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, 2000


                                       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 ____.

    8,090,556 shares of the Registrant's  Common Stock,  $.001 par value
          per share, were outstanding as of August 1, 2000.

<PAGE>

                                      INDEX

                                                                            PAGE
                                                                            ----
PART I - FINANCIAL INFORMATION

 Item 1 -  Condensed Consolidated Financial Statements

   Condensed Consolidated Balance Sheets as of December 31, 1999
    and June 30, 2000 (Unaudited)                                             1

   Condensed Consolidated Statements of Operations for the three-month
    and six-month periods ended June 30, 1999 and 2000 (Unaudited)            2

   Condensed Consolidated Statements of Cash Flows for the six-month
    periods ended June 30, 1999 and 2000 (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         15


PART II - OTHER INFORMATION

 Item 4 - Submission of Matters to Vote of Securities                        16

 Signatures                                                                  17

<PAGE>
<TABLE>
<CAPTION>

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

                                                                             December 31,        June 30,
                                                                                 1999              2000
                                                                            ----------------  ---------------
                                                                                               (unaudited)
<S>                                                                         <C>               <C>
Assets
Current assets:
   Cash and cash equivalents...........................................        $      3,359      $     8,211
   Short-term investments..............................................               3,823           10,404
   Accounts receivable, net............................................               4,741            3,410
   Other current assets................................................                 555              629
                                                                            ----------------  ---------------
         Total current assets..........................................              12,478           22,654
                                                                            ----------------  ---------------

Fixed assets, net......................................................               2,618            2,655
Deferred tax asset, net................................................               2,946            2,960
Other assets, net......................................................                  55              261
                                                                            ----------------  ---------------
                                                                               $     18,097      $    28,530
                                                                            ================  ===============
Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable....................................................        $        869      $     1,046
   Accrued expenses....................................................               1,135            1,239
   Accrued compensation expense........................................                 910              748
   Deferred revenue....................................................               3,827            3,718
                                                                            ----------------  ---------------
          Total current liabilities....................................               6,741            6,751
                                                                            ----------------  ---------------

Redeemable convertible preferred stock.................................                   -            9,852

Commitments and contingencies
Stockholders' equity:
  Common stock;  $.001 par value;  25,000,000 shares  authorized;
   7,307,678 and 8,086,956 shares issued and outstanding at
   December 31, 1999 and June 30, 2000, respectively...................                   7                8
  Additional paid-in capital...........................................              18,101           24,338
  Accumulated deficit..................................................              (6,648)         (12,295)
  Accumulated other comprehensive loss.................................                (104)            (124)
                                                                            ----------------  ---------------
          Total  stockholders' equity..................................              11,356           11,927
                                                                            ----------------  ---------------
                                                                               $     18,097      $    28,530
                                                                            ================  ===============

<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

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


                                                       Three Months Ended June 30,         Six Months Ended June 30,
                                                       ----------------------------       ----------------------------
                                                             1999         2000                  1999         2000
                                                             ----         ----                  ----         ----
<S>                                                    <C>           <C>                  <C>           <C>
Revenues:
   Licenses........................................    $     2,311   $    1,689           $     5,187   $    2,879
   Maintenance and other...........................          2,646        2,813                 4,948        5,450
                                                           --------     --------              --------     --------
      Total revenues...............................          4,957        4,502                10,135        8,329

Cost of revenues:
   Licenses........................................            142           96                   290          238
   Maintenance and other...........................            975        1,216                 1,925        2,271
                                                           --------     --------              --------     --------
      Total cost revenues..........................          1,117        1,312                 2,215        2,509
                                                           --------     --------              --------     --------

Gross profit.......................................          3,840        3,190                 7,920        5,820

Operating expenses:
   Sales and marketing.............................          2,738        3,443                 5,437        6,359
   Research and development........................          1,302        2,171                 2,659        4,222
   General and administrative......................            491          534                   980        1,201
                                                           --------     --------              --------     --------
      Total operating expenses.....................          4,531        6,148                 9,076       11,782
                                                           --------     --------              --------     --------

Loss from operations...............................           (691)      (2,958)               (1,156)      (5,962)
Other income, net..................................             33          216                    67          316
                                                           --------     --------              --------     --------

Loss before benefit from income taxes..............           (658)      (2,742)               (1,089)      (5,646)
Benefit from income taxes..........................           (230)          -                   (381)          -
                                                           --------     --------              --------     --------

Net loss...........................................           (428)      (2,742)                 (708)      (5,646)
Preferred stock dividend...........................             -          (303)                   -          (423)
Accretion of warrants and beneficial conversion
 feature...........................................             -          (181)                   -        (4,662)
                                                           --------     --------              --------     --------

Net loss applicable to common shareholders.........     $     (428)   $  (3,226)            $    (708)   $ (10,731)
                                                           ========     ========              ========     ========


Basic and diluted net loss per common share........     $    (0.06)   $   (0.40)            $   (0.10)   $   (1.38)
                                                           ========     ========              ========     ========

Basic and diluted weighted average number of common
shares outstanding.................................          7,176        8,050                 7,164        7,799
                                                           ========     ========              ========     ========
<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

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

                                 (In thousands)

                                                                                Six Months Ended June 30,
                                                                             ---------------------------------
                                                                                  1999              2000
                                                                                  ----              ----
<S>                                                                             <C>               <C>
Cash Flows From Operating Activities:
Net Loss...............................................................            $    (708)        $ (5,646)
Adjustments to reconcile net loss to net cash used by operating
 activies:
   Depreciation and amortization.......................................                  467              480
   Deferred tax benefit................................................                 (415)             (14)
   Change in assets and liabilities:
      Accounts receivable, net.........................................                1,111            1,331
      Other assets.....................................................                 (233)            (281)
      Accounts payable.................................................                  111              177
      Accrued expenses.................................................                 (534)             (58)
      Deferred revenue.................................................                  131             (109)
                                                                             ----------------  ---------------

       Net cash used by operations.....................................                  (70)          (4,120)
                                                                             ----------------  ---------------

Cash Flows From Investing Activities:
Capital expenditures...................................................                 (255)            (517)
Purchase of short-term investments.....................................               (2,852)          (6,601)
                                                                             ----------------  ---------------

       Net cash used by investing activities...........................               (3,107)          (7,118)
                                                                             ----------------  ---------------

Cash Flows From Financing Activities:
Proceeds from issuance of common stock.................................                  134            1,414
Net proceeds from issuance of redeemable convertible preferred stock and
 warrants..............................................................                   --           14,676
                                                                             ----------------  ---------------

       Net cash provided by financing activities.......................                  134           16,090
                                                                             ----------------  ---------------

Net increase (decrease) in cash and cash equivalents...................               (3,043)           4,852
Cash and cash equivalents at beginning of period.......................                6,811            3,359
                                                                             ----------------  ---------------
Cash and cash equivalents at end of period.............................            $   3,768         $  8,211
                                                                             ================  ===============
<FN>
   The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>

                                  OPTIKA INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.      Basis of Presentations

     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, 2000 are not necessarily
indicative of the results to be expected for any subsequent quarter or for the
entire fiscal year ending December 31, 2000. These condensed consolidated
financial statements should be read in conjunction with the financial statements
and notes thereto for the year ended December 31, 1999, included in our Annual
Report on Form 10-K for the year ended December 31, 1999.

2.      Net 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 earning
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 1999, 395,700 options to purchase our common stock were granted.
During the first half of 2000, 592,890 options to purchase our common stock were
granted.

     Net loss applicable to common shareholders during the quarter and six
months ended June 30, 2000 includes certain one-time and recurring adjustments
included in the loss per share computation relating to the $15 million
convertible preferred stock private placement with Thomas Weisel Capital
Partners L.P., which closed on February 23, 2000. The private placement provides
funds for the development of Trading Partner Resolution Networks, to increase
the market presence of Optika's Acorde family of products, and to aggressively
expand the North American sales force. The net loss per share 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. The accumulating dividend and the discount
allocation will continue until such time as the preferred stock is converted to
common stock or redeemed.

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

<TABLE>
<CAPTION>

                                                        Quarter Ended       Six Months Ended
                                                           June 30,             June 30,
                                                      -----------------     -----------------
                                                        1999      2000        1999      2000
                                                        ----      ----        ----      ----
<S>                                                  <C>       <C>         <C>       <C>
Loss Per Share:
  Net loss applicable to common shareholders...      $   (428) $ (3,226)   $   (708) $ (10,731)
  Basic weighted average common shares
   outstanding.................................         7,176     8,050       7,164      7,799
  Basic net loss per common share..............      $  (0.06) $  (0.40)   $  (0.10) $   (1.38)
Effect of Dilutive Securities:
  Options and warrants.........................            --        --          --         --
  Diluted weighted average common shares
   outstanding.................................         7,176     8,050       7,164      7,799
  Diluted net loss per common share............      $  (0.06) $  (0.40)   $  (0.10) $   (1.38)
</TABLE>

In 2000 and 1999, all options and warrants were excluded from the dilutive stock
calculation because of their antidilutive effect on net loss per share.

3.      Preferred Stock Transaction

     On February 23, 2000 we completed the sale of 731,851 shares of Series A
Convertible Preferred Stock (the "Preferred Stock") and Warrants (the "Warrants)
to purchase an aggregate of 307,298 shares of our common stock to an investor
group consisting principally of Thomas Weisel Capital Partners and affiliated
entities ("TWCP") for an aggregate purchase price of $15 million. The Preferred
Stock has a $0.001 par value; 731,851 shares authorized, issued and outstanding
at June 30, 2000; and an aggregate liquidation value of $15.4 million at June
30, 2000. The Preferred Stock can only be called for redemption if, after one
year, our common stock trades above $40.992 per share for a specific period of
time. Until then, it accrues a cumulative dividend of eight percent (8%) per
annum. The Preferred Stock is subject to mandatory redemption provisions on the
eighth anniversary of the issuance for cash equal to the stated liquidation
preference plus accumulated unpaid dividends. The Preferred Stock is convertible
to common stock at the holder's option based upon the conversion formula as
defined in the Preferred Stock Certificate of Designation. In connection with
the private placement we also are required to make various representations and
warranties to TWCP and are obligated to indemnify them in connection with any
breach of such representations and warranties up to a maximum of $15 million for
a period of one year, with certain exceptions and limitations. We also assumed
an obligation to register the shares of our common stock underlying the
Preferred Stock and Warrants.

4.      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.


<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 is a provider of business-to-business electronic commerce solutions.
By leveraging the technology of the Internet, our software bridges the gap
between paper and electronic commerce across the enterprise and throughout
supply chains.

    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, or Original Equipment Manufacturer, or OEMs, 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 and OEMs. For 1999, approximately 71% of our license
revenues were derived from our APs, approximately 3% of our license revenues
were derived from sales by OEMs and the remaining license fees were derived from
direct sales. However, no individual AP accounted for more than 10% of our total
revenues. For the years ended December 31, 1997, 1998 and 1999, we generated
approximately 23%, 24% 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 and OEMs, which are responsible for the installation
and integration of the software for their customers, enter into sales agreements
with the end-user, and purchase 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 OEMs and the end-user, and
the APs and OEMs then purchase maintenance services directly from us. For fiscal
years 1998 and 1999, approximately 60% and 53%, respectively, of our total
revenues were derived from software licenses and approximately 28% and 33%,
respectively, of our total revenues were derived from maintenance agreements.
For fiscal years 1998 and 1999, other revenues, which are comprised of training,
consulting and implementation services, and third-party hardware and software
products, accounted for 12% and 14%, respectively, of our total revenues.

     We adopted the provisions of Statement of Position 97-2, "Software
Revenue Recognition" (SOP 97-2), for transactions entered into after January 1,
1998. Under SOP 97-2, 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 (VSOE) use 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. We adopted
SOP 98-9 "Modification of SOP 97-2, Software Revenue Recognition, with Respect
to Certain Transactions", which amended SOP 97-2 on January 1, 2000. SOP 98-9
requires the "residual approach" for multiple element arrangements when VSOE
exists for the undelivered elements such as maintenance but is not known for the
delivered elements. The adoption of SOP 98-9 had no material impact on our
financial position or results of operations.

    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 or permits end-users to return the software in the
event that errors cannot be corrected. We have not experienced significant
software returns to date.

    Based on our 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 research and
development costs have been expensed as incurred.

Revenues

     Total revenues decreased 18% from $10.1 million, for the six months ended
June 30,1999, to $8.3 million, for the six months ended June 30, 2000. Total
revenues decreased 9% from $5.0 million for the quarter ended June 30, 1999 to
$4.5 million for the quarter ended June 30, 2000.

     Licenses. License revenues decreased 45% from $5.2 million, during the six
months ended June 30, 1999, to $2.9 million, for the six months ended June 30,
2000, and decreased 27% from $2.3 million during the quarter ended June 30, 1999
to $1.7 million for the quarter ended June 30, 2000. License revenues
represented 51% and 35% of the total revenues for the six months ended June
30,1999 and 2000, respectively and represented 47% and 38% of the total revenues
for the quarter ended June 30, 1999 and 2000, respectively. The decrease in
license revenues during the second quarter of 2000 is primarily a result of our
focus on the launching of the Optika Acorde family of products and the events
surrounding its promotion. License revenues generated outside of the United
States accounted for approximately 18% of the Company's revenues for the six
months ended June 30, 1999, compared to 17% for the same period in 2000, and 23%
and 12% for the quarter ended June 30,1999 and 2000, respectively. The decrease
in international revenues as a percentage of total revenue is a result of the
slow European first and second quarter sales.

     Maintenance and Other. Maintenance revenues, exclusive of other revenue,
increased 16% from $3.3 million during the six months ended June 30, 1999, to
$3.8 million for the six months ended June 30, 2000 and increased 10% from $1.7
million during the quarter ended June 30, 1999, to $1.9 million for the quarter
ended June 30, 2000. Maintenance revenue represented 33% and 46% of the total
revenues for the six months ended June 30,1999 and 2000, respectively and 35%
and 42% of the total revenues for the quarter ended June 30, 1999 and 2000,
respectively. This increase was primarily a result of an increase in the number
of installed systems. Other revenue, consisting primarily of consulting
services, training and consulting fees represented 16% and 19% of total revenues
for the six months ended June 30,1999 and 2000, respectively, and 19% and 20% of
total revenues for the quarter ended June 30, 1999 and 2000, respectively. The
increase in other revenue as a percentage of total revenue was primarily due
decreased license revenue in the first half of 2000.

Cost of Revenues

     Licenses. Cost 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 $290,000, or 6%
of license revenues, to $238,000 or 8% of license revenues, for the six months
ended June 30, 1999 and 2000 respectively, and decreased from $142,000 or 6% of
license revenues to $ 96,000 or 6% of license revenues for the quarter ended
June 30, 1999 and 2000, respectively. The decrease in absolute dollar cost of
licenses was attributable to the decreased license revenue.

     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 increased in absolute dollars
from $1.9 million or 39% of maintenance and other revenues to $2.3 million or
42% of maintenance and other revenues for the six months ended June 30, 1999 and
2000, respectively. Cost of maintenance and other increased in absolute dollars
$975,000 or 37% of maintenance and other revenues to $1.2 million or 43% of
maintenance and other revenues for the quarters ended June 30, 1999 and 2000,
respectively. The absolute dollar increase in cost of maintenance and other is
primarily a result of the direct costs associated with the increased number of
service and consulting 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 increased from $5.4 million, or 54% of total revenues, for the six
months ended June 30, 1999 to $6.4 million, or 76% of total revenues, for the
six months ended June 30, 2000. Sales and marketing expenses increased from $2.7
million, or 55% of total revenues, for the quarter ended June 30, 1999 to $3.4
million, or 77% of total revenues, for the quarter ended June 30, 2000. The
increase in sales and marketing expenses is primarily attributable to costs
associated with the promotion of the Optika Acorde family of products and the
increase of sales staff in the United States. We anticipate that sales and
marketing expenses will increase in absolute dollars in future quarters as we
continue to build our North American sales staff.

     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 increased from $2.7 million, or 26% of total
revenues, for the six months ended June 30, 1999 to $4.2 million, or 51% of
total revenues, for the six months ended June 30, 2000. Research and development
expenses increased from $1.3 million, or 26% of total revenues, for the quarter
ended June 30, 1999 to $2.2 million, or 48% of total revenues, for the quarter
ended June 30, 2000. The absolute dollar increase in research and development is
primarily the result of the continued cost to develop the Optika Acorde family
of products. We anticipate that research and development expenses will continue
at 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 increased from $980,000, or 10% of total revenues for
the six months ended June 30, 1999 to $1.2 million or 14% of total revenues for
the six months ended June 30, 2000. General and administrative expenses
increased from $491,000, or 10% of total revenues, for the quarter ended June
30, 1999 to $534,000 or 12% of total revenues, for the quarter ended June 30,
2000. For the six months ended June 30, 2000 the increase in general and
administrative expenses as compared to the same period in 1999 was primarily due
to costs associated with hiring and retaining staff, legal and accounting costs
associated with revising and updating certain employee benefit plans and certain
tax - related charges related to the exercise of options under our non-qualified
stock option plan. We anticipate that these charges will decrease in future
quarters.

     Other Income, net. Other income, net consists primarily of interest earned
on our investing activities and foreign currency translation adjustments. Net
other income was $67,000 during the six months ended June 30, 1999 compared to
net other income of $316,000 during the six months ended June 30, 2000. Net
other income was $33,000 during the quarter ended June 30, 1999 compared to net
other income of $216,000 during the quarter ended June 30, 2000, primarily as a
result of 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 foreseeable
future periods. Our realization of the recorded net deferred tax assets is
dependent on future taxable income and therefore, we cannot assure you that such
benefits will be realized.

Liquidity and Capital Resources

     Cash and cash equivalents at June 30, 2000 were $8.2 million, increasing by
approximately $4.9 million from December 31, 1999. The increase in cash and cash
equivalents is primarily due to the proceeds from the preferred stock
transactions offset by the 2000 first quarter net loss and capital expenditures
associated with additional computer equipment.

     For the six months ended June 30, 1999, net cash used by operating
activities was $70,000 compared to net cash used by operating activities of $4.1
million for the six months ended June 30, 2000. Cash used by operating
activities for the six months ended June 30, 2000 is primarily due to the first
and second quarter losses.

     Cash used by investing activities was $3.1 million for the six months ended
June 30, 1999 compared to cash used of $7.1 million for the six months ended
June 30, 2000. The cash used in investing activities is primarily due to the
purchase of marketable securities during the first half of 2000.

     Cash provided by financing activities was $134,000 for the six months ended
June 30, 1999. Cash provided by financing activities was $16.1 million for the
six months ended June 30, 2000. Cash provided by financing activities resulted
primarily from proceeds from the private placement of preferred stock and
warrants for approximately $14.7 million of proceeds, net of issuance costs.

     At June 30, 2000, our principal sources of liquidity included cash and
short-term investments of $18.6 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, 2000, 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 its 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.

Year 2000

     We have experienced no significant "Year 2000" issues in either our own
products or internal systems. Although, we are not aware of any "Year 2000"
issues, now or in the future, which could have a material adverse effect on us,
such problems may not be evident now, but may become evident in the future

Business Risks

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

     Fluctuation in our operating results may cause the price of our common
stock to decline. Our sales and other operating results have varied
significantly in the past and will likely vary significantly in the future as a
result of factors such as:

o The size and timing of significant orders and their fulfillment

o Customer acceptance of Application Service Provider, or ASP, operations and
our ability to successfully create and profitably operate an ASP operation,
with which we have very limited prior experience

o Rate of rollout, demand and customer adoption of our product offerings,
including, in particular, our products and solutions used to establish
Trading Partner Resolution Networks, or TPRNs

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

o Changes in pricing policies by us or our competitors

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

o Changes in the level of our operating expenses

o Warranty and customer support expenses

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

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

o Product life cycles

o Software bugs and other product quality problems

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

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

o Changes in our business strategy

o Changes in accounting pronouncements

o The level of international expansion and foreign currency exchange rates

o Seasonal trends

     A significant portion of our revenues have been, and we believe will
continue to be, derived from a limited number of orders, and the timing of such
orders and their fulfillment have caused, and are expected to continue to cause,
material fluctuations in our operating results. Revenues are also difficult to
forecast because the markets for our products are rapidly evolving, and our
sales cycle and the sales cycle of our APs and OEMs 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.

     Our business will suffer if we fail to successfully adapt our product
offerings to the ASP delivery model. In February 2000, we announced our
intentions to distribute our product through an ASP delivery model, as well as
our traditional distribution channels. We have limited experience in developing,
selling and delivering products for an ASP delivery model. Further, customers
may not accept the ASP model of distribution. Our inability, for technological
or other reasons, to architect and to configure, in a timely manner, the
products that allow their profitable use in an ASP model or customers' failure
to accept the ASP delivery model, would harm our business and results of
operations.

     The success of our business depends upon our ability to hire, retain and
integrate highly skilled personnel. 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 expand, train
and manage its 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.

     Any discontinuation or disruption of our relationships with APs and OEMs or
competition from them could adversely affect our results of operations and
financial condition. 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 and OEMs 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
not 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 and OEMs. Our OEMs
occasionally compete with our APs and us. Selling through indirect channels may
also hinder our ability to forecast sales accurately, evaluate customer
satisfaction, provide quality service and support or recognize emerging customer
requirements.

     Our sales strategy may not be successful. 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. Our strategy of marketing our
products directly and indirectly (through APs and OEMs) may result in
distribution channel conflicts. To the extent that Optika, APs and OEMs target
the same customers, they may come into conflict with each other. Channel
conflict could materially and adversely affect our relationship with existing
APs and OEMs, or adversely affect our ability to attract new APs and OEMs. Our
loss of a number of our more significant APs or OEMs, our inability to obtain
qualified new APs or OEMs, or to obtain access to the channels of distribution
offering software products to our targeted markets, or the failure of APs or
OEMs to pay us for our software, could have a material adverse effect on our
business and results of operations.

     Our business will suffer if we fail to develop and successfully introduce
new and enhanced products to meet the changing needs of our customers. 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. Our 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.

     We rely on third party licenses of software we incorporate into our
products. The unavailability of such licenses would adversely affect our
business and results of operations. 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 businessand 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.

     We have limited product offerings and our business will suffer if demand
for our products declines or fails to develop as we expect. Optika Acorde
(formerly Optika eMedia) accounts for substantially all of our current license
revenue. Our future financial performance will depend in general on the
continued transition from imaging software to e-business, and in particular on
the successful development, introduction and customer acceptance of new and
enhanced versions of our existing software product offerings, particularly our
recently announced TPRN products. Such markets, primarily the market for our
TPRN products, 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. If the e-business software market grows more
slowly than we currently anticipate, our business would be materially and
adversely affected. In addition, when TPRN products constitute a greater share
of our revenues, we will become increasingly subject to many of the risks faced
by companies that are dependent on the growth of the Internet. These risks
include, but are not limited to, the possibility that the Internet will fail to
achieve broad acceptance as a business-to-business electronic commerce medium, a
relatively new and unproven business model, our ability to anticipate and adapt
to a rapidly developing market, and that many well-financed Internet companies
may seek to enter our market niche. The rollout of the TPRN products will
require us to become proficient in areas such as becoming an application service
provider, which are unfamiliar to us. We may not be successful in launching our
TPRN products, and we may encounter unexpected delays or costs in such rollout,
and any such failures could have a material adverse effect on our business and
results or operations.

     Delays in the lengthy and complex sales and implementation cycles of our
customers could adversely affect our results of operations and our business. The
license of our software products is typically an executive-level decision by
prospective end-users, and generally requires us and our APs and OEMs 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.

     Intense competition for our product offerings may result in our price
reductions, reduced gross margins and loss of market share. 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 TPRN 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 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 e-business
market, 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 is likely to 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.

    Our competitors have significantly greater resources than we do. We may not
have the resources necessary to successfully compete in our market. 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. Successful new product introductions or enhancements by our
competitors could cause a significant decline in 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.
We may not have sufficient resources to make such investments and we may not be
able to make the technological advances necessary to be competitive.

     Expansion of our operations has resulted and will continue to result in
significant expenditures and strains on our resources, which may adversely
affect our results. We have increased and intend to continue to increase the
scale of our operations, which creates significant expenditures. The increased
scale of operations has resulted and will result in significantly higher
operating expenses, which are expected to continue to increase significantly in
the future. If our revenues do not correspondingly increase, our results of
operations would be materially and adversely affected. Expansion of our
operations may impose a significant strain on our management, financial and
other resources. In this regard, any significant revenue growth will depend in
significant part upon expansion of our marketing, sales and AP support
capabilities. This expansion will continue to require significant expenditures
to build the necessary infrastructure. Our efforts to expand our marketing,
sales and customer support may not be successful and may not result in
additional revenues or profitability in any future period.

     We may not be able to adequately protect our intellectual property and we
may be exposed to infringement claims by third parties. 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.

     We rely upon and intend to increase our international sales activities,
which subjects us to additional business risks. Sales outside the United States
accounted for approximately 23%, 24% and 17% of our revenues in 1997, 1998 and
1999, respectively. We intend to expand our international operations,
third-party distributor relationships and hiring of additional sales
representatives, each of which involves a significant investment of time and
resources. We may not be successful in expanding our international operations.
In addition, 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.

     Our products are complex and may contain defects that would lead to
increased costs, reduction of net revenues and damage to our reputation. 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.

     The price of our common stock has been and is likely to continue to be
highly volatile. The market price of our shares of common stock is likely 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

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.

     Our existing stockholders could take actions that are not in your best
interest. Holders of our Series A 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, 2000, approximately 26.4% 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.

     Provisions in our charter documents and Delaware law could prevent or delay
a change in control of our company, even if such a change in control would be
beneficial to the stockholders. 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.

     Risks Associated with Recently Completed Financing. On February 23, 2000 we
completed the sale of $15.0 million of Series A Convertible Preferred Stock and
warrants to purchase our common stock to an investor group consisting
principally of Thomas Weisel Capital Partners and affiliated entities, or TWCP.
The preferred stock can only be redeemed by us if, after one year, our stock
trades above a specified price level for a period of time. The Preferred Stock
is subject to mandatory redemption provisions on the eighth anniversary of the
issuance for cash equal to the stated liquidation preference plus accumulated
unpaid dividends. Until then, it accrues a cumulative dividend of eight percent
(8%) per annum. In connection with the financing, we were also required to make
various representations and warranties to TWCP and are obligated to indemnify
them in connection with any breach of such representations and warranties up to
a maximum of $15 million for a period of one year, with certain exceptions and
limitations. We also assumed an obligation to register the shares of our common
stock underlying the preferred stock and the warrants.

ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of June 30, 2000 we had $10.4 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, 2000 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 10, 2000. At
such meeting the following actions were voted upon:

a.    Election of  Directors

           Nominees               Number of Votes For       Withhold Authority
James E. Crawford                      6,775,128                  469,925
Mark K. Ruport                         6,777,428                  467,625

b.    Approval of a series of Amendments to the 1994 Stock Option / Stock
Issuance Plan

          Affirmative Votes         Negative Votes             Abstentions
             2,599,040                 1,392,718                   33,035

There were 3,220,260 broker non-votes for this proposal.

c.    Approval of the Company's 2000 Employee Stock Purchase Plan

          Affirmative Votes         Negative Votes             Abstentions
             3,929,122                    64,976                   30,695

There were 3,220,260 broker non-votes for this proposal.

d.    Ratification of KPMG LLP as the Company's independent accountants for
the fiscal year ending December 31, 2000

          Affirmative Votes         Negative Votes             Abstentions
             7,227,336                    15,830                    1,893


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.


<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)




              8/11/2000                             /s/   Mark K. Ruport
            -------------                 -------------------------------------
               (Date)                                   Mark K. Ruport
                                            President, Chief Executive Officer
                                                 and Chairman of the Board

              8/11/2000                             /s/ Steven M. Johnson
            -------------                 -------------------------------------
               (Date)                                   Steven M. Johnson
                                         Chief Financial Officer, Vice President
                                          Finance and Administration, Secretary
                                               and Chief Accounting Officer