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


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    Form 10-Q

(Mark one)
[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 2001


                                       OR
[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the transition period from _______________ to ______________

                         Commission File Number 0-28672

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

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

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


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

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

       8,214,713 shares of the Registrant's Common Stock, $.001 par value
             per share, were outstanding as of November 5, 2001.

================================================================================
<PAGE>
                                      INDEX


                                                                           PAGE
                                                                           -----
PART I - FINANCIAL INFORMATION

  Item 1 -  Condensed Consolidated Financial Statements

     Condensed Consolidated Balance Sheets as of December 31, 2000
       and September 30, 2001 (Unaudited)                                     1

     Condensed Consolidated Statements of Operations for the three-
       month and nine-month periods ended September 30, 2000 and
       2001 (Unaudited)                                                       2

     Condensed Consolidated Statements of Cash Flows for the nine-
       month periods ended September 30, 2000 and 2001 (Unaudited)            3

     Notes to Condensed Consolidated Financial Statements (Unaudited)         4

  Item 2 - Management's Discussion and Analysis of Financial Condition
     and Results of Operations                                                7

  Item 3 - Quantitative and Qualitative Disclosures About Market Risk        16

PART II - OTHER INFORMATION

  Item 2 - Changes in Securities and Use of Proceeds                         17

  Item 6 - Exhibits and Reports on Form 8-K                                  18

  Signatures                                                                 19

<PAGE>
<TABLE>
<CAPTION>
                                  OPTIKA INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)

                                                                              December 31,     September 30,
                                                                                 2000              2001
                                                                            ----------------  ---------------
                                                                                                (unaudited)
<S>                                                                            <C>              <C>
Assets
Current assets:
   Cash and cash equivalents...........................................        $      2,192     $      1,130
   Short-term investments..............................................               9,512            6,705
   Accounts receivable, net............................................               2,913            2,798
   Other current assets................................................                 801              728
                                                                            ----------------  ---------------
         Total current assets..........................................              15,418           11,361
                                                                            ----------------  ---------------

Property and equipment, net............................................               2,625            1,664
Other assets, net......................................................                 481              374
                                                                            ----------------  ---------------
                                                                               $     18,524     $     13,399
                                                                            ================  ===============
Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable....................................................        $      1,052     $        442
   Accrued expenses....................................................               1,043            1,522
   Accrued compensation expense........................................                 909              775
   Deferred revenue....................................................               3,902            3,497
                                                                            ----------------  ---------------
          Total current liabilities....................................               6,906            6,236
                                                                            ----------------  ---------------

Redeemable convertible preferred stock.................................              10,849               --

Commitments and contingencies

Stockholders' equity:
   Common stock; $.001 par value; 25,000,000 shares authorized;
      8,107,149 and 8,214,713 shares issued and outstanding
      at December 31, 2000 and September 30, 2001, respectively........                   8                8
   Preferred stock; Series A-1 convertible, $.001 par value; 731,851
      shares authorized, issued and outstanding at September 30, 2001..                  --            5,199
   Additional paid-in capital..........................................              23,425           29,051
   Accumulated deficit.................................................             (22,689)         (27,107)
   Accumulated other comprehensive income..............................                  25               12
                                                                            ----------------  ---------------
          Total  stockholders' equity..................................                 769            7,163
                                                                            ----------------  ---------------
                                                                               $     18,524     $     13,399
                                                                            ================  ===============
<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                  OPTIKA INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)
                    (In thousands, except per share amounts)

                                                           Three Months Ended               Nine Months Ended
                                                              September 30,                   September 30,
                                                       ----------------------------      -------------------------
                                                              2000         2001              2000          2001
                                                             ------       ------            ------        ------
<S>                                                      <C>           <C>               <C>           <C>
Revenues:
   Licenses.......................................        $    1,251    $   1,373         $   4,130     $   4,432
   Maintenance and other..........................             2,650        2,406             8,100         7,365
                                                            ---------     --------          --------      --------
      Total revenues..............................             3,901        3,779            12,230        11,797
                                                            ---------     --------          --------      --------
Cost of revenues:
   Licenses.......................................               144          234               382           547
   Maintenance and other..........................             1,328          768             3,599         2,569
                                                            ---------     --------          --------      --------
      Total cost of revenues......................             1,472        1,002             3,981         3,116
                                                            ---------     --------          --------      --------
Gross profit......................................             2,429        2,777             8,249         8,681
                                                            ---------     --------          --------      --------
Operating expenses:
   Sales and marketing............................             3,764        1,757            10,123         6,628
   Research and development.......................             2,149        1,275             6,371         4,287
   General and administrative.....................               567          389             1,768         1,391
   Restructuring and other non-recurring charges..                 -            -                 -         1,071
                                                            ---------     --------          --------      --------
      Total operating expenses....................             6,480        3,421            18,262        13,377
                                                            ---------     --------          --------      --------
Loss from operations..............................            (4,051)        (644)          (10,013)       (4,696)
Other income, net.................................               217           87               533           284
                                                            ---------     --------          --------      --------
Loss before income tax provision..................            (3,834)        (557)           (9,480)       (4,412)
Income tax provision..............................             2,966            -             2,966             6
                                                            ---------     --------          --------      --------
Net loss..........................................            (6,800)        (557)          (12,446)       (4,418)
Preferred stock dividend..........................              (301)           -              (724)         (447)
Accretion of preferred stock and beneficial
 conversion feature...............................              (184)           -            (4,846)         (250)
Increase to income available to common stockholders
 from the exchange of prefered stock..............                 -            -                 -         6,196
                                                            ---------     --------          --------      --------
Net income (loss) applicable to common stockholders        $  (7,285)   $    (557)        $ (18,016)    $   1,081
                                                            =========     ========          ========      ========

Basic net income (loss) per common share..........         $   (0.90)   $   (0.07)        $   (2.28)    $    0.13
                                                            =========     ========          ========      ========
Basic weighted average number of common shares
  outstanding.....................................             8,095        8,200             7,897         8,174
                                                            =========     ========          ========      ========

Diluted net loss per common share.................         $   (0.90)   $   (0.07)        $   (2.28)    $   (0.49)
                                                            =========     ========          ========      ========
Diluted weighted average number of common shares
  outstanding.....................................             8,095        8,200             7,897         8,973
                                                            =========     ========          ========      ========
<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                  OPTIKA INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                 (In thousands)
                                                                             Nine Months Ended September 30,
                                                                             ---------------------------------
                                                                                    2000             2001
                                                                                   ------           ------
<S>                                                                            <C>              <C>
Cash Flows From Operating Activities:
Net loss...............................................................        $    (12,446)    $      (4,418)
Adjustments to reconcile net loss to net cash used by operating
activities:
   Depreciation and amortization.......................................                  794              789
   Loss on disposal of fixed assets....................................                   --              193
   Deferred tax expense................................................                2,946               --
   Changes in assets and liabilities:
      Accounts receivable, net.........................................                2,409              115
      Other assets.....................................................               (1,025)             180
      Accounts payable.................................................                  691             (610)
      Accrued expenses.................................................                   59              345
      Deferred revenue.................................................                 (215)            (405)
                                                                             ----------------  ---------------
       Net cash used by operations.....................................               (6,787)          (3,811)
                                                                             ----------------  ---------------

Cash Flows From Investing Activities:
Capital expenditures...................................................               (1,086)             (28)
Proceeds from sales of equipment.......................................                   --                7
Sale (purchase) of short-term investments, net.........................               (6,652)           2,794
                                                                             ----------------  ---------------
       Net cash provided (used) by investing activities................               (7,738)           2,773
                                                                             ----------------  ---------------

Cash Flows From Financing Activities:
Proceeds from issuance of common stock.................................                1,498              127
Net proceeds from issuance of redeemable convertible preferred stock and
  warrants.............................................................               14,676               --
Expenditures for preferred stock exchange..............................                   --             (151)
                                                                             ----------------  ---------------
       Net cash provided (used) by financing activities................               16,174              (24)
                                                                             ----------------  ---------------

Net increase (decrease) in cash and cash equivalents...................                1,649           (1,062)
Cash and cash equivalents at beginning of period.......................                3,359            2,192
                                                                             ----------------  ---------------
Cash and cash equivalents at end of period.............................        $       5,008     $      1,130
                                                                             ================  ===============
<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
                                  OPTIKA INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.      Basis of Presentation

     The unaudited condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring adjustments, which
in the opinion of management are necessary to fairly present our consolidated
financial position, results of operations, and cash flows for the periods
presented. Certain information and footnote disclosures normally included in
audited financial information prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the Securities
and Exchange Commission's (SEC's) rules and regulations. The consolidated
results of operations for the period ended September 30, 2001 are not
necessarily indicative of the results to be expected for any subsequent quarter
or for the entire fiscal year ending December 31, 2001. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 2000, included in the Annual Report on Form 10-K for the year ended December
31, 2000 of Optika Inc. (the "Company").

2.      Net Income (Loss) Per Common Share

     Basic earnings (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed using the weighted average number of
common shares outstanding plus all dilutive potential common shares outstanding.
During the first nine months of 2000, 867,265 options to purchase our common
stock were granted. During the first nine months of 2001, 1,496,600 options to
purchase our common stock were granted.

     Net loss applicable to common stockholders during the three and nine months
ended September 30, 2000 and 2001 includes certain one-time and non-recurring
adjustments included in the earnings per share computation relating to the $15
million convertible preferred stock private placement with Thomas Weisel Capital
Partners L.P., which closed in February 2000 and the exchange of those preferred
shares in May 2001. Net loss per share for the nine months ended September 30,
2000 includes a one-time adjustment of $4.4 million that treats the beneficial
conversion terms of the preferred stock as a one-time additional return to the
preferred stockholders. The beneficial conversion arises from accounting
pronouncement requirements to allocate a portion of the $15 million private
placement to the issuance of common stock warrants. The net loss per share also
includes an adjustment that is comprised of the accumulating 8% dividend on the
convertible preferred stock and an allocation of the discount associated with
the preferred stock issuance, prorated for the portion of the period that the
preferred stock was outstanding. Basic net income (loss) per share for the nine
months ended September 30, 2001 includes an increase to income applicable to
common stockholders of $6.2 million offset by a non-cash preferred stock
dividend and accretion of preferred stock of $250,000. The one-time increase to
income available to common stockholders resulted from the May 7, 2001 exchange
of the Series A Preferred Stock for the Series A-1 Preferred Stock.

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

<TABLE>
<CAPTION>
                                                         Three Months Ended           Nine Months Ended
                                                            September 30,               September 30,
                                                          2000        2001            2000         2001
                                                         ------      ------          ------       ------
<S>                                                    <C>         <C>             <C>          <C>
Basic Earnings (Loss) Per Share:
  Net income (loss) applicable to common stockholders. $ (7,285)   $   (557)       $(18,016)    $  1,081
  Basic weighted average common shares outstanding....    8,095       8,200           7,897        8,174
    Basic net income (loss) per common share.......... $  (0.90)   $  (0.07)       $  (2.28)    $   0.13

Diluted Loss Per Share:
  Net income (loss) applicable to common stockholders. $ (7,285)   $   (557)       $(18,016)    $  1,081
  Preferred stock dividend, accretion and effect of
   exchange...........................................       --          --              --       (5,499)
                                                       ---------   ---------       ---------    ---------
                                                         (7,285)       (557)        (18,016)      (4,418)

  Weighted average common shares outstanding..........    8,095       8,200           7,897        8,174
  Assumed conversion of preferred stock...............       --          --              --          799
                                                       ---------   ---------       ---------    ---------
  Diluted weighted average common shares
   outstanding........................................    8,095       8,200           7,897        8,973
    Diluted net loss per common share................. $  (0.90)   $  (0.07)       $  (2.28)    $  (0.49)
</TABLE>

In 2000 and 2001, 2.3 million and 2.8 million options and warrants,
respectively, were excluded from the dilutive stock calculation because of their
antidilutive effect on net loss per share.

3.      Preferred Stock Transaction

     On May 7, 2001, the Company, Thomas Weisel Capital Partners L.P., a
Delaware limited partnership, certain of its affiliates and RKB Capital, L.P.
(the "Purchasers"), entered into an Exchange Agreement, pursuant to which we
have issued Series A-1 Convertible Preferred Stock (the "Series A-1 Preferred"),
having the terms and provisions set forth in the Certificate of Designation
designating the Series A-1 Convertible Preferred Stock, on a one-for-one basis,
in return for the exchange, surrender and cancellation of the Series A
Redeemable Convertible Preferred Stock (the "Series A Preferred"). The Series
A-1 Preferred issued in exchange for the Series A Preferred is substantially
identical to the Series A Preferred with the exception of certain changes made
to the redemption, dividend, protective and liquidation provisions thereof. In
connection with this transaction, we also purchased the warrants associated with
the Series A Preferred for an aggregate of $0.01. The Series A-1 Preferred is
convertible to common stock at the holders' option based upon the conversion
formula as defined in the Certificate of Designation.

     The Series A-1 Preferred was recorded in stockholders' equity at its fair
value. The difference between the carrying value of the Series A Preferred and
the fair value of the Series A-1 Preferred of $5.35 million (as determined by an
independent valuation) was recorded as an increase in additional paid-in capital
and as a one-time adjustment to net income (loss) applicable to common
stockholders. As a result of the Exchange Agreement, future periods will not
have adjustments to income for accumulating dividends or allocations of the
discounts associated with the Series A Preferred Stock.

4.      Restructuring and other non-recurring charges

     On February 6, 2001, we strategically reduced our workforce by 42 employees
to align our expenses more closely with revenues. This reduction in force
resulted in approximately $1.1 million of restructuring charges in the first
quarter of 2001. This restructuring charge consisted of $652,000 of severance
costs, $240,000 of lease termination and $179,000 of asset write-offs. All
severance costs and the majority of the lease costs are expected to be paid in
cash before the end of 2001. The table below outlines the restructuring accrual
activity through September 30, 2001 (in thousands):

                     Severance Costs Lease Termination Asset Write-Offs  Total
                     --------------- ----------------- ----------------  -----
Restructuring charge       $ 652           $ 240             $ 179      $1,071
Usage                       (627)           (104)             (179)       (910)
                           ------          ------            ------     -------
Balance September 30,
  2001                     $  25           $ 136             $   --     $  161
                           ======          ======            ======     =======

5.      Contingencies

     We are, from time to time, subject to certain claims, assertions or
litigation by outside parties as part of our ongoing business operations. The
outcome of any such contingencies are not expected to have a material adverse
effect upon our business, results of operations and financial condition. We are
currently not a party to any material legal proceedings.

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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

Overview

     Optika Inc. is a leading provider of imaging, workflow and collaborative
commerce software. Optika's Acorde family of Internet software solutions,
including Acorde Context, Process and Resolve, allow companies to effectively
and cost-efficiently manage paper-intensive or complex business processes and
transactions. Acorde provides the ability to access and store multiple formats
of business content, both digital and non-digital; automate processes across the
organization and externally with partners and customers; and enable online
collaboration around these paper-intensive or complex processes in real and near
time. A three-tier, scalable and extensible solution, Acorde delivers a variety
of client desktops, including Windows, web and the ability to integrate with
line-of-business and other third-party applications. The Acorde product family
allows organizations to improve processing efficiency, reduce operating costs
and increase customer and trading partner service and satisfaction. The Acorde
product is an evolution of Optika's eMedia product.

     The license of our software products is typically an executive-level
decision by prospective end-users and generally requires us and our Advantage
Partners, or APs, to engage in a lengthy and complex sales cycle (typically
between six and twelve months from the initial contact date). We distribute our
products through a direct sales force and a network of APs. For 2000,
approximately 72% of our license revenues were derived from our APs and the
remaining license fees were derived from direct sales. However, no individual
customer accounted for more than 10% of our total revenues. For the years ended
December 31, 1998, 1999 and 2000, we generated approximately 24%, 17% and 15%,
respectively, of our total revenues from international sales. Our revenues
consist primarily of license revenues, which are comprised of one-time fees for
the license of our products, service revenues, and maintenance revenues, which
are comprised of fees for upgrades and technical support. Our APs, which are
responsible for the installation and integration of the software for their
customers, enter into sales agreements with the end-user, and license software
directly from us. We license software directly to the end-user through software
license agreements. Annual maintenance agreements are also entered into between
the APs and the end-user, and the APs then purchase maintenance services
directly from us. For 1999 and 2000, approximately 53% and 33%, respectively, of
our total revenues were derived from software licenses and approximately 33% and
47%, respectively, of our total revenues were derived from maintenance
agreements. For 1999 and 2000, other revenues, which are comprised of training,
consulting and implementation services, and third-party hardware and software
products, accounted for 14% and 20%, respectively, of our total revenues.

     During February 2001, we strategically reduced our workforce by
approximately 25%. This reduction in force resulted in approximately $1.1
million of restructuring charges to earnings in the first quarter of 2001,
primarily to cover severance and severance related costs. We will realize
savings during fiscal year 2001 from the reduction in salary costs, office space
and related overhead expenses as a result of the restructuring plan. Further, we
anticipate cash outflows during fiscal year 2001 will be reduced from the
related expense reductions.

     We earn our revenue primarily from licenses and fees. Our revenue is
recognized in accordance with Statement of Position 97-2 (SOP 97-2), as amended
by Statement of Position 98-9. For sales made either through our Advantage
Partners or direct by the Company, we will generally recognize license revenue
upon shipment when a non-cancelable license agreement has been signed or a
purchase order has been received, delivery has occurred, the fee is fixed or
determinable and collectibility is probable. The license fees are not assumed to
be fixed or determinable if the fees are due more than 12 months after delivery
or are based on achievement of a milestone. Where applicable, fees from multiple
element arrangements are unbundled and recorded as revenue as the elements are
delivered to the extent that vendor specific objective evidence, or VSOE, of
fair value exists for the delivered and undelivered elements. We establish VSOE
of fair value on maintenance and professional services elements based on prices
charged when the same elements are sold in separate transactions. We have not
established VSOE on license elements. Revenue on undelivered and delivered
elements is recorded using the residual method in accordance with SOP 97-2, as
amended.

     Software maintenance revenues are deferred and recognized ratably over the
maintenance period, which is generally one year. The unrecognized portion of
software maintenance revenues is recorded in the accompanying balance sheets as
deferred revenue. Other revenues are recognized as services are performed.

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

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

Results of Operations

Comparison of Three and Nine Months Ended September 30, 2001 to September 30,
2000

Revenues

     Total revenues decreased 4% from $12.2 million, for the nine months ended
September 30, 2000, to $11.8 million, for the nine months ended September 30,
2001. Total revenues decreased 3% from $3.9 million for the quarter ended
September 30, 2000 to $3.8 million for the quarter ended September 30, 2001.

     Licenses. License revenues increased 7% from $4.1 million, during the nine
months ended September 30, 2000, to $4.4 million, for the nine months ended
September 30, 2001, and increased 10% from $1.3 million during the quarter ended
September 30, 2000 to $1.4 million for the quarter ended September 30, 2001.
License revenues represented 34% and 38% of the total revenues for the nine
months ended September 30, 2000 and 2001, respectively and represented 32% and
36% of the total revenues for the quarters ended September 30, 2000 and 2001,
respectively. The increase in license revenues during the first nine months of
2001 is primarily due to increases in sales made by APs in North America
resulting from our increased focus on our core competencies, increased service
levels to our customers and APs, and the maturity of our Acorde product suites.
License revenues generated outside of the United States accounted for
approximately 22% of our total license revenues for the nine months ended
September 30, 2000, compared to 10% for the same period in 2001, and 31% and 10%
for the quarters ended September 30, 2000 and 2001, respectively. The decrease
in international revenues as a percentage of total revenue is a result of lower
than expected Latin American and European license revenues.

      Maintenance and Other. Maintenance revenues, exclusive of other revenue,
decreased 4% from $5.6 million during the nine months ended September 30, 2000,
to $5.4 million for the nine months ended September 30, 2001 and remained
constant at $1.8 million for the three months ended September 30, 2000 and 2001.
Maintenance revenue represented 46% of the total revenues for the nine months
ended September 30, 2000 and 2001 and 46% of the total revenues for the quarters
ended September 30, 2000 and 2001, respectively. Maintenance revenues from
customers outside of the United States accounted for approximately 14% of our
total maintenance revenues for the nine months ended September 30, 2000,
compared to 13% for the same period in 2001 and 15% and 12% for the quarters
ended September 30, 2000 and 2001, respectively. This slight annual decrease was
primarily a result of the loss of revenue from customers utilizing FilePower
(predecessor product to Optika eMedia and Acorde) that have chosen not to
upgrade to Acorde, partially offset by maintenance revenues received from new
customers. Other revenue, consisting primarily of consulting services, training
and consulting fees represented 20% and 17% of total revenues for the nine
months ended September 30, 2000 and 2001, respectively, and 22% and 17% of total
revenues for the quarters ended September 30, 2000 and 2001, respectively. The
decrease in other revenue as a percentage of total revenue was primarily due to
decreased consulting, project management and implementation services resulting
from our low direct license revenue in the third and fourth quarters of 2000
which drove our service revenue in the first and second quarters of 2001.

Cost of Revenues

     Licenses. Cost of licenses consists primarily of royalty payments to
third-party vendors and costs of product media, duplication, packaging and
fulfillment. Cost of licenses increased from $382,000, or 9% of license
revenues, to $547,000, or 12% of license revenues, for the nine months ended
September 30, 2000 and 2001 respectively, and increased from $144,000 or 12% of
license revenues to $234,000, or 17% of license revenues, for the quarters ended
September 30, 2000 and 2001, respectively. The absolute dollar increase in cost
of licenses is attributable to the increased third party components of our
software sales.

     Maintenance and Other. Costs of maintenance and other consists of the
direct and indirect costs of providing software maintenance and support,
training and consulting services to our APs, OEMs and end-users, and the cost of
third-party software products. Cost of maintenance and other decreased from $3.6
million, or 44% of maintenance and other revenues, to $2.6 million or 35% of
maintenance and other revenues for the nine months ended September 30, 2000 and
2001, respectively. Cost of maintenance and other decreased from $1.3 million,
or 50% of maintenance and other revenues, to $768,000, or 32% of maintenance and
other revenues, for the quarters ended September 30, 2000 and 2001,
respectively. The decrease in cost of maintenance and other is primarily a
result of the direct third-party contracting and the consolidation of the
executive management and certain other redundant positions within the
department.

Operating Expenses

     Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and other related expenses for sales and marketing
personnel, marketing, advertising and promotional expenses. Sales and marketing
expenses decreased from $10.1 million, or 83% of total revenues, for the nine
months ended September 30, 2000 to $6.6 million, or 56% of total revenues, for
the nine months ended September 30, 2001. Sales and marketing expenses decreased
from $3.8 million, or 96% of total revenues, for the quarter ended September 30,
2000 to $1.8 million, or 47% of total revenues, for the quarter ended September
30, 2001. The decrease in sales and marketing expenses is due to our
restructuring activities in February 2001. We anticipate that sales and
marketing expenses will remain relatively flat in absolute dollars in future
quarters.

     Research and Development. Research and development expenses consist
primarily of salaries and other related expenses for research and development
personnel, contractors, as well as the cost of facilities and equipment.
Research and development expenses decreased from $6.4 million, or 52% of total
revenues, for the nine months ended September 30, 2000 to $4.3 million, or 36%
of total revenues, for the nine months ended September 30, 2001. Research and
development expenses decreased from $2.1 million, or 55% of total revenues, for
the quarter ended September 30, 2000 to $1.3 million, or 34% of total revenues,
for the quarter ended September 30, 2001. The decrease in research and
development is primarily the result of restructuring activities in February
2001. We anticipate that research and development expenses will continue at
approximately this level throughout the year.

     General and Administrative. General and administrative expenses consist
primarily of salaries and other related expenses of administrative, executive
and financial personnel, and outside professional fees. General and
administrative expenses decreased from $1.8 million, or 14% of total revenues,
for the nine months ended September 30, 2000 to $1.4 million, or 12% of total
revenues, for the nine months ended September 30, 2001. General and
administrative expenses decreased from $567,000, or 15% of total revenues, for
the quarter ended September 30, 2000 to $389,000, or 10% of total revenues, for
the quarter ended September 30, 2001. The decrease in general and administrative
costs primarily is the result of the restructuring activities in February 2001.
We anticipate that general and administrative expenses will continue at
approximately this level throughout the year.

     Restructuring and other non-recurring charges. On February 6, 2001, we
strategically reduced our workforce by 42 employees to align our expenses more
closely with revenues. This reduction in force resulted in approximately $1.1
million of restructuring charges in the first quarter of 2001. This
restructuring charge consisted of $652,000 of severance costs and $240,000 of
lease termination and $179,000 of asset write-offs. All severance costs and the
majority of the lease costs are expected to be paid in cash before the end of
2001. Our operating expenses were reduced by approximately $1.0 million per
quarter as a result of this restructuring.

     Other Income, net. Other income, net consists primarily of interest earned
on our investing activities. Net other income was $533,000 during the nine
months ended September 30, 2000 compared to net other income of $284,000 during
the nine months ended September 30, 2001. Net other income was $217,000 during
the quarter ended September 30, 2000 compared to net other income of $87,000
during the quarter ended September 30, 2001. The decrease in net other income
was the result of decreased interest income due to lower investment and a
decline in interest rates derived from the remaining proceeds of our preferred
stock issuance.

     Income Tax Expense (Benefit). During the third quarter ended September 30,
2000 we took a $ 3.0 million non-cash charge to earnings to fully reserve our
net deferred tax asset, which consists primarily of net operating loss
carryforwards, to reflect that we may be unable to use our net operating loss
carryforwards in the foreseeable future. The deferred tax asset is available to
reduce future tax expense should we generate taxable income.

Liquidity and Capital Resources

     Cash and cash equivalents, including short-term investments, at September
30, 2001 was $7.8 million, decreasing by approximately $3.9 million from
December 31, 2000. This decrease is primarily due to the net loss.

     For the nine months ended September 30, 2000, net cash used by operating
activities was $6.8 million compared to net cash used by operating activities of
$3.8 million for the nine months ended September 30, 2001. Cash used by
operating activities for the nine months ended September 30, 2001 is primarily
due to the net loss.

     Cash used by investing activities was $7.7 million for the nine months
ended September 30, 2000 compared to cash provided by investing activities of
$2.8 million for the nine months ended September 30, 2001. The cash provided by
investing activities is primarily due to the sale of marketable securities
during the first nine months of 2001.

     Cash provided by financing activities was $16.2 million for the nine months
ended September 30, 2000. Cash used by financing activities was $24,000 for the
nine months ended September 30, 2001. Cash provided by financing activities in
2000 resulted primarily from proceeds from the private placement of preferred
stock and warrants for approximately $14.7 million, net of issuance costs.

     At September 30, 2001, our principal sources of liquidity include cash and
short-term investments of $7.8 million. In addition, we have a secured credit
facility for up to $3.0 million, bearing interest at the bank's prime rate. As
of September 30, 2001, we had $2.8 million available for borrowing and no other
debt outstanding.

     We believe that our current cash and short-term investments, together with
anticipated cash flows from operations and our bank credit facility, will be
sufficient to meet our working capital and capital expenditure requirements for
at least the next 12 months.

Recent Accounting Pronouncements

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations", which
is effective immediately. SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001
and eliminates the pooling-of-interests method. The adoption of this standard
will not impact on our current consolidated financial statements.

     In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which is effective January 1, 2002. SFAS No. 142 requires that goodwill
and other intangible assets with indefinite useful lives no longer be amortized,
but instead tested for impairment at least annually. The adoption of this
standard will not have a material impact on our consolidated financial position,
results of operations, or cash flows.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations", which is effective for fiscal years beginning after
June 15, 2002. SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The adoption of this
standard will not have a material impact on our consolidated financial position,
results of operations, or cash flows.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for fiscal
years beginning after December 15, 2001. SFAS No. 144 establishes one accounting
model to be used for long-lived assets to be disposed of by sale and broadens
the presentation of discontinued operations to include more disposal
transactions. We are currently evaluating the requirements and impact of this
statement on our consolidated financial positions and results of operations.

Business Risks

     In evaluating our business, you should carefully consider the business
risks discussed in this section.

     Operating Result Fluctuations. Our sales and other operating results have
varied significantly in the past and may vary significantly in the future as a
result of potential factors such as:

o       The size and timing of significant orders and their fulfillment

o       Rate of rollout, demand and customer adoption of our product offerings

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

o       Changes in pricing policies by us or our competitors

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

o       Changes in the level of our operating expenses

o       Warranty and customer support expenses

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

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

o       Product life cycles

o       Software bugs and other product quality problems

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

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

o       Changes in our business strategy

o       Changes in accounting pronouncements

o       The level of international expansion and foreign currency exchange rates

o       Seasonal trends

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

     Blended Sales Model. During 1998, we altered our sales strategy with the
introduction of a direct sales team, but we had limited experience in marketing
and selling our products on a direct sales basis. Consequently, we may not be
successful in achieving a significant level of direct sales on a timely basis,
or at all. During 2000, our direct sales team had to adapt to selling our
collaborative commerce product, Acorde Resolve, which presented a different
series of sales challenges than our historical software products. If we are
unable to execute our direct sales strategy, it could have a material adverse
effect on our business and results of operations.

     Product Offerings. The Optika Acorde family of products (which included
Optika eMedia) account for substantially all of our current license revenue. Our
future financial performance will depend in general on the acceptance of our
product offerings, and in particular on the successful development, introduction
and customer acceptance of new and enhanced versions of our products. Such
markets, primarily the market for our collaborative commerce product, may not
grow and we may not be successful in developing and marketing these or any other
products, and these products may not achieve widespread customer acceptance. To
date, we have not recognized any direct revenue from the sale of our
collaborative commerce product, Acorde Resolve, which was first released June
30, 2000. We may encounter unexpected delays or costs in such new product
rollout, and any such failures could have a material adverse effect on our
business and results or operations.

     Capital Requirements. We believe that our existing cash balances and liquid
resources will be sufficient to fund our operating activities, capital
expenditures and other obligations through at least the next twelve months.
Recently capital market conditions have materially and adversely affected the
ability of many Internet companies to raise additional capital in both private
and public markets. If market conditions do not improve and we are not
successful in generating sufficient cash flow from operations or in raising
additional capital when required in sufficient amounts and on terms acceptable
to us, we may be required to reduce our planned expenditures and scale back the
scope of our business plan, either of which could have a material adverse effect
on our business. On February 6, 2001, we had a strategic reduction in force to
more closely align our operating expenses with our current revenues. We reduced
our workforce by approximately 25%, primarily in the areas of administration and
finance, research and development, and sales and marketing.

     Key Employees. Most of our senior management team has joined us within the
last five years. These individuals may not be able to achieve and manage growth,
if any, or build an infrastructure necessary for us to operate. Our ability to
compete effectively and to manage any future growth will require that we
continue to assimilate new personnel and to train and manage our work force. Our
future performance depends to a significant degree upon the continuing
contributions of our key management, sales, marketing, customer support, and
product development personnel. We have at times experienced, and continue to
experience, difficulty in recruiting qualified personnel, particularly in sales,
software development and customer support. We believe that there may be only a
limited number of persons with the requisite skills to serve in those positions,
and that it may become increasingly difficult to hire such persons. Competitors
and others have in the past, and may in the future, attempt to recruit our
employees. We have from time to time experienced turnover of key management,
sales and technical personnel. The loss of key management, sales or technical
personnel, or the failure to attract and retain key personnel, could harm our
business.

     Advantage Partners. Our future results of operations will depend on the
success of our marketing and distribution strategy, which has relied, to a
significant degree, upon APs to sell and install our software, and provide
post-sales support. These relationships are usually established through formal
agreements that generally do not grant exclusivity, do not prevent the
distributor from carrying competing product lines and do not require the
distributor to purchase any minimum dollar amount of our software. Some APs may
not continue to represent Optika or sell our products. Other APs, some of which
have significantly greater financial, marketing and other resources than us, may
develop or market software products that compete with our products or may
otherwise discontinue their relationship with, or support of, us. Some of our
APs are small companies that have limited financial and other resources that
could impair their ability to pay us. Our strategy may not be successful and our
strategy may adversely impact sales through our APs. Selling through indirect
channels may also hinder our ability to forecast sales accurately, evaluate
customer satisfaction or recognize emerging customer requirements.

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

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

     Sales Cycle. The license of our software products is typically an
executive-level decision by prospective end-users, and generally requires us and
our APs to engage in a lengthy and complex sales cycle (typically between six
and twelve months from the initial contact date). In addition, the
implementation by customers of our products may involve a significant commitment
of resources by such customers over an extended period of time. For these and
other reasons, the sales and customer implementation cycles are subject to a
number of significant delays over which we have little or no control. Our future
performance also depends upon the capital expenditure budgets of our customers
and the demand by such customers for our products. Certain industries to which
we sell our products, such as the financial services industry, are highly
cyclical. Our operations may in the future be subject to substantial
period-to-period fluctuations as a consequence of such industry patterns,
domestic and foreign economic and other conditions, and other factors affecting
capital spending. Such factors may have a material adverse effect on our
business and results of operations.

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

     Competitor Resources. Many of our current and potential competitors are
substantially larger than we are, have significantly greater financial,
technical and marketing resources and have established more extensive channels
of distribution. As a result, such competitors may be able to respond more
rapidly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the development, promotion and sale of their
products than we can. We expect our competitors to continue to improve the
performance of their current products and to introduce new products or new
technologies that provide added functionality and other features. Our failure to
keep pace with our competitors through new product introductions or enhancements
could cause a significant decline in our sales or loss of market acceptance of
our products and services, result in continued intense price competition, or
make our products and services or technologies obsolete or noncompetitive. To be
competitive, we will be required to continue to invest significant resources in
research and development, and in sales and marketing.

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

     International Operations. Sales outside the United States accounted for
approximately 24%, 17% and 15% of our revenues in 1998, 1999 and 2000,
respectively. We have only limited experience in developing localized versions
of our products and cannot assure you that we will be able to successfully
localize, market, sell and deliver our products internationally. Our inability
to successfully expand our international operations in a timely manner, or at
all, could materially and adversely affect our business and results of
operations. Our international revenues may be denominated in foreign currencies
or the U.S. dollar. We do not currently engage in foreign currency hedging
transactions; as a result, a decrease in the value of foreign currencies
relative to the U.S. dollar could result in losses from transactions denominated
in foreign currencies, could make our software less price-competitive, and could
have a material adverse effect upon our business, results of operations, and
financial condition.

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

      Common Stock Price Volatility. The market price of our shares of common
stock has been, and is likely to continue to be, highly volatile and may be
significantly affected by factors such as:

o       Actual or anticipated fluctuations in our operating results

o       Announcements of technological innovations

o       New products or new contracts by us or our competitors

o       Sales of common stock by management, directors or other related parties

o       Sales of significant amounts of common stock into the market

o       Developments with respect to proprietary rights

o       Conditions and trends in the software and other technology industries

o       Adoption of new accounting standards affecting the software industry

o       Changes in financial estimates by securities analysts and others

o       General market conditions

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

In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have particularly affected the market prices
for the common stock of technology companies. These broad market fluctuations
may adversely affect the market price of our common stock. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against
such company. Such litigation may be brought against us in the future. Such
litigation, regardless of its outcome, would result in substantial costs and a
diversion of management's attention and resources that could have a material
adverse effect upon our business and results of operations.

      Change In Company Control. Certain provisions of our Certificate of
Incorporation, equity incentive plans, Bylaws, and Delaware law may discourage
certain transactions involving a change in control of our company. Our
classified Board of Directors and the ability of the Board of Directors to issue
"blank check" preferred stock without further stockholder approval, may have the
effect of delaying, deferring or preventing a change in our control and may also
affect the market price of our stock. On July 12, 2001 our Board of Directors
adopted a Shareholder Rights Plan under which all stockholders of record as of
July 18, 2001 received one right for each share of common stock then owned by
them to purchase, upon the occurrence of certain triggering events, one
one-hundredth of a share of Series B Preferred Stock at a price of $30, subject
to adjustment. The rights are exercisable only if a person or group acquires 15%
or more of our common stock in a transaction not approved by our Board of
Directors. These provisions and certain other provisions of our Amended and
Restated Certificate of Incorporation and certain provisions of our Amended and
Restated Bylaws and of Delaware law, could delay or make more difficult a
merger, tender offer or proxy contest.

ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of September 30, 2001 we had $6.7 million in short-term investments that
are sensitive to market risks. Our investment portfolio is used to preserve our
capital until it is required to fund operations, including our research and
development activities. We do not own any derivative financial instruments. Due
to the nature of our investment portfolio we are primarily subject to interest
rate risk.

     Our investment portfolio includes fixed rate debt instruments that are
primarily United States government and agency bonds of duration ranging from one
to five years. The market value of these bonds is subject to interest rate risk,
and could decline in value if interest rates increase. A hypothetical increase
or decrease in market interest rates by 10% from September 30, 2001, would cause
the fair market value of these short-term investments to change by an
insignificant amount. Although the market value of these short-term investments
would change due to the interest rate fluctuation, we have the ability to hold
the investments to maturity, which would reduce overall market risk.

<PAGE>
                           PART II - OTHER INFORMATION


Item 2. Changes in Securities and Use of Proceeds.

     On July 12, 2001, our Board of Directors declared a dividend distribution
of one Right for each outstanding share of our common stock to stockholders of
record at the close of business on July 18, 2001, the "Record Date," and
authorized the issuance of one Right with each share of common stock issued
thereafter between the Record Date and the Distribution Date (as defined below).
Each Right entitles the registered holder to purchase from the company one
one-hundredth of a share, or a "Unit," of Series B Preferred Stock, par value
$.001 per share, at a purchase price of $30 per Unit, subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement between
Optika and Fleet National Bank, as Rights Agent, dated as of July 18, 2001, as
the same may be amended.

     Initially, the Rights will attach to all certificates representing shares
of our outstanding common stock, and no separate Rights Certificates will be
distributed. The Rights will separate from the common stock and the
"Distribution Date" will occur upon the earlier of (i) ten business days
following a public announcement (the date of such announcement being the "Stock
Acquisition Date") that a person or group of affiliated or associated persons
has obtained beneficial ownership of 15% or more of the then outstanding shares
of our common stock (an "Acquiring Person"), and (ii) ten business days (or a
later date determined by the Board of Directors prior to the time any person
becomes an Acquiring Person) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of the then outstanding shares of our common stock.

     The Rights are not exercisable until the Distribution Date and will expire
at the close of business on July 18, 2011 unless earlier redeemed or exchanged
by Optika. Under certain circumstances the exercisability of the Rights may be
suspended. In no event, however, will the Rights be exercisable prior to the
expiration of the period in which the Rights may be redeemed. If a person
becomes an Acquiring Person, each holder of a Right (other than Rights
beneficially owned by the Acquiring Person, which will thereupon become void)
will thereafter have the right to receive, upon exercise, shares of common stock
(or, in certain circumstances, cash, property or other securities of Optika)
having a value equal to two times the exercise price of the Right. The exercise
price is the purchase price multiplied by the number of Units issuable upon
exercise of a Right.

     If, at any time following the date that any person becomes an Acquiring
Person, (i) Optika is acquired in a merger or other business combination
transaction and Optika is not the surviving corporation, (ii) any person merges
with Optika and all or part of its common stock is converted or exchanged for
securities, cash or property of the company or any other person or (iii) 50% or
more of the our assets or earning power is sold or transferred, each holder of a
Right (except Rights which have been voided) shall thereafter have the right to
receive, upon exercise, common stock of the Acquiring Person having a value
equal to two times the exercise price of the Right.

     The purchase price payable, and the number of Units issuable, upon exercise
of the Rights are subject to adjustment to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or convertible securities at
less than the current market price of the Preferred Stock, or (iii) upon the
distribution to the holders of the Preferred Stock of evidences of indebtedness,
cash or assets (excluding regular quarterly cash dividends) or of subscription
rights or warrants (other than those referred to above).

     At any time until ten business days following the Stock Acquisition Date, a
majority of the Board of Directors may redeem the Rights in whole, but not in
part, at a price of $.001 per Right (subject to adjustment in certain events)
(the "Redemption Price") payable, at the election of the majority of the Board
of Directors, in cash or shares of our common stock. Immediately upon the action
of a majority of the Board of Directors ordering the redemption of the Rights,
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.

     Optika may at any time after there is an Acquiring Person, by action of a
majority of the Board of Directors, exchange all or part of the then outstanding
and exercisable Rights (other than Rights that shall have become void) for
shares of common stock pursuant to a one-for-one exchange ratio, as adjusted.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a stockholder of Optika.

     The Units that may be acquired upon exercise of the Rights will be
nonredeemable and subordinate to any other shares of preferred stock that may be
issued by Optika. Each Unit will have a minimum preferential quarterly dividend
of $.01 per Unit or any higher per share dividend declared on our common stock.
In the event of liquidation, the holder of a Unit will receive a preferred
liquidation payment equal to the greater of $.01 per Unit and the per share
amount paid in respect of a share of common stock. Each Unit will have one vote,
voting together with the common stock.

     In the event of any merger, consolidation or other transaction in which
shares of common stock are exchanged, each Unit will be entitled to receive the
per share amount paid in respect of each share of common stock. The rights of
holders of the Preferred Stock with respect to dividends, liquidation and
voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions. Because of the nature of the Preferred
Stock's dividend, liquidation and voting rights, the economic value of one Unit
that may be acquired upon the exercise of each Right should approximate the
economic value of one share of common stock.

     A copy of the Rights Agreement and the Certificate of Designation
classifying and designating the Series B Preferred Stock are attached as
exhibits to, and are incorporated herein by reference from, Optika's
Registration Statement on Form 8-A filed with the Securities and Exchange
Commission on July 18, 2001.

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

(a)     Exhibits:

 3.1    Certificate of Designation of the Series B Preferred Stock filed on July
        18, 2001 (incorporated by reference to Exhibit 3.1 to the Registrant's
        Registration Statement on Form 8-A filed with the Securities and
        Exchange Commission on July 18, 2001, Commission File No. 000-28672).

 4.1    Rights Agreement, including Form of Right Certificate, as Exhibit A, and
        form of Summary of Rights, as Exhibit B (incorporated by reference to
        Exhibit 4.1 to the Registrant's Registration Statement on Form 8-A filed
        with the Securities and Exchange Commission on July 18, 2001, Commission
        File No. 000-28672).

(b)     Reports on Form 8-K

        The Company did not file any current reports on Form 8-K during the
        quarter ended September 30, 2001.

<PAGE>

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                               OPTIKA INC.
                                              (Registrant)


              11/6/2001                          /s/   Mark K. Ruport
             -----------                     ----------------------------------
               (Date)                                  Mark K. Ruport
                                             President, Chief Executive Officer
                                                   and Chairman of the Board


              11/6/2001                          /s/ Steven M. Johnson
             -----------                     ----------------------------------
               (Date)                                Steven M. Johnson
                                             Chief Financial Officer, Executive
                                                 Vice President, Secretary
                                                and Chief Accounting Officer