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 June 30, 2002

                                       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               80920
       Colorado Springs, CO                (Zip Code)
(Address of principal executive offices)

                                (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 ____.

   8,326,486 shares of the Registrant's Common Stock, $.001 par value
         per share, were outstanding as of August 12, 2002.

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

                                      INDEX


                                                                          PAGE
PART I - FINANCIAL INFORMATION                                           ------

  Item 1 -  Condensed Consolidated Financial Statements

     Condensed Consolidated Balance Sheets as of December 31, 2001 and
     June 30, 2002 (Unaudited)                                              1

     Condensed Consolidated Statements of Operations for the three-month
     and six-month periods ended June 30, 2001 and 2002 (Unaudited)         2

     Condensed Consolidated Statements of Cash Flows for the six-month
     periods ended June 30, 2001 and 2002 (Unaudited)                       3

     Notes to Condensed Consolidated Financial Statements (Unaudited)       4

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

  Item 3 - Quantitative and Qualitative Disclosures About Market Risk      14

PART II - OTHER INFORMATION

  Item 4 - Submission of Matters to a Vote of Security Holders             15

  Item 6 - Exhibits and Reports on Form 8-K                                15

  Signatures                                                               16


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

                                                       December 31,  June 30,
                                                           2001        2002
                                                       -----------  ----------
                                                                    (unaudited)
Assets
Current assets:
   Cash and cash equivalents.......................    $    1,746   $   1,658
   Short-term investments..........................         5,950       5,952
   Accounts receivable, net of allowance for
    doubtful accounts of $110 at December 31, 2001
    and $107 at June 30, 2002.....................          4,035       3,768
   Other current assets............................           537         430
                                                       -----------  ----------
         Total current assets......................        12,268      11,808
                                                       -----------  ----------
Property and equipment, net........................         1,364       1,069
Other assets.......................................           269         231
                                                       -----------  ----------
                                                       $   13,901   $  13,108
                                                       ===========  ==========
Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable................................    $      486   $     529
   Accrued expenses................................         1,210         643
   Accrued compensation expense....................           861         641
   Deferred revenue................................         3,949       4,419
                                                       -----------  ----------
          Total current liabilities................         6,506       6,232
                                                       -----------  ----------
Stockholders' equity:
   Common stock; $.001 par value; 25,000,000 shares
    authorized; 8,214,713 and 8,288,659 shares
    issued and outstanding at December 31, 2001
    and June 30, 2002, respectively................             8           8
   Preferred stock; Series A-1 convertible, $.001
    par value; 731,851 shares authorized, issued
    and outstanding at December 31, 2001 and
    June 30, 2002..................................         5,199       5,199
  Additional paid-in capital.......................        29,051      29,129
  Accumulated deficit..............................       (26,863)    (27,460)
                                                       -----------  ----------
          Total  stockholders' equity..............         7,395       6,876
                                                       -----------  ----------
                                                       $   13,901   $  13,108
                                                       ===========  ==========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                          OPTIKA INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                   (In thousands, except per share amounts)

                                              Three Months Ended        Six Months Ended
                                                    June 30,                 June 30,
                                            ----------------------   ----------------------
                                                2001       2002          2001       2002
                                                ----       ----          ----       ----
<S>                                         <C>        <C>           <C>        <C>
Revenues:
   Licenses............................     $  1,637   $  1,319      $  3,059   $  2,313
   Maintenance and other...............        2,625      3,156         5,146      6,036
                                              ------     ------        ------     ------
      Total revenues...................        4,262      4,475         8,205      8,349
                                              ------     ------        ------     ------
Cost of revenues:
   Licenses............................          164        126           313        218
   Maintenance and other...............          911        960         1,988      1,819
                                              ------     ------        ------     ------
      Total cost of revenues...........        1,075      1,086         2,301      2,037
                                              ------     ------        ------     ------
Gross profit...........................        3,187      3,389         5,904      6,312
                                              ------     ------        ------     ------
Operating expenses:
   Sales and marketing.................        2,093      1,831         4,871      3,649
   Research and development............        1,366      1,285         3,012      2,574
   General and administrative..........          487        390         1,002        766
   Restructuring and other non-
    recurring charges..................            -          -         1,071          -
                                              ------     ------        ------     ------
      Total operating expenses.........        3,946      3,506         9,956      6,989
                                              ------     ------        ------     ------
Loss from operations...................         (759)      (117)       (4,052)      (677)
Other income, net......................          100         43           197         77
                                              ------     ------        ------     ------
Loss before income taxes (benefit).....         (659)       (74)       (3,855)      (600)
Income taxes (benefit).................           (1)        (3)            6         (3)
                                              ------     ------        ------     ------
Net loss...............................         (658)       (71)       (3,861)      (597)
Preferred stock dividend...............         (130)         -          (447)         -
Accretion of preferred stock and
 beneficial conversion feature.........          (71)         -          (250)         -
Increase to income available to common
 stockholders from the exchange of
 of preferred stock ...................        6,196          -         6,196          -
                                              ------     ------        ------     ------
Net income (loss) applicable to common
stockholders...........................     $  5,337   $    (71)     $  1,638   $   (597)
                                              ======     ======        ======     ======
Basic net income (loss) per common
 share.................................     $   0.65   $  (0.01)     $   0.20   $  (0.07)
                                              ======     ======        ======     ======
Basic weighted average number of
 common shares outstanding.............        8,172      8,281         8,161      8,263
                                              ======     ======        ======     ======

Diluted net loss per common share......     $  (0.07)  $  (0.01)     $  (0.43)  $  (0.07)
                                              ======     ======        ======     ======
Diluted weighted average number of
common shares outstanding..............        8,973      8,281         8,957      8,263
                                              ======     ======        ======     ======
<FN>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</FN>
</TABLE>

                          OPTIKA INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)

                                                           Six Months Ended
                                                               June 30,
                                                       -------------------------
                                                           2001         2002
                                                           ----         ----
Cash Flows From Operating Activities:
Net loss...........................................    $  (3,861)   $   (597)
Adjustments to reconcile net loss to net cash used
by operating activities:
   Depreciation and amortization...................          560         364
   Loss (gain) on disposal of fixed assets.........          198          (4)
   Changes in assets and liabilities:
      Accounts receivable, net.....................          153         267
      Other assets.................................          356         145
      Accounts payable.............................         (513)         43
      Accrued expenses.............................          498        (787)
      Deferred revenue.............................         (289)        470
                                                       ----------   ---------
       Net cash used by operating activities.......       (2,898)        (99)
                                                       ----------   ---------
Cash Flows From Investing Activities:
Capital expenditures...............................          (18)        (74)
Proceeds from sales of equipment...................            7           9
Sale (purchase) of short-term investments, net.....        2,828          (2)
                                                       ----------   ---------
      Net cash provided (used) by investing
       activities..................................        2,817         (67)
                                                       ----------   ---------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock.............           90          78
Expenditures for preferred stock exchange..........         (151)         --
                                                       ----------   ---------
      Net cash provided (used) by financing
       activities..................................          (61)         78
                                                       ----------   ---------
Net decrease in cash and cash equivalents..........         (142)        (88)
Cash and cash equivalents at beginning of period...        2,192       1,746
                                                       ----------   ---------
Cash and cash equivalents at end of period.........    $   2,050    $  1,658
                                                       ==========   =========
The accompanying notes are an integral part of these
condensed consolidated financial statements.


<PAGE>
                          OPTIKA INC. AND SUBSIDIARIES
             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 rules and regulations. We have made certain
reclassifications, consistent with the Financial Accounting Standards Board's
Emerging Issues Task Force Topic No. D-103, "Income Statement Characterization
of Reimbursements Received for Out-of-Pocket Expenses Incurred", to prior
balances to conform to the current year presentation of out-of-pocket expenses
incurred. The consolidated results of operations for the periods ending June 30,
2002, are not necessarily indicative of the results to be expected for any
subsequent quarter or for the entire fiscal year ending December 31, 2002. These
unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended December 31, 2001, included in the Annual Report on Form 10-K for the
year ended December 31, 2001 of Optika Inc. (the "Company").

2.    Net Loss Per Common Share

    Basic income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period.
Diluted loss per share is computed using the weighted average number of common
shares outstanding plus all dilutive potential common shares outstanding. During
the first six months of 2001, 1,306,600 options to purchase our common stock
were granted. During the first six months of 2002, 178,000 options to purchase
our common stock were granted.

    Net income applicable to common stockholders during the three and six months
ended June 30, 2001, includes certain 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. These
results include 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.

    The following is the reconciliation of the numerators and denominators of
the basic and diluted income (loss) per share computations (in thousands except
per share data):
<TABLE>
<CAPTION>
                                                 Three Months Ended        Six Months Ended
                                                       June 30,                June 30,
                                                  2001        2002         2001       2002
                                               -----------------------  -----------------------
<S>                                            <C>         <C>          <C>        <C>
Basic Earnings Per Share:
   Net income (loss) applicable to common
    shareholders.............................  $  5,337    $    (71)   $   1,638   $   (597)
   Basic weighted average common shares
    outstanding..............................     8,172       8,281        8,161      8,263
   Basic net income (loss) per common share..  $   0.65    $  (0.01)   $    0.20   $  (0.07)
Diluted Earnings Per Share:
   Net income (loss) applicable to common
    stockholders.............................  $  5,337    $    (71)   $   1,638   $   (597)
   Preferred stock dividend, accretion and
    effect of exchange.......................    (5,995)          -       (5,499)         -
                                               --------    --------    ---------   --------
                                                   (658)        (71)      (3,861)      (597)

   Weighted average common shares outstanding     8,172       8,281        8,161      8,263
   Assumed conversion of preferred stock.....       801           -          796          -
                                               --------    --------    ---------   --------
   Diluted weighted average common shares
    outstanding..............................     8,973       8,281        8,957      8,263
   Diluted net loss per common share.........  $  (0.07)   $  (0.01)   $   (0.43)  $  (0.07)
</TABLE>

In 2001 and 2002, 2.7 million and 2.9 million options and warrants,
respectively, were excluded from the dilutive stock calculation because of their
antidilutive effect on net loss per share.

3.    Restructuring and other charges

    On February 6, 2001, we 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 costs have
been paid as of June 30, 2002.

4.    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 significant legal proceedings.
<PAGE>
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

    This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
Many of these forward-looking statements can be identified by the use of words
such as "may," "will," "expect," "anticipate," "believe," "estimate," "assume,"
"continue," "project," "plan," and similar words and phrases. These statements
include statements concerning adoption of the Acorde product family by our
customers, general economic conditions in the software industry, our
relationships with our partners, and the availability of competing products.
Forward-looking statements are subject to risks and uncertainties, including
those discussed below under the caption "Business Risks," that could cause
actual results or outcomes to differ materially from those expressed in the
forward-looking statements. Any forward-looking statement speaks only as of the
date on which it is made and, except to fulfill our obligations under the United
States securities laws, we undertake no obligation to update any such statement
to reflect events or circumstances after the date on which it is made.

Overview

    Optika(R) Inc. is a leading provider of imaging, workflow and collaboration
software. Optika's Acorde family of enterprise content management (ECM) software
solutions, including Acorde Context(TM), Acorde Process(TM) and Acorde
Resolve(TM), 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. Built on a
three-tier, scalable and extensible platform, Acorde delivers a variety of
client desktops, including Windows and Web and easily integrates with enterprise
resource planning (ERP), line-of-business (LOB) 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 license of our software products is typically an executive-level
decision by prospective end-users and generally requires our sales staff and our
Advantage Partner's, 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
2001, approximately 67% 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, 2001, 2000 and 1999, we generated approximately 12%,
15% and 17%, 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 2001 and 2000, approximately 39% and 33%, respectively, of
our total revenues were derived from software licenses and approximately 44% and
47%, respectively, of our total revenues were derived from maintenance
agreements. For 2001 and 2000, other revenues, which are comprised of training,
consulting and implementation services, and third-party hardware and software
products, accounted for 17% and 20%, respectively, of our total revenues.

Critical Accounting Policies

    Our significant accounting policies are described in Note 1 in the Notes to
Consolidated Financial Statements included in our Annual Report on Form 10-K for
the year ended December 31, 2001. The accounting policies used in preparing our
interim consolidated financial statements for the periods ending June 30, 2002
are the same as those described in our Annual Report on Form 10-K.

    Our critical accounting policies are those having the most impact to the
reporting of our financial condition and results and those requiring significant
judgments and estimates. These policies include those related to (1) revenue
recognition, (2) income taxes, (3) accounting for preferred stock, and (4)
restructuring charges. Our critical accounting policies are described in more
detail in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report on Form 10-K
for the year ended December 31, 2001. With respect to these critical accounting
policies, our management believes that the application of judgments and
assessments is consistently applied and produces financial information which
fairly depicts the results of operations for all periods presented.

Results of Operations

Revenues

    Total revenues increased 2% from $8.2 million, for the six months ended June
30, 2001, to $8.3 million, for the six months ended June 30, 2002. Total
revenues increased 5% from $4.3 million for the quarter ended June 30, 2001 to
$4.5 million for the quarter ended June 30, 2002.

    Licenses. License revenues decreased 24% from $3.1 million, during the six
months ended June 30, 2001, to $2.3 million, for the six months ended June 30,
2002, and decreased 19% from $1.6 million during the quarter ended June 30, 2001
to $1.3 million for the quarter ended June 30, 2002. License revenues
represented 37% and 28% of the total revenues for the six months ended June 30,
2001 and 2002, respectively, and represented 38% and 29% of the total revenues
for the quarter ended June 30, 2001 and 2002, respectively. The decrease in
license revenues during the first six months of 2002 is primarily due to
decreases in sales made by APs in North America and Europe resulting from the
current slowdown in the economic environment. License revenues generated outside
of the United States accounted for approximately 10% of our revenues for the six
months ended June 30, 2001, compared to 11% for the same period in 2002, and 10%
and 8% for the quarters ended June 30, 2001 and 2002, respectively.
International revenues as a percentage of total revenue are down in the second
quarter of 2002 due to slow European sales.

    Maintenance and Other. Maintenance revenues, exclusive of other revenue,
increased 2% from $3.6 million during the six months ended June 30, 2001, to
$3.7 million for the six months ended June 30, 2002 and increased 3% from $1.8
million during the quarter ended June 30, 2001, to $1.9 million for the quarter
ended June 30, 2002. Maintenance revenue represented 44% of the total revenues
for the six months ended June 30, 2001 and 2002 and 43% and 42% of the total
revenues for the quarters ended June 30, 2001 and 2002, respectively. This
increase was primarily a result of increased pricing for value-added services
provided to our customer base. Other revenue, consisting primarily of consulting
services, training and consulting fees represented 18% and 28% of total revenues
for the six months ended June 30, 2001 and 2002, respectively, and 19% and 29%
of total revenues for the quarters ended June 30, 2001 and 2002, respectively.
The increase in other revenue as a percentage of total revenue for the first six
months of 2002 was primarily due to increased service contracts to our direct
customer base.

Cost of Revenues

    Licenses. Costs of licenses consist primarily of royalty payments to
third-party vendors and costs of product media, duplication, packaging and
fulfillment. Cost of licenses decreased in absolute dollars from $313,000, or
10% of license revenues for the six months ended June 30, 2001, to $218,000 or
9% of license revenues, for the six months ended June 30, 2002 and decreased
from $164,000 or 10% of license revenues for the quarter ended June 30, 2001 to
$126,000 or 10% of license revenues for the quarter ended June 30, 2002. The
decrease in absolute dollar cost of licenses was attributable to the decreased
third party components of our software sales.

    Maintenance and Other. Costs of maintenance and other consist of the direct
and indirect costs of providing software maintenance and support, training and
consulting services to our APs, OEMs and end-users. Cost of maintenance and
other decreased in absolute dollars from $2.0 million or 39% of maintenance and
other revenues for the six months ended June 30, 2001 to $1.8 million or 30% of
maintenance and other revenues for the six months ended June 30, 2002. Cost of
maintenance and other increased in absolute dollars from $911,000 or 35% of
maintenance and other revenues for the quarter ended June 30, 2001 to $960,000
or 30% of maintenance and other revenues for the quarter ended June 30, 2002.
The absolute dollar increase in cost of maintenance and other is primarily a
result of increased third-party contracting for our increased service contracts.

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 $4.9 million, or 59% of total revenues, for the six
months ended June 30, 2001 to $3.6 million, or 44% of total revenues, for the
six months ended June 30, 2002. Sales and marketing expenses decreased from $2.1
million, or 49% of total revenues, for the quarter ended June 30, 2001 to $1.8
million, or 41% of total revenues, for the quarter ended June 30, 2002. The
decrease in sales and marketing expenses is due to our restructuring activities
in February 2001. We anticipate that sales and marketing expenses will continue
be slightly higher in future periods.

    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 $3.0 million, or 37% of total
revenues, for the six months ended June 30, 2001 to $2.6 million, or 31% of
total revenues, for the six months ended June 30, 2002. Research and development
expenses decreased from $1.4 million, or 32% of total revenues, for the quarter
ended June 30, 2001 to $1.3 million, or 29% of total revenues, for the quarter
ended June 30, 2002. 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 $1.0 million or 12% of total revenues for
the six months ended June 30, 2001 to $766,000 or 9% of total revenues for the
six months ended June 30, 2002. General and administrative expenses decreased
from $487,000 or 11% of total revenues, for the quarter ended June 30, 2001 to
$390,000 or 9% of total revenues, for the quarter ended June 30, 2002. The
decrease in general and administrative costs 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
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 to earnings in the first quarter of 2001. This
restructuring charge consisted of $652,000 of severance costs, $240,000 of lease
terminations and $179,000 of asset write-offs. All costs were paid as of June
30, 2002. Our operating expenses were reduced by $750,000 to $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. Other income, net was $197,000 during the six
months ended June 30, 2001 compared to other income, net of $77,000 during the
six months ended June 30, 2002. Other income, net was $100,000 during the
quarter ended June 30, 2001 compared to other income, net of $43,000 during the
quarter ended June 30, 2002, primarily as a result of the decrease in interest
income from a lower investment base and overall lower earned interest rate.

    Benefit from Income Taxes. We have recorded a valuation allowance against
our carryforward tax benefits to the extent that we believe that it is more
likely than not all of such benefits will not be realized in the near term. We
perform our assessment of benefit realization and the associated valuation
allowance on a quarterly basis. Our assessment of this valuation allowance was
made using all available evidence, both positive and negative. In particular we
considered both our historical results and our projections of profitability for
only reasonably foreseeable future periods. Our realization of the recorded net
deferred tax assets is dependent on future taxable income and therefore, we
cannot be assured that such benefits will be realized.

Liquidity and Capital Resources

    Cash and cash equivalents at June 30, 2002 were $1.7 million, decreasing by
$88,000 from December 31, 2001. The decrease in cash and cash equivalents is
primarily due to the net loss.

    For the six months ended June 30, 2001, net cash used by operating
activities was $2.9 million compared to net cash used by operating activities of
$99,000 for the six months ended June 30, 2002. Cash used by operating
activities for the six months ended June 30, 2002 is primarily due to the first
and second quarter net losses.

    Cash provided by investing activities was $2.8 million for the six months
ended June 30, 2001 compared to cash used by investing activities of $67,000 for
the six months ended June 30, 2002. The cash provided by investing activities is
primarily due to the sale of marketable securities during the first half of
2001.

    Cash used in financing activities was $61,000 for the six months ended June
30, 2001. Cash provided by financing activities was $78,000 for the six months
ended June 30, 2002. Cash provided by financing activities in 2002 resulted
primarily from proceeds from common stock issuances through our Employee Stock
Purchase Plan.

    At June 30, 2002, our principal sources of liquidity included cash and
short-term investments of $7.6 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 June 30, 2002, we had $2.8 million available for borrowing and no 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 working capital and capital expenditure requirements for at
least the next 12 months. Thereafter, we may require additional funds to support
such activity through public or private equity financing or from other sources.
Additional financing may not be available at all, or if available, such
financing may not be obtainable on terms favorable to us and may be dilutive.

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
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.

    Product Offerings. The Optika Acorde family of products 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.

    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 technology 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.

    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.

    Sales and Distribution Channels. Our future results of operations will
depend on the success of our marketing and distribution strategy, which relies,
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. Selling through indirect channels may
hinder our ability to forecast sales accurately, evaluate customer satisfaction
or recognize emerging customer requirements. Our future results of operations
also depend on the success of our efforts to build a direct sales force. We have
only limited experience in selling our products directly.

    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. 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 our
APs and us 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 our products 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.

    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 12%, 15% and 17% of our revenues in 2001, 2000 and 1999,
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 an 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.

    Nasdaq National Market Listing. Our common stock is traded on the Nasdaq
National Market, which currently requires us to maintain at least $4 million in
net tangible assets to remain listed on the Nasdaq National Market, among other
minimum continued listing requirements. Effective November 1, 2002, the Nasdaq
National Market has changed the continued listing requirements to include a
minimum $10 million in stockholders' equity requirement instead of the $4
million net tangible assets requirement. As of June 30, 2002, our stockholders'
equity was $6.9 million. Addressing this requirement will require us to pursue
alternative courses of action which would have the effect of increasing our
stockholders' equity to maintain our Nasdaq National Market listing or transfer
our listing to another market, such as listing on the Nasdaq SmallCap Market.
The effect of pursuing any such alternatives could, among other things,
negatively affect the share price of our common stock, the liquidity of our
stock or require the issuance of additional equity instruments to meet the
National Market listing requirements.

     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. We also have a stockholders 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 June 30, 2002 we had $6.0 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. Any material change in
the interest rates would not have a material change in the market value of our
debt instruments. A hypothetical increase or decrease in market interest rates
by 10% from June 30, 2002 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 4 - Submission of Matters to a Vote of Security Holders.

      The Company held its annual meeting of shareholders on May 8, 2002. At the
meeting the stockholders voted on the following actions:

a.    Election of Directors
       Nominees           Number of Votes For       Withhold  Authority
       --------           -------------------       -------------------
James T. Rothe, Ph.D.           8,301,886                     55,643
Charles P. Schneider            8,299,566                     57,963

b.    Ratify the appointment of KPMG LLP as the Company's independent
accountants for the fiscal year ending December 31, 2002.
       Affirmative Votes          Negative Votes       Abstentions
       -----------------          --------------       -----------
           8,317,297                  30,877              9,355

The foregoing results include the 731,851 shares of our Series A-1 Convertible
Preferred Stock, all of which voted for the nominees and in favor of the
proposal to ratify the appointment of KPMG LLP.

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

a.    Exhibits

   None

b.    Reports on Form 8-K

       We did not file any Current Reports on Form 8-K during the quarter ended
    June 30, 2002.


<PAGE>

SIGNATURES


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

                                          OPTIKA INC.
                                         (Registrant)




         8/13/2002                   /s/   Mark K. Ruport
      ---------------          -------------------------------
          (Date)                        Mark K. Ruport
                               President, Chief Executive Officer
                                   and Chairman of the Board



         8/13/2002                   /s/ Steven M. Johnson
      ---------------          -------------------------------
          (Date)                       Steven M. Johnson
                               Chief Financial Officer, Executive
                                  Vice President, Secretary
                                 and Chief Accounting Officer