<PAGE>

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


                      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, 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                                    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 ____.
                                                 -----

           8,171,648 shares of  the Registrant's Common Stock, $.001
         par value per share,  were outstanding as of August 3, 2001.


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

                                     INDEX

<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
PART I - FINANCIAL INFORMATION

       Item 1 - Condensed Consolidated Financial Statements

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

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

                 Condensed Consolidated Statements of Cash Flows for
                 the six-month periods ended June 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                15

PART II - OTHER INFORMATION

       Item 2 - Changes in Securities and Use of Proceeds                                 16

       Item 4 - Submission of Matters to a Vote of Securities                             16

       Item 6 - Exhibits and Reports on Form 8-K                                          16

       Signatures                                                                         17
</TABLE>

<PAGE>

                                 OPTIKA INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
              (In thousands, except share and per share amounts)

<TABLE>

                                                                                                  December 31,      June 30,
                                                                                                      2000            2001
                                                                                                 ---------------  -------------
                                                                                                                   (unaudited)
<S>                                                                                              <C>              <C>
Assets
Current assets:
   Cash and cash equivalents..................................................................   $        2,192   $      2,050
   Short-term investments.....................................................................            9,512          6,674
   Accounts receivable, net of allowance for doubtful accounts of $86 at December 31, 2000 and
       June 30, 2001..........................................................................            2,913          2,760
   Other current assets.......................................................................              801            568
                                                                                                 ---------------  ------------
         Total current assets.................................................................           15,418         12,052
                                                                                                 ---------------  ------------

Property and equipment, net...................................................................            2,625          1,878
Other assets, net.............................................................................              481            358
                                                                                                 ---------------  ------------
                                                                                                 $       18,524   $     14,288
                                                                                                 ===============  ============
Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable...........................................................................   $        1,052   $        539
   Accrued expenses...........................................................................            1,043          1,578
   Accrued compensation expense...............................................................              909            872
   Deferred revenue...........................................................................            3,902          3,613
                                                                                                 ---------------  ------------
          Total current liabilities...........................................................            6,906          6,602
                                                                                                 ---------------  ------------

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 8,171,648
      shares, issued and outstanding at December 31, 2000 and June 30, 2001, respectively.....                8              8
   Preferred stock; Series A-1 convertible, $.001 par value; 731,851 shares authorized, issued
    and outstanding at June 30, 2001..........................................................                -          5,199
  Additional paid-in capital..................................................................           23,425         29,014
  Accumulated deficit.........................................................................          (22,689)       (26,550)
  Accumulated other comprehensive income......................................................               25             15
                                                                                                 ---------------  ------------
          Total  stockholders' equity.........................................................              769          7,686
                                                                                                 ---------------  ------------

                                                                                                 $       18,524   $     14,288
                                                                                                 ===============  ============
</TABLE>






   The accompanying notes are an integral part of these financial statements.

                                       1
<PAGE>

                                  OPTIKA INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                  Three Months Ended June 30,        Six Months Ended June 30,
                                                                  ---------------------------        -------------------------

                                                                     2000            2001              2000          2001
                                                                   --------        --------          ---------      --------
<S>                                                                <C>             <C>               <C>            <C>
Revenues:
  Licenses....................................................     $  1,689        $  1,637          $   2,879      $  3,059
  Maintenance and other.......................................        2,813           2,536              5,450         4,959
                                                                   --------        --------          ---------      --------
     Total revenues...........................................        4,502           4,173              8,329         8,018
                                                                   --------        --------          ---------      --------

 Cost of revenues:
  Licenses....................................................           96             164                238           313
  Maintenance and other.......................................        1,216             822              2,271         1,801
                                                                   --------        --------          ---------      --------
     Total cost of revenues...................................        1,312             986              2,509         2,114
                                                                   --------        --------          ---------      --------

Gross profit..................................................        3,190           3,187              5,820         5,904
                                                                   --------        --------          ---------      --------

Operating expenses:
  Sales and marketing.........................................        3,443           2,093              6,359         4,871
  Research and development....................................        2,171           1,366              4,222         3,012
  General and administrative..................................          534             487              1,201         1,002
  Restructuring and other non-recurring charges...............            -               -                  -         1,071
                                                                   --------        --------          ---------      --------

     Total operating expenses.................................        6,148           3,946             11,782         9,956
                                                                   --------        --------          ---------      --------

Loss from operations..........................................       (2,958)           (759)            (5,962)       (4,052)
Other income, net.............................................          216             100                316           197
                                                                   --------        --------          ---------      --------

Loss before income tax expense (benefit)......................       (2,742)           (659)            (5,646)       (3,855)
Income tax expense (benefit)..................................            -              (1)                 -             6
                                                                   --------        --------          ---------      --------

Net loss......................................................       (2,742)           (658)            (5,646)       (3,861)
Preferred stock dividend......................................         (303)           (130)              (423)         (447)
Accretion of preferred stock and beneficial conversion
  feature.....................................................         (181)            (71)            (4,662)         (250)
Increase to income available to common stockholders from
  the exchange of preferred stock.............................            -           6,196                  -         6,196
                                                                   --------        --------          ---------      --------
Net income (loss) applicable to common stockholders...........     $ (3,226)       $  5,337          $ (10,731)     $  1,638
                                                                   ========        ========          =========      ========

Basic net income (loss) per common share......................     $  (0.40)       $   0.65          $   (1.38)     $   0.20
                                                                   ========        ========          =========      ========

Basic weighted average number of common shares
  outstanding.................................................        8,050           8,172              7,799         8,161
                                                                   ========        ========          =========      ========

Diluted net loss per common share.............................     $  (0.40)       $  (0.07)         $   (1.38)     $  (0.43)
                                                                   ========        ========          =========      ========

Diluted weighted average number of common shares outstanding..        8,050           8,973              7,799         8,957
                                                                   ========        ========          =========      ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                  Six Months Ended June 30,
                                                                                            -------------------------------------
                                                                                              2000                        2001
                                                                                              ----                        ----
<S>                                                                                         <C>                         <C>
Cash Flows From Operating Activities:
Net loss.............................................................................       $  (5,646)                  $  (3,861)
Adjustments to reconcile net loss to net cash used by operating activities:
   Depreciation and amortization.....................................................             480                         560
   Loss on disposal of fixed assets..................................................              --                         198
   Deferred tax benefit..............................................................             (14)                         --
   Changes in assets and liabilities:
      Accounts receivable, net.......................................................           1,331                         153
      Other assets...................................................................            (281)                        356
      Accounts payable...............................................................             177                        (513)
      Accrued expenses...............................................................             (58)                        498
      Deferred revenue...............................................................            (109)                       (289)
                                                                                            ---------                   ---------

      Net cash used by operating activities..........................................          (4,120)                     (2,898)
                                                                                            ---------                   ---------

Cash Flows From Investing Activities:
Capital expenditures.................................................................            (517)                        (18)
Proceeds from sales of equipment.....................................................              --                           7
Sale (purchase) of short-term investments, net.......................................          (6,601)                      2,828
                                                                                            ---------                   ---------

      Net cash  provided (used) by investing activities..............................          (7,118)                      2,817
                                                                                            ---------                   ---------

Cash Flows From Financing Activities:
Proceeds from issuance of common stock...............................................           1,414                          90
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...............................          16,090                         (61)
                                                                                            ---------                   ---------

Net increase (decrease) in cash and cash equivalents.................................           4,852                        (142)
Cash and cash equivalents at beginning of period.....................................           3,359                       2,192
                                                                                            ---------                   ---------
Cash and cash equivalents at end of period...........................................       $   8,211                   $   2,050
                                                                                            =========                   =========
</TABLE>

  The accompanying notes are an integral part of these financial statements.

                                       3
<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 June 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 financial statements
and notes thereto for the year ended December 31, 2000, included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.

2.   Net Income (Loss) Per Common Share

   Basic earnings per share is computed by dividing net income 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 half of 2000, 592,890 options to purchase our common stock were granted.
During the first half of 2001, 1,306,600 options to purchase our common stock
were granted.

   Net loss applicable to common shareholders during the three and six months
ended June 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 three and six months ended June
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 shareholders. 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 a recurring 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
quarter that the preferred stock was outstanding. Basic net income per share for
the three months and six months ended June 30, 2001 includes a one-time increase
to income available to common stockholders of $6.2 million offset by a non-cash
preferred stock dividend and accretion of preferred stock of $201,000. 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 per share computations (in thousands except per share
data):

<TABLE>
<CAPTION>
                                                                       Three Months Ended          Six Months Ended
                                                                             June 30,                  June 30,
                                                                             --------                  --------
                                                                        2000          2001         2000         2001
                                                                        ------------------         -----------------
<S>                                                                   <C>           <C>         <C>           <C>
Basic Earnings Per Share:
     Net income (loss) applicable to common shareholders...........   $  (3,226)    $  5,337    $  (10,731)   $  1,638
     Basic weighted average common shares outstanding..............       8,050        8,172         7,799       8,161
     Basic net loss per common share...............................   $   (0.40)    $   0.65    $    (1.38)   $   0.20
</TABLE>

                                       4
<PAGE>

<TABLE>
<S>                                                                   <C>           <C>         <C>           <C>
Diluted Earnings Per Share:
       Net income (loss) applicable to common stockholders.........   $  (3,226)    $  5,337    $  (10,731)   $  1,638
       Preferred stock dividend, accretion and effect of exchange..          --       (5,995)           --      (5,499)
                                                                      ---------     --------    ----------    --------
                                                                         (3,226)        (658)      (10,731)     (3,861)

Weighted average common shares  outstanding........................       8,050        8,172         7,799       8,161
       Assumed conversion of preferred stock.......................          --          801            --         796
                                                                      ---------     --------    ----------    --------
       Diluted weighted average common shares outstanding..........       8,050        8,973         7,799       8,957
       Diluted net income (loss) per common share..................   $   (0.40)    $  (0.07)   $    (1.38)   $  (0.43)
</TABLE>

In 2000 and 2001, $2.1 million and $2.7 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, Optika Inc. (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 to earnings 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 June 30, 2001 (in thousands except per share data):

<TABLE>
<CAPTION>
                                   Severance Costs        Lease Termination         Asset Write-Offs          Total
                                   ---------------        -----------------         ----------------          -----
<S>                                <C>                    <C>                       <C>                       <C>
Restructuring Charge                         $ 652                   $  240                  $   179          $1,071
Usage                                         (507)                     (36)                    (179)           (722)
                                             -----                     ----                    -----          ------
    Balance June 30, 2001                    $ 145                   $  204                  $    --          $  349
                                             =====                     ====                    =====          ======
</TABLE>

                                       5
<PAGE>

5.   Contingencies

     We are, from time to time, subject to certain claims, assertions or
litigation by outside parties as part of its 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.

                                       6
<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 and those 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.
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.  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.  Maintenance revenues are deferred and
recognized ratably over the maintenance period, which is generally one year.
Other revenues are recognized as services are performed.

                                       7
<PAGE>

   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.  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.

Revenues

   Total revenues decreased 4% from $8.3 million, for the six months ended June
30, 2000, to $8.0 million, for the six months ended June 30, 2001.   Total
revenues decreased 7% from $4.5 million for the quarter ended June 30, 2000 to
$4.2 million for the quarter ended June 30, 2001.

   Licenses. License revenues increased 6% from $2.9 million, during the six
months ended June 30, 2000, to $3.1 million, for the six months ended June 30,
2001, and decreased 3% from $1.7 million during the quarter ended June 30, 2000
to $1.6 million for the quarter ended June 30, 2001. License revenues
represented 35% and 38% of the total revenues for the six months ended June 30,
2000 and 2001, respectively, and represented 38% and 39% of the total revenues
for the quarter ended June 30, 2000 and 2001, respectively. The increase in
license revenues during the first six 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. The decrease in license
revenue for the quarter ended June 30, 2001 as compared to June 30, 2000 is a
result of one large sale in the quarter ended June 30, 2000 which was not
repeated in the quarter ended June 30, 2001. License revenues generated outside
of the United States accounted for approximately 17% of our revenues for the six
months ended June 30, 2000, compared to 11% for the same period in 2001, and 12%
and 11% for the quarters ended June 30, 2000 and 2001, respectively. The
decrease in international revenues as a percentage of total revenue is a result
of the slow European first and second quarter sales and continued focus on North
American operations.

   Maintenance and Other. Maintenance revenues, exclusive of other revenue,
decreased 5% from $3.8 million during the six months ended June 30, 2000, to
$3.6 million for the six months ended June 30, 2001 and decreased 4% from $1.9
million during the quarter ended June 30, 2000, to $1.8 million for the quarter
ended June 30, 2001. Maintenance revenue represented 46% and 45% of the total
revenues for the six months ended June 30, 2000 and 2001, respectively and 42%
and 44% of the total revenues for the quarters ended June 30, 2000 and 2001,
respectively. This decrease was primarily a result of the loss of revenue from
customers utilizing FilePower (predecessor product to Optika eMedia) 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 19% and 17% of total revenues
for the six months ended June 30, 2000 and 2001, respectively, and 20% and 17%
of total revenues for the quarters ended June 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 drives our service revenue in the first and second quarters of
2001.

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 increased in absolute dollars from $238,000, or 8%
of license revenues for the six months ended June 30, 2000, to $313,000 or 10%
of license revenues, for the six months ended June 30, 2001 and increased from
$96,000 or 6% of license revenues for the quarter ended June 30, 2000 to
$164,000 or 10% of license revenues for the quarter ended June 30, 2001. The
increase in absolute dollar cost of licenses was attributable to the increased
third party components of our software sales.

                                       8
<PAGE>

   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, and the cost of third-party
software products. Cost of maintenance and other decreased in absolute dollars
from $2.3 million or 42% of maintenance and other revenues for the six months
ended June 30, 2000 to $1.8 million or 36% of maintenance and other revenues for
the six months ended June 30, 2001. Cost of maintenance and other decreased in
absolute dollars from $1.2 million or 43% of maintenance and other revenues for
the quarter ended June 30, 2000 to $822,000 or 32% of maintenance and other
revenues for the quarter ended June 30, 2001. The absolute dollar decrease in
cost of maintenance and other is primarily a result of decreased third-party
contracting and the consolidation of the executive management and certain other
redundant positions within the departments.

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 $6.4 million, or 76% of total revenues, for the six
months ended June 30, 2000 to $4.9 million, or 61% of total revenues, for the
six months ended June 30, 2001. Sales and marketing expenses decreased from $3.4
million, or 77% of total revenues, for the quarter ended June 30, 2000 to $2.1
million, or 50% of total revenues, for the quarter ended June 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 $4.2 million, or 51% of total revenues, for
the six months ended June 30, 2000 to $3.0 million, or 38% of total revenues,
for the six months ended June 30, 2001. Research and development expenses
decreased from $2.2 million, or 48% of total revenues, for the quarter ended
June 30, 2000 to $1.4 million, or 33% of total revenues, for the quarter ended
June 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 $1.2 million or 14% of total revenues for
the six months ended June 30, 2000 to $1.0 million or 13% of total revenues for
the six months ended June 30, 2001. General and administrative expenses
decreased from $534,000 or 12% of total revenues, for the quarter ended June 30,
2000 to $487,000 or 12% of total revenues, for the quarter ended June 30, 2001.
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
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 to earnings in the first quarter of 2001. This
restructuring charge consisted of $652,000 of severance costs and $240,000 of
lease termination, $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 $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. Net other income was $316,000 during the six months
ended June 30, 2000 compared to net other income of $197,000 during the six
months ended June 30, 2001. Net other income was $216,000 during the quarter
ended June 30, 2000 compared to net other income of $100,000 during the quarter
ended June 30, 2001, primarily as a result of the decrease in interest income
derived from the proceeds of our preferred stock issuance.

   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. 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

                                       9
<PAGE>

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, 2001 were $2.1 million, decreasing by
$142,000 from December 31, 2000. The decrease in cash and cash equivalents is
primarily due to the net loss offset by the sale of short-term investments.

   For the six months ended June 30, 2000, net cash used by operating activities
was $4.1 million compared to net cash used by operating activities of $2.9
million for the six months ended June 30, 2001. Cash used by operating
activities for the six months ended June 30, 2001 is primarily due to the first
and second quarter net losses.

   Cash used by investing activities was $7.1 million for the six months ended
June 30, 2000 compared to cash provided of $2.8 million for the six months ended
June 30, 2001. The cash provided by investing activities is primarily due to the
sale of marketable securities during the first half of 2001.

   Cash provided by financing activities was $16.1 million for the six months
ended June 30, 2000. Cash used in financing activities was $61,000 for the six
months ended June 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 June 30, 2001, our principal sources of liquidity included cash and short-
term investments of $8.7 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, 2001, the Company 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 flow 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:

 .    The size and timing of significant orders and their fulfillment

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

 .    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

 .    Changes in pricing policies by us or our competitors

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

 .    Changes in the level of our operating expenses

 .    Warranty and customer support expenses

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

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

 .    Product life cycles

                                       10
<PAGE>

 .    Software bugs and other product quality problems

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

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

 .    Changes in our business strategy

 .    Changes in accounting pronouncements

 .    The level of international expansion and foreign currency exchange rates

 .    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

                                       11
<PAGE>

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

                                       12
<PAGE>

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

                                       13
<PAGE>

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:

 .  Actual or anticipated fluctuations in our operating results

 .  Announcements of technological innovations

 .  New products or new contracts by us or our competitors

 .  Sales of common stock by management

 .  Sales of significant amounts of common stock into the market

 .  Developments with respect to proprietary rights

 .  Conditions and trends in the software and other technology industries

 .  Adoption of new accounting standards affecting the software industry

 .  Changes in financial estimates by securities analysts and others

 .  General market conditions

 .  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

                                       14
<PAGE>

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.

   Beneficial Ownership. Holders of our Preferred Stock and members of our Board
of Directors and our executive officers, together with members of their families
and entities that may be deemed affiliates of, or related to, such persons or
entities, beneficially own, as of August 1, 2001, approximately 22% of the
outstanding shares of our voting stock. Accordingly, these stockholders could,
if acting in concert, be able to substantially influence the election of all
members of our Board of Directors and determine the outcome of corporate actions
requiring stockholder approval, such as mergers and acquisitions. The interests
of these stockholders could conflict with the interests of other stockholders.

   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, 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 June 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. Any material change in
the interest rates would 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, 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.

                                       15
<PAGE>

                          PART II - OTHER INFORMATION


Item 2.  Changes in Securities and Use of Proceeds.

         In May 2001, the Company entered into an Exchange Agreement with Thomas
Weisel Capital Partners L.P., a Delaware limited partnership, certain of its
affiliates and RKB Capital, L.P., pursuant to which the Company issued to such
parties a total of 731,851 shares of Series A-1 Convertible Preferred Stock, on
a one-for-one basis, in return for the exchange, surrender and cancellation of
the Company's Series A Redeemable Convertible Preferred Stock. 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. This
transaction was made in reliance on the exemption from the registration
requirements of the Securities Act of 1933 provided by Section 3(a)(9) of the
Securities Act. No commission or other remuneration was paid directly or
indirectly for soliciting such exchange.

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

         The Company held its annual meeting of shareholders on May 8, 2001. At
such meeting the following actions were voted upon:

<TABLE>
<CAPTION>
a.   Election of  Directors
           Nominees              Number of Votes For        Withhold  Authority
           --------              -------------------        -------------------
<S>                              <C>                        <C>
Richard A. Bass                       7,840,175                    80,766
Alan B. Menkes                        7,840,175                    80,766
</TABLE>

b.   Ratification of KPMG LLP as the Company's independent accountants for the
fiscal year ending December 31, 2001.

<TABLE>
<CAPTION>
     Affirmative Votes       Negative Votes           Abstentions
     -----------------       --------------           -----------
<S>                          <C>                      <C>
         7,859,866               45,140                  15,935
</TABLE>

The foregoing results include the 731,851 shares of our Series A Convertible
Preferred Stock, all of which voted for the nominees and in favor of each of the
proposals.

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

a.  Exhibits


    None

b.  Reports on Form 8-K


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

                                       16
<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)



       8/11/2001                         /s/   Mark K. Ruport
-----------------------            ------------------------------
        (Date)                                 Mark K. Ruport
                                     President, Chief Executive Officer
                                         and Chairman of the Board



       8/11/2001                           /s/ Steven M. Johnson
-----------------------            -----------------------------
        (Date)                                 Steven M Johnson
                                    Chief Financial Officer, Executive
                                        Vice President, Secretary
                                       and Chief Accounting Officer

                                       17