Netobjects Inc – ‘10-Q/A’ for 12/31/00

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Amendment to Quarterly Report   —   Form 10-Q
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 1: 10-Q/A      Amendment to Quarterly Report                         22    139K 

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------

 Form 10-Q/A

Amendment #1

(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 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: 0-25427

--------------

NETOBJECTS, INC.
(Exact name of Registrant as specified in its charter)

94-3233791
(I.R.S. Employer Identification No.)

(650) 482-3200
 (Registrant's Telephone Number)

Delaware
(State or Other Jurisdiction of Incorporation or Organization)

 301 Galveston Drive, Redwood City, California 94063
(Address of Principal Executive Offices)

NOT APPLICABLE
 (Former Name, Former Address, and Former Fiscal Year,
If Changed Since Last Report) 

----------------

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___                                  

As of January 31, 2001,  the  Registrant had  outstanding  31,662,672  shares of
common stock, $.01 par value.                                                   

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                                               TABLE OF CONTENTS                                               

                                                                                                               
Part I: Financial Information                                                                                  

Item 1.  Financial Statements (unaudited)                                                                      

         Condensed Consolidated Balance Sheets at December 31, 2000 and September 30, 2000...................1 

         Condensed Consolidated Statements of Operations and Comprehensive Loss for the three-months           
         ended December 31, 2000 and December 31, 1999.......................................................2 

         Condensed Consolidated Statements of Cash Flows for the three-months                                  
         ended December 31, 2000 and December 31, 1999.......................................................3 

         Notes to  Condensed Consolidated Financial Statements...............................................4 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations...............8 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.........................................19 

Part II: Other Information                                                                                     

Item 4.  Submission of Matters to a Vote of Security Holders................................................20 

Item 6.  Exhibits and Reports on Form 8-K...................................................................20 

         Signatures.........................................................................................20 


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                                                         PART I. FINANCIAL INFORMATION                                

ITEM 1. FINANCIAL STATEMENTS                                                                                          


                                NETOBJECTS, INC.                                                                      
                                AND SUBSIDIARIES                                                                      
                      Condensed Consolidated Balance Sheets                                                           
                        (In thousands, except share data)                                                             
                                                                                 December 31, 2000  September 30, 2000
                                                                                 -----------------  ------------------
                                        Assets                                                                        

                                                                                                                      
Cash and cash equivalents                                                              $   2,848        $   8,323     
Accounts receivable, net of allowance for doubtful accounts of $2,818                                                 
  and $1,315 at December 31, 2000 and September 30, 2000, respectively                     2,938            5,647     
IBM trade receivable                                                                         273              250     
Prepaid expenses                                                                           2,777            2,845     
Note receivable                                                                            1,500             --       
Other current assets                                                                         916              636     
                                                                                       ---------        ---------     
       Total current assets                                                               11,252           17,701     

Property and equipment, net                                                                2,369            2,700     
Intangible assets, net of accumulated amortization of $10,809 and $8,531 as                                           
  of December 31, 2000 and September 30, 2000, respectively                                8,291           10,690     
Other long-term assets                                                                     1,968            1,523     
                                                                                       ---------        ---------     
Total Assets                                                                           $  23,880        $  32,614     
                                                                                       =========        =========     

                       Liabilities & Stockholders' Equity                                                             

Accounts payable                                                                       $   2,057        $     944     
Accrued compensation                                                                       1,035            1,337     
Other accrued liabilities                                                                  4,220            3,900     
IBM note payable                                                                             750             --       
Advance on sale of Enterprise division                                                     4,000             --       
Deferred revenue                                                                           2,153            2,434     
Current portion of capital lease obligations                                                 141              168     
                                                                                       ---------        ---------     
       Total current liabilities                                                          14,356            8,783     
Capital lease obligations, less current portion                                               28               57     
                                                                                       ---------        ---------     
Total liabilities                                                                         14,384            8,840     

Stockholders' Equity:                                                                                                 
Common stock,  $0.01 par value.  120,000,000 and 60,000,000 shares authorized                                         
  as of December 31, 2000 and September 30, 2000, respectively                                                        
   31,687,043 and 31,632,125 shares issued and outstanding at                                                         
  December 31, 2000 and September 30, 2000, respectively                                     316              316     
Treasury Stock                                                                               (26)            --       
Additional paid-in capital                                                               132,006          132,007     
Notes receivable from stockholders                                                          (598)            (598)    
Deferred stock-based compensation                                                           (254)            (423)    
Accumulated other comprehensive losses                                                       (97)             (89)    
Accumulated deficit                                                                     (121,851)        (107,439)    
                                                                                       ---------        ---------     
       Total stockholders' equity                                                          9,496           23,774     
                                                                                       ---------        ---------     
Total liabilities and stockholders' equity                                             $  23,880        $  32,614     
                                                                                       =========        =========     

<FN>                                                                                                                  
                   The  accompanying   notes  are  an  integral  part  of  these                                      
condensed consolidated financial statements.                                                                          
</FN>                                                                                                                 

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                                NETOBJECTS, INC.                                                     
                                AND SUBSIDIARIES                                                     
     Condensed Consolidated Statements of Operations and Comprehensive Loss                          
                 (In thousands, except share and per share data)                                     


                                                                   Three months ended December 31,   
                                                                ------------------------------------ 
                                                                     2000                   1999     
                                                                ------------------------------------ 
Revenues:                                                                                            
                                                                                                     
     Software license fees and online revenues                  $      1,124            $      4,637 
     Service revenues                                                    116                      87 
     Software license fees from IBM                                      273                   1,122 
                                                                ------------            ------------ 
          Total revenues                                               1,513                   5,846 
                                                                ------------            ------------ 

Cost of revenues:                                                                                    
     Software license fees and online revenues                         1,920                   1,846 
     Service revenues                                                    510                     255 
                                                                ------------            ------------ 
          Total cost of revenues                                       2,430                   2,101 
                                                                ------------            ------------ 

Gross profit                                                            (917)                  3,745 
                                                                ------------            ------------ 

Operating expenses:                                                                                  
     Sales and marketing                                               3,595                   4,698 
     Research and development                                          2,668                   2,590 
     General and administrative                                        1,278                   1,382 
     Amortization of intangible assets                                 2,399                   2,017 
     Terminated investment activities                                    914                    --   
     Stock-based compensation                                            116                     206 
                                                                ------------            ------------ 
          Total operating expenses                                    10,970                  10,893 
                                                                ------------            ------------ 

Operating loss                                                       (11,887)                 (7,148)

Interest income (expense)                                                 58                     375 
                                                                ------------            ------------ 
     Loss before income taxes                                        (11,829)                 (6,773)
                                                                ------------            ------------ 

Income taxes                                                              12                      12 
                                                                ------------            ------------ 

Net loss from continuing operations                             $    (11,841)           $     (6,785)
Loss from discontinued operations of Enterprise division        $     (2,571)           $       (913)
Net loss                                                        $    (14,412)                 (7,698)
                                                                ------------            ------------ 
Translation adjustment                                                    (8)                    (11)
                                                                ------------            ------------ 
     Comprehensive loss                                         $    (14,420)           $     (7,709)
                                                                ============            ============ 

Basic and diluted net loss per share                            $      (0.46)           $      (0.29)
                                                                ============            ============ 

Shares used to calculate basic and diluted net loss per share     31,632,125              26,829,265 
                                                                ============            ============ 

<FN>                                                                                                 
The accompanying notes are an integral part of these condensed consolidated financial statements.    
</FN>                                                                                                

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                                NETOBJECTS, INC.                                                                        
                                AND SUBSIDIARIES                                                                        
                 Condensed Consolidated Statements of Cash Flows                                                        
                                 (in thousands)                                                                         

                                                                                         Three months ended December 31,
                                                                                         -------------------------------
                                                                                              2000             1999     
                                                                                           ---------------------------  
                                                                                                                        
Cash used in operating activities:                                                                                      
Net loss from continuing operations                                                         $(11,841)        $ (6,785)  

Net loss from discontinued operations                                                         (2,571)            (913)  
Adjustments to reconcile net loss to net cash used in operating activities:                                             
     Depreciation                                                                                331              430   
     Amortization of intangible assets                                                         2,399            2,016   
     Amortization of deferred stock-based compensation                                           116              206   
     Changes in allowance for doubtful accounts and returns on accounts receivable             1,503             (284)  
     Changes in operating assets and liabilities:                                                                       
         Accounts receivable                                                                   1,183           (3,189)  
         Other receivables                                                                      (275)            (200)  
         Prepaid expenses                                                                         69             (311)  
         Other current assets                                                                     (5)            --     
         Other long term assets                                                                 (446)            --     
         Accounts payable                                                                      1,113             (524)  
         Accrued compensation                                                                   (302)             200   
         Other accrued liabilities                                                               320            1,103   
         Deferred revenue                                                                       (281)             293   
         Interest and income taxes payable                                                      --                (44)  
                                                                                            --------         --------   
              Net cash used in operating activities                                           (8,687)          (8,002)  
                                                                                            --------         --------   

Cash provided by (used in) investing activities:                                                                        
     Purchases of property and equipment                                                        --               (455)  
     Cash paid for Sitematic Corporation, net of cash acquired                                  --             (1,297)  
     Notes receivable issued to MyComputer.com                                                (1,500)            --     
     Proceeds from sale of short-term investments                                               --              1,379   
                                                                                            --------         --------   
              Net cash used in investing activities                                           (1,500)            (373)  
                                                                                            --------         --------   

Cash provided by financing activities:                                                                                  
     Proceeds from short-term borrowings                                                         750             --     
     Proceeds from advance on sale of Enterprise division                                      4,000             --     
     Payment on capital lease obligations                                                        (56)             (86)  
     Proceeds from issuance of common stock, net of issuance costs                              --               (110)  
     Repurchases of common stock                                                                  26             --     
                                                                                            --------         --------   
              Net cash provided by (used in) financing activities                              4,720             (196)  
                                                                                            --------         --------   
Effect of exchange rate changes on cash                                                                                 
                                                                                                  (8)             (11)  
Net decrease in cash                                                                          (5,475)          (8,582)  
Cash and cash equivalents at beginning of period                                               8,323           23,623   
                                                                                            --------         --------   
Cash and cash equivalents at end of period                                                  $  2,848         $ 15,041   
                                                                                            ========         ========   

Supplemental disclosures of cash flow information:                                                                      
           Noncash  investing  and  financing activities:                                                               
              Equipment recorded under capital leases                                       $   --           $    478   
              Issuance of common stock for acquisition                                      $   --           $ 13,478   
              Issuance of stockholders note receivable                                      $   --           $    200   
              Deferred stock-based compensation on cancellation of stock options            $     53         $   --     

<FN>                                                                                                                    
     The accompanying notes are an integral part of these condensed consolidated financial                              
                                      statements.                                                                       
</FN>                                                                                                                   

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       NETOBJECTS, INC. AND SUBSIDIARIES
      Notes to Consolidated Financial Statements

1.       Description of the Business                                            

         The Company  was  incorporated  in  Delaware  on November  21, 1995 and
became a majority-owned subsidiary of IBM on April 11, 1997. In fiscal 1998, the
Company  changed its fiscal year end from  September 30 to the Saturday  nearest
September 30. For presentation  purposes,  the consolidated financial statements
and notes refer to the calendar month end.                                      

         On May 7, 1999, the Company  completed its initial public offering.  At
the time, all series of convertible  preferred shares outstanding were converted
to common stock.                                                                

         On October 4, 1999 NetObjects acquired Sitematic Corporation and issued
common stock that brought IBM's ownership to less than 50%.                     

         On July 14, 2000,  NetObjects acquired Rocktide  Corporation and issued
common stock that brought IBM's ownership to 48%.                               

         NetObjects provides software, solutions, and services that enable small
businesses to build,  deploy,  maintain websites online, and conduct e-business;
and  enable  large  enterprises  to  effectively  create  and  manage  corporate
intranets (See Note 6).                                                         

2.       Summary of Significant Accounting Policies                             

Basis of Presentation of Interim Financial Statements         

         The accompanying  unaudited condensed consolidated financial statements
of NetObjects,  Inc. and subsidiaries  ("the Company" or "NetObjects") have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Rule 10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
notes  required  by  generally  accepted  accounting   principles  for  complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring  adjustments)  considered  necessary for a fair presentation
have been included. Operating results for the three-month period ending December
31, 2000 are not necessarily  indicative of the results that may be expected for
the fiscal year ending September 30, 2001. For further information, refer to the
audited  financial  statements  and footnotes  thereto for the fiscal year ended
September 30, 2000  included in the  Company's  Annual Report on Form 10-K filed
December 29, 2000.                                                              

Net Loss per Share                                            

         Basic net loss per share is computed using the weighted  average number
of outstanding shares of common stock,  excluding shares of common stock subject
to repurchase. Diluted net loss per share is computed using the weighted-average
number of shares of common  stock  outstanding  and,  when  dilutive,  shares of
restricted  common  stock  subject to  repurchase  and options  and  warrants to
purchase  common stock using the treasury  stock  method,  and from  convertible
securities using the  if-converted  basis. All potential common shares have been
excluded  from the  computation  of diluted  net loss per share for all  periods
presented because the effect would have been anti-dilutive.                     

         Diluted  net loss per share for the  three-months  ended  December  31,
2000,  does not include the effect of  warrants  to purchase  336,528  shares of
common  stock  with a  weighted  average  exercise  price of $7.70,  options  to
purchase 9,729,017 shares of common stock with a weighted-average exercise price
of $7.40 per share,  or 33,262  shares of common  stock  issued  and  subject to
repurchase by the Company at a  weighted-average  price of $0.16,  because their
effects are anti-dilutive.                                                      

         Diluted  net loss per share for the  three-months  ended  December  31,
1999,  does not include the effect of warrants to purchase  4,562,737  shares of
convertible  preferred  stock with a weighted  average  exercise price of $7.46,
options to purchase  7,121,157  shares of common  stock with a  weighted-average
exercise  price of $7.15 per share,  or 36,040 shares of common stock issued and
subject  to  repurchase  by the  Company at a  weighted-average  price of $0.13,
because their effects are anti-dilutive.                                        

         At December 31, 2000, the Company had outstanding  warrants to purchase
253,195 shares of common stock with an exercise  price of $6.68,  that expire in
October 2003 and February 2004, respectively, and 83,333 shares of common stock 

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       NETOBJECTS, INC. AND SUBSIDIARIES
      Notes to Consolidated Financial Statements - Continued

     with an exercise  price of $10.80 and an expiration  date in December 2002.
outstanding warrants as of December 31, 2000 are held by IBM.         

         As of  December  31,  1999,  the Company  had  outstanding  warrants to
purchase  3,482,838 shares of common stock with an exercise price of $6.68, that
expire on October 8, 2003 and  February  18,  2004,  respectively,  and  864,850
shares of common 0 stock with an exercise price of $10.80 and  expiration  dates
between March 2000 and December 2000.                                           

Recent accounting pronouncements                              

         In December 1999, the Securities and Exchange  Commission  (SEC) issued
Staff  Accounting  Bulletin  (SAB) No. 101,  "Revenue  Recognition  in Financial
Statements,"  which provides  guidance related to revenue  recognition  based on
interpretations  and  practices  followed by the SEC and  requires  companies to
report any changes in revenue  recognition as a cumulative  change in accounting
principle at the time of implementation in accordance with Accounting Principles
Board Opinion No. 20,  "Accounting  Changes." The Company  anticipates  that the
adoption  of SAB No.  101 will  not  have a  material  impact  on its  financial
position,  results of operations  or cash flows.  The Company will adopt SAB No.
101 in the fourth quarter of fiscal 2001.                                       

3.       Balance Sheet Components                                               

         During the first quarter of fiscal 2000,  the Company loaned a total of
$1.875  million  to  MyComputer.com.  The loans were made  under  notes  bearing
interest  at the prime  rate and  maturing  on October  18,  2001.  The  Company
cancelled  $375,000 of this  indebtedness upon the termination of the agreement,
as provided by its terms. The remaining indebtedness, which totals $1.5 million,
will  convert  into My  Computer  preferred  stock  that is  issued in an equity
financing  of at least  $15.0  million  prior to October 18,  2001.  We have not
received notice from MyComputer of any such financing and cannot be assured that
MyComputer  will receive such  financing or be able to repay the notes issued to
us. As of December  31,  2000,  the  Company  deems the notes  receivable  to be
collectible.                                                                    

4.       Segment Information                                                    

         The Company conducted its business in two distinct segments: Enterprise
and Small Business Online.  The principal products of the Enterprise segment are
NetObjects  Collage and NetObjects  Authoring Server,  which are targeted toward
the large business  intranet market.  The Enterprise  segment is being sold, see
below. The principal  product of the Small Business Online segment is NetObjects
Fusion, which is targeted to small businesses that would like to establish a web
site or upgrade an  existing  site.  The  Company  uses a direct  sales force to
distribute  NetObjects  Authoring Server o domestically and through resellers in
international  markets. The Company sells h NetObjects Fusion through resellers,
distributors, and a dedicated web site.                                         

         The  Company's  Chief  Operating  Decision  Maker  (CODM)  is the Chief
Executive Officer. During the three months ended December 31, 2000 and 1999, the
CODM  received  only  revenue  information  on a  disaggregated  basis  for  the
Company's two segments.  All other operating information was prepared on a basis
consistent with the consolidated statement of operations.                       

   Revenue information for the Company's two segments is as follows:

                                                        [Enlarge/Download Table]
                   For the three month period ended                                        
                           December 31, 2000                                               

                                                                       Discontinued        
                                         Small Business & Online        Operations -       
                                                Markets              Enterprise Markets    
                                     ------------------------------------------------------
                                                                                           
Revenues:                                                                                  
     Domestic license and Online               $  370                   $ (190)            
     International license                        754                     (385)            
     Domestic service                             117                      282             
     International service                        --                        34             
     IBM license                                  273                      --              
                                     ------------------------------------------------------
Total Revenue                                  $1,513                   $ (259)            
                                     ======================================================

               In the Small Business & Online segment,  four customers accounted
for approximately 50.0% of the outstanding  accounts receivables at December 31,
2000.  There  were no  significant  customer  concentrations  in the  Enterprise
segment.                                                                        

         For the three  months ended  December 31, 2000,  revenues for the Small
Business & Online  segment were  concentrated  in the United  States and Europe,

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representing approximately $0.8 million and $0.7 million respectively. Sales for
the  Enterprise  segment  were  concentrated  in the United  States and  Europe,
representing approximately $90,000 and ($349,000), respectively.                

         As of  January  9,  2001,  NetObjects  agreed  to sell  the  Enterprise
Division  to Merant  Corporation  for $18  million in cash (See Note 6). For the
quarter ending December 31, 2000, the Enterprise Division has been included as a
discontinued  operation in the accompanying  condensed consolidated statement of
operations and comprehensive loss.                                              

                                                        [Enlarge/Download Table]
                        For the three month period ended                                          
                                December 31, 1999                                                 

                                                                                Discontinued      
                                                                                Operations -      
                                             Small Business & Online Markets  Enterprise Markets  
                                          --------------------------------------------------------
Revenues:                                                                                         
                                                                                                  
     Domestic license and Online                         $ 2,562                 $ 875            
     International license                                 2,260                   150            
     Domestic service                                       --                     600            
     International service                                  --                     272            
                                                           1,188                   166            
                                          --------------------------------------------------------
Total Revenue                                            $ 6,010                 $2,063           
                                          ========================================================

         In the Small  Business & Online  segment,  two customers  accounted for
approximately 38% of total revenue for the three months ended December 31, 1999.
There were no significant customer concentrations in the Enterprise segment.    

         For the three  months ended  December 31, 1999,  revenues for the Small
Business & Online  segment were  concentrated  in the United  States and Europe,
representing  approximately $3.7 million and $2.3 million,  respectively.  Sales
for the Enterprise  segment were  concentrated  in the United States and Europe,
representing approximately $1.4 million and $0.5 million, respectively.         

5.       Deferred stock-based compensation                                      

         The amortization of deferred employee stock-based compensation combined
with the expense associated with stock options granted to non-employees, relates
to the following items in the accompanying consolidated statements of operations
and comprehensive loss (in thousands):                                          

                                 Three months ended December 31,
                                   -----------------------------------------
                                   2000                 1999
                                   -----------------------------------------
Sales & marketing                          $  40                 $  53          
Research & development                        11                    28          
General & administrative                      65                   126          
                                   -----------------------------------------
                                 $ 116                 $ 206
                                   =========================================
6.        Subsequent Events                                                     

         In  December  2000,  the  Company  issued  a  promissory  note  to  IBM
Corporation  for $750,000 at an annual interest rate of 10%. The note was repaid
by the Company on January 2, 2001.                                              

         On  January  9,  2001,  the  Company  signed an  agreement  to sell the
Enterprise  Division  to  Merant  Corporation  for  $18  million  in  cash.  The
shareholders of NetObjects, Inc. approved the sale of the division on January 9,
2001.  As a  result  of the  sale  of the  Enterprise  division,  the  financial
statements  for the  first  quarter  of fiscal  year  2001 and the prior  period
reflect the Company's Enterprise division as a discontinued operation.          

                                                        [Enlarge/Download Table]
         The  Enterprise  division's  results  from  operations  for the periods                            
presented are as follows:                                                                                   

                                                                   Three months ended December 31,          
                                                                  2000                        1999          
                                                         ----------------------   ------------------------- 
                                                                                                            
                  Revenues                                          $      (259)                 $    2,063 
                  Cost of revenues                                          491                       1,086 
                                                         ----------------------   ------------------------- 
                  Gross Profit (Loss)                                      (749)                        977 
                  Sales and marketing                                     1,336                       1,250 
                  Research and development                                  486                         640 
                                                         ----------------------   ------------------------- 
                  Total operating expenses                                1,822                       1,890 
                                                         ----------------------   ------------------------- 
                  Net loss                                          $    (2,571)                 $     (913)
                                                         ======================   ========================= 

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         The sale is  expected  to close by March 2001,  but  completion  of the
transaction  cannot be assured.  If the sale closes, it will result in a gain of
approximately $14 million,  net of tax, to the Company. The $18 million purchase
price  includes a $4 million  payment made by Merant in  December,  2000 for the
exclusive  option to purchase the NetObjects  Enterprise  division.  The advance
will be converted to a three-year software license if the sale is not completed.

         On  January  10,  2001,  the  Company  granted an  aggregate  amount of
3,025,600  stock options to all the  employees at an option price  equivalent to
the  market  price at the  close of the  business  day,  of  $0.468  per  share.
Executive  officers  of the  Company  received  a total  of  1,400,000  of these
options.  The initial grant of 1,512,800 stock options will vest with respect to
one quarter of the shares on July 10, 2001, and the remaining  shares vest in 18
equal  monthly  installments  thereafter,  subject to the  optionee's  continued
employment with the issuer. The remaining 1,512,800 stock options will vest with
respect to one quarter of the shares on  September  1, 2001,  and the  remaining
shares  vests  in 18  equal  monthly  installments  thereafter,  subject  to the
optionee's continued employment with the issuer.                                

         In January,  2001, NetObjects  restructured and eliminated 32 full-time
employees, excluding the Enterprise division sale, in order to transition to the
Company's new business model.  The Company will continue to focus on the sale of
Fusion and Matrix, and subsequent releases to small businesses.                 

         On January 29, 2001 and  February 9, 2001,  NetObjects  signed  secured
promissory  notes with IBM  Corporation in the aggregate  amount of $3.0 million
bearing 10% interest annually. Principal and interest are payable on the earlier
to occur  of (1) the  date on which  NetObjects  receives  payment  from  Merant
Corporation  for the sale of the  Enterprise  division (2) March 26, 2001 or (3)
when such amounts are declared due and payable by IBM Corporation upon default. 

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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  should  be read in  conjunction  with the  accompanying
condensed  consolidated  financial statements and notes included in this report.
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Any statements  contained  herein that are not statements of historical
fact may be  deemed  to be  forward-looking  statements.  Without  limiting  the
foregoing, the words "believes,"  "anticipates," "plans," "expects," and similar
expressions  are  intended  to  identify   forward-looking   statements.   These
forward-looking  statements include,  without  limitation,  statements about the
market  opportunity for web site building  software and services,  our strategy,
competition and expected expense levels,  and the adequacy of our available cash
resources.  Our actual results could differ  materially  from those expressed or
implied by these  forward-looking  statements  as a result of  various  factors,
including  the risk  factors  described  in Risk  Factors and  elsewhere in this
report.  We  undertake no  obligation  to update  publicly  any  forward-looking
statements for any reason,  even if new information  becomes  available or other
events occur in the future.                                                     

Overview                                                                        

         We provide  both  online  and  software  solutions  that  enable  small
businesses to build, deploy and maintain Internet web sites, and applications to
conduct e-business;  and enable large enterprises to create corporate intranets.
For fiscal year 2001,  our  revenues are derived  principally  from license fees
from our  software  products  and, to a lesser  extent,  from fees on a range of
services complementing these products. For small business and other customers we
license  NetObjects  Fusion and offer  online  services.  Our  online  business,
announced  in the quarter  ended  December  31, 1999 and  branded  GoBizGo,  was
established  with the acquisition of Sitematic  Corporation in October 1999. For
enterprise  customers we license  NetObjects Fusion and NetObjects  Collage.  In
July 2000, we acquired  Rocktide  Incorporated  and used their technology in our
new online  offering  branded  Matrix  platform.  In fiscal year 1999,  we began
providing training, consulting and design services to large enterprise customers
for creating corporate websites.                                                

         We earn revenues from software  license fees through direct licenses to
enterprises, through important strategic relationships such as our relationships
with IBM and through  our  indirect  (OEM)  distribution  channel.  Professional
services  and   maintenance   are  typically   sold  through  our  direct  sales
organization.  Most of our software license fees to date have come from licenses
to our indirect  distribution  channel and OEM resellers.  Our business model is
undergoing a major  transformation,  as we shift from a  predominantly  software
license  revenue  model,  to one driven  and  sustained  by online  subscription
revenue.  In  addition,  we will  continue to derive  revenue  from our flagship
Fusion product offering.                                                        

         We recognize  revenues from software  license fees upon delivery of our
software products to our customers,  net of allowances for estimated returns and
price protection, as long as we have no significant obligations remaining and we
believe that collection of the resulting receivable is probable. We provide most
of our  distributors  of software  products  with rights of return and record an
allowance for estimated future returns based upon our historical experience with
product  returns  by those  distributors.  Software  license  fees  earned  from
products  bundled with OEM resellers are recognized  upon  delivery,  if the OEM
vendor  commits to a quantity  and a fixed  price with no right of return or, if
the  volumes are not  committed,  then when the OEM  resellers  ship the bundled
products to their  customers.  We  recognize  service  revenues as services  are
rendered, or, if applicable, using the percentage-of-completion method. We defer
web-site hosting subscriptions, which typically are paid up-front, and recognize
these fees as revenue ratably over the term of the contract, which ranges from 1
to 48 months.  We defer  recognition  of  maintenance  fees,  paid primarily for
support and upgrades, upon receipt of payment and recognize the related revenues
ratably  over the term of the  contract,  which  typically  is 12 months.  These
payments generally are made in advance and are nonrefundable.                   

         We acquired  Sitematic  Corporation  in October  1999 in order to offer
on-line  website  building  and hosting  capabilities  to small  businesses.  In
December 1999, we combined our online resources with the Sitematic  offering and
launched GoBizGo.com. These combined services include website building software,
e-mail list management for communicating with customers,  domain name and search
engine registration,  auction export,  relevant content information for building
and maintaining an e-business online, and web hosting services.  Currently,  our
online  business  has two  sources of  revenue:  Subscriptions  for  web-hosting
services provided directly to small businesses;  and fees charged to our GoBizGo
business "partners" for establishing co-branded sites.                          

         In March 2000, we launched  NetObjects  Collage, an integrated platform
for the management of enterprise web applications.  NetObjects  Collage provides
an  integrated  platform that combines  collaboration  with content  management,
enterprise   integration,   and  dynamic   application   services.   We  provide
professional  services to help our customers install  NetObjects  Collage and to
train their personnel in the use and maintenance of corporate websites with this
product.  Due to the  transformation  of our business model, in January 2001, we

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signed an  agreement  to sell the  Enterprise  division,  including  our Collage
platform to Merant  Corporation for $18 million in cash, of which we received $4
million in December 2000.                                                       

         In July  2000,  we  acquired  privately-held  Rocktide,  Inc.  for $3.6
million in  NetObjects  common  stock and $0.4  million in cash.  Rocktide  is a
provider of the next generation  application  service  provider (ASP) technology
and wireless e-Services that help Web-enable businesses worldwide.  This product
technology  was  incorporated  in our newly branded Matrix  Platform,  which was
launched on October 30, 2000.                                                   

         Building  on the  success  of  NetObjects  Fusion and the growth of the
Internet,  we are  changing  the company  from a  traditional  desktop  software
company to an online services  provider.  In order to facilitate this transition
in January,  2001, we reduced the number of personnel and part-time employees by
32 and 4,  respectively.  The  financial  impact  of the  restructuring  will be
recognized in the second fiscal quarter of 2001.                                

         We have incurred substantial net losses in each fiscal period since our
inception  and, as of December  31,  2000,  had an  accumulated  deficit of $122
million.  Such net losses and accumulated  deficit  resulted  primarily from the
significant  costs incurred in the development of our products and  establishing
our brand identity,  marketing  organization,  domestic and international  sales
channels, and general and administrative infrastructure.  Our operating expenses
before goodwill  amortization and other non-cash charges  decreased in the first
quarter of fiscal  year 2001,  but we expect to  continue  to incur  substantial
losses from operations for the foreseeable future.                              

         Our future operating results must be considered in light of our limited
operating   history  and  the  risks,   expenses  and  difficulties   frequently
encountered by companies in early stages of development,  particularly companies
in rapidly  evolving  markets such as the market for web site building  software
and  services.  To achieve our new  business  objectives  we will need to do the
following:                                                                      

         |X|      Become a leading  supplier of B2B online services for partners
that reach small business;                  
         |X|      Continue to develop  successfully  new versions of our product
offerings;                                  
         |X|      Continue  to  be a  leading  provider  of  e-business  product
                  solutions for building Web sites,  and of online  services for
                  small  businesses;  |X|  Respond  quickly and  effectively  to
        competitive, market, and technological developments;
|X|      Control expenses;                                    
         |X|      Continue to attract,  train, and retain qualified personnel in
the competitive online market place: and    
         |X|      Maintain    existing    relationships    and   establish   new
                  relationships  with leading  Internet  hardware,  software and
         online companies, such as our existing OEM resellers.

         There  can  be  no   assurance   that  we  will   achieve   or  sustain
profitability.  Moreover,  particularly  as we  transition  to our new  business
model,  we may be unable to adjust spending in a timely manner to compensate for
both  anticipated  and  unanticipated  revenue  shortfalls.   Accordingly,   any
significant  shortfall  of  revenues in  relation  to  expectations  would cause
significant declines in our operating results.                                  

         Our total  revenues  fluctuate  from  quarter  to  quarter  due to many
factors , including new product and product upgrade introductions.  In addition,
we attempt to limit sales of existing  products during the months  preceding the
release of  upgraded  products in order to reduce  returns of the older  product
from some of our  direct  and  indirect  channel  resellers.  The  timing of our
recognition of revenues from  strategic  arrangements  with other  companies has
contributed  to  fluctuations  in revenues  from quarter to quarter.  During the
three months ended  December  31, 2000,  we had no IBM revenue from  services as
compared to previous  quarters and earned license fees and on-line  service fees
of $273,000 from IBM. We have no ongoing commitments from IBM that will generate
significant revenues for us.                                                    

         In addition to  fluctuations in revenues from IBM and other third party
distributors,  our revenues have become more variable due to factors such as our
decision to focus our sales  activities  on  NetObjects  Matrix  rather than OEM
licenses of NetObjects Fusion,  our planned sale of the Enterprise  Division and
the  uncertainty  of  generating   significant   revenues  from  small  business
subscriptions for online services.                                              

         Other factors  contributing  to  uncertainty  and  fluctuations  in our
quarterly  operating results seasonal demand for our products and services,  for
example,  annual  reductions  in sales in  Europe in July and  August,  costs of
litigation and intellectual  property  protection,  technical  difficulties with
respect to the use of our products,  general  economic  conditions  and economic
conditions  specifically related to businesses dependent upon the Internet.  The
promptness  with which sales and licensing  data,  used in  recognizing  product
royalties,  is  delivered  to us from third  parties  also may affect  quarterly
operating  results.  It often is difficult to forecast the effect these factors,
would have on our results of operations for any given fiscal quarter.           

         Due  to  the  foregoing  factors,  we  believe  that   period-to-period
comparisons  of  historical  operating  results  should not be relied upon as an

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indication of future  performance.  Also,  operating  results may fall below our
expectations  or the  expectations  of securities  analysts or investors in some
future quarter and our stock price may decline substantially.                   

Results of Operations                                                           

                                                        [Enlarge/Download Table]
The following  table sets forth  financial  data for the periods  indicated as a             
percentage of total revenues:                                                                

                                                              Three months ended December 31,
                                                              -------------------------------
                                                                2000                  1999   
                                                               ----------------------------  
Revenues:                                                                                    
                                                                                             
     Software license fees and online revenues                   74%                    79%  
     Service revenues                                             8                      2   
     Software license fees from IBM                              18                     19   
                                                               ----                   ----   
          Total revenues                                        100                    100   
                                                               ----                   ----   
Cost of revenues:                                                                            
     Software license fees and online revenues                  129                     33   
     Service revenues                                            34                      4   
                                                               ----                   ----   
          Total cost of revenues                                163                     37   
                                                               ----                   ----   
Gross profit                                                    (63)                    63   
                                                               ----                   ----   
Operating expenses:                                                                          
     Sales and marketing                                        238                     80   
     Research and development                                   176                     44   
     General and administrative                                  84                     24   
     Amortization of intangible assets                          156                     35   
     Terminated investment activities                            60                    --    
     Stock-based compensation                                     8                      4   
                                                               ----                   ----   
          Total operating expenses                              722                    187   
                                                               ----                   ----   
Operating loss                                                 (785)                  (124)  
Interest income (expense)                                         4                      6   
                                                               ----                   ----   
     Loss before income taxes                                  (781)                  (118)  
                                                               ----                   ----   
Income taxes                                                      1                    --    
                                                               ----                   ----   
     Net loss from continuing operations                       (782)                  (118)  
     Loss from discontinued operations                         (170)                   (14)  
                                                               ----                   ----   
     Net loss                                                  (952)                  (132)  
                                                               ====                   ====   

Three Months Ended December 31, 2000 and 1999                                   

         Revenues.  In  the  first  quarter  of  fiscal  year  2001,  NetObjects
restructured, downsized and signed an agreement to sell the Enterprise Division.
Our new  business  structure  focuses on small  businesses  and  eliminates  the
Enterprise  Division.  Total revenues from  continuing  operations  decreased to
approximately $ 1.5 million from approximately $5.8 million for the three months
ended December 31, 2000 and 1999, respectively.  The 74% decrease year-over-year
was primarily due to our  restructuring  and  substantially  reduced  NetObjects
license fees.                                                                   

         IBM software  license fees for the three months ended December 31, 2000
and 1999 were $0.3 million and $1.1 million,  respectively. We do not anticipate
that future sales to IBM will grow substantially going forward.                 

         Cost of Revenues.  Our cost of software  license fees includes the cost
of  product  media,  duplication,   manuals,   packaging  materials,   shipping,
technology  licensed  to us and  fees  paid to  third-party  vendors  for  order
fulfillment.  Since October 1999, our cost of software license fees has included
the cost of providing online hosting,  including royalty  payments.  Our cost of
software  license fees was  approximately  $1.9 million and $1.8 million for the
three-months ended December 31, 2000 and 1999, respectively.                    

         Our cost of  service  revenues  increased  to $0.5  million  from  $0.3
million in the three months ended December 31, 2000 and 1999, respectively.  The
increased cost was due to our staffing levels and a continued use of third party
contractors  in the three months ended December 31, 2000 as compared to the same
period in the previous fiscal year.                                             

         Sales and Marketing. Our sales and marketing expenses consist primarily
of salaries,  commissions,  consulting fees,  tradeshow  expenses,  advertising,
marketing  materials  and the cost of  customer  service  operations.  Sales and
marketing  expenses  were  approximately  $3.6  million and $4.7 million for the

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three months ended December 31, 2000 and 1999,  respectively,  representing 238%
and 80%, respectively, of total revenues for each period.                       

         Research and Development. Our research and development expenses consist
primarily of salaries and consulting  fees to support  product  development.  To
date,  we have expensed all research and  development  costs as we have incurred
them  because  we  generally  establish  the  technological  feasibility  of our
products  upon  completion  of  a  working  model.  We  have  not  yet  incurred
significant costs between the date of completion of a working model and the date
of general  release  of a  product.  We believe  that  continued  investment  in
research and development is critical to attaining our strategic  objectives and,
as a result, we expect research and development expenses to continue to increase
in dollar amounts from current levels.  Research and  development  expenses were
approximately  the same for the three months  ended  December 31, 2000 and 1999.
Research and  development  costs will continue to be a  significant  part of the
operating  expenses due to the focus on our new Matrix  software;  however,  the
spending levels should decrease because of the reduction in personnel.          

         General and  Administrative.  Our general and  administrative  expenses
consist  primarily of salaries and fees for professional  services.  General and
administrative  expenses were  approximately the same for the three months ended
December 31, 2000 and 1999.                                                     

         Amortization of intangible  assets.  Amortization of goodwill and other
intangible assets increased to $2.4 million from $2.0 for the three months ended
December  31,  2000 and  1999,  respectively.  The  increase  was  predominantly
attributable  to the  amortization  of goodwill  recorded in connection with the
purchase of Rocktide Corporation in July, 2000.                                 

         Stock-Based Compensation.  For the three months ended December 31, 2000
and 1999, we incurred  stock-based  compensation  charges of approximately  $116
thousand  and $206  thousand for each period,  respectively.  These  stock-based
compensation  charges  are being  amortized  on an  accelerated  basis  over the
vesting period of the options.                                                  

         Other Income  (Expense).  We earned interest income of $58 thousand for
the three months ended  December 31, 2000 and $375 thousand for the three months
ended December 31, 1999. The interest income was the result of the investment of
funds obtained at our initial public offering ("IPO").                          

         Income taxes.  We have had a net  operating  loss for each period since
our inception  through  December 31, 2000. Our accumulated  deficit through this
period is  approximately  $122  million.  We recorded an income tax provision of
approximately  $12,000 in the three  months  ended  December 31, 2000 related to
income earned by our international operations.                                  

Liquidity and Capital Resources                                                 

         At  December  31,  2000,  NetObjects  had cash,  cash  equivalents  and
short-term  investments  totaling $2.8 million,  a decrease of $5.5 million from
September 30, 2000.  The decrease was  primarily  due to losses from  continuing
operations  and  the  investment   activities  related  to  the  acquisition  of
MyComputer.com which were terminated.                                           

         Net cash used in operating activities was $8.7 million and $8.0 million
for the three months ended  December  31, 2000 and 1999,  respectively.  For the
period ended December 31, 2000, net cash used in operating  activities  included
an increase in accounts receivable of approximately $1.2 million,  due to slower
than expected  collections.  An increase of $1.1 million in accounts payable was
due to the cashflow  constraints of the corporation.  Net cash used in operating
activities  for the period  ended  December  31,  1999  included  a decrease  in
accounts receivable of $3.2 million.                                            

         Net cash  utilized in  investing  activities  was $1.5  million for the
three months  ended  December 31, 2000 as compared to $0.4 million net cash used
in  investing  activities  for the three months  ended  December  31, 1999.  The
Company loaned a total of $1.875 million to MyComputer under the agreement.  All
of the loans  were made  under  notes  bearing  interest  at the prime  rate and
maturing  on  October  18,  2001.  The  Company   cancelled   $375,000  of  this
indebtedness  upon the  termination of the agreement,  as provided by its terms.
The  remaining  indebtedness,  which  totals $1.5  million,  will  convert  into
MyComputer  preferred  stock that is issued in an equity  financing  of at least
$15.0  million  prior to October  18,  2001.  We have not  received  notice from
MyComputer  of any such  financing  and cannot be assured that  MyComputer  will
receive  such  financing  or be able to repay  the  notes  issued  to us.  As of
December 31, 2000, the Company deems the notes receivable to be collectible.    

         Net cash  provided  by  financing  activities  was  approximately  $4.7
million for the three months ended December 31, 2000 as compared to $0.2 million
used for the  three  months  ended  December  31,  1999.  Net cash  provided  by
financing  activities  for the three  months ended  December 31, 2000  consisted
primarily of the option  proceeds  from the sale of the  Enterprise  division to
Merant  Corporation  of $4.0  million  and from  the  short-term  loan  from IBM
corporation for $750 thousand. On December 21, 2000 the Company signed an option
and  license  agreement  under  which  we  received  $4  million  in cash for an
exclusive  option to purchase the  Enterprise  division for $18 million.  If the
sale is  completed,  the option  payment  will be credited  in full  towards the
purchase  price.  On January 8, 2001,  NetObjects and Merant signed a definitive
agreement for the purchase of the Enterprise division. If the acquisition is not
completed,  Merant  will have a three  year  license  to  distribute  NetObjects

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Collage  and the $4 million  option  payment  will be  credited  against  future
royalty  payment  obligations  under the license  agreement.  Completion  of the
acquisition is subject to customary  closing  conditions.  We expect the sale to
close before  March,  2001,  but there can be no assurance  that the sale of the
Enterprise division will occur.                                                 

         We anticipate a moderate  decrease in our  operating  expenses over the
next three quarters.  However,  we expect our operating  expenses to continue to
constitute a material  use of our cash  resources.  In addition,  we may require
cash resources to fund acquisitions or investments in complementary  businesses,
technologies  or  product  lines.  During  the next  quarter  we intend to raise
capital through the sale of the Enterprise Division to Merant Corporation. If we
fail to  raise  additional  capital  to fund  future  operations  our  business,
financial  condition and results of operations  will be materially and adversely
affected, and our stock price will decline substantially.                       

Recent Developments                                                           

         In  December  2000,  the  Company  issued  a  promissory  note  to  IBM
Corporation  for $750,000 at an annual interest rate of 10%. The note was repaid
by the Company on January 2, 2001.                                              

         On  January  9,  2001,  the  Company  signed an  agreement  to sell the
Enterprise  Division  to  Merant  Corporation  for  $18  million  in  cash.  The
shareholders of NetObjects, Inc. approved the sale of the division on January 9,
2001.  As a  result  of the  sale  of the  Enterprise  division,  the  financial
statements  for the first  quarter of fiscal year 2001 and prior period  reflect
the  Company's  Enterprise  division as a  discontinued  operation.  The sale is
expected  to close by March 2001 but  completion  of the  transaction  cannot be
assured.  If the sale  closes,  it will  result in a gain of  approximately  $14
million,  net of tax, to the Company.  The $18 million purchase price includes a
$4 million payment made by Merant in December,  2000 for the exclusive option to
purchase the NetObjects  Enterprise  division.  The advance will be a three-year
license if the sale is not completed.                                           

         On  January  10,  2001,  the  Company  granted an  aggregate  amount of
3,025,600  stock options to all the  employees at an option price  equivalent to
the  market  price at the  close of the  business  day,  of  $0.468  per  share.
Executive  officers  of the  Company  received  a total  of  1,400,000  of these
options.  The initial grant of 1,512,800 stock options will vest with respect to
one quarter of the shares on July 10, 2001, and the remaining  shares vest in 18
equal  monthly  installments  thereafter,  subject to the  optionee's  continued
employment with the issuer. The remaining 1,512,800 stock options will vest with
respect to one quarter of the shares on  September  1, 2001,  and the  remaining
shares  vests  in 18  equal  monthly  installments  thereafter,  subject  to the
optionee's continued employment with the issuer.                                

         In January,  2001, NetObjects  restructured and eliminated 32 full-time
positions,  excluding  the  Enterprise  division  sale,  in order to  transition
according to the new business  model.  The Company will continue to focus on the
sale of Fusion and Matrix, and subsequent releases to small businesses.         

         On January 29, 2001 and  February 9, 2001,  NetObjects  signed  secured
promissory  notes with IBM  Corporation in the aggregate  amount of $3.0 million
bearing 10% interest annually. Principal and interest are payable on the earlier
to occur  of (1) the  date on which  NetObjects  receives  payment  from  Merant
Corporation  for the sale of the  Enterprise  division (2) March 26, 2001 or (3)
when such amounts are declared due and payable by IBM Corporation upon default. 

RISK FACTORS

         NetObjects  believes  that its results of  operations  in any quarterly
period may be impacted  adversely  by a number of factors,  including  those set
forth below.  Readers of this report should  consider  these and other  ordinary
business risk factors in evaluating the business,  financial condition,  results
of operations and prospects of NetObjects.                                      

Our  ability  to  continue  as a  going  concern  is  dependent  on our  raising
additional funds.                                                               

         Without  raising new proceeds  from the sale of assets,  debt or equity
financing,  we will not have  enough  cash to remain in  business.  For the year
ended September 30, 2000, our auditors, KPMG LLP, in their independent auditors'
report,  have expressed  "substantial  doubt" as to our ability to continue as a
going concern.  This doubt is based on our significant operating losses since we
were formed,  and our insufficient funds as of September 30, 2000 to finance our
operations through fiscal year 2001.                                            

We have a history of  substantial  losses and expect  substantial  losses in the
future.                                                                         

         We were incorporated in November 1995 and first recognized  revenues in
October  1996.  As of  December  31,  2000,  we had an  accumulated  deficit  of
approximately  $122  million.  We expect to sustain  significant  losses for the
foreseeable future,  which could harm our business and decrease the market price

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of our stock.                                                                   

         To achieve  and sustain  profitability,  we must,  among other  things,
increase substantially our revenues from our two principal products,  NetObjects
Fusion and Matrix, and substantially increase our revenues from professional and
online services, which have been insignificant to date.                         

Our revenues are declining and will be  substantially  lower in fiscal year 2001
as we change our business model.                                                

         We are changing our business  model from one in which we have  received
large up front license fees for the  distribution  of large numbers of copies of
NetObjects  Fusion to one in which we intend to earn most of our  revenues  from
distribution  arrangements  with  service  providers  that  will pay us  reduced
license fees and a percentage of their subscription revenues received from small
business subscribers.                                                           

         There can be no assurance  that we will generate  substantial  revenues
under our new business model and we expect our revenues to decline substantially
in the current  fiscal year in  comparison  to our revenues in preceding  fiscal
years.                                                                          

Our online services are new and have not received a broad customer acceptance.  

         Since inception,  we have invested  resources to create and enhance our
online  services,  which we believe support and add to market  acceptance of our
products.  With the  acquisition  of  Sitematic  Corporation,  providing  online
services to enable small businesses to conduct e-commerce has become an integral
part  of our  business  growth  strategy.  Including  the  period  during  which
Sitematic operated these services they have been offered to customers  generally
for less  than 12  months.  Together  with our  distribution  partners,  we must
attract a substantial  number of small business  subscribers  for these services
for our online business to succeed.  We may fail to attract these new customers,
which would hurt our business and could cause our stock price to fall.          

We may not adequately  adjust our operating  expense to reflect the  anticipated
reduction in revenue.                                                           

         We must  reduce our  operating  expenses  relative  to the  anticipated
revenue reduction but anticipate that these expenses will  substantially  exceed
our revenues for at least fiscal year 2001. As a result, we expect our operating
expenses, as well as planned capital  expenditures,  to continue to constitute a
material use of our cash resources.  In addition,  we may require cash resources
to fund acquisitions or investments in complementary businesses, technologies or
product lines.                                                                  

We may not be able to raise additional capital to fund our future operations.   

         We believe that our current cash and cash equivalents,  are adequate to
finance our current  level of operations  only for a short period.  We intend to
raise  additional  capital to fund  future  operations  through  the sale of our
Enterprise division,  and if possible, the sale of additional equity securities,
new  borrowings,  some  combination  of debt  and  equity,  or  other  available
transactions.  On January 9, 2001, the Company announced that the option to sell
the Enterprise division was exercised,  and Merant Corporation will purchase the
Enterprise  Division for a total of $18 million in cash, the sale is expected to
close in March,  2001.  If we fail to raise  additional  capital to fund  future
operations our business,  financial  condition and results of operations will be
materially and adversely affected.                                              

Our relationship with IBM has changed substantially over time.                  

         While IBM owns a  substantial  percentage  of our common  stock and has
three  representatives  on our board of directors,  it is under no obligation to
continue any business  relationships  with us. IBM is allowed to compete with us
or act in a manner that is disadvantageous to us.                               

Although we have contracts with IBM to bundle our products with their offerings,
we have no commitments for future revenues from IBM.                            

         Revenues  from  IBM  have  been a  substantial  portion  of  our  total
revenues,  representing  approximately 18% and 19% of our total revenues for the
three month period ending December 31, 2000 and the fiscal year ending September
30, 2000,  respectively.  Lotus also  currently  markets,  bundles and sells our
products  and has created  foreign  language,  or  "localized,"  versions of our
software,  for which IBM pays us reduced  royalties  on  products  that it sells
outside the U.S. Lotus' obligation to create localized  versions of our software
expired  on  December  31,  1999.  We may need to incur  substantial  additional
expense to obtain  localized  versions of new products or product  upgrades from
Lotus  or  other  vendors  if  necessary  to  satisfy  the  requirements  of key
customers.                                                                      

         We have a number of license and  reseller  agreements  or  arrangements
with IBM many of which are subject to the terms of our 10-year license agreement
that expires in April 2007. We have no future  revenue  commitments  from IBM or
Lotus.                                                                          

         We have business  conflicts with IBM. IBM has chosen in the past and is
free in the  future  to  promote  and  bundle  competitors'  products  over  our
products.                                                                       

         Although  we  have  been   dependent  on  IBM,  and  IBM  has  provided
substantial support to us, IBM makes independent  business and product decisions
that present conflicts with our business objectives.                            

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IBM controls us and is free to sell its interest in us.       

         As of  December  31,  2000 IBM owns  approximately  48.0% of our common
stock and holds  warrants  that if  exercised,  would  increase its ownership to
approximately  48.6%  of our  outstanding  voting  securities.  As  our  largest
stockholder,  with  three  representatives  on our board of  directors,  IBM has
substantial  influence  over our  direction and  management,  and may be able to
prevent or cause a change in control  of us and could  take other  actions  that
might be favorable to IBM and potentially harmful to us.                        

         IBM  can  act in  ways  that  may be  disadvantageous  to us,  such  as
competing  with  us,  investing  in our  competitors  and  taking  advantage  of
corporate opportunities.                                                        

         IBM is contractually or otherwise free to act in ways that may harm our
business.   Our  restated  certificate  of  incorporation   contains  provisions
expressly acknowledging that:                                                   

         o        IBM retains  "freedom of action" to conduct its  business  and
                  pursue other business opportunities,  even in competition with
us;                                         
         o        IBM  has  no  obligation  to  refrain  from  investing  in our
                  competitors,  doing business with our customers or hiring away
our key personnel;                          
         o        No director appointed by IBM is prohibited from taking actions
                  or from voting on any action because of any actual or apparent
                  conflict of interest  between that  director and us, and these
                  provisions  materially  limit  the  liability  of IBM  and its
                  affiliates,  including IBM's  representatives  on our board of
                  directors and Lotus,  from conduct and actions taken by IBM or
                  its affiliates,  even if the conduct or actions are beneficial
to IBM and harmful to us; and               
         o        These provisions materially limit the liability of IBM and its
                  affiliates,  including IBM's  representatives  on our board of
                  directors and Lotus,  from conduct and actions taken by IBM or
                  its affiliates,  even if the conduct or actions are beneficial
to IBM and harmful to us.                   

Furthermore:                                                  

         o        IBM is  eligible  to sell  its  stock  subject  to  applicable
                  securities   laws,    contractual    arrangements   with   the
                  underwriters and the terms of a registration rights agreement.
                  IBM may  transfer  some or all of its stock,  including to our
                  competitors.  Such a transfer  could  result in a transfer  of
                  IBM's  interest  in us,  which  could  cause our  revenues  to
decrease and our stock price to fall; and   
         o        IBM is under  no  obligation  to  inform  us of any  corporate
                  opportunity  and is free to avail itself of any opportunity or
 to transfer the opportunity to a third party.

         Any of IBM's rights could give rise to conflicts of  interests,  and we
cannot be certain that any conflicts would be resolved in our favor.  Any of the
risks arising from our  relationship  with IBM could harm our business and cause
our stock price to fall.                                                        

         IBM  could  obtain  and  use  our  source  code  if we  default  on our
obligations under license  agreements with IBM. Although our license  agreements
with IBM contain  restrictions  on IBM's use and  transfer of our  software  and
intellectual  property,  these  restrictions are subject to exceptions.  Under a
software  license  agreement  with IBM,  we have  placed our key source  code in
escrow for IBM's  benefit.  IBM may obtain access to the source code upon events
of default related to the Company's failure to provide required  maintenance and
support or its bankruptcy or similar event of financial reorganization.  IBM may
use the source code that it obtains to create  derivative  works,  which it will
own subject to the Company's rights in the underlying software.                 

         Our licensing  arrangements  with IBM are not exclusive and IBM is free
to enter into similar  arrangements  with our competitors.  All of our licensing
arrangements  with IBM are  non-exclusive.  IBM has the right to cease promoting
and distributing our software at any time.                                      

We have many established  competitors,  and may be unable to compete effectively
against them.                                                                   

         The market for web site building software and services for the Internet
and corporate  intranets is relatively  new,  constantly  evolving and intensely
competitive.  We expect  competition  to  intensify  in the future.  Many of our
current and potential competitors have longer operating histories,  greater name
recognition  and  significantly  greater  financial,   technical  and  marketing
resources,  and we may be unable to compete effectively against them. We compete
for small  business  customers  with web  content  software  makers  like Adobe,
Macromedia,  and  Microsoft  and in the on-line web  hosting and  services  with
providers like Verio, Bigstep,  Icat, and Yahoo Store.  Microsoft's FrontPage, a
web site building  software  product,  has a dominant  market  share.  Microsoft
bundles FrontPage 2000 in several versions of the Office 2000 product suite that
dominates  the  market  for  desktop  business  application  software.  For  our
enterprise  customers,  we compete in the Internet  application  development and

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services market with companies such as Interwoven and Vignette. New technologies
and the expansion of existing  technologies  could also increase the competitive
pressures  on us by enabling our  competitors  to offer  lower-cost  or superior
products or  service.  Increased  competition  could  diminish  the value of our
products and services and result in reduced operating margins and loss of market
share. We cannot assure you that we will be able to compete successfully against
current or future competitors.                                                  

We may not be able to accurately forecast revenue and adjust spending.          

         Because  our  business is  evolving  rapidly,  we are in the process of
transforming our business model, and we have a very limited  operating  history,
we have little  experience in forecasting  our revenues.  Our expense levels are
based in part on our  expectations  of future  revenues,  and to a large  extent
those expenses are fixed,  particularly in the short-term.  We cannot be certain
that our revenue expectations will be accurate or that we will be able to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall. 

Our quarterly operating results will probably fluctuate.                        

         We believe that  period-to-period  comparisons of our financial results
are not  necessarily  meaningful,  and  you  should  not  rely  upon  them as an
indication of our future performance.  Going forward,  our revenues from IBM, if
any, are likely to become more variable.  The promptness  with which sales data,
used for recognizing  product royalties,  are reported to us from third parties,
including IBM, may cause annual results to be more volatile.                    

We allow product  returns and provide price  protection to some  purchasers  and
resellers  of our  products  and  our  allowances  for  product  returns  may be
inadequate.                                                                     

         We have  stock-balancing  programs for our software products that under
specified  circumstances  allow for the return of software by  resellers.  These
programs  also  provide for price  protection  for our  software for some of our
direct and indirect channel resellers that, under specified conditions,  entitle
the  reseller to a credit if we reduce our price to similar  channel  resellers.
There can be no  assurance  that  actual  returns or price  protection  will not
exceed  our  estimates,   and  our  estimation   policy  may  cause  significant
fluctuations.                                                                   

Most of our revenues  have been derived  from sales of a single  product,  and a
decline in demand or the sale price of that product  would harm our business and
cause our stock price to fall.                                                  

         In the quarter  ending  December  31, 2000,  our revenues  were derived
entirely from the sales of  NetObjects  Fusion  software.  On January 9, 2001 we
agreed to sell the Enterprise  Division to Merant Corporation for $18 million in
cash.  About 68% of our revenues from software  license fees in fiscal 2000 were
derived from versions of one of our products,  NetObjects  Fusion, and we expect
that this single  product will continue to account for the majority of our total
revenues in the near-term.  To remain  competitive,  software products typically
require frequent  updates that add new features.  There can be no assurance that
we will  succeed in creating and selling  updated or new versions of  NetObjects
Fusion. A decline in demand for, or in the average selling price of,  NetObjects
Fusion,  whether as a result of new product  introductions or price  competition
from competitors,  technological change or otherwise, would hurt our business or
cause our stock price to fall.                                                  

We may not be able to expand our distribution channels or sales force.          

         We need to maintain our  third-party  distribution  channel because our
direct sales to third  parties  would be  insufficient  to support our operating
base. While we derive some of our revenues from selling our products directly to
third  parties,  most of our  revenues are derived from the sale of our products
through  third-party  distributors  and OEM resellers.  We need to develop third
party  relationships for promoting our on-line offerings.  A substantial portion
of our revenues from NetObjects  Fusion comes from  arrangements  with a limited
number of  customers.  There can be no  assurance  that  third  parties  will be
willing or able to carry our  products in the future.  If third  parties were to
reduce or cease  carrying our products,  our direct sales to third parties would
be insufficient to support our operating expense base.                          

We need to maintain and  establish new bundling  arrangements  because we may be
less successful at selling our products on a stand-alone basis.                 

        We  believe  that  products  that are not sold in a  "suite"  containing
software products or components that perform different functions are less likely
to be commercially successful. For example,  NetObjects Fusion 5.0 includes free
web site  hosting  services.  IBM also  bundles  our  products  with some of its
software  products,  such as the bundling of  NetObjects  Fusion with  WebSphere
Studio and NetObjects  Fusion with Lotus Designer  Studio and Lotus  SmartSuite.
NetObjects  Fusion is also bundled with Novell's NetWare for Small Business.  We
cannot be assured of  maintaining  or  obtaining  suitable  product or component
bundling  arrangements  with third  parties.  Failure to  maintain  or  conclude
suitable software product bundling  arrangements could hurt our business,  cause
our revenues to decrease and our stock price to fall.                           

Our products may contain defects that could subject us to liability in excess of
insurance limitations.                                                          

        Our software  products are complex and may contain  undetected errors or
result in system failures.  Despite extensive testing, errors could occur in any
of our current or future  product  offerings  after  commencement  of commercial

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shipments.  Any errors  could  result in loss of or delay in  revenues,  loss of
market share,  failure to achieve  market  acceptance,  diversion of development
resources,  and injury to our reputation or damage to our efforts to build brand
awareness.  We cannot be certain that the  contractual  limitations of liability
will  be  enforceable,  or that  our  insurance  coverage  will  continue  to be
available  on  reasonable  terms or will be available in amounts to cover one or
more large  claims,  or that the insurer  will not  disclaim  coverage as to any
future claim.  The successful  assertion of one or more large claims that exceed
available  insurance  coverage or changes in our insurance  policies,  including
premium  increases  or  the  imposition  of  large  deductible  or  co-insurance
requirements, could cause our revenues to decrease and our stock price to fall. 

If we fail to respond adequately to rapid  technological  changes,  our existing
products and services will become obsolete or unmarketable.                     

        The market for our  products  is marked by rapid  technological  change,
which leads to frequent new product  introductions and  enhancements,  uncertain
product  life  cycles,   changes  in  customer  demands  and  evolving  industry
standards. New web site building products and services based on new technologies
or new  industry  standards  could  render our  existing  products  obsolete and
unmarketable.  We believe that to succeed,  we must enhance our current products
and  develop  new  products  on a timely  basis to keep pace with  technological
developments and to satisfy the increasingly  sophisticated  requirements of our
customers.                                                                      

Our product and software  development efforts are inherently difficult to manage
and keep on schedule, so development delays may increase our costs.             

        On occasion, we have experienced software development delays and related
cost overruns,  which to date have not materially affected our business,  and we
cannot be certain that we will not encounter  these problems in the future.  Any
delays in  developing  and  releasing  enhanced or new products  could cause our
revenues  to  decrease.   In  addition,  we  cannot  be  certain  that  we  will
successfully  develop  and market new  products  or  product  enhancements  that
respond  to  technological  change,  evolving  industry  standards  or  customer
requirements,   or  that  any  product   innovations  will  achieve  the  market
penetration or price stability necessary for profitability.                     

The loss of our key personnel,  or failure to hire additional  personnel,  could
harm our business  because we would lose  experienced  personnel and new skilled
personnel are in short supply and command high salaries.                        

        We depend on the continued  service of our key personnel,  and we expect
that we will need to hire additional personnel in all areas. The competition for
personnel throughout our industry is intense,  particularly in the San Francisco
Bay Area, where our headquarters are located.  We have experienced  difficulties
in attracting new personnel, and all of our personnel, including our management,
may terminate  their  employment at any time for any reason.  Currently,  we are
dependent  upon the  services of Samir Arora,  our  President,  Chief  Executive
Officer,  Chairman of the Board and one of our founders. The loss of Mr. Arora's
services  would  materially  impede the  operation and growth of our business at
this  time.  We do  not  maintain  key  person  life  insurance  for  any of our
personnel.  Furthermore,  our  failure to attract  new  personnel  or retain and
motivate our current personnel could hurt our business.                         

A third party could be prevented from acquiring our shares of stock at a premium
to the market price because of our anti-takeover provisions.                    

         As of December 31, 2000 IBM owns approximately 48.0% of our outstanding
stock and holds  warrants  that if  exercised,  would  increase its ownership to
approximately  48.6%  of  our  outstanding  voting  securities.  That  ownership
interest and provisions of our restated certificate of incorporation,  bylaws, a
voting  agreement  between  us and  IBM  and  Delaware  law  could  make it more
difficult  for a third party to acquire  us,  even if a change in control  would
result in the purchase of your shares of common stock at a premium to the market
price.                                                                          

If we fail to  adequately  protect our  intellectual  property  rights or face a
claim of intellectual  property infringement by a third party, we could lose our
intellectual property rights or be liable for significant damages.              

        Trademarks and other proprietary rights are important to our success and
our  competitive   position.  We  seek  to  protect  our  trademarks  and  other
proprietary   rights,   but  our   actions   may  be   inadequate   to   prevent
misappropriation  or  infringement  of  our  technology,  trademarks  and  other
proprietary  rights or to  prevent  others  from  claiming  violations  of their
trademarks  and other  proprietary  rights.  Although we have  obtained  federal
registration of the trademark  NetObjects  Fusion, we know that other businesses
use the word "Fusion" in their marks alone or in  combination  with other works.
We do not  believe  that we will be able to prevent  others  from using the word
"Fusion" for competing  goods and  services.  For example,  Allaire  Corporation
markets its application  development  and server  software for web  development,
including applications for e-commerce,  under the federally registered trademark
"ColdFusion." Under an agreement with Allaire  Corporation,  we have agreed that
neither  company will  identify  its products and services  with the single word
"Fusion,"  unless  otherwise  agreed  as in the case of our  co-bundled  product
"Fusion2Fusion."  Business  customers may confuse our products and services with
similarly named brands,  which could dilute our brand names or limit our ability
to build  market  share.  To license  many of our  products,  we rely in part on
"shrink-wrap" and "clickwrap"  licenses that are not signed by the end user and,
therefore  may be  unenforceable  under the laws of  certain  jurisdictions.  In
addition,  we may license content from third parties. We could become subject to
infringement  actions  based upon these  third-party  licenses,  and we could be
required to obtain  licenses from other third  parties to continue  offering our
products.                                                                       

        We  cannot  be  certain  that  we will  be  able  to  avoid  significant

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expenditures  to protect our  intellectual  property  rights,  to defend against
third-party  infringement  or other  claims or to  license  content  from  third
parties alleging that our products infringe their intellectual  property rights.
Incurring  significant  expenditures to protect our intellectual property rights
or to defend  against  claims or to license  content could decrease our revenues
and cause our stock price to fall.                                              

         Since we are no longer a majority-owned subsidiary of IBM, we no longer
enjoy cross-licensing  protection that we received as an IBM subsidiary.  We may
face material  litigation risk associated with patent  infringement  claims that
IBM's patent  cross-licensees  could not assert  against us while we were an IBM
subsidiary.                                                                     

Our international operations continue to expand and may not be successful.      

         International sales represented approximately 57% of our total revenues
in the  quarter  ended  December  31,  2000 and  approximately  35% of our total
revenues in the quarter  ended  December 31, 1999. We intend to expand the scope
of our  international  operations  and currently have a subsidiary in the United
Kingdom. Our continued growth and profitability will require continued expansion
of our international operations, particularly in Europe.                        

         Our  international  operations  are,  and  any  expanded  international
operations  will be, subject to a variety of risks  associated  with  conducting
business  internationally  that could materially  adversely affect our business,
including the following:                                                        

         o        difficulties   in   staffing   and   managing    international
operations;                                 
o        lower gross margins than in the United States;       
o        slower adoption of the Internet;                     
o        longer payment cycles;                               
o        fluctuations in currency exchange rates;             
         o        seasonal  reductions  in business  activity  during the summer
  months in Europe and other parts of the world;
o        recessionary environments in foreign economies; and  
         o        increases  in  tariffs,   duties,   price  controls  or  other
                  restrictions on foreign  currencies or trade barriers  imposed
by foreign countries.                       

         Furthermore,  the laws of foreign  countries  may provide  little or no
protection of our intellectual property rights.                                 

If  internet  and  intranet  usage  does not  continue  to grow,  we will not be
successful.                                                                     

         Sales  of our  products  and  services  depend  in  large  part  on the
emergence of the Internet as a viable  commercial  marketplace with a strong and
reliable  infrastructure  and on the  growth of  corporate  intranets.  Critical
issues  concerning  use of  the  Internet  and  intranets,  including  security,
reliability,cost,  ease of use and quality of service, remain unresolved and may
inhibit the growth of, and the degree to which  business is conducted  over, the
Internet and  intranets.  Failure of the Internet and  intranets to develop into
viable  commercial  mediums  would harm our  business  and cause our revenues to
decrease and our stock price to fall.                                           

Due to our small size, limited operations and the difficulty of hiring personnel
in  our  industry,   any  future   acquisitions  could  strain  our  managerial,
operational and financial resources.                                            

        In the  future we may make  acquisitions  of, or large  investments  in,
businesses that offer products,  services and technologies that we believe would
help us better provide  e-business web site and intranet site building  software
and services to businesses. Any future acquisitions or investments would present
risks such as difficulty in combining the technology, operations or workforce of
the acquired  business with our own,  disruption of our ongoing  businesses  and
difficulty in realizing the anticipated  financial or strategic  benefits of the
transaction.                                                                    

         To make  these  acquisitions  or large  investments  we might use cash,
common stock or a combination of cash and common stock.  If we use common stock,
these acquisitions could further dilute existing  stockholders.  Amortization of
goodwill or other intangible assets resulting from acquisitions could materially
impair our operating results and financial condition.  Furthermore, there can be
no assurance that we would be able to obtain acquisition financing,  or that any
acquisition, if consummated,  would be smoothly integrated into our business. If
we make  acquisitions  or large  investments  and are unable to  surmount  these
risks,  our business could be harmed,  our revenues could decrease and our stock
price could fall.                                                               

We  may  become   subject  to  burdensome   government   regulation   and  legal
uncertainties in areas including network security, encryption and privacy, among
others,  because we conduct  electronic  commerce  and provide  information  and
services over the Internet.                                                     

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        We are not currently  subject to direct  regulation by any  governmental
agency,  other than laws and  regulations  generally  applicable to  businesses,
although  specific U.S. export controls and import controls of other  countries,
including  controls  on the use of  encryption  technologies,  may  apply to our
products.  Due to the  increasing  popularity  and  use of the  Internet,  it is
possible  that a number of laws and  regulations  may be  adopted  in the United
States and abroad with particular  applicability to the Internet. It is possible
that  governments  will enact  legislation that may apply to us in areas such as
network  security,   encryption,  the  use  of  key  escrow,  data  and  privacy
protection,  electronic  authentication  or  "digital"  signatures,  illegal and
harmful content,  access charges and retransmission  activities.  Moreover,  the
applicability to the Internet of existing laws governing issues such as property
ownership,  content, taxation, defamation and personal privacy is uncertain. Any
new   legislation  or  regulation  or   governmental   enforcement  of  existing
regulations  may limit the growth of the  Internet,  increase  our cost of doing
business or increase our legal  exposure,  any of which could cause our revenues
to decrease and our stock price to fall.                                        

A  governmental  body  could  impose  sales and  other  taxes on the sale of our
products,  license of our technology or provision of services,  which would harm
our financial condition.                                                        

         We currently do not collect  sales or similar taxes with respect to the
sale of products,  license of  technology or provision of services in states and
countries  other than  states in which we have  offices.  In October  1998,  the
Internet Tax Freedom Act, or ITFA, was signed into law. Among other things,  the
ITFA imposes a three-year  moratorium  on  discriminatory  taxes on  e-commerce.
Nonetheless,  foreign  countries,  or,  following  the  moratorium,  one or more
states,  may seek to impose sales or other tax  obligations  on  companies  that
engage in on-line commerce within their jurisdictions. A successful assertion by
one or more states or any foreign  country that we should collect sales or other
taxes on the sale of products, license of technology or provision of services or
remit  payment  of  sales or other  taxes  for  prior  periods,  could  hurt our
business.                                                                       

Our stock price might have wide fluctuations,  and Internet-related  stocks have
been particularly volatile.                                                     

         The market price of our common stock is highly  volatile and subject to
wide fluctuations.  Recently, the stock market has experienced significant price
and  volume  fluctuations  and the market  prices of  securities  of  technology
companies,  particularly  Internet-related companies, have been highly volatile.
Market fluctuations,  as well as general political and economic conditions, such
as recession or interest rate or currency  rate  fluctuations,  could  adversely
affect the market price of our common stock.                                    

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK             

         Our  exposure to market  risks for changes in  interest  rates  relates
primarily to investments in debt securities issued by U.S.  government  agencies
and corporate debt securities. We place our investments with high quality credit
issuers  and,  by policy,  limits the amount of the credit  exposure  to any one
issuer. We manage interest rate risk by limiting  investments to debt securities
of relatively short  maturities.  In addition,  we maintain  sufficient cash and
cash equivalents so that we can hold investments to maturity.                   

         As of  December  31,  2000,  we had cash and cash  equivalents  of $2.8
million,  including  approximately  $1.7  million  in money  market  funds  with
maturities of less than 90 days.  Based upon our balance of cash and  short-term
investments at December 31, 2000, a decrease in interest rates of 0.5% would not
cause a material decrease in our annual interest income.                        

         Our general  policy is to limit the risk of  principal  loss and ensure
the safety of invested  funds by  limiting  market and credit  risk.  All highly
liquid  investments  with a  maturity  of  three  months  or less at the date of
purchase are  considered to be cash  equivalents;  investments  with  maturities
greater than three  months are  considered  to be  short-term  investments.  Our
investment  policy  limits  purchases of debt  securities to maturities of three
months or less.                                                                 

         To date,  we have not  purchased  or sold  forward  contracts  to hedge
foreign currency exposure,  since the relative amounts of international  revenue
generated have not been large enough to make hedging cost-effective.            

19

10-Q/A
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PART II: OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    

         (c) We filed a  definitive  information  statement  on Schedule  14C on
January  22,  2001 in  connection  with the sale of the  Enterprise  Division to
Merant  Corporation.  Two of our  stockholders  who  represent a majority of the
voting power of our common  stock,  approved the  transaction.  The  information
contained in the Schedule 14C is incorporated into this report by reference.    

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K                              

(a) None                                            

SIGNATURES

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

NETOBJECTS, INC.

Date: February 16, 2001                                                         

                                     /s/ Russell F. Surmanek
                                               ---------------------------------
                                 Russell F. Surmanek
                                               Executive Vice President, Finance
                                          and Operations and Chief
                                   Financial Officer

20

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q/A’ Filing		Date		First		Last			Other Filings
		2/18/04		7
		10/8/03		7
		10/18/01		7		13
		9/30/01		6					PRE 14C
		9/1/01		9		14
		7/10/01		9		14
		3/26/01		9		14
Filed on:		2/16/01		22
		2/9/01		9		14
		1/31/01		1
		1/29/01		9		14			10-K/A
		1/22/01		22					DEF 14C
		1/10/01		9		14
		1/9/01		8		17
		1/8/01		13					DEF 14C,  PRE 14C
		1/2/01		8		14
For Period End:		12/31/00		1		21			10-Q
		12/29/00		6					10-K
		12/21/00		13
		10/30/00		11
		9/30/00		2		15			10-K,  10-K/A
		7/14/00		6					8-K
		12/31/99		2		19			10-Q,  10-Q/A
		10/4/99		6					8-K
		5/7/99		6					S-1/A
		4/11/97		6
		11/21/95		6
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