreciation is
computed using the straight-line method based on estimated useful
lives ranging from three to five years.

Long-Lived Assets

The carrying amount of long-lived assets is reviewed if facts and
circumstances suggest that it may not be recoverable.  For
purposes of evaluating the recoverability of long-lived assets,
the Company estimates the future undiscounted cash flows of the
businesses to which long-lived assets relate.  When such
estimates of the future undiscounted cash flows are less than the
carrying amount of long-lived assets, the difference is charged
to operations.  The Company estimates the future undiscounted
cash flows using historical results and current projections.  If
current projections of future cash flows are not achieved, the
Company may be required to record reductions in the carrying
values of long-lived assets in future periods.

Deferred Revenue

Deferred revenue primarily relates to end-user maintenance and
business partner agreements which have been paid for by customers
prior to the performance of those services.  Revenue from these
services is recognized ratably over the term of the corresponding
maintenance or partner agreement.

Revenue Recognition

In October 1997, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position ("SOP") No. 97-
2, "Software Revenue Recognition" which superseded SOP No. 91-1.
SOP No. 97-2 was effective for fiscal years after December 15,
1997, as amended by SOP No. 98-4 and SOP No. 98-9, and provides
guidance on applying generally accepted accounting principles for
software revenue recognition transactions.  The Company has
adopted the provisions of SOP No. 97-2 for the fiscal year ended
December 31, 1998.  The Company recognizes revenue from sales of
its products upon shipment, provided fees are fixed and
determinable and collection is probable.

Research and Development Costs

The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed"
("SFAS No. 86"), which requires capitalization of certain
software development costs subsequent to the establishment of
technological feasibility.  Based on the Company's product
development process, technological feasibility is established
upon completion of a working model.  Since the Company does not
incur any costs between the completion of the working model and
the point at which the product is ready for general release, all
research and development costs are charged to expense as
incurred.

Accounting for Stock-Based Compensation

Effective January 1, 1999, the Company adopted the disclosure
provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
In accordance with the provisions of SFAS No. 123, the Company
applies Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees" ("APB No. 25") and related
interpretations in accounting for its employee stock option
plans.  In March 2000, the FASB issued FASB Interpretation No. 44
("FIN 44"), "Accounting for Certain Transactions Involving Stock
Compensation".  The Company adopted FIN 44 effective July 1, 2000
with respect to certain provisions applicable to new awards,
exchanges of awards in a business combination, modifications to
outstanding awards and changes in grantee status that occur on or
after that date.  FIN 44 addresses practice issues related to the
application of APB No. 25.  The application of FIN 44 did not
have a material impact on the Company's financial position or
consolidated results of operations.

Income Taxes

The Company uses the liability method of accounting for income
taxes.  Accordingly, deferred tax assets and liabilities are

-26-
<PAGE>

recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
assets and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.  The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period of the enactment date.  A
valuation allowance is established against deferred tax assets
when management concludes that the "more likely than not" realization
criteria has not been met.

Advertising Costs

The Company expenses all costs of advertising as incurred.
Advertising costs included in selling, general and administrative
expenses aggregated $458,918 and $217,189 in 2000 and 1999,
respectively.

Net Income (Loss) per Common Share

The Company calculates net income (loss) per share as required by
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share".  Basic earnings (loss) per share is calculated by
dividing net income (loss) by the weighted average number of
common shares outstanding for the period.  Diluted earnings
(loss) per share is calculated by dividing net income (loss) by
the weighted average number of common shares and dilutive common
stock equivalents outstanding.  During the periods presented,
common stock equivalents were not considered as their effect
would be antidilutive.

Segment Information

The Company follows the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131").  In
accordance with SFAS No. 131, certain information is disclosed
based on the way management organizes financial information for
making operating decisions and assessing performance.  The
Company currently operates in a single segment and will evaluate
additional segment disclosure requirements as it expands its
operations.

Goodwill

Goodwill associated with the acquisition of the assets of
Software Connections, Inc. d/b/a ALE Systems ("ALE") is being
amortized using the straight-line method over a period of five
years.  Amortization charged to operations during 2000 and
accumuated amortization at December 31, 2000 was $196,655 (see
Note 4).

Recent Pronouncements

The FASB recently issued Statement of Financial Accounting
Standards No 137, "Accounting for Derivative Instruments and
Hedging Activities-Deferral of Effective Date of FASB Statement
No. 133" ("SFAS No. 137").  SFAS No. 137 defers for one year the
effective date of Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133").   The rule now will apply to all
fiscal quarters of all fiscal years beginning after June 15,
2000.  SFAS No. 133 permits early adoption as of the beginning of
any fiscal quarter after its issuance.  The Statement will
require the Company to recognize all derivatives on the balance
sheet at fair value.  Derivatives  that are not  hedges must be
adjusted to fair value through income.  If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in
fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings.  The ineffective
portion of a derivative's change in fair value will be
immediately recognized in earnings.  The Company does not
expect the adoption of SFAS No.133 to have a material impact on
the earnings and financial position of the Company.

During December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 ("SAB No. 101") which
provides guidance on recognition, presentation, and disclosure of
revenue in financial statements.  SAB No. 101 does not impact the
Company's revenue recognition policies.

-27-
<PAGE>

NOTE 2. BASIS OF REPORTING

The Company's financial statements are presented on a going-
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business.

The Company has incurred a net loss of $7,292,361 for the year
ended December 31, 2000 and has incurred net losses since its
inception in 1998.  The Company also has a working capital deficiency
of $1,494,819 at December 31, 2000.  In addition, the Company is
currently a party to shareholder class actions, as more fully
described in Note 7.

The Company's ability to continue as a going concern is
contingent upon its ability to secure financing, attain
profitable operations, and receive a favorable outcome to the
litigation described above.  Management plans to increase
revenues by expanding its customer base, enhancing existing
products, and developing new and upgraded products.

The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the
Company to continue as a going concern.

NOTE 3. RESTATEMENT OF FINANCIAL STATEMENTS

During August 2000 the Company filed a Form 8-K with the
Securities and Exchange Commission ("the Commission") informing
the Commission that it will restate its financial statements for
1999 and the first quarter of 2000.  The restatement results from
the Company's change in its revenue recognition policy from a
method that did not comply with Generally Accepted Accounting
Principles ("GAAP") to a method which does comply with GAAP.

The Company had previously recognized revenue upon shipment of
its product to a customer for a trial period in order to allow
the customer to determine whether to keep or return the product,
with a reserve established to cover returns.  Under the new
policy, revenue is not recognized until the customer agrees to
accept the product and collection of the fee is probable.

Following is a summary of revenue and income (loss) for the year
ended December 31, 1999 before income taxes:

                                       Previously
                                        Reported     Restated
                                       -----------  ----------
Total revenue                         $10,246,193  $2,706,998
                                       ===========  ==========
Net income (loss) before income taxes $ 3,350,493   $(419,737)
                                       ===========  ==========

The Company is currently involved in litigation as a result of
this restatement (see Note 7).

NOTE 4. ACQUISITIONS

On January 12, 1999, the Company acquired the net assets of
California Software Products, Inc. ("CSPI") with a historical
cost of $700,840 in exchange for a Common Stock subscription.
Since CSPI's line of business was substantially the same as the
Company's, and the shareholders, officers and directors of CSPI
and CSC were substantially the same, the Company valued the net
assets acquired from CSPI at their historical cost.  On January
27, 2000, the subscription was converted into 2,000,000 shares of
the Company's Common Stock.

On October 20, 2000, the Company acquired the net assets of Software
Connections, Inc, dba ALE Systems ("ALE"), consisting of assets
valued at $1,836,632 and liabilities valued at $4,102,233.
Consideration for this purchase consisted of an initial cash payment
of $750,000, an earn-out payable bearing no interest over 60 months
valued between $625,000 and $2,500,000 depending on ALE's operating
results during that period, and a note payable bearing no interest in
the amount of $292,500 payable in monthly installments over 36 months.
The acquisition has been accounted for as a purchase and, accordingly,
the operating results of ALE have been included in the consolidated
financial statements of the Company since the date of acquisition.
The excess of the aggregate purchase price over the fair market value
of net assets acquired of $3,933,101 is being amortized over five years.

The following unaudited pro forma consolidated results of operations
for the years ended December 31, 2000 and 1999 assume the ALE acquistion
occurred as of January 1, 1999:

                                                2000         1999
                                            ------------ ------------
Net revenue                                $  6,115,708 $ 13,316,273
                                            ============ ============
Net loss                                   $ (7,776,581)$ (1,146,150)
                                            ============ ============
Loss per share, basic and fully diluted    $      (0.69) $     (0.18)
                                            ============ ============



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<PAGE>

NOTE 5. NONRECURRING IMPAIRMENT CHARGES

In 1999, the Company discontinued selling a DOS-based version of
its computer software.  Because of this, an item that accounted
for $84,828 of inventory became obsolete and was charged to
operations.

On November 8, 2000, the Company signed a letter of intent to
merge with Unicomp, Inc. ("Unicomp"), a Georgia corporation.  On
that same date, and two days thereafter, the Company entered into
various agreements with Unicomp through which the Company acquired
Unibol, Ltd., a United Kingdom corporation, and through which the
Company contends it also acquired Unibol, Inc., a Georgia corporation
("Unibol U.S.").  In the Stock Purchase Agreement, Amendment, and
related documents, the Company agreed to pay cash of $1,000,000, an
additional $500,000 due in four monthly installments commencing
on the first of the month beginning with the second month after
the Closing Date, and $1,500,000 of the Company's Common Stock
due and valued on the six month anniversary of the Closing Date.
On November 13, 2000, the Company paid the $1,000,000 in cash due
under the agreements.  Subsequent to the cash payment, a dispute
arose between the Company and Unicomp about Unicomp's providing
of financial information, the identity of the companies included
under the acquisition documents, as well as the intent of certain
provisions contained in the Amendment purporting to grant sole
operational and voting control over the Unibol entities to the
Chief Executive Officer of Unicomp for a six month period.  As a
result, the Company did not make any of the installment payments
due under the purchase agreement, and merger discussions were
terminated.  The Company thereafter filed a lawsuit in California
against Unicomp, several of its officers and directors, and a
third party alleging fraudulent misrepresentation and various
other charges in connection with the acquisition of Unibol, Ltd.
and Unibol, Inc.  Unicomp also filed a lawsuit in Georgia against
the Company seeking to preserve Unicomp's interest in one of the
Unibol companies, Unibol, Inc., as well as to uphold the original
terms and conditions of the Agreement and Amendment, although that
lawsuit was subsequently dismissed by the Georgia court.  The claims
previously asserted by Unicomp in the Georgia action are asserted
by Unicomp in a cross-complaint to the action in California filed
by the Company.  On January 22, 2001, at a meeting of Unibol UK's
shareholders, the shareholders elected to revoke the agreement
giving control over the Unibol entities to the Chief Executive
Officer of Unicomp and the Company asserted its physical and
operational control over Unibol UK on or about January 29, 2001.
Due to legal obstacles, the Company has not been able to ascertain
what assets and liabilities it purchased in connection with this
acquisition.  In addition, the outcome of the current litigation is
not known at this time.  As a result, the Company has established
a valuation reserve at December 31, 2000 against its $1,000,000 cash
investment in Unibol.  This reserve is presented as an
extraordinary item in the Company's Consolidated Statement of
Operations for the year ended December 31, 2000.

NOTE 6. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2000 is as follows:


  Computer equipment                              $143,684
  Office equipment                                 128,158
  Equipment held under capital leases               74,714
                                                  ---------
                                                   346,556
  Less accumulated depreciation and amortization   (61,363)
                                                  ---------
                                                  $285,193
                                                  =========

NOTE 7. COMMITMENTS AND CONTINGENCIES

Leases
------
In February 2000, the Company entered into a non-cancelable
operating lease agreement for its corporate facilities.  The
lease is for a term of five years with an option to extend the
lease for an additional five years at the conclusion of the
original lease term.  In addition, the Company assumed a non-
cancelable operating lease agreement for its facilities located
in Richmond, VA in connection with its acquisition of ALE.
The lease expires in January 2003.

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<PAGE>

Future minimum payments under non-cancelable operating leases
with initial terms of one year or more are as follows:


     2001                                    $  447,064
     2002                                       437,608
     2003                                       301,305
     2004                                       295,049
     2005                                        99,103
                                             ----------
                                             $1,580,129
                                             ==========

Rent expense for the years ended December 31, 2000 and 1999
totaled $295,961 and $93,081, respectively.

Litigation

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

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

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

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

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

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<PAGE>

status of the case in Orange County, California, at this time it
is not reasonably possible to estimate the likelihood of an
unfavorable outcome or the amount or range of potential loss, if
any, on the cross-complaint.

The Company believes that it has meritorious defenses to these
actions and intends to vigorously defend them.  At this time it
is not reasonably possible to estimate the range of damages, if
any, that the Company might incur in connection with the above
actions.  However, the uncertainty associated with substantial
unresolved litigation might be expected to have an adverse impact
on the Company's business.

The Company is subject to various other legal proceedings and
claims, either asserted or unasserted, which arise in the
ordinary course of business.  While the outcome of these claims
cannot be predicted with certainty, management does not believe
that the outcome of any of these other legal matters will have a
material adverse effect on the Company's results of operations or
financial position.

NOTE 8. STOCKHOLDERS' EQUITY

Preferred Stock

The Company's Board of Directors has the authority to issue
shares of preferred stock, in one or more series, and containing
certain rights and limitations, including dividend rights, voting
rights, conversion privileges, redemption rights, and liquidation
or sinking fund rights.  No preferred stock has been issued or is
outstanding at December 31, 2000 and the Company has no present
plans to issue any shares of preferred stock.

Common Stock

On February 1, 2000, the Company entered into an agreement for
investor relations services that was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.  Under
the terms of the agreement, the Company received investor
relations services for a nine month period from February 1, 2000
to October 31, 2000 in exchange for 420,000 shares of the
Company's Common Stock valued at $0.625 per share.  These shares
were issued on March 6, 2000, and were valued at the fair market
value of the shares on the date the Company agreed to issue the
shares.

On February 1, 2000, the Company entered into an agreement for
various corporate financial services that was exempt from
registration pursuant to Section 4(2) of the Securities Act of
1933.  Under the terms of the agreement, the Company received
specified financial consulting services in exchange for 200,000
shares of the Company's Common Stock valued at $0.525 per share.
These shares were issued on March 15, 2000, and were valued at
the fair market value of the shares on the date the Company agreed
to issue the shares.

On March 15, 2000 the Company effected a 2 for 1 forward stock
split. All share and per share amounts in this report have been
restated to give effect to this split.

On March 15, 2000, pursuant to a private placement agreement that
was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 dated November 23, 1999, the Company
issued 600,000 shares of its Common Stock in exchange for cash of
$200,000 and a note receivable in the amount of $74,032.  The
note bears no interest and matures on September 6, 2001.  This
note was subsequently forgiven in its entirety in accordance with
the terms of an agreement entered into on March 30, 2001 (see
Note 14).

-31-
<PAGE>

On April 6, 2000, the Company entered into an agreement for
investor relations services that was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.  Under
the terms of the agreement, the Company received investor
relations services for a six month period from April 1, 2000 to
September 30, 2000 in exchange for 150,000 shares of the
Company's Common Stock valued at $5.10 per share.  These shares
were issued on April 14, 2000, and were valued at the fair market
value of the shares on the date the Company agreed to issue the
shares.

During the three months ended June 30, 2000, the Company
completed a private offering of its Common Stock under the
provisions of Rule 506 of Regulation D under the Securities Act
of 1933, as amended.  The Company issued a total of 2,654,971
shares of its Common Stock in exchange for proceeds of
$8,232,639, net of offering costs of $547,259.

During the year ended December 31, 2000, the Company issued
13,000 shares of its Common Stock that was exempt from
registration pursuant to Section 4(2) of the Securities Act of
1933 valued between $1.50 and $7.20 per share in exchange for
other services valued at $55,533, the fair market value of the
shares on the dates the Company agreed to issue the shares.

Common Stock Subscription

On January 12, 1999, the Company acquired the net assets of
California Software Products, Inc. ("CSPI") with a historical
cost of $700,840 in exchange for a Common Stock subscription.
Since CSPI's line of business was substantially the same as the
Company's, and the shareholders, officers, and directors of CSPI
and CSC were substantially the same, the Company valued the net
assets acquired from CSPI at their historical cost.  On January
27, 2000, the subscription was converted into 2,000,000 shares
of the Company's Common Stock.

NOTE 9. EMPLOYEE STOCK OPTION PLAN

The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
No. 25") and related Interpretations in accounting for its
employee stock options.  Under APB No. 25, because the exercise
price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no
compensation expense is recognized.

On December 4, 2000, the Board of Directors of the Company
approved by action taken without a meeting by written consent,
subject to the approval of the shareholders, an option plan (the
"Plan") creating 3,000,000 shares of Common Stock underlying
options that may be granted under the Plan.  The Plan was
approved by the holders of a majority of the outstanding Common
Stock of the Company on December 4, 2000. As of December 31,
2000, the Company had issued 2,078,500 shares under the Plan,
with 921,500 shares remaining for future grant under the Plan.
In addition, the Company granted 1,000,000 non-qualified stock
options not under the Plan in connection with an employment
agreement entered into in conjunction with the Company's
acquisition of ALE.  These options were granted on October 20,
2000 at $0.74 per share, the fair market value of the Company's
stock as of the date of grant, vest at a rate of 40,000 shares
per month, and are exercisable for a five year period.

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<PAGE>

The following is a summary of changes in options outstanding for
the year ended December 31, 2000:

                                                  Weighted-
                                                  average
                                                  exercise
                                         Options    price
                                      ----------  ----------
  Outstanding - beginning of year              -     $     -
  Granted                              3,328,500        0.60
  Exercised                                    -           -
  Forfeited                             (250,000)      (0.68)
                                      ----------  ----------
  Outstanding - end of year            3,078,500        0.57
                                      ==========  ==========
  Exercisable at end of year              80,000     $  0.74
                                      ==========  ==========
  Weighted-average fair value of       $    0.59
  options granted during the year     ==========

The following table summarizes information about stock options
outstanding at December 31, 2000:

                           Outstanding             Exercisable
             -------------------------------------------------------
                            Weighted
                             average    Weighted            Weighted
   Range of                 remaining    average            average
  exercise        Number   contractual  exercise  Number    exercise
   prices       outstanding   life        price exercisable  price
--------------------------------------------------------------------
$0.31 - $0.56   1,777,000     4.91    $  0.36         -      $   -

$0.57 - $1.25   1,290,000     4.77       0.83    80,000       0.74

$1.26 - $13.56     11,500     4.26       4.72         -         -


The weighted average remaining contractual life of all stock
options outstanding at December 31, 2000 was 4.8 years.

Pro forma information regarding net income and earnings per share
is required by SFAS No. 123 and has been determined as if the
Company had accounted for its employee stock options under the
fair value method of that Statement.  The fair value for these
options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average
assumptions for 2000: risk free interest rate of 6%; dividend
yield of 0%; volatility factor of the expected market price of
the Company's Common Stock of 233%; and a weighted-average life
of the option of 4.8 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable.  In addition, option
valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value
of the options is charged to expense in the year(s) that the
options were issued.  The Company's pro forma information
follows:

                                           December 31,
                                        2000        1999
                                     ----------  ----------
     Pro forma net loss              $9,262,481  $       -
                                     ==========  ==========
     Pro forma loss per share -
       basic and fully diluted       $     0.83  $       -
                                     ==========  ==========
NOTE 10. INCOME TAXES

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<PAGE>

The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"), which requires use of the liability
method.  SFAS No. 109 provides that deferred tax assets and
liabilities are recorded based on the differences between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes, referred to as temporary
differences.  Deferred tax assets and liabilities at the end of
each period are determined using the currently enacted tax rates
applied to taxable income in the periods in which the deferred
tax assets and liabilities are expected to be settled or
realized.

The provision for income taxes differs from the amount computed
by applying the statutory federal income tax rate to income
before provision for income taxes.  The sources and tax effects
of the differences are as follows:

                                   2000         1999
                                  -------      -------
     U.S federal statutory rate   (34.0%)      (34.0%)
     R&D credit                     8.5%         9.5%
     Valuation reserve             25.5%        24.5%
                                  -------      -------
     Total                           --%          --%
                                  =======      =======

As of December 31, 2000, the Company has a net operating loss
carryforward of approximately $6,665,000 for tax purposes, which
will be available to offset future taxable income.  If not used,
the carryforward will expire through the year 2020.  To the
extent that net operating loss carryforwards, when realized,
relate to stock option deductions, the resulting benefits will be
credited to stockholders' equity.  The deferred tax asset
relating to the operating loss carryforward of approximately
$2,266,000 at December 31, 2000 has been fully reserved.

NOTE 11. RELATED PARTY TRANSACTIONS

The Company will from time-to-time make loans to or receive loans
from its officers.  These loans typically bear no interest and
are due on demand.

On December 13, 1999, the Company entered into an employment
agreement with Bruce Acacio, its Chief Executive Officer.  The
agreement is for a three year term with the total consideration
to be paid summarized as follows:

                                   Year 1    Year 2     Year 3
                                  --------  --------   --------
Annual Base Salary               $225,000  $300,000   $350,000
Annual Bonus (1)                 $100,000  $100,000   $100,000
Stock Options (shares) (2)        300,000   300,000    300,000


In addition, on December 13, 1999, the Company also entered into
an employment agreement with Carol Conway DeWees, its President.
The agreement is also for a three year term with the total
consideration to be paid summarized as follows:

                                   Year 1    Year 2     Year 3
                                  --------  --------  --------
Annual Base Salary               $180,000  $230,000  $280,000
Annual Bonus (1)                 $100,000  $100,000  $100,000
Stock Options (shares) (2)        250,000   250,000   250,000



  (1) Bonuses are to be paid quarterly based upon a percentage of
      achievement of revenue goals set forth by the Company's Board
      of Directors.
  (2) Option grants are to be issued at the end of each year
      during the term of the agreement, and are exercisable at the
      end of the initial term of the agreement.

Both agreements provide that, upon termination of the employee as
a result of unlawful or dishonest acts by the employee,
conviction of the employee of a felony offense, or a breach of
any term of the employment agreement by the employee, the Company
shall pay the employee the full amount of compensation accrued as
of the date of termination.  In addition, both agreements provide
for the immediate payment of all compensation due under the
agreement for the remainder of the term of the agreement upon the
termination of employment due to a default or breach of any term

-34-
<PAGE>

of the agreement by the Company.  Finally, both agreements
contain non-competition provisions as well as provisions under
which both officers will continue to serve the Company in the
same capacity in the event of a change of control.

For the year ended December 31, 2000, the Company's CEO and President
received cash compensation totaling $277,288 and $232,288,respectively.
On December 13, 2000, both the Company's CEO and President
voluntarily elected to defer the increases in their annual base
salaries until a later date.

NOTE 12. EMPLOYEE BENEFIT PLAN

Effective January 12, 1999, the Company assumed the CSPI Savings
and Investment Plan (the "Plan") in conjunction with the
Company's acquisition of CSPI covering substantially all of the
Company's employees.  Employees may contribute up to 15% of their
total compensation to the Plan.  The Company is required to match
25% of the first $4,000 contributed to the Plan.  401(k) expenses
for the Plan, including administrative costs, were $9,066 and
$12,161, respectively, for the years ended December 31, 2000 and
1999.

Effective October 20, 2000, the Company assumed the Software
Connections Inc. 401(k) Plan (the " SCI Plan") in conjunction
with the Company's acquisition of ALE.  Employees who are at
least 21 years of age and have completed 6 months of service may
contribute up to 15% of their total compensation to the Plan.
The Company may make elective contributions to the SCI Plan at
its discretion.  401(k) expenses for the SCI Plan, including
administrative costs, were $513 for the year ended December 31,
2000.

NOTE 13. LONG TERM DEBT

Long-term debt at December 31, 2000 consists of the following:

     Reserve for shareholder settlement
       agreement (see Note 14)                 $  530,517
     Earn-out payable to shareholder in
       connection with acquisition of ALE
       (see Note 4)                               604,167
     Note payable to shareholder in
       connection with acquisition of ALE
       (see Note 4)                               277,604
     Capital lease obligations                     69,707
                                               -----------
                                                1,481,995
     Less current maturities                     (217,564)
                                               -----------
                                               $1,264,431
                                               ===========

Maturities of long-term debt at December 31, 2000 are as follows:

     2001                                      $  217,564
     2002                                         135,512
     2003                                          15,068
     2004                                         530,517
     2005                                         583,334
                                               -----------
                                               $1,481,995
                                               ===========

NOTE 14. SUBSEQUENT EVENTS

Shareholder Settlement Agreement
--------------------------------
On February 13, 2001, the Company entered into a settlement and
release agreement (the "Settlement Agreement") with certain
shareholders that participated in the Company's private placement
of Common Stock during 2000 (the "Participating Subscribers").
Under the terms of this agreement, the Participating Subscribers
have agreed to release the Company, two of its officers and
directors and an unrelated party (the "Released Parties") from
any and all alleged claims against the Released Parties in
connection with the Company's private placement of Common Stock
during 2000 in exchange for a cash payment of $0.565 per share
purchased, a note payable over 36 months bearing no interest equal
to $0.365 per share purchased, and one warrant exercisable into
one share of the Company's Common Stock for each share purchased.The
warrants have an exercise price of $2.00 and must be exercised
within 24 months.  In addition, the two officers and the
unrelated party agreed to give up a portion of their individual
common share holdings to the Participating Subscribers.  All
amounts payable under the Settlement Agreement are to be paid no
later than March 30, 2001.

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


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

For purposes of financial statement presentation, the Company has
included the cash and notes payable under the Settlement
Agreement in accounts payable and accrued expenses and long-term
liabilities, respectively, at December 31, 2000, with a
corresponding reduction in additional paid-in capital.

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

-35-
<PAGE>

Common Stock to the Participating Subscribers.

-36-
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

In  October  1997,  the American Institute  of  Certified  Public
Accountants ("AICPA") issued Statement of Position ("SOP") No. 97-
2,  "Software Revenue Recognition" which superseded SOP No. 91-1.
SOP  No.  97-2 was effective for fiscal years after December  15,
1997,  as  amended by SOP No. 98-4 and SOP No. 98-9, and provides
guidance  on  applying  generally accepted accounting  principles
("GAAP")  for  software  revenue recognition  transactions.   The
Company  had been improperly recognizing revenue on shipments  of
new  products that failed to meet the criteria specified  in  SOP
No.  97-2.   The  Company's  independent  accountant  issued   an
unqualified opinion on the Company's financial statements for the
year ended December 31, 1999, a copy of which was included in the
Company's  Annual Report on Form 10-KSB filed for the  year  then
ended.   In  addition, the Company filed a Form  10-QSB  for  the
three month period ended March 31, 2000 which contained financial
statements  that  were also not prepared in accordance  with  the
provisions  of SOP No. 97-2.  During the first quarter  of  2000,
the  Company was seeking to list its Common Stock on the American
Stock  Exchange  ("AMEX") and, during the  listing  process,  was
notified   that  the  Company  would  need  to  submit  reaudited
financial  statements for the year ended December 31,  1999  from
another independent accountant because the Company was unable  to
provide  evidence that its independent accountant  met  the  peer
review  standards mandated by the American Institute of Certified
Public  Accountants  ("AICPA").  On May 2,  2000,  the  Company's
Board   of  Directors  approved  a  resolution  engaging  a   new
certifying  independent  accountant,  Squar,  Milner,   Reehl   &
Williamson, LLP ("Squar"), who was initially engaged to perform a
SAS 71 review of the Company's financial statements for the three
months  ended  March  31,  2000.  After  appointing  Squar,  AMEX
notified  the  Company  that it would  accept  audited  financial
statements  for the three month period ended March  31,  2000  in
lieu  of  having  the year ended December 31, 1999  reaudited  by
Squar.  Squar subsequently notified the Company that it would not
be  able to perform this audit within the timeframe requested  by
the  Company.   On  July  24, 2000, the  Company  engaged  a  new
certifying  independent accountant, Stark, Tinter and Associates,
LLP ("Stark") in order to complete the audit within the Company's
timeframe.    Upon   examination  of  the   Company's   financial
statements, Stark notified the Company that the method  in  which
the Company used to record revenue was not in compliance with the
provisions  of SOP No. 97-2.  The restated operating results  for
the  year ended December 31, 1999 included in this report on Form
10-KSB  is  prepared  in  accordance  with  GAAP,  including  the
provisions of SOP No. 97-2.

-37-
<PAGE>

                            PART III

ITEM  9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS  AND  CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The  names  and  positions of the Company's directors,  executive
officers, and significant employees are as follows:

Name                    Age      Position
---------------------------------------------------------
R. Bruce Acacio          40      Chief Executive Officer and
                                  Chairman of the Board
Carol Conway DeWees      57      President, Secretary, and
                                  Director
Lawrence J. Jagiello     39      Chief Financial Officer,
                                  Treasurer and Director

Mr.  Acacio is Chairman of the Board and Chief Executive  Officer
of  the Company, and has held those positions since the Company's
inception.   Mr.  Acacio  is  the  former  President  and   Chief
Executive Officer of California Software Products, Inc. ("CSPI"),
a  predecessor  company.  In January 1997,  during  Mr.  Acacio's
tenure  as President and Chief Executive Officer, CSPI filed  for
Chapter 11 protection under the federal bankruptcy laws due to an
unresolved  conflict with a major creditor.  At CSPI, Mr.  Acacio
was  responsible  for  the  release of  new  versions  of  CSPI's
trademarked  BABY/36  and BABY/AS2000  products.   Prior  to  his
involvement  with  CSPI, Mr. Acacio has  held  sales  and  middle
management positions with UK-based conglomerate Lex Service,  PLC
and as an agent manager for  IBM. In these positions, he has been
responsible  for turning around troubled operations and expanding
business units.

Ms.  DeWees is the President and Secretary of the Company  and  a
member  of  the  Company's Board of Directors.   Ms.  DeWees  has
served as a director since the Company's inception and has served
as  the  President and Secretary of the Company since July  1999.
Prior to that, Ms. DeWees served as Vice President of the Company
and was responsible for new product development and support.  Ms.
DeWees  is the former Vice President and Chief Financial  Officer
of  CSPI.   In  January 1997, during Ms. DeWees' tenure  as  Vice
President and Chief Financial Officer, CSPI filed for Chapter  11
protection under the federal bankruptcy laws due to an unresolved
conflict with a major creditor.  At CSPI, Ms. DeWees was directly
involved  in the planning and execution of new product  releases,
support  and  documentation  of  new  versions  of  BABY/36   and
BABY/AS2000.  Prior to her involvement with CSPI, Ms. DeWees held
account and management positions with Ketchum Public Relations in
San  Francisco,  California, servicing both  the  technology  and
consumer products sectors.

Mr. Jagiello is the Company's Chief Financial Officer, Treasurer,
and  a  member of the Company's Board of Directors and  has  held
such  positions since August 2000.  Prior to his employment  with
the  Company,  Mr.  Jagiello was the Chief Financial  Officer  of
WWW.COM,  Inc,  a  leading  Internet  music  application  service
provider  based  in Irvine, California, where he was  responsible
for  all  accounting,  finance,  purchasing  and  human  resource
functions.  Prior to that, Mr. Jagiello served as Vice  President
of  Finance  at  Epoch Networks, Inc., a privately-held  Internet
service provider, based in Irvine, California, where, in addition
to  overseeing the finance and accounting functions, he co-led  a
high-yield  public  debt  offering.  In  addition,  Mr.  Jagiello
formerly worked in the audit group in the Irvine office of  Ernst
&  Young, LLP, where he performed audit and advisory services for
technology and manufacturing clients.

SECTION 16(a)  BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's
equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company.  Officers, directors and
greater than ten-percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section
16(a) forms they file.  To the Company's knowledge, based solely
on review of the copies of such reports furnished to the Company
and written representations that no other reports were required
during the fiscal year ended December 31, 2000, its officers,
directors and greater than ten percent beneficial owners complied
with all Section 16(a) filing requirements.

-38-
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION.

The following table discloses compensation paid by the Company
during the fiscal year ended December 31, 2000 to (i) the
Company's Chief Executive Officer, and (ii) two individuals who
were the only executive officers, other than the Chief Executive
Officer, who were serving as an executive officer at the end of
2000 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

                             ANNUAL           LONG TERM
                          COMPENSATION      COMPENSATION
                        ---------------------------------
                                             SECURITIES
  NAME AND                                   UNDERLYING   ALL OTHER
  PRINICPAL               SALARY  BONUS     OPTIONS/SARs COMPENSATION
  POSITION (1)     YEAR    ($)     ($)           (#)          ($)
---------------------------------------------------------------------
R. Bruce Acacio
Chairman of the
Board and Chief
Executive Officer  2000 $225,000  $52,288     300,000      $1,000 (2)

                   1999  180,000        -           -      $1,000 (2)


Carol Conway DeWees
President and
Secretary          2000 $180,000  $52,288     250,000      $1,000 (2)

                   1999  150,000        -           -      $1,000 (2)



Lawrence J. Jagiello
Chief Financial
Officer and
Treasurer (3)      2000  $62,500  $     -     925,000       $   -

                   1999        -        -           -       $   -


(1)  No executive officer of the Company drew a salary from the
     Company prior to January 12, 1999.

(2)  These payments consist of amounts funded by the Company's
     401(k) plan for the years ended December 31, 2000 and 1999.

(3)  Mr. Jagiello joined the Company on August 14, 2000.

-39-
<PAGE>


OPTION/SAR GRANTS TABLE

Stock Option Grants.  During the year ended December 31, 2000,
stock options were awarded to the Company's Chief Executive
Officer and the other Named Executive Officers in the amounts and
with the terms indicated in the following table:



                  NUMBER OF    % OF TOTAL
                  SECURITIES   OPTIONS/SARs  EXERCISE
                  UNDERLYING    GRANTED TO    OR BASE
                  OPTIONS/SARs  EMPLOYEES     PRICE
                    GRANTED      IN FISCAL    ($/SH)   EXPIRATION
    NAME              (#)          YEAR        (1)       DATE
-----------------------------------------------------------------

R. Bruce Acacio     300,000       9.01%       $  0.34   12/13/05

Carol Conway DeWees 250,000       7.51%       $  0.34   12/13/05

Lawrence J.Jagiello 200,000       6.00%       $  1.25     8/8/05
                    200,000       6.00%       $  0.56    8/28/05
                    525,000      15.77%       $  0.31   12/13/05

(1)  All options were granted at the fair market value at the
     date of grant.

OPTION EXERCISES / FISCAL YEAR-END VALUE

During Fiscal 2000, none of the Named Executive Officers,
including the Chief Executive Officer, exercised any stock
options or SARs. The following table includes the number of
shares of Common Stock covered by both exercisable and
unexercisable stock options as of December 31, 2000 for the Named
Executive Officers who hold options.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES

             NUMBER OF SECURITIES       VALUE OF UNEXERCISED IN-
              UNDERLYING UNEXERCISED      THE-MONEY OPTIONS/SARs
  NAME        OPTIONS/SARs AT FY END(#)       AT FY END ($)
----------------------------------------------------------------
         EXERCISABLE UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
         -------------------------------------------------------
R. Bruce       -          300,000        $     -     $      -
Acacio

Carol Conway   -          250,000        $     -     $      -
DeWees

Lawrence J.    -          925,000        $     -     $      -
Jagiello

APPROVAL OF THE 2000 STOCK OPTION PLAN

On December 4, the Board of Directors of the Company approved by
action taken without a meeting by written consent, subject to the
approval of the shareholders, the Option Plan creating 3,000,000
shares of Common Stock underlying options that may be granted under
the Option Plan. The Option Plan was approved by the holders of a
majority of the outstanding Common Stock of the Company on December
4, 2000. The Board of Directors believes that the establishment of
the Option Plan is in the best interests of the Company because it
permits the Company to attract and retain employees by providing them
with appropriate equity incentives. As of December 31, 2000,
approximately 67 persons were eligible to participate in the Option
Plan, and the Company had issued 821,500 shares under the Option Plan,
with 2,178,500 shares remaining for future grant.

Options granted under the Option Plan may be either "incentive stock
options" (which qualify for special tax treatment under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code")) or
nonstatutory stock options. Employees, including officers and directors
who are employees, of the Company and its subsidiaries (an "Eligible
Employee"), may be granted either incentive or nonstatutory stock options.
However, members of the Board of Directors who are not officers or
employees of the Company or its subsidiaries, and consultants to the
Company and its subsidiaries (together, an "Eligible Director or
Consultant") may only be granted nonstatutory stock options.

The Option Plan may be administered by the Board of Directors or by
a committee of non-employee directors designated by the Board of
Directors. The Option Plan is currently being administered by the
Board of Directors. Subject to the terms of the Option Plan, the
Board of Directors determines the persons who are to receive awards,
the number of shares subject to each such award, and the terms and
conditions of such awards.  The Board of Directors or committee thereof
may provide that the total number of shares of stock subject to an
option may vest and become exercisable in periodic installments.

As of December 31, 2000, the aggregate fair market value of shares
of Common Stock subject to outstanding options under the Option Plan
was $205,375, based upon the closing sale price of such stock on the
OTCBB on such date.

Upon a dissolution, liquidation or sale of substantially all of the
assets of the Company, a merger or consolidation in which the Company
is not the surviving entity, or a reverse merger in which the Company
is the surviving entity, but the shares of Common Stock of the Company
are converted into other property (collectively, a "Corporate Change"),
the surviving entity must assume any outstanding options under the
Option Plan or substitute similar options for such options, or the
options will remain in full force and effect. If the surviving entity
refuses to continue such options or substitute similar options, then
the time in which such options are exercisable will be accelerated
and the options will terminate to the extent not exercised prior to
the occurrence of a Corporation Change.

Unless terminated earlier as provided in the Option Plan, the Option
Plan will terminate on January 24, 2010, which is ten years from the
date the Option Plan was adopted by the Board.

The Board or a committee thereof has the authority to determine the
amounts, terms and grant dates of options to be granted in the future
to Eligible Employees or Eligible Directors or Consultants under the
Option Plan. To date, no such determinations have been made and, as a
result, it is not possible to state such information.

COMPENSATION OF DIRECTORS

The Company's only directors are its current executive officers
who are already drawing a salary for the management of the
Company.  They do not receive any additional compensation for
their services as directors.  Accordingly, it may be necessary
for the Company to compensate newly appointed directors in order
to attract a quality governance team. At this time the Company
has not identified any specific individuals or candidates nor has
it entered into any negotiations or activities in this regard.

-40-
<PAGE>

EMPLOYMENT AGREEMENTS

On December 13, 1999, the Company entered into an employment
agreement with Bruce Acacio, its Chief Executive Officer.  The
agreement is for a three year term with the total consideration
to be paid summarized as follows:

                                     Year 1   Year 2   Year 3
                                     ------   ------   ------

Annual Base Salary                $225,000  $300,000 $350,000

Annual Bonus (1)                  $100,000  $100,000 $100,000

Stock Options (shares) (2)         300,000   300,000  300,000



In addition, on December 13, 1999, the Company also entered into
an employment agreement with Carol Conway DeWees, its President.
The agreement is also for a three year term with the total
consideration to be paid summarized as follows:

                                     Year 1   Year 2   Year 3
                                     ------   ------   ------
Annual Base Salary                $180,000  $230,000 $280,000

Annual Bonus (1)                  $100,000  $100,000 $100,000

Stock Options (shares) (2)         250,000   250,000  250,000



(1)  Bonuses are to be paid quarterly based upon a percentage of
     achievement of revenue goals set forth by the Company's Board of
     Directors.

(2)  Option grants are to be issued at the end of each year
     during the term of the agreement, and are exercisable at the end
     of the initial term of the agreement.

Both agreements provide that, upon termination of the employee as
a result of unlawful or dishonest acts by the employee,
conviction of the employee of a felony offense, or a breach of
any term of the employment agreement by the employee, the Company
shall pay the employee the full amount of compensation accrued as
of the date of termination.  In addition, both agreements provide
for the immediate payment of all compensation due under the
agreement for the remainder of the term of the agreement upon the
termination of employment due to a default or breach of any term
of the agreement by the Company.  Finally, both agreements
contain non-competition provisions as well as provisions under
which both officers will continue to serve the Company in the
same capacity in the event of a change of control.  As of
December 13, 2000, both Mr. Acacio and Ms. Dewees voluntarily
elected to indefinitely forego the salary increases contained in
their respective employment contracts.

-41-
<PAGE>

ITEM  11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS  AND
            MANAGEMENT.

The following table sets forth certain information as of December
31, 2000, with respect to the beneficial ownership of the
Company's Common Stock by: (i) all persons known by the Company
to be beneficial owners of more than 5% of the Company's Common
Stock, (ii) each director and Named Executive Officer, and (iii)
by all executive officers and directors as a group.

                          COMMON STOCK
                          ------------

                               Amount and
                               Nature of
  Name and Address of          Beneficial          Percent of
  Beneficial Owner (1)         Ownership         Common Stock (2)
----------------------       --------------     ----------------
R. Bruce Acacio               3,578,414 (3)         27.74%

David LaMarr                  3,274,214 (3)         25.98%

Carol Conway DeWees           3,398,814 (4)         26.45%

Lawrence J. Jagiello                  -                -

All  executive officers and
directors  as  a  group  (3
members)                      6,977,228 (5)        53.06%

Footnotes to Beneficial Owners:

(1)  The address of each beneficial owner is c/o California
     Software Corporation, 2485 McCabe Way, Irvine, CA  92614.
(2)  The number of shares outstanding used in this calculation
     was the number of shares of Common Stock actually
     outstanding on December 31, 2000.
(3)  Includes 3,274,214 shares of Common Stock held by Mr. Acacio
     and Mr. LaMarr in joint tenancy and 300,000 shares of Common
     Stock underlying options.
(4)  Includes 250,000 shares of Common Stock underlying options.
(5)  Includes 550,000 shares of Common Stock underlying options.

-42-
<PAGE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company engaged the services of NevWest Securities
Corporation ("NevWest") on November 23, 1999 as its investment
banking firm in conjunction with corporate finance and investment
banking services. The Company agreed to compensate NevWest for
its services as a promoter with a warrant that permitted NevWest
to purchase 600,000 shares of Common Stock in the Company.  The
principal terms of the warrant include an exercise price equal to
110% of the average daily closing price of the Company on the
OTCBB (trading symbol: "CAWC"), calculated as of each day's
closing bid over the course of the Company's first 30 days of
available and/or active trading on the OTCBB.  The warrant was
exercisable within a period commencing 30 days after the first
day of available and/or active trading of the Company on the
OTCBB and expiring two (2) years from such commencement date.  On
February 7, 2000, NevWest exercised the warrant and paid the
Company $200,000 cash and $74,032 in the form of a non-interest
bearing promissory note with a maturity date of September 6,
2001.  On March 30, 2001, the Company entered into an agreement
with NevWest and an affiliate to borrow cash of $450,000 to
assist it in paying the cash amounts due under a settlement
agreement with shareholders that participated in the Company's
private placement of its Common Stock during 2000.  Under the
terms of the notes, the Company agreed to repay the notes
beginning April 10, 2001 over a 36-month period at an interest
rate of prime plus 2% (10% as of March 30, 2001).  The notes are
secured by all of the tangible and intangible assets of the
Company; furthermore, the Company's Chief Executive Officer agreed
to personally guarantee one-half of the loan amount.  In addition,
the Company agreed to forgive the promissory note owed to it by
NevWest in the amount of $74,032.

The Company engaged the services of OTC Financial Network
("OTCFN"), a division of National Financial Communications Corp.,
a full service financial communications and investor relations
firm assisting the Company in shareholder communications. For its
services as a promoter, OTCFN received a fee payable in
restricted Common Stock of the Company in the amount of 420,000
shares valued at $0.625 per share.  These shares were issued to
OTCFN on March 6, 2000.

The Company engaged the services of A to Z Consultants ("A to Z")
to assist the Company in its shareholder communications.  For its
services as a promoter, A to Z received a fee payable in
restricted Common Stock of the Company in the amount of 150,000
shares valued at $5.10 per share.  These shares were issued to A
to Z on April 14, 2000.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits:

A list of exhibits required to be filed as part of this Annual
Report is set forth in the Index to Exhibits, which immediately
precedes such exhibits and is incorporated herein by reference.

(b)  Reports on Form 8-K:

A report on Form 8-K was filed on November 3, 2000, describing
the acquisition of ALE Systems.  The item reported thereunder was
Item 2 (Acquisition or Disposition of Assets).

A report on Form 8-K was filed on November 28, 2000, describing
the Company's acquisition of Unibol.  The item reported
thereunder was Item 2 (Acquisition or Disposition of Assets).

A report on Form 8-K was filed on December 7, 2000, describing
the termination of the Unibol merger agreement and announcing the
Company's filing of a lawsuit against Unicomp, Inc.  The item
reported thereunder was Item 5 (Other Events).

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<PAGE>

                           SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                           CALIFORNIA SOFTWARE CORPORATION

Date: April 10, 2001

                           By:/s/R. Bruce Acacio

                           R. Bruce Acacio
                           Chairman of the Board and
                           Chief Executive Officer

In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.


By:/s/R. Bruce Acacio

R. Bruce Acacio
Chairman  of  the  Board and Chief Executive  Officer  (Principal
Executive Officer)
April 10, 2001

By:/s/Carol Conway DeWees

Carol Conway DeWees
President, Secretary and Director
April 10, 2001

By:/s/Lawrence J. Jagiello

Lawrence J. Jagiello
Chief   Financial  Officer,  Treasurer  and  Director  (Principal
Financial Officer and Principal Accounting Officer)
April 10, 2001

-44-
<PAGE>

                        INDEX TO EXHIBITS

Exhibit  Name and/or Identification of Exhibit
Number
------ -------------------------------------------------------

2.1    Stock Purchase Agreement, dated November 8, 2000, by and
        among California Software Corporation, Unibol, Ltd., ICS
        Computing Group Ltd. (aka Unicomp Computing Group, Ltd.)
        and Unicomp, Inc.

2.2    Stock Purchase Addendum, dated November 10, 2000, by and
        among California Software Corporation, Unibol, Ltd., ICS
        Computing Group Ltd. (aka Unicomp Computing Group, Ltd.)
        and Unicomp, Inc. (filed as Exhibit 2.1 to the Registrant's
        Form 8-K dated November 28, 2000 and incorporated herein
        by reference)

2.3    Stock Purchase Agreement, dated October 20, 2000, by and
        among California Software Corporation, Software Connections,
        Inc., Gayle P. Goodrich, and California Software Applications,
        Inc. (filed as Exhibit 2.1 to the Registrant's Form 8-K dated
        November 3, 2000 and incorporated herein by reference)

3.1    Articles of Incorporation of the Company filed with the
        Nevada Secretary of State on October 28, 1998 (filed on
        March 14, 2000 as Exhibit 3(a) to the Registrant's Form 10-
        KSB and incorporated herein by reference)

3.2    Bylaws of the Company adopted October 31, 1998 (filed on
        March 14, 2000 as Exhibit 3(b) to the Registrant's Form 10-
        KSB and incorporated herein by reference)

10.1    Standard Multi-Tenant Office Lease between the Company and
        McCabe Way Irvine, LLC dated February 14, 2000 (filed on
        October 18, 2000 as Exhibit 10 to the Registrant's Form
        10-QSB/A and incorporated herein by reference)

10.2    Assumption of Premise Lease dated September 25, 1997
        (filed on March 14, 2000 as Exhibit 10 to the Registrant's
        Form 10-KSB and incorporated herein by reference)

10.3    Employment Agreement dated December 13, 1999 between the
        Company and R. Bruce Acacio (filed on October 18, 2000 as
        Exhibit 10.2 to the Registrant's Form 10-KSB/A and incorporated
        herein by reference)

10.4    Employment Agreement dated December 13, 1999 between the
        Company and Carol Conway DeWees (filed on October 18, 2000 as
        Exhibit 10.3 to the Registrant's Form 10-KSB/A and incorporated
        herein by reference)

10.5    2000 Stock Option Plan dated December 4, 2000 (filed on January 9,
        2001, included in the Registrant's Schedule 14C and incorporated
        herein by reference)




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