OMNIS TECHNOLOGY CORP


                         Filing Type: 10-QSB
                         Description: Quarterly Report
                         Filing Date: November 6, 2000
                         Period End: September 30, 2000


                   Primary Exchange: NASDAQ - Small Cap Market
                                  Ticker: OMNS



<PAGE>


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB


(Mark One)

         [X]      Quarterly Report under Section 13 or 15(d) of the Securities
                  Exchange Act of 1934

         For the quarter period ended September 30, 2000

         [ ]      Transition Report Pursuant to Section 13 or 15(d) of the
                  Exchange Act

         For the transition period from _________ to _________

         Commission File number 0-16449

                          OMNIS TECHNOLOGY CORPORATION

             (Exact name of registrant as specified in its charter)

          Delaware                                94-3046892
  (State of incorporation)               (IRS Employer Identification No.)

                         981 Industrial Road, Building B
                              San Carlos, CA 94070
                    (Address of principal executive offices)


                                 (650) 632-7100
                         (Registrant's telephone number)

Check  whether  the issuer:  (1) has filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities 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 [X] No [ ]

As of October 20, 2000,  there were  10,277,832  shares of  registrant's  Common
Stock, $.10 par value, outstanding.





<PAGE>




                  OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                      INDEX

                          PART I. FINANCIAL INFORMATION

                                                                        Page No.

Item 1.      Financial Statements:                                            1

             Condensed Consolidated Balance Sheets -                          1
             September 30, 2000 and March 31, 2000

             Condensed  Consolidated  Statements  of Operations -             2
             Three and Six Months ended September 30, 2000 and 1999

             Condensed Consolidated Statements of Cash Flows -                3
             Six Months ended September 30, 2000 and 1999

             Notes to Condensed Consolidated Financial Statements             4

Item 2.      Management's Discussion and Analysis of Financial                6
             Condition and Results of Operations

                           PART II. OTHER INFORMATION

Item 1.      Legal Proceedings                                               33

Item 2.      Changes in Securities                                           34

Item 3.      Defaults upon Senior Securities                                 34

Item 4.      Submission of Matters to a Vote of Security Holders             34

Item 5.      Other Information                                               34

Item 6.      Exhibits and Reports on Form 8-K                                34

             Signatures                                                      35



<PAGE>

<TABLE>
                                      PART I. FINANCIAL INFORMATION


ITEM 1.   Financial Statements

                              OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                  CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>


                                                  ASSETS


                                                           September 30, 2000             March 31, 2000
                                                           ------------------             --------------
                                                                (Unaudited)
<S>                                                             <C>                       <C>
Current assets:
    Cash and cash equivalents                                   $    621,000              $   1,238,000
    Trade accounts receivable, less allowance for
         doubtful accounts and returns of $107,000 and
         $179,000 at June 30 and March 31,
          respectively                                               818,000                    594,000
    Inventory                                                         14,000                     26,000
    Other current assets                                             194,000                    397,000
                                                                 ------------               ------------

         Total current assets                                      1,647,000                  2,255,000
                                                                 ------------               ------------

Property, furniture and equipment, net                               912,000                    923,000
Intangibles                                                        1,434,000
                                                                 ------------               ------------

         Total assets                                           $  3,993,000              $  3,178,000
                                                                 ============               ============

                                 LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
    Note payable                                                $      2,000                     56,000
    Note payable to stockholder                                    3,144,000                  2,028,000
    Accounts payable                                                 620,000                    460,000
    Accrued liabilities                                              928,000                    591,000
    Deferred revenue                                                 300,000                    206,000
                                                                 ------------               ------------

         Total current liabilities                                 4,994,000                  3,341,000
                                                                 ------------               ------------

    Long-term debt                                                 1,003,000                         --
                                                                 ------------               ------------
         Total liabilities                                         5,997,000                  3,341,000
                                                                 ------------               ------------

Stockholders' deficiency:
    Preferred stock                                                  300,000                    300,000
    Common stock 1,026,000                                         1,004,000
    Paid-in capital                                               51,349,000                 50,374,000
    Deferred compensation                                         (1,507,000)                (2,045,000)
    Accumulated deficit                                          (53,477,000)               (50,082,000)
    Accumulated other comprehensive income                           305,000                    286,000
                                                                 ------------               ------------
         Total stockholders' deficiency                           (2,004,000)                  (163,000)
                                                                 ------------               ------------

         Total liabilities and stockholders' deficiency         $  3,993,000              $   3,178,000
                                                                 ============               ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>



                                                    1

<PAGE>

<TABLE>

                                  OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   (UNAUDITED)
<CAPTION>


                                                     Three Months Ended                    Six Months Ended
                                                        September 30,                       September 30,
                                                     2000           1999                 2000            1999
                                                     ----           ----                 ----            ----
<S>                                              <C>            <C>                 <C>              <C>
Net revenues:
       Products                                  $    851,000     $    948,000     $  1,665,000     $  2,052,000
       Services                                       235,000          236,000          407,000          504,000
                                                 ------------     ------------     ------------     ------------

       Total net revenues                           1,086,000        1,184,000        2,072,000        2,556,000

Costs and expenses:
       Cost of product revenues                        11,000           27,000           45,000           67,000
       Cost of service revenues                       146,000           44,000          378,000           98,000
       Sales and marketing                          1,164,000          569,000        2,529,000        1,099,000
       Research and development 531,000               521,000        1,110,000          906,000
       General and administrative                     596,000        1,109,000        1,301,000        1,352,000
                                                 ------------     ------------     ------------     ------------

       Total costs and expenses                     2,448,000        2,270,000        5,363,000        3,522,000
                                                 ------------     ------------     ------------     ------------

Operating loss                                     (1,362,000)      (1,086,000)      (3,291,000)        (966,000)
                                                 ------------     ------------     ------------     ------------

Other income (expense):
       Interest income                                  7,000            2,000           22,000            4,000
       Interest expense and other, net                (65,000)          (3,000)        (126,000)         (10,000)
                                                 ------------     ------------     ------------     ------------
                                                      (58,000)          (1,000)        (104,000)          (6,000)
                                                 ------------     ------------     ------------     ------------
Loss before income taxes                           (1,420,000)      (1,087,000)      (3,395,000)        (972,000)

Income tax expense                                      1,000                0                0            4,000
                                                 ------------     ------------     ------------     ------------


       Net loss                                  ($ 1,421,000)    $ (1,087,000)    $ (3,395,000)    $   (976,000)
                                                 ============     ============     ============     ============

Basic and diluted net loss per share             $      (0.14)    $      (0.11)    $      (0.33)    $      (0.10)
                                                 ============     ============     ============     ============

Weighted average number of common
           shares outstanding                      10,247,047        9,683,348       10,185,536        9,681,589
                                                 ============     ============     ============     ============

<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>




                                                        2


<PAGE>

<TABLE>

                           OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (UNAUDITED)
<CAPTION>


                                                                       Six  Months Ended
                                                                           September 30,
                                                                   ---------------------------
                                                                      2000                 1999
                                                                  ------------         ------------
<S>                                                               <C>                  <C>
Cash flows from operating activities:
     Net loss                                                     $(3,395,000)         $  (976,000)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
            Depreciation and amortization expense                     151,000              183,000
            Non cash compensation                                     538,000              555,000
            Change in assets and liabilities:
                Trade accounts receivable                            (224,000)              33,000
                Inventory                                              12,000              (10,000)
                Loss on disposal of property                             --                  1,000
                Other assets                                          203,000              268,000
                Accounts payable and accrued liabilities              497,000               33,000
                Deferred revenues                                      94,000               54,000
                                                                  -----------          -----------
     Net cash provided by (used in) operating activities           (2,124,000)             141,000
                                                                  -----------          -----------

Cash flows from investing activities:
     Purchases of property, furniture and equipment                  (206,000)             (70,000)
     Acquisition of software assets                                  (534,000)                --
     Proceeds from sale of fixed assets                                  --                  1,000
                                                                  -----------          -----------

        Net cash used in investing activities                        (740,000)             (69,000)
                                                                  -----------          -----------

Cash flows from financing activities:
     Proceeds from incentive stock option exercise                    110,000                2,000
     Proceeds from stock issuance                                        --                 39,000
     Additions of debt                                              2,107,000              121,000
     Repayments of debt                                               (54,000)             (72,000)
                                                                  -----------          -----------

        Net cash provided by financing activities                   2,163,000               90,000
                                                                  -----------          -----------

Effect of exchange rate changes on cash                                84,000              (70,000)
                                                                  -----------          -----------

Net increase (decrease) in cash and cash equivalents                 (617,000)              92,000
Cash and cash equivalents at beginning of period                    1,238,000              271,000
                                                                  -----------          -----------

Cash and cash equivalents at end of period                        $   621,000          $   363,000
                                                                  ===========          ===========

Supplemental non-cash disclosure:
Issuance of common stock for software system                      $   900,000                 --
                                                                  ===========          ===========
</TABLE>



                                                 3


<PAGE>


                  OMNIS TECHNOLOGY CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.   The  unaudited   financial   information   furnished  herein  reflects  all
     adjustments,  consisting  only of  normal  recurring  items,  which  in the
     opinion of management are necessary to fairly state the Company's financial
     position,  the results of its  operations  and the changes in its financial
     position for the periods  presented.  These financial  statements should be
     read in conjunction with the Company's audited financial statements for the
     year ended March 31, 2000.  The results of operations  for the period ended
     September 30, 2000 are not necessarily indicative of results to be expected
     for any other interim period or the fiscal year ending March 31, 2001.

2.   The Company has adopted  Statement of Financial  Accounting  Standards  No.
     128, "Earnings per Share" (SFAS 128). SFAS 128 requires a dual presentation
     of basic and diluted EPS.  Basic EPS  excludes  dilution and is computed by
     dividing  net  income  (loss) by the  weighted  average  of  common  shares
     outstanding  for the period.  Diluted EPS reflects the  potential  dilution
     that could  occur if  securities  and other  contracts  to issue stock were
     exercised  or  converted  into  common  stock,  unless  the  effect of such
     securities  would be  anti-dilutive.  As of September 30, 2000, the Company
     had 1,690,910 potentially dilutive securities outstanding.

                                                           Six Months Ended
                                                             September 30
                                                   ----------------------------

                                                        2000            1999
                                                        ----            ----

Revenue by geographic region (1):
     Revenue from North America                     $   793,000     $   961,000
     Revenue from Europe                              1,279,000       1,595,000

     Total                                          $ 2,072,000     $ 2,556,000
                                                    ===========     ===========

Operating loss by geographic region (1):
     From North America                             $(2,963,000)    $  (752,000)
     From Europe                                       (328,000)       (214,000)

     Total                                          $(3,291,000)    $  (966,000)
                                                    ===========     ===========


(1) Revenues are broken out geographically by ship from location.



                                        4


<PAGE>


<TABLE>
COMPREHENSIVE INCOME (LOSS)

Comprehensive  income includes changes in the balance of items that are reported
directly  in a  separate  component  of  stockholders'  equity on the  condensed
consolidated  balance sheets.  The  reconciliation  of net loss to comprehensive
loss is as follows.
<CAPTION>


                                              Three Months Ended            Six Months Ended
                                                 September 30                 September 30
                                                 ------------                 ------------

                                             2000           1999           2000           1999
                                             ----           ----           ----           ----
<S>                                      <C>            <C>            <C>            <C>
Net loss:                                $(1,421,000)   $(1,087,000)   $(3,395,000)   $  (976,000)
Other comprehensive (loss) gain
     Foreign currency translation
     adjustments                              69,000        (20,000)        19,000        (57,000)
                                         -----------    -----------    -----------    -----------

Total comprehensive income (loss)
                                         $(1,352,000)   $(1,107,000)   $(3,376,000)   $(1,033,000)
                                         ===========    ===========    ===========    ===========
</TABLE>


INTANGIBLES

Intangibles  includes  the purchase of a software  system which  occurred in May
2000.  The costs from this  software  system is  amortized  over its useful life
estimated to be three years. Also,  included is approximately  $200,000 in legal
fees related to an acquisition.

LONG TERM DEBT

The debt consists of a loan from a  shareholder  which is due September 30, 2002
and bears interests at ten percent.



                                       5



<PAGE>


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


         This  Item 2, as well as  other  portions  of this  document,  includes
certain  forward-looking  statements  about the  Company's  business,  revenues,
expenditures   and   operating   and   capital   requirements.    In   addition,
forward-looking statements may be included in various other Company documents to
be issued  concurrently or in the future and in oral or other statements made by
representatives  of the  Company  to  investors  and  others  from time to time.
Forward-looking  statements  are subject to risks and  uncertainties  that could
cause actual results to differ  materially  from predicted  results.  Such risks
include, among others

-    the Company's liquidity,

-    significant  variability  in operating  results,  including  variability in
     product revenues and gross margins,

-    fluctuating demand for new and established products,

-    dependence on development of new products,

-    increasing expenses for marketing and development of new products,

-    historical lack of profitability,

-    rapid  technological  change  that  affects  the  ability of the Company to
     respond to customer or market demands,

-    risks associated with global operations,

-    the continued and future acceptance of the Company's products,

-    the rate of growth in the industries of the Company's products,

-    the  presence  of  competitors  with  greater   technical,   marketing  and
     financials resources, and

-    the ability of the Company to successfully expand its operations.

Any of such  statements and this discussion  should be read in conjunction  with
the  discussion  of "Risk  Factors"  in this  Item 2 and the  Company's  audited
consolidated financial statements,  including the notes thereto, included in its
annual  report for the fiscal year ended March 31,  2000,  on Form 10-KSB  filed
with the  Commission  on June 29,  2000 and the  amended  10-KSB  filed with the
Commission on July 31, 2000.


                                       6


<PAGE>


OVERVIEW

         The Company, through its operating subsidiaries, Omnis Software Inc., a
California  corporation,  Omnis  Holdings  Limited and Omnis  Software  Limited,
limited  liability  companies  organized  under the laws of  England,  and Omnis
Software  GmbH,  a German  corporation,  develops  software  tools and  delivers
consulting  services.  The Company's products are designed to allow customers to
develop  software  solutions  which can be  continuously  enhanced to respond to
changing  business and technical needs. The Company's  products support the full
life cycle of applications and are designed for rapid development and deployment
of sophisticated  Web and  client/server  applications,  providing true reuse of
software objects and the ability to integrate objects from disparate programming
languages on a number of different  operating  system  platforms.  The Company's
products are used by  corporations,  system  integrators,  independent  software
vendors,  small  businesses,  and  independent  consultants  to  deliver  custom
software  solutions  for a wide range of uses  including  financial  management,
decision support,  executive information,  sales and marketing,  and multi-media
authoring systems. In addition to these products, the Company provides technical
support and training to help plan, analyze,  implement, and maintain application
software based on the Company's technology.

         The Company was incorporated under the laws of the State of Delaware on
August 5, 1987 pursuant to a reorganization of predecessor  companies originally
incorporated under the laws of England in 1983.

Recent Developments

         On August 23, 2000 the Company  entered into an  Agreement  and Plan of
Merger (the  "Merger  Agreement")  with  PickAx,  Inc.,  a Delaware  corporation
("Pick"),  one of the stockholders of Pick, Gilbert Figueroa, and Raining Merger
Sub, Inc. ("Merger Sub"), a Delaware  corporation and wholly owned subsidiary of
Omnis.  Pursuant to the Merger Agreement  (attached hereto as an Exhibit) Merger
Sub, will be merged with and into Pick. Pick as the surviving  corporation  will
become a wholly-owned subsidiary of Omnis.  Shareholder approval is required for
consummation of the merger. A Preliminary  Proxy Statement for a special meeting
of the  Shareholders  was filed  with the SEC on  October  26,  2000.  A revised
Preliminary  Proxy  Statement  will be filed with the SEC on about  November  6,
2000.  The  Company's  shareholders  will be asked to approve  the merger at the
special meeting.

         There have numerous changes to the Company's work force and composition
of the Board of Directors.

         On  September  22,  2000,  the Board  decided to reduce  the  Company's
employee work force.  Between August 30, 2000 and October 6, 2000  approximately
twenty   employees  were   terminated   thereby   reducing  the  work  force  by
approximately 29%.

         On August 14,  2000,  Mr.  James  Dorst  resigned  as a director of the
Company and Bryan  Sparks was elected by the Board of Directors as a director to
fill the vacancy


                                       7


<PAGE>



created by the  resignation  of Mr.  Dorst.  On September  22, 2000 Mr. Bryce J.
Burns was appointed as the Chairman of the Board of the Company.  On October 16,
2000 Mr. Dorst also resigned as the Chief Operating  Officer and Chief Financial
Officer to the  Company.  The Company  has not hired a successor  to replace Mr.
Dorst but intends to identify and hire a successor  Chief  Financial  Officer as
soon as practicable.

         On August 23, 2000 the Company  also  obtained  $750,000 in  additional
loans from three private parties (the "Lenders") pursuant to the terms of a Note
Purchase Agreement.  The Company issued three unsecured  promissory notes to the
Lenders in connection therewith (the "Notes"). The Notes bear interest at 4% per
annum and shall be  automatically  converted  into shares of common stock of the
Company  on the  second  anniversary  of  the  date  of  issuance  thereof  at a
conversion price equal to $6.17 per share. The Notes are also convertible at any
time at the  option of the  holders  thereof  at the same  conversion  price per
share.  Subsequently,  in September,  2000,  the Company  borrowed an additional
$250,000  from The  Philip and Debra  Barrett  Charitable  Remainder  Trust (the
"Trust").  Philip  Barrett,  a director  of the  Company,  is the  trustee and a
beneficiary of the Trust. The Company issued an unsecured promissory note to the
Trust in connection with the loan (the "Barrett Note").  The Barrett Note is due
and payable two years from the date of  issuance  and bears  interest at 10% per
annum.  A future  credit  facility may be difficult to obtain with the Company's
historical  operating results. In order to obtain additional funds in the future
for its continued operation,  the Company will need to seek additional equity or
debt capital. Other major shareholders have expressed the willingness to provide
additional funds but no legally binding commitment has been made.

         On September  22,  2000,  the Board of  Directors  determined  that the
Company would seek to raise additional equity capital prior to December 31, 2000
of between $5 Million to $10 Million by means of a private  placement  of common
stock of the Company at an issue price in the range of $6 per share. There is no
assurance  that the  Company  will be able to raise such  additional  capital on
commercially  reasonable terms, if at all. In addition,  the raising of any such
capital would be dilutive to the Company's stockholders.





                                       8


<PAGE>


RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED  SEPTEMBER 30, 2000 AND
SEPTEMBER 30, 1999

Total Net Revenues

         Total net revenues for the six months ended  September  30, 2000,  were
$2,072,000,  representing  a decrease of 18.9% as compared to total net revenues
of $2,556,000 for the six months ended September  30,1999.  This decrease is due
primarily to the reduction in selling price of development kits and runtimes and
the repositioning of the OMNIS Studio product line.

         Total net revenues for the three months ended  September 30, 2000, were
$1,086,000,  representing  a decrease of 8% as compared to total net revenues of
$1,184,000  for the three months ended  September 30, 1999. The change is due to
the  reduction  in  selling  price  of  development  kits and  runtimes  and the
repositioning of the OMNIS Studio product line.

         Product  revenues  decreased  during the six months ended September 30,
2000, to $1,665,000  from $2,052,000 in the six months ended September 30, 1999.
This  decrease is due to a reduction in sales price of OMNIS Studio  development
kit and license  fees to motivate  existing  customers  to upgrade from Omnis as
well as attract new developers.

         Product revenues  decreased during the three months ended September 30,
2000, to $851,000  from  $948,000 in the three months ended  September 30, 1999.
This  decrease is due to a reduction in sales price of Omnis Studio  development
kit and license fees to motivate  existing  customers to upgrade from Omnis 7 as
well as attract new developers.

         Service  revenues for the six months ended September 30, 2000 decreased
19.2% to $407,000 from $504,000 for the six months ended September 30, 1999. The
majority  of this  decrease  is due to the  Company's  decision to phase out its
consulting offerings. Maintenance revenue, which primarily consists of email and
telephone  support to the Company's  customers,  decreased  slightly  during the
period ending  September 30, 2000, due to the decrease in the annual support fee
being charged to customers.

         Service  revenues  for  the  three  months  ended  September  30,  2000
decreased  only by $1,000 to $235,000  from  $236,000 for the three months ended
September 30, 1999.

         The  Company  sells its  products  in U.S.  Dollars  in North  America,
British  Pounds  Sterling  in the United  Kingdom and German  Deutsche  Marks in
Germany.  As the Company  recognizes  revenues  and  expenses  in U.S.  Dollars,
British  Pounds  Sterling,  and German  Deutsche Marks but reports its financial
results in U.S.  Dollars,  changes in exchange rates may cause  variances in the
Company's period-to-period revenues and results of operations in future periods.
Foreign  exchange  gains and  losses  have not been  material  to the  Company's
performance to date.


                                       9


<PAGE>


         Cost of Product Revenues.

         Cost of product revenues as a percentage of product revenues  decreased
from 3.2% in the six months ended  September  30, 1999 to 2.7% in the six months
ended  September  30, 2000 as a direct  result of the decrease in average  sales
price of the Company's products.

         Cost of product revenues as a percentage of product revenues  decreased
slightly  from 2.8% in the three months ended  September 30, 1999 to 1.3% in the
three months ended September 30, 2000.

         Cost of Services Revenues.

         Cost of service revenues  increased as a percentage of service revenues
from 19.4% in the six months  ended  September  30,  1999,  to 92.76% in the six
months ended September 30, 2000. This is due to the establishment of a technical
support  department in the US this year that offers real time telephone  support
to its North American  customers.  Previously,  only email support was available
from the engineering office in the United Kingdom.

         Cost of service revenues  increased as a percentage of service revenues
from 18.6% in the three months  ended  September  30, 1999,  to 62% in the three
months ended September 30, 2000. This is due to the establishment of a technical
support  department  in the US this  year that will  offer  real time  telephone
support to its North  American  customers.  Previously,  only  email  support is
available from the engineering office in the United Kingdom.

         Selling and Marketing Expenses.

         Sales and marketing expenses increased to $2,529,000 for the six months
ended  September  30, 2000 as compared to  $1,099,000  for the six months  ended
September 30, 1999.  The increase in sales and marketing  expenses was primarily
due to  increases  in targeted  advertising,  direct mail  programs,  trade show
participation and strategic marketing programs with partners.

         Sales and  marketing  expenses  increased to  $1,164,000  for the three
months  ended  September  30, 2000 as compared to $569,000  for the three months
ended  September  30,  1999.  The increase in sales and  marketing  expenses was
primarily due to increases in targeted advertising,  direct mail programs, trade
show participation and strategic marketing programs with partners.

         Research and Development Expenses.

         Research and  development  costs  increased to  $1,110,000  for the six
months  ended  September  30,  2000,  as compared to $906,000 for the six months
ended September 30, 1999,  primarily due to an increase of staff at its Research
and Development Center in the United Kingdom. The Company continues to invest in
the  development  of its  newer



                                       10


<PAGE>



product  line,  OMNIS  Studio,  aimed at sales  opportunities  that the  Company
believes will expand its installed base of customers.

         Research  and  development  costs  increased  to $531,000 for the three
months ended  September  30, 2000,  as compared to $521,000 for the three months
ended September 30, 1999,  primarily due to an increase of staff at its Research
and Development Center in the United Kingdom. The Company continues to invest in
the  development  of its  newer  product  line,  OMNIS  Studio,  aimed  at sales
opportunities  that the  Company  believes  will  expand its  installed  base of
customers.

         General and Administrative Expenses.

         General and administrative expenses decreased to $1,301,000 for the six
months ended  September 30, 2000,  as compared to $1,352,000  for the six months
ended September 30,1999.  General and administrative  expense for the six months
ended  September  30, 2000  included the  recognition  of non-cash  compensation
expense of $538,000 that resulted from the issuance of certain  options at below
fair market  value,  offset by  reductions  in head count in the  quarter  ended
September 30, 2000.

         General and administrative expenses decreased to $596,000 for the three
months ended  September 30, 2000, as compared to $1,109,000 for the three months
ended  September  30,  1999.  General and  administrative  expense for the three
months  ended   September  30,  2000  included  the   recognition   of  non-cash
compensation  expense of $269,000  that  resulted  from the  issuance of certain
options at below fair market value.  During the three months ended September 30,
1999, non-cash compensation expense of $555,000 was recognized.

         Other Income (Expense), Net.

         Other income (expense) is comprised primarily of interest income earned
on cash and cash equivalents,  interest expense, and any gain or loss on foreign
currency transactions.  Interest income increased to $7,000 for the three months
ended  September 30, 2000,  from $2,000 for the three months ended September 30,
1999, primarily due to higher average balances of cash and cash equivalents.

         Interest  expense  increased  to  $65,000  for the three  months  ended
September  30, 2000,  from $3,000 for the three months ended  September 30, 1999
primarily  due to the $3.0 million  promissory  note obtained from a significant
stockholder  and an aggregate of $1.0 million  promissory  notes  obtained  from
others.

         Inflation.

         The Company  believes that  inflation has not had a material  impact on
the Company's  operating results to date and does not expect inflation to have a
material impact on the Company's operating results in fiscal year 2001.



                                       11


<PAGE>


RISK FACTORS

         Quarterly Fluctuations.

         The Company  has  experienced  significant  quarterly  fluctuations  in
operating results and anticipates such  fluctuations in the future.  The Company
generally ships orders as received and, as a result,  typically has little or no
backlog.  Quarterly  revenues and operating  results,  therefore,  depend on the
volume and timing of orders received during the quarter,  which are difficult to
forecast.  Furthermore,  the  Company  has  typically  sold to  large  corporate
enterprises,  significant  partners,  and  distributors  which often purchase in
significant quantities,  and therefore, the timing of the receipt of such orders
could cause significant  fluctuations in operating  results.  Historically,  the
Company has often  recognized a substantial  portion of its license  revenues in
the last month of the quarter.  Service revenues tend to fluctuate as consulting
projects, which may continue over several quarters, are undertaken or completed.
Operating  results may also  fluctuate due to factors such as the demand for the
Company's  products,  the size and  timing of  customer  orders,  changes in the
proportion of revenues  attributable to licenses and service fees,  commencement
or conclusion of significant consulting projects, changes in pricing policies by
the Company or its competitors,  the number, timing, and significance of product
enhancements  and new product  announcements by the Company and its competitors,
the ability of the Company to develop,  introduce,  and market new and  enhanced
versions of the Company's  products on a timely  basis,  changes in the level of
operating  expenses,  changes in the Company's sales incentive plans,  budgeting
cycles  of  its  customers,   customer  order   deferrals  in   anticipation  of
enhancements  or new  products  offered  by  the  Company  or  its  competitors,
nonrenewal of  maintenance  agreements,  product life cycles,  software bugs and
other product  quality  problems,  personnel  changes,  changes in the Company's
strategy,  the level of  international  expansion,  seasonal  trends and general
domestic and  international  economic and  political  conditions,  among others.
Accordingly,  the Company  believes  that  period-to-period  comparisons  of its
operating  results are not necessarily  meaningful and should not be relied upon
as indications of future performance.

         Expense Levels.

         The Company's  expense levels are based,  in  significant  part, on the
Company's  expectations as to future revenues and are therefore relatively fixed
in the short  term.  If revenue  levels fall below  expectations,  net income is
likely to be  disproportionately  adversely  affected because a  proportionately
smaller amount of the Company's expenses vary with its revenues. There can be no
assurance that the Company will be able to achieve  profitability on a quarterly
or annual basis in the future.  Due to all the foregoing  factors,  it is likely
that in some future  quarter the Company's  operating  results will be below the
expectations of public market analysts and investors.  In such event,  the price
of the Company's Common Stock would likely be materially adversely affected.



                                       12


<PAGE>


         Future Operating Results.

         The Company's future operating  results will depend,  to a considerable
extent,  on its ability to rapidly and  continuously  develop new products  that
offer its customers enhanced performance at competitive prices. Inherent in this
process  are a number  of  risks.  The  development  of new,  enhanced  software
products is a complex and uncertain  process requiring high levels of innovation
from the Company's  designers as well as accurate  anticipation  of customer and
technical trends by the marketing staff.

         The  Company's  operating  results will also be affected by the volume,
mix,  and timing of orders  received  during a period and by  conditions  in the
industries  that it serves as well as the  general  economy.  Additionally,  the
Company  operates on a global basis with offices or distributors in Europe,  and
Asia, as well as North America.  Changes in the economies,  trade policies,  and
fluctuations  in  interest  or  exchange  rates may have an impact on its future
financial  results.  Also,  as the Company  continues to operate more  globally,
seasonality may become an increasing factor in its financial performance.

         The Company's products are typically used to develop  applications that
are  critical  to a  corporate  customer's  business  and  the  purchase  of the
Company's  products  is often  part of a  customer's  larger  business  process,
reengineering  initiative,  or  implementation  of  client/server  or  web-based
computing. As a result, the license and implementation of the Company's software
products generally involves a significant commitment of management attention and
resources by prospective customers.  Accordingly, the Company's sales process is
often subject to delays  associated with a long approval  process that typically
accompanies significant initiatives or capital expenditures. For these and other
reasons,  the sales cycle associated with the license of the Company's  products
is often  lengthy and subject to a number of  significant  delays over which the
Company has little or no  control.  There can be no  assurance  that the Company
will not experience these and additional  delays in the future.  Therefore,  the
Company  believes  that its  quarterly  operating  results  are  likely  to vary
significantly in the future.

         The  development  and  introduction  of new or enhanced  products  also
requires the Company to manage the transition from older,  displaced products in
order to minimize disruptions in customer ordering patterns and excessive levels
of older product  inventory and to ensure that adequate supplies of new products
can be delivered to meet customer  demand.  Because the Company is  continuously
engaged in this  product  development  and  transition  process,  its  operating
results may be subject to considerable fluctuations,  particularly when measured
on a quarterly basis.

         Liquidity and Capital Resources.

         For the six months ended  September 30, 2000,  the net operating use of
cash was fueled by a net loss of  $3,395,000,  a change in net current assets of
$582,000, depreciation and amortization expense of $151,000 and the amortization
of  non-cash  compensation  expense  of  $538,000.  Net cash  used by  investing
activities was used to purchase $206,000 in furniture and computer equipment and
$543,000 for expenses


                                       13

<PAGE>



related to the  acquisition of software assets to enhance the Omnis product line
for a net use of $140,000. Cash flows from financing activities were provided by
$2,107,000 additional borrowings under the Astoria Note noted above, $900,000 in
proceeds  from the issuance of common  stock and  $110,000  from the exercise of
stock options offset by $54,000  repayment of debt. These total changes combined
with a $84,000  cash  provided  from the effect of exchange  rates for six month
period contributed to a net decrease in cash for the period of $617,000.

         At September  30, 2000,  the Company's  principal  sources of liquidity
consisted  of cash and cash  equivalents  of  $621,000.  The  Company's  working
capital  position was a deficit of $1,086,000 at March 31, 2000 and a deficit of
$2,347,000 at June 30, 2000 compared to a deficit of $3,347,000 at September 30,
2000.

         On September  22,  2000,  the Board of  Directors  determined  that the
Company would seek to raise additional equity capital prior to December 31, 2000
of between $5 Million to $10 Million by means of a private  placement  of common
stock of the Company at an issue price in the range of $6 per share. There is no
assurance  that the  Company  will be able to raise such  additional  capital on
commercially  reasonable  terms if at all. In addition,  the raising of any such
capital would be dilutive to the Company's stockholders.

         The Company does not currently have an established  line of credit with
a commercial  bank and has funded  operations  over the past  several  months by
means of the $3 million  working  capital  facility  provided by Astoria Capital
Partners, LP, a California limited partnership  ("Astoria").  On August 23, 2000
the Company  also  obtained  $750,000  in  additional  loans from three  private
parties (the "Lenders") pursuant to the terms of a Note Purchase Agreement.  The
Company  issued three  unsecured  promissory  notes to the Lenders in connection
therewith  (the  "Notes").  The Notes bear interest at 4% per annum and shall be
automatically converted into shares of common stock of the Company on the second
anniversary of the date of issuance thereof at a conversion price equal to $6.17
per  share.  The Notes  are also  convertible  at any time at the  option of the
holders  thereof  at the same  conversion  price  per  share.  Subsequently,  in
September, 2000, the Company borrowed an additional $250,000 from The Philip and
Debra Barrett  Charitable  Remainder  Trust (the  "Trust").  Philip  Barrett,  a
director of the  Company,  is the trustee and a  beneficiary  of the Trust.  The
Company issued an unsecured  promissory note to the Trust in connection with the
loan (the  "Barrett  Note").  The Barrett Note is due and payable two years from
the date of  issuance  and bears  interest  at 10% per  annum.  A future  credit
facility  may be  difficult to obtain with the  Company's  historical  operating
results.  In order to obtain  additional  funds in the future for its  continued
operation,  the Company  will need to seek  additional  equity or debt  capital.
Astoria and other major  shareholders  have expressed the willingness to provide
additional funds but no legally binding commitment has been made.

         Key Personnel and Management.

         The  success of the  Company  depends to a  significant  extent  upon a
number of key  management  and technical  personnel,  the loss of one or more of
whom could adversely


                                       14


<PAGE>


affect its business.  In addition the Company  believes that its future  success
will depend to a significant  extent on its ability to recruit,  hire and retain
highly  skilled  management  and  employees  for  product  development,   sales,
marketing, and customer service.  Competition for such personnel in the software
industry  is intense,  and there can be no  assurance  that the Company  will be
successful in attracting and retaining such personnel. Management of the Company
will also be  required  to manage  any growth of the  Company  in a manner  that
requires a  significant  amount of  management  time and skill.  There can be no
assurance  that the Company will be  successful in managing any future growth or
that any failure to manage such growth will not have a material  adverse  effect
on the Company's business, operating results or financial condition.

         Intellectual Property.

         The Omnis products include  technologies  developed by the Company. The
Company  relies  primarily  on a  combination  of trade  secret,  copyright  and
trademark laws and contractual  provisions to protect its proprietary  rights in
such  technologies.  There  is no  assurance  that  such  laws  and  contractual
provisions  will  adequately  protect  the  intellectual  properties  and  other
proprietary  rights of the Company.  The Company has filed a final United States
patent  application  for  certain of its Studio  Web  Client  technologies.  The
Company has initiated procedures for preparing and filing additional provisional
and final patent  applications as appropriate  for its developing  technologies.
The  Company  has  not  been  granted  any  patents  on any  of its  proprietary
technologies  and there is no  assurance  that any such patents will be granted.
Patent  protection  may become  important in the  protection  of the  commercial
viability of the  Company's  innovative  products and the failure to obtain such
patent  protection  could have an adverse effect on the commercial  viability of
such products. The Company's success therefore may in part depend on its ability
to obtain strong patent  protection or licenses to strong patents in the future.
It is not  possible  to  anticipate  the  breadth or degree of  protection  that
patents would afford any product of the Company or the underlying  technologies.
There can be no  assurance  that any  patents  issued or licensed to the Company
will not be successfully challenged in the future or that any Omnis product will
not infringe the patents of third  parties.  As the number of software  products
available  in the market  increases  and the  functions  and  features  of these
products further  overlap,  the Company  anticipates that software  products may
become increasingly  subject to infringement  claims.  There can be no assurance
that third parties will not assert  infringement  claims  against the Company in
the future with respect to any current or future  product.  Any such  assertion,
whether with or without  merit,  could  require the Company to enter into costly
litigation or royalty arrangements.  If required,  such royalty arrangements may
not be available on reasonable terms, or at all.

         Dependence on Principal Products.

         Any  factor  adversely  affecting  sales  of  the  Company's  principal
products, including but not limited to Omnis Studio and Omnis Studio Web Client,
would have a  material  adverse  effect on the  Company.  The  future  financial
performance of the Company will depend in  significant  part upon the successful
development, introduction and customer acceptance of new or enhanced versions of
its principal  products and other



                                       15


<PAGE>



products.  There can be no  assurance  that the Company  will be  successful  in
marketing its principal products or any new or enhanced products the Company may
develop in the future.  In addition  competitive  pressures or other factors may
result  in price  erosion  that  could  have a  material  adverse  effect on the
Company's results of operation.

         International Operations.

         Additionally,  the Company  operates on a global  basis with offices or
distributors  in  Europe  and  Asia as well as in North  America.  International
operations are subject to inherent risks,  including  costs and  difficulties in
staffing and managing foreign operations; difficulties in obtaining and managing
local  distributors;  the costs and  difficulties  in  localizing  products into
languages  other  than  English  for  foreign  markets;  political  or  economic
instability,  unexpected  regulatory  changes  and  fluctuations  in interest or
exchange rates in the specific  countries in which the Company  distributes  its
products or in international markets in general;  longer receivables  collection
periods and greater difficulty in accounts receivable collection;  import/export
duties and quotas;  reduced protection for intellectual  property rights in some
countries;  and  potentially  adverse  tax  consequences.  Also,  as the Company
continues to operate more internationally,  seasonality may become an increasing
factor in its  financial  performance.  There  can be no  assurance  that  these
factors  or any  combination  of these  factors  will not  adversely  affect the
international revenues or overall financial performance of the Company.

         Delays in Sales and Commitments.

         The Company's products are typically used to develop  applications that
are critical to a customer's business and the purchase of the Company's products
is often part of a customer's larger business process, reengineering initiative,
or  implementation  of  client/server  computing.  As a result,  the license and
implementation  of  the  Company's   software  products   generally  involves  a
significant  commitment  of management  attention  and resources by  prospective
customers.  Accordingly,  the Company's sales process is often subject to delays
associated with a long approval process that typically  accompanies  significant
initiatives  or capital  expenditures.  For these and other  reasons,  the sales
cycle associated with the license of the Company's products is often lengthy and
subject to a number of  significant  delays over which the Company has little or
no control. There can be no assurance that the Company will not experience these
and additional  delays in the future.  Therefore,  the Company believes that its
quarterly operating results are likely to vary significantly in the future.

         Changes in Pricing Structure.

         The Company  announced a reduction  in certain  portions of its pricing
structure  for fiscal  year 2000 and  beyond.  There is no  guarantee  that this
reduction  in price  will lead to  increased  unit  volume  or other  additional
revenue streams to replace this lost revenue,  which could lead to a significant
cash flow  strain  on the core  operations  of the  Company.  Additionally,  the
Company is relying on increased revenues related to its new OMNIS Studio product
line, which have not generated revenues as originally  projected



                                       16


<PAGE>


by the Company.  There is no assurance  that this product line will generate the
revenues  needed to sustain  the  Company in coming  quarters  and  beyond.  The
Company  has  committed  to  decreasing   sales   conflicts  with  its  partners
particularly in the service revenue area and has already taken a number of steps
in this  regard.  This has had and will  continue  to have a negative  effect on
service  revenues as compared to previous  quarters  and years.  There can be no
guarantee that the Company will be able replace the decreasing  service revenues
with new product revenues.



                                       17

<PAGE>


INDUSTRY AND TRENDS

         Evolution of Enterprise Computing

         The evolution of computing has been  characterized  by several distinct
stages.   In   the   1970s,    main-frame   and   minicomputer    systems   with
character-oriented  user  terminals  emerged  as  the  principal  structure  for
enterprise  computing.  This was  followed in the 1980s by the  introduction  of
personal   computers  and  workstations   which  primarily   addressed  personal
productivity applications such as word processing and spreadsheets.  In the late
1980s,  local and  enterprise-wide  networks  connecting  these desktop  systems
became increasingly prevalent, initially for accessing file storage archives (Me
servers) and electronic mail communications.

         Building on this infrastructure,  client/server computing emerged as an
important new  architecture  for corporate  computing in the early 1990s. In the
client/server  computing  model,   application  software  is  divided  into  two
components: a "client" handling functions such as the user interface, local data
storage,  manipulation and  presentation,  and a "server" handling tasks such as
data  management  and access,  storage,  and  retrieval  for  multiple  clients.
Typically,  the client software runs in a single-user desktop system,  while the
server  operates  utilizing a shared  mainframe  or  workstation,  and  messages
linking  client and server are  exchanged  through  connecting  networks.  These
networks  could be either  Local Area  Networks  ("LANs") or Wide Area  Networks
("WANs") with the distinction being intuitive;  LANs generally connected clients
together  with a server  within a building or  department  while WANs  typically
utilized  dedicated  communication  lines and linked remote facilities  together
over greater distances.

         In the last several years the Internet has become a viable  alternative
to  dedicated  communication  lines  for the  dissemination  and  collection  of
information,  with clients accessing data from remote servers using applications
known as "browsers" via the Internet.  Virtual Private  Networks  ("VPNs") where
individual  clients can access  departmental and enterprise  servers have become
commonplace. The existence of this new infrastructure has led to an explosion in
electronic commerce, the development of electronic communities and "Portals" and
password protected corporate "Intranets" for the secure transmission of critical
corporate information.

         This evolution  continues with the client/server  paradigm moving to an
Application  Service Provider ("ASP") model, where clients access remote servers
which host the entire  application  and  related  data.  In essence  the classic
"computer room" is being replaced by off-site Internet hosting  facilities where
the  bulk  of the  computing  is  handled  in  larger  more  economic  computing
facilities.  New wireless technologies fit into this movement of computing power
to larger Internet-enabled  facilities,  with Wireless Access Protocols ("WAPs")
emerging.  These new wireless  technologies  are being  designed to allow remote
clients to access and transmit data  efficiently  without the  requirement  of a
hard-wired physical connection.

         As a result of these  watershed  changes in the computing  environment,
the market for  application  development  tools has grown  rapidly as businesses
seek to develop



                                       18



<PAGE>



applications  which will address  these new  paradigms and allow for secure data
transmission  across  the  Internet.  At the  same  time the  overall  computing
environment  is becoming  more  complex,  and  businesses  are seeking to reduce
application development times and efficiently utilize their software development
resources. As a result, businesses are increasingly seeking software development
tools which allow them to take  advantage  of the software  re-use  potential of
object-oriented programming.

Object-Oriented Programming Environments

         Software development tools based on object-oriented  programming models
are  generally   recognized  as  the  most  efficient   solution  to  enterprise
application   development.   Object-oriented   programming  languages  aggregate
functions   and  data  into  classes  and  objects.   Object-based   application
development  tools then provide a set of software  components  and libraries for
the creation and storage and manipulation of objects in the relevant programming
language.  This structure  enables re-use of the software in the  development of
other  applications.  By contrast  traditional  non-object  or  imperative  mode
programming  models  require the developer to "start from scratch" with each new
application, which is extremely inefficient.

         Object-oriented   programming   environments,   such  as  Omnis  Studio
software,  allow  the  development  of object  components  that are easy to use,
modify,  and  re-use so that  developers  do not need to commit to  lengthy  and
complex  development of applications.  This permits  businesses to support their
most recent  product  offerings  and  corporate  positioning  by  deploying  and
modifying applications more rapidly and efficiently.

Browser Technology

         Increasingly,  businesses  also have been using the  Internet  to reach
more  customers  and to create an  extended  virtual  "corporation"  among their
vendors,  partners,  and contractors.  While Internet  browsers will continue to
become more  sophisticated,  they are likely to remain primarily  viewing tools.
Other applications are used to provide the actual customer solutions,  with most
of the processing performed on the servers.

         In addition to browsers,  in the current  environment  most  businesses
need powerful  crossware  applications  (software that supports cross  database,
cross platform,  cross object and cross component uses) that have the ability to
operate across the Internet with a wide variety of:

--   Platforms (e.g., Windows 95, 98 and 2000, Windows NT, Macintosh and Linux);

--   Databases (e.g., DB2, Oracle, Informix, Sybase and SQL); `

--   Object Types built using the C++ and other programming languages; and

--   Component Formats (e.g., ActiveX from Microsoft  Corporation  ("Microsoft")
     and Java Beans from JavaSoft and others).


                                       19

<PAGE>


Products

         Omnis 7(3) has been the Company's  main product line for many years and
continues  to be a  major  source  of  revenue.  Omnis  Studio  is  an  enhanced
object-oriented  product  offering with  technical  features and  cross-platform
capabilities which exceed those of Omnis 7(3).

Omnis 7(3)

         Omnis 7(3) (the "Classic") is the Company's long standing product fine,
covering the full range of application  development  and  deployment  needs from
prototyping through build and release. Omnis 7(3) is a high performance tool for
rapid  development of business  enterprise  applications  that has established a
large customer base. With its cross-platform,  cross-database capabilities,  the
Company  expects this product to continue to generate some level of demand among
programmers  and developers of  client/server  software for at least the next 18
months.

         Written  in  C++,  the  Classic  product  was  widely  embraced  by the
Company's customers,  partners,  and VARs. The Company has continued to develop,
support and upgrade  Omnis 7(3) , but recently  announced  its intention to drop
enhancements  to the product in the Fall of 2001.  Management  believes that for
the  near-term  there  continues  to be  worldwide  demand for a low-cost,  high
performance  procedural  application  development  tool for business  enterprise
applications in client/server and Internet environments, but that, in the longer
term, customers would be best served by migrating to the Omnis Studio product.

         The Classic product family includes  several  products:  the Omnis 7(3)
development  environment,  Omnis Change  Management  System,  and Omnis  Version
Control  System,  which  together  address a wide range of team and  application
management tasks, including version tracking and control, change management, and
turnkey build-and-release  functionality. The Classic product line also includes
Web  enabling  functionality  that  allows  users of Omnis  7(3) to adapt  their
applications for the Internet.  Web Enabler supports leading industry standards,
including  SMTP/POP3,  FTP, HTTP,  TCP/IP,  and HTML, along with GIF and JPEG Me
formats.  The license  fees and pricing for the  Classic  remain  unchanged  and
varies with the  configuration of the product  licensed.  List prices range from
$585 to $1,499.

         The  Classic  applications  can be deployed  with data access  services
through  the Omnis 7(3)  proprietary  database  or  configured  with data access
services to leading  databases such as DB2,  Oracle,  Sybase and Informix.  When
customers  deploy an  application,  they require a  deployment  license for each
end-user.  The global list prices for the database  deployment licenses of Omnis
7(3)  generally  range  from $18 to $165 per  user,  depending  upon  quantities
purchased and the distribution channel used.

         Omnis Studio

         Omnis Studio is the  Company's  premium  product line and was the first
commercially available application development tool which integrated ActiveX and
Java


                                       20

<PAGE>



Beans  components.   Omnis  Studio  is  an  object-oriented   rapid  application
development tool,  offering easy visual assembly of components and objects.  Key
features of Omnis Studio include  cross-platform support for Windows 95, Windows
98, Windows NT, Windows 2000, MacOS and Linux;  local and portable data caching;
a powerful code inspector; a versatile report writer; a multiple-mode  debugger;
and support for  localization and  multilingual  implementation.  At the time of
this  filing  Omnis  Studio  was the  only  known  commercially  released  rapid
application development tool which runs on all of the foregoing platforms.

         Omnis Studio includes two powerful subsystems: the Component Integrator
and the Omnis Studio Web Client. The Component Integrator provides a development
environment  where software  developers can combine,  integrate,  optimize,  and
extend  third-party  components  such as ActiveX and Java Beans.  Because  Omnis
Studio  understands  different  object  models,  developers can work in a single
integration  environment  using a single  interface,  regardless of component or
object type.

         The Omnis Studio Data Access Manager enables developers to use a single
interface to view, access and manipulate all  industry-leading  databases.  High
performance  drivers provide fast and easy access to IBM's DB2 Universal Server,
and databases supplied by Oracle Corporation,  Sybase Incorporated, and Informix
Corporation.  Most other leading  databases,  including  Microsoft's  SQL Server
database, are accessible via ODBC.

         The Omnis Studio Version  Control System ("VCS")  provides  application
development teams and application  development managers with better control over
developing their crossware applications.  The Omnis Studio VCS offers a complete
tool set for version tracking and control,  component storage and security,  and
build-and-release,  so that team managers can easily  roll-back  changes,  split
development, or create custom builds.

         The Omnis  Studio Web Client was  released in April 1999 and provides a
novel way of deploying  business  solutions on the World Wide Web. Web solutions
are  written  using  Omnis  Studio,  bringing  all the  benefits of a 4GL to the
Internet,  such as rapid prototyping,  easy  customization,  and straightforward
debugging.  With  Omnis  Studio,  web forms are  developed  using  drag and drop
techniques and helpful  wizards,  and can include  controls like dropdown lists,
tabs and sidebars to ease navigation through the solution in a web browser.  The
server application is developed using standard Omnis technology. Once developed,
the  solution  can be  efficiently  set up. The server runs an Omnis engine that
sits  between the web server and the  database,  and Omnis  applications  can be
viewed on the Internet  using a standard web browser,  such as newer versions of
Microsoft Internet Explorer or Netscape Navigator.

Business Strategy

         The Company's  product  development  strategy is to continue to develop
sophisticated  application  development  tools  to  enable  businesses  to build
mission-critical software applications which have the following characteristics:



                                       21

<PAGE>


o    Provide  integration  with existing systems and execute across a variety of
     platforms and databases.

o    Allow the extension of the Client/Server model across the Internet into the
     ASP and emerging WAP markets.

o    Deliver superior object-oriented  functionality at a lower cost than any of
     its competitors.

o    Enable  its  customers  to  provide  solutions  faster  than the  Company's
     competitors.

o    Encourage the  development  of reusable  program  components and reduce the
     cost of solution delivery.

         The  Company's  growth  strategy  is  focused on  continuing  to garner
revenue from its existing customer base,  reconnecting with corporate  customers
lost  during  the past  several  years and at the same time  attracting  a large
number of new  customers.  The  Company  has a very loyal core group of software
developers  among  its  customer  base,  many of whom  have  used the  Company's
products for several  years and who are  interested  in expanding  the number of
applications  which are  developed  using the  Company's  products.  In order to
capitalize on the commitment of existing  customers as well as introducing Omnis
Studio to new developers the Company has implemented the following:

o    In  recognition  of  the  importance  of  the  initial  user   installation
     experience  Omnis has  significantly  improved the ease of  installation by
     providing a more  intuitive  interface and by creating  Wizards  (i.e.  our
     "Application  Builder") to illustrate how quickly  meaningful  applications
     can be created.

o    The sales  price of an Omnis  Studio  developers  kit has been  reduced  to
     eliminate cost as a barrier to product  adoption.  Omnis now offers a range
     of support  programs  coupled with moderate  runtime  license  fees.  These
     support programs are designed to give existing developers a defined path to
     migrate  from our  Classic  products  to Omnis  Studio and to  provide  new
     developers with the help they need to become  productive Omnis  programmers
     as quickly as possible.

o    A complete Website redesign to allow for downloading evaluation versions of
     Omnis  Studio  as  well  as an  on-line  store  allowing  the  purchase  of
     development  kits  directly  from our  Website.  In  addition  the  Company
     provides enhanced  web-based  functionality for our developer  community as
     well  as an  on-line  database  of  solutions  that  our  developers  offer
     potential customers.

o    A tactical  marketing  effort which  emphasizes  efficient  advertising  in
     targeted  developer  communities and attendance at appropriate trade shows.
     This


                                       22


<PAGE>


     provides  the Company with  exposure to the  potential  customer  base and,
     combined with leads  generated from downloads;  at our website,  provides a
     database  of sales leads that our inside  sales team can pursue.  The North
     American team also  prequalifies  corporate  opportunities  for appropriate
     follow-up by our North American  technical sales team. The Company believes
     its Omnis  Studio  products  are easy to use and easy to learn  and  enable
     developers to assemble their  applications with  drag-and-drop  ease via an
     elegant  and  intuitive  user  interface.  The  Company  believes  that the
     practical and visual  interface of Omnis  Studio,  along with its component
     and web integration,  allows developers from many different backgrounds and
     skill  levels to build more types of  applications  more  quickly  and less
     expensively by following common rules for assembly.

         The license fees for Omnis  Studio  Developer  Kits were  substantially
reduced in fiscal  year 2000 and  generally  have a United  States list price of
$149. The Company has shifted its revenue model to a support-based program, with
a variety of supported developer programs priced at an annually renewable fee of
$999.

         The Company has also instituted  special support programs for the North
American market:

o    Incubator  Partner  Program - The Incubator  Program is designed to attract
     new developers  and to provide a migration  path for Classic  developers to
     transition their applications to Omnis Studio.  This program provides North
     American technical voice support,  subsidized training and, upon completion
     of  training,  subsidized  runtime  licenses  for  applications  which  are
     developed within the first 12 months of  participation  in the program.  In
     addition the program  provides access to the Omnis  Developer  Portal where
     developers  can share  information,  code  snippets  and  where  additional
     wizards are provided as a part of the program.

o    Preferred  Partner Program - Incubator  "graduates" and established  Studio
     developers can  participate in the Preferred  Program  offering many of the
     same benefits of the Incubator  Programs with additional  functionality  In
     particular,  Preferred  Partners  have access to more robust  Omnis  Studio
     enhancements and externals, appropriate for the more experienced user.

         Omnis Studio  applications  can be deployed  with data access  services
through  the  Omnis  Proprietary   database   (generally  suitable  for  smaller
departmental  applications)  or configured  with data access services to leading
databases  (e.g.,  DB2, Oracle,  Sybase and Informix).  When customers deploy an
application a deployment license is required for each end-user.



                                       23

<PAGE>


SALES, MARKETING AND DISTRIBUTION

Sales

         The Company  sells its  products  in North  America  primarily  through
technical  sales  representatives  who follow-up on qualified leads generated by
the Company's  inside sales  department.  Inside sales leads are generated  from
responses  to  targeting  advertising  in  technical  trade  media,  trade  show
attendees,  web-site  downloads of evaluation  copies of Omnis Studio and legacy
customer inquiries. For larger enterprise sales, the Company employs a technical
sales group to meet directly with qualified potential customers.  North American
technical account  representatives are located throughout the country and inside
sales personnel are located at the corporate offices in San Carlos,  California.
The Company  sells Omnis  Studio  directly  over the  Internet on its Website at
www.omnis.net, as well as through established Internet based software retailers.
Overseas,  the Company sells its products primarily through a direct sales force
operating from sales offices in the United Kingdom,  Germany,  Scandinavia,  and
Benelux.

         The Company is committed to expanding sales growth by making additional
sales to its current  customer base and  increasing the number of new customers.
The  Incubator and  Preferred  Partner  Programs are designed to enable Omnis to
give its customers the tools they need to build their own  businesses as quickly
and successfully as possible.  Sales  initiatives are focused upon the following
markets:

o    Existing  customers and legacy  opportunities:  The Company is committed to
     retaining and building its existing and former  customer base. In the years
     Omnis has been in  business  many of the Fortune  500  companies  have been
     Omnis  users.  It is our aim to  return  them to the  fold,  reeducate  and
     transition Classic developers to Omnis Studio over the next 24 months.

o    Linux  Marketplace:  We are focusing marketing efforts on capturing the new
     Linux software developer  community.  We believe this represents a new wave
     of  younger  developers  who will soon be  writing  significant  enterprise
     applications.  Presently  Omnis  Studio  is  the  only  known  commercially
     released rapid application development tool that runs on Windows, MacOS and
     Linux operating systems.

o    Application  Service Providers:  Management believes that the Company's Web
     Client technology can offer  significant  advantages in the small to medium
     sized ASP market.  We expect that,  as our  customers  evolve to this newer
     model of  providing  hosted  applications  solutions,  Omnis Studio and Web
     Client will be a part of their success.

         The Company recognizes that, given all the internal changes of the past
several years,  our products have not achieved the market  penetration  that the
technology  deserves.  We also recognize that our competitors are generally much
stronger than we


                                       24



<PAGE>



are  financially and  organizationally.  While we plan to focus on the foregoing
markets,  we also will be working hard to "Align and  Redirect"  Omnis Studio in
development environments where Omnis is not presently the preferred tool.

International Distribution

         The  Company has  non-exclusive  distributor  relationships  in over 25
countries as well as an exclusive  distribution  relationship in France.  All of
the  Company's  exclusive  distributors  provide  primary  customer  service and
support for their markets.  Distributors in Latin America and in the Pacific Rim
are managed  from the San  Carlos,  California  office,  while  distributors  in
Europe, Middle East and Africa are managed from the United Kingdom office of the
Company.

         The Company believes that in order to increase sales opportunities,  it
will be  required  to expand  its  international  operations.  The  Company  has
committed  and  continues to commit  significant  management  time and financial
resources  to  developing  direct and indirect  international  sales and support
channels.  There can be no assurance,  however, that the Company will be able to
maintain or increase international market demand for its products. To the extent
that  the  Company  is  unable  to do  so  in a  timely  manner,  the  Company's
international  sales  will be  limited,  and the  Company's  business  operating
results and financial condition could be materially and adversely affected.

         International  operations are subject to inherent risks,  including the
impact of possible  recessionary  environments  in economies  outside the United
States,  additional  costs of localizing  products for foreign  markets,  longer
receivables  collection  periods,  greater  difficulty  in  accounts  receivable
collection,  unexpected  changes in regulatory  requirements,  difficulties  and
costs of staffing  and  managing  foreign  operations,  reduced  protection  for
intellectual  property  rights  in  some  countries,   potentially  adverse  tax
consequences,  and political and economic instability. There can be no assurance
that the Company or its  distributors  or  resellers  will be able to sustain or
increase  international  revenues from licenses or from maintenance and service,
or that the  foregoing  factors will not have a material  adverse  effect on the
Company's future  international  revenues,  and  consequently,  on the Company's
business, operating results, and financial condition.

Marketing

         In fiscal 2000, the Company substantially  increased both its Marketing
team and its expenditure on Marketing.

         In support  of its  direct and  reseller  sales  efforts,  the  Company
conducts numerous  marketing programs including print and web media advertising,
direct mail programs, trade show presentations, and strategic marketing programs
with partners.  The purpose of these efforts is to build  awareness and generate
quality sales prospects that lead to increased market share and revenues.

         The Company has also initiated a comprehensive rebranding campaign that
included a complete  redesign of its web site and change of  corporate  identity
giving it a much more professional and substantive feel.


                                       25


<PAGE>


         Current  initiatives  include  leveraging  the  Company's  first  mover
advantage in the Linux market through partnerships,  aggressively  promoting the
Company's  powerful  web  application  deployment   technology,   and  providing
technical papers and collateral  material to support the new developer  programs
and pricing infrastructure that were introduced early this year.

Training Services

         As part of its global sales efforts,  the Company  offers  professional
training  programs to its customers and  prospective  customers.  These classes,
held at various locations throughout the world, emphasize foundation skills (for
the newer developer),  advanced classes (for the more experienced developer) and
classes  designed to assist  existing  customers in the  migration  from 7(3) to
Omnis Studio.  Training  services are offered as  fundamental  components of our
Partner  Programs as wen as to augment sales efforts.  The Company believes that
appropriate  training programs in combination with ease of installation and use,
low cost of initial  adoption and web-based  provision of  additional  developer
services, will maximize the probability of future success.

Technical Support

         Because  the  Company's   products  are  used  by  customers  to  build
applications which may become a critical component of their business operations,
continuing  customer  technical support services are an important element of the
Company's  business  strategy.  The Company offers customer  service programs to
meet customer support  requirements.  Customers who participate in the Company's
annual support programs receive  maintenance  releases and associated  technical
support and  documentation.  Recently,  the Company has begun to offer real-time
telephone  support to its North American  customers as well as high-level e-mail
support from its primary engineering offices in the United Kingdom.

         The  Company's  technical  support team focuses on problem  solving and
resolution in installation and other ongoing technical issues. Technical support
representatives  are trained in basic and advanced uses of Omnis  products.  The
Company operates the technical support function through a consolidated database,
combining  customer  information  from the United States,  United  Kingdom,  and
German support center databases into single database structure, thereby enabling
its  worldwide  technical  support staff to work from the same database and have
simultaneous  access  to the  same  information.  The  global  support  strategy
includes a worldwide  high-level  support  center in the United  Kingdom,  which
supports the Company's United States,  Canadian and United Kingdom customers and
some of the Company's foreign  distributors.  These distributors are responsible
for supporting those customers to whom they have sold the Company's products.  A
support center in Germany provides support for the Company's direct customers in
Europe and the Company's European based distributors.  In addition,  the Company
has improved its website to better provide  technical  support to its customers.
The Company  believes its  customers are now better able to find answers to many
of their questions quickly and easily on the Company's website.


                                       26

<PAGE>


Customers

         The  Company has  customers  in a wide range of  industries,  including
financial   services,   pharmaceuticals,   manufacturing,    telecommunications,
aerospace, defense, and universities. In fiscal year 2000, one customer, Nortel,
accounted  for  approximately  16.7  percent  of total  net  revenues.  No other
customer accounted for more than 10 percent of total net revenues.

         As is the case with other  participants in the software  industry,  the
Company  generally  ships  products  as orders are  received.  As a result,  the
Company has  historically  operated with little  backlog.  Because of this short
cycle  between  receipt of an order and  shipment,  the Company does not believe
that its backlog as of any particular date is meaningful.

      The Company's customers can be segmented into two general categories:

      1. Corporate IT Departments -- The bulk of the Company's  revenue has been
         generated  from sales to  information  technology  departments of large
         corporations.

      2. Independent Software Vendors ("ISV"), Developers -- ISVs typically have
         written their own vertical  application  software  which they sell as a
         complete  package  to  end-user  customers.  This  category  would also
         include  Value  Added  Resellers   ("VARs")  and  software   consulting
         companies who provide contract programming services to their customers.

         The  Company's  products  are  designed  to enable the  development  of
applications which operate in traditional client/server  environments as well as
across the Internet.  Some of the Company's  customers have purchased  copies of
the Company's products for evaluation  purposes.  There can be no assurance that
these  customers will broadly  implement new projects or that they will purchase
additional products from the Company. The Company's future financial performance
will depend on the growth of the Company's sector of the computing market and on
its ability to compete  effectively  in this  market.  There can be no assurance
that this  market  will  continue  to grow or that the  Company  Will be able to
respond effectively to customer  requirements and competitive  offerings in this
market.

         As the market  evolves,  the Company  anticipates  that  competition is
likely to increase from both existing and future  market  participants,  most of
whom are larger  companies  and have greater  financial,  technical,  marketing,
sales, and distribution  resources and a larger installed base of customers than
the  Company.  There  can  be  no  assurance  that  the  Company  could  compete
effectively with such competitors.

Product Development

         Since its  inception in the United  Kingdom,  the Company has benefited
from having a global perspective in terms of partners, customers,  technological
outlook and products.  The Company's  corporate research facilities are based in
England.


                                       27

<PAGE>


         The Company believes that developing new products is best  accomplished
with a cross-disciplinary  approach, combining the talents and perspectives of a
multi-faceted  virtual  development  team that includes  developers,  customers,
VARs, sales and marketing,  technical support,  quality assurance, and technical
services. In the course of planning products,  the Company's product development
team filters  industry  trends,  ideas from  customers and potential  customers,
partners  and  potential  partners,  feedback  from  the  Company's  own  sales,
marketing,  technical  support,  and  professional  services staff,  and general
business  information  and then  analyzes  the  potential  risks and benefits of
pursuing a given strategy.

         The software industry is characterized by rapid technological advances,
frequent new product  introductions,  rapid  enhancements  of existing  products
through new releases, and changing customer requirements.  The future success of
the Company will largely  depend on its ability to enhance its current  products
and to successfully develop new products which keep pace with technology trends,
competitive offerings,  and evolving customer requirements.  In particular,  the
Company  believes it must  continue to enhance  the basic  functionality  of its
products and extend the product line to keep pace with the advances in hardware,
operating  systems,  programming  languages,   databases,  and  Internet-related
technology. Any failure of the Company to anticipate new technology developments
and  customer  needs  or any  significant  delays  in  product  development  and
introduction could result in a loss of competitiveness and revenues.  Because of
the  complexity  of software  products,  new product  introductions  may contain
undetected  software  errors  that,  despite  quality  assurance  testing by the
Company,  are  discovered  only after a product has been  installed  and used by
customers. Although the Company has not experienced any material adverse effects
from such  errors to date,  there can be no  assurance  that  errors will not be
discovered in the future which would cause delays in shipments, loss of revenues
or require  significant design changes that could adversely affect the Company's
competitive  position and operating results.  There can be no assurance that any
of the Company's product  development efforts will lead to a commercially viable
product,  and the  Company is unable to predict  whether  or when  proposed  new
products,  product  enhancements,  or product  extensions  might be  released or
whether, when released, they will achieve market acceptance.

         The Company  markets its  products to  customers  for the  development,
deployment,  and  management  of Internet and  client/server  applications.  The
Company's license  agreements with its customers  typically  contain  provisions
designed to limit the Company's  exposure to potential product liability claims.
It is possible,  however,  that the limitation of liability provisions contained
in the Company's license agreements may not be effective as a result of existing
or future  federal,  state or local laws, or ordinances or unfavorable  judicial
decisions. Although the Company has not experienced any product liability claims
to date, the sale and support of its products by the Company may entail the risk
of such claims,  which are likely to be  substantial  in fight of the use of its
products in business-critical applications. A successful product liability claim
brought  against  the  Company  could have a material  adverse  effect  upon the
Company's business, operating results, and financial condition.


                                       28


<PAGE>


Competition

         The applications  development tools software market is rapidly changing
and intensely  competitive.  The Company currently  encounters  competition from
several direct  competitors,  including  Microsoft  Corporation  (Visual Basic),
Inprise  Corporation  (Delphi),  Allaire  Corporation  (Cold  Fusion)  and Magic
Software Enterprises.  In addition, the Company competes indirectly with several
other  companies.  These include (a) the relational  database  vendors,  such as
Oracle, Sybase and Informix, who provide application development tools primarily
for customers  who use their  database  technology;  (b) 4GL  application  tools
vendors  such  as  Progress  Software   Corporation  and  Cognoscente   Software
International  Incorporated;  (c) CASE tools vendors such as Knowledgeware  Inc.
and Intersolv Inc.; (d) shrink-wrap  database software  suppliers such as Lotus,
Microsoft  Access,  and ACIUS, and (e) developers in Java as competition for the
Omnis web client technology.

         The Company  believes  that its  ability to compete  depends on factors
both  within and outside its  control,  including  the timing and success of new
products developed by the Company and its competitors,  product  performance and
price,  distribution,  and customer support.  There can be no assurance that the
Company will be able to compete  successfully with respect to these factors.  In
particular,  competitive  pressures from existing and new  competitors who offer
lower prices or introduce new products,  including  "native" products that fully
utilize the  capabilities of a particular  operating  platform,  could result in
delays in purchase decisions by or loss of sales to potential customers or cause
the Company to institute price  reductions,  any of which would adversely affect
the Company's  results of  operations.  In particular,  software  licenses which
permit  developers  to  develop  configurable  applications  and  deliver  those
applications  to  end-users,  have  been  and  may  continue  to be  subject  to
significant  pricing  pressures  which  could  have  an  adverse  effect  on the
Company's business and results of operations. There can be no assurance that the
Company  will be able to maintain  its price  structure  or that entry of future
competitors in the Company's current market will not result in pricing pressures
in the future.

         Additional competitive factors influencing the market for the Company's
products include product  functionality  and features,  platforms,  performance,
vendor and product reputation, product and service quality. These items may also
result in market confusion, delays in purchases,  intensified competition, price
restructuring,  or  price  reductions.  The  Company  believes  that  the  broad
functionality of its products,  including its cross platform  capability and its
important features for group development, application deployment and maintenance
has  enabled  the  Company  to compete  effectively  to date,  particularly  for
professional  development  environments  in major  corporations.  The  Company's
primary  focus  on  client/server   application   development  tools  may  be  a
disadvantage  in  competing  with  vendors  who can  provide a greater  range of
products to customers who wish to deal with a limited number of suppliers  (i.e.
Oracle, Sybase, and Informix).

         As  the  web-based  market  evolves,   the  Company   anticipates  that
competition  is  likely  to  increase  from  both  existing  and  future  market
participants,  most of whom are larger  companies  and have  greater  financial,
technical,  marketing,  sales, and distribution


                                       29


<PAGE>



resources and a larger  installed base of customers than the Company.  Moreover,
if such competition were to enter the crossware  market,  which is the principal
market in which the  Company  participates,  the  Company  might be  required to
increase  defensive  measures to maintain its position in these target  markets.
This increased effort could adversely affect operating  results due to increased
marketing programs,  price declines,  longer sales cycles, and increased product
development  expenses,  among other things.  There can be no assurance  that the
Company could compete effectively with such new products.

Intellectual Properties and Other Proprietary Rights

         The  Company  relies  primarily  on  a  combination  of  trade  secret,
copyright,  and  trademark  laws  and  contractual  provisions  to  protect  its
proprietary  rights.  In addition to trademark  and copyright  protections,  the
Company licenses its products to end users on a "right to use" basis pursuant to
a perpetual  license  agreement  that  restricts  use of products to a specified
number of users.  The Company  generally  relies on shrink-wrap or  "click-wrap"
licenses  which become  effective when a customer opens the package or downloads
and installs  software of its system.  Because they are not  negotiated  with or
signed by the licensees,  in order to retain  exclusive  ownership rights to its
software and technology,  the Company generally  provides its software in object
code  only,  with   contractual   restrictions  on  copying,   disclosure,   and
transferability.  There  can be no  assurance  that  these  protections  will be
adequate,  or that the  Company's  competitors  will not  independently  develop
technologies  that are  substantially  equivalent  or superior to the  Company's
technology.

         Copyright  and  other  protection  for  intellectual  property  may  be
unavailable or restricted in certain foreign countries. In addition, shrink-wrap
or  click-wrap   licenses  may  be  unenforceable  under  the  laws  of  certain
jurisdictions. Nevertheless, the Company believes that its copyright and license
protections are important.  However,  because of the rapid pace of technological
change in the computer software industry, factors such as the product knowledge,
ability,  and  experience of the Company's  personnel,  brand name  recognition,
customer  support,  and ongoing product  maintenance and enhancement may be more
significant in maintaining the Company's competitive advantage.

         As the number of software  products  available in the market  increases
and the functions and features of these products  further  overlap,  the Company
anticipates  that  software   products  may  become   increasingly   subject  to
infringement  claims.  There can be no  assurance  that third  parties  will not
assert infringement claims against the Company in the future with respect to any
current or future product.  Any such  assertion,  whether with or without merit,
could   require  the  Company  to  enter  into  costly   litigation  or  royalty
arrangements.  If required,  such royalty  arrangements  may not be available on
reasonable terms, or at all.

         The Company has filed a final patent  application  in the United States
for certain of its Omnis  Studio Web Client  technologies  and has  instituted a
procedure  for  preparing  and  filing  additional  provision  and final  patent
applications  as appropriate for its developing  technologies.  At this time the
Company has not been granted any patents on


                                       30

<PAGE>


any of its  proprietary  technologies  and there is no  assurance  that any such
patents  will  be  granted.  Patent  protection  may  become  important  in  the
protection of the commercial  viability of the Company's innovative products and
the failure to obtain such patent protection could have an adverse effect on the
commercial  viability of such products.  The Company's  success therefore may in
part depend on its ability to obtain  strong  patent  protection  or licenses to
strong  patents in the future.  It is not possible to anticipate  the breadth or
degree of protection that patents would afford any product of the Company or the
underlying  technologies.  There can be no assurance  that any patents issued or
licensed to the Company  will not be  successfully  challenged  in the future or
that any Omnis product will not infringe the patents of third parties.

         The level of research and  development  efforts in areas related to the
Omnis.  products  makes it possible  that third  parties will obtain  patents or
other  proprietary  rights that may be necessary or useful to its  products.  In
recent years the practice of applying  for and issuing  software  patents in the
United States and other jurisdictions has accelerated and the scope and validity
of such patents are frequently in dispute.  In cases where third parties are the
first to invent a particular  product or  technology,  it is possible  that such
parties  would obtain  patents that would be  sufficiently  broad to prevent the
Company from marketing the same or similar products. Although the Company is not
presently aware that any patents  necessary to its products have been issued for
which  licenses  are  not  available  to  the  Company,   it  is  possible  that
applications  for such  patents  have been made or that such  patents  have been
issued.  The scope and validity of such patents,  if issued, the extent to which
the Company may desire or need to obtain  licenses  under such patents,  and the
cost and  availability of such licenses are currently  unknown.  There can be no
assurance others may not independently  develop or obtain technology  similar to
that of the Company.

         As the number of software  products  available in the market  increases
and the functions and features of these products  further  overlap,  the Company
anticipates  that  software   products  may  become   increasingly   subject  to
infringement  claims.  There can be no  assurance  that third  parties  will not
assert infringement claims against the Company in the future with respect to any
current or future product.  Any such  assertion,  whether with or without merit,
could  require  the  Company  to enter  into  expensive  litigation  or  royalty
arrangements.  If required,  such royalty  arrangements  may not be available on
reasonable terms, or at all.

Production

         The Company uses  subcontractors  in the United  Kingdom to perform its
manufacturing operations,  which include duplication and preparation of software
media,  documentation,  and  packaging.  The  principal  materials  used  in the
manufacture  of  the  Company's  products  are  CD  ROMs,  boxes,  binders,  and
multi-color printed materials which the Company obtains from its manufacturers.

         The Company utilizes certain of its distributors in some  international
markets to  localize  the  products,  including  conversion  of the  product and
product  documentation to


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<PAGE>


native  languages,  where necessary.  The production of the resulting  localized
product is then handled by the distributor for that market.

         The Company  requires  that quality  control  tests be performed on all
duplicated disks and finished  products.  Quality control  personnel work in the
United Kingdom  operation to help ensure product  quality.  The Company produces
software and documentation based upon forecasts of monthly sales.



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<PAGE>


                                     PART II

                                OTHER INFORMATION

ITEM 1.  Legal Proceedings

         Compass  Litigation.  In March  1998 the  Company  was sued by  Compass
Software  ("Compass") in the Federal  district court for the Eastern District of
Washington  claiming  damages in the range of $2 Million for software  copyright
infringement  and related claims.  The Company obtained a full dismissal of that
case with  prejudice on November  29,  1999,  and no appeal was filed by Compass
within the time allowed by law.

         In this connection the Company  previously had sued Compass in 1994 for
illegally  infringing and distributing  the Company's  software  products.  This
matter was settled with an agreement that Compass would pay certain  amounts and
would not make illegal copies of the Company's  software in the future.  Compass
failed to pay the  promised  amounts  when due.  The  Company  then  obtained  a
judgment  for breach of  contract  against  Compass.  As part of its  efforts to
enforce its judgment against Compass,  the Company purchased,  at a judgment Hen
sale,  certain  intangible  property of Compass including the rights to the 1998
infringement suit brought by Compass ("Execution Sale").  Compass then requested
the  applicable  trial court to set aside the  Execution  Sale.  The trial court
granted the request and the Company appealed the judgment.  The court of appeals
subsequently  ruled in favor of the  Company  and  directed  the trial  court to
determine  the amount of fees to be awarded to the Company.  That amount has not
yet been  determined.  The Company also filed a second lawsuit  against  Compass
alleging  additional  acts of  infringement  for periods after 1994. A trial was
conducted in this case before Judge  Barbara J.  Rothstein of the United  States
District  court for the Western  District of  Washington.  On July 25, 2000, the
District Court ruled that Compass reproduced and distributed unauthorized copies
of Omnis Software using duplicates of existing serial numbers. The Court awarded
statutory  damages to Omnis in the amount of approximately  $150,000 in addition
to  injunctive  relief and  attorney  fees from  Compass.  On October 20, 2000 a
mediation  hearing was  conducted  to review the amount of damages to be paid by
Compass to Omnis. At the mediation Compass offered to pay approximately  $25,000
in damages.  Omnis is  currently  preparing a motion for judgment to collect the
$150,000 judgment awarded in July, 2000 and for an additional  $245,000 in legal
fees.

BTN -- Germany Litigation.  The Company entered into a professional  development
services  agreement  with BTN  Versandhandel  GmbH of Leiferde,  Germany for the
development  of an Omnis  application.  The Company  developed  and  delivered a
version of the  application  to BTN.  BTN  failed to pay the  Company as agreed,
claiming  there were flaws in the  application  and the project was suspended by
the Company  awaiting  their  payment.  BTN commenced  legal action  against the
Company in Germany claiming  damages of  approximately  DM250,000 for failure to
perform under the services  agreement.  The Company has countersued BTN claiming
the balance owed under the contract of  approximately  DM60,000.  The Company is
defending against the BTN claim and is pursuing its counterclaim against BTN.


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<PAGE>



ITEM 2.  Changes in Securities

None.

ITEM 3.  Defaults Upon Senior Securities

None.

ITEM 4.  Submission of Matters to a Vote of Security Holders

None.

ITEM 5.  Other Information

None.

ITEM 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits:

3.1      Restated Certificate of Incorporation, as amended and corrected.(1)

3.2      Certificate of Amendment of Certificate of Incorporation dated February
         9, 1999(2)

3.3      Certificate of Designations dated March 31, 1999, as corrected.(3)

3.4      Bylaws, as amended.(4)

10.1     Merger  Agreement  dated as of August 23,  2000  between  the  Company,
         PickAx, Inc., Gilbert Figueroa, and Raining Merger Sub, Inc.

27.1     Financial Data Schedule

      (1)Incorporated  herein by  reference  to the  Current  Report on Form 8-K
         filed by the Company with the Commission on June 16, 1998.

      (2)Incorporated  herein by reference  to the  Company's  Annual  Report on
         Form  10-KSB/A,  as amended,  for the fiscal year ended March 31, 1999,
         filed by the Company with the Commission on July 29, 1999.

      (3)Incorporated  herein by  reference  to the  Current  Report on Form 8-K
         filed by the Company with the Commission on April 15, 1999.

      (4)Incorporated  herein by reference to the Annual  Report on form 10-KSB,
         as  amended,  for the fiscal year ended  March 31,  1998,  filed by the
         Company with the Commission on June 29, 1998.

(b)      Reports  on Form 8-K.  No  reports  on Form 8-K were  filed  during the
         quarter ended September 30, 2000.


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<PAGE>


SIGNATURES


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


Date: November 6, 2000

                                     OMNIS TECHNOLOGY CORPORATION
                                     (Registrant)


                                     /s/ GWYNETH GIBBS
                                     --------------------------

                                     Gwyneth Gibbs, President and Interim Chief
                                     Executive Officer




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