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


                                    FORM 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934


                         FOR QUARTER ENDED JUNE 30, 1998


                         COMMISSION FILE NUMBER 0-24719


                                 SOFTWORKS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         DELAWARE                      7372                52-1092916
      (State or other        (Primary Standard          (I.R.S. Employer
       jurisdiction of       Industrial Classification   Identification No.)
       Incorporation or      Code Number)
       organization)

                        5845 RICHMOND HIGHWAY, SUITE 400
                              ALEXANDRIA, VA 22303
                                (703) 317 - 2424
    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)


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

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  [X]*


Indicate the number of shares  outstanding of each of issuer's classes of common
stock as of the latest practicable date:

                                           NUMBER OF SHARES OUTSTANDING ON
             TITLE OF CLASS                         June 30, 1998
             --------------                -------------------------------

      Common Stock, $.001 par value                   14,083,000

        * Registrant became subject to the filing requirements of the Securities
    Exchange  Act of 1934 on July 30, 1998 when its  Registration  Statement  on
    Forms S-1 and 8-A were declared  effective by the  Commission.  On August 4,
    1998,  the Company  consummated  its Initial  Public  Offering of  4,200,000
    shares of its common stock at a price of $7.00 per share;  1,700,000  shares
    of which were  issued and sold by the Company  and  1,500,000  of which were
    sold by Computer Concepts Corporation,  the Registrant's parent company, and
    1,000,000 shares of which were sold by an unrelated selling shareholder.

<PAGE>


                                 SOFTWORKS, INC.
      Quarterly Report on Form 10-Q for the Six Months Ended June 30, 1998
                                Table of Contents



                                                                          PAGE
                                                                          ----
PART I    FINANCIAL INFORMATION

  ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997      3 

  Consolidated Statements of Operations for the three and six months
  ended June 30, 1998 and 1997                                               4

  Consolidated Statements of Cash Flows for  the six months
  ended June 30, 1998 and 1997                                               5

  Notes to Consolidated Financial Statements                                 6

  ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF                           
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS                   10 

PART II   OTHER INFORMATION

  ITEM 1.   LEGAL PROCEEDINGS                                               17
                                                                              
  ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS                       17

  ITEM 3.   DEFAULTS UPON SENIOR SECURITIES                                 17

  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY                     17
            HOLDERS


  ITEM 5.   OTHER INFORMATION                                               17

  ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                18

  SIGNATURE                                                                 19
  
<PAGE>

                                     PART I

ITEM 1.   FINANCIAL STATEMENTS

                                 SOFTWORKS, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                     June 30,         December 31,
                                                                       1998               1997
                                                                  ----------------   -------------
                                                                    (UNAUDITED)
                          Assets
<S>                                                                     <C>              <C>  
Current Assets:
  Cash and cash equivalents                                            $   504         $    360
  Accounts receivable, net of allowance for doubtful accounts of
    $257 and $206, respectively                                          7,241           10,652
  Installment receivables                                                7,918            6,148
  Prepaid expenses and other current assets                              1,476              984
  Deferred tax assets                                                      375              138
                                                                 -------------    -------------
     Total current assets                                               17,514           18,282

  Installment receivables, noncurrent                                    7,948            6,480
  Property and equipment, net                                            1,441            1,523
  Software development costs, net                                        3,735            3,357
  Goodwill, net of accumulated amortization of $2,902 and $2,477,
    respectively                                                         4,584            4,611
  Other assets                                                             943              734
  Deferred tax assets, noncurrent                                          527              696
                                                                 -------------    -------------
     Total assets                                                     $ 36,692         $ 35,683
                                                                 =============    =============

           Liabilities and Stockholder's Equity

Current Liabilities:
  Accounts payable and accrued expenses                                $ 3,976         $ 4,689
  Current portion of long-term debt                                      1,005           1,083
  Deferred maintenance revenue                                           5,555           6,225
  Deferred installment revenue                                           6,923           5,506
  Due to Parent                                                          1,632           1,554
                                                                 -------------   -------------
    Total current liabilities                                           19,091          19,057

  Deferred maintenance revenue, noncurrent                               1,483             740
  Deferred installment revenue, noncurrent                               7,918           7,122
  Long-term debt                                                         1,517           1,294
  Payable to Parent for federal income taxes                             1,383           1,383
                                                                  -------------  -------------
    Total liabilities                                                   31,392          29,596

Stockholders' Equity:
  Preferred stock, $.001 par value; 2,000,000 shares authorized;           -               -
    none issued or outstanding
  Common stock, $.001 par value; 150,000,000 authorized;                   14               14
    14,083,000 shares issued and outstanding
  Additional paid-in capital                                             5,549           5,549
  Retained (deficit) earnings                                             (202)            578
  Accumulated other comprehensive loss                                     (61)            (54)
                                                                  -------------  -------------

    Total stockholders' equity                                           5,300           6,087
                                                                  -------------  -------------

     Total liabilities and stockholders' equity                       $ 36,692        $ 35,683
                                                                  =============  =============
<FN>
          THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
</FN>
</TABLE>
<PAGE>
                                 SOFTWORKS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                   Three Months Ended                   Six Months Ended
                                                        June 30,                               June 30,
                                            --------------------------------      --------------------------------
                                                1998              1997                 1998             1997
                                            --------------   ---------------      ---------------   --------------
                                             (UNAUDITED)      (UNAUDITED)          (UNAUDITED)       (UNAUDITED)
<S>                                            <C>             <C>                  <C>              <C>  
Revenue:
   Software licenses                             6,026          3,809                9,762            6,104
   Maintenance                                   2,625          2,458                5,176            4,829
   Professional services                           403              -                  712                -
                                            -----------    -----------           ----------      -----------
     Total revenue                               9,054          6,267               15,650           10,933
                                            -----------    -----------           ----------      -----------

Cost of revenue (exclusive of
  amortization and depreciation shown
  separately below):
  Software licenses                                194            114                  633              215
  Maintenance                                    1,612          1,337                3,258            2,500
  Professional services                            196              -                  421                -
                                            -----------    -----------           ----------      -----------
     Total cost of revenue                       2,002          1,451                4,312            2,715
                                            -----------    -----------           ----------      -----------
Gross margin                                     7,052          4,816               11,338            8,218
                                            -----------    -----------           ----------      -----------

Operating expenses:
  Sales and marketing                            4,516          3,300                7,911            5,605
  General and administrative                     1,254            594                2,356            1,478
  Amortization and depreciation                    525            445                1,015              881
  Research and development                         421            413                  693              686
                                            -----------    -----------           ----------      -----------
     Total operating expenses                    6,716          4,752               11,975            8,650
                                            -----------    -----------           ----------      -----------
Operating income (loss)                            336             64                 (637)            (432)

Other expenses                                    (169)             -                 (169)               -
                                            -----------    -----------           ----------      -----------
Income (loss) from operations before
  income taxes                                     167             64                 (806)            (432)

Provision for (benefit from) income taxes          180             84                  (26)             (79)
                                            -----------    -----------           ----------      -----------
Net loss                                       $   (13)       $   (20)             $  (780)          $ (353)
                                            ===========    ===========           ==========      ===========
Basic and diluted net loss                     $ (0.00)       $ (0.00)             $ (0.06)         $ (0.03)
                                            ===========    ===========           ==========      ===========

Basic and diluted weighted average shares
outstanding                                     14,083         14,083               14,083           14,083
                                            ==========     ===========           ==========      ==========
<FN>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
</FN>
</TABLE>

<PAGE>


                                 SOFTWORKS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                       Six Months Ended
                                                                           June 30,
                                                             ----------------------------------
                                                                  1998              1997
                                                             ----------------  ----------------
                                                               (UNAUDITED)       (UNAUDITED)

<S>                                                           <C>               <C>    
Cash flows from operating activities:
  Net loss                                                    $      (780)      $      (353)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities ---
    Amortization and depreciation
      Property and equipment                                          383               296
      Software development costs                                      799               298
      Goodwill                                                        425               361
    Provision for doubtful accounts                                   128                96
    Deferred tax benefit                                              (68)             (127)
  Changes in operating assets and liabilities---
    Accounts receivable and installment receivables                    45            (3,334)
    Prepaid expenses and other current assets                        (492)              (50)
    Other assets                                                     (209)              (11)
    Accounts payable and accrued expenses                            (480)              543
    Deferred revenue                                                2,286             2,407
                                                              ------------     ------------
       Net cash provided by operating activities                    2,037               126
                                                              ------------     ------------
Cash flows from investing activities:
  Purchases of property and equipment                                (301)             (526)
  Software development and technology purchases                    (1,286)             (420)
  Additional consideration for SOFTWORKS, Inc. acquisition           (405)             (374)
                                                              -------------    -------------
       Net cash used in investing activities                        (1,992)          (1,320)
                                                              -------------    -------------
Cash flows from financing activities:
  Net borrowings from Parent                                            78               233
  Repayments of long-term debt                                           -              (121)
  Proceeds from long-term debt                                          28                 -
                                                              -------------    -------------
       Net cash provided by financing activities                       106               112
                                                              -------------    -------------
Effect of exchange rate changes on cash and cash equivalents            (7)                -
                                                              --------------   -------------
Net increase (decrease) in cash and cash equivalents                   144            (1,082)
Cash and cash equivalents, beginning of period                         360             1,735
                                                             --------------    -------------
Cash and cash equivalents, end of period                      $        504      $        653
                                                             ==============    =============
Supplemental disclosure of cash flow information:
  Interest paid                                               $         17      $         21
                                                             --------------    -------------
  Income taxes paid                                           $         14      $          -
                                                             ==============    =============
Supplemental schedule of noncash investing and
  financing activities:
  Assumption of long-term debt from capitalized
    software technology                                       $         -       $     2,160
                                                             ==============    =============

<FN>
                           THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
</FN>
</TABLE>


<PAGE>

                                 SOFTWORKS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         AS OF JUNE 30, 1998 (UNAUDITED)


1. Organization and Nature of Operations:

The Company

     SOFTWORKS, Inc. ("SOFTWORKS" or the "Company") designs, develops,  markets,
and supports  systems  management  software  products for  enterprise  computing
environments primarily in the United States.  SOFTWORKS owns subsidiaries in the
United  Kingdom,  France,  Brazil,  Australia,  Italy,  and Spain which  operate
primarily as sales offices.  SOFTWORKS was  incorporated in 1977 under the state
laws of Maryland and reincorporated in 1998 under the state laws of Delaware. In
1993,  SOFTWORKS was acquired by Computer  Concepts  Corp.  (the "Parent" or the
"Stockholder"). 

Public Offering

     On August 4, 1998, the Company completed an initial public offering ("IPO")
of 4,200,000 shares of the Company's common stock, par value $.001. 1,700,000 of
these shares were sold by the Company,  resulting in net proceeds to the Company
of approximately  $10.3 million,  while the remaining 2,500,000 shares sold were
owned by the Parent and another  stockholder.  In conjunction  with the IPO, the
Company also issued 190,000 shares of common stock to a financial advisor.


Voting Trust Agreement

     In conjunction with the IPO, shares owned by the Parent were deposited in a
voting trust.  The voting power of the shares  deposited in the trust is held by
three  trustees  who are and  will be  members  of the  Board  of  Directors  of
SOFTWORKS.  One  trustee is the  Chairman  of the Parent and the  remaining  two
trustees are directors who do not have a significant  financial  interest in the
Parent,  one of which is the Chairman of SOFTWORKS.  The agreement provides that
upon  a  change  in  either  of  the  remaining  two  trustees,  the  non-Parent
stockholders  have control of the selection of the  successor  director/trustee.
This  agreement  remains in effect until the Parent reduces its ownership to 25%
of SOFTWORKS.


Risks and Other Factors

     As a company  that  develops,  markets,  licenses  and supports a family of
enterprise systems management  software products for data and storage management
and  performance  management,  SOFTWORKS  faces  certain  risks.  These  include
dependence on proprietary  technology,  rapid  technological  change,  errors or
failures in its products, dependence on key personnel,  challenges in recruiting
personnel and a highly competitive marketplace.

     As of June 30,  1998,  the Parent  owned  more than 50% of the  outstanding
shares of the Company.  The Parent received a going concern opinion with respect
to its audited financial  statements for the year ended December 31, 1997. Under
certain  circumstances,  the Parent's  financial  condition  may  influence  its
decisions  as the  controlling  stockholder  of the  Company.  The voting  trust
agreement  noted above gives the majority of trustees  control over  significant
corporate  actions,  including certain  disposition or encumbrance of assets and
the payment of dividends.

<PAGE>

2. Significant Accounting Policies

Financial Statement Presentation

     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,  the
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     These  financial  statements  are  unaudited  and have been prepared by the
Company  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission  regarding  interim  financial  reporting.  Accordingly,  they do not
include all of the  information  and  footnotes  required by generally  accepted
accounting  principles for complete  financial  statements,  and it is suggested
that  these  financial  statements  be read in  conjunction  with the  financial
statements,  and the notes thereto,  included in the Company's  prospectus dated
August  4,  1998.  In the  opinion  of  management,  the  comparative  financial
statements for the fiscal periods  presented herein include all adjustments that
are normal and recurring which are necessary for a fair statement of the results
for the interim periods.  The results of operations for the three and six months
ended June 30, 1998 are not necessarily indicative of the results for the entire
year ending December 31, 1998.

Increase in Authorized Shares and Stock Split

     On May 27, 1998 the Company  restated  its  articles  of  incorporation  to
increase  the number of  authorized  shares to  2,000,000  preferred  shares and
150,000,000 common shares. Additionally, on May 28, 1998, the Board of Directors
of SOFTWORKS effected a 5,000-for-1 stock split.  Further, on June 29, 1998, the
Board of Directors of SOFTWORKS  declared and issued a stock dividend of 583,000
shares of Common Stock to the  Stockholder.  The effects of the stock split, and
stock  dividend  have been given  retroactive  application  in the  consolidated
financial statements for all periods presented.

Revenue Recognition

     Revenue  from  the  sale  of  perpetual  and  term  software   licenses  is
recognized,  net  of  provisions  for  returns,  at the  time  of  delivery  and
acceptance  of  software  products  by  the  customer,  when  collectibility  is
probable. The Company provides customers with the option to pay for license fees
in one lump sum or generally in equal annual  installments over extended periods
of time, generally three to five years. In such instances,  the Company does not
consider sales contracts with amounts due for periods greater than one year from
delivery,  fixed and  determinable,  and accordingly  recognizes such amounts as
revenue  when they  become  due.  Maintenance  revenue  that is bundled  with an
initial  license fee is deferred and  recognized  ratably  over the  maintenance
period.  Amounts  deferred  for  maintenance  are  based  on the  fair  value of
equivalent  maintenance  services  sold  separately.  Revenue from  professional
services, such as training and staff augmentation, is recognized as the services
are performed.

     The American  Institute of Certified Public Accountants issued Statement of
Position 97-2 "Software  Revenue  Recognition"  ("SOP 97-2"),  which  superceded
Statement of Position 91-1  "Software  Revenue  Recognition."  SOP 97-2 provides
additional  guidance  with respect to multiple  element  arrangements;  returns,
exchanges, and platform transfer rights;  resellers;  services;  funded software
development arrangements;  and contract accounting.  The Company implemented SOP
97-2 for the year ended  December  31,  1997.  The  adoption of SOP 97-2 was not
material to the Company's revenue recognition policy for software transactions.

<PAGE>

Cash Equivalents

     The  Company  considers  all highly  liquid  instruments  with an  original
maturity of three months or less at the time of purchase to be cash equivalents.

Income Taxes

     The  Company  accounts  for  income  taxes  under  Statement  of  Financial
Accounting  Standards No. 109,  "Accounting  for Income Taxes" ("SFAS No. 109").
SFAS No. 109 requires the  determination  of deferred tax assets and liabilities
based on the differences between the financial statement and income tax bases of
assets and liabilities,  using enacted tax rates. SFAS No. 109 requires that the
net  deferred tax asset is adjusted by a valuation  allowance,  if, based on the
weight of  available  evidence,  it is more likely than not that some portion or
all of the net deferred tax asset will not be realized.

Basic and Diluted Net (Loss) Income Per Share

     In March 1997, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  No.  128,  "Earnings  Per Share"  ("SFAS No.  128").  SFAS No. 128 is
effective for financial  statements issued for periods ending after December 15,
1997 and has been implemented for all periods  presented.  SFAS No. 128 requires
dual  presentation of basic and diluted  earnings per share.  Basic earnings per
share  includes no  dilution  and is  computed  by  dividing  net income  (loss)
available to common stockholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share includes the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised or converted  into common stock.  For all periods  presented the
Company  had no  potentially  dilutive  securities,  as a result  the  basic and
diluted earnings per share amounts are identical.

     Basic and diluted net earnings per share is also  computed  pursuant to SEC
Staff  Accounting  Bulletin No. 98 ("SAB 98").  SAB 98 requires  that all equity
instruments issued at nominal prices,  prior to the effective date of an initial
public offering,  be included in the calculation of basic and diluted net income
(loss) per share as if they were outstanding for all periods presented.  To date
the Company has not had any issuances or grants at nominal prices.

Foreign Currency

     The   functional   currency   for  all  of  the   Company's   international
subsidiaries  is the  subsidiary's  local  currency.  Assets and liabilities of
international  subsidiaries  are  translated  into U.S.  dollars  at  period-end
exchange rates and revenue and expense accounts and cash flows are translated at
average  exchange  rates  during the  period.  Gains and losses  resulting  from
translation  are  recorded  as  accumulated   other   comprehensive   income  in
stockholders'  equity.  Transaction  gains  and  losses  are  recognized  in the
consolidated statements of operations as incurred.

Fair Value of Financial Instruments

     The carrying  value of current assets and current  liabilities  approximate
their  fair  value  because  of  the  relatively   short   maturities  of  these
instruments.

<PAGE>

3. Geographic Information:

     The Company is primarily  engaged in a single line of business.  Geographic
data is summarized  between the United States and  International.  International
consists of operations through the Company's  international  subsidiaries in the
United Kingdom,  France,  Brazil,  Australia,  Spain and Italy, as well as sales
generated  through  international  distributors  primarily  in Europe  and Asia.
Geographic data is presented in accordance with SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related  Information" for all periods presented as
follows (in thousands):

<TABLE>
<CAPTION>
                                           Three Months Ended             Six Months Ended
                                                June 30,                       June 30,
                                    -----------------------------   ----------------------------
                                       1998             1997           1998             1997
                                    ------------     ------------   -----------      -----------
<S>                                 <C>             <C>           <C>              <C>       
Revenue:
 United States                      $   7,022       $    5,161    $   12,312       $    8,808
 International                          2,032            1,106         3,338            2,125
                                    ----------     ------------   -----------      -----------
   Total                            $   9,054       $    6,267    $   15,650       $   10,933
                                    ==========     ============   ===========      ===========

Operating Income (Loss):
 United States                      $     464       $      215    $       80       $      (48)
 International                           (128)            (151)         (717)            (384)
                                    ----------     ------------   -----------      -----------
   Total                            $     336       $       64    $     (637)      $     (432)
                                    ==========     ============   ===========      ===========

Identifiable Assets:
 United States                      $  32,457       $    23,881   $    32,457      $    23,881
 International                          4,235             1,307         4,235            1,307
                                    -----------     ------------   -----------     ------------
   Total                            $  36,692       $    25,188    $   36,692      $    25,188
                                    ===========     ============   ===========     ============
</TABLE>

<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
        OF OPERATIONS

     Forward-Looking   Statements.  All  statements  other  than  statements  of
historical  fact  included  in  this  Form  10-Q  including  without  limitation
statements under,  "Management's  Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position,  business
strategy and the plans and  objectives  of the Company's  management  for future
operations, are forward-looking  statements.  When used in this Form 10-Q, words
such as  "anticipate,"  "believe,"  "estimate,"  "expect,"  "intend" and similar
expressions,  as  they  relate  to  the  Company  or  its  management,  identify
forward-looking  statements.  Such  forward-looking  statements are based on the
beliefs  of the  Company's  management,  as  well  as  assumptions  made  by and
information  currently  available to the Company's  management.  Actual  results
could  differ  materially  from  those   contemplated  by  the   forward-looking
statements  as a  result  of  certain  factors  including  but not  limited  to,
fluctuations in future operating results, technological changes or difficulties,
management of future growth, expansion of international operations,  the risk of
errors or failures in the Company's software products, dependence on proprietary
technology,  competitive factors, risks associated with potential  acquisitions,
the ability to recruit  personnel,  the dependence on key personnel,  control of
the Company by the parent, and management's discretion in the application of the
offering proceeds. Such statements reflect the current views of the Company with
respect to future events and are subject to these and other risks, uncertainties
and  assumptions  relating  to the  operations,  results of  operations,  growth
strategy  and  liquidity  of  the  Company.  All  subsequent  written  and  oral
forward-looking  statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this paragraph.


                                    Overview

     The Company develops, markets, licenses and supports a family of enterprise
systems  management  software  products  for data  and  storage  management  and
performance  management.  The  Company's  offerings are grouped into four market
segments ("Arenas"):  performance  management  ("Performance  Arena");  data and
storage  management  ("DataStor  Arena");  Year 2000  ("Year 2000  Arena");  and
professional  services  ("Services  Arena").  The  Company  derives  its revenue
primarily  from the licensing of its computer  software  programs,  the sales of
software maintenance services,  and from professional services involving product
implementation and staff augmentation services.

     The  Company's  revenue  consists of revenue  from  licensing  its software
products, revenue from the maintenance and support of its software products and,
commencing  in the third  quarter of 1997,  revenue from  professional  services
relating to information  technology  ("IT")  consulting and staff  augmentation.
Generally,  the  Company  is  required  by  its  license  agreement  to  provide
maintenance  and  enhancements  during  the  maintenance  period.  "Maintenance"
includes  diagnosis  and  correction  of errors in the  current  version  of the
product  and  telephone  consultation  to  discuss  general  support  questions.
"Enhancements" include upgrades to the products as they become available and new
releases of products,  except for those which are sold as charged options to the
Company's  general  customer base.  Substantially  all of the Company's  license
agreements are perpetual.

     Maintenance  agreements  are  typically  for a term of one year  and  renew
automatically  upon the payment by the  customer of an annual  maintenance  fee.
Maintenance  revenue also includes  maintenance  services for an initial  period
that is included in the initial  charge when the Company  licenses  its software
products under a long-term agreement. Thereafter on each anniversary date of the
license,  the  customer  may elect to renew its  maintenance  contract  with the
Company. Customers may also elect to purchase advance maintenance at the time of
product licensing for maintenance periods beyond the first year.

<PAGE>
                               Operating Results

The following table sets forth for the periods  indicated  certain  consolidated
statement of operations data expressed as a percentage of total revenue.

<TABLE>
<CAPTION>
                                                    Three Months Ended                Six Months Ended
                                                         June 30,                          June 30,
                                               ---------------------------       ---------------------------
                                                  1998            1997              1998            1997
                                               -----------     -----------       -----------     -----------
                                                 (UNAUDITED)      (UNAUDITED)      (UNAUDITED)   (UNAUDITED)
<S>                                                 <C>             <C>               <C>             <C>  
Revenue:
  Software licenses                                 66.6%           60.8%             62.4%           55.8%
  Maintenance                                       29.0%           39.2%             33.1%           44.2%
  Professional services                              4.4%            0.0%              4.5%            0.0%
                                               -----------     -----------       -----------     -----------
           Total revenue                           100.0%          100.0%            100.0%          100.0%

Cost of Revenue (exclusive of
  amortization and depreciation shown
  separately below):
  Software licenses                                  2.1%            1.8%              4.1%            1.9%
  Maintenance                                       17.8%           21.4%             20.8%           22.9%
  Professional services                              2.2%            0.0%              2.7%            0.0%
                                               -----------     -----------       -----------     -----------
           Total cost of revenue                    22.1%           23.2%             27.6%           24.8%
                                               -----------     -----------       -----------     -----------

Gross margin                                        77.9%           76.8%             72.4%           75.2%
                                               -----------     -----------       -----------     -----------

Operating expenses:
  Sales and marketing                               49.9%           52.6%             50.5%           51.2%
  General and administrative                        13.9%            9.5%             15.1%           13.5%
  Amortization and depreciation                      5.8%            7.1%              6.5%            8.1% 
  Research and development                           4.6%            6.6%              4.4%            6.3%
                                               -----------     -----------       -----------     -----------
          Total operating expenses                  74.2%           75.8%             76.5%           79.1%
                                               -----------     -----------       -----------     -----------

Operating income (loss)                              3.7%            1.0%             (4.1%)          (3.9%)

Other (expenses) income                             (1.9%)           0.0%             (1.1%)           0.0%
                                               -----------     -----------       -----------     -----------
Income (loss) from operations before
income taxes                                         1.8%            1.0%             (5.2%)          (3.9%)

Provision for (benefit from) income taxes            1.9%            1.3%             (0.2%)          (0.7%)
                                               -----------     -----------       -----------     -----------
Net loss                                            (0.1%)          (0.3%)            (5.0%)          (3.2%)
                                               ===========     ===========       ===========     ===========
</TABLE>


THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997

     Revenue.  Total revenue for the three months ended June 30, 1998  increased
by 44.5% to $9.1  million  from $6.3 million for the three months ended June 30,
1997.  License  revenue for the three months ended June 30, 1998 increased 58.2%
to $6.0 million from $3.8 million for the quarter  ended June 30, 1997.  Revenue
from  product  licenses  in the  Company's  DataStor  Arena  that  includes  its
multi-platform  data storage management product,  CenterStage,  increased 78.1%

<PAGE>

for the three months ended June 30, 1998.  Revenue from product  licenses in the
Company's  Performance Arena increased 31.6% for the three months ended June 30,
1998.  Maintenance  revenue  increased 6.8% to $2.6 million for the three months
ended June 30, 1998 from $2.5  million for the three months ended June 30, 1997.
Professional services,  which commenced operations in the third quarter of 1997,
contributed  $403,000  to total  revenue  for the period  ended  June 30,  1998.
International   revenue,   consisting  of  the  Company's   licensing  from  its
international operations,  comprised of foreign subsidiaries,  distributors, and
marketing  agents,  increased  83.7% to $2.0  million for the three months ended
June 30, 1998 from $1.1 million for the three  months ended June 30, 1997.  As a
percentage of total revenue,  international  revenue  increased to 22.4% for the
quarter ended June 30, 1998 from 17.6% for the quarter ended June 30, 1997.  The
increase  was  primarily  the  result  of  increased  product  sales  in the UK,
Australia and Brazil

     Cost of  Revenue.  Included  in the cost of  revenue  are cost of  software
license revenue,  cost of maintenance revenue, and cost of professional services
revenue.  Cost of software  license revenue  includes  royalties paid to Company
developers  and to third parties.  Cost of software  license  revenue  increased
70.2% to $194,000, or 2.1% of total revenue, for the three months ended June 30,
1998 from $114,000,  or 1.8% of total  revenue,  for the three months ended June
30, 1997.  This increase was primarily  attributable to an increase in royalties
expense as a result of increased sales of products.  Cost of maintenance revenue
increased 20.6% to $1.6 million, or 17.8% of total revenue, for the three months
ended June 30, 1998 from $1.3 million, or 21.4% of total revenue,  for the three
months ended June 30,  1997.  This  increase is  attributable  to an  increasing
customer base of maintenance  contracts.  Cost of professional services revenue,
which consists primarily of salaries and expenses,  commenced  operations in the
third quarter of 1997 and was $196,000 for the three months ended June 30, 1998.

     Sales and Marketing Expense.  Sales and marketing expenses include salaries
and related costs,  commissions,  travel,  facilities  and computers,  pre-sales
support,  communications  costs, trade shows and other promotional  expenses for
the Company's direct sales organization and marketing staff. Sales and marketing
expenses  increased  36.8% to $4.5  million for the three  months ended June 30,
1998 from $3.3 million for the three months ended June 30, 1997.  This  increase
was  attributable  primarily to increased  commission  expenses  resulting  from
increased  sales,  and increased  personnel  costs  resulting from growth in the
Company's sales  organization.  As a percentage of revenue,  sales and marketing
expenses  decreased to 49.9% for the three months ended June 30, 1998 from 52.6%
for the three  months ended June 30,  1997.  The Company  expects that sales and
marketing  expenditures  will  increase  in terms of absolute  dollars,  and may
decrease  as  a  percentage  of  revenue,  during  the  remainder  of  1998  and
thereafter.  The  increase  in  absolute  dollars is  expected to be incurred as
additional  personnel  are hired,  field  offices  are  opened  and  promotional
expenditures  increase to allow the Company to increase  its market  penetration
and to pursue new market opportunities.

     General and Administrative  Expense.  General and  administrative  expenses
include   administrative   salaries  and  related  benefits,   management  fees,
recruiting  and  relocation  expenses,  as well as legal,  accounting  and other
professional fees. General and administrative  expenses increased 111.1% to $1.3
million for the three  months  ended June 30, 1998 from  $594,000  for the three
months ended June 30, 1997. The increase in general and administrative  expenses
was  principally  due to an  increase  in  staffing  levels  and  administrative
personnel necessary to support the Company's growth. As a percentage of revenue,
this  expense  increased  to 13.9% for the three months ended June 30, 1998 from
9.5% for the three months ended June 30, 1997. The Company  expects that general
and  administrative  expenditures  will  increase  in  absolute  dollars and may
decrease  as a  percentage  of total  revenue  during 1998 and  thereafter.  The
increase in absolute dollars is expected to be required for the expansion of the
Company's  administrative  staff  and  internal  systems  to  support  expanding
operations and the costs of operating as a public company.

     Amortization  and  Depreciation  Expense.   Amortization  and  depreciation
expenses  increased  18.0% to $525,000  for the three months ended June 30, 1998
from $445,000 for the three months ended June 30, 1997.

     Research and Development Expense. Research and development expenses include
compensation  and related  costs for the  personnel  involved  in the  Company's
research and development  efforts.  Research and development  expenses increased
1.9% to $421,000 for the three months ended June 30, 1998 from  $413,000 for the
three months ended June 30, 1997.

<PAGE>

     Provision for (Benefit  from) Income Taxes.  The provision for income taxes
increased  to $180,000 for the three months ended June 30, 1998 from $84,000 for
the three months ended June 30, 1997. During these periods, the Company reported
its  financial  results on a  consolidated  basis  with its parent  corporation,
Computer Concepts, and did not file separate tax returns.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

     Revenue.  Total revenue increased 43.1% to $15.7 million for the six months
ended June 30, 1998 from $10.9  million for the six months  ended June 30, 1997.
License  revenue  increased  59.9% to $9.8 million for the six months ended June
30, 1998 from $6.1 million for the six months  ended June 30, 1997.  Maintenance
revenue  increased  7.2% to $5.2  million for the six months ended June 30, 1998
from $4.8 million for the six months ended June 30, 1997. Professional services,
which commenced operations in the third quarter of 1997, contributed $712,000 to
total revenue for the six month period ended June 30, 1998.

     Cost of  Revenue.  Included  in the cost of  revenue  are cost of  software
license revenue,  cost of maintenance revenue, and cost of professional services
revenue.  Cost of software  license revenue  includes  royalties paid to Company
developers  and to a third party under a licensing  agreement  for certain  Year
2000 products. Cost of software license revenue increased 194.4% to $633,000, or
4.1% of total revenue, for the six months ended June 30, 1998 from $215,000,  or
1.9% of total revenue, for the six months ended June 30, 1997. This increase was
primarily  attributable  to the  royalties  paid as a  result  of a third  party
agreement  that was not in effect in during the six-month  period ended June 30,
1997,  as well as an  increase  in royalty  payments  resulting  from  increased
software license revenue.  Cost of maintenance  revenue  increased 30.3% to $3.3
million, or 20.8% of total revenue,  for the six months ended June 30, 1998 from
$2.5 million, or 22.9% of total revenue, for the six months ended June 30, 1997.
Cost of professional services revenue,  which consists primarily of salaries and
expenses, commenced operations in the third quarter of 1997 and was $421,000 for
the six months ended June 30, 1998.

     Sales and Marketing Expense.  Sales and marketing expenses include salaries
and related costs, commissions, travel, facilities and computers, communications
costs and promotional  expenses for the Company's direct sales  organization and
marketing staff.  Sales and marketing  expenses  increased 41.1% to $7.9 million
for the six months  ended  June 30,  1998 from $5.6  million  for the six months
ended June 30,  1997.  This  increase  was  attributable  primarily to increased
commission  expenses  resulting from increased  sales,  and increased  personnel
costs resulting from growth in the Company's sales organization. As a percentage
of revenue,  sales and marketing  expenses decreased to 50.5% for the six months
ended June 30, 1998 from 51.2% for the six months ended June 30, 1997

     General and Administrative  Expense.  General and  administrative  expenses
include  administrative  salaries and related  benefits,  legal,  accounting and
other professional fees. General and administrative  expenses increased 59.4% to
$2.4 million for the six months ended June 30, 1998 from $1.5 for the six months
ended June 30,  1997.  The increase in general and  administrative  expenses was
principally due to an increase in finance and administrative personnel necessary
to support the Company's  growth and the costs of operating as a public company.
As a percentage of revenue,  this expense  increased to 15.1% for the six months
ended June 30, 1998 from 13.5% for the six months ended June 30, 1997.

     Amortization  and  Depreciation  Expense.   Amortization  and  depreciation
expenses  increased 15.2% to $1.0 million for the six months ended June 30, 1998
from $881,000 for the six months ended June 30, 1997.

     Research and Development Expense. Research and development expenses include
salaries and related costs for the personnel  involved in the Company's research
and development efforts. Research and development expenses were $693,000 for the
six months  ended June 30, 1998 and  $686,000  for the six months ended June 30,
1997.  

     Provision for (Benefit  from) Income  Taxes.  The benefit from income taxes
decreased to $26,000 for the six months ended June 30, 1998 from $79,000 for the
six months ended June 30, 1997.  During these periods,  the Company reported its
financial  results  on a  consolidated  basis  with the  Parent and did not file
separate tax returns.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The  Company  has  funded  its  operations   through  cash  generated  from
operations and advances from the Parent.  The Company had cash, cash equivalents
and  short-term  investments of $504,000 at June 30, 1998. At June 30, 1998, the
balance owing to the Parent was $3.0 million.

     For the six  months  ended June 30,  1998 and 1997,  net cash  provided  by
operating  activities was $2.0 million and $126,000,  respectively.  For the six
months ended June 30, 1998 and 1997,  net cash used in investing  activities was
$2.0 and $1.3  million  respectively.  The  increase  in cash used in  investing
activities was primarily a result of additional software development  purchases.
For the six months ended June 30, 1998 and 1997,  net cash provided by financing
activities was $106,000 and $112,000 respectively

     The Company's principal commitments as of June 30, 1998 consisted primarily
of (i) leases on its corporate  headquarters  facilities,  various sales offices
and  operating  equipment,  (ii)  employment  agreements  and  (iii) a  software
licensing and  distribution  agreement.  There were no material  commitments for
capital  expenditures.  The Company intends to enter into a credit  agreement in
September,  1998 with a commercial  bank to obtain a $3.0 million line of credit
secured by all of the Company's personal property,  consisting  primarily of the
Company's domestic accounts  receivable.  Amounts  outstanding under the line of
credit will bear  interest at the bank's  prime rate or LIBOR plus 1.7%,  at the
Company's  option.  Amounts  available  under this  facility,  together with the
Company's  current  cash  balances  and cash  flow from its  operations  and the
proceeds of its recent  public  offering,  are expected to be sufficient to meet
its  working  capital  and  capital  expenditure  needs for at least the next 12
months. However, there can be no assurance that the Company will have sufficient
capital to finance potential  acquisitions or other growth oriented  activities,
which  could  require  the  Company  to incur  additional  debt or obtain  other
financing.

RECENT DEVELOPMENTS

     Initial  Public  Offering.  On August 4, 1998 the Company  consummated  its
Initial  Public  Offering  ("IPO") of 4,200,000  shares of its Common Stock at a
price of $7.00 per share, of which 1,700,000  shares were issued and sold by the
Company and 1,500,000 shares were sold by the Parent,  and 1,000,000 shares were
sold by another  selling  stockholder.  The net proceeds to the Company from the
IPO were approximately $10.3 million.

YEAR 2000 ISSUES

     Background.   Some  computers,   software,   and  other  equipment  include
programming  code in which calendar year data is abbreviated to only two digits.
As a result of this design decision, some of these systems could fail to operate
or fail to produce correct  results if "00" is interpreted to mean 1900,  rather
than 2000.  These  problems  are widely  expected to increase in  frequency  and
severity  as the year  2000  approaches,  and are  commonly  referred  to as the
"Millenium Bug"or "Year 2000 Problem".

     Assessment.  The Year 2000 Problem could affect  computers,  software,  and
other equipment used, operated, or maintained by the Company.  Accordingly,  the
Company is reviewing its internal  computer  programs and systems to ensure that
the  programs  and systems will be Year 2000  compliant.  The Company  presently
believes  that its  computer  systems  will be Year 2000  compliant  in a timely
manner.  However,  while the estimated cost of these efforts are not expected to
be  material  to the  Company's  financial  position  or any  year's  results of
operations, there can be no assurance to this effect.

<PAGE>

     The Company has obtained certification of its processes to assess Year 2000
Problems from the Information  Technology Association of America (ITAA). Because
the Company's business involves software development, the Company has not sought
further   verification  or  validation  by  independent  third  parties  of  its
corrections  of Year 2000 Problems . However,  the  Company's  Year 2000 project
team is reviewing the Company's  project plans and monitoring  progress  against
those plans.

     Software Sold to Consumers.  The Company believes that it has substantially
identified  and  resolved  all  potential  Year  2000  Problems  with any of the
software  products,  which it develops and  markets.  However,  management  also
believes that it is not possible to determine  with complete  certainty that all
Year  2000  Problems   affecting  the  Company's  software  products  have  been
identified or corrected  due to  complexity of these  products and the fact that
these  products  interact with other third party vendor  products and operate on
computer systems which are not under the Company's control.

     Internal  Infrastructure.  The  Company  believes  that  it has  identified
substantially  all of the major computers,  software  applications,  and related
equipment used in connection with its internal operations that must be modified,
upgraded,  or replaced to minimize the  possibility of a material  disruption to
its business. The Company has commenced the process of modifying, upgrading, and
replacing  major systems that have been  identified as adversely  affected,  and
expects to complete this process before the end of 1998.

     Systems Other than Information Technology Systems. In addition to computers
and related systems, the operation of office and facilities  equipment,  such as
fax machines, photocopiers, telephone switches, security systems, elevators, and
other common  devices may be affected by the Year 2000  Problem.  The Company is
currently assessing the potential effect of, and costs of remediating,  the Year
2000 Problem on its office and facilities equipment.

     The  Company  estimates  the total cost to the  Company of  completing  any
required modifications, upgrades, or replacements of these internal systems will
not have a  material  adverse  effect on the  Company's  business  or results of
operations.  This estimate is being  monitored and will be revised as additional
information becomes available.

     Suppliers.  The  Company  has  initiated  communications  with third  party
suppliers of the major computers,  software, and other equipment used, operated,
or maintained by the Company to identify and, to the extent possible, to resolve
issues involving the Year 2000 Problem.  However,  the Company has limited or no
control over the actions of these third party suppliers. Thus, while the Company
expects that it will be able to resolve any significant  Year 2000 Problems with
these systems,  there can be no assurance that these  suppliers will resolve any
or all Year 2000 Problems with these systems before the occurrence of a material
disruption to the business of the Company or any of its  customers.  Any failure
of these third  parties to resolve Year 2000  problems  with their  systems in a
timely manner could have a material  adverse  effect on the Company's  business,
financial condition, and results of operation.

     Most Likely  Consequences  of Year 2000  Problems.  The Company  expects to
identify  and resolve all Year 2000  Problems  that could  materially  adversely
affect its business  operations.  However,  management  believes  that it is not
possible  to  determine  with  complete  certainty  that all Year 2000  Problems
affecting the Company have been  identified or corrected.  The number of devices
that could be affected and the  interactions  among these devices are simply too
numerous.  In  addition,  one  cannot  accurately  predict  how many  Year  2000
Problem-related  failures  will occur or the  severity,  duration,  or financial
consequences  of these  perhaps  inevitable  failures.  As a result,  management
expects that the Company could likely suffer the following consequences:

<PAGE>

     1.   a significant number of operational  inconveniences and inefficiencies
          for the Company and its clients that may divert  management's time and
          attention and financial and human resources from its ordinary business
          activities; and 

     2.   a  lesser  number  of  serious   system   failures  that  may  require
          significant  efforts  by the  Company  or its  clients  to  prevent or
          alleviate material business disruptions.

     Contingency Plans. The Company is currently developing contingency plans to
be implemented as part of its efforts to identify and correct Year 2000 Problems
affecting its internal systems.  The Company expects to complete its contingency
plans by the end of 1998.  Depending on the systems affected,  these plans could
include  accelerated  replacement  of affected  equipment or software,  short to
medium-term  use of backup  equipment  and  software,  increased  work hours for
Company  personnel  or use of contract  personnel  to correct on an  accelerated
schedule any Year 2000 Problems that arise or to provide manual  workarounds for
information  systems,  and  similar  approaches.  If the  Company is required to
implement  any of these  contingency  plans,  it could have a  material  adverse
effect on the Company's financial condition and results of operations.

     Based on the activities  described above, the Company does not believe that
the Year 2000  Problem  will have a  material  adverse  effect on the  Company's
business or results of operations.

     Disclaimer.  The  discussion of the  Company's  efforts,  and  management's
expectations,  relating to Year 2000 compliance are forward-looking  statements.
The  Company's  ability  to  achieve  Year  2000  compliance  and the  level  of
incremental costs associated  therewith,  could be adversely  impacted by, among
other things,  the availability  and cost of programming and testing  resources,
vendors' ability to modify  proprietary  software,  and  unanticipated  problems
identified in the ongoing compliance review.


IMPACT OF EUROPEAN MONETARY UNION

     The European Union is moving towards economic and monetary union in Europe,
with the goal of introducing a single  currency  called the EURO. The Company is
currently   assessing  the  effect  of  the  EURO  conversion  on  its  European
operations.

<PAGE>

                            PART II OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

     The Company is, from time to time,  involved in various  litigation matters
arising in the ordinary  course of its business.  The Company  believes that the
resolution of currently pending legal proceedings,  either individually or taken
as  a  whole,  will  not  have  a  material  adverse  effect  on  the  Company's
consolidated financial position or results of operations.


ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

     Not Applicable


ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

     Not Applicable


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

     Not Applicable


ITEM 5    OTHER INFORMATION

     Not Applicable


<PAGE>


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibit  Index

Exhibit Number              Description
---------------------------------------------------------------------

3.1           Certificate of Incorporation of Registrant*
3.2           By-Laws of Registrant*
4.1           Specimen Common Stock Certificate*
10.1          Lease Agreement dated June 14, 1994 between Registrant and WHT 
                 Reall Estate Limited Partnership*
10.2          First Amendment to Lease Agreement*
10.3          Second Amendment to Lease Agreement*
10.4          1998 Long Term Incentive Plan*
10.5          Employment Agreement between the Registrant and James Cannavino*
10.6          Employment Agreement between the Registrant and C.R. Kinsey, III*
10.7          Employment Agreement between the Registrant and Judy G. Carter*
10.8          Employment Agreement between the Registrant and Lisa Welch*
10.9          Employment Agreement between the Registrant and Joseph Miksch*
10.10         Employment Agreement between the Registrant and Robert McLaughlin*
10.11         Form of Indemnification Agreement between the Company
              and its officers and directors*
10.12         Distribution Agreement dated July 8, 1997 between the Registrant 
              and Cognizant Technology Solutions Corporation*
27.1          Financial Data Schedule

*  Incorporated by reference to Registration Statement No 333-53939.


(b)      Reports on Form 8-K
                  None.


<PAGE>



                                    SIGNATURE

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

                                                 Softworks, Inc.


Date: September 17, 1998                         By:  /s/  Robert C. McLaughlin
                                                 ------------------------------
                                                      Robert C. McLaughlin
                                                      Chief Financial Officer