================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 AMENDMENT NO. 1
                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended September 30, 2000
                         Commission File Number -0-25427

                                NETOBJECTS, INC.
             (Exact name of registrant as specified in its charter)


            Delaware                                            94-3233791
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                             Identification No.)

  301 Galveston Drive, Redwood City, California                   94063
   (Address of principal executive offices)                     (zip code)

               Registrant's telephone number, including area code:
                (650) 482-3200 Securities registered pursuant to
                            section 12(b) of the Act:

                                                   (Name of Each Exchange on
               (Title of Each Class)                   Which Registered)
            ---------------------------          ----------------------------
                      None                                   None

           Securities registered pursuant to section 12(g) of the Act:
                          Common Stock, par value $.01

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

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

      As of September 30, 2000, the aggregate  market value of voting stock held
by non-affiliates of the Registrant,  based upon the closing sales price for the
Registrant's Common Stock, as reported in the NASDAQ National Market System, was
$36.8  million.  Shares of Common Stock held by each officer and director and by
each  person  who owns 5% or more of the  outstanding  Common  Stock  have  been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive  determination for any other
purpose.

      As of December 31, 2000,  Registrant had outstanding  31,687,043 shares of
Common Stock, $.01 par value.

                       DOCUMENTS INCORPORATED BY REFERENCE

      The following  documents (or parts thereof) are  incorporated by reference
into the following parts of this Form 10-K: Certain information required in Part
III of this Form 10-K is incorporated from the registrant's  Proxy Statement for
its Annual meeting of Stockholders.

================================================================================



<PAGE>


                                TABLE OF CONTENTS

                                    Part III

Item 10.  Directors and Executive Officers...................................  1

Item 11.  Executive Compensation.............................................  5

Item 12.  Share Ownership.................................................... 11

Item 13.  Certain Relationships and Related Transactions..................... 13

Signatures      ............................................................. 16



Item 10.  Directors and Executive Officers of the Registrant

Directors

         The Company's  bylaws provide that the number of Directors shall be six
until changed by approval of the  stockholders  or a majority of the  Directors.
Each Director is elected to serve until the next annual meeting of  stockholders
and until the election and  qualification  of his or her successor or his or her
earlier resignation or removal.

         The names of the  Company's  Directors  as of  September  30,  2000 and
certain information about them are set forth below:

Name                         Age          Positions with the Company
----                         ---          --------------------------
Samir Arora                  35           Chairman of the Board, Chief Executive
                                          Officer and President
Robert G. Anderegg           51           Director
Lee A. Dayton                57           Director
Blake Modersitzki            34           Director
Michael D. Zisman            51           Director

         Samir  Arora has  served as  Chairman  of the  Board,  Chief  Executive
Officer and President  since the Company's  inception in November 1995. In 1992,
Mr. Arora founded Rae Technology,  a provider of software  applications and from
1992  through  November  1995 served as its CEO.  From 1986 to 1992,  Mr.  Arora
served in several  management  roles at Apple  Computer,  Inc. Mr. Arora holds a
diploma in sales and  marketing  from the London  Business  School and  attended
INSEAD, France and BITS, India. Samir Arora is the brother of Sal Arora, who was
the Company's Chief Technology Architect and Vice President, Engineering Desktop
Products and Online Services until October 2000.

         Robert G.  Anderegg has been a Director of the Company  since April 11,
1997. Mr. Anderegg has served as Vice President and Assistant General Counsel at
IBM since August 1998. He has been  appointed to serve on the Board of Directors
by IBM as one of its  representatives.  Mr.


<PAGE>


Anderegg has served as an Assistant General Counsel or Associate General Counsel
at IBM since 1988. Mr.  Anderegg holds a B.S.  degree from Georgia  Institute of
Technology and received his J.D. from Harvard Law School.

         Lee A. Dayton has been a Director of the Company  since April 11, 1997.
Mr. Dayton is Vice President,  Corporate  Development and Real Estate at IBM. He
has  been  appointed  to serve on the  Board of  Directors  by IBM as one of its
representatives.  Mr. Dayton has held various management  positions at IBM since
he  joined in 1965 as a systems  engineer.  Mr.  Dayton  also is a  director  of
Riverdeep Group plc and numerous other wholly-owned subsidiaries of IBM on whose
Boards he is appointed to serve by IBM as one of its representatives. Mr. Dayton
holds a B.S. in Engineering from Northwestern University.

         Blake  Modersitzki  has been a director  of the Company  since  January
2000.  He has been an employee of Novell,  Inc.  for the past five years.  He is
presently Vice President, Novell Ventures and Strategic Business Development, in
which position he has served since March 1998. He served as Business Development
Director from January 1997 to March 1998 and Senior Manager, Sales and Marketing
for Small Business Networks from May 1995 to January 1997. Mr. Modersitzki holds
a B.S. in Economics from Brigham Young University.

         Michael D. Zisman has been a Director  of the  Company  since April 11,
1997. Mr. Zisman is an Executive Vice President of Lotus, a position that he has
held  since  October  1996.  He has been  appointed  to  serve  on the  Board of
Directors by IBM as one of its representatives.  From July 1994 to October 1996,
he held other executive  positions at Lotus.  Mr. Zisman was the Chief Executive
Officer of Soft-Switch,  Inc., a software development company, from 1979 to July
1994.  Mr.  Zisman  holds  a B.S.  from  Lehigh  University,  an M.S.  from  the
University of  Pennsylvania  Moore School and a Ph.D. from The Wharton School at
the University of Pennsylvania.

         John Sculley served as a Director of the Company from December 20, 1996
until December 7, 2000.

Executive Officers

         The names of, and certain information regarding,  executive officers of
the Company as of  September  30, 2000 who are not  Directors of the Company are
set forth below.  The executive  officers  serve at the pleasure of the Board of
Directors and the Chief Executive Officer.

Name                       Age         Positions with the Company
----                       ---         --------------------------
Russell F. Surmanek        43          Executive Vice  President, Finance and
                                       Operations and Chief  Financial Officer
Mark Patton                43          Executive Vice President, Products and
                                       Services
Steven Mitgang (1)         39          Executive Vice President, Small Business
                                       and Corporate Marketing
Jack Rotolo                40          Executive Vice President, Worldwide Sales

(1)  Mr. Mitgang is resigning from the Company effective February 1, 2001.


                                      -3-
<PAGE>


         Russell F. Surmanek has served as Executive Vice  President,  Finance &
Operations, and Chief Financial Officer since April 1999. From 1990 to 1999, Mr.
Surmanek  served in several  senior  financial  management  positions  at Oracle
Corporation,   most  recently  as  Vice  President,  Finance  &  Administration,
Worldwide  Operations.  From 1989 to 1990, Mr.  Surmanek was  Controller,  North
America Sales & Support for International  Computers Limited (ICL). From 1983 to
1989, Mr. Surmanek held various financial  management  positions at Racal-Milgo,
Inc.,  a data  communications  equipment  manufacturer.  From 1981 to 1983,  Mr.
Surmanek held various finance positions at Northern  Telecom,  Inc. Mr. Surmanek
holds a B.S. in Business Administration from the State University of New York at
Buffalo, and an M.B.A. from the University of Michigan.

         Mark  Patton was  appointed  Executive  Vice  President,  Products  and
Services in April 2000, having served as General Manager, Small Business Markets
since October 1999,  and Senior Vice  President,  Worldwide  Sales and Corporate
Marketing  from December  1996 to October  1999.  From February 1995 to November
1996,  Mr.  Patton was Vice  President  and  General  Manager of the Digital and
Applied Imaging  Division at Eastman Kodak,  Inc. From February 1994 to February
1995, Mr. Patton was Vice President and General  Manager,  American  Division at
Logitech, Inc., a computer peripheral products manufacturer. From August 1985 to
February  1994,  Mr.  Patton held various  sales  management  positions at Apple
Computer,  Inc.  Mr.  Patton  holds a B.A.  in  Speech  Communication  from  the
University of Washington.

         Steven Mitgang was appointed  Executive Vice President,  Small Business
and  Corporate  Marketing in October  1999.  Prior to joining the  Company,  Mr.
Mitgang was Senior Vice  President of  Marketing  and  Business  Development  at
Sitematic  from August 1998.  From December 1995 to August 1998, Mr. Mitgang was
Senior  Vice  President  of  Marketing  for  Jostens  Learning  Corporation,   a
curriculum software company. Mr. Mitgang held executive-level positions with the
Upper  Deck   Company   from  August  1991  to  January  1995  and  with  Reebok
International  from August 1989 to August  1991.  From June 1984 to August 1989,
Mr. Mitgang  managed  accounts in the New York office of Chiat/Day  Advertising.
Mr.  Mitgang holds an A.B. in  Architecture  from the  University of California,
Berkeley.

         Jack Rotolo was appointed Executive Vice President,  Worldwide Sales in
July 1999.  From March 1997  until  July 1999,  Mr.  Rotolo was Vice  President,
Worldwide Sales. Prior to joining the Company,  Mr. Rotolo was senior manager of
Apple  Computer's  consumer  markets  solution  development   organization  from
September  1993 to February  1996.  While at Apple,  Mr. Rotolo also managed the
business,  consumer and higher education channel strategy  organization and held
various sales  management  positions in the reseller  operations  group.  Before
joining Apple,  Mr. Rotolo worked as regional  manager for  Pepsi-Cola  Bottling
Group. He holds a B.S. in Finance from the University of Dayton.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16 of  the  1934  Act,  as  amended,  requires  the  Company's
officers,  directors  and persons who own more than ten percent of a  registered
class of the  Company's  equity  securities  to file  reports of  ownership  and
changes in ownership with the Securities and Exchange  Commission and to furnish
the  Company  with  copies of all such forms they file.  Based on the  Company's
review of the forms it has received and on written  representations from certain
reporting  persons  that no



                                      -4-
<PAGE>


such forms were required for them, the Company believes that IBM and Samir Arora
each  failed to timely  file a required  report on Form 4 during the fiscal year
ended  September  30,  2000.  These  reports  were filed in  September  2000 and
November 2000, respectively.

Item 11.  Executive Compensation

Summary Compensation Table
<TABLE>
         The following Summary Compensation Table sets forth summary information
as to compensation  received by (i) the Company's Chief Executive Officer,  (ii)
each of the four other  most  highly  compensated  persons  who were  serving as
executive  officers of the Company as of September  30, 2000 and (iii) two other
individuals who would have been among the four most highly compensated  officers
if they had been  executive  officers  at  year-end  (collectively,  the  "named
executive  officers"),  for services  rendered to the Company in all  capacities
during the three fiscal years ended September 30, 2000.
<CAPTION>
                                                                                                                 Long-Term
                                                                                                                Compensation
                                                                                                                 ----------
                                                                    Annual Compensation                            Awards
                                                                                                                 Securities
                                                                                                                 Underlying
                                                                                                Other            Options/SARs
Name and Principal Position            Fiscal Year           Salary         Bonus           Compensation           (number)
<S>                                       <C>               <C>           <C>               <C>                  <C>
Samir Arora
Chairman of the Board, Chief              2000             $ 218,164      $ 84,260          $      ---           1,200,000
Executive Officer and President           1999               183,129        55,987                 ---                 ---
                                          1998               175,338        47,434                 ---                 ---

Russell F. Surmanek
Executive Vice President, Finance         2000               232,556       200,000           1,591,387             610,000
and Operations, Chief Financial           1999               108,447       113,750                 ---             235,000
Officer                                   1998                   ---           ---                 ---                 ---

Jack Rotolo  (1)                          2000               192,897        82,652           2,092,348             540,000
Executive Vice President,                 1999               119,923        53,774                 ---             166,666
Worldwide Sales                           1998               135,683         9,840                 ---              17,666

Mark Patton
Executive Vice President and              2000               202,167        42,005             776,613             580,000
General Manager, Small Business Markets   1999               162,525       105,754                 ---              71,666
                                          1998               150,000        35,555                 ---                 ---


                                                             -5-
<PAGE>


Steven Mitgang
Executive Vice President, Small           2000               149,002        33,711                 ---             660,294
Business and Corporate Marketing          1999               108,447           ---                 ---                 ---
                                          1998                   ---           ---                 ---                 ---

Peter Shaw (2)
Executive Vice President,                 2000               163,390        54,000                 ---             100,000
Corporate Development

Morris Taradalsky (3)                     2000               139,302        46,537             311,397                 ---
Executive Vice President and              1999               176,073        24,343                 ---              63,333
General Manager, Enterprise Division      1998               166,048        86,095                 ---                 ---
<FN>
(1)  Mr. Rotolo became an executive  officer in August 1999, and the 1999 figures reflect his  compensation for
     the entire year.
(2)  Mr. Shaw was not employed as an executive  officer at the Company  prior to fiscal year 2000 and resigned
     from the Company on April 14, 2000.
(3)  Mr. Taradalsky resigned from the Company on January 1, 2000.
</FN>
</TABLE>


                                                             -6-
<PAGE>


Option Grants in Last Fiscal Year
<TABLE>
         The following table provides  information  regarding the grant of stock
options during fiscal year 2000 to the named executive officers.
<CAPTION>
                                             Individual Grants


                                        % of Total                                       Potential Realizable Value at Assumed
                                           Options                                      Annual Rate of Stock Price Appreciation
                      Number of Shares   Granted to    Exercise                                     for Option Term (9)
                       Underlying      Employees in    Price         Expiration        -----------------------------------------
        Name           Options (1)         Fiscal     ($/share)          Date                   5%                   10%
--------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                  <C>      <C>              <C>                 <C>                 <C>
Samir Arora              33,293(5)           1%       $  6.312         10/01/09            $ 132,159.32        $   334,856.87
                        166,707(5)           3           6.312         10/01/09              661,757.25          1,677,022.81
                        200,000(2)           3           7.125         11/08/09              896,174.84          2,271,083.01
                        400,000(4)           6          13.187         04/25/10            3,317,293.38          8,406,672.73
                        400,000(6)           6           2.937         08/22/10              738,825.41          1,872,328.64

Russell F. Surmanek     160,000(5)           3           6.312         10/01/09              635,133.26          1,609,552.39
                        200,000(2)           3           7.125         11/08/09              889,174.84          2,271,083.01
                         50,000(4)           1          12.125         04/24/10              381,267.37            966,206.37
                        200,000(6)           3           2.937         08/22/10              369,412.70            936,164.32

Jack Rotolo              10,394(5)           0           6.312         10/01/09               41,259.84            104,560.55
                         79,606(5)           1           6.312         10/01/09              316,002.62            800,812.67
                        200,000(3)           3           7.125         11/08/09              896,174.84          2,271,083.01
                         50,000(4)           1          12.125         04/24/10              381,267.37            966,206.37
                        200,000(6)           3           2.937         08/22/10              369,412.70            936,164.32

Mark Patton               3,456(5)           0           6.312         10/01/09               13,754.60             34,856.87
                        126,535(5)           2           6.312         10/01/09              502,291.17          1,272,904.44
                        200,000(2)           3           7.125         11/08/09              896,174.84          2,271,083.01
                         50,000(4)           1          12.125         04/24/10              381,267.37            966,206.37
                        200,000(6)           3           2.937         08/22/10              369,412.70            936,164.32

Steven Mitgang          100,294(2)           2           0.230         10/04/09            1,110,218.68          1,781,501.41
                         43,245(2)           1           6.937         10/04/09              188,662.45            478,107.70
                        106,755(2)           2           6.937         10/04/09              465,733.85          1,180,261.02
                        200,000(2)           3           7.125         11/08/09              896,174.84          2,271,083.01
                         10,000(4)           0          12.125         04/24/10               76,253.47            193,241.27
                        200,000(6)           3           2.937         08/22/10              369,412.70            936,164.32


                                                                 -7-
<PAGE>


Peter Shaw (8)           14,415(7)           0           6.937         10/04/09               62,887.48            159,369.23
                         85,585(7)           1           6.937         10/04/09              373,376.72            946,209.91

Morris Taradalsky (8)     5,941(5)           0           6.312         10/01/09               23,583.29             59,764.69
                        124,059(5)           2           6.312         10/01/09              492,462.48          1,247,996.62
                        200,000(2)           3           7.125         11/08/09              896,174.84          2,271,083.01
<FN>
(1)   Options are incentive stock options to the extent  qualified and  nonstatutory  options  otherwise.  The
      options  generally  terminate  30 days  following  the  executive's  employment  with the Company or the
      expiration date,  whichever occurs earlier. The exercise price of each option was determined to be equal
      to or greater than the fair market value per share of the Common Stock at the grant date.

(2)   Options to purchase shares vest as to 25% at the end of the first year, with the remainder vesting in 36
      equal monthly installments.

(3)   Options vest in 12 equal monthly installments.

(4)   Options vest in 24 equal monthly installments.

(5)   Options vest in 36 equal monthly installments.

(6)   Options vest in 48 equal monthly installments.

(7)   In the event of  termination  without  cause  during the first year of  employment,  50% of the unvested
      shares  granted  pursuant to the option  shall  accelerate  and become  vested.  This  acceleration  was
      triggered on April 14, 2000 due to Mr. Shaw's  termination.  The original vesting schedule was set forth
      in footnote 2 above.

(8)   Unvested  options were  cancelled due to the  termination  of the option  holder's  employment  with the
      Company.

(9)   Amounts represent  hypothetical  gains that could be achieved for the respective options if exercised at
      the end of the option term. These gains are based on assumed rates of stock price appreciation of 5% and
      10% compounded  annually from the date the respective options were granted to their expiration date. The
      gains shown are net of the option  exercise  price,  but do not include  deductions  from taxes or other
      expenses  associated  with the exercise of the option or the sale of the underlying  shares.  The actual
      gains,  if any, on the  exercise of stock  options will depend on the future  performance  of the Common
      Stock, the option holder's continued  employment  throughout the option period and the date on which the
      options are exercised.
</FN>
</TABLE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values
<TABLE>
         The  following  table  provides  information  regarding  the  aggregate
exercises of options by each of the named executive officers. In addition,  this
table   includes  the  number  of  shares  covered  by  both   exercisable   and
unexercisable  stock  options  as of  September  30,  2000,  and the  values  of
"in-the-money"  options,  which values represent the positive spread between the
exercise  price  of any  such  options  and the  fiscal  year-end  value  of the
Company's Common Stock.


                                       -8-
<PAGE>
<CAPTION>
                                                            Number of Securities Underlying           Value of the Unexercised
                                                             Unexercised Options at Fiscal          In-The-Money Options Fiscal
                                                                      Year-End                            Year-End (2)
                             Shares
                           Acquired on        Value
       Name                Exercise        Realized (1)      Exercisable       Unexcersiable     Exercisable        Unexercisable
<S>                          <C>         <C>                    <C>                <C>           <C>                <C>
Samir Arora                     ---                ---          432,985            992,015       $291,957.24        $ 115,117.78

Russell F. Surmanek          50,000      $1,591,387.49          232,640            562,360            783.40           36,816.61

Mark Patton                  61,040       1,671,087.37          153,942            488,324         34,635.94           57,447.59

Jack Rotolo                  73,050       2,516,941.58          258,978            402,020          9,871.01           49,964.85

Steven Mitgang               62,147         908,801.57          121,462            476,685         93,073.11           54,962.47
<FN>
(1)   Based upon the fair market  value of the  purchased  shares on the exercise  date less the exercise  price
      paid for the shares.
(2)   Based upon the fair market value of the  Company's  Common Stock,  $3.125,  which was the closing price on
      September 30, 2000, less the exercise price paid for the shares.
</FN>
</TABLE>

Compensation of Directors

         The  Company's  Directors  do not receive cash  compensation  for their
services as Directors or members of Committees  of the Board of  Directors.  The
Company's Amended and Restated 1997 Stock Option Plan provides for the automatic
grant of options  to  purchase  20,000  shares of Common  Stock to each  outside
Director  upon  initially  joining the Board of Directors.  The option  exercise
price is equal to the fair market  value of a share of Common  Stock at the date
of  grant,  the  option  term is six  years,  and the  options  vest and  become
exercisable  pro rata at the end of each  month for 48 months  while the  option
holder continues to serve as a Director.

         Mr.  Modersitzki has received this automatic  option grant.  During the
fiscal year, the Company  reimbursed John Sculley for certain expenses  incurred
to attend Board of Directors meetings.

Employment Contracts, Termination of Employment and Change-in-Control Agreements

         On  November  8,  1999  the  Compensation  Committee  of the  Board  of
Directors  approved  the  issuance of new options to purchase a total of 200,000
shares each to Mesrrs. Samir Arora, Surmanek,  Taradalsky,  Patton, Gagan Arora,
Mitgang and Rotolo at a price of $7.125 per share.  These  options  vest monthly
based on continued  employment  with the Company  over the  following 24 months,
except for Mr.  Rotolo's  options  which  vest  ratably  over 12 months.  If the
Company is acquired  by another  company and the  employment  of either  Messrs.
Surmanek,  Mitgang or Rotolo is


                                      -9-
<PAGE>


terminated other than for cause within 12 months following such acquisition, the
options granted to him will  automatically  accelerate upon such  termination to
provide for vesting of 100% of the shares.  The options  have a term of 10 years
and an exercise  price equal to the fair market  value of the  Company's  Common
Stock on the date of grant.  All of these option grants are  nonstatutory  stock
options and are subject to the terms of an Executive Stock Option Agreement.

         The  Company  entered  into an  employment  agreement  with  Russell F.
Surmanek,  Executive Vice President,  Finance and Operations and Chief Financial
Officer,  as of April 5, 1999. The employment  agreement initially had a term of
24  months,  but was  amended as of  December  1, 2000 to extend the term by one
year. Under the agreement,  Mr. Surmanek is entitled to receive an annual salary
of $220,000  plus a 15% sales  target  bonus  payable  semi-monthly,  20% of his
annual salary as an annual fiscal year bonus,  and a starting bonus of $100,000.
If Mr. Surmanek's  employment is terminated  without cause before April 5, 2002,
he is entitled to be paid the  remaining  salary  which would have been  payable
during the term,  including  pro-rata  bonus  amounts.  Additionally,  under the
agreement the Company granted options to purchase 235,000 shares of Common Stock
to Mr.  Surmanek.  If Mr.  Surmanek's  employment is terminated  for any reason,
other than for cause, the agreement  provides for the acceleration of vesting of
his stock  options  so that 65% of the shares  underlying  the  options  will be
vested as of the date of  termination.  If the  company is  acquired  by another
company, the vesting of Mr. Surmanek's stock options also will accelerate by one
calendar  year,  or as  necessary  to provide for vesting of at least 65% of the
shares underlying the options as of the date of the acquisition.

Loans to Officers and Directors.

         In April 2000, the Company advanced $250,000 and in September 2000, the
Company advanced another  $250,000 to Samir Arora,  each advance  evidenced by a
promissory  note  bearing  interest at 6.45%,  the  applicable  federal  rate as
defined in Section 1274(d) of the Internal Revenue Code of 1986, as amended (the
"Code"). The notes are due in full two years from the date of issuance. Prior to
the due date, under the terms of each promissory note, Mr. Arora is obligated to
repay any net proceeds from the sale of any of his shares of Common Stock of the
Company until the principal sum and all accrued and unpaid interest  thereon has
been paid in full.

         In August  2000,  the  Company  advanced  $75,000  to  Steven  Mitgang,
evidenced by a promissory note bearing interest at 7.00%, the applicable federal
rate as  defined in  Section  1274(d) of the Code.  The note was due in full two
years  from the date of  issuance  and was  secured  by a pledge  of stock  upon
exercise of stock options to purchase  25,000  shares of Common Stock.  Prior to
the due date,  under the terms of the promissory note, Mr. Mitgang was obligated
to repay the advance only from certain  proceeds  from the sale of 25,000 shares
to be acquired upon the exercise of stock options.

         In October 1999, the Company advanced  $200,000 to Russell F. Surmanek,
evidenced by a promissory note bearing interest at 5.42%, the applicable federal
rate as  defined in  Section  1274(d) of the Code.  The note was due in full two
years from the date of issuance.  Prior to the due date,  under the terms of the
promissory  note,  Mr.  Surmanek  was  obligated  to repay the advance only from
certain proceeds from the sale of 15,000 shares to be acquired upon the exercise
of stock options.


                                      -10-
<PAGE>


Mr.  Surmanek  repaid the principal and accrued  interest  under the note to the
Company in full on March 28, 2000.

Contractual Arrangements

         The  Company is a party to a voting  agreement  with IBM that  provides
that IBM will vote its shares of voting stock in a way that limits the number of
IBM representatives on a six-member board of directors to three, notwithstanding
IBM's right to elect a greater  number of directors  under the Delaware  General
Corporation  Law. The  agreement  defines an IBM  representative  as an officer,
director  or other agent or employee  of IBM,  IBM's  subsidiaries  or any other
entity  controlled by IBM,  other than the Company.  The voting  agreement  also
obligates the Company and IBM to maintain a board of directors consisting of six
members unless the holders of a majority of outstanding voting stock,  excluding
IBM's shares,  approve an amendment to the Company's amended and restated bylaws
or restated  certificate of  incorporation  to change the size of the board. The
voting  agreement  remains  in  effect  until  IBM  holds  less  than 45% of the
Company's  voting  securities  on a  fully-diluted  basis (as defined in the IBM
Voting Agreement) for a period of 180 consecutive days. As of December 31, 2000,
IBM held approximately 48.5% of the Company's voting securities as calculated on
this  fully-diluted  basis,  which takes into account  outstanding  warrants and
options to  purchase  shares of Common  Stock.  While the IBM  voting  agreement
remains effective,  it may allow IBM's representatives on the Board of Directors
to control any determinations with respect to most material transactions outside
the  ordinary  course  of our  business,  including  mergers  or other  business
combinations,  the acquisition or disposition of our assets, future issuances of
the Company's  equity or debt  securities  and the payment of  dividends.  IBM's
current  representatives  on the Company's Board of Directors are Lee A. Dayton,
Robert G. Anderegg and Michael D. Zisman.

         In addition,  as there is currently one vacancy on the Company's  Board
of Directors, the IBM representatives  represent a majority of the directors. If
the  voting  agreement  expires,  IBM could  still  control or have the power to
control determinations of the type described in the preceding paragraph.

Compensation Committee Interlocks and Insider Participation

         The Company's Board of Directors has a standing Compensation Committee.
The  Compensation  Committee  currently  has two  members who served as a member
during the previous fiscal year: Lee A. Dayton and John Sculley. Neither Messrs.
Dayton or Sculley was an officer or  employee  of the Company  during the fiscal
year or prior  thereto,  or had any  relationship  requiring  disclosure  by the
Company under any paragraph of Item 404 of Regulation S-K.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
<TABLE>
         The  following  table sets forth  information  as of December  31, 2000
concerning the ownership of Common Stock by (i) each  stockholder of the Company
known  by  the  Company  to be the  beneficial  owner  of  more  than  5% of the
outstanding  shares of Common  Stock,  (ii) each current  member of the Board of
Directors of the Company,  (iii) each executive  officer of the Company named in
the Summary  Compensation Table appearing under "Executive  Compensation"  below
and (iv) all current Directors and executive officers of the Company as a group.


                                      -11-
<PAGE>


<CAPTION>
Name and Address                                                   Shares Beneficially Owned (1)
                                                                   Number                Percent
<S>                                                              <C>                       <C>
International Business Machines Corporation (2)
         New Orchard Road
         Armonk, NY 10504
                                                                 15,542,050                48.5%
Current Directors:

Samir Arora (3)                                                   2,137,779                  6.6
Robert G. Anderegg                                                      ---                  ---
Lee A. Dayton                                                           ---                  ---
Blake Modersitzki (4)                                                 5,417                    *
Michael D. Zisman                                                       ---                  ---

Named Executive Officers who are not Directors:
Russell F. Surmanek (5)                                             355,919                  1.1
Mark Patton (6)                                                     342,881                  1.1
Jack Rotolo (7)                                                     381,251                  1.2
Steve Mitgang (8)                                                   198,794                    *

All Executive Officers and Directors as a group (9 persons) (9)   3,442,041                 10.2

Peter Shaw (10)                                                     465,457                 1.47
Morris Taradalsky (11)                                              133,425                    *
<FN>
* Represents beneficial ownership of less than 1% of the Company's Common Stock.

(1)  The number of shares of common stock issued and  outstanding  on January 2,
     2001  was  31,687,043.  Warrants  are  assumed  to  be  exercised  in  full
     notwithstanding  the warrant  holders'  right to exercise  the warrant on a
     "net" basis by surrendering  shares of common stock having a value equal to
     the warrant  exercise  price upon exercise of the warrant.  The persons and
     entities  named in the table have sole  voting and  dispositive  power with
     respect  to all  shares  shown as  beneficially  owned by them,  except  as
     described below.

(2)  Includes   warrants  to  purchase   253,195   shares  of  common  stock  at
     approximately  $6.68  per  share  that are  exercisable  on a net basis and
     expire on various dates in 2003 and 2004,  and warrants to purchase  83,333
     shares of common  stock at $10.80 per share that are  exercisable  on a net
     basis and expire in December 2003.

(3)  Includes  options  held by Mr. Arora to purchase  656,424  shares of common
     stock that are exercisable within 60 days of January 2, 2001. Also includes
     299,457  shares of common stock owned by  Information  Capital LLC,  wholly
     owned  by Mr.  Arora,  and  362,129  shares  of  common  stock  held by Rae
     Technology  II LLC,  of which he is  President  and owns a majority  of the
     equity  interests.  Mr. Arora exercises shared voting and dispositive power
     over the shares held by Rae  Technology  II LLC, but  disclaims  beneficial
     ownership of those shares  except to the extent of his  pecuniary  interest
     therein.

(4)  Represents  options  held by Mr.  Modersitzki  to purchase  5,417 shares of
     common stock that are exercisable within 60 days of January 2, 2001.


                                      -12-
<PAGE>


(5)  Includes  options held by Mr. Surmanek to purchase 353,056 shares of common
     stock that are exercisable within 60 days of January 2, 2001.

(6)  Includes  options held by Mr. Patton to purchase  269,523  shares of common
     stock that are exercisable within 60 days of January 2, 2001.

(7)  Includes  options held by Mr. Rotolo to purchase  370,958  shares of common
     stock that are exercisable within 60 days of January 2, 2001.

(8)  Includes  options held by Mr. Mitgang to purchase  190,647 shares of common
     stock that are exercisable within 60 days of January 2, 2001.

(9)  Includes options and warrants to purchase  1,846,025 shares of common stock
     that are exercisable within 60 days of January 2, 2001.

(10) Mr. Shaw  resigned  from the Company on April 14, 2000.  Any options  which
     remained unvested at that time were cancelled.

(11) Mr.  Taradalsky  resigned from the Company on January 1, 2000.  Any options
     which remained unvested at that time were cancelled.

</FN>
</TABLE>

Item 13.  Certain Relationships and Related Transactions

         Set forth below is a summary of certain material  transactions  between
the Company and any of its Directors, Executive Officers or holders of more than
5% of the Company's  Common  Stock,  or between the Company and persons in which
Directors,  Executive  Officers  or such  stockholders  have  direct or indirect
material interests for the period October 1, 1999 through December 31, 2000.

Transactions with IBM

         Promissory Note. In December 2000, the Company  borrowed  $750,000 from
IBM,  evidenced by a promissory note bearing interest at 10% per annum. The note
was repaid in full on January 2, 2001.

         Software License Agreement. The Company and IBM have a 10-year software
license  agreement,  originally  entered into on March 18, 1997.  The  agreement
provides for payment of royalties by IBM to the Company in connection with sales
of product  bundles that include the  Company's  products and for payment to the
Company for services performed in connection with the IBM WebSphere project. The
agreement  has been  amended a number  of times.  The  agreement  obligates  the
Company to place all of its source code into an escrow. IBM may obtain access to
the source  code upon  events of default  related  to the  Company's  failure to
provide  required  maintenance and support or its bankruptcy or similar event of
financial reorganization.  IBM may use the source code that it obtains to create
derivative  works,  which it will own  subject  to the  Company's  rights in the
underlying software.  Additional terms of the software license agreement and its
amendments  and certain  transactions  occurring  under the agreement as amended
since October 1, 1998 are as follows:

         o    Amendment  Number 1 and Amendment  Number 4 license IBM to use the
              Company's  products  in its  internal  operations  by  paying  for
              upgrade  copies at an annual  rate of 25% of  $402,000 or at a per
              copy  royalty  rate.  Amendment  Number 4 also sets forth  royalty
              rates for the  Company's  products if they are bundled and sold by
              IBM with IBM  products.  These  rates are based on the  percentage
              which the value of the Company's  product bears to the total value
              of all of the other  products in the  bundle.  If the value of the
              Company's product is equivalent to or less than the total value of
              all of the other products in the bundle,  the Company receives 37%
              of IBM's average  selling  price for a


                                      -13-
<PAGE>


              stand-alone  license of the  Company's  product  during a calendar
              quarter.  If the value of the  Company's  product is more than the
              value of the other  products,  the Company  receives  69% of IBM's
              average  selling price for a stand-alone  license of the Company's
              product  during a  calendar  quarter.  If IBM sells the  Company's
              products alone,  the Company receives 75% of IBM's average selling
              price for a stand-alone  license of the Company's product during a
              calendar quarter.

         o    In  Amendment  Number 3 and  Amendment  Number  7, IBM  agreed  to
              translate the Company's software into languages other than English
              for which we are required to pay 115% of the costs associated with
              the translation.  The costs are recovered through the sales of the
              Company's  products  outside of the United States by IBM and Lotus
              by  reducing  the royalty  rate  otherwise  due to us by 50%.  The
              Company  is  permitted  to repay  the  translation  costs  over an
              extended  period of time, and the repayment is derived solely from
              earned international royalties. This agreement expired on December
              31, 1999.

         o    The  Company  became an IBM  "Business  Partner"  under  Amendment
              Number 5, which permits the Company to resell IBM products and pay
              IBM 50% of the royalty payment received by the Company.

         o    The  Company  and  IBM  entered  into a  letter  agreement,  dated
              December 22, 1999,  in which the Company  granted IBM the right to
              bundle  copies of  NetObjects  Fusion  3.01 with Lotus  SmartSuite
              during  calendar  year  2000,  for  which  IBM paid the  Company a
              one-time fee of $1.0 million.  The Company agreed to reimburse IBM
              for up to $400,000 for promotional  and  advertising  expenditures
              that IBM incurs in marketing these bundles.

         o    In March 2000, the Company and IBM entered into a letter agreement
              in which the  Company  granted  IBM the right to bundle  copies of
              NetObjects  Fusion  5.0 with IBM PC's for a 12-month  period,  for
              which  IBM  agreed  to pay a  one-time  fee of $2.3  million.  The
              Company agreed to reimburse IBM for up to $500,000 for promotional
              and  advertising  expenditures  that IBM  incurs  marketing  these
              bundles.

         o    In June 2000, the Company and IBM entered into a letter  agreement
              in which the  Company  granted  IBM the right to bundle  unlimited
              copies of NetObjects  Fusion 5.0 with Lotus Domino, in addition to
              granting a license to IBM to bundle unlimited copies of NetObjects
              NAS  ServerSuite  2000  for up to  five  users  with  other  Lotus
              software products. The term of this agreement is from July 1, 2000
              to September 30, 2001 for a one-time fee of $2.05 million.

         o    In June 2000,  Company and IBM entered into a letter  agreement in
              which  the  Company  provided  Lotus  SmartSuite  up to  5,000,000
              upgrades to  NetObjects  Fusion 5.0 for a period from July 1, 2000
              to July 31, 20001, for a one-time fee of $500,000.

         o    IBM  granted  the  Company a  non-exclusive  right to  incorporate
              utilities  for Lotus  FastSite  into  NetObjects  Fusion 5.0 for a
              one-time fee of $75,000.


                                      -14-
<PAGE>


Distribution Agreement with Novell

         During fiscal year 1999, Novell bundled NetObjects Fusion with Novell's
NetWare for Small Business product offering under a license agreement  providing
for  royalties on a per unit basis as products  are sold by Novell.  The Company
was  entitled  to receive a minimum of $500,000  of  royalties  under the Novell
agreement.  This license agreement  automatically renews for additional one-year
periods  unless  terminated by either party,  and is currently in effect.  After
September 30, 2000, either party may terminate the agreement on 90 days' written
notice,  and as of December 31, 2000,  neither party has done so. Christopher M.
Stone, a former  Executive  Vice  President  with Novell,  was a Director of the
Company until January 25, 2000. Blake  Modersitzki,  Managing Director of Novell
Ventures, was elected as a Director on January 25, 2000.

Certain Business Relationships

         During the fourth quarter of fiscal year 2000, the Company formed a new
subsidiary, ibizu, Inc., of which Gagan (Sal) Arora, an executive officer of the
Company and Samir Arora's brother,  became CEO, President and a director in July
2000.  Effective as of September 30, 2000,  the Company  transferred  all of the
software for an on-line  application service to ibizu, Inc., but retained rights
to use the initial  version of the  transferred  software.  In exchange  for the
transfer, the Company received shares of preferred stock representing 50% of the
total  outstanding  shares of ibizu,  Inc. Sal Arora purchased  shares of common
stock  representing  18.25% of ibizu's  total shares  outstanding  at $0.001 per
share. Three other technical employees of the Company, who had helped to develop
the  transferred  software,  became  employees of ibizu,  Inc. and between them,
purchased the remaining  31.75% of ibizu,  Inc.'s initially issued shares at the
same price.  The common  shares of Mr. Arora and the other three  employees  are
subject to vesting over four years based upon their  continuous  employment with
ibizu,  Inc.  Mark Patton,  the  Company's  current  Executive  Vice  President,
Products and Services,  is the Company's sole  representative on the ibizu, Inc.
board of  directors.  Mr. Arora and one other  employee of ibizu,  Inc. are on a
leave of absence from the Company and have not terminated their employment.  The
Company expended a total of $694,171 on development of the software  transferred
to ibizu,  Inc.  during fiscal year 2000.  The Company has no ongoing  financial
commitment to ibizu, Inc.

         The  Company is a licensee of Rae  Technology,  Inc.  patents  under an
April 10, 1997 license  agreement.  Samir Arora is a director,  President  and a
majority  shareholder  of Rae  Technology,  Inc.  During  fiscal year 2000,  the
Company reimbursed Rae Technology approximately $9,074.85 for patent prosecution
expenses under the terms of the license agreement.


                                      -15-
<PAGE>


<TABLE>
                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated on the 29th day of January 2001.
<CAPTION>
                Signature                                         Title                                 Date
                ---------                                         -----                                 ----
<S>                                         <C>                                                 <C>
/s/  SAMIR ARORA                            Chairman of the Board, Chief Executive Officer
--------------------------------------      and President (principal executive officer)         January 29, 2001
Samir Arora

                           *                Executive Vice President, Finance and Operations,
--------------------------------------      and Chief Financial Officer (principal financial    January 29, 2001
Russell F. Surmanek                         officer)


                           *
--------------------------------------      Director                                            January 29, 2001
Robert G. Anderegg

                           *
--------------------------------------      Director                                            January 29, 2001
Lee A. Dayton

                           *
--------------------------------------      Director                                            January 29, 2001
Blake Modersitzki

                           *
--------------------------------------      Director                                            January 29, 2001
Michael D. Zisman



/s/  SAMIR ARORA                                                                                January 29, 2001
--------------------------------------
Samir Arora
Attorney-in-fact
</TABLE>


                                                                -16-