<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                           WASHINGTON, D.C. 20549-1004

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

                         COMMISSION FILE NUMBER 0-020992

                                 MATHSOFT, INC.
             (Exact name of registrant as specified in its charter)

            MASSACHUSETTS                              04-2842217
     (State or other jurisdiction        (I.R.S. Employer Identification Number)
   of incorporation or organization)

                                 101 MAIN STREET
                       CAMBRIDGE, MASSACHUSETTS 02142-1521
   (Address, including zip code, of registrant's principal executive offices)

                                 (617) 577-1017
               (Registrant's telephone number including area code)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.

                                 YES     /X/                     NO / /

AS OF OCTOBER 31, 1997 THERE WERE 9,074,335 SHARES OF COMMON STOCK, $.01 PAR
VALUE PER SHARE, OUTSTANDING.



<PAGE>   2
                         MATHSOFT, INC. AND SUBSIDIARIES

                                    FORM 10-Q



                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

                                TABLE OF CONTENTS


                                                                           PAGE
                                                                          ------
PART I.    FINANCIAL INFORMATION:

     Item 1. Consolidated Condensed Financial Statements

          - Consolidated Condensed Balance Sheets as of
          September 30, 1997 and June 30, 1997                               3-4

          - Consolidated Condensed Statements of Operations for the
          Three Month Periods Ended September 30, 1997 and 1996                5

          - Consolidated Condensed Statements of Cash Flows for the
          Three Month Periods Ended September 30, 1997 and 1996              6-7

          - Notes to Consolidated Condensed Financial Statements            8-10

     Item 2. Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                      11-13
     
     Cautionary Statements                                                 14-17


PART II.   OTHER INFORMATION:

     Item 6. Exhibits and Reports on Form 8-K                                 18


SIGNATURES                                                                    19


                                       2
<PAGE>   3
                         MATHSOFT, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                     ASSETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,     JUNE 30,
                                                                         1997           1997
                                                                     -------------   ----------
<S>                                                                  <C>             <C>       
CURRENT ASSETS:
       Cash and cash equivalents                                      $2,707,430     $2,802,389
       Accounts and other receivables, less reserves of
          approximately $1,796,000 at September 30, 1997
          and $1,720,000 at June 30, 1997                              4,193,541      3,237,812
       Inventories                                                       270,989        343,785
       Prepaid expenses                                                  369,372        475,525

                                                                      ----------     ----------
              Total current assets                                     7,541,332      6,859,511
                                                                      ----------     ----------

PROPERTY AND EQUIPMENT, AT COST:
       Computer equipment and software                                 4,469,696      4,396,927
       Property and equipment under capital lease                        512,780        427,898
       Furniture and fixtures                                          1,015,177        989,520
       Leasehold improvements                                            626,890        626,889
                                                                      ----------     ----------
                                                                       6,624,543      6,441,234
       Less - Accumulated depreciation and amortization                5,087,942      4,888,216

                                                                      ----------     ----------
                                                                       1,536,601      1,553,018

OTHER ASSETS:
       Purchased technology, net of accumulated amortization
            of approximately $2,938,000 at September 30, 1997 and
            $2,722,000 at June 30, 1997                                   70,500        287,253
       Other assets                                                      106,638         86,661

                                                                      ----------     ----------
                                                                         177,138        373,914
                                                                      ----------     ----------
                                                                      $9,255,071     $8,786,443
                                                                      ==========     ==========
</TABLE>


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


                                       3
<PAGE>   4
                         MATHSOFT, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             SEPTEMBER 30,        JUNE 30,
                                                                 1997               1997
                                                             ------------      ------------
<S>                                                          <C>               <C>         
CURRENT LIABILITIES:
       Current portion of capital lease obligations          $    308,201      $    319,690
       Accounts payable                                         2,103,370         2,036,745
       Accrued expenses                                         2,505,997         2,592,532
       Accrued restructuring, current portion                      10,539            10,539
       Deferred revenue                                         1,522,603         1,443,244
                                                             ------------      ------------
              Total current liabilities                         6,450,710         6,402,750
                                                             ------------      ------------

ACCRUED RESTRUCTURING, LESS CURRENT PORTION                        11,857            13,613
                                                             ------------      ------------

CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION                   155,555           182,619
                                                             ------------      ------------

ACCRUED RENT, LESS CURRENT PORTION                                 15,076            19,335
                                                             ------------      ------------

STOCKHOLDERS' EQUITY:
       Preferred stock, $.01 par value -
          Authorized - 1,000,000 shares
          Issued and outstanding-none                                --                --
       Common stock, $.01 par value-
          Authorized - 20,000,000 shares
          Issued and outstanding - 9,036,146 shares
           at September 30, 1997 and 9,006,376 shares at
          June 30, 1997                                            90,361            90,064
       Additional paid-in capital                              29,228,915        29,161,835
       Accumulated deficit                                    (26,642,308)      (26,992,109)
       Cumulative translation adjustment                          (55,095)          (91,664)
                                                             ------------      ------------
              Total stockholders' equity                        2,621,873         2,168,126
                                                             ------------      ------------
                                                             $  9,255,071      $  8,786,443
                                                             ============      ============
</TABLE>


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


                                      4
<PAGE>   5
                         MATHSOFT, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED
                                                         SEPTEMBER 30,
                                                     1997            1996
                                                  ----------     -----------
<S>                                               <C>            <C>        
REVENUES:
       Software licenses                          $5,432,088     $ 3,924,406
       Services and other                            922,870         601,871
                                                  ----------     -----------
          Total revenues                           6,354,958       4,526,277
                                                  ----------     -----------

COST OF REVENUES:
       Software licenses                             984,678         783,034
       Services and other                            316,273         191,273
                                                  ----------     -----------
          Total cost of revenues                   1,300,951         974,307
                                                  ----------     -----------
          Gross profit                             5,054,007       3,551,970
                                                  ----------     -----------

OPERATING EXPENSES:
       Sales and marketing                         2,621,963       2,425,480
       Research and development                    1,401,826       1,090,842
       General and administrative                    679,224         525,610
                                                  ----------     -----------
          Total operating expenses                 4,703,013       4,041,932
                                                  ----------     -----------

          INCOME (LOSS) FROM OPERATIONS              350,994        (489,962)

INTEREST INCOME, NET                                   8,842          39,708
                                                  ----------     -----------
          INCOME (LOSS) BEFORE PROVISION FOR
               INCOME TAXES                          359,836        (450,254)

PROVISION FOR INCOME TAXES                            10,035          14,836
                                                  ----------     -----------
          NET INCOME (LOSS)                       $  349,801     $  (465,090)
                                                  ==========     ===========

NET INCOME (LOSS) PER COMMON AND COMMON
       EQUIVALENT SHARE                           $     0.04     $     (0.05)
                                                  ==========     ===========

WEIGHTED AVERAGE NUMBER OF COMMON
     AND COMMON EQUIVALENT SHARES OUTSTANDING      9,791,346       8,616,653
                                                  ==========     ===========
</TABLE>


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


                                      5
<PAGE>   6
                         MATHSOFT, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                                                SEPTEMBER 30,
                                                            1997            1996
                                                        -----------      -----------
<S>                                                     <C>              <C>         
CASH FLOWS FROM OPERATING ACTIVITIES

  Net income (loss)                                     $   349,801      $ ($465,090)
  Adjustments to reconcile net income (loss) to  net
    cash used in operating activities -
     Depreciation and amortization                          418,535          262,771
     Changes in assets & liabilities-
      Accounts and other receivables                       (955,729)         302,246
      Inventories                                            72,796           (3,616)
      Prepaid expenses                                      106,153          (80,846)
      Accounts payable                                       66,625          543,636
      Accrued expenses                                     (154,670)      (1,016,646)
      Deferred revenue                                       79,359           71,562
                                                        -----------      -----------
       Net cash used in operating activities                (17,130)        (385,983)

CASH FLOWS FROM INVESTING ACTIVITIES

  Purchases of property and equipment                      (183,308)        (192,296)
  Increase in other assets                                  (22,034)         (21,056)
                                                        -----------      -----------
        Net cash used in investing activities              (205,342)        (213,352)
                                                        -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES

  Payments on capital lease obligations                     (60,865)          (4,676)
  Borrowings on capital lease obligations                    84,432             --
  Proceeds from exercise of stock options and
      Employee Stock Purchase Plan                           67,377          219,393
                                                        -----------      -----------
      Net cash provided by financing activities              90,944          214,717

Effect of exchange rate changes on cash                      36,569           (8,226)
                                                        -----------      -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                   (94,959)        (392,844)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD            2,802,389        4,954,416
                                                        -----------      -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                  2,707,430        4,561,572
                                                        ===========      ===========
</TABLE>


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


                                        6
<PAGE>   7
                         MATHSOFT, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED
                                                     SEPTEMBER 30,
                                                   1997         1996
                                                 -------      -------
<S>                                              <C>          <C>    
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
       INFORMATION:
          Cash paid during the period for-
               Interest                          $11,432      $   715
                                                 =======      =======
               Income taxes                      $ 2,981      $22,366
                                                 =======      =======
</TABLE>


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


                                      7
<PAGE>   8
                         MATHSOFT, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been
prepared by MathSoft, Inc. ("MathSoft" or 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 should be read in conjunction with the consolidated
financial statements and notes thereto for the fiscal year ended June 30, 1997.
The accompanying consolidated condensed financial statements reflect all
adjustments (consisting solely of normal, recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of results for the
interim periods presented. The results of operations for the three month period
ended September 30, 1997 are not necessarily indicative of the results to be
expected for the full fiscal year.

2.  INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following:

<TABLE>
<CAPTION>
                                                SEPTEMBER 30,           JUNE 30,
                                                     1997                 1997
                                                ------------            --------
<S>                                             <C>                     <C>     
Materials and supplies                            $ 75,980              $ 41,648
Finished goods                                     195,009               302,137
                                                  --------              --------
                                                  $270,989              $343,785
                                                  ========              ========
</TABLE>

3.  ACQUISITION OF ACROSCIENCE CORPORATION

On November 26, 1996, the Company acquired all of the outstanding capital stock
of AcroScience Corporation, a Boulder, Colorado developer of visual modeling and
programming tools, in a business combination accounted for as a pooling of
interests. As a result of the transaction, AcroScience Corporation became a
wholly-owned subsidiary of the Company. As part of the business combination,
former stockholders of AcroScience Corporation received a total of 250,000
shares of the Company's common stock in exchange for all outstanding shares of
AcroScience Corporation.

For financial reporting purposes, the periods preceding the acquisition have not
been restated, as the acquisition of AcroScience Corporation was not material to
the Company's historical consolidated financial statements.


                                       8
<PAGE>   9
                         MATHSOFT, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


4.  NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE

For the three month period ended September 30, 1996, net loss per share was
computed using the weighted average number of shares of common stock outstanding
during the period. Common stock equivalents have not been included, as their
effect would have been antidilutive.

For the three month period ended September 30, 1997, net income per common and
common equivalent share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during the period,
computed in accordance with the treasury stock method. Fully diluted net income
per common and common equivalent share has not been presented, as the amounts
would not differ significantly from primary earnings per share.

In March 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 128).
SFAS No. 128 establishes standards for computing and presenting earnings per
share and applies to entities with publicly held common stock or potential
common stock. SFAS No. 128 must be adopted as of June 30, 1998 and will require
restatement of prior years' reported per share amounts. Early adoption of SFAS
No. 128 is not permitted.

In accordance with Staff Accounting Bulletin No. 74, the Company is disclosing
the effect this statement would have on the three month periods ended September
30, 1997 and 1996 on a pro forma basis. The following table summarizes the pro
forma earnings per share amounts under SFAS No. 128.

<TABLE>
<CAPTION>
                                   FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
                                                                      PER SHARE
                                             NET INCOME     SHARES       AMOUNT
<S>                                          <C>           <C>           <C>    
Net income                                    $349,801          --          --
Basic earnings (loss) per share:
Earnings available to common shareholders      349,801     9,023,775     $   .04

Diluted earnings (loss) per share:
Stock options                                     --         767,572        --



Income available to common stockholders
   plus assumed conversions                   $349,801     9,791,346     $   .04
                                              ========     =========     =======
</TABLE>


                                       9
<PAGE>   10
                         MATHSOFT, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


4.  NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                   FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
                                                                       PER SHARE
                                             NET INCOME     SHARES       AMOUNT
<S>                                          <C>           <C>           <C>     
Net loss                                     $(465,090)         --          --
Basic earnings (loss) per share:
Earnings available to common shareholders     (465,090)    8,616,653     $  (.05)

Diluted earnings (loss) per share:
Stock options                                     --            --          --
                                             ---------    ----------     -------


Loss available to common stockholders
   plus assumed conversions                  $(465,090)    8,616,653     $  (.05)
                                             =========    ==========     =======
</TABLE>

Basic earnings (loss) per common share is computed by dividing net income (loss)
by the weighted average number of shares of common stock outstanding during the
three month period. The computation of diluted earnings per share is similar to
the computation of basic earnings per common share except that the denominator
is increased for the assumed exercise of dilutive options using the treasury
stock method.


                                       10
<PAGE>   11
                         MATHSOFT, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Three Month Period Ended September 30, 1997 Compared with the Three Month Period
Ended September 30, 1996.

RESULTS OF OPERATIONS

Total revenues increased 40.4% from $4,526,000 in the first quarter of fiscal
1997 to $6,355,000 in the first quarter of fiscal 1998. The increase in total
revenues was primarily attributable to upgrade revenue generated by the recent
release of Mathcad 7 for Windows in June 1997 and new license and services
revenue generated from S-PLUS 4 released in September 1997.

Mathcad for Windows generated upgrade revenue of $206,000 in the first quarter
of fiscal 1997 compared to $1,503,000 in the first quarter of fiscal 1998, and
increased as a percentage of total revenues from 4.6% to 23.7%, respectively.
Prior to the release of Mathcad 7 for Windows, the Company's last significant
upgrade, Mathcad 6 for Windows, was released in early fiscal 1995 and its
upgrade cycle therefore was winding to a close in the first quarter of fiscal
1997. Worldwide S-PLUS product line and services revenue increased 40.2% from
$1,402,000 in the first quarter of fiscal 1997 to $1,966,000 in the first
quarter of fiscal 1998, and remained constant as a percentage of total revenues
at 31.0% compared to 30.9%, respectively. In addition, S-PLUS services revenue
increased due to a record level of consulting services in the first quarter of
fiscal 1998. Total international revenues attributable to sales of all Company
product lines increased 15.3% from $1,301,000 in the first quarter of fiscal
1997 to $1,500,000 in the first quarter of fiscal 1998, and decreased as a
percentage of total revenues from 28.7% to 23.6%, respectively.

Total cost of revenues increased 33.6% from $974,000 in the first quarter of
fiscal 1997 to $1,301,000 in the first quarter of fiscal 1998, and decreased as
a percentage of total revenues from 21.5% to 20.5%, respectively. The decrease
in total cost of revenues as a percentage of total revenues was primarily
attributable to switching from disk to CD media with the release of Mathcad 7
for Windows, thereby decreasing direct material costs on a per unit basis. To a
lesser degree, fixed costs, such as licensing costs for the "S" language used in
the S-PLUS product line and the amortization of purchased technology, decreased
as a percentage of total revenues due to an overall higher revenue base in the
first quarter of fiscal 1998. Such decreases were partially offset by


                                       11
<PAGE>   12
                         MATHSOFT, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS (CONTINUED)

increased inventory reserves in the first quarter of fiscal 1998 to adequately
cover inventory exposure in the sales distribution channel and an increase in
cost of services from $191,000 in the first quarter of fiscal 1997 to $316,000
in the first quarter of fiscal 1998.

Sales and marketing expenses increased 8.1% from $2,425,000 in the first quarter
of fiscal 1997 to $2,622,000 in the first quarter of fiscal 1998, and decreased
as a percentage of total revenues from 53.6% to 41.3%, respectively. The
increase in overall sales and marketing expenses was primarily attributable to
expenses incurred related to the launch of Mathcad 7 for Windows and S-PLUS 4,
as well as to an increase in S-PLUS domestic sales expenses incurred to support
direct sales into this expanding product line. 

Research and development expenses increased 28.5% from $1,091,000 in the first
quarter of fiscal 1997 to $1,402,000 in the first quarter of fiscal 1998, and
decreased as a percentage of total revenues from 24.1% to 22.1%, respectively.
The increase in overall research and development expenses was due to expenses
incurred related to development initiatives in the Company's Data Analysis
Products Division and additional personnel to support such initiatives.

General and administrative expenses increased 29.1% from $526,000 in the first
quarter of fiscal 1997 to $679,000 in the first quarter of fiscal 1998, and
decreased as a percentage of total revenues from 11.6% to 10.7%, respectively.
The increase in overall general and administrative expenses was due primarily to
costs incurred for management incentive compensation provisions based primarily
on the achievement of profitability targets, and to a lesser extent, to
fluctuations in international exchange rate transactions.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents, totaling $2,707,000 at September 30, 1997, decreased
$95,000 during the three month period ended September 30, 1997 from $2,802,000
at June 30, 1997. The negative cash flow resulted primarily from purchases of
property and equipment of approximately $183,000, partially offset by proceeds
received from the exercise of stock options of approximately $67,000.


                                       12
<PAGE>   13
                         MATHSOFT, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

The Company's financial reserves are represented by cash and cash equivalents as
of September 30, 1997. The Company also has a line of credit agreement with a
commercial bank. Borrowings under the line are limited to the lesser of 65% of
eligible domestic accounts receivable or $1,000,000. Borrowings are secured by a
first security interest on substantially all of the Company's assets and bear
interest at the bank's prime rate plus 1%. The Company had no outstanding
borrowings under this line as of September 30, 1997. The agreement contains
covenants that, among other things, require the Company to meet certain
profitability and maximum leverage ratios, and to maintain a minimum level of
tangible net worth. Through September 30, 1997, the Company has complied with
all such covenants. The line of credit expires in December 1998.

The Company believes its financial reserves and cash flows from future
operations will be sufficient to meet its liquidity requirements for at least
the next twelve months. The foregoing statement is forward-looking and involves
risks and uncertainties, many of which are outside the Company's control. The
Company's actual experience may differ materially from that discussed above.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Cautionary Statements" as well as future events that have
the effect of reducing the Company's available cash balances, such as
unanticipated operating losses or capital expenditures or cash expenditures
related to possible future acquisitions. The Company may be presented from time
to time with acquisition opportunities which require additional external
financing, and the Company may from time to time seek to obtain additional funds
from public or private issuances of equity or debt securities. There can be no
assurance that any such financing will be available at all or on terms
acceptable to the Company.


                                       13
<PAGE>   14
                         MATHSOFT, INC. AND SUBSIDIARIES

                              CAUTIONARY STATEMENTS


In addition to the other information in this report, the following cautionary
statements should be considered carefully in evaluating the Company and its
business. Information provided by the Company from time to time may contain
certain "forward-looking" information, as that term is defined by (i) the
Private Securities Litigation Reform Act of 1995 (the "Act") and (ii) in
releases made by the Securities and Exchange Commission (the "SEC"). These
cautionary statements are being made pursuant to the provisions of the Act and
with the intention of obtaining the benefits of the "safe harbor" provisions of
the Act.

VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company's quarterly operating
results may vary significantly from quarter to quarter, depending upon factors
such as the introduction and market acceptance of new products and new versions
of existing products, the ability to reduce expenses, and the activities of
competitors. Because a high percentage of the Company's expenses are relatively
fixed in the near term, minor variations in the timing of orders and shipments
can cause significant variations in quarterly operating results. The Company
operates with little or no backlog and has no long-term contracts, and
substantially all of its product revenues in each quarter result from software
licenses issued in that quarter, and the Company's ability to accurately
forecast future revenues and income for any period is necessarily limited. Any
forward-looking information provided from time to time by the Company represents
only management's then current estimate of future results or trends, and actual
results may differ materially from those contained in the Company's estimates.

POTENTIAL VOLATILITY OF STOCK PRICE. There has been significant volatility in
the market price of securities of technology companies. The Company believes
factors such as announcements of new products by the Company or its competitors,
quarterly fluctuations in the Company's financial results or other software
companies' financial results, shortfalls in the Company's actual financial
results compared to results previously forecasted by stock market analysts, and
general conditions in the software industry and conditions in the financial
markets could cause the market price of the Common Stock to fluctuate
substantially. These market fluctuations may adversely affect the price of the
Company's Common Stock.

RISKS ASSOCIATED WITH ACQUISITIONS. The Company has made a number of
acquisitions and will continue to review future acquisition opportunities. No
assurances can be given that acquisition candidates will continue to be
available on terms and conditions acceptable to the Company. Acquisitions
involve numerous risks, including, among other things, possible dilution to
existing shareholders, difficulties and expenses incurred in connection with the
acquisitions and the subsequent assimilation of the operations and services or
products of the acquired companies, the difficulty of operating new (albeit
related) businesses, the diversion of management's attention from other business
concerns and the potential loss of key employees of the acquired company. In the
event that the operations of an acquired business do not live up to
expectations, the Company may be required to restructure the acquired business
or


                                       14
<PAGE>   15
                         MATHSOFT, INC. AND SUBSIDIARIES

                              CAUTIONARY STATEMENTS


RISKS ASSOCIATED WITH ACQUISITIONS  (CONTINUED).
write-off the value of some or all of the assets of the acquired business. There
can be no assurance that any acquisition will be successfully integrated into
the Company's operations.

RISKS ASSOCIATED WITH DIVESTITURES. The Company's product offerings presently
may be divided between two principal product families - those related to its
Mathcad line addressing the calculation needs of the technical, professional and
education markets, and its S-PLUS offerings, marketed primarily to professionals
needing statistical analysis tools.

In setting strategic goals to maximize shareholder value, the Company from time
to time considers the options of divesting itself of one product family or the
other, or product lines within a given family, to concentrate its focus on the
business opportunity associated with the remaining product family or product
lines.

At the present time, the Company is not party to any agreement relating to the
sale of either of its product families or product lines within such families,
but it may elect to pursue such options at any time. If the Company were to
consummate such a sale, there can be no assurance that it would receive returns
from such sale that investors in the Company would consider attractive.

RISKS ASSOCIATED WITH DISTRIBUTION CHANNELS. The Company markets and distributes
its S-PLUS products in the U.S. through the Company's telesales force and
internationally through third party resellers and distributors. Mathcad products
are currently marketed and distributed in the U.S. through third party resellers
and distributors, telesales and direct mail (for upgrades to the Company's
installed base). Internationally, the Company's Mathcad products are marketed
and distributed through third party resellers and distributors. There can be no
assurance that the Company will be able to retain its current resellers and
distributors, or expand its distribution channels by entering into arrangements
with new resellers and distributors in the Company's current markets or in new
markets.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. Sales outside North America
accounted for approximately 32.5% of the Company's total revenues in fiscal
1996, approximately 34.0% of the Company's total revenues in fiscal 1997 and
approximately 23.6% for the three months ended September 30, 1997, and may
continue to represent a significant portion of the Company's product revenues.
Any decrease in sales outside North America may have a materially adverse effect
on the Company's operating results. The Company's international business and
financial performance may be affected by fluctuations in exchange rates and by
trade regulations.


                                       15
<PAGE>   16
                         MATHSOFT, INC. AND SUBSIDIARIES

                              CAUTIONARY STATEMENTS


RELIANCE ON THIRD PARTY LICENSORS. Maple V, a software product licensed as a
part of Mathcad, certain copyrighted texts licensed from third party publishers
incorporated in the Company's Electronic Books, and the S programming language,
the language on which all of the StatSci division's products are based, are
currently licensed from a single source or limited source suppliers. If such
licenses are discontinued, there can be no assurance that the Company will be
able to independently develop substitutes or be able to obtain alternative
sources or, if able to be developed or obtained as needed in the future, that
such efforts would not result in delays or reductions in product shipments or
cost increases that could have a material adverse effect on the Company's
consolidated business operations.

RAPID TECHNOLOGICAL CHANGE; COMPETITION. The technical calculation software
market is subject to rapid and substantial technological change, similar to that
affecting the software industry generally. The Company, to remain successful,
must be responsive to new developments in hardware and chip technology,
operating systems, programming technology and multimedia capabilities. In
addition, the Company competes against numerous other companies, some of which
have significant name recognition, as well as substantially greater capital
resources, marketing experience, research and development staffs and production
facilities than the Company. The Company's financial results may be negatively
impacted by the failure of new or existing products to be favorably received by
retailers and consumers due to price, availability, features, other product
choices or the necessity of promotions to increase sales of the Company's
products.

UNCERTAINTIES REGARDING PROTECTION OF PROPRIETARY TECHNOLOGY; UNCERTAINTIES
REGARDING PATENTS. The Company believes that while the mathematical calculations
performed by the Company's software are not proprietary, the speed and quality
of displaying the computation and the ease of use are unique to MathSoft's
products. The Company's success will depend, in part, on its ability to
aggressively protect the proprietary aspects of its products. The Company seeks
to protect these proprietary aspects of its products principally through a
combination of patents, contract provisions and copyright, trademark and trade
secret laws. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate to prevent misappropriation of
its technology. Although the Company believes that its products and technology
do not infringe any existing proprietary rights of others, the use of patents to
protect software has increased and there may be pending or issued patents of
which the Company is not aware that the Company may need to license or challenge
at significant expense. There can be no assurance that any such license would be
available on acceptable terms, if at all, or that the Company would prevail in
any such challenge.


                                       16
<PAGE>   17
                         MATHSOFT, INC. AND SUBSIDIARIES

                              CAUTIONARY STATEMENTS


RELIANCE ON ATTRACTING AND RETAINING KEY EMPLOYEES. The Company's continued
success will depend in large part on its ability to attract and retain
highly-qualified technical, managerial, sales and marketing and other personnel.
Competition for such personnel is intense. Except for the President and Chief
Financial Officer, none of the senior management of the Company is subject to an
employment contract, although the Company does have non-competition agreements
with its key management and technical personnel. There can be no assurance that
the Company will be able to continue to attract or retain such personnel.


                                       17
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                         MATHSOFT, INC. AND SUBSIDIARIES

                           PART II - OTHER INFORMATION


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits:

                10.1  Executive Agreement, dated as of July 28, 1997, between
                      the Company and Charles J. Digate.

                10.2  Option Acceleration Agreement, dated as of September 15,
                      1997, between the Company and Robert P. Orlando.

                27.1  Financial Data Schedule.

         (b) Reports on Form 8-K:

                      The Company filed a Current Report on Form 8-K dated 
                      July 17, 1997 reporting fiscal fourth quarter and year-end
                      results.













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<PAGE>   19
                         MATHSOFT, INC. AND SUBSIDIARIES

                                   SIGNATURES


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


                                    MATHSOFT, INC.




Dated:  November 13, 1997           By  /s/ Charles J. Digate
                                    -------------------------
                                    Charles J. Digate
                                    Chairman, President and Chief Executive
                                    Officer
                                    (Principal Executive Officer)




Dated:  November 13, 1997           By  /s/ Robert P. Orlando
                                    -------------------------
                                    Robert P. Orlando
                                    Vice President Finance and Administration,
                                    Chief Financial Officer, Treasurer, and 
                                    Clerk
                                    (Principal Financial and Accounting Officer)


                                       19
<PAGE>   20
                        MATHSOFT, INC. AND SUBSIDIARIES


                                 EXHIBIT INDEX


    EXHIBIT NO.       DESCRIPTION
    -----------       -----------

    10.1              Executive Agreement, dated as of July 28, 1997, between
                      the Company and Charles J. Digate.

    10.2              Option Acceleration Agreement, dated as of September 15,
                      1997, between the Company and Robert P. Orlando.

    27.1              Financial Data Schedule.














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