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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE TRANSITION PERIOD TO

COMMISSION FILE NUMBER: 0-21010

CENTURA SOFTWARE CORPORATION
(FORMERLY GUPTA CORPORATION)
(Exact name of registrant as specified in its charter)

CALIFORNIA 94-2874178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

975 ISLAND DRIVE, REDWOOD SHORES, CALIFORNIA 94065
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (650) 596-3400

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to section 12(g) of the Act:

COMMON STOCK, $.01 PAR VALUE PER SHARE

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 _

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $27,166,615 as of February 28, 1998, based upon the
closing sale price on the NASDAQ National Market reported for such date. Shares
of Common Stock held by each officer and director and by each person who owns 5%
or more of the outstanding Common Stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

As of February 28, 1998, there were 29,526,171 shares of the Registrant's
Common Stock outstanding.

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PART I

ITEM 1. BUSINESS

Except for the historical information contained herein, the matters
discussed in this document are forward-looking statements that involve certain
risks and uncertainties, including the risks and uncertainties under "Risk
Factors".

OVERVIEW

Centura Software Corporation (the "Company" or "Centura"), formerly Gupta
Corporation, provides a suite of products usable by application developers to
build and deploy component based distributed business applications. Centura
products include an embedded database that scales from Smart Cards to the Web,
and application development tools for Windows and Web clients. Centura products
are designed to be deployed in both thin- and fat-client environments, using
business logic objects that can be reused in multi-tier architectures in
distributed environments (The Internet is referred to hereinafter as the "World
Wide Web" or the "Web" and corporate internal Webs are referred to as
"Intranets"). The Company's product lines include a family of embedded
databases, (SQLBASE), application development tools, (CENTURA TEAM DEVELOPER,
THE 32-BIT VERSION OF SQLWINDOWS, SQLWINDOWS AND CENTURA NET.DB) and PC to
mainframe connectivity products (SQLHOST). Now in its seventh generation,
SQLBASE was the first Relational Database Management System ("RDBMS") available
in the PC and PC LAN environment offering similar RDBMS functions previously
found only in high-end databases. The Company's products have historically been
market leaders in the Windows client/server environment, used both in
work-group/departmental business applications, as well as packaged applications
sold by third party software vendors to small and medium size businesses. The
Company is continuing to enhance its existing Windows client product line. At
the same time, the Company is enhancing its products into new market
opportunities for thin-clients (the Web, Portable Device Applications ("PDAs")
and smart appliances. In these markets, a small memory requirement (or
"footprint"), client/server or embedded application and database architecture
has a natural fit.

The Company's embeddable database, SQLBASE, is a robust, small footprint
RDBMS, which requires no database administrator ("DBA"). Business applications
that embed SQLBASE operate with a single set of source code on a desktop PC, a
PC LAN, the Web, and connected mobile client environments. The Company's
development tools, CENTURA TEAM DEVELOPER and SQLWINDOWS, are 4GL object
oriented tools offering improved programmer productivity. The Company recently
introduced CENTURA NET.DB, a browser-based SQL to HTML Web authoring tool.
CENTURA NET.DB makes it easy to connect corporate databases with end users,
providing dynamic access to SQL databases in JavaScript enabled Web browsers. In
addition, as CENTURA NET.DB is browser based, it can run on any client platform
capable of running a browser. SQLHOST allows organizations to integrate DB2 or
legacy data into a client/server environment without compromising performance,
control, or security.

The primary customers of Centura products are application developers,
including Fortune 1000 developers who deploy Centura products throughout company
branch offices and customers' offices, Independent Software Vendors (ISVs) who
develop and deploy shrink-wrapped, packaged applications for small and medium
size business, and Value Added Resellers who develop customized software for
end-users. A new set of customers is emerging which embed SQLBASE in smart
and/or mobile electronic devices, such as the government of Mexico which imbeds
SQLBASE in Smart Cards for NAFTA export control. Some application developers
deploy both the embedded database and the application development tools in their
applications. Other developers deploy only the embedded database, connecting
SQLBASE to other business logic application tools such as Java or Visual Basic,
or to application development tools sitting on top of other, larger databases.

The Company has established multiple distribution channels that provide
broad market coverage for its products and address the specific needs of its
varied customer segments worldwide. The Company's

products are used in at least 75 countries. Its customers include include
Automatic Data Processing ("ADP"), Aurum, CamData, Citibank N.A., Daimler-Benz,
Ford Motor Company, SQL Financials, IFS, Help Desk Software, Norfolk Southern,
Ontario Hydro, Lilly Software, Siemens-Nixdorf Informations Systeme AG
("Siemens-Nixdorf"), The Southern Company, United Airlines, United Parcel
Service, Deutsch Bank, M-5, Xerox, Computer Asssociates, and the governments of
Mexico, France, Australia and the United Kingdom.

INDUSTRY OVERVIEW

Over the past few decades, organizations have increasingly used their
computing systems to improve their management of mission-critical business
functions, such as manufacturing, distribution, customer support, finance and
administration. In the 1970s and 1980s, computing environments for such
applications were dominated by large computer systems with a mainframe or
minicomputer acting as a host processor for terminals with very limited
computing power. These traditional host-based systems are expensive to install
and maintain, and related software development is typically time consuming. In
addition, management of and access to the critical information resources
residing on these systems is generally limited to a staff of dedicated
management information systems ("MIS") professionals and relatively inaccessible
to a broader base of users.

In the late 1980s, a new architecture for information processing called
"client/server" computing emerged to address the many shortcomings of host-based
systems. Client/server computing typically provides increased functionality at a
lower hardware and software cost, an easier-to-use operating environment and
information access by a broader base of users. A client/server system typically
consists of multiple intelligent desktop client computers linked in a network
with high performance server computers. The client replaces the dumb terminal
employed in host-based systems and has resident software that manages the user
interface and performs local data access and manipulation. The server performs
many of the functions previously performed by the host in a host-based system,
such as network management, data storage, printing, communications, and data
security and integrity.

The widespread use of increasingly powerful PCs has made it possible for
organizations to deploy client/server systems based on local area networks
("LANs"), thereby increasing the benefits of the large existing installed base
of PCs. A LAN is a group of computers connected for the purpose of sharing data
and networked resources such as printers and data storage devices. PC
client/server computing combines the benefits of host-based systems with the
cost-effectiveness and ease of use of PCs. Other factors increasing the
deployment of PC client/server systems include the continued decline in the
costs of high-performance PCs and improvements to PC operating systems,
including easy-to-use graphical user interfaces such as those incorporated in
Microsoft Corporation's ("Microsoft's") Windows and Windows 95, and Windows NT
operating systems. In addition, connectivity software is available to enable PC
clients to access varied data sources, including existing mainframes and
minicomputers, thereby protecting an organization's investment in these
host-based systems.

Today, the traditional fat-client PC and PC LAN environment continues to
exist as a platform for business applications. At the same time, new form
factors are emerging with a need for the company's products. As suggested by the
creation of network computers there is an increasing trend among end-users to
move the business logic from the PC to the server, which generally provides an
easier way to maintain consistent and secure up to date applications and data.
In addition, due to the proliferation of PCs to millions of end-users, the costs
of maintaining a PC has become a matter of concern to many enterprises. This
client/server architecture is referred to as a thin-client, and can refer to
both a Windows network computer as well as a Web browser client. The Company
believes the introduction of small, smart server centric access devices, such as
palm top organizers, smart phones, PDAs and WebTV-TM- will continue to increase.
This new multi- or n-tier, thin-client establishes a need for a new software
application architecture, creating an opportunity for software tools such as
those available from the Company that fit the needs of the thin-client world.

The Web is an example of a thin-client architecture. The Web opens the
corporate data sources and applications to new and highly distributed end-users
who typically operate through standard platform-independent user environments,
commonly known as "browsers" which typically also run on PCs, but will
increasingly be accessible through mobile, smart devices. Industry analysts are
expecting millions of new small, form factors that will provide mobile access to
servers over the next 5 years. Similar to the rapid emergence of PCs and LANs in
the late 1980s and early 1990s, the emergence of the Web and multiple types of
access devices raises new challenges and opportunities for organizations and the
business applications they choose to manage their business. More than ever
before, the use of technology will impact the bottom line of a business, as
recent studies continue to support the effectiveness of the Web for performing
business transactions. Corporations will increasingly provide direct, electronic
access to back office data to their employees, customers and suppliers.

Web-based systems can be deployed as simple departmental systems or highly
distributed networks that can provide access to end-users in locations and
geographies outside the corporate network. There is also an increasing trend
toward disconnected or so-called distributed or "mobile" applications where a
stand-alone PC, laptop PC, Smart Card or other thin-clients manages data locally
and may be connected asynchronously to centralized, host-based data sources.
Such systems can also be deployed as part of an overall enterprise system
combining stand-alone PCs, multiple PC client/servers and enterprise-wide
servers.

With the continued price/performance curve of the microprocessor, new form
factors of thin-clients will continue to evolve and proliferate, such as palm
top organizers, PDAs, smart phones and WebTV-TM-. Industry analysts are
forecasting shipments of millions of units of new smart, thin-clients. These
mobile devices can instantaneously connect end-users to remote server
information, available for either information or transactions. These new
thin-clients are catalysts for new technologies and new applications and provide
an opportunity for a new generation of business applications taking advantage of
the thin-client server-centric access architecture. These thin-clients need
robust, small footprint embedded databases.

The increase in the deployment of PCs--in both traditional fat client/server
environments and increasingly for implementation and access to thin-client
Web-based or multi-tier environments--is fueling demand by organizations for new
applications utilizing this thin-client architecture.

One other industry trend is changing the architectural design of today's
business applications. Organizations want to integrate the data generated by the
back office throughout the enterprise and, increasingly, with its customers.
Customer service account representatives need access to the latest information
about corporate customers and sales activity and desire electronic connection or
integration to company accounting records. Organizations generally want to
eliminate the information time lag between disparate information systems
throughout the enterprise and the external supply chain and tend to prefer
enterprise wide applications, regardless of their size. It would be unlikely
that one software vendor can provide all the applications required within an
organization. What is important is that the business logic of one application
can be shared between other applications operating in the organization. This
integration between disparate applications places an increased demand for
business applications built with components and objects. Existing software
applications and new software applications are being redesigned to meet the
changing demands for integration and access to metadata, and center on the use
and design of components, objects and reusable code that can operate in a
distributed COM/DCOM environment. Additionally, Java has emerged as a clear
player in the development arena. Java offers a great opportunity to help deliver
and use server side components via Java Enterprise Beans deployed under the
CORBA Architecture. Java objects running on the server will provide the
scalability and platform independence needed to build distributed applications.

The Company was founded to provide application development tools deployed in
applications operating in the Windows client/server environment. In 1996, 1997
and 1998 the Company announced and delivered extensions that operate in a Web
browser client/server environment. The Company will continue

to invest in tools for both the thin- and fat-client Windows world, and will
take advantage of new opportunities for its products in the emerging thin-client
world of the Web and smart mobile devices, which is a natural extension of
Intranet and network-centric computing. The Company's current product offerings
are fully compliant with and accommodate data structures for years beginning
after January 1, 2000.

COMPANY STRATEGIES

The Company products have historically been used by its customers to design
client/server applications with Windows clients. As the client/server world
continues to evolve with new types of clients accessing a server-centric
architecture, the Company is transitioning its products to meet the needs of
developers whose applications link the new thin-clients (the Web, PDAs, smart
phones, etc.) to servers. At the same time, the Company will continue to evolve
its object oriented application development tools so that class libraries can
use and generate components and objects in a distributed COM/DCOM and CORBA
environment. Key elements of its strategies are highlighted below. Finally, the
Company believes its small footprint RDBMS can be embedded in other types of new
smart electronic devices, such as copiers and routers.

EMBEDDED DATABASE. The Company believes several industry trends will drive
demand for a robust, non-DBA, small footprint embedded database. An embedded
database is integrated with business application code, and is invisible to the
end user. An embedded database has high server programmability, allowing
developers to control the database server from the applications, reducing the
need for a DBA through self tuning and self recovery functions. A robust
embedded database is scalable, and can support hundreds of simultaneous users.

One growth factor for embedded databases is the expectation by certain
industry analysts that the next growth opportunity for PCs is the implementation
of enterprise wide applications in mid-size businesses. This mid-size market is
being targeted by application vendors now selling to large corporations, as well
as application vendors now selling to small businesses. Both of these
application vendors may find their existing choice of a database is not
appropriate for the mid size business. Application vendors sold to Fortune 1000
customers typically run on top of large databases. These Fortune 1000 databases
generally require large license fees, a large footprint, and a requirement for
an in house DBA--attributes that do not match the mid-size business market
requirements. On the other hand, current small business application vendors will
discover their existing embedded database probably provides adequate response
for transactions happening with a small number of end-users, but will not scale
up to several hundred end-users, and will be unable to respond to the
transaction needs of mid-size companies. The demand for robust, non-DBA,
scalable, embedded databases that operate in either a LAN-based or Web-based
environment will continue to grow as more and more small and medium size
businesses buy and implement enterprise transaction-based applications. These
small and mid-size businesses do not have an internal DBA, and cannot afford the
expense of hiring such a person.

The other trend impacting the growing need for embedded databases is the
emerging market for distributed, mobile thin-clients, such as WebTV-TM-, palm
top organizers and smart devices, such as cellular phones and Smart Cards. These
new thin-clients and smart appliances require a robust, small footprint embedded
database that can also synchronize and exchange data between a server and the
mobile client. SQLBASE EXCHANGE, the add-on product sold with SQLBASE, is a
database replication tool, enabling an embedded database on a mobile,
thin-client to easily exchange data with a remote server.

With the proliferation of the Web, there is a growing need for small,
non-dba databases for use with common application development tools, such as
Java and Visual Basic. The SQLBASE API makes it easy for application developers
to connect SQLBASE within their application development process. SQLBASE
supports open connectivity to a variety of development tools, including Visual
Basic, Java and Visual C++, utilizing high performance ODBC and JDBC level 4.
SQLBASE offers a 100% Java JDBC driver (Level 4)

that permits Java developers to optimize their SQLBASE connectivity
requirements. Further, as part of the embedded oriented features of SQLBASE,
Centura currently offers external functions, which allow developers to call DLL
base procedures from Triggers and Stored Procedures. Due to the importance of
Java, it is the Company's intention to incorporate Java base external functions
in future releases of SQLBASE. There can be no assurance that the Company will
be successful in these efforts.

The foregoing factors combine to create, what the Company believes, is a
compelling opportunity for the Company's embedded database products.

APPLICATION DEVELOPMENT TOOLS. The Company believes there will be a
continued demand for building applications that run in an n-tier environment,
with access to common, reusable business logic objects for both fat-clients and
thin-clients. CENTURA TEAM DEVELOPER is a 4GL, object-oriented development tool,
designed to maximize developer's investment in developing business logic code.
CENTURA TEAM DEVELOPER applications have native connectivity not only to
SQLBASE, but Oracle, Sybase and Microsoft SQLServer with the same set of APIs.
The same CENTURA TEAM DEVELOPER business logic can be deployed as both a Windows
and browser client, with minimal reprogramming of code, providing an easy
redefinition of application packages to support Internet-based
customer-to-supplier value chains. With the continued trend toward enterprise
wide applications, Centura expects a continued interest in the use of
application development tools that access and create components and business
logic objects available on either the server or the client. Developers will be
able to create new application solutions throughout the enterprise by
customizing and modifying existing components. These components will provide a
common linkage between disparate applications. Sales automation systems can be
linked to accounting systems, and companies can post and retrieve applications
via thin- and fat-clients--all possible by using common business logic
components created with CENTURA TEAM DEVELOPER. The Company expects that in the
future, a component's location on the network will become irrelevant to the
developer. Developers will expect to be able to compose, distribute, and debug
applications from any location. The Company plans to offer enhancements for
CENTURA TEAM DEVELOPER in 1998 that are designed to make it easy to manage and
distribute ActiveX components in a COM/DCOM distributed architecture. As Java
servlets or Java Beans can be invoked from COM interfaces, the Company intends
to enhance CENTURA TEAM DEVELOPER to be able to use these types of objects as
well as pure COM objects. In addition, it is the Company's intention that
CENTURA TEAM DEVELOPER may, in the future support integration with CORBA
environments to expose and use Java objects. There can be no assurance that the
Company will be successful in these efforts. The Company expects companies to
gradually move away from buying custom applications towards the building of new
systems by integrating and customizing existing components. The competitive
advantage will come from customizing off-the-shelf applications. This "buy and
customize" approach offers the best of both worlds: rapid development and the
ability to customize the application to meet existing business processes
requirements. The object architecture provided by CENTURA TEAM DEVELOPER is
conducive to individual customization of applications. This component, reusable
architecture, provides an advantage to the Company's application developers,
especially in sales situations where evaluation criteria might be the ease in
which components can be customized.

CENTURA NET.DB is a Web authoring tool, enabling Webmasters or software
developers to design SQL to HTML dynamic queries deployed within any
JavaScript-enabled Web browser. CENTURA NET.DB is browser-based for both design
and deployment. CENTURA NET.DB requires no special SQL, HTML, CGI, Perl, or C/
C++ expertise--and there is no requirement for browser plug-ins and other server
software. The CENTURA NET.DB architecture is intelligent about its use of
resources, accessing only the business logic code necessary to satisfy a
user/program request, and enabling hundreds of simultaneous accesses on a single
NT server. The Company expects to offer a version of CENTURA NET.DB that will
enable transaction processing via the Web.

TOTAL COST OF OWNERSHIP. The Company's products are built to be cost
effective for both the software developer and the end user.

The Company's products offer several advantages for the developer. The
Company's products are scalable, allowing a single set of source code to be
deployed on multiple platforms. Business applications that embed SQLBASE can be
installed as a single user desktop or a server environment from a single SKU.
Applications written with CENTURA TEAM DEVELOPER can interface with SQLBASE, as
well as Oracle, with a single set of code. This single set of source code
approach may reduce the amount of quality assurance resources required by
application developers, which can sometimes exceed the cost of developing the
application source code. CENTURA TEAM DEVELOPER maximizes the investment dollar
spent to develop and test business logic objects. Using the CENTURA TEAM
DEVELOPER class libraries, application developers can easily share business
logic code between applications. CENTURA TEAM DEVELOPER can deploy a single set
of business logic as either a Windows or a browser client, enabling the
transformation of business applications from Windows clients to Web clients,
without reprogramming the original Windows client logic. Using the built-in
revision control features of CENTURA TEAM DEVELOPER, programming teams have
access to the latest code, making it easier to develop complex applications on
time and on budget. CENTURA TEAM DEVELOPER is well positioned for the emerging
need to develop complex, enterprise-wide component based architecture
applications. Self recovery and self tuning features found in SQLBASE typically
result in fewer support calls from end-users providing better customer
satisfaction between the end user and the application developer.

The Company's products also offer a low total cost of ownership to
end-users. SQLBASE is a very small, yet robust database. This means applications
can run very effectively on a small footprint PC, reducing the hardware cost
required to install and operate applications which embed SQLBASE. SQLBASE
applications can include, within the application, log-in and assignment of
password features for new users, eliminating the need for end-users to know how
to operate the database. With built-in self-tuning and self-recovery processes,
SQLBASE applications automatically reboot and reestablish the database when a PC
loses power. SQLBASE applications reduce the need for internal MIS or data base
administrators, and reduces the amount of support calls for which an end user
would typically pay. End-users do not have to upgrade to 32-bit architectures
before installing applications built with the Company's products. CENTURA NET.DB
operates in a 16-bit browser environment, making it easy to connect end-users
around the world who may not yet have upgraded to a 32-bit PC. Both CENTURA TEAM
DEVELOPER and CENTURA NET.DB make it easy to webify an application built with
CENTURA TEAM DEVELOPER or SQLBASE, allowing access by employees and customers to
corporate data. The Company's products are priced for a PC client/server
environment, minimizing the cost of client/server solutions. This enables a low
cost of entry for small and medium size businesses. The Company's products are
cross platform, enabling applications to operate on Windows NT, Windows 95,
Windows 3.1, DOS and NetWare with minimal programming changes. See "Risk
Factors-- New Product Risks; Rapid Technological Change" and "--Highly
Competitive Markets".

DISTRIBUTION CHANNELS, PARTNERSHIPS AND STRATEGIC ALLIANCES. The Company
distributes its products using a blended distribution model that provides
incentives for its direct sales force to work closely with business partners.
The Company's Synergy Partner Program is designed to meet the needs of
businesses that include resellers, commercial application developers,
consultants, independent software vendors ("ISVs"), and complementary tools
providers. A number of companies, including SQL Financials, ADP and Aurum have a
partnership with Centura, whereby Centura provides these application developers
the right to remanufacture the SQLBASE product. See "Risk Factors--Dependence
Upon Distribution Channels" and "--Dependence on Third-Party Organizations".

WORLDWIDE MARKETS. The Company has designed its products and established
its marketing and sales channels to address the worldwide market opportunities,
including markets requiring double-byte enabled source code, for embeddable
databases and PC client/server systems. The Company has established operations
on six continents that have exclusive rights through either wholly-owned
subsidiaries or third-party distribution partners. CENTURA TEAM DEVELOPER is
shipped with OBJECT NATIONALIZER, which facilitates application development in
multiple languages. Approximately 58% of the Company's net revenues for 1997
were derived from sales outside the United States, and its products are
installed in at least 75 countries. The Company generally launches new products
on a worldwide basis. The Company's software

products support international data conventions, and certain products have been
localized into French, German and Japanese language editions.

SUPPORT PROGRAMS. The Company provides product support services directly
and through third-party vendors to enable easy customer implementation of its
client/server systems. The Company provides a variety of programs to support
customers ranging from small development groups to those who require access to
qualified support engineers 24 hours a day, seven days a week. Traditional
service offerings are augmented with an informal support network through a forum
on CompuServe, an Internet news group, and a strong presence on the World Wide
Web. A pay per request program is being implemented, and is scheduled to be
offered beginning in 1998. The Company-certified training partners offer courses
each year to assure customers of the right mix of classroom or on-site training.
Customers can also opt to study at their own pace with a specially developed
computer-based training course. In addition, a team of professional consulting
engineers are available to help companies develop application systems using
Centura products.

CHANGES IN STRATEGIC DIRECTION On January 6, 1997, in an effort to expand
its product offerings in areas complimentary with the Company's core products,
technology and overall strategic concept and into architectures embracing the
World Wide Web, the Company entered into a definitive agreement to acquire
Infospinner, Inc. ("Infospinner") of Richardson, Texas (the "Merger Agreement").
The Company did not obtain the majority vote of its shareholders required for
approval of the proposed merger within the designated time frame, and as such,
Infospinner elected to exercise its right, pursuant to the Merger Agreement, to
terminate the transaction. Beginning in the second half, and culminating in the
fourth quarter of 1997, the Company refocused and restructured its operations to
leverage its core technological competencies into next generation products which
continue to embrace a distributed architecture with components accessible
through both the client and the server and operating in both the Web and other
thin-clients. With the addition of CENTURA NET.DB, the Company's products now
encompass a comprehensive architecture for the development and deployment of
information systems and applications from a host environment, through two-tier
client/server and SQL databases, to the multi-tier environment of the World Wide
Web. See "Risk Factors--Changes in Strategic Direction: Restructuring;" "--New
Product Risks; Rapid Technological Change".

PRODUCTS

The Company's embeddable database, development environments, family of
connectivity products, and Web-based development environments, enable teams of
developers to embed, build and deploy scaleable client/server applications
throughout distributed computing environments. The Company's major products
include:

SQLBASE--THE SQLBASE family consists of embeddable and small-footprint
database products that enable application developers to provide low cost of
ownership applications with complete and robust RDBMS functionality and help
businesses deploy decentralized applications easily and cost-effectively. These
products--SQLBASE SERVER and SQLBASE DESKTOP--help organizations store data on
machines ranging from small mobile devices and single-user PCs to workgroup
servers and company-wide LAN and Web database servers. New versions of SQLBASE,
referred to as the SQLBASE MICROSERVERS, are being designed to meet the needs of
thin-clients and Smart Cards.

CENTURA TEAM DEVELOPER AND SQLWINDOWS--THE CENTURA TEAM DEVELOPER AND
SQLWINDOWS products enable customers to develop and deploy 32- and 16-bit, next
generation and Web-centric client/server object-oriented applications. CENTURA
TEAM DEVELOPER and SQLWINDOWS are created specifically to meet the needs of
application development teams seeking the power to move from workgroup and
enterprise pilot projects into large enterprise applications. These products
deliver client/server application scalability, new Internet integration, and
drag-and-drop replication functionality. The product family includes CENTURA
TEAM DEVELOPER and SQLWINDOWS, CENTURA APPLICATION SERVER, and the CENTURA
DEVELOPERS KIT, a set of

object-oriented interfaces that help developers create reusable objects in the
CENTURA TEAM DEVELOPER 32-bit and SQLWINDOWS 16-bit environments.

CENTURA WEB DEVELOPER--CENTURA WEB DEVELOPER, a subset of CENTURA TEAM
DEVELOPER, enables the development of Web-based, thin-client applications which
allow the deployment of CENTURA TEAM DEVELOPER business logic and transaction
processing applications in thin-client environments.

SQLHOST--THE SQLHOST products allow organizations to integrate DB2 or legacy
data into a client/ server environment without compromising performance, control
or security. SQLHOST for Visual Basic allows Visual Basic applications to access
host-based data.

CENTURA NET.DB--CENTURA NET.DB is a SQL to HTML browser-based Web authoring
tool. CENTURA NET.DB reads the referential integrity of a SQL database, and
automatically generates an HTML page view of each table. Using smart wizards,
Webmasters can easily customize and design dynamic SQL queries and updates of
live databases. The SQL queries can be deployed in any JavaScript enabled
browser and are therefore platform independent. No special browser plug-ins or
server software is needed.

END-USERS AND APPLICATIONS

No customer accounted for more than 10% of net revenues during the fiscal
years ended December 31, 1997, 1996, or 1995.

The Company's products are used by end-users in a wide variety of industries
for different applications:

INDUSTRY APPLICATION
- ------------------------------------ ----------------------------------------------------

Aerospace........................... Engineering information tracking and analysis

Automotive Products................. Multi-media-based information management

Consulting Services................. Information and human resource management

Consumer Products................... Sales tracking
Central repository for corporate financial data

Financial Services.................. Accounting solutions
Payroll services
Various commercial real estate applications
Portfolio and credit tracking
Decision support for insurance underwriters
Tax preparation automation
On-line remote banking

Government.......................... Child welfare case management and others

Industrial Products................. Sales administration and analysis

Petroleum and Chemicals............. Chemical hazard assessment and evaluation

Pharmaceuticals..................... Document creation and management

Retail, Wholesale and
Distribution...................... Enterprise security
On-line help desk telecommunications maintenance
Mission-critical pricing and production management
Import/Export tracking via Smart Card technology

Systems Integration Services........ Document-image processing

Telecommunications.................. Call tracking for technical support
Human resources management

Transportation...................... Economic analysis

Utilities........................... Decision-support for purchasing
Marketing contact and customer support

MARKETING, DISTRIBUTION AND PRODUCT SUPPORT

The Company's marketing and sales efforts are targeted to worldwide users
and developers of PC client/server systems and applications. These users,
ranging from individual PC application developers to MIS departments of large
corporations, typically purchase client/server software through different
channels and require different levels of support.

The Company generally segregates its customers, and accordingly its sales
force, into two basic categories:

EMBEDDED APPLICATIONS/LARGE SCALE DEPLOYMENT. Many customers purchase the
Company's products as part of a larger scale application deployment activity,
such as embedding a database in an application to be sold or otherwise marketed,
or creating an enterprise specific system solution using one or more of the
Company's products. As these applications can be complex and in some cases
critical to the business of an enterprise, these customers typically require a
greater degree of individual attention both from the Company's direct sales
force and technical support organizations, or from technically sophisticated
third parties, than do users who purchase the Company's products for a single
use or one-time development activity. To address the requirements of these
customers, the Company has established a field sales organization, which
operates in the United States, Canada, Mexico, Brazil, France, Germany, Italy,
Switzerland, Austria, the Netherlands, Belgium, the United Kingdom, Australia
and Japan. See "Risk Factors--International Sales and Operations" and "--Recent
Company Losses; Fluctuations in Quarterly Results".

These customers include vertical software partners, hardware original
equipment manufacturers ("OEMs"), systems integrators and ISVs with whom the
Company generally has established marketing or licensing arrangements. Such
partners include Automated Data Processing, Inc (payroll systems), Learmonth and
Burchett Management Systems PLC (CASE tools), Artemis International (project
management), PeopleSoft, Inc. (human resources), Project Software & Development,
Inc. (facilities management), Aurum Software Inc. (sales management) and
Spectrum Associates (manufacturing). In addition, the Company has an
architecture which enables ISVs to use the Company's products to co-engineer
enterprise-wide client/server applications or deliver add-on software. Hardware
OEMs purchase the Company's products and bundle them with their personal
computer hardware or applications software for resale to their customers. The
Company currently has OEM relationships with NCR, IBM, Siemens-Nixdorf, Computer
Associates International, Inc. ("CA") and other computer vendors. The Company
has entered into cooperative arrangements with system integrators, such as
Electronic Data Systems, that build large, custom turnkey solutions for their
corporate customers using the Company's products.

SINGLE USE OR ONE-TIME DEVELOPMENT. These customers generally utilize
outside services to specify, design, build and deploy limited client/server
systems within the enterprise. In addition, ISVs may utilize the Company's
development tools in the early stages of application development. These
customers include small, medium and large size businesses. The Company reaches
these customers through its corporate telesales organization and through an
indirect distribution channel, consisting of resellers, application developers,
distributors, value-added resellers ("VARs") and consultants.

The Company also distributes its products through major independent
distributors that may in turn sell such products to smaller VARs, resellers and
dealers. The Company presently has a distribution agreement with DistribuPro,
for distribution of the Company's products in North America. The Company also
has a network of international distributors, including Computer 2000 AG GmbH in
Europe and Mitsubishi Corporation in Japan. Many of the Company's distributors
carry competing product lines. The Company's distributors may from time to time
be granted stock exchange or rotation rights. Such returns or exchanges are
generally offset by an immediate replacement order of equal or greater value.
Although the Company believes that, to date, it has provided adequate allowances
for exchanges and returns, there can be no certainty that actual returns will
not exceed the Company's allowances, particularly in connection with
introduction of new products or enhancements. See "Risk Factors--Dependence Upon
Distribution Channels" and "--International Sales and Operations."

In a number of markets, including rapidly growing client/server markets such
as Japan and Korea, the Company has entered into multi-year master distribution
agreements with unrelated companies that have also licensed the use of the
Company's name. These organizations are in place to increase the Company's
opportunities and penetration in such markets where the rapid adoption of
client/server technologies is

anticipated. While the Company believes that to date these agreements have
increased the Company's penetration in these markets, there can be no certainty
that this performance will continue or that these relationships will remain in
place. The Company has the option to acquire 100% of the outstanding stock of
one of its foreign distributors, using a purchase price formula based on net
profits and revenues. See "Risk Factors--Dependence Upon Distribution Channels."

The Company also sells its products through a worldwide network of VARs and
consultants that specialize in developing customized solutions for smaller,
departmental networks. These VARs bundle the Company's products and products of
other software vendors into systems that are sold directly to end-users. The
Company has certified over 1,000 VARs marketing to industries such as financial
services, telecommunications, publishing, transportation and health care. See
"Risk Factors--Dependence Upon Distribution Channels."

MARKETING. To support its sales organizations, the Company conducts
comprehensive marketing programs and cooperative selling arrangements with the
Company's strategic partners. The Company's marketing programs include direct
mail, public relations, advertising, seminars, trade shows and ongoing customer
communication programs. The Company has entered into cooperative selling
arrangements with strategic partners, including NCR, ICL Personal Systems and
Siemens-Nixdorf that provide joint marketing or network solutions for
incorporating their products with the Company's products. The Company also
cooperates with suppliers of competitive client/server software, such as Oracle
Corporation ("Oracle") and Sybase, Inc., ("Sybase"), when customers desire
large-scale, joint solutions that include front-end tools from the Company or
deployment of desktop or mobile database applications.

The majority of the Company's revenues have been derived from the licensing
of software products for PC client/server systems, and such products are
expected to continue to account for substantially all of the Company's revenues
for the foreseeable future. Accordingly, broad market acceptance of PC client/
server systems is critical to the Company's future success. Failure of the
Company to successfully implement its sales and marketing strategies, or the
loss of one or more resellers, distributors, vertical software partners or other
marketing partners, could have a material adverse effect on the Company's
business, operating results and financial condition. See "Risk
Factors--Dependence Upon Distribution Channels" and "--Market Acceptance of PC
Client/Server Systems".

CUSTOMER SUPPORT AND SERVICE. The Company is committed to providing timely,
high-quality technical support, which the Company believes is critical to
maintaining customer satisfaction in the PC client/server market. Customer
requirements for support and service vary depending on factors such as the
number of different hardware and software vendors involved in an installation,
the complexity of the application and the nature of the hardware configuration.
The Company offers flexible multi-tiered technical support programs tailored to
these specific customer needs. The Company offers a licensed maintenance service
to all its customers to provide bug fixes and software enhancements. In
addition, the Company provides technical support through a telephone hotline
service. For the large enterprise-wide customer, the Company offers
comprehensive premium support programs. The Company broadens its support
coverage through its worldwide network of authorized support centers, certified
business partners and authorized consultants. See "Risk Factors--Dependence on
Third-Party Organizations".

RESEARCH, PRODUCT DEVELOPMENT AND ENGINEERING

Since inception, the Company has made substantial investments in research
and product development. During 1997, 1996 and 1995, the Company's expenditures
in research and development, net of capitalized software, were $9.7 million,
$11.0 million and $14.4 million, representing 17%, 17% and 22% of net revenues,
respectively. The Company's products have been developed by its internal product
development staff and, in certain instances, by strategic use of outside
consultants. The Company believes that timely development of new products and
enhancements to existing products is essential to maintain its competitive
position.

The Company is committed to continued development of new technologies for PC
client/server computing. The Company supports major 32-bit operating systems,
including Microsoft Windows 95, Microsoft Windows NT and Novell NetWare. In
addition, the Company plans to continue to offer upgrades to its products.
Delays or difficulties associated with new products or product enhancements
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Risk Factors--New Product Risks; Rapid
Technological Change" and "--Component Software Markets".

COMPETITION

The market for embedded databases and application development tools system
software is intensely competitive and rapidly changing. The Company's products
are specifically targeted at the emerging portion of this market relating to
embeddable database PC and Web client/server software, and the Company's current
and prospective competitors offer a variety of solutions to address this market
segment.

EMBEDDABLE DATABASE MARKET. As database capacity is often indicative of
differences in customer application, segments within the PC client/server market
in which the Company competes can generally be distinguished and segregated by
the number of anticipated users and target capacity of the database utilized.
The Company generally markets its database products in environments utilizing
capacity ranging from small, five kilobyte Smart Card environments to those in
excess of five Gigabytes. Competitors of the Company include Microsoft, Oracle,
Computer Associates, IBM, Sybase, Pervasive, and Informix, and generally have
product offerings which compete with the Company's products in some or all of
these capacity ranges. In addition, some of these competitors are providers of
sophisticated database software, originally designed and marketed primarily for
use with mainframes and minicomputers, which, if successfully re-configured to
provide similar functionality in PC client/server, or smaller capacity
environments, could materially and adversely impact the Company's revenues,
results of operations and financial condition.

TOOLS AND CONNECTIVITY MARKETS. The Company faces competition from
providers of application development software, such as Sybase's Powersoft
Division, Microsoft, and Borland, and connectivity software competitors such as
IBM. The Company also faces potential competition from vendors of applications
development tools based on 4GLs (fourth-generation languages) or CASE (Computer
Aided Software Engineers) technologies. With the emergence of the World Wide Web
as an important platform for application development and deployment, additional
competitors or potential competitors have emerged.

Many of the Company's competitors have longer operating histories and
significantly greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger installed base, than
the Company. In addition, many competitors have established relationships with
customers of the Company. The Company's competitors could in the future
introduce products with more features and lower prices than the Company's
offerings. These companies could also bundle existing or new products with more
established products to compete with the Company. Furthermore, as the PC and Web
client/ server market expands, a number of companies, with significantly greater
resources than the Company, could attempt to increase their presence in this
market by acquiring or forming strategic alliances with competitors of the
Company, or by introducing products specifically designed for the PC and Web
client/ server market.

compete effectively because of the significantly larger resources available to
many of the Company's competitors. There can be no assurance that the Company
will be able to compete successfully or that competition will not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors--Highly Competitive Markets" and
"--Market Acceptance of PC Client/Server Systems".

INTELLECTUAL PROPERTY

The Company currently has one patent issued with respect to its SQLWINDOWS
and CENTURA TEAM DEVELOPER products and relies on a combination of trademark,
copyright and trade secret protection and nondisclosure agreements to establish
and protect its proprietary rights. Policing unauthorized use of the Company's
technology is expensive and difficult, and there can be no assurance that these
measures will be successful. While the Company's competitive position may be
affected by its ability to protect its proprietary information, the Company
believes that ultimately factors such as the technical expertise and innovative
skill of its personnel, its name recognition, and ongoing product support and
enhancements may be more significant in maintaining the Company's competitive
position.

The Company provides its software products to customers under non-exclusive,
non-transferable license agreements. As is customary in the software industry to
protect intellectual property rights, the Company does not sell or transfer
title to its software products to customers. Under the Company's current
standard form of end user license agreement, licensed software may be used
solely for the customer's internal operations and, except for limited deployment
rights provided in certain of its SQLWINDOWS packages, only on designated
computers at specified sites. The Company relies primarily on "shrink-wrap"
licenses for the protection of products intended for single, one-time use or
limited deployment. A shrink-wrap license agreement is a printed license
agreement included within packaged software that sets forth the terms and
conditions under which the purchaser can use the product, and binds the
purchaser by its acceptance and purchase of the software products to such terms
and conditions. Shrink-wrap licenses typically are not signed by the licensee
and therefore may be unenforceable under the laws of certain jurisdictions.

The Company has entered into source code escrow agreements with a number of
resellers and end users that require release of source code to such parties with
a limited, nonexclusive right to use such code in the event that there is a
bankruptcy proceeding by or against the Company, the Company ceases to do
business or the Company breaches its contractual obligations to the customer.
The Company has, in certain cases, licensed its source code to customers for
specific uses.

There can be no assurance that third parties will not assert infringement
claims against the Company in the future with respect to current or future
products or that any such assertion may not result in costly litigation or
require the Company to obtain a license to intellectual property rights of third
parties. There can be no assurance that such licenses will be available on
reasonable terms, or at all. As the number of software products in the industry
increases and the functionality of these products further overlap, the Company
believes that software developers may become increasingly subject to
infringement claims. Any such claims, with or without merit, can be time
consuming and expensive to defend.

EMPLOYEES

As of December 31, 1997, the Company had 180 full-time employees, including
31 in research and development, 6 in manufacturing, 94 in sales and marketing,
16 in technical services and support and 33 in finance and administration. The
Company maintains competitive compensation, benefits, equity participation and
work environment policies to assist in attracting and retaining qualified
personnel. None of the Company's employees are covered by collective bargaining
agreements. The Company believes its relationship with its employees is good.
The Company believes that the success of its business will depend in large

part on its ability to attract and retain qualified personnel. Competition for
such personnel is intense, and there can be no assurance that the Company will
be successful in attracting and retaining such personnel.

RISK FACTORS

This Annual Report on Form 10-K contains certain 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. Actual results could differ materially
from those projected in the forward-looking statements as a result of certain of
the risk factors set forth below and elsewhere in this Annual Report on Form
10-K. In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
presented in this report.

CHANGES IN STRATEGIC DIRECTION: RESTRUCTURING. In efforts to stem losses
and maximize return on the Company's core assets and technologies, the Company
has restructured its operations and announced changes in strategic direction
several times in recent financial periods. The first of these changes, which
began in December 1995, encompassed a change in the Company's name from Gupta
Corporation to Centura Software Corporation and the identification of a flagship
product bearing the name CENTURA. In early 1997, the Company refocused its
marketing and sales efforts away from RDBMS and development tools products to a
middleware connectivity product and the related Merger Agreement with
Infospinner for which the Company did not obtain required shareholder approval
within the specified time frame and, as such, was not consummated. In the second
half of 1997, however, the Company restructured and refocused operations on its
core competencies, products and technologies and terminated its distribution
arrangement with Infospinner. There can be no assurance that the restructuring
efforts the Company has engaged in to date will be successful or that the
Company will be able to sustain profitability on a quarterly or annual basis. In
addition, there can be no assurance that the Company's management will not deem
it appropriate to undertake other major restructuring efforts or changes in
strategic direction in the future or to what degree any of these efforts will
result in improved operational performance, if at all.

RECENT CHANGES IN SENIOR MANAGEMENT. In the fourth quarter of 1997, the
Company announced significant changes in senior management. Such changes
included the appointment of Scott R. Broomfield as Chief Executive Officer, John
W. Bowman as Chief Financial Officer, and Kathy Lane as Senior Vice President of
Marketing, and the election of Messrs. Jack King, Phillip Koen, Jr., and Earl
Stahl to the Company's Board of Directors, and the retirement of Samuel M.
Inman, III, Earl Stahl and Richard Gelhaus from their positions as officers of
the Company. In February 1998 the Company announced the election of Messrs.
William D. Nicholas and Peter Micciche to the Board of Directors and the
appointment of Scott R. Broomfield to the position of Chairman & CEO. There can
be no assurance that the new management team will be successful in execution of
its objectives or that the successful execution of these objectives will result
in improved operating results or financial position of the Company.

DEPENDENCE ON KEY PERSONNEL. The Company's future performance is
substantially dependent on the performance of its executive officers and key
product development, technical, sales, marketing and management personnel. The
Company does not have employment or non-competition agreements with any of its
employees. The loss of the services of any executive officer or other key
technical or management personnel of the Company for any reason could have a
material adverse effect on the business, operating results and financial
condition of the Company. In addition, the Company needs to recruit a Vice
President, Engineering/Chief Technology Officer. The Company considers this
position critical to the success of its ongoing competitive position in defined
markets and operations. There can be no assurance that an appropriate individual
will be located to fill this position on a timely basis on terms reasonable to
the Company, or at all.

The future success of the Company also depends on its continuing ability to
identify, hire, train, motivate and retain other highly qualified technical and
managerial personnel. Competition for such personnel is intense and the Company
has experienced difficulty in identifying and hiring qualified

engineering and software development personnel. There can be no assurance that
the Company will be able to attract, assimilate or retain other highly qualified
technical and managerial personnel in the future. The inability to attract and
retain the necessary technical and managerial personnel could have a material
and adverse effect upon its business, operating results and financial condition.
See "Business--Employees" and "--Executive Officers of Registrant".

RECENT COMPANY LOSSES; FLUCTUATIONS IN QUARTERLY RESULTS. The Company has
experienced in the past and may in the future to continue to experience
significant fluctuations in quarterly operating results. The Company reported a
loss of $0.6 million for fiscal year 1997, a profit of $2.0 million for 1996,
and a loss of $44.1 million for 1995. There can be no assurance that the
restructuring efforts the Company has engaged in to date will be successful or
that the Company will be able to sustain profitability on a quarterly or annual
basis. Many of the Company's product licensing arrangements are subject to
revenue recognition on a per-unit deployed basis as the Company's deferred
obligation to such customers is gradually extinguished. Revenue recognition in
such cases is therefore dependent upon the business activities of the Company's
customers and the timely and accurate reporting of such activities to the
Company, which makes predictability of the related revenue extremely uncertain.
In addition, quarterly operating results of the Company will depend on a number
of other factors that are difficult to forecast, including, general market
demand for the Company's products; the size and timing of individual orders
during a quarter; the Company's ability to fulfill such orders; introduction,
localization or enhancement of products by the Company; delays in the
introduction and/or enhancement of products by the Company and its competitors;
market acceptance of new products; reviews in the industry press concerning the
products of the Company or its competitors; software "bugs" or other product
quality problems; competition and pricing in the software industry; sales mix
among distribution channels; customer order deferrals in anticipation of new
products; reduction in demand for existing products and shortening of product
life cycles as a result of new product introductions; changes in operating
expenses; changes in the Company's strategy; personnel changes; foreign currency
exchange rates; mix of products sold; inventory obsolescence; product returns
and rotations; and general economic conditions. Sales of the Company's products
also may be negatively affected by delays in the introduction or availability of
new hardware and software products from third parties. The Company's financial
results also may vary as a result of seasonal factors including year and quarter
end purchasing and the timing of marketing activities, such as industry
conventions and tradeshows.

Although the Company has operated historically with little or no backlog of
traditional boxed product shipments, it has experienced a seasonal pattern of
product revenue decline between the fourth quarter and the succeeding first
quarter, contributing to lower worldwide product revenues and operating results
during such quarters. It has generally realized lower European product revenues
in the third quarter as compared to the rest of the year. The Company has also
experienced a pattern of recording a substantial portion of its revenues in the
third month of a quarter. As a result, product revenues in any quarter are
dependent on orders booked in the last month. Because the Company's staffing and
other operating expenses are based in part on anticipated net revenues, a
substantial portion of which may not be generated until the end of each quarter,
delays in the receipt or shipment of orders, including delays that may be
occasioned by failures of third party product fulfillment firms to produce and
ship products, or the actual loss of product orders can cause significant
variations in operating results from quarter to quarter. The Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in sales of the
Company's products in relation to the Company's expectations could have an
immediate adverse impact on the Company's business, operating results and
financial condition. To the extent that the Company's expenses exceed expected
revenues in any fiscal period, its business, operating results and financial
condition could be materially and adversely affected. Due to the foregoing
factors, it is likely that the Company's operating results may, during any
fiscal period, fall below the expectations of securities analysts and investors.
In such event, the trading price of the Company's common stock could be
materially and adversely affected. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations".

VOLATILITY OF THE COMPANY'S COMMON STOCK PRICE. The market for the
Company's common stock is highly volatile. The trading price of the Company's
common stock fluctuated significantly in 1997, 1996 and 1995, and may continue
to be subject to wide fluctuations in response to quarterly variations in
operating and financial results, announcements of new products or customer
contracts by the Company or its competitors, litigation and other factors. Any
shortfall in revenue or earnings from levels expected by securities analysts or
others could have an immediate and significant adverse effect on the trading
price of the Company's common stock in any given period. Additionally, the
Company may not learn of, or be able to confirm, revenue or earnings shortfalls
until late in the fiscal quarter or following the end of the quarter, which
could result in an even more immediate and adverse effect on the trading of the
Company's common stock. Finally, the Company participates in a highly dynamic
industry, which often results in significant volatility of its common stock
price.

DILUTIVE AND POTENTIAL DILUTIVE EFFECT TO SHAREHOLDERS. The Company has
engaged in a number of transactions which have resulted in dilution to the
Company's shareholders. On May 2, 1994, a lawsuit was filed against the Company
and certain of its officers and directors by a holder of the Company's common
stock, on his own behalf and purportedly on behalf of a class of others
similarly situated (the "Class Action Lawsuit"). The Company reached a binding
settlement agreement (the "Settlement Agreement") with plaintiffs' counsel in
the lawsuit, and gained court approval of the Settlement Agreement on September
30, 1996. As part of the settlement, the Company agreed to provide up to a
maximum of 2,500,000 shares of its common stock (the "Settlement Shares") to a
fund to be distributed among the members of the plaintiff class. As of December
31, 1997, 2,500,000 Settlement Shares have been issued and distributed in full
settlement of the Class Action Lawsuit. Issuance of the Settlement Shares was
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended (the "Securities Act"), pursuant to Section 3(a)(10) of the
Securities Act, which provides for exemption of registration under the
Securities Act for securities issued pursuant to terms and conditions which have
been approved, after a hearing on the fairness of such terms and conditions, by
a United States court. As a result, the Settlement Shares, when issued and
delivered in accordance with the Settlement Agreement approved by the United
States District Court for the Northern District of California, were fully
tradeable, fully paid and non-assessable. See Note 6 of Notes to Consolidated
Financial Statements.

In February 1998, Computer Associates, Inc. ("CA"), and Newport Acquisition
Company, LLP ("NAC") entered into a Note Purchase and Sale Agreement (to which
the Company consented) and the Company and NAC entered into a Note Conversion
Agreement (the "Agreements"). Under the terms of the Agreements, a promissory
note, plus accrued interest, in the amount of $12,251,000, payable to CA (the
"CA Note") was acquired by NAC, and immediately converted into 11,415,094 shares
of the Company's common stock (the "Shares"). Concurrently with execution of the
Agreements, the Company and NAC entered into an Investor Rights Agreement (the
"Rights Agreement") wherein the Company has agreed to register the Shares under
the Securities Act, effective February 27, 1999.

Also in February 1998, pursuant to the terms a Common of Stock and Warrant
Purchase Agreement, the Company completed a management-led private placement of
2,330,191 shares of the Company's common stock (the "Private Placement"),
resulting in gross proceeds to the Company of $2,470,000. Transaction costs
associated with both the Agreements and the Private Placement are estimated to
be approximately $600,000. The Company has agreed to register the Private
Placement shares under the Securities Act.

In June 1997, the Company issued warrants to purchase 90,000 and 10,000
shares of common stock to Pacific Business Funding Corporation and its affiliate
Sand Hill Capital, LLC, respectively, at an exercise price of $2.094 per share.
The warrants expire on June 30, 2002. In February 1998, in connection with the
Agreements, the Company entered into a Warrant Purchase Agreement with CA
wherein the Company issued and sold to CA, a warrant to purchase 500,000 shares
of the Company's common stock (the "CA Warrant"). The CA Warrant is exercisable
at $1.906 per share and expires on February 27, 2003. The Company has agreed to
register the shares issuable upon exercise of the CA Warrant under the
Securities

Act, no later than April 29, 1998. Also in February 1998, in connection with the
Private Placement the Company issued warrants to purchase 582,548 shares of the
Company's common stock at an exercise price of $1.25 per share (the "Private
Placement Warrants"). The Private Placement Warrants expire on February 27,
2003. Also, in consideration of services rendered in connection with the Private
Placement, the Company issued to Rochon Capital Group, Ltd. warrants to purchase
354,717 shaes of the Company's common stock at an exercise price of $2.12 (the
"Rochon Warrants"). The Rochon Warrants expire on February 27, 2003. The Company
has agreed to register the shares issuable under the terms of the Private
Placement Warrants and the Rochon Warrants under the Securities Act. In March
1998 the Company issued to NAC an additional warrant to purchase 893,320 shares
of the Company's Common Stock at an exercise price of $1.81 per share (the "NAC
Warrant"), pursuant to a Right of First Refusal provision contained in the
Rights Agreement. The NAC Warrant is subject to three-year vesting.

From time to time, the Company issues shares of common stock pursuant to its
1992 Employee Stock Purchase Plan and pursuant to options granted under its 1995
Incentive Stock Option Plan, 1998 Employee Stock Option Plan and 1996 Directors'
Stock Option Plan. Additional options remain outstanding and are exercisable
pursuant to the Company's 1986 Incentive Stock Option Plan, which terminated in
July 1996. In addition, the Company has issued non-plan options to purchase an
aggregate of 1,500,000 shares of common stock to the Company's Chief Executive
Officer, Chief Financial Officer and Sr. Vice President of Marketing. In March
1998, the Company's Board of Directors approved the 1998 Employee Stock Option
Plan, under which options to purchase 1,415,000 shares of common stock are
issuable to non-officer employees.

Future issuance of such shares of the Company's common stock pursuant to any
of the foregoing will dilute the beneficial ownership of existing Company
shareholders.

NEED FOR ADDITIONAL EQUITY FINANCING. The Company may be required to seek
additional equity financing to finance the acquisition of new products and
technologies, capital equipment and continuing operations. If the Company needs
further financing, there can be no assurance that it will be available on
reasonable terms or at all. Any additional equity financing will result in
dilution to the Company's shareholders.

NEW PRODUCT RISKS; RAPID TECHNOLOGICAL CHANGE. The markets for the
Company's software products and services are characterized by rapid
technological developments, evolving industry standards, swift changes in
customer requirements and computer operating environments, and frequent new
product introductions and enhancements. As a result, the success of the Company
depends substantially upon its ability to continue to enhance existing products,
develop and introduce in a timely manner, new products incorporating
technological advances and meet increasing customer expectations, all on a
timely and cost-effective basis. To the extent one or more competitors introduce
products that better address customer needs, the Company's businesses could be
adversely affected. The Company's success will also depend on the ability of its
primary products, SQLBASE, CENTURA TEAM DEVELOPER, SQLWINDOWS, CENTURA NET.DB,
and SQLHOST, to perform well with existing and future leading, industry-standard
application software products intended to be used in connection with RDBMS. Any
failure to deliver these products as scheduled or their failure to achieve early
market acceptance as a result of competition, technological change, failure of
the Company to timely release new versions or upgrades, failure of such upgrades
to achieve market acceptance or otherwise, could have a material adverse effect
on the business, operating results and financial condition of the Company. In
addition, commercial acceptance of the Company's products and services could be
adversely affected by critical or negative statements or reports by industry and
financial analysts concerning the Company and its products, or other factors
such as the Company's financial performance. If the Company is unable to develop
and introduce new products or enhancements to existing products in a timely
manner in response to changing market conditions or customer requirements, its
business, operating results and financial condition could be materially and
adversely affected.

The Company depends substantially upon internal efforts for the development
of new products and product enhancements. The Company has in the past
experienced delays in the development of new products and product versions,
which resulted in loss or delays of product revenues, and there can be no
assurance that the Company will not experience further delays in connection with
its current product development or future development activities. Also, software
products as complex as those offered by the Company may contain undetected
errors when first introduced or as new versions are released. The Company has in
the past discovered software errors in certain of its new products and
enhancements, respectively, after their introduction. Although the Company has
not experienced material adverse effects resulting from any such errors to date,
there can be no assurance that errors will not be found in new products or
releases after commencement of commercial shipments, resulting in adverse
product reviews and a loss of or delay in market acceptance, which could have a
material adverse effect upon the Company's business, operating results and
financial condition.

From time to time, the Company or its competitors may announce new products,
product versions, capabilities or technologies that have the potential to
replace or shorten the life cycles of the Company's existing products. The
Company has historically experienced increased returns of a particular product
version following the announcement of a planned release of a new version of that
product. The Company provides allowances for anticipated returns, and believes
its existing policies result in the establishment of allowances that are
adequate, and have been adequate in the past, but there can be no assurance that
product returns will not exceed such allowances in the future. The announcement
of currently planned or other new products may cause customers to delay their
purchasing decisions in anticipation of such products, which could have a
material adverse effect on business, operating results and financial condition
of the Company. See "Business--Research and Product Development" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations".

YEAR 2000 ISSUE. The "Year 2000 Issue" arises because most computer systems
and programs were designed to handle only a two-digit year, as opposed to a four
digit year. When the year 2000 begins these computers may interpret "00" as the
year 1900 and could either stop processing date-related computations or could
process them incorrectly. As customers and potential customers of the Company
begin to devote incremental resources to this issue, resources previously
allocated to other information systems requirements may be redirected to address
the Year 2000 issue. To the extent that the Company's products are not selected
as part of customers' overall Year 2000 solution, redirection of these customer
resources could have a material adverse effect on the Company's results of
operations and financial condition. In addition, the Year 2000 Issue creates
risk for the Company from unforeseen problems in its internal computer systems
and from third parties with which the Company interacts. Such failures of the
Company's and/or third parties' computer systems could have a material impact on
the Company's ability to conduct its business, and to process and account for
the transfer of funds electronically.

EMBEDDABLE DATABASE MARKET. Since database capacity is often indicative of
differences in customer application, segments within the PC client/server market
in which the Company competes can generally be distinguished and segregated by
the target capacity of the database utilized. The Company generally markets its
database products in environments utilizing capacity ranging from small, five
kilobyte Smart Card environments to those in excess of five Gigabytes.
Competitors of the Company, including Microsoft, Oracle, CA, IBM, Sybase,
Borland, Pervasive, and Informix, generally have product offerings which compete
with the Company's products in some or all of these capacity ranges. In
addition, some of these competitors are providers of sophisticated database
software, originally designed and marketed primarily for use with mainframes and
minicomputers, which, if successfully re-configured to provide similar
functionality in Windows or Browser clients, or smaller capacity environments,
could materially and adversely impact the Company's revenues, results of
operations and financial condition.

COMPETITION. The market for embedded databases and application development
tools system software is intensely competitive and rapidly changing. The
Company's products are specifically targeted at

the emerging portion of this market relating to embeddable PC and Web
client/server software, and the Company's current and prospective competitors
offer a variety of solutions to address this market segment. The Company faces
competition from providers of application development software, such as Oracle,
Sybase's Powersoft Division, Microsoft, and Borland, and connectivity software
competitors such as IBM. The Company also faces potential competition from
vendors of applications development tools based on 4GLs (generation languages)
or CASE (Computer Aided Software Engineers) technologies. With the emergence of
the World Wide Web as an important platform for application development and
deployment and a variety of newly created Java based development tools,
additional competitors or potential competitors have emerged.

The principal competitive factors affecting the market for the Company's
products include breadth of distribution and name recognition, product
architecture, performance, functionality, price, product quality, customer
support. The Company experienced increased competition during 1997, 1996, and
1995, resulting in loss of market share. The Company must continue to introduce
enhancements to its existing products and offer new products on a timely basis
in order to remain competitive. However, even if the Company introduces such
products in this manner, it may not be able to compete effectively because of
the significantly larger resources available to many of the Company's
competitors. There can be no assurance that the Company will be able to compete
successfully or that competition will not have a material adverse effect on the
Company's business, operating results and financial condition. See
"Business--Competition".

MARKET ACCEPTANCE OF PC CLIENT/SERVER SYSTEMS. To date, substantially all
of the Company's revenues have been derived from the licensing of software
products for PC client/server systems and licensing of such products is expected
to continue to account for substantially all of the Company's revenues for the
foreseeable future. With the increasing focus on enterprise-wide systems that
embrace the World Wide Web, some customers may opt for solutions that favor
mainframe or mini-computer solutions with associated Web connectivity.
Accordingly, some companies may abandon use of PC client/server systems, which
could have a material adverse effect on the Company's future success. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations".

COMPONENT SOFTWARE MARKETS. The advent of so-called "component" software
may alter the way in which customers buy software. In this structure, logical
statements or discreet "units of activity" can be distributed pursuant to
executable statements within a Windows or Browser client environment. As
specific software functionality can be bundled into smaller units or objects
rather than in broad, highly functional products such as the Company's
development tools, customers may be less willing to buy such broad, highly
functional products. If such a trend continues, the Company may choose to
introduce component-type products. The costs and efforts necessary to package
and distribute such components are largely unknown and there can be no assurance
that the Company will be able to repackage and distribute its products in such a
component-type software structure, in an efficient manner, or at all.

INTERNET SOFTWARE MARKET. The market for Internet software in general, and
the segments of such market addressed by the Company's products in particular,
are relatively new. The future financial performance of the Company will depend
in part on the continued expansion of this market and these

market segments and the growth in the demand for other products developed by the
Company, as well as increased acceptance of the Company's products by MIS
professionals. There can be no assurance that the Internet software market and
the relevant segments of the market will continue to grow, that the Company will
be able to respond effectively to the evolving requirements of the market and
market segments, or that MIS professionals will accept the Company's products.
If the Company is not successful in developing, marketing, localizing and
selling applications that gain commercial acceptance in these markets and market
segments on a timely basis, the Company's business, operating results and
financial condition could be materially and adversely affected. See
"Business--Overview".

DEPENDENCE UPON DISTRIBUTION CHANNELS. The Company relies on relationships
with value-added resellers and independent third party distributors for a
substantial portion of its sales and revenues. Some of the Company's resellers
and distributors also offer competing products. Most of the Company's resellers
and distributors are not subject to any minimum purchase requirements, they can
cease marketing the Company's products at any time, and they may from time to
time be granted stock exchange or rotation rights. Moreover, the introduction of
new and enhanced products may result in higher product returns and exchanges
from distributors and resellers. Any product returns or exchanges in excess of
recorded allowances could have a material adverse effect on the Company's
business, operating results and financial condition. The Company also maintains
strategic relationships with a number of vertical software vendors and other
technology companies for marketing or resale of the Company's products. Any
termination or significant disruption of the Company's relationship with any of
its resellers or distributors, or the failure by such parties to renew
agreements with the Company, could materially and adversely affect the Company's
business, operating results and financial condition. Since 1994 the Company has
reduced its resources devoted to North American corporate sales and also
decreased its expenditures on corporate and product marketing. Failure of the
Company to successfully implement, support and manage its sales strategies could
have a material adverse effect on the Company.

The distribution channels through which client/server software products are
sold have been characterized by rapid change, including consolidations and
financial difficulties of distributors, resellers and other marketing partners
including certain of the Company's current distributors. The bankruptcy,
deterioration in financial condition or other business difficulties of a
distributor or retailer could render the Company's accounts receivable from such
entity uncollectible, and this could result in a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that distributors will continue to purchase the Company's products or
provide the Company's products with adequate promotional support. Failure of
distributors to do so could have a material and adverse effect on the Company's
business, operating results and financial condition.

In a number of international markets the Company has entered into
quasi-exclusive, multi-year agreements with independent companies that have also
licensed the use of the Company's name. These agreements are in place to
increase the Company's opportunities and penetration in such markets where the
rapid adoption of client/server technologies is anticipated. While the Company
believes that to date these agreements have increased the Company's penetration
in such markets, there can be no certainty that this performance will continue
nor that these relationships will remain in place. The Company's future cost of
maintaining its business in these markets could increase substantially if these
agreements are not renewed. See "Business--Marketing, Distribution and Product
Support".

DEPENDENCE ON THIRD-PARTY ORGANIZATIONS. The Company is increasingly
dependent on the efforts of third party "partners", including consultants,
system houses and software developers to implement, service and support the
Company's products. These third parties increasingly have opportunities to
select from a very broad range of products from the Company's competitors, many
of whom have greater resources and market acceptance than the Company. In order
to succeed, the Company must actively recruit and sustain relationships with
these third parties. There can be no assurance that the Company will be
successful in recruiting new partners or in sustaining its relationships with
its existing partners.

INTERNATIONAL SALES AND OPERATIONS. International sales represented 58%,
60% and 61% of the Company's net revenues for the years ended December 31, 1997,
1996 and 1995, respectively. A key component of the Company's strategy is
continued expansion into international markets, and the Company currently
anticipates that international sales, particularly in new and emerging markets,
will continue to account for a significant percentage of total revenues. The
Company will need to retain effective distributors, and hire, retain and
motivate qualified personnel internationally to maintain and/or expand its
international presence. There can be no assurance that the Company will be able
to successfully market, sell, localize and deliver its products in these
international markets. In addition to the uncertainty as to the Company's
ability to sustain or expand its international presence, there are certain risks
inherent in doing business on an international level, such as unexpected changes
in regulatory requirements and government controls, problems and delays in
collecting accounts receivable, tariffs, export license requirements and other
trade barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, political and economic instability, fluctuations in currency
exchange rates, seasonal reductions in business activity during summer months in
Europe and certain other parts of the world, restrictions on the export of
critical technology, and potentially adverse tax consequences, which could
adversely impact the success of international operations. Sales of the Company's
products are denominated both in local currencies of the respective geographic
region and in US dollars, depending upon the economic stability of that region
and locally accepted business practices. Accordingly, any increase in the value
of the US dollar relative to local currencies in these markets may negatively
impact revenues, results of operations and financial condition. An increase in
the relative value of the US dollar would serve to increase the relative foreign
currency cost to the customer of a US dollar denominated purchase, which may
negatively affect the Company's sales in foreign markets. In addition, the US
dollar value of a sale denominated in a region's local currency decreases in
proportion to relative increases in the value of the US dollar. In addition,
effective copyright and trade secret protection may be limited or unavailable
under the laws of certain foreign jurisdictions. There can be no assurance that
one or more of such factors will not have a material adverse effect on the
Company's international operations and, consequently, on the Company's business,
operating results and financial condition. See "Business--Marketing,
Distribution and Product Support--Customer Support and Service".

PROPRIETARY RIGHTS. The success and ability of the Company to compete is
dependent in part upon the Company's proprietary technology. While the Company
relies on trademark, trade secret and copyright laws to protect its technology,
the Company believes that factors such as the technological and creative skills
of its personnel, new product developments, frequent product enhancements, name
recognition and customer support are more essential to establishing and
maintaining a technology leadership position. The Company has one patent with
respect to its SQLWINDOWS and CENTURA TEAM DEVELOPER products. The Company
believes that the ownership of patents is not presently a significant factor in
its business and that its success does not depend on the ownership of patents,
but primarily on the innovative skills, technical competence and marketing
abilities of its personnel. Also, there can be no assurance that others will not
develop technologies that are similar or superior to the Company's technology.
The source code for the Company's proprietary software is protected both as a
trade secret and as a copyrighted work. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain and use their products or
technology without authorization, or to develop similar technology
independently. In addition, effective copyright and trade secret protection may
be unavailable or limited in certain foreign countries.

The Company generally enters into confidentiality or license agreements with
its employees, consultants and vendors, and generally controls access to and
distribution of its software, documentation and other proprietary information.
Despite efforts to protect proprietary rights, unauthorized parties may attempt
to copy aspects of the Company's products or to obtain and use information that
is regarded as proprietary. Policing such unauthorized use is difficult. There
can be no assurance that the steps taken by the Company will prevent
misappropriation of the Company's technology or that such agreements will be
enforceable. In addition, litigation may be necessary in the future to enforce
intellectual property rights, to protect trade secrets or to determine the
validity and scope of the proprietary rights of others. Such

litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results and financial condition.

There can be no assurance that third parties will not claim infringement by
the Company with respect to current or future products, and the Company expects
that it will increasingly be subject to such claims as the number of products
and competitors in the client/server and Internet connectivity software market
grows and the functionality of such products overlaps with other industry
segments. In the past, the Company has received notices alleging that its
products infringe trademarks of third parties. The Company has historically
dealt with and will in the future continue to deal with such claims in the
ordinary course of business, evaluating the merits of each claim on an
individual basis. There are currently no material pending legal proceedings
against the Company regarding trademark infringement. Any such third party
claims, whether or not they are meritorious, could result in costly litigation
or require the Company to enter into royalty or licensing agreements. Such
royalty or license agreements, if required, may not be available on terms
acceptable to the Company, or at all. If the Company was found to have infringed
upon the proprietary rights of third parties, it could be required to pay
damages, cease sales of the infringing products and redesign or discontinue such
products, any of which could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Intellectual
Property".

MANAGEMENT OF POTENTIAL GROWTH. In recent years, the Company has
experienced both expansion and contraction of its operations each of which has
placed significant demands on the Company's administrative, operational and
financial resources. To manage future growth, if any, the Company must continue
to improve its financial and management controls, reporting systems and
procedures on a timely basis and expand, train and manage its work force. There
can be no assurance that the Company will be able to perform such actions
successfully. The Company intends to continue to invest in improving its
financial systems and controls in connection with higher levels of operations.
Although the Company believes that its systems and controls are adequate for the
current level of operations, the Company anticipates that it may need to add
additional personnel and expand and upgrade its financial systems to manage any
future growth. The Company's failure to do so could have a material adverse
effect upon the Company's business, operating results and financial condition.

LEGAL PROCEEDINGS. On September 17, 1997, Technology Venture (Software)
Holdings Limited, formerly known as Eagerquest Investments Limited
("Eagerquest") filed suit against the Company in the United States District
Court for the Central District of California alleging that the Company acted
improperly in terminating its contract with Eagerquest for the distribution of
the Company's products in the territories of Hong Kong and China and that the
Company's actions illegally damaged Eagerquest. The Company believes that its
actions were within its rights under its contract with Eagerquest and that the
allegations are without merit. The Company intends to defend itself vigorously
in this action and that the outcome will not have a material adverse affect on
the Company's financial situation or business prospects.

Other than the above, there are currently no material pending legal
proceedings against the Company or any of its subsidiaries. The Company operates
in an environment, however, where litigation may occur in the course of its
normal business operations. In the complex and volatile industry in which the
Company operates, disputes, litigation, regulatory proceedings and other actions
are a necessary risk of doing business. There can be no assurance that the
Company will not participate in such legal proceedings and that the costs and
charges will not have a material adverse impact on the Company's future success.

DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The following table sets forth information as of February 28, 1998,
regarding the directors and executive officers of the Company:

NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------

Scott R. Broomfield................. 41 President and Chief Executive Officer (Principal Executive Officer),
Chairman of the Board of Directors

John W. Bowman...................... 43 Senior Vice President, Finance and Operations and Chief Financial
Officer (Principal Financial Officer)

Michael Moore....................... 60 Senior Vice President, World Wide Sales

Kathy Lane.......................... 55 Senior Vice President, Marketing

Ann Bontatibus...................... 53 Vice President, Technical Services and Support

Lionel Carrasco..................... 35 Vice President, Business Development

John Griffin........................ 50 Vice President, European Operations

Richard Lucien...................... 40 Vice President, Corporate Controller
(Principal Accounting Officer)

Samuel M. Inman, III(1)............. 47 Director

Jack King(2)........................ 64 Director

Phillip Koen, Jr.(2)(1)............. 46 Director

Peter Micciche(2)................... 44 Director

William D. Nicholas(1).............. 49 Director

Earl M. Stahl....................... 43 Director

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

(1) Member of the Audit Committee of the Board of Directors.

(2) Member of the Compensation Committee of the Board of Directors.

Mr. Broomfield has served as Chief Executive Officer and a director of the
Company since December 1997 and Chairman of the Board of Directors and Chief
Executive Officer since February 1998. Prior to joining the Company, Mr.
Broomfield was a principal with the firm of Hickey & Hill Incorporated ("Hickey
& Hill") from February 1993 to December 1997, advising companies needing
operational and financial restructuring. In this capacity, Mr. Broomfield
assisted companies with executive management, strategy, operational and
financial restructuring, business planning and business development. Prior to
joining Hicky & Hill, Mr. Broomfield held senior management positions at Trilogy
Systems, Inc., and Digital Equipment Corporation. Mr. Broomfield has a BS in
psychology from Azusa Pacific University and an MBA, from Santa Clara
University.

Mr. Bowman has served as Chief Financial Officer of the Company since
December 1997. Prior to joining the Company Mr. Bowman also served as a
principal with the firm of Hickey & Hill from July 1997 to December 1997 where
he assisted companies with executive management, strategy, operational and
financial restructuring, business planning and business development. Prior to
joining Hicky & Hill, Mr. Bowman was President of Country Club Foods, Inc. from
November 1995 through June 1997 and from February 1992 through November 1995
served as Vice President of Finance for Speckels Sugar Co., Inc. Prior to this,
from 1978 through 1992, Mr. Bowman held various senior financial management
positions at Unisys Corporation. Mr. Bowman holds a BS in Business Management
from San Diego State University and an MBA in Finance from the University of
California, Berkeley.

Mr. Moore joined the Company in January 1997 and served as Sr. Vice
President of Sales for the Intercontinental Region from January 1997 through
October 1997 and Senior Vice President, Worldwide

Sales since that time. Prior to joining the Company, Mr. Moore served in several
senior sales management positions at Tandem Computer Corporation, including VP,
Western US Operations, VP, Intercontinental Division, and VP, Worldwide Sales
Operations, from 1981 until 1995. Prior to joining Tandem, Mr. Moore held sales
management positions for both Honeywell Information Systems and Durango Systems.
Mr. Moore holds a BA degree in Political Science from Long Beach State
University, CA.

Ms. Lane has served as Senior Vice President of Marketing since joining the
Company in December 1997. Prior to this, Ms. Lane served as Vice President,
Marketing for Harman Interactive from June 1994 until May 1997 when the company
was sold to Intel. Prior to that, from September 1993 through June 1994, Ms.
Lane founded and served at NewMedia Ware. From June 1991 through June 1993 Ms.
Lane served as President, Professional Division at Chipsoft, (which was later
acquired by Intuit, a leading provider of accounting and tax software for the
desk-top). Prior to this, Ms. Lane served as CEO of Softview from September 1988
through June 1991 and in executive and senior marketing roles at several
software and related companies, including Dataquest, a market research firm, and
was elected to and chaired the Marketing Special Interest Group for the Software
Publishers Association for four years. Ms. Lane received a B.S. in Business
Administration from Fort Hays State College in Kansas.

Ms. Bontatibus began her tenure at Centura Software Corporation in January,
1994 as Director of Professional Services and was promoted to the position of
Vice President, Worldwide Services and Support in March 1997. Prior to joining
Centura, from 1987 until January 1994, Ms. Bontatibus held the position of
Director, Field Services at Ingres Corporation, a software company that
developed and marketed the Ingres database and 4GL development tools. Prior to
this Ms. Bontatibus held senior project management and consultant positions at
Amdahl, Chevron and IBM. Ms. Bontatibus holds a B.S. degree in Accounting from
New York University.

Mr. Carrasco has served as Vice President, Business Development since
November 1997. Mr. Carrasco joined the Company in June 1996 and served in
various Senior Product Management positions from June 1996 until November 1997.
Prior to joining the Company, from September 1995 until June 1996, Mr. Carrasco
served as Chief Executive Officer and Chief Technical Officer of Ingenieria de
Soluciones in Mexico City, a company that builds custom sized software
applications and development tools. Prior to this, Mr. Carrasco was Chief
Executive Officer and Chief Technical Officer of ISSA, a distribution partner of
the Company in Mexico and was co-founder of Centura de Mexico, the Company's
wholly owned subsidiary in Mexico. Mr. Carrasco brings several years of
professional experience including working as an international consultant for the
United Nations, and in various countries as an evangelist for new technologies.
Mr. Carrasco's most important enterprise to date is ISOL, which is
internationally recognized by Microsoft as one of the most valuable and
technically capable software houses in Latin America. Currently, Mr. Carrasco is
a member of the Board of Directors of two software houses in Mexico. Mr.
Carrasco obtained his bachelors degree in History from the National School of
Anthropology and History in Mexico in 1985 and his masters degree in Computer
Science from the Arthuro Rosembluet Foundation in 1987.

Mr. Griffin has served as Vice President and Managing Director for Europe at
Centura Software Corporation since January 1, 1998. Mr. Griffin joined the
Company in January 1997 and served as Managing Director, Northern Europe Region
through December 1997. Prior to joining the Company, Mr. Griffin was Managing
Director at BMC Software Limited from 1985 until 1995. He held various
management positions at IBM UK Limited from 1970 to 1985. Mr. Griffin holds a
Bachelor of Arts in Economics and Law from Keele University.

Mr. Lucien has served as Vice President, Corporate Controller since joining
the Company in December 1997 and served as a consultant to the Company from July
1997 through December 1997. Prior to joining the Company, Mr. Lucien was
Corporate Controller at Berkeley Systems, Inc., a software games and
entertainment company, from February 1996 through June 1997 and was Director of
Corporate Reporting at Spectrum HoloByte, Inc., a software games and
entertainment company, from July 1994

through February 1996. Prior to this, Mr. Lucien served in the International
Consulting Practice of Tohmatsu & Co., the Japanese affiliate of Delloitte,
Touche, Tohmatsu, International, in Osaka, Japan, from July 1991 through March
1994. Prior to this, Mr. Lucien served in various financial management positions
at Nellcor, Inc., a manufacturer of non-invasive medical instruments from June
1987 through 1990. Mr Lucien began his professional career at Touche Ross & Co.
in January 1985 and holds a B.S. degree in business administration from
California State University, Hayward.

Mr. Inman served as Chairman of the Board of Directors from September 1996
until February 1998 and as President and Chief Executive Officer (Principal
Executive Officer) from December 1995 until December 1997, and President and
Chief Operating Officer from April 1995 until November 1997. Prior to joining
the Company, from March 1993 until April 1995, Mr. Inman served as President and
Chief Operating Officer of Ingram Micro Inc., the largest microcomputer products
distributor worldwide, where he was responsible for overseeing and managing
Ingram's U.S. operations. Prior to joining Ingram, Mr. Inman, a 21-year veteran
of IBM, served as President of IBM's Personal Computer Company for the Americas.
He is a graduate of Purdue University, where he earned a B.S. degree in
mathematics.

Mr. King has served on the Company's Board of Directors since December 1997.
Mr. King has been President and CEO of Zitel Corporation, a company specializing
in Year 2000 software conversion consulting, systems integration and
"intelligence-based" technology solutions, since November 1986. Prior to joining
Zitel, Mr. King has held key executive and senior management positions at
Dynamic Disk, Data Electronics, Memorex and Xerox Corporation. Mr. King holds a
B.S. in Industrial Management from San Diego State University.

Mr. Koen has has served on the Company's Board of Directors since December
1997. Mr. Koen has served as Senior Vice President, Finance and Chief Financial
Officer of PointCast Corporation since June of 1997. Prior to this Mr. Koen
served as Chief Financial Officer of Etec Systems from December 1993 until June
1997. Prior to that he was the Vice President of Finance, and then the Chief
Financial Officer at Levelor Corporation from April 1989 to December 1993. Mr.
Koen holds a B.A. in Economics from Claremont Mens College and an M.B.A in
General Management from the University of Virginia.

Mr. Micciche has served as a member of the Board of Directors since February
1998. Mr. Micciche has been President and CEO of SceneWare Corporation since
September 1994. Prior to that he was Vice-President and General Manager, North
America at The ASK Group from December 1992 until May, 1993, and was President
of Cognos Corporation from December 1989 through December 1992. Mr. Micciche
graduated from Boston College with a Bachelor of Science in Accounting and from
Suffolk University with an MBA in Finance.

Mr. Nicholas has served as a member of the Board of Directors since February
1998 and has been associated with Crossroads Capital Partners, LLC since June
1997. Prior ot this he was President of Integrated Consulting Solutions, Inc.
from January 1994 through June 1997. From March 1981 until January 1994 Mr.
Nicholas served as a Partner in the Information & Technology Group of Ernst &
Young. Mr. Nicholas received a Bachelor of Arts in Mathematics from LaSalle
University, holds a Bachelor of Science in Accounting from St. Joseph's
University, and obtained a Masters in Business Administration from Villanova
University. Mr. Nicholas is a Certified Public Accountant (CPA) and a Certified
Data Processor (CDP).

Mr. Stahl, served as Chief Technology Officer and Senior Vice President for
the products organization at Centura Software Corporation from April 16, 1995
until December 1997. Mr. Stahl joined Centura in 1988 and has held various key
positions within the company's development organization, including spearheading
the company's client/server tools development effort. Mr. Stahl has more than 20
years of industry experience, which includes product development and support on
mainframe, minicomputers, and PC systems. He holds a B.S. in computer science
from San Diego State University and has previously managed development projects
at Bell Northern Research, Dest Corporation, and VisiCorp. Mr. Stahl is
currently Vice President of Engineering for DataMind Corporation.

The Board of Directors elects the Company's officers and such officers serve
at the discretion of the Board of Directors of the Company. There are no family
relationships among the officers or directors of the Company.

ITEM 2. PROPERTIES

The Company leases approximately 48,000 square feet of office, development
and warehousing space in facilities in Redwood Shores, California.

As of December 31, 1997, the Company also has offices in the metropolitan
areas of Atlanta, Chicago, Dallas, Los Angeles, New York, Washington, D.C.,
Bruetten (Switzerland), Duesseldorf, Leuven (Belgium), London, Sydney
(Australia), Mexico City, Milan, Maarssen (The Netherlands), Munich, Paris, and
Vienna. The Company believes that its facilities are adequate for its current
needs and that suitable additional space will be available as needed.

ITEM 3. LEGAL PROCEEDINGS

On September 17, 1997, Technology Venture (Software) Holdings Limited,
formerly known as Eagerquest Investments Limited ("Eagerquest") filed suit
against the Company in the United States District Court for the Central District
of California alleging that the Company acted improperly in terminating its
contract with Eagerquest for the distribution of the Company's products in the
territories of Hong Kong and China and that the Company's actions illegally
damaged Eagerquest. The Company believes that its actions were within its rights
under its contract with Eagerquest and that the allegations are without merit.
The Company intends to defend itself vigorously in this action and that the
outcome will not have a material adverse affect on the Company's financial
situation or business prospects.

As of December 31, 1997, to the best of the Company's knowledge there were
no other pending actions, potential actions, claims or proceedings against the
Company that could result in potential damages in excess of $50,000. As noted in
the "Legal Proceedings" section under "Risk Factors" above, the Company exists
in a volatile legal and regulatory environment and it is not possible to
anticipate or estimate the potential adverse impact of unknown claims or
liabilities against the Company, its officers and directors, and as such no
estimate is made in the Company's financial statements for such unknown claims
or liabilities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NOT APPLICABLE

No matters were submitted to a vote of the Company's shareholders during the
fiscal quarter ended December 31, 1997.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS

The Company's common stock is quoted on The Nasdaq SmallCap Market (the
"SmallCap Market") under the trading symbol "CNTR". The following table sets
forth, for the periods indicated, the quarterly high and low sale prices per
share of the Company's common stock. The Company's common stock began trading on
The Nasdaq National Market ("Nasdaq") on February 5, 1993 under the trading
symbol "GPTA". At December 31, 1997 the Company did not meet the Nasdaq minimum
tangible net worth requirements for continued listing. On January 13, 1998, the
Company was notified that effective January 15, 1998, the Company's shares were
to be listed on the SmallCap Market and that continued listing on the SmallCap
Market was contingent upon meeting all continued listing standards adopted by
the National Association of Securities Dealers (the "NASD"), effective February
27, 1998. At February 27, 1998, including, on a pro-forma basis, the effect of
the Agreements and the Private Placement, the Company had met all the SmallCap
Market continued listing requirements as required by the NASD. Continued listing
of the Company on the SmallCap Market is predicated on continuing to meet the
listing requirements adopted by the NASD.

HIGH LOW
--------- ---------

1997
First Quarter............................................................ $ 5.125 $ 2.875
Second Quarter........................................................... 3.625 1.313
Third Quarter............................................................ 3.125 1.438
Fourth Quarter........................................................... 2.719 1.063
1996
First Quarter............................................................ $ 7.125 $ 5.563
Second Quarter........................................................... 6.750 4.688
Third Quarter............................................................ 5.625 4.375
Fourth Quarter........................................................... 4.750 2.750

The Company has not paid any cash dividends. The Company currently does not
anticipate paying any cash dividends in the foreseeable future.

As of February 28, 1998, there were approximately 1,036 shareholders of
record (not including beneficial holders of stock held in street name) of the
Company's common stock.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Company's consolidated financial statements and related
notes included elsewhere herein. The statements of operations data for the years
ended December 31, 1997, 1996 and 1995 and the balance sheets data at December
31, 1997 and 1996 are derived from, and are qualified by reference to, the
audited consolidated financial statements of the Company included elsewhere in
this Annual Report on Form 10-K and should be read in conjunction with those
consolidated financial statements and the notes thereto, which have been audited
by Price Waterhouse, LLP, independent accountants, whose report is included
elsewhere in this Annual Report on Form 10-K. The statement of operations data
for the years ended December 31, 1994 and 1993 and the balance sheet data at
December 31, 1995, 1994 and 1993 are derived from audited consolidated financial
statements not included in this Annual Report on Form 10-K. Historical earnings
per share data has been restated to reflect the adoption of Statement of
Financial Accounting Standard No. 128, "Earnings per Share." The pro-forma
balance sheet data for 1997 is unaudited.

SELECTED CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------

Net Revenues:
Product.................................... $ 40,714 $ 45,452 $ 49,408 $ 46,134 $ 41,655
Service.................................... 17,232 17,781 16,306 10,398 5,820
--------- --------- --------- --------- ---------
Net Revenues................................. 57,946 63,233 65,714 56,532 47,475
Cost of revenues............................. 12,218 14,578 19,640 17,146 11,407
--------- --------- --------- --------- ---------
Gross Profit................................. $ 45,728 $ 48,655 $ 46,074 $ 39,386 $ 36,068
Operating income (loss)...................... $ 1,230 $ 2,484 $ (42,993) $ (32,981) $ (1,858)
Net income (loss)............................ $ (649) $ 2,027 $ (44,079) $ (31,841) $ (1,908)
Basic net income (loss) per share(3)......... $ (0.04) $ 0.15 $ (3.62) $ (2.66) $ (0.17)
Basic weighted average common shares(3)...... 15,439 13,231 12,175 11,957 11,411
Diluted net income (loss) per share(3)....... $ (0.04) $ 0.15 $ (3.62) $ (2.66) $ (0.17)
Diluted weighted average common shares(3).... 15,439 13,380 12,175 11,957 11,411

SELECTED CONSOLIDATED BALANCE SHEETS DATA
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
1997
-----------
PRO-FORMA(1)

Working Capital (Deficit)(2)..... $ (4,250) $ (18,232) $ (15,616) $ (25,604) $ 599 $ 40,919
Total Assets..................... 30,070 28,200 36,705 48,104 58,161 72,372
Long-term Obligations............ 856 856 12,188 11,744 1,939 477
Shareholders' Equity (Deficit)... $ 4,028 $ (9,954) $ (16,923) $ (24,057) $ 18,670 $ 49,223

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

(1) The December 1997 Pro-forma balances reflect adjustments to the December 31,
1997 balances for the conversion of the CA Note, plus accrued interest and a
private placement of common stock which were completed on February 27, 1998.
The balance of the CA Note plus accrued interest was approximately
$12,112,000 at December 31, 1997 and gross proceeds from the Private
Placement were $2,470,000. Transaction costs associated with both the sale
and conversion of the CA Note and the Private Placement are estimated to be
approximately $600,000. See Note 13 to the Consolidated Financial
Statements.

(2) Working Capital (Deficit) includes deferred revenue of $14,618,000,
$21,891,000, $28,800,000, $21,879,000 and $12,261,000 at December 31, 1997,
1996, 1995, 1994 and 1993, respectively.

(3) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of shares used in computing net income (loss) per basic and diluted common
shares and equivalents.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's discussion and analysis of the financial condition and results
of operations should be read in conjunction with the audited consolidated
financial statements and the notes thereto, as well as "Risk Factors" included
in this Annual Report on Form 10-K.

OVERVIEW

The Company commenced operations in 1984 and provides a suite of products
application developers use to build and deploy business applications in a cost
effective manner. Centura products include an embedded database that scales from
Smart Cards to the Web, and object oriented application development tools.
Centura products are designed to be deployed in both thin- and fat-client
environments, using business logic objects that can be reused in multi-tier
architectures in distributed environments. The Company's product lines include
an embedded database, (SQLBASE), application development tools, (CENTURA TEAM
DEVELOPER, THE 32-BIT VERSION OF SQLWINDOWS, AND CENTURA NET.DB) and PC to
mainframe connectivity products (SQLHOST). These products are expected to
constitute the majority of the Company's net revenues for the foreseeable
future. The Company cannot accurately predict the exact timing of new product
releases or enhancements. Any failure to deliver products as scheduled, or such
products' failure to achieve early market acceptance, could have a material
adverse effect on the business, operating results and financial condition of the
Company. The Company distributes its products in the United States and
internationally through a corporate sales organization consisting of the
Company's internal sales force complimented by marketing arrangements with
vertical software partners, hardware original equipment manufacturers and
systems integrators, and a channel sales organization consisting of value-added
resellers and distributors. See "Item 1. Business--Risk Factors--New Product
Risks; Rapid Technological Change," "--Highly Competitive Markets", "--Market
Acceptance of PC Client/Server Systems" and "--Internet Software Market".

The Company has experienced in the past and may in the future continue to
experience significant fluctuations in quarterly operating results. The Company
reported a loss of $0.6 million for fiscal year 1997, a profit of $2.0 million
for 1996, and a loss of $44.1 million for 1995. Beginning in the fourth quarter
of 1997, the Company refocused and restructured its operations to leverage its
core technological competencies into next generation products, which include
embeddable databases and continue to embrace object oriented application
development and both thin- and fat-client environments. With the addition of
CENTURA NET.DB, the Company's products now provide a comprehensive architecture
for the development and deployment of information systems and applications from
a host environment, through two-tier client/server and SQL databases, to the
multi-tier environment of the World Wide Web. The Company recognized total
restructuring charges of $1.0 million in 1997 and approximately $5.4 million in
1995. There can be no assurance that the restructuring efforts the Company has
engaged in to date will be successful or that the Company will be able to
sustain profitability on a quarterly or annual basis. Many of the Company's
product licensing arrangements are subject to revenue recognition on a per-unit
deployed basis as the Company's deferred obligation to its customers is
gradually extinguished. Revenue recognition in such cases is therefore dependent
upon the business activities of the Company's customers and the timely and
accurate reporting of such activities to the Company, which makes predictability
of the related revenue extremely uncertain. Although the Company has operated
historically with little or no backlog of traditional boxed product shipments,
it has experienced a seasonal pattern of product revenue decline between the
fourth quarter and the succeeding first quarter, contributing to lower worldwide
product revenues and operating results during such quarters. It has generally
realized lower European product revenues in the third quarter as compared to the
rest of the year. The Company has also experienced a pattern of recording a
substantial portion of its revenues in the third month of a quarter. As a
result, product revenues in any quarter are dependent on orders booked in the
last month. Accordingly, any significant shortfall in sales of the Company's
products in relation to the Company's expectations could have an immediate
adverse impact on the Company's business, operating results and financial
condition.

To the extent that the Company's expenses exceed expected revenues in any fiscal
period, its business, operating results and financial condition could be
materially and adversely affected. Due to the foregoing factors, it is likely
that the Company's operating results may, during any fiscal period, fall below
the expectations of securities analysts and investors. See "Part I, Item 1.
Business, Risk Factors--Recent Company Losses; Fluctuations in Quarterly
Results."

RECENT DEVELOPMENTS

SALE AND CONVERSION OF NOTE PAYABLE. In February 1998, Computer Associates,
Inc. ("CA"), and Newport Acquisition Company, LLP ("NAC") entered into a Note
Purchase and Sale Agreement and the Company and NAC entered into a Note
Conversion Agreement (the "Agreements"). Under the terms of the Agreements, a
promissory note, plus accrued interest, in the amount of $12.3 million, payable
to CA (the "CA Note") was acquired by NAC, and immediately converted into
11,415,094 shares of the Company's common stock (the "Shares"). In February
1998, in connection with the Agreements, the Company entered into a Warrant
Purchase Agreement with CA wherein the Company sold and issued to CA, at an
issuance price of $.001 per share, a warrant to purchase 500,000 shares of the
Company's common stock. The warrant is exercisable at $1.906 per share and
expires on February 28, 2003.

PRIVATE PLACEMENT. Also in February 1998, pursuant to the terms of Stock
Purchase Agreements, the Company completed a private placement of 2,330,191
shares of the Company's common stock (the "Private Placement"), resulting in net
proceeds to the Company, after deducting estimated transaction costs, of
approximately $1.9 million. Under the terms of the Stock Purchase Agreements,
the Company has agreed to register the shares, issued pursuant to the Stock
Purchase Agreements under the Securities Act of 1933, no later than May 29,
1998. In connection with the Private Placement the Company issued warrants to
purchase 582,548 shares of the Company's common stock. The warrants are
exercisable at $1.25 per share and expire on February 28, 2003. Also, in
consideration of services rendered in connection with the Private Placement, the
Company issued to Rochon Capital Group, Ltd. Warrants to purchase 354,717 shares
of the Company's common stock at an exercise price of $2.12 (the "Rochon
Warrants"). The Rochon warrants expire on February 27, 2003. Transaction costs
associated with both the Agreements and the Private Placement are estimated to
be approximately $0.6 million. See Note 13, of Notes to The Consolidated
Financial Statements.

The Company had, on a pro-forma basis, including the effect of the
Agreements and the Private Placement, deficit working capital of $4.3 million
and net shareholders equity of $4.0 million at December 31, 1997.

In addition, at December 31, 1997 the Company did not meet the Nasdaq
minimum tangible net worth requirements for continued listing on the Nasdaq
National Market. On January 13, 1998, the Company was notified that effective
January 15, 1998, the Company's shares were to be listed on The Nasdaq SmallCap
Market (the "SmallCap Market") and that continued listing on the Small Cap
Market was contingent upon meeting listing standards adopted by the NASD,
effective February 27, 1998. At February 27, 1998, including, on a pro-forma
basis, the effect of the Agreements and the Private Placement, the Company had
met all SmallCap Market listing requirements as required by the NASD. Continued
listing on the SmallCap Market is predicated on the Company continuing to meet
the listing requirements adopted by the NASD.

RESULTS OF OPERATIONS

The following table sets forth consolidated statements of operations data as
a percentage of net revenues for the periods indicated:

YEAR ENDED DECEMBER 31,
-------------------------------------

1997 1996 1995
----------- ----------- -----------
Net revenues:
Product.......................................................... 70% 72% 75%
Service.......................................................... 30 28 25
--- --- ---
Net revenues................................................... 100 100 100

Cost of revenues:
Product.......................................................... 8 8 14
Service.......................................................... 13 15 16
--- --- ---
Cost of revenues............................................... 21 23 30
--- --- ---
Gross profit................................................. 79 77 70
--- --- ---
Operating expenses:
Sales and marketing.............................................. 45 46 65
Research and development......................................... 17 17 22
General and administrative....................................... 12 10 17
Acquisition expense.............................................. 1 1 --
Litigation expense............................................... -- (1) 23
Restructuring expense............................................ 2 -- 8
--- --- ---
Total operating expenses....................................... 77 73 135
--- --- ---
Operating income (loss)...................................... 2 4 (65)
Other income (expense), net........................................ (3) -- --
Provision for income taxes......................................... -- 1 2
--- --- ---
Net income (loss).................................................. (1)% 3% (67)%
--- --- ---
--- --- ---
Gross Margins:
Gross margin on product revenues................................. 88% 89% 82%
Gross margin on service revenues................................. 57% 46% 34%

NET PRODUCT REVENUES. Net product revenues for 1997 decreased 10% to $40.7
million from $45.5 million in 1996 primarily due to decreased sales of
SQLWINDOWS. Customers continued to migrate from the 16-bit to the 32-bit
environment offered by the CENTURA TEAM DEVELOPER product, which partially
offset the decline in SQLWINDOWS sales. Sales of the Company's SQLBASE products
increased to $24.5 million or 60% of net product revenues in 1997 from $23.8
million or 52% of net product revenues in 1996. The CENTURA TEAM DEVELOPER
product line, released in May 1996, accounted for $10.7 million or 26% of net
product revenues for 1997 compared with $8.5 million or 19% of net product
revenues in 1996. Net product revenues for 1996 decreased 8% from $49.4 million
in 1995 primarily due to decreased sales of SQLWINDOWS. Sales of SQLBASE
products in 1996 decreased slightly from $24.8 million or 50% of net product
revenue in 1995. Sales of other tools and connectivity software accounted for
$5.5 million or 14%, $13.1 million or 29% and $4.0 million or 8% of net product
revenues for 1997, 1996 and 1995, respectively. International revenue accounted
for 63%, 67% and 66% of total net product revenues for 1997, 1996 and 1995,
respectively.

NET SERVICE REVENUES. Net service revenues decreased 3% to $17.2 million in
1997 from $17.8 million in 1996. The Company believes the decrease corresponds
to the overall decrease in net product revenues experienced in 1997, partially
offset by renewals of customer support and service agreements from prior

years. Net service revenues increased in 1996 from $16.3 million in 1995 due
primarily to a larger installed customer base, inception of a group focusing on
sales of license maintenance and telephone support and marketing programs
designed to encourage customers to reinstate support. License maintenance and
telephone support contracts are typically paid in advance, and revenue is
recognized ratably over the term of the contract. International service revenues
accounted for 46%, 41% and 46% of total net service revenues for 1997, 1996 and
1995, respectively.

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition", which the Company currently intends to adopt for transactions
entered into in the fiscal year beginning January 1, 1998. SOP 97-2 provides
guidance on recognizing revenue for software transactions and supersedes SOP
91-1, "Software Revenue Recognition". The Company believes that the adoption of
SOP 97-2 will not have a significant impact on its current licensing or revenue
recognition practices.

COST OF PRODUCT REVENUES. Cost of product as a percentage of product
revenues was 12%, 11% and 18% for 1997, 1996 and 1995, respectively. In December
1995, the Company completed a financial restructuring which included a decision
to consolidate all warehouse and manufacturing functions into a single new
vendor. This resulted in a non-recurring charge against cost of revenues for an
estimated write-off of raw materials of approximately $0.6 million and led to a
more efficient production process which contributed to the reduced cost of
product in 1997 and 1996 from 1995 levels. Cost of product includes the cost of
subcontracted production and the amortization of capitalized software. Cost of
product varies significantly by distribution channel. Channel sales typically
involve sales of packaged products and, as a result, generally have higher costs
of production than embedded applications or large scale deployment sales, which
generally involve software reproduction licenses.

In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed", the Company capitalizes internal development costs on a project when
the technological feasibility of such project has been determined. The Company
ceases capitalizing such expenses when the products derived from the project are
released for sale. The capitalized costs are then amortized ratably over the
useful life of the products, generally estimated to be two to three years.
Amortization of capitalized software costs, which include the amortization
software purchased from third parties, increased to $2.7 million in 1997 from
$1.6 million in 1996. Amortization of capitalized software costs, including one
time charge to write-off capitalized software, were $2.2 million in 1995. See
Notes 2 and 3 of Notes to Consolidated Financial Statements.

COST OF SERVICE REVENUES. Cost of service revenues, as a percentage of
service revenues, decreased to 43% in 1997 from 54% in 1996 and 66% in 1995.
Cost of service consists primarily of personnel costs related to maintenance,
training and technical support. In December 1995 and August 1997, the Company
completed operational restructurings which encompassed outsourcing certain
support functions. The outsourcing activities enabled a lower infrastructural
cost of service while maintaining adequate levels of support. It is likely that
the Company will increase the levels of technical service in 1998 and as such,
the cost of service as a percentage of service revenues may also increase, to
the extent that service revenues do not grow at the same rate.

SALES AND MARKETING EXPENSES. Sales and marketing expenses, consisting
principally of salaries, sales commissions and costs of advertising and
marketing campaigns, decreased 10% to $26.2 million in 1997 from $29.1 million
in 1996. In 1996, sales and marketing expenses decreased 32% from $42.9 million
in 1995. Sales and marketing expenses represented 45%, 46% and 65% of net
revenues in 1997, 1996 and 1995, respectively. The decrease in sales and
marketing expenses in 1997 was due to reductions in staffing, including the
elimination of portions of the field sales organization which were focussed on
the Foresite product which the Company discontinued in the fourth quarter of
1997. The decrease in sales and marketing expenses in 1996 as compared with 1995
related to the elimination of the telebusiness product

sales organization and the reduction of marketing staff and programs with the
objective of targeting marketing at enterprise client/server solution providers.

RESEARCH AND DEVELOPMENT EXPENSES. The table below sets forth gross
research and development expenses, capitalized internal software development
costs, and net research and development expenses in dollar amounts and as a
percentage of net revenues for the periods indicated:

YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)

Gross research and development expenses...................... $ 10,742 $ 12,897 $ 16,662
Capitalized internal software development costs.............. (1,018) (1,865) (2,242)
--------- --------- ---------
Net research and development expenses........................ $ 9,724 $ 11,032 $ 14,420
--------- --------- ---------
--------- --------- ---------
As a percentage of net revenues:
Gross research and development expenses.................... 19% 20% 25%
Net research and development expenses...................... 17% 17% 22%

Research and development expenses decreased 12% to $9.7 million in 1997 from
$11.0 million in 1996. The decrease reflects a reduction in staffing and
associated continuing engineering costs required to develop new products in
1997. The Company anticipates that development costs will increase in 1998 as
the Company expands its efforts to leverage core technologies into next
generation products. Research and development expenses in 1995 reflected a $3.4
million write-off of previously capitalized software development costs in
conjunction with the Company's restructuring efforts in that year. After
accounting for this one-time charge, research and development expenses were
essentially flat in 1996 as compared with 1995. The Company believes that the
development of new products and the enhancement of existing products, are
essential to its continued success, and the Company intends to continue to
devote substantial resources to new product development.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 5% to $7.0 million in 1997 from $6.7 million in 1996, due principally
to increases in costs to retain key personnel, offset by staffing reductions in
the second half of 1997. General and administrative expenses were $11.0 million
in 1995 which included an approximate $1.3 million one time charge for
accounting and professional fees for re-audits of the 1993 and 1994 fiscal year
financial statements and the audit of the 1995 fiscal year financial statements.
These expenses represented 12%, 10% and 17% of net revenues in 1997, 1996 and
1995, respectively. In 1995 and 1997, the Company completed operational
restructuring which included staff reductions and the abandonment of certain MIS
projects which led to reduced general and administrative expenses in 1996 as
compared with 1995. See: --Year 2000 Issue.

LITIGATION SETTLEMENT--CLASS ACTION LAWSUIT. (See Note 7 of Notes to
Consolidated Financial Statements). The Company reached a binding settlement
agreement with plaintiffs' counsel in a lawsuit filed against the Company and
certain of its officers and directors by a holder of the Company's common stock
and gained court approval of the settlement agreement on September 30, 1996. As
part of the settlement, the Company agreed to provide up to a maximum of
2,500,000 shares of its common stock to a fund to be distributed among the
members of the plaintiff class. As of December 31, 1997, 2,500,000 shares have
been issued and distributed under the settlement agreement and no additional
shares are required to be issued. The 1995 Consolidated Financial Statements
include $15.3 million in litigation expense arising from the settlement
agreement and associated legal expenses.

ACQUISITION EXPENSES. On January 6, 1997, in an effort to expand its
product offerings in areas complimentary with the Company's core products,
technology and Internet applications, the Company entered into a definitive
agreement to acquire Infospinner, Inc. (Infospinner) of Richardson, Texas (the
"Merger Agreement"). The Company did not obtain the majority vote of its
shareholders required for the

approval of the proposed merger, and as such, Infospinner elected to exercise
its right, pursuant to the Merger Agreement, to terminate the transaction. In
connection with the Merger Agreement, the Company entered into a non-exclusive
distribution agreement with Infospinner which was subsequent terminated. See
"Restructuring expenses."

RESTRUCTURING EXPENSES. Beginning in the second half of 1997, the
distribution agreement with Infospinner terminated and the Company restructured
its operations to leverage its core technological competencies into next
generation products, which include embeddable databases and development tools
that continue to embrace object oriented development and both thin- and
fat-client environments. In 1997 the Company incurred charges related to its
restructuring efforts in the amount of approximately $1.5 million, which
included the write-off of prepaid distribution royalties in connection with the
termination of the Infospinner distribution agreement and severance costs,
offset by the reversal of approximately $0.5 million in existing restructuring
reserves, originally recorded in 1995. The results of operations for 1996
include the reversal of $0.2 million of restructuring reserves due to a change
in estimated employee reduction costs. In 1995 the Company incurred
restructuring costs of $5.0 million related primarily to severance, write-offs
of purchased technology and prepaid license fees, facilities charges associated
with early termination of leases and cancellations of distributor agreements.
There can be no assurance that the restructuring efforts the Company has engaged
in to date will be successful or that the Company will be able to achieve
consistent levels of profitability on a quarterly or annual basis. In addition,
there can be no assurance that the Company's management will not deem it
appropriate to undertake other major restructuring efforts in the future or to
what degree any of these efforts will result in improved operational
performance, if at all. See "Item I Business--"Company Strategies" and "--Risk
Factors--Change in Strategic Direction: Restructuring" and "--New Product Risks;
Rapid Technological Change."

In addition to the restructuring charges detailed above, the Company took
certain one-time charges that were reflected in its 1995 operating results.
These charges included $1.3 million in accounting and related professional fees
for audits of the 1995, 1994 and 1993 financial statements, charged to general
and administrative expense; a $3.4 million write-off of capitalized software
development expense, charged to research and development; and $0.6 million in
liquidation of inventories, charged to cost of revenues.

OTHER INCOME (EXPENSE), NET. Other income (expense), net is comprised of
interest income, interest expense and gains or losses on foreign currency
transactions. The Company's gains or losses from foreign currency transactions
have fluctuated from period to period, primarily as a result of fluctuating
values of the U.S. dollar and instability in European and Latin American
currency markets. The Company recorded a foreign currency loss of approximately
$1.0 million in 1997, principally due to the decline in the value of certain
European currencies in the first quarter of 1997. The Company recorded a foreign
currency gain of $0.2 million in 1996 and a loss of $0.4 million in 1995. The
Company expanded its hedging program in the second half of 1997 in an effort to
hedge up to a targeted 90% of its exposure to foreign currency fluctuation. The
costs of currency hedging are reflected in the reported gains and losses of
foreign currency transactions. The Company anticipates that it will continue the
hedging program in 1998. Nonetheless, a decrease in the value of foreign
currencies relative to the value of the U.S. dollar could result in losses from
foreign currency transactions. The Company's net interest expense was $0.8
million in 1997 and $0.2 million in 1996 and the Company had net interest income
of $0.4 million in 1995. The decrease in interest income and the increase in
interest expense over these periods is due principally to the decrease in cash
available for investment.

Sales of the Company's products are denominated both in local currencies of
the respective geographic region and in U.S. dollars, depending upon the
economic stability of that region and locally accepted business practices.
Accordingly, any increase in the value of the U.S. dollar relative to local
currencies in these markets may negatively impact revenues, results of
operations and financial condition. An increase in the relative value of the
U.S. dollar would serve to increase the relative foreign currency cost to the
customer of a U.S. dollar denominated purchase, which may negatively affect the
Company's

sales in those markets. The U.S. dollar value of a sale denominated in a
region's local currency decreases in proportion to relative increases in the
value of the U.S. dollar.

PROVISION FOR INCOME TAXES. The provision for income taxes was $0.1 million
in 1997, $0.5 million in 1996 and $1.1 million in 1995. The provision for income
taxes related primarily to foreign withholding taxes. As of December 31, 1997,
the Company had net operating loss carryforwards of approximately $70.2 million
available to offset future federal taxable income and $30.8 million available to
offset future state taxes, which expire in 2012. The availability and timing of
these loss carryforwards to offset future taxable income may be limited due to
the occurrence of certain events, including certain changes in ownership
interests. At December 31, 1997, 1996 and 1995, the Company fully reserved its
deferred tax assets due to the existence of uncertainty of the Company's ability
to realize the deferred tax assets. The Company does not anticipate that recent
developments, resulting in the issuance of approximately 13.7 million shares of
common stock, will impair its ability to utilize net operating loss
carryforwards available at December 31, 1997. See Note 8 and Note 13 of Notes to
Consolidated Financial Statements and "--Recent Developments."

YEAR 2000 ISSUE. The Company has commenced, for all of its information
systems, a year 2000 date conversion project to address all necessary code
changes, testing and implementation of mission critical applications. The "Year
2000 Issue" arises because most computer systems and programs were designed to
handle only a two-digit year, as opposed to a four digit year. When the year
2000 begins these computers may interpret "00" as the year 1900 and could either
stop processing date-related computations or could process them incorrectly. The
Year 2000 Issue creates risk for the Company from unforeseen problems in its
internal computer systems and from third parties with which the Company
interacts. Such failures of the Company's and/or third parties' computer systems
could have a material impact on the Company's ability to conduct its business,
and to process and account for the transfer of funds electronically. Management
has not completed its assessment of all of the potential Year 2000 compliance
expenses and the related potential effect on the Company's earnings.

INFLATION. The Company believes that inflation has not had a material
impact on the Company's operating results and does not expect inflation to have
a material impact on the Company's operating results in 1998.

LIQUIDITY AND CAPITAL RESOURCES:

At December 31, 1997, the Company had a deficit working capital position of
approximately $18.2 million and a net shareholders deficit of approximately $10
million, due principally to deferred product and support revenue of $14.6
million, and a subordinated note, including accrued interest, in the amount of
approximately $12.1 million.

In February 1998, the Company entered into a series of transactions which
resulted in the reduction of its working capital deficit to $4.3 million
(deficit) and its net shareholders deficit to $4.0 million net shareholders
equity, on a pro forma basis. See "--Recent Developments."

The Company reached a binding settlement agreement with plaintiffs' counsel
in a lawsuit filed against the Company and certain of its officers and directors
by a holder of the Company's common stock and gained court approval of the
settlement agreement on September 30, 1996. As part of the settlement, the
Company agreed to provide up to a maximum of 2,500,000 shares of its common
stock to a fund to be distributed among the members of the plaintiff class. As
of December 31, 1997, 2,500,000 shares have been issued and distributed under
the settlement agreement and no additional shares are required to be issued. See
Note 6 of Notes to Consolidated Financial Statements.

The Company entered into an unsecured floating rate convertible subordinated
note for $10.0 million (the "Note") and a related agreement with Computer
Associates Inc. ("CA") (the "CA Agreement") in March 1995. The Note would mature
on March 31, 1998 and could be convertible into common stock at

the Company's option on May 1, 1998 for a number of shares based on the market
price of the Company's common stock at the time of conversion if certain
conditions had been met. Interest on the Note is calculated based on the
one-month LIBOR plus 1.25% and was payable quarterly. At the Company's option
interest payments could be deferred until the principal was due. Pursuant to the
CA Agreement, the ability of the Company to convert the Note to common stock
required the Company to maintain a minimum market capitalization of $40.0
million commencing on (and including) November 1, 1997, and continuing through
the duration of the Note (the "Minimum Market Capitalization Requirement"). If
the Company did not meet the Minimum Market Capitalization Requirement, the
Company would lose the option to convert the Note into common stock, and all
outstanding principal and interest would be due and payable on March 31, 1998.

At December 31, 1997 the Company had approximately $6.0 million in unsecured
foreign currency contracts, denominated in various European currencies, as part
of a program to hedge the financial exposure arising from foreign denominated
monetary assets and liabilities.

The deferred product and support revenue of $14.6 million at December 31,
1997 reflects a delay in recognition of revenue in accordance with contractual
agreements and requires minimal resources of the Company.

Net cash used by operating activities was $3.3 million in 1997, $7.7 million
in 1996 and $5.1 million in 1995. The use of cash in 1997 was due principally to
decreases in deferred revenue and accounts payable and accrued liabilities,
offset by depreciation and amortization and decreases in accounts receivable. In
1996, net income and increases in depreciation and amortization in 1996 were
offset by decreases in accounts payable and accrued liabilities, litigation
expense and deferred revenue. In 1995, increases in accrued litigation,
depreciation and amortization, adjustments for capitalized software, deferred
revenue, and provision for sales returns and allowances were offset by the net
loss and the increase to accounts receivable. Inventories, which were located at
the Company's third party turnkey vendor, decreased by $1.1 million in 1995.
This decrease in 1995 was due in part to planned reductions of inventories and a
consolidation of worldwide inventories into a single third party vendor
location.

Cash used in investing activities was $1.6 million in 1997, principally due
to the purchase of equipment and capitalized software costs, partially offset by
maturities of investments. Cash provided by investing activities was $4.6
million in 1996, principally due to maturities of investments offset by
acquisition of property and equipment, and capitalization of software
development costs. Cash used in investing activities of $2.7 million in 1995 was
utilized for additions in the amount of $4.0 million of internally developed and
purchased software and $3.1 million in additions to property and equipment,
primarily computer and other capital equipment, partially offset by the sale of
$5.4 million of short-term investments, net of purchases.

Net cash provided by financing activities in 1997 and 1996 totaled $2.2
million and $0.2 million, respectively, primarily as a result of proceeds from
short-term borrowings and issuance of common stock offset by repayment of the
notes payable. Net cash provided by financing activities in 1995 totaled $10.5
million primarily as a result of the $10.0 million subordinated convertible debt
financing by CA.

The Company believes that expected cash flows from operations and existing
cash balances, will be sufficient to meet the Company's currently anticipated
working capital and capital expenditure requirements for the next 12 months. The
Company may, however, choose to raise cash for operational or other needs
sometime in the future. If the Company needs further financing, there can be no
assurance that it will be available on reasonable terms or at all. Any
additional equity financing will result in dilution to the Company's
shareholders.

The Company's capital requirements also may be affected by acquisitions of
businesses, products and technologies that are complementary to the Company's
business, which the Company considers from time to time. The Company regularly
evaluates such opportunities. Any such transaction, if consummated, may further
reduce the Company's working capital or require the issuance of equity.

In January 1998, the Company entered into a $5.0 million asset based loan
facility with Coast Business Credit. The loan provides for borrowings of up to
$5.0 million, secured by the Company's accounts receivable, combined with a $0.5
million capital equipment facility. The facility bears interest at a rate of
2.25% above the Bank of America Reference Rate, and provides for the ability to
reduce interest costs based on the achievement of certain financial covenants.
The facility matures in January 2000 and provides for the ability to extend the
agreement for one year at the option of the Company. The facility replaces the
Pacific Business Funding Corporation accounts receivable factoring agreement
entered into by the Company in June 1997.

FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company has experienced in the past and expects in the future to
continue to experience significant fluctuations in quarterly operating results.
The Company has at times recognized a substantial portion of its net revenues in
the last month or last few weeks of a quarter. The Company generally ships
products as orders are received and, therefore, has little or no backlog. As a
result, quarterly sales and operating results generally depend on a number of
factors that are difficult to forecast, including, among others, the volume and
timing of and ability to fulfill orders received within the quarter. Operating
results also may fluctuate due to factors such as demand for the Company's
products, introduction, localization or enhancement of products by the Company
and its competitors, market acceptance of new products, reviews in the industry
press concerning the products of the Company or its competitors, changes or
anticipated changes in pricing by the Company or its competitors, mix of
distribution channels through which products are sold, mix of products sold,
returns from the Company's distributors and general economic conditions. As a
result, the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as any
indication of future performance.

In addition, because the Company's staffing and other operating expenses are
based in part on anticipated net revenues, a substantial portion of which may
not be generated until the end of each quarter, delays in the receipt or
shipment of orders and ability to achieve anticipated revenue levels can cause
significant variations in operating results from quarter to quarter. The Company
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in sales of
the Company's products in relation to the Company's expectations could have an
immediate adverse impact on the Company's business, operating results and
financial condition. In addition, the Company currently intends to increase its
operating expenses to fund greater levels of sales and marketing operations and
expand distribution channels. To the extent that such expenses proceed or are
not subsequently followed by increased net revenues, the Company's business,
operating results and financial condition could be materially and adversely
affected.

In the future, the Company may make acquisitions of complementary companies,
products or technologies. Managing acquired businesses entails numerous
operational and financial risks, including difficulties in assimilating acquired
operations, diversion of management's attention to other business concerns,
amortization of acquired intangible assets and potential loss of key employees
or customers of acquired operations. There can be no assurance that the Company
will be able to effectively complete or integrate acquisitions, and failure to
do so could have a material adverse effect on the Company's operating results.
As of the date hereof, the Company has no understanding or agreement with any
other entity regarding any potential acquisition or combination, the
consummation of which is probable.

In addition, quarterly operating results of the Company will depend on a
number of other factors that are difficult to forecast, including factors listed
in "Item 1. Business, --Risk Factors--Recent Company Losses; Fluctuations in
Quarterly Results".

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Centura Software Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 61 present fairly, in all material
respects, the financial position of Centura Software Corporation at December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ Price Waterhouse LLP

San Jose, California
February 10 , 1998, except as to Note 13
which is dated February 27, 1998

CENTURA SOFTWARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

PRO-FORMA
AT DECEMBER DECEMBER 31,
31, --------------------
1997 1997 1996
------------- --------- ---------
(UNAUDITED)
(NOTE 13)

ASSETS
Current Assets:
Cash and cash equivalents................................ $ 5,844 $ 3,974 $ 6,669
Short-term investments................................... -- -- 2,065
Accounts receivable, less allowances of $1,621 and
$2,826................................................. 11,744 11,744 13,574
Inventories.............................................. 259 259 216
Other current assets..................................... 3,089 3,089 3,300
------------- --------- ---------
Total current assets................................... 20,936 19,066 25,824
Property and equipment, at cost, net of accumulated
depreciation............................................. 3,511 3,511 3,622
Capitalized software, at cost, net of accumulated
amortization............................................. 2,573 2,573 4,226
Long-term investments...................................... 1,263 1,263 1,221
Other assets............................................... 1,787 1,787 1,812
------------- --------- ---------
Total assets........................................... $ 30,070 $ 28,200 $ 36,705
------------- --------- ---------
------------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of long-term obligations................. $ -- $ 10,000 $ 336
Accounts payable......................................... 4,244 4,244 5,683
Accrued compensation and related expenses................ 1,521 1,521 2,484
Short-term borrowings.................................... 1,581 1,581 --
Other accrued liabilities................................ 3,013 5,125 4,313
Accrued litigation expenses.............................. 209 209 6,733
Deferred revenue......................................... 14,618 14,618 21,891
------------- --------- ---------
Total current liabilities.............................. 25,186 37,298 41,440
Long-term debt, less current portion....................... -- -- 10,032
Other long-term liabilities................................ 856 856 2,156
------------- --------- ---------
Total liabilities...................................... 26,042 38,154 53,628

Commitments and contingencies (Note 7)
Shareholders' equity (deficit):
Preferred stock, no par value; 2,000 shares authorized;
none issued............................................ -- -- --
Common stock, par value $.01 per share; 60,000 shares
authorized; 15,784 shares and 13,728 shares issued and
outstanding (29,526 shares, pro forma)................. 84,618 70,636 63,047
Cumulative translation adjustment........................ (484 ) (484) (513)
Accumulated deficit...................................... (80,106 ) (80,106) (79,457)
------------- --------- ---------
Total shareholders' equity (deficit)................... 4,028 (9,954) (16,923)
------------- --------- ---------
Total liabilities and shareholders' equity (deficit)... $ 30,070 $ 28,200 $ 36,705
------------- --------- ---------
------------- --------- ---------

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

CENTURA SOFTWARE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------

Net revenues:
Product.................................................................... $ 40,714 $ 45,452 $ 49,408
Service.................................................................... 17,232 17,781 16,306
--------- --------- ----------
Net revenues............................................................. 57,946 63,233 65,714
Cost of revenues:
Product.................................................................... 4,779 5,060 8,878
Service.................................................................... 7,439 9,518 10,762
--------- --------- ----------
Cost of revenues......................................................... 12,218 14,578 19,640
--------- --------- ----------
Gross profit........................................................... 45,728 48,655 46,074

Operating expenses:
Sales and marketing........................................................ 26,224 29,106 42,931
Research and development................................................... 9,724 11,032 14,420
General and administrative................................................. 6,990 6,667 11,043
Acquisition expense........................................................ 530 467 --
Litigation expense......................................................... -- (878) 15,323
Restructuring expense...................................................... 1,030 (223) 5,350
--------- --------- ----------
Total operating expenses................................................. 44,498 46,171 89,067
--------- --------- ----------
Operating income (loss)................................................ 1,230 2,484 (42,993)
Other income (expense):
Interest income............................................................ 234 637 1,127
Interest expense........................................................... (1,039) (831) (701)
Foreign currency gain (loss)............................................... (1,012) 215 (439)
--------- --------- ----------
Income (loss) before income taxes............................................ (587) 2,505 (43,006)
Provision for income taxes................................................... 62 478 1,073
--------- --------- ----------
Net income (loss)............................................................ $ (649) $ 2,027 $ (44,079)
--------- --------- ----------
--------- --------- ----------
Basic net income (loss) per share............................................ $ (.04) $ 0.15 $ (3.62)
--------- --------- ----------
--------- --------- ----------
Basic weighted average common shares......................................... 15,439 13,231 12,175
--------- --------- ----------
--------- --------- ----------
Diluted net income (loss) per share.......................................... $ (.04) $ 0.15 $ (3.62)
--------- --------- ----------
--------- --------- ----------
Diluted weighted average common shares....................................... 15,439 13,380 12,175
--------- --------- ----------
--------- --------- ----------

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

CENTURA SOFTWARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------

Cash flows from operating activities:
Net income (loss).............................................................. $ (649) $ 2,027 $ (44,079)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization................................................ 5,390 5,311 6,252
Adjustments to capitalized software development costs........................ -- -- 3,360
Issuance of stock warrants................................................... 103 165 --
Provision for doubtful accounts, sales returns and allowances................ 187 586 7,138
Non-cash restructuring charges............................................... 166 (223) 2,205
Changes in assets and liabilities:
Accounts receivable........................................................ 1,643 (1,986) (4,978)
Inventories................................................................ (43) 2 1,096
Other current assets....................................................... (429) (301) 169
Other assets............................................................... (12) (21) (155)
Accounts payable and accrued liabilities................................... (2,416) (4,189) 2,099
Deferred revenue........................................................... (7,273) (6,909) 6,921
Accrued litigation expense................................................. 9 (2,877) 14,328
Other long-term liabilities................................................ -- 742 546
--------- --------- ----------
Net cash used in operating activities.................................... (3,324) (7,673) (5,098)

Cash flows from investing activities:
Maturities of investments...................................................... 2,065 8,748 19,812
Purchases of investments....................................................... -- (123) (14,419)
Proceeds from sale of property and equipment................................... -- 341 --
Acquisitions of property and equipment......................................... (2,253) (1,262) (3,115)
Capitalization of software costs............................................... (1,018) (2,890) (4,013)
Capitalization of other intangibles............................................ (360) (202) (932)
--------- --------- ----------
Net cash provided by (used in) investing activities...................... (1,566) 4,612 (2,667)

Cash flows from financing activities:
Repayment of note payable...................................................... (368) (327) (305)
Proceeds from notes payable.................................................... -- -- 10,000
Proceeds from short-term borrowings, net....................................... 1,581 -- --
Repayment of capital lease obligations......................................... -- (32) (448)
Proceeds from issuance of common stock, net.................................... 953 587 1,300
--------- --------- ----------
Net cash provided by financing activities................................ 2,166 228 10,547
Effect of exchange rate changes on cash and cash equivalents..................... 29 (363) 52
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents............................. (2,695) (3,196) 2,834
Cash and cash equivalents at beginning of period................................. 6,669 9,865 7,031
--------- --------- ----------
Cash and cash equivalents at end of period....................................... $ 3,974 $ 6,669 $ 9,865
--------- --------- ----------
--------- --------- ----------
Supplemental disclosure of cash flow information:
Cash paid for income taxes..................................................... $ 60 $ 154 $ 1,183
--------- --------- ----------
--------- --------- ----------
Cash paid for interest......................................................... $ 204 $ 62 $ 142
--------- --------- ----------
--------- --------- ----------

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

CENTURA SOFTWARE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE DATA)

COMMON STOCK CUMULATIVE
-------------------- TRANSLATION (ACCUMULATED
SHARES AMOUNT ADJUSTMENT DEFICIT) TOTAL
--------- --------- ------------- ------------ ----------

Balances, December 31, 1994.......................... 12,041 $ 56,277 $ (202) $ (37,405) $ 18,670
Issuance of common stock under stock option
plans............................................ 243 397 -- -- 397
Issuance of common stock under Employee Stock
Purchase Plan.................................... 98 903 -- -- 903
Cumulative translation adjustment.................. -- -- 52 -- 52
Net loss........................................... -- -- -- (44,079) (44,079)
--------- --------- ----- ------------ ----------
Balances, December 31, 1995.......................... 12,382 57,577 (150) (81,484) (24,057)
Issuance of common stock under stock option
plans............................................ 198 362 -- -- 362
Issuance of common stock under Employee Stock
Purchase Plan.................................... 100 225 -- -- 225
Issuance of common stock in relation to settlement
of class action securities litigation............ 1,048 4,718 -- -- 4,718
Issuance of stock warrants for 100,000 shares
related to merger with InfoSpinner, Inc.......... -- 165 -- -- 165
Cumulative translation adjustment.................. -- -- (363) -- (363)
Net income......................................... -- -- -- 2,027 2,027
--------- --------- ----- ------------ ----------
Balances, December 31, 1996.......................... 13,728 63,047 (513) (79,457) (16,923)
Issuance of common stock under stock option
plans............................................ 472 674 -- -- 674
Issuance of common stock under Employee Stock
Purchase Plan.................................... 132 279 -- -- 279
Issuance of common stock in relation to settlement
of class action securities litigation............ 1,452 6,533 -- -- 6,533
Issuance of stock warrants for 100,000 shares in
connection with short-term borrowings............ -- 103 -- -- 103
Cumulative translation adjustment.................. -- -- 29 -- 29
Net loss........................................... -- -- -- (649) (649)
--------- --------- ----- ------------ ----------
Balances, December 31, 1997.......................... 15,784 $ 70,636 $ (484) $ (80,106) $ (9,954)
--------- --------- ----- ------------ ----------
--------- --------- ----- ------------ ----------

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

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BUSINESS AND RISK FACTORS:

Centura Software Corporation (the "Company"), formerly Gupta Corporation,
develops, markets and supports an integrated set of software solutions for the
PC client/server system market.

On January 6, 1997, the Company entered into a definitive agreement (the
"Agreement") to acquire InfoSpinner, Inc. ("InfoSpinner") of Richardson, Texas.
The completion of the transaction was subject to the approval of both companies'
shareholders as well as other legal requirements. In addition, under the terms
of the Agreement, either party had the right to terminate the transaction if the
merger had not been consummated by April 30, 1997. As of April 30, 1997, the
Company did not obtain the majority vote of the shareholders required for the
approval of the proposed merger, and as a result, the board of directors of
InfoSpinner elected to exercise its right to terminate the transaction.

The Company has in the past experienced significant losses from operations,
and as a result its liquidity and capital resources have declined. Management
implemented measures which improved its operating results, including
cost-cutting measures, new product introductions and refocused marketing and
technological efforts on the Company's core competencies. However, the Company's
future profitability is subject to certain risks, including competition from
larger companies with greater financial resources, its ability to raise
additional financing, if needed, its ability to retain key personnel and its
ability to successfully develop, produce and market new products. Management
believes that the recent measures combined with the introduction of new products
and the refocus on core competencies has heightened the possibility of the
Company to improve cash flow.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reported
period. Actual results could differ materially from those estimates.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the financial statements of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.

CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.

FINANCIAL INSTRUMENTS. Financial instruments that potentially subject the
Company to concentrations of credit risk consist principally of cash,
investments, and accounts receivable. At December 31, 1997, the Company's cash
and cash equivalents include Money Market accounts and Certificates of Deposit.
Cost approximates market value of the securities at December 31, 1997.

The Company generally does not require collateral for its receivables and
maintains reserves for potential credit losses.

The Company accounts for investments under the Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities". SFAS 115 establishes standards for financial
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. Each
investment is classified into one of three categories: held-to-maturity,
available-for-sale or trading. Investments which the Company

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
has the intent and ability to hold until maturity are classified as
held-to-maturity and are recorded at amortized cost.

The Company enters into forward contracts to reduce the risks associated
with foreign currency fluctuations on net assets denominated in foreign
currencies. At December 31, 1997, the Company had $5,980,000 in forward
contracts denominated in four European currencies; German Deutsche Marks,
British Pounds Sterling, Netherland Guilders, and Italian Lire. At December 31,
1996 the Company had $400,000 forward contracts denominated in Mexican Pesos.

The carrying value of all other financial instruments approximate their
respective fair values. See Note 13, "Subsequent Events".

INVENTORIES. Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market, and consist principally of finished goods.

PROPERTY AND EQUIPMENT. Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of three to five years. Leasehold improvements are amortized over
the life of the lease or the estimated useful life, whichever is shorter.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS. The Company capitalizes internally
generated software development costs and purchased software in compliance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed". Capitalization of
internally generated software development costs begins upon the establishment of
technological feasibility of the product, which the Company defines as the time
when a complete product is available. The Company makes an ongoing assessment of
the recoverability of these costs which requires considerable judgment by
management with respect to certain external factors, including but not limited
to, anticipated future gross product revenue, estimated economic life and
changes in software and hardware technology. Internally generated software
development costs capitalized were $1,018,000 and $1,865,000 for the years ended
December 31, 1997 and 1996, respectively. The Company did not capitalize and
purchased software in 1997 and capitalized $1,025,000 of purchased software in
1996.

Amortization of all capitalized software costs begins when a product is
available for general release to customers, and is computed separately for each
product as the greater of (a) current gross revenue for a product to the total
of current and anticipated gross revenue for the product, or (b) the
straight-line method over the remaining estimated economic life of the product,
up to three years. Amortization and adjustments are included in cost of product
revenues and amounted to $2,671,000, $1,644,000 and $5,580,000, which included
the write-off of $3,360,000 in previously capitalized development costs, for the
years ended December 31, 1997, 1996 and 1995, respectively.

FOREIGN CURRENCY TRANSACTIONS. The functional currency of each foreign
subsidiary is the local currency. For these operations, assets and liabilities
are translated into U.S. dollars at period-end exchange rates, and income and
expense accounts are translated at a rate that approximates the average exchange
rate prevailing during the period. The resulting translation adjustments are
recorded as a separate component of shareholders' equity (deficit). Gains and
losses from foreign currency-denominated transactions effected by the Company's
U.S. operations are included in other income (expense).

REVENUE RECOGNITION. The Company receives licensing fees from certain
resellers (including original equipment manufacturers) under product licensing
arrangements. Such fees are recorded as revenue as

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
product is sold and reported to the Company by the reseller when ongoing
significant post delivery obligations exist. When no such obligations exist,
such fees are recorded as revenue when the product is shipped and collectability
is probable. For licensing agreements with end-users, fees are recognized upon
shipment of product, if there are no significant post-delivery obligations and
collectibility is probable. Service revenues from customer maintenance fees for
ongoing customer support and product updates, including maintenance bundled with
software licenses, is recognized ratably over the period of the contract. When
licensing agreements terminate, the Company records any licensing fees
previously not recognized. Revenue from other services, including training, are
recognized as performed. The Company enters into agreements with certain of its
distributors involving boxed product. Revenues from these distributors are
generally recognized when the product is shipped and are reduced by management's
estimate of anticipated stock exchanges based on historical experience. License
maintenance and telephone support contracts are typically paid in advance, and
revenue is recognized ratably over the term of the contract.

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition", which the Company currently intends to adopt for transactions
entered into the fiscal year beginning January 1, 1998. SOP 97-2 provides
guidance on recognizing revenue on software transactions and supersedes SOP
91-1, "Software Revenue Recognition". The Company believes that the adoption of
SOP 97-2 will not have a significant impact on its current licensing or revenue
recognition practices.

NET INCOME (LOSS) PER SHARE. The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128
requires the presentation of basic earnings per share ("EPS") and diluted EPS,
for companies with potentially dilutive securities, such as options. Earnings
per share for all prior periods have been restated to conform with the
provisions of SFAS 128.

Basic earnings per share is computed using the weighted average number of
shares of common stock. Diluted earnings per share is computed using the
weighted average number of shares of common stock, common equivalent shares
outstanding during the period. Common equivalent shares consist of convertible
preferred stock (using the if converted method) and stock options and warrants
(using the treasury stock method). Common equivalent shares are excluded from
the computation if their effect is antidilutive.

For the year ended December 31, 1996, 149,000 options and warrants to
purchase common stock were included within the computation of diluted EPS.
Antidilutive options and warrants to purchase 4,055,000, 2,935,000, and
3,633,000 shares of common stock were outstanding at December 31, 1997, 1996 and
1995, respectively. Antidilutive convertible debt to convert to 3,774,000 and
1,832,000 shares of common stock were outstanding at December 31, 1996, and
1995, respectively. No such shares were outstanding at December 31, 1997 as the
Company lost the conversion option during 1997.

STOCK-BASED COMPENSATION. During 1995, the FASB issued Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", which requires companies to measure employee stock compensation
based on the fair value method of accounting or to continue to apply the
provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting
for Stock Issued to Employees", and provide pro forma footnote disclosure under
the fair value method described in SFAS 123. The Company adopted SFAS 123 on
January 1, 1996, and will continue to apply the principles of

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
APB 25, while providing the pro forma footnote disclosure required by SFAS 123.
See Note 8 "Capital Stock," for the required pro-forma disclosure.

RECENT ACCOUNTING PRONOUNCEMENT. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards
for the reporting of comprehensive income and its components in a full set of
general-purpose financial statements for periods ending after December 15, 1997.
Reclassification of financial statements for earlier periods for comparative
purposes is required. The Company will adopt SFAS 130 in 1998 and does not
expect such adoption to have a material effect on the consolidated financial
statements.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of An
Enterprise and Related Information" ("SFAS 131"). SFAS 131 revises information
regarding the reporting of operating segments. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will adopt SFAS 131 beginning in 1998 and has not
evaluated the impact of such adoption on the notes to its consolidated financial
statements.

RECLASSIFICATIONS. In order to conform to the 1997 presentation, certain
reclassifications have been made to the 1996 and 1995 consolidated financial
statements.

NOTE 3. BALANCE SHEET DETAIL:

Property and equipment, at cost, net of accumulated depreciation consists of
the following:

DECEMBER 31,
----------------------
1997 1996
---------- ----------
(IN THOUSANDS)

Computer equipment.................................................... $ 16,418 $ 16,253
Furniture and fixtures................................................ 1,997 2,045
Leasehold improvements................................................ 2,075 491
---------- ----------
20,490 18,789
Less: accumulated depreciation and amortization....................... (16,979) (15,167)
---------- ----------
$ 3,511 $ 3,622
---------- ----------
---------- ----------

Capitalized software, at cost, net of accumulated amortization consists of
the following:

DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)

Internally developed software............................................ $ 7,142 $ 6,124
Purchased software....................................................... 3,852 3,852
--------- ---------
10,994 9,976
Less: accumulated amortization........................................... (8,421) (5,750)
--------- ---------
$ 2,573 $ 4,226
--------- ---------
--------- ---------

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3. BALANCE SHEET DETAIL: (CONTINUED)
Deferred revenue consists of the following:

DECEMBER 31,
--------------------
1997 1996
--------- ---------
(IN THOUSANDS)

Deferred product revenue................................................ $ 7,152 $ 15,002
Deferred support revenue................................................ 7,466 6,889
--------- ---------
$ 14,618 $ 21,891
--------- ---------
--------- ---------

NOTE 4. SHORT-TERM BORROWINGS

On June 26, 1997, the Company entered into a one year agreement to factor,
with recourse, certain accounts receivable. Under the terms of the agreement,
the Company may factor accounts receivable at an advance rate of eighty percent
of such eligible accounts receivable. Interest is calculated at the rate of 1.2%
per month based on the average daily balance outstanding. As of December 31,
1997 total eligible accounts receivable factored were $1,581,000. See Note 8,
"Capital Stock--Warrants" and Note 13, "Subsequent Events."

NOTE 5. RESTRUCTURING CHARGES:

In December 1995, the Company approved a plan to restructure its operations
to meet emerging market opportunities in next generation client/server
computing. In connection with the restructuring, the Company reduced its
worldwide headcount by approximately 16% and consolidated facilities and
operations to improve efficiency. The following analysis sets forth the
significant components of the restructuring charge included in other accrued
liabilities at December 31, 1997, 1996 and 1995:

SEVERANCE
AND FACILITY
BENEFITS CHARGES OTHER TOTAL
----------- ----------- --------- ---------

Accrued liability at December 31, 1995......................... $ 1,623 $ 1,029 $ 493 $ 3,145
Less: payments applied......................................... (1,400) (466) (493) (2,359)
Reversal of reserve............................................ (223) -- -- (223)
----------- ----------- --------- ---------
Accrued liability at December 31, 1996......................... -- 563 -- 563
----------- ----------- --------- ---------
Less: payments applied......................................... (89) (89)
Reversal of reserve............................................ -- (474) -- (474)
----------- ----------- --------- ---------
Accrued liability at December 31, 1997......................... $ -- $ -- $ -- $ --
----------- ----------- --------- ---------
----------- ----------- --------- ---------

In November 1997, the Company incurred restructuring charges of $1,504,000,
which included a write-off of $640,000 in prepaid royalties, $344,000 of
severance benefits for certain executives and employees and a $520,000 write-off
of other assets, partially offset by the reversal of $474,000 of reserves
established in prior periods due to changes in estimates. The decision to
write-off the existing prepaid royalty and other assets was associated with the
Company's decision to discontinue certain products. At December 31, 1997
$290,000 related to the restructuring charge was included in other current
liabilities. The Company expects to pay all remaining obligations related to
these charges in 1998.

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5. RESTRUCTURING CHARGES: (CONTINUED)
The 1996 results of operations include the reversal of $223,000 of
restructuring reserves due to changes in estimates.

NOTE 6. LONG-TERM DEBT:

Long-term debt consists of the following:

DECEMBER 31,
---------------------
1997 1996
---------- ---------
(IN THOUSANDS)

Subordinated note payable.............................................. $ 10,000 $ 10,000
Other note payable..................................................... -- 368
---------- ---------
10,000 10,368
Less: current portion.................................................. (10,000) (336)
---------- ---------
Long-term debt......................................................... $ -- $ 10,032
---------- ---------
---------- ---------

The Company entered into an unsecured floating rate convertible subordinated
note and related agreement CA (the "CA Agreement") in March 1995 for
$10,000,000. The CA Agreement matures on March 31, 1998 and was convertible into
common stock at the Company's option on the maturity date for a number of shares
based on the market price of the Company's common stock at the time of
conversion. Interest on the note is calculated based on the one-month LIBOR plus
1.25% and is payable quarterly. At the Company's option interest payments may be
deferred until the principal is due. The conversion to common stock requires the
Company to maintain a minimum market capitalization of $40.0 million commencing
on (and including) November 1, 1997, and continuing through the duration of the
note (the "Minimum Market Capitalization Requirement"). The Company did not meet
the Minimum Market Capitalization Requirement and lost the option to convert the
note into common stock. Accrued interest totaled $2,112,000 and $1,300,000 and
is included in other accrued liabilities and other long-term liabilities at
December 31, 1997 and 1996, respectively. See Note 13. "Subsequent Events".

NOTE 7. COMMITMENTS AND CONTINGENCIES:

The Company has long-term noncancelable lease commitments for office space
and equipment. At December 31, 1997, future minimum rental payments under
noncancelable operating leases are as follows (in thousands):

1998............................................................... $ 3,852
1999............................................................... 3,433
2000............................................................... 2,641
2001............................................................... 2,069
2002............................................................... 1,472
Thereafter......................................................... 121
---------
$ 13,588
---------
---------

Rent expense for the years ended December 31, 1997, 1996 and 1995, amounted
to $3,057,000, $3,235,000, and $3,524,000, respectively.

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
On May 2, 1994, a lawsuit was filed against the Company and certain of its
officers and directors, by a holder of the Company's common stock, on his own
behalf and purportedly on behalf of a class of others similarly situated. The
lawsuit was subsequently amended, and alleged that the Company made false and
misleading statements and failed to disclose material information relating to
existing business conditions and the Company's prospects and that officers and
directors violated the insider trading laws. The plaintiff was seeking damages
of an unstated amount.

The Company reached a binding settlement agreement (the "Settlement
Agreement") with plaintiffs' counsel in the lawsuit, and gained court approval
of the Settlement Agreement on September 30, 1996. As part of the settlement,
the Company agreed to provide up to a maximum of 2,500,000 shares of its common
stock (the "Settlement Shares") to a fund to be distributed among the members of
the plaintiff class. As of December 31, 1997, 2,500,000 shares have been issued
and distributed under the settlement agreement and no additional shares are
required to be issued. The 1995 Consolidated Financial Statements include
$15,300,000 in litigation expense arising from the settlement agreement and
associated legal expenses.

NOTE 8. CAPITAL STOCK

INCENTIVE STOCK OPTION PLAN. Under the Company's 1986 Incentive Stock
Option Plan, as amended, (the "86 ISOP"), 6,000,000 shares of common stock have
been reserved for issuance to eligible employees, directors and consultants.
Under the 86 ISOP, incentive stock options or nonstatutory stock options may be
granted at prices not less than fair market value of the Company's common stock
at the date of grant (85% for nonstatutory options). The options generally vest
over a four year period, beginning one year after the date of grant. Unexercised
options expire one to three months after termination of employment with the
Company. In July 1996 the 86 ISOP was terminated and shares in the plan
available for grant at that time have been canceled.

Under the Company's 1995 Incentive Stock Option Plan, as amended, (the "95
ISOP"), 1,000,000 shares of common stock were initially reserved for issuance to
eligible employees, directors and consultants. In September, 1996, an additional
1,000,000 shares were reserved increasing the total to 2,000,0000 shares. Under
the 95 ISOP, incentive stock options or nonstatutory stock options may be
granted at prices not less than fair market value of the Company's common stock
at the date of grant (85% for nonstatutory options). The options generally vest
over a four year period, beginning one year after the date of grant. Unexercised
options expire three months after termination of employment with the Company.

During 1997, 1996, and 1995, holders of stock options were granted the
opportunity to exchange previously granted stock options for new stock options
exercisable at $1.50, $5.94 and $9.00 per share, respectively, the fair market
value of common stock on the dates of exchange. The remaining original

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. CAPITAL STOCK (CONTINUED)
terms of the stock options were not changed. Options to purchase 2,844,000,
2,337,000, and 904,000 shares of common stock were exchanged in the 1997, 1996,
and 1995 repricing, respectively.

The following table summarizes the stock activity under the 86 ISOP and 95
ISOP:

OPTION PRICE PER
OPTION SHARES SHARE
-------------------------- --------------------
AVAILABLE OUTSTANDING LOW HIGH
----------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Balances, December 31, 1994.......................................... 682 2,333 $ 0.250 $ 27.250
Shares authorized.................................................... 1,000 --
Options granted...................................................... (3,606) 3,606 $ 6.625 $ 13.125
Options exercised.................................................... -- (243) $ 0.500 $ 10.750
Options canceled..................................................... 2,163 (2,163) $ 0.500 $ 20.000
----------- ------
Balances, December 31, 1995.......................................... 239 3,533 $ 0.250 $ 27.250
Shares authorized.................................................... 1,000 --
Shares discontinued.................................................. (689) --
Options granted...................................................... (2,886) 2,886 $ 4.250 $ 6.625
Options exercised.................................................... -- (198) $ 3.375 $ 6.500
Options canceled..................................................... 3,536 (3,536) $ 1.250 $ 27.250
----------- ------
Balances, December 31, 1996.......................................... 1,200 2,685 $ 0.250 $ 12.062
Shares discontinued.................................................. (545) --
Options granted...................................................... (3,682) 3,682 $ 1.500 $ 5.000
Options exercised.................................................... -- (472) $ .250 $ 1.625
Options canceled..................................................... 3,740 (3,740) $ 1.250 $ 10.750
----------- ------
Balances, December 31, 1997.......................................... 713 2,155
----------- ------
----------- ------

DIRECTORS STOCK OPTION PLAN. Under the 1996 Directors' Stock Option Plan
(the "96 DSOP"), 500,000 shares of common stock have been reserved for issuance
to non-employee directors of the Company. The 96 DSOP provides that each outside
Director will be automatically granted a non-statutory stock option to purchase
50,000 shares of common stock on the later of the following events occurring:
(a) the effective date of the plan, or (b) the date on which such person first
becomes a non-employee Director, provided that such Director agrees to cancel
all options granted to such Director from a prior Directors' stock option plan,
other than the initial 20,000 shares granted to the Director under such plan.
The options become exercisable in installments cumulatively as to 1/48 of the
shares on each of the first forty-eight monthly anniversaries of the grant date.
The options will remain exercisable for up to ninety days following the
optionee's termination of service as a director of the Company unless such
termination is a result of death, in which case the options will remain
exercisable for up to 6 month period. Options are granted at a price equal to
the fair market value of the Company's common stock on the date of the grant.
Options granted under the 96 DSOP have a term of ten years. 200,000 options were
granted and 50,000 options were canceled in 1997. 250,000 options were granted
and 100,000 options were canceled in 1996 under the 96 DSOP. At December 31,
1997 300,000 options are issued and outstanding and 200,000 options are
available for future grants under the 96 DSOP.

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. CAPITAL STOCK (CONTINUED)
OTHER STOCK OPTIONS. In November 1997, the Company granted 1,500,000
options to certain executive officers as an option grant external to the 86
ISOP, or the 95 ISOP. The options vest over a period of two years from the date
of grant and exercisable at $1.91 per share.

The following table summarizes information regarding all stock options
outstanding at December 31, 1997:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------- ------------------------------
WEIGHTED- NUMBER
NUMBER AVERAGE EXERCISABLE
OUTSTANDING AT REMAINING WEIGHTED- AT DECEMBER WEIGHTED-
DECEMBER 31, CONTRACTUAL AVERAGE 31, AVERAGE
RANGE OF EXERCISE PRICES 1997 LIFE (YEARS) EXERCISE PRICE 1997 EXERCISE PRICE
- --------------------------------------- -------------- --------------- --------------- ------------- ---------------

$0.5000 to $1.9063..................... 3,627,853 5.24 $ 1.69 819,062 $ 1.49
$2.3125 to $5.9375..................... 171,000 8.41 $ 2.76 46,375 $ 3.90
$6.1250 to $10.750..................... 155,667 8.00 $ 6.29 77,072 $ 6.44
-------------- ----- -------------
3,954,520 5.49 $ 1.92 942,509 $ 2.02
-------------- ----- -------------
-------------- ----- -------------

EMPLOYEE STOCK PURCHASE PLAN. Under the 1992 Employee Stock Purchase Plan
(the "ESPP"), 300,000 shares of common stock were initially reserved for
issuance to eligible employees. In 1996, 100,000 additional shares of common
stock were reserved for issuance to eligible employees increasing the total to
400,000. The ESPP permits employees to purchase common stock through payroll
deductions, which may not exceed 10% of an employee's compensation, at a price
equal to the lower of 85% of the fair market value of the Company's common stock
at the beginning or end of the offering period. The ESPP became effective upon
the Company's initial public offering and 132,000, 100,000 and 98,000 purchase
rights were issued in 1997, 1996 and 1995, respectively. At December 31, 1997
there were no ESPP shares available for employee purchases.

WARRANTS. In June 1997, the Company issued warrants to purchase 90,000 and
10,000 shares of common stock to Pacific Business Funding Corporation and its
affiliate Sand Hill Capital, LLC, at an exercise price of $2.09 per share. The
warrants were valued at $103,000 using a risk-free rate of 6.33% and a
volatility factor of 55%, and the related charge is included in general and
administrative expenses in 1997. The warrants expire on June 30, 2002.

Warrants to purchase 100,000 shares of common stock were issued by the
Company on November 22, 1996 in connection with a potential acquisition of
InfoSpinner, Inc. These warrants were valued at $165,000, using a risk-free rate
of 5.97% and a volatility factor of 55%, and are included in acquisition
expenses in 1996. Exercise of the warrants was contingent upon completion of the
proposed acquisition. As the Company did not obtain the majority vote of its
shareholders required for approval of the proposed acquisition within the
designated time frame, the warrants have been cancelled.

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. CAPITAL STOCK (CONTINUED)
SHARES RESERVED FOR FUTURE ISSUANCE. The following table summarizes shares
of common stock reserved for future issuance as of December 31, 1997 (in
thousands):

Incentive stock option plan...................................... 713,437
Directors' stock option plan..................................... 200,000
Employee stock purchase plan..................................... --
---------
913,437
---------
---------

PRO FORMA STOCK COMPENSATION DISCLOSURE. The Company applies the provisions
of APB 25 and related interpretations in accounting for compensation expense
under the 95 ISOP, 96 DSOP and ESPP. Had compensation expense under these plans
been determined pursuant to SFAS 123, the Company's net income (loss) and net
income (loss) per share for the years ended December 31, 1997, 1996 and 1995
would have been as follows:

YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
(IN THOUSANDS, EXCEPT, PER SHARE
DATA)

Net income (loss):
As reported........................................... $ (649) $ 2,027 $ (44,079)
Pro-forma............................................. $ (5,512) $ (3,594) $ (46,548)
Basic and diluted net income (loss) per share:
As reported........................................... $ (0.04) $ .15 $ (3.62)
Pro-forma............................................. $ (.36) $ (.27) $ (3.82)

The fair value of each stock option granted under the 86 and 95 ISOP and 96
DSOP was estimated using the Black-Scholes model with the following assumptions:
zero dividend yield; an expected life of 48 months; weighted average expected
volatility of 65%, 63.54% and 67.49% in 1997, 1996 and in 1995; and a weighted
average risk-free interest rate of 6.20%, 5.57% and 6.21% in 1997, 1996 and
1995. The weighted average fair value of stock options granted under the 95
ISOP, the 96 DSOP and non-plan options for the years ended December 31, 1997,
1996, and 1995 were $.91, $3.06 and $5.28, respectively.

The fair value of the shares granted under the ESPP is considered to have an
immaterial impact on this calculation.

The above pro forma amounts include compensation expense based on the fair
value of stock options granted and vesting during the years ended December 31,
1997, 1996 and 1995, and exclude the effects of stock options granted prior to
January 1, 1995. Accordingly, the above pro forma net income and net income per
share are not representative of the effects of computing stock compensation
expense using the fair value method for future periods.

SHAREHOLDER RIGHTS PLAN. In August 1994, the Company adopted a Shareholder
Rights Plan pursuant to which one Preferred Share Purchase "Right" was
distributed for each outstanding share of common stock. Each Right entitles
shareholders to purchase a fraction of a share of Preferred Stock at an exercise
price of $60.00 upon certain events. The Rights expire on August 3, 2004, unless
earlier redeemed by the Company.

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8. CAPITAL STOCK (CONTINUED)
The Rights become exercisable if a person acquires 15% or more of the
Company's common stock or announces a tender offer that would result in such
person owning 15% or more of the Company's common stock. If the Rights become
exercisable, the holder of each Right (other than the person whose acquisition
triggered the exercisability of the Rights) will be entitled to purchase, at the
Right's then current exercise price, a number of shares of the Company's common
stock having a market value of twice the exercise price. In addition, if the
Company were to be acquired in a merger or the Company sells more than 50% of
its assets or earning power, each Right will entitle its holder to purchase, at
the Right's then current exercise price, common stock of the acquiring company
having a market value of twice the exercise price. The Rights are redeemable by
the Company at a price of $.01 per Right at any time within ten days after a
person has acquired 15% or more of the Company's common stock.

NOTE 9. INCOME TAXES:

Operating income (loss) before income taxes are attributable to the
following jurisdictions:

YEAR END DECEMBER 31,
--------------------------------
1997 1996 1995
--------- --------- ----------
(IN THOUSANDS)

Domestic....................................................... $ 360 $ 2,903 $ (42,182)
Foreign........................................................ (947) (398) (1,897)
--------- --------- ----------
$ (587) $ 2,505 $ (44,079)
--------- --------- ----------
--------- --------- ----------

The provision for income taxes on income (loss) before income taxes
primarily consists of foreign withholding taxes.

The difference between income taxes at the statutory federal income tax rate
and income taxes reported in the income statement are primarily the result of
foreign withholding taxes.

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9. INCOME TAXES: (CONTINUED)
Deferred income taxes result from temporary differences in the recognition
of certain expenses for financial and income tax reporting purposes. The net
deferred tax asset consisted of the following:

DECEMBER 31,
----------------------
1997 1996
---------- ----------
(IN THOUSANDS)

Deferred tax assets:
Net operating losses................................................ $ 26,437 $ 21,414
Nondeductible reserves.............................................. 1,333 4,486
Credit carryforwards................................................ 4,521 3,756
Deferred revenue.................................................... 5,146 8,379
Depreciation........................................................ 482 534
---------- ----------
Gross deferred tax asset.......................................... 37,919 38,569
Less: valuation allowance........................................... (37,133) (37,585)
---------- ----------
Net deferred tax asset............................................ 786 984
---------- ----------
Deferred tax liabilities:
Software capitalization............................................. (786) (984)
---------- ----------
Total net deferred tax assets (liabilities)........................... $ -- $ --
---------- ----------
---------- ----------

At December 31, 1997, the Company had net operating loss carryforwards of
approximately $70.2 million available to offset future federal taxable income
and $30.8 million available to offset future state taxes, which expire through
2012. The availability and timing of these carryforwards to offset future
taxable income may be limited due to the occurrence of certain events, including
certain changes in ownership interests. At December 31, 1997 and 1996, the
Company fully reserved its deferred tax assets due to the existence of
sufficient uncertainty with respect to its the ability to realize the deferred
tax assets.

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10. SEGMENT INFORMATION:

The Company participates in one industry segment: the development and
marketing of computer software and related services. No one customer has
accounted for more than 10% of consolidated annual revenues. The following table
presents a summary of operations by geographic region:

NORTH REST OF
AMERICA EUROPE WORLD TOTAL
---------- --------- --------- ----------
(IN THOUSANDS)

Year ended December 31, 1997:
Total revenues................................ $ 24,473 $ 27,650 $ 5,823 $ 57,946
Operating income (loss)....................... (12,787) 11,742 2,275 1,230
Identifiable assets at year end............... 22,329 4,843 1,028 $ 28,200

Year ended December 31, 1996:
Total revenues................................ $ 25,332 $ 27,551 $ 10,350 $ 63,233
Operating income (loss)....................... (4,472) 3,932 3,024 2,484
Identifiable assets at year end............... 30,281 5,443 981 36,705

Year ended December 31, 1995:
Total revenues................................ $ 25,644 $ 28,679 $ 11,391 $ 65,714
Operating income (loss)....................... (38,936) (4,061) 4 (42,993)
Identifiable assets at year end............... 40,482 7,124 498 48,104

Revenues have been allocated to geographic regions based primarily upon
destination of product shipment. Operating income (loss) represents total
revenue less operating expenses. In computing operating income (loss), all
general corporate expenses have been allocated to North American operations, and
cost of product revenues have been allocated based upon revenues attributable to
each region.

NOTE 11. EMPLOYEE BENEFIT PLAN:

The Company has a Savings Plan (the "Plan") as allowed under Section 401(k)
of the Internal Revenue Code. The Plan provides employees with tax deferred
salary deductions and a number of investment options. The Plan allows for
contributions by the Company as determined annually by the Board of Directors.
The Company has not contributed to the Plan since its inception.

NOTE 12. RELATED PARTY TRANSACTIONS:

The Company recognized revenue of $750,000, $664,000 and $2,450,000 for the
years ended December 31, 1997, 1996, and 1995 respectively, from Computer
Associates International, Inc., the holder of the floating rate subordinated
convertible debenture.

The Company has the option to acquire 100% of the outstanding stock of one
of its independent foreign distributors, using a purchase price formula based on
net profits and revenues. The Company recognized revenue of $489,000, $1,783,000
and $2,007,000 for the years ended December 31, 1997, 1996, and 1995 from this
distributor.

NOTE 13. SUBSEQUENT EVENTS:

LOAN FACILITY. In January 1998, the Company entered into a $5,000,000 asset
based loan facility with Coast Business Credit, the "Facility". The loan
provides for borrowings of up to $5,000,000, secured by the

CENTURA SOFTWARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13. SUBSEQUENT EVENTS: (CONTINUED)
Company's accounts receivable, combined with a $500,000 capital equipment
facility. The Facility bears interest at 2.25% above the Bank of America
Reference Rate, and provides for ability to reduce interest cost based on the
achievement of certain financial covenants. The Facility matures in January 2000
and provides for the ability to extend the agreement for one year at the option
of the Company. The facility replaces an accounts receivable factoring agreement
entered into by the Company in June 1997.

SALE AND CONVERSION OF NOTE PAYABLE. In February 1998, Computer Associates,
Inc. ("CA"), and Newport Acquisition Company, LLP ("NAC") entered into a Note
Purchase and Sale Agreement and the Company and NAC entered into a Note
Conversion Agreement (the "Agreements"). Under the terms of the Agreements, a
promissory note, plus accrued interest, in the amount of $12,251,000, payable to
CA (the "CA Note") was acquired by NAC, and immediately converted into
11,415,094 shares of the Company's common stock (the "Shares"). In February
1998, in connection with the Agreements, the Company entered into a Warrant
Purchase Agreement with CA wherein the Company sold and issued to CA, at an
issuance price of $.001 per share, a warrant to purchase 500,000 shares of the
Company's common stock. The warrant is exercisable at $1.906 per share and
expires on February 27, 2003.

PRIVATE PLACEMENT. Also in February 1998, pursuant to the terms of Stock
Purchase Agreements, the Company completed a private placement of 2,330,191
shares of the Company's common stock (the "Private Placement"), resulting in
gross proceeds to the Company of $2,470,000. The Company has agreed to register
the shares under the Securities Act of 1933, as amended. In connection with the
Private Placement the Company issued warrants to purchase 582,548 shares of the
Company's common stock. The warrants are exercisable at $1.25 per share and
expire on February 28, 2003. Also, in consideration of services rendered in
connection with the Private Placement, the Company issued to Rochon Capital
Group, Ltd. warrants to purchase 354,717 shares of the Company's common stock at
an exercise price of $2.12 (the "Rochon Warrants"). The Rochon Warrants expire
on February 27, 2003.

Transaction costs associated with both the Agreements and the Private
Placement were approximately $600,000.

Schedule II

CENTURA SOFTWARE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF CHARGED TO END OF
DESCRIPTION THE YEAR EXPENSES WRITE-OFFS THE YEAR
- --------------------------------------------------------------- ------------- ----------- ----------- -----------

1997:
Allowance for doubtful accounts.............................. $ 1,140 $ 530 $ (405) $ 1,265
Reserve for sales returns and allowances..................... 1,686 (343) (987) 356
------ ----------- ----------- -----------
$ 2,826 $ 187 $ (1,392) $ 1,621
------ ----------- ----------- -----------
------ ----------- ----------- -----------
1996:
Allowance for doubtful accounts.............................. $ 1,529 $ 406 $ (795) $ 1,140
Reserve for sales returns and allowances..................... 1,946 180 (440) 1,686
------ ----------- ----------- -----------
$ 3,475 $ 586 $ (1,235) $ 2,826
------ ----------- ----------- -----------
------ ----------- ----------- -----------
1995:
Allowance for doubtful accounts.............................. $ 1,007 $ 1,708 $ (1,186) $ 1,529
Reserve for sales returns and allowances..................... 1,884 5,430 (5,368) 1,946
------ ----------- ----------- -----------
$ 2,891 $ 7,138 $ (6,554) $ 3,475
------ ----------- ----------- -----------
------ ----------- ----------- -----------

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the executive officers and directors of the Company
required by this item is contained in "Part I, Item 1. Business--Directors and
Executive Officers of Registrant".

Additional information required by this item is incorporated by reference
from the Company's Proxy Statement for the 1998 Annual Meeting of Shareholders
to be held June 17, 1998, a copy of which will be filed with the Securities and
Exchange Commission no later than 120 days from the end of the Company's last
fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting of Shareholders to be held June 17, 1998, a copy of which will be filed
with the Securities and Exchange Commission.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting of Shareholders to be held June 17, 1998, a copy of which will be filed
with the Securities and Exchange Commission.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting of Shareholders to be held June 17, 1998, a copy of which will be filed
with the Securities and Exchange Commission.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report:

(1) Financial Statements. The following financial statements of the Company
are contained in Item 8 of this Annual Report on Form 10-K:

1. Report of Price Waterhouse LLP, Independent Accountants.

2. Consolidated Balance Sheets at December 31, 1997 and 1996.

3. Consolidated Statements of Operations for each of the three years in
the period ended December 31, 1997.

4. Consolidated Statements of Shareholders' Equity (Deficit) at December
31, 1997, 1996 and 1995.

5. Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1997.

6. Notes to Consolidated Financial Statements.

(2) Financial Statement Schedules. The following financial statement
schedules of the Company for the year ended December 31, 1997, 1996 and
1995 is contained in Item 8 of this Annual Report on Form 10-K:

1. II--Valuation and Qualifying Accounts

2. Report of Price Waterhouse LLP, Independent Accountants. Refer to
Item 14(a)(1)1 above.

Schedules not listed above have been omitted because they are either
inapplicable or the required information has been given in
Management's Discussion and Analysis of Financial Condition and
Results of Operations or in the financial statements or the notes
thereto.

(3) Exhibits.--Refer to Item 14(c) below.

(b) Reports on Form 8-K.

The Company filed a report on Form 8-K dated December 9, 1997 announcing a
change in its executive officers and Board membership and information
relating to the Company's change in management.

EXHIBIT
NUMBER DESCRIPTION
- ---------------------- ---------------------------------------------------------------------------------------------

2.1 (1) Agreement and Plan of Reorganization dated January 6, 1997 by and among the Registrant, IS
Acquisition Corporation and InfoSpinner, Inc.

2.2 (1) Form of Certificate of Merger among the Registrant, IS Acquisition Corporation and
InfoSpinner, Inc.

3 (i)(2) Articles of Incorporation of Registrant, as amended on September 24, 1996.

3 (iii) Bylaws of Registrant, as amended effective February 27, 1998.

4.1 (13) Preferred Shares Rights Agreement, dated as of August 3, 1994, between the Registrant and
Chemical Trust Company of California, including the Certificate of Determination of Rights,
Preferences and Privileges of Series A Participating Preferred Stock, the form of Rights
Certificate and the Summary of Rights, attached thereto as Exhibits A, B and C, respectively.

4.2 Amendment to Preferred Shares Rights Agreement effective February 27, 1998.

10.1 (3) Form of Directors' and Officers' Indemnification Agreement.

10.2 (4)(5) 1986 Incentive Stock Option Plan, as amended, and forms of agreements thereunder.

10.3 (3) 1991 United Kingdom Sub Plan and forms of agreement thereunder.

10.4 (2) 1992 Employee Stock Purchase Plan and forms of agreements thereunder, as amended on September
24, 1996.

10.5 (3)* 1992 Directors' Stock Option Plan and forms of agreements thereunder.

10.8 (3) Lease Agreement dated February 4, 1992 between Registrant and Bohannon Associates.

10.9 (6) 1996 Executive Officers' Compensation Plan.

10.12(3) Forms of License Agreements.

10.14(2) 1995 Stock Option Plan and forms of agreement thereunder, as amended on September 24, 1996.

10.16(7) Note Purchase Agreement dated March 31, 1996 between the Company and Computer Associates
International, Inc.

10.17(8)* Executive Employment Agreement dated April 10, 1996 between the Company and Sam M. Inman III.

10.18(9)* Loan Agreement Secured by Property and Securities dated August 31, 1996 between the Company
and Earl and Ann Stahl.

10.19(2)* 1996 Directors' Stock Option Plan and forms of agreement thereunder.

10.20(2) Stipulation of Settlement dated July 19, 1996, in regards to the Registrant's securities
litigation between plaintiff's settlement counsel and the Registrant's counsel, including
exhibits thereto, and related Final Judgment and Order of Dismissal dated September 30, 1996.

10.21(14) Distributorship Agreement dated January 6, 1997, between the Registrant and InfoSpinner, Inc.

10.22* Intentionally omitted.

EXHIBIT
NUMBER DESCRIPTION
- ---------------------- ---------------------------------------------------------------------------------------------

10.23(15) Factoring Agreement dated June 26, 1997, between Centura Software Corporation and Pacific
Business Funding Corporation.

10.24(15) Warrant to Purchase Common Stock issued June 30, 1997 by Centura Software Corporation to Sand
Hill Capital.

10.25(15)* 1997 Executive Retention Program.

10.26(16) Lease Agreement, dated October 14, 1996, between Westport Investment and the Registrant.

10.27* Letter Agreement dated November 5, 1997 between the Registrant and Hickey & Hill
Incorporated, and form of Nonstatutory Stock Options issued to new Executives.

10.28* Settlement Agreements and Mutual Releases between the Registrant and Sam M. Inman, III and
between the Registrant and Earl Stahl.

10.29 Loan and Security Agreement dated January 19, 1998 between the Registrant and Coast Business
Credit, a division of Southern Pacific Bank.

10.30 Common Stock and Warrant Purchase Agreement dated February 27, 1998 between the Registrant
and certain Purchasers of the Registrant's Common Stock.

10.31 Note Conversion Agreement dated February 27, 1998 between the Registrant and Newport
Acquisition Company No. 2, LLC.

10.32 Warrant Purchase Agreement dated February 27, 1998 between the Registrant and Computer
Associates International, Inc.

10.33 Investor Rights Agreement dated February 27, 1998 between the Registrant and Newport
Acquisition Company No. 2, LLC.

10.34 Common Stock Purchase Warrants issued to Rochon Capital Group, Ltd. on February 27, 1998.

10.35* 1998 Employee Stock Option Plan and form of Nonstatutory Option Agreements thereunder.

11.1 (14) Statement regarding Computation of per share earnings.

16 (10)(11)(12) Letter regarding change in Certifying Accountant.

21 (1) Subsidiaries of Registrant.

23.1 Consent of Price Waterhouse LLP, Independent Accountants.

24.1 Power of Attorney. See Page 65.

27.1 Financial Data Schedules at December 31, 1997 and for the year ended December 31, 1997.

27.2 Financial Data Schedules for the three month periods ended March 31, June 30, and September
30, 1997, respectively, restated for the effect of the adoption of Statement of Financial
Accounting Standard No. 128, "Earnings Per Share."

27.3 Financial Data Schedules for the three month periods ended March 31, June 30, and September
30, 1996, respectively, and years ended December 31, 1995 and 1996, restated for the effect
of the adoption of Statement of Financial Accounting Standard No. 128, "Earnings Per Share."

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

* Management Compensatory Plan or Arrangement.

(1) Incorporated by reference from the Company's Registration Statement on Form
S-4 (No. 333-20491) filed with the Commission on January 27, 1997.

(2) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.

(3) Incorporated by reference from the Company's Registration Statement on Form
S-1 (No. 33-55566), declared effective by the Commission on February 4,
1993.

(4) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-62194) filed with the Commission on May 5, 1993.

(5) Incorporated by reference from the Company's Registration Statement on Form
S-8 (No. 33-83850) filed with the Commission on September 9, 1994.

(6) Incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.

(7) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.

(8) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995.

(9) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.

(10) Incorporated by reference from the Company's Current Report on Form 8-K
dated July 2, 1993.

(11) Incorporated by reference from the Company's Current Report on Form 8-K
dated October 11, 1995 as amended by Amendment No. 1 dated October 25, 1995
(Form 8-K/A).

(12) Incorporated by reference from the Company's Current Report on Form 8-K
dated January 8, 1996.

(13) Incorporated by reference from the Company's Registration Statement on Form
8-A filed with the Commission on August 10, 1994.

(14) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-4 filed with the Commission on March 10,
1997.

(15) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997.

(16) Incorporated by reference from the Company's Quarterly Report on Form
10-Q/A for the quarter ended June 30, 1997.

SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) 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.

CENTURA SOFTWARE CORPORATION

By: /s/ SCOTT R. BROOMFIELD Date: March 30, 1998
- ------------------------------
Scott R. Broomfield,
PRESIDENT, CHIEF EXECUTIVE
OFFICER AND CHAIRMAN OF THE
BOARD OF DIRECTORS (PRINCIPAL
EXECUTIVE OFFICER)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Scott R. Broomfield or John W. Bowman, or either
of them, with the power to substitution, his attorney-in-fact and agents, to
sign any and all amendments to this Annual Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or substitute or substitutes may do or cause to
be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

By: /s/ SCOTT R. BROOMFIELD
-------------------------------------------
Scott R. Broomfield, PRESIDENT, CHIEF EXECUTIVE Date: March 30, 1998
OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS
(PRINCIPAL EXECUTIVE OFFICER)

/s/ JOHN W. BOWMAN
-------------------------------------------
John W. Bowman, SENIOR VICE PRESIDENT, FINANCE Date: March 30, 1998
AND OPERATIONS AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)

By: /s/ RICHARD LUCIEN
-------------------------------------------
Richard Lucien, VICE PRESIDENT, CORPORATE Date: March 30, 1998
CONTROLLER (PRINCIPAL ACCOUNTING OFFICER)

By: /s/ PETER MICCICHE
------------------------------------------- Date: March 30, 1998
Peter Micciche, DIRECTOR

By: /s/ WILLIAM D. NICHOLAS
------------------------------------------- Date: March 30, 1998
William D. Nicholas, DIRECTOR

By: /s/ EARL M. STAHL
------------------------------------------- Date: March 30, 1998
Earl M. Stahl, DIRECTOR

By: /s/ SAMUEL M. INMAN, III
------------------------------------------- Date: March 30, 1998
Samuel M. Inman, III, DIRECTOR

By: /s/ PHILIP KOEN, JR.
------------------------------------------- Date: March 30, 1998
Philip Koen, Jr., DIRECTOR

By: /s/ JACK KING
------------------------------------------- Date: March 30, 1998
Jack King, DIRECTOR

CENTURA SOFTWARE CORPORATION
INDEX TO EXHIBITS

EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ---------------------- ------------------------------------------------------------------------------- -----------------

2.1 (1) Agreement and Plan of Reorganization dated January 6, 1997 by and among the
Registrant, IS Acquisition Corporation and InfoSpinner, Inc.

2.2 (1) Form of Certificate of Merger among the Registrant, IS Acquisition Corporation
and InfoSpinner, Inc.

3 (i)(2) Articles of Incorporation of Registrant, as amended on September 24, 1996.

3 (iii) Bylaws of Registrant, as amended effective February 27, 1998.

4.1 (13) Preferred Shares Rights Agreement, dated as of August 3, 1994, between the
Registrant and Chemical Trust Company of California, including the Certificate
of Determination of Rights, Preferences and Privileges of Series A
Participating Preferred Stock, the form of Rights Certificate and the Summary
of Rights, attached thereto as Exhibits A, B and C, respectively.

4.2 Amendment to Preferred Shares Rights Agreement effective February 27, 1998.

10.1 (3) Form of Directors' and Officers' Indemnification Agreement.

10.2 (4)(5) 1986 Incentive Stock Option Plan, as amended, and forms of agreements
thereunder.

10.3 (3) 1991 United Kingdom Sub Plan and forms of agreement thereunder.

10.4 (2) 1992 Employee Stock Purchase Plan and forms of agreements thereunder, as
amended on September 24, 1996.

10.5 (3)* 1992 Directors' Stock Option Plan and forms of agreements thereunder.

10.8 (3) Lease Agreement dated February 4, 1992 between Registrant and Bohannon
Associates.

10.9 (6) 1996 Executive Officers' Compensation Plan.

10.12(3) Forms of License Agreements.

10.14(2) 1995 Stock Option Plan and forms of agreement thereunder, as amended on
September 24, 1996.

10.16(7) Note Purchase Agreement dated March 31, 1996 between the Company and Computer
Associates International, Inc.

10.17(8)* Executive Employment Agreement dated April 10, 1996 between the Company and Sam
M. Inman III.

10.18(9)* Loan Agreement Secured by Property and Securities dated August 31, 1996 between
the Company and Earl and Ann Stahl.

10.19(2)* 1996 Directors' Stock Option Plan and forms of agreement thereunder.

10.20(2) Stipulation of Settlement dated July 19, 1996, in regards to the Registrant's
securities litigation between plaintiff's settlement counsel and the
Registrant's counsel, including exhibits thereto, and related Final Judgment
and Order of Dismissal dated September 30, 1996.

EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ---------------------- ------------------------------------------------------------------------------- -----------------

10.21(14) Distributorship Agreement dated January 6, 1997, between the Registrant and
InfoSpinner, Inc.

10.22* Intentionally omitted.

10.23(15) Factoring Agreement dated June 26, 1997, between Centura Software Corporation
and Pacific Business Funding Corporation.

10.24(15) Warrant to Purchase Common Stock issued June 30, 1997 by Centura Software
Corporation to Sand Hill Capital.

10.25(15)* 1997 Executive Retention Program.

10.26(16) Lease Agreement, dated October 14, 1996, between Westport Investments and the
Registrant.

10.27* Letter Agreement dated November 5, 1997 between the Registrant and Hickey &
Hill Incorporated, and form of Nonstatutory Stock Options issued to new
Executives.

10.28* Settlement Agreements and Mutual Releases between the Registrant and Sam M.
Inman, III and between the Registrant and Earl Stahl.

10.29 Loan and Security Agreement dated January 19, 1998 between the Registrant and
Coast Business Credit, a division of Southern Pacific Bank.

10.30 Common Stock and Warrant Purchase Agreement dated February 27, 1998 between the
Registrant and certain Purchasers of the Registrant's Common Stock.

10.31 Note Conversion Agreement dated February 27, 1998 between the Registrant and
Newport Acquisition Company No. 2, LLC.

10.32 Warrant Purchase Agreement dated February 27, 1998 between the Registrant and
Computer Associates International, Inc.

10.33 Investor Rights Agreement dated February 27, 1998 between the Registrant and
Newport Acquisition Company No. 2, LLC.

10.34 Common Stock Purchase Warrants issued to Rochon Capital Group, Ltd. on February
27, 1998.

10.35* 1998 Employee Stock Option Plan and form of Nonstatutory Option Agreements
thereunder.

11.1 (14) Statement regarding Computation of per share earnings.

16 (10)(11)(12) Letter regarding change in Certifying Accountant.

21 (1) Subsidiaries of Registrant.

23.1 Consent of Price Waterhouse LLP, Independent Accountants.

24.1 Power of Attorney. See Page 65.

27.1 Financial Data Schedules at December 31, 1997 and for the year ended December
31, 1997.

27.2 Financial Data Schedules for the three month periods ended March 31, June 30,
and September 30, 1997, respectively, restated for the effect of the adoption
of Statement of Financial Accounting Standard No. 128, "Earnings Per Share."

EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
- ---------------------- ------------------------------------------------------------------------------- -----------------

27.3 Financial Data Schedules for the three month periods ended March 31, June 30,
and September 30, 1996, respectively, and years ended December 31, 1995 and
1996, restated for the effect of the adoption of Statement of Financial
Accounting Standard No. 128, "Earnings Per Share."