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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

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


                  For the quarterly period ended March 31, 1998


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


                         Commission file number 1-13587


                           CROSSZ SOFTWARE CORPORATION
             (Exact name of registrant as specified in its charter)


             Delaware                                   94-3087939
(State or other jurisdiction of            (IRS Employer Identification Number)
incorporation or organization)


                         60 Charles Lindbergh Boulevard
                            Uniondale, New York 11553
                    (Address of principal executive offices)


                                 (516) 228-8500
              (Registrant's telephone number, including area code)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing  requirements  for the past 90 days. Yes /X/  No / /

         As of April 30, 1998 there were  5,120,172  shares of the  Registrant's
common stock outstanding.

Transitional Small Business Disclosure Format. Yes / /  No /X/

--------------------------------------------------------------------------------
<PAGE>
                           CROSSZ SOFTWARE CORPORATION

                                   FORM 10-QSB

                                      INDEX


PART I.        FINANCIAL INFORMATION                                        PAGE
                                                                            ----

Item 1.        Financial Statements

               Condensed Balance Sheet
               As of March 31, 1998 (unaudited)........................      3

               Condensed Statement of Operations
               For the three months ended March 31, 1998 and
               1997 (unaudited).......................................       4

               Condensed Statement of Cash Flows
               For the three months ended March 31, 1998 and
               1997 (unaudited).......................................       5

               Notes to the Condensed Financial Statements............       6

Item 2.        Management's Discussion and Analysis or Plan of Operation     7

PART II.       OTHER INFORMATION

Item 2.        Changes in Securities and Use of Proceeds.............       15

Item 5.        Other Information.....................................       16

Item 6.        Exhibits and Reports on Form 8-K......................       16

SIGNATURES...........................................................       17

<PAGE>

Part I.

FINANCIAL INFORMATION

Item 1.   Financial Statements

                           CROSSZ SOFTWARE CORPORATION
                             CONDENSED BALANCE SHEET
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                         March 31,
                                                                           1998
ASSETS
Current assets
<S>                                                                   <C>
      Cash and cash equivalents .................................     $  3,157,002
      Accounts receivable, net of allowance for doubtful
          accounts of $30,000 ...................................          248,173


      Restricted certificate of deposit .........................          887,060
      Prepaid expenses and other current assets .................           80,792

          Total current assets ..................................        4,373,027

Property and equipment, net .....................................        1,187,412
Deposits and other assets .......................................          146,369

          Total assets ..........................................     $  5,706,808
                                                                      ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
      Accounts payable ..........................................     $    250,013
      Accrued expenses ..........................................        1,176,660
      Deferred revenue ..........................................           73,631
      Loan payable to stockholders ..............................          861,335
      Customer advance ..........................................          300,000
      Capital lease obligations due within one year .............          214,109

          Total current liabilities .............................        2,875,748

Capital lease obligations .......................................          277,771
Deferred rent ...................................................          269,157

          Total liabilities .....................................        3,422,676

Stockholders' equity
      Preferred stock, 2,000,000 shares authorized;
          none issued and outstanding ...........................             --
      Common stock, $0.001 par value:  30,000,000 shares
          authorized; 5,120,172 shares issued and outstanding ...            5,120
      Additional paid-in capital ................................       30,393,881
      Accumulated deficit .......................................      (28,102,569)
      Receivable from stockholder ...............................          (12,300)

          Total stockholders' equity ............................        2,284,132

          Total liabilities and stockholders' equity ............     $  5,706,808
                                                                      ------------
</TABLE>

            See accompanying notes to Condensed Financial Statements.

                                       5
<PAGE>
                           CROSSZ SOFTWARE CORPORATION
                        CONDENSED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                      Three Months Ended
                                                                           March 31,

                                                                   1998                1997
Revenues
<S>                                                            <C>                        <C>      
     Software licenses ...................................     $    75,000                $      --
     Services and maintenance ............................          36,861                     15,190

               Total revenues ............................         111,861                     15,190

Cost of revenues
     Software licenses ...................................             750                       --
     Services and maintenance ............................          24,756                      3,570

               Total cost of revenues ....................          25,506                      3,570

Gross Profit .............................................          86,355                     11,620

Operating expenses
     Sales and marketing .................................       1,327,218                  1,074,331
     Research and development ............................         566,417                    535,416
     General and administrative ..........................         450,001                    284,724

               Total operating expenses ..................       2,343,636                  1,894,471

Loss from operations .....................................      (2,257,281)                (1,882,851)

Interest income ..........................................          63,341                     18,854
Interest expense .........................................         (41,412)                   (43,511)
Other (expense) income ...................................            (231)                       542

Net loss .................................................     $(2,235,583)               $(1,906,966)
                                                               -----------                -----------

Basic net loss per share .................................     $      (.44)               $      (.77)

Weighted average shares used in basic per share
     computation (Note 3) ................................       5,112,089                  2,470,208
                                                               -----------                -----------
</TABLE>

            See accompanying notes to Condensed Financial Statements.

                                       6
<PAGE>
                           CROSSZ SOFTWARE CORPORATION
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                      Three Months Ended
                                                                                           March 31,
                                                                                      1998                 1997
Cash flows from operating activities
<S>                                                                               <C>                 <C>
    Net loss .............................................................        $(2,235,583)        $(1,906,966)
    Adjustments to reconcile net loss to net cash used in
     operating activities
       Depreciation and amortization .....................................            106,580              94,571
       Loss (gain) on sales of computer equipment ........................                231                (542)
       Options issued for consulting services ............................               --                45,000
       Changes in operating assets and liabilities
         Accounts receivable, net ........................................            251,594             228,819
         Prepaid expenses and other current assets .......................            (32,538)             (3,287)
         Deposits and other assets .......................................              3,906             (12,225)
         Accounts payable and accrued expenses ...........................           (215,439)           (180,261)
         Compensation payable to related parties .........................               --               (37,521)
         Deferred rent ...................................................                224               3,324
         Deferred revenue ................................................             43,597             557,395

    Net cash used in operating activities ................................         (2,077,428)         (1,211,693)

Cash flows from investing activities
   Loan receivable from stockholder ......................................            (65,000)               --
   Acquisitions of property and equipment ................................            (45,964)           (130,128)
   Purchase of restricted certificate of deposit .........................             (9,221)            (10,168)

    Net cash used in investing activities ................................           (120,185)           (140,296)

Cash flows from financing activities
   Proceeds from issuance of  common stock ...............................              9,185              10,787
   Repayment of loan payable to stockholders .............................            (30,000)            (30,000)
   Payments of capital lease obligations .................................            (61,920)            (65,098)
   Proceeds from sale-leaseback transaction ..............................               --               312,471

Net cash (used in) provided by financing activities ......................            (82,735)            228,160

Net decrease in cash and cash equivalents ................................         (2,280,348)         (1,123,829)

Cash and cash equivalents at beginning of year ...........................          5,437,350           1,367,566

Cash and cash equivalents at end of period ...............................        $ 3,157,002         $   243,737
                                                                                  -----------         -----------
</TABLE>

            See accompanying notes to Condensed Financial Statements.

                                       7
<PAGE>
                           CROSSZ SOFTWARE CORPORATION
                   NOTES TO THE CONDENSED FINANCIAL STATEMENTS


1.       Basis of Presentation

         The unaudited  condensed  financial  statements included herein reflect
all adjustments,  consisting only of normal recurring adjustments,  which in the
opinion of  management  are  necessary to fairly state the  Company's  financial
position,  results of operations and cash flows for the periods presented. These
financial  statements  should be read in conjunction with the Company's  audited
financial  statements included in the Company's Annual Report on Form 10-KSB for
the year ended  December 31, 1997.  The condensed  results of operations for the
period ended March 31, 1998 are not necessarily  indicative of the results to be
expected  for any  subsequent  quarter,  or for the entire  fiscal  year  ending
December 31, 1998, or for any future period.

2.       Initial Public Offering

         On November 20, 1997, the Company's  Initial Public Offering ("IPO") of
2,500,000 shares of common stock was consummated, which resulted in net proceeds
to the Company of  $12,469,574  before  repayment of certain  bridge and interim
financings,  including interest thereon, which totaled approximately $5,281,000.
As of the  closing  date  of the  offering,  all  of the  Company's  Convertible
Preferred  Stock  and  Mandatorily   Redeemable   Convertible   Preferred  Stock
outstanding  was converted  into 331,523 and  1,365,790  shares of common stock,
respectively.

3.       Net Loss Per Common Share

         The Company  adopted  Statement of Financial  Accounting  Standards No.
128,  "Earnings per Share"  ("SFAS 128")  beginning  with the  Company's  fourth
quarter of 1997.

         Basic net loss per common  share is computed  by dividing  net loss for
the period by the sum of the weighted  average  number of shares of common stock
issued and  outstanding  after  conversion of all  outstanding  preferred  stock
effected  contemporaneously with the IPO. All outstanding shares of Series A, B,
C and D Preferred Stock were converted as though such conversion occurred at the
beginning of the earliest  period  presented or the date of issuance in the case
of the Series D. Historical net loss per share has not been presented since such
amount  is not  deemed to be  meaningful  due to the  significant  change in the
Company's  capital  structure  resulting  from the IPO.  Options and warrants to
acquire  common stock have not been included in the  computation of net loss per
share because to do so would have been antidilutive for the periods presented.

4.       Supplemental Cash Flow Information
<TABLE>
<CAPTION>

                                                               Three Months Ended
                                                                    March 31,
                                                                 1998       1997

<S>                                                            <C>        <C>
Interest paid during the period...........................     $31,696    $ 47,416
Schedule of non cash investing and financing  activities:
Series D Preferred Stock, issued for dividends                      --     251,775
</TABLE>

                                       8

<PAGE>
5.       Recent Accounting Pronouncements

         American Institute of Certified Public Accountants  ("AICPA") Statement
of Position 97-2 ("SOP 97-2")

         Prior to 1998, the Company  recognized  revenue in accordance  with the
AICPA  Statement of Position 91-1. In October 1997, the AICPA issued SOP 97-2 on
software  revenue  recognition.  The  Company  has adopted SOP 97-2 in the first
quarter of 1998.  The Company  believes that the adoption of this statement will
not have a significant impact on the Company.

6.       Use of Estimates

         The  preparation  of  the  financial   statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

7.       Liquidity and Business Risks

         The company has incurred operating losses since inception, has incurred
negative cash flows from operating  activities and had an accumulated deficit of
$28,102,569  as of March 31,  1998.  The  Company  has had a  limited  operating
history as a software product company and has not made significant  sales of its
products.  Therefore,  revenues are  difficult to predict.  Based on its current
operating  plan, the Company  believes that its current cash and cash equivalent
position  is  sufficient  to meet is working  capital  and  capital  expenditure
requirements  for the next four months.  It is  anticipated  that cash generated
from  operations  will  be  insufficient  to  satisfy  the  Company's  liquidity
requirements,  and therefore the Company will seek to sell additional  equity or
convertible debt securities. To date, the Company has no commitments, agreements
or understandings with respect to such additional  financing and there can be no
assurance that the Company will be able to consummate any such transaction.  The
sale of  additional  equity  or  convertible  debt  securities  could  result in
additional dilution to the Company's stockholders.

Item 2.  Management's Discussion and Analysis or Plan of Operation

         The discussion in this report on Form 10-QSB  contains  forward-looking
statements that involve risks and  uncertainties.  The Company's  actual results
may differ materially from those discussed  herein.  Factors that could cause or
contribute to such differences  include, but are not limited to, those discussed
in "Risk  Factors"  in this  Part I, Item 2 as well as those  discussed  in this
section and elsewhere in this Report,  and the risks discussed in "Risk Factors"
in Part I, Item 1 - Business,  included in the  Company's  Annual Report on Form
10-KSB for the year ended December 31, 1997.

         The discussion  and analysis  below should be read in conjunction  with
the Financial  Statements  of the Company and the Notes to Financial  Statements
included elsewhere herein.

Overview

         The  Company  commenced  operations  in  February  1989,  and  to  date
substantially  all of its revenues  have been derived  from  providing  contract
services to customers using its proprietary business intelligence technology. In
the third quarter of 1996, the Company shifted its focus to commercializing  its
proprietary  business  intelligence  technology and most of its activities since
then have been  devoted  to  research  and  development,  recruiting  personnel,
raising   capital,   and   developing  a  sales  and   marketing   strategy  and
infrastructure.  Accordingly,  the Company has a limited  operating history as a
software  product  company and has made only  limited  sales of its  QueryObject
System. The Company believes that comparisons of its future operating results to
the operating results presented  herein,  will not be meaningful.  The Company's
future financial performance will depend upon the successful customer acceptance
of QueryObject System.
                                       10

<PAGE>
         To date, the Company has incurred  substantial  losses from operations,
and at March 31, 1998 had an accumulated  deficit of $28,102,569.  The Company's
operations and activities have been primarily funded through sales of equity and
debt  securities,  including  the closing of the IPO on November 25,  1997.  The
Company expects to incur substantial operating expenses in the future to support
its  product  development  efforts,   establish  and  expand  its  domestic  and
international sales and marketing capabilities,  including recruiting additional
indirect channel  partners,  and support and expand its technical and management
personnel and organization.

         In  November  1997,  the Company  began  implementation  of  full-scale
marketing  activity  for  QueryObject  System.   QueryObject  System  previously
required   additional   consulting   services  to  implement  and  was  promoted
selectively  through the direct sales channel,  at several industry trade shows,
and to potential  business  partners.  The current release of QueryObject System
has reduced consulting requirements and is capable of running on additional UNIX
operating  systems and the Windows NT  operating  system.  In 1998,  the Company
intends to increase  promotional  activity,  including  increased trade show and
partnering activity and public relations. The Company intends to market and sell
QueryObject  System  through its direct sales force as well as through  indirect
channel  partners such as Original  Equipment  Manufacturers  ("OEMs") and Value
Added Resellers  ("VARs").  The Company  anticipates that sales through indirect
channel  partners  will be harder to  forecast  and will most  likely have lower
gross margins.  There can be no assurance that the Company will be successful in
developing  additional products,  in marketing and selling its products, or that
such products will achieve broad market acceptance.  The Company's  inability to
develop its products or to establish and expand its relationships  with indirect
channel partners would have a material adverse effect on the Company's business,
financial condition and results of operations.

         Revenues  from  the  sales  of the  Company's  products  are  generally
recognized upon the execution of a software licensing  agreement and shipment of
the product,  provided that no  significant  vendor  obligations  remain and the
resulting  receivable is deemed collectible by management.  In instances where a
significant vendor obligation exists,  revenue recognition is delayed until such
obligation  has been  satisfied.  Allowances  for estimated  future  returns are
provided  for  upon  shipment.  It is  anticipated  that in the near  term,  the
Company's  revenues  from its sales of products will be difficult to predict due
to the discretionary nature of business data delivery software purchases and the
variable  length of the sales cycle with  respect to new product  introductions.
Further,  although the Company's  product line will include  products with sales
prices  from  $7,500 to over  $250,000,  the  preponderance  of its  revenues is
expected to be derived from products with sales prices from $60,000 to $160,000.
As a result, the timing of the receipt and shipment of a single order can have a
significant  impact on the Company's  revenues,  results of operations  and cash
flows for a particular period. Results of Operations

                                       11

<PAGE>
         The  following   table  sets  forth  certain  items  in  the  Company's
statements of  operations  for the three months ended March 31, 1998 and 1997 ($
in thousands):

                                                           Three Months Ended
                                                               March 31,
                                                          1998          1997
Revenues
      Software licenses .............................   $    75        $  --
      Services and maintenance ......................        37             15
                                                        -------        -------

         Total revenues .............................       112             15
                                                        -------        -------

Cost of revenues
      Software licenses .............................         1           --
      Services and maintenance ......................        25              4
                                                        -------        -------

         Total cost of revenues .....................        26              4
                                                        -------        -------

Gross profit ........................................        86             11
                                                        -------        -------

Operating expenses
      Sales and marketing ...........................     1,327          1,074
      Research and development ......................       566            535
      General and administrative ....................       450            285
                                                        -------        -------

         Total operating expenses ...................     2,343          1,894
                                                        -------        -------

Loss from operations ................................    (2,257)        (1,883)
  Interest income ...................................        63             19
  Interest expense ..................................       (42)           (44)
  Other income ......................................      --                1
                                                        -------        -------

Net loss ............................................   $(2,236)       $(1,907)
                                                        =======        ======= 

Revenues

         The  Company's  license  revenues  have been  generated  from  sales of
QueryObject  System.  Service  revenues  have been  generated  from fees paid by
customers on a project or contract  basis for data analysis by the Company using
its  proprietary  software,  and are recognized  over the term of the respective
agreements. Maintenance revenues consist of ongoing support and products updates
and are  recognized  ratably over the term of the  contract,  which is typically
twelve months.

         Total  revenues  increased  by $97,000,  or 647%,  from $15,000 for the
three  months  ended March 31, 1997  ("1997") to $112,000  for the three  months
ended March 31, 1998  ("1998").  License  revenues  were $75,000 in 1998,  which
represented  one license sale.  No license sales were recorded in 1997.  Service
and maintenance  revenue increased by $22,000,  or 147%, from $15,000 in 1997 to
$37,000 in 1998, primarily due to increased maintenance revenues associated with
license  sales  completed  during  the year ended  December  31,  1997,  and are
recognized ratably over a twelve month period.

                                       12

<PAGE>
Cost of Revenues

         Cost  of  software  license  revenues  consists  primarily  of  product
packaging, documentation and production costs. Cost of software license revenues
as a percentage of software  license  revenues was 1.3% for 1998, which resulted
from the sale of one license.  No license  revenue was recorded in 1997. Cost of
services and maintenance  revenues  consist  primarily of customer support costs
and direct  costs  associated  with  providing  services.  Cost of services  and
maintenance  revenues  increased  as a percentage  of services  and  maintenance
revenues from 26.7% in 1997 to 67.6% in 1998,  primarily due to higher personnel
costs necessary to service an expanded customer base.

Operating Expenses

         Sales and Marketing.  Sales and marketing expenses consist primarily of
personnel costs,  including sales  commissions and incentives,  of all personnel
involved  in the sales and  marketing  process,  as well as  related  recruiting
costs,  public relations,  advertising  related costs,  collateral  material and
trade shows. Sales and marketing  expenses  increased by $253,000,  or 24%, from
$1,074,000  in 1997 to  $1,327,000  in 1998.  This increase was primarily due to
increased  personnel costs and increased costs  associated with public relations
and trade shows. The Company believes that its sales and marketing expenses will
increase in absolute dollars as the Company continues to increase  promotion and
other marketing expenses.

         Research and  Development.  Research and development  expenses  consist
primarily of salaries and other personnel  related  expenses,  recruiting  costs
associated  with  the  hiring  of  additional  software  engineers  and  quality
assurance personnel, consultant costs and depreciation of development equipment.
Research and development  expenses increased by $31,000, or 6%, from $535,000 in
1997 to $566,000 in 1998,  primarily due to an increase in software  engineering
and quality  assurance  personnel and related costs,  and consultant  costs. The
Company believes that a significant level of investment for product research and
development  is required to remain  competitive  and,  accordingly,  the Company
anticipates  that it will  continue to devote  substantial  resources to product
research and development and that these costs will increase in absolute dollars.
To date, all research and development costs have been expensed as incurred.

         General and Administrative. General and Administrative expenses consist
primarily  of personnel  costs for finance,  MIS,  human  resources  and general
management,  as  well  as  insurance  and  professional  expenses.  General  and
administrative  expenses increased by $165,000, or 58%, from $285,000 in 1997 to
$450,000 in 1998,  primarily due to increased  professional  expenses associated
with  being a public  company  such as  increased  professional  fees,  expenses
related to directors' and officers'  insurance and investor relations  programs,
and, to a lesser extent,  increased  personnel  related costs and benefits.  The
Company believes that its general and  administrative  expenses will increase in
absolute  dollars  as it  incurs  additional  costs  related  to  being a public
company.

                                       13
<PAGE>
Interest Income and Interest Expense

         Interest income represents income earned on the Company's cash and cash
equivalents. Interest income increased by $44,000, or 232%, from $19,000 in 1997
to $63,000 in 1998, primarily due to a higher level of cash and cash equivalents
on deposit during 1998.

         Interest expense  generally  represents  charges relating to the H.C.C.
Financial Services Loan Agreement (the "Loan Agreement") and interest expense on
capital  equipment  leases.  Interest expense  decreased by $2,000,  or 5%, from
$44,000 in 1997 to $42,000 in 1998.  This  decrease was primarily due to reduced
outstanding borrowings under the Loan Agreement.

Provision for Income Taxes

         The Company  accounts for income taxes in accordance  with Statement of
Financial  Accounting  Standards  No. 109,  "Accounting  for Income  Taxes." The
Company incurred net operating losses in 1997 and 1996 and consequently  paid no
federal or state  income  taxes.  At  December  31,  1997,  the  Company had net
operating  losses and  research and  experimental  tax credit  carryforwards  of
$22,000,000  and  $144,000,  respectively,  available to offset  future  federal
taxable income and tax. These net operating loss carryforwards expire at various
dates through 2012.  Although the  determination  of whether an ownership change
has occurred is subject to factual and legal uncertainties, the Company believes
that an ownership change occurred upon the completion of previous financings and
such "ownership  change" will materially limit the Company's  ability to utilize
its NOL carryforward.  Moreover,  while such loss carryforwards are available to
offset  future  taxable  income of the  Company,  the Company does not expect to
generate sufficient taxable income so as to utilize all or a substantial portion
of such loss carryforwards prior to their expiration.

Liquidity and Capital Resources

         On November 25, 1997, the Company consummated the IPO. The Company sold
2,500,000  shares  of  Common  Stock  in  the  IPO  and  received  approximately
$12,470,000  of cash,  net of  underwriting  discounts,  commissions  and  other
offering costs. The Company  immediately repaid $5,100,000 plus accrued interest
due on the Bridge Notes and interim  financings noted below.  Upon completion of
the IPO,  all  outstanding  shares of Series A,  Series B, Series C and Series D
Preferred Stock (a total of approximately  1,697,000 shares) were converted into
shares of Common Stock.

         Prior to the IPO,  the  Company  had  funded its  operations  primarily
through sales of preferred  equity  securities,  with net proceeds  therefrom of
approximately  $14,000,000 and, to a lesser extent,  through interim  financings
and the Bridge Financing,  through capital and operating  equipment leases,  the
issuance of notes  payable and the Loan  Agreement.  As of March 31,  1998,  the
Company had $3,157,000 in cash and cash equivalents.  Net cash used in operating
activities was $2,077,000  and  $1,212,000 in 1998 and 1997,  respectively.  For
1998, net cash used in operating activities was primarily  attributable to a net
loss of $2,236,000,  less  depreciation and amortization of $107,000.  For 1997,
net cash used in operating  activities was primarily  attributable to a net loss
of $1,907,000 less depreciation and amortization of $95,000 and deferred revenue
of  $557,000.  Net  cash  provided  by  financing  activities  in 1997  resulted
primarily from the proceeds of sale-leaseback  transactions.  In addition to the
IPO, since January 1, 1997, the Company's principal sources of capital have been
through several bridge  financings  whereby the Company  received  approximately
$6,100,000 in proceeds. The Company repaid promissory notes issued in connection
with  such  bridge  financings  either  out of  proceeds  from the IPO or out of
proceeds from a bridge financing consummated in July 1997.

                                       14

<PAGE>
         The Company does not currently  have a line of credit with a commercial
bank.  Under the Loan Agreement,  the Company has outstanding  borrowings in the
aggregate principal amount of approximately  $861,000, such indebtedness secured
by a security  interest in and lien on all of the Company's  assets. An Addendum
to the Loan  Agreement  provides that H.C.C.,  the lender  thereunder,  will not
demand  payment under the Loan Agreement (and requires the Company to maintain a
restricted  Certificate  of Deposit  which was in the amount of  $887,000  as of
March 31, 1998),  until the earlier of March 31, 1998, a material  breach by the
Company under the Addendum or an event of default under the Loan  Agreement.  In
April  1998,  the  Company  began  repaying  the  indebtedness  under  the  Loan
Agreement,  utilizing  the funds on deposit  in the  restricted  Certificate  of
Deposit.  The indebtedness is being repaid at the rate of 10% of the outstanding
month end balance each month, for twelve consecutive months, to be followed by a
payment in full of the remaining outstanding balance.  Additionally, as of March
31, 1998, the Company has available  $189,000 under an equipment leasing line of
credit.

         As of December 31, 1997, the Company's principal  commitments consisted
of obligations under operating and capital leases and employment agreements.  At
that date,  the Company had  approximately  $554,000 in  outstanding  borrowings
under  capital  leases which are payable  through  2001.  Pursuant to employment
agreements with executive  officers of the Company,  the Company is obligated to
pay $936,000 and $460,000 in salaries for the years ended  December 31, 1998 and
1999, respectively.

         As of March 31, 1998,  the Company had working  capital of  $1,497,000.
The Company has had a limited  operating  history as a software  product company
and has not made  significant  sales of its  products.  Therefore,  revenues are
difficult to predict.  Based on its current operating plan, the Company believes
that its current cash and cash  equivalent  position is  sufficient  to meet its
working capital and capital  expenditure  requirements for the next four months.
It is  more  likely  than  not  that  cash  generated  from  operations  will be
insufficient to satisfy the Company's liquidity requirements beyond four months.
The independent  accountants' report for the year ended December 31, 1997 states
that the Company's  recurring losses from operations and the Company's  negative
cash flow from operating  activities raise substantial doubt about the Company's
ability to continue as a going concern. The Company will seek to sell additional
equity or convertible debt securities.  To date, the Company has no commitments,
agreements or understandings with respect to such additional financing and there
can be no  assurance  that  the  Company  will be able to  consummate  any  such
transaction.  The sale of additional equity or convertible debt securities could
result in additional dilution to the Company's stockholders.

Year 2000 Compliance

         The Company has assessed and continues to assess the impact of the Year
2000 issue on its  operations,  including the development of cost estimates for,
and the extent of programming changes required to address,  this issue. Although
final cost estimates have yet to be determined,  the Company  expects that these
Year 2000 costs will not be material to the Company's  expenses  during 1998 and
1999.  The Company does not currently have any  information  concerning the Year
2000 compliance status of its suppliers and customers.  In the event that any of
the  Company's  significant  suppliers or customers  does not  successfully  and
timely achieve Year 2000 compliance,  the Company's business or operations could
be adversely affected.

                                       15
<PAGE>
Risk Factors That May Affect Future Results

         The Company's  business  involves a number of risks,  some of which are
beyond the Company's control. The following discussion  highlights some of these
risks and should be read in conjunction  with "Risk Factors" in Part I, Item 1 -
Business,  included in the  Company's  Annual Report on Form 10-KSB for the year
ended December 31, 1997.

         Accumulated Deficit;  Historical and Projected Future Operating Losses;
Going Concern Qualification in the Independent Accountants' Report. At March 31,
1998,  the Company had an  accumulated  deficit of  $28,102,569.  For the fiscal
years ended December 31, 1997 and 1996, and for the three months ended March 31,
1998, the Company incurred net losses of $10,563,484, $4,917,935 and $2,235,583,
respectively.  In  addition,  the Company  has  incurred a net loss in each year
during which it has operated,  and its  operations to date have been financed in
significant part through sales of both equity and debt securities. The Company's
expense levels are high and revenues are difficult to predict.  As a result, the
Company  expects to  continue  to incur net losses for the  foreseeable  future.
There can be no assurance that significant  revenues or profitability  will ever
be achieved or, if they are achieved, that they can be sustained or increased on
a quarterly or annual basis in the future.  Future operating results will depend
on many factors,  including the demand for the Company's products,  the level of
product and price  competition,  the  Company's  success in expanding its direct
sales force and indirect  distribution  channels,  the ability of the Company to
develop  and  market  products  and to  control  costs,  the  percentage  of the
Company's  revenues  derived from indirect channel partners and general economic
conditions.  The independent accountants' report for the year ended December 31,
1997  states  that  the  Company's  recurring  losses  from  operations  and the
Company's  negative cash flow from operating  activities raise substantial doubt
about the Company's ability to continue as a going concern.

         Dependence   Upon   New   Products;    Uncertain   Market   Acceptance.
Substantially  all of the  Company's  revenues  for the  foreseeable  future are
expected to be derived from sales of QueryObject System. Between January 1, 1995
and March 31, 1998,  the Company  realized  software  product  revenue from only
eight  QueryObject  System  installations,  one of which  (sold  in 1995)  was a
pre-production  beta  version.  Further,  the Company has recently  commenced an
integrated  marketing  effort for its products.  The Company's  future financial
performance will depend upon the successful introduction and customer acceptance
of QueryObject  System and the  development of new and enhanced  versions of the
product.  The failure to achieve broad market  acceptance of QueryObject  System
will have a material  adverse  effect on the  business,  operating  results  and
financial condition of the Company.

         Lack of Substantial Revenue; Limited Operating History. The Company has
had a limited  operating  history as a software product company and has not made
significant  sales of its products.  Total  revenues for the year ended December
31,  1997 and for the three  months  ended March 31,  1998 were  $1,012,159  and
$111,861, respectively. Total revenues for the periods noted above included four
sales and one sale,  respectively,  of  QueryObject  System.  Prior to 1997, the
Company's  revenues were derived  primarily from contract  services  provided to
customers using the Company's proprietary data analysis technology.  The Company
has  discontinued  this business.  The Company  believes that comparisons of its
future  operating  results to  operating  results  presented  herein will not be
meaningful.

                                       16
<PAGE>
         Limited  Working  Capital;  Need For Additional  Funding.  At March 31,
1998,  the  Company  had working  capital of  $1,497,279.  The Company has had a
limited  operating  history  as a  software  product  company  and has not  made
significant sales of its products. Therefore, revenues are difficult to predict.
Based on its current  operating plan, the Company believes that its current cash
and cash  equivalent  position is  sufficient  to meet its  working  capital and
capital  expenditure  requirements  for the next four months.  It is more likely
than not that cash generated from operations will be insufficient to satisfy the
Company's  liquidity  requirements  beyond  four  months,  and as a result,  the
Company will seek to sell additional  equity or convertible debt securities.  To
date, the Company has no commitments,  agreements or understandings with respect
to such additional financing and there can be no assurance that the Company will
be able to consummate  any such  transaction.  The sale of additional  equity or
convertible debt securities could result in additional dilution to the Company's
stockholders.

         Potentially Limited Trading Market; Possible Volatility of Stock Price.
The  Common  Stock is listed on the Nasdaq  SmallCap  Market  ("Nasdaq").  Under
recently  implemented  Nasdaq rules, in order for the Company to remain eligible
for listing on Nasdaq,  (i) the  Company's  Common Stock must have a minimum bid
price of $1.00,  (ii) the  Company  must have  minimum  tangible  net  assets of
$2,000,000 or a market  capitalization  of $35,000,000 or net income of $500,000
in two of the three prior  years,  (iii) the Company must have a public float of
at least  500,000  shares  with a market  value of at least  $1,000,000  and the
Common  Stock must have at least two  market  makers and be held of record by at
least 300 stockholders. While the Company currently satisfies Nasdaq listing and
maintenance  standards,  the Company believes that without additional  financing
(of  which  there  can be no  assurance),  the  Company  could  have  less  than
$2,000,000  in net  tangible  assets by June 30,  1998.  The failure to meet the
maintenance  criteria  in the future  may  result in the Common  Stock no longer
being eligible for quotation on Nasdaq and trading,  if any, of the Common Stock
would thereafter be conducted in the non- Nasdaq  over-the-counter  market. As a
result  of such  delisting  of the  Common  Stock  from  Nasdaq,  it may be more
difficult  for investors to dispose of, or to obtain  accurate  quotations as to
the market value of, the Common Stock.

         The   regulations   of   the   Securities   and   Exchange   Commission
("Commission")  promulgated  under  the  Securities  Exchange  Act of  1934,  as
amended,  require additional disclosure relating to the market for penny stocks.
Commission  regulations  generally define a penny stock to be an equity security
that has a market  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  A  disclosure  schedule  explaining  the penny stock market and the
risks  associated  therewith  is required  to be  delivered  to a purchaser  and
various sales practice requirements are imposed on broker-dealers who sell penny
stocks to persons  other than  established  customers and  accredited  investors
(generally  institutions).  In  addition,  the  broker-dealer  must  provide the
customer  with  current  bid and  offer  quotations  for the  penny  stock,  the
compensation  of the  broker-dealer  and its  salesperson in the transaction and
monthly account  statements showing the market value of each penny stock held in
the  customer's  account.  If the  Company's  securities  become  subject to the
regulations  applicable to penny stocks,  the market liquidity for the Company's
securities  could be severely  affected.  In such an event,  the  regulations on
penny stocks  could limit the ability of  broker-dealers  to sell the  Company's
securities  and thus the ability of purchasers  of the  Company's  securities to
sell their  securities  in the  secondary  market.  In the  absence of an active
trading  market,   holders  of  the  Common  Stock  may  experience  substantial
difficulty in selling their securities.

         The  trading  price of the  Company's  Common  Stock is  expected to be
subject to  significant  fluctuations  in response to  variations  in  quarterly
operating results,  changes in analysts' earnings estimates,  general conditions
in the computer  software  industry and other  factors.  In addition,  the stock
market is subject to price and volume fluctuations that affect the market prices
for companies and that are often unrelated to operating performance.

                                       17
<PAGE>
         Dependence on Significant Customers. For the fiscal year ended December
31, 1997 and for the three  months  ended March 31,  1998,  one customer in each
period accounted for 65% and 67%, respectively, of the Company's total revenues.
The Company does not know at this time if significant future revenues from these
customers will occur.

         Potential  Fluctuations in Periodic Results. The Company's revenues may
be  subject  to  significant   variation  from  period  to  period  due  to  the
discretionary  nature of business  intelligence data delivery software purchases
and will be difficult to predict.  Further,  although the Company's product line
will  include  products  with sales  prices  from $7,500 to over  $250,000,  the
majority of its  revenues is expected  to be derived  from  products  with sales
prices  from  $60,000 to  $160,000.  As a result,  the timing of the receipt and
shipment  of a single  order  can have a  significant  impact  on the  Company's
revenues and results of operations for a particular  period. It is also expected
that for the foreseeable  future a relatively small number of customers and VARs
will account for a significant percentage of the Company's revenues. The Company
anticipates that product revenues in any quarter will be substantially dependent
on orders  booked  and  shipped in that  quarter,  and  revenues  for any future
quarter  will not be  predictable  with any  significant  degree  of  certainty.
Product  revenues are also difficult to forecast because the market for business
intelligence  software  products is rapidly  evolving,  and the Company's  sales
cycle may vary substantially  with each customer.  As the Company matures in its
product  releases,  it is anticipated that the Company will operate with limited
order backlog  because its software  products will typically be shipped  shortly
after orders are received.

                                       18
<PAGE>
Part II.          OTHER INFORMATION

Item 2.           Changes in Securities and Use of Proceeds

         On November 19, 1997 the  Commission  declared  effective the Company's
Registration Statement on Form SB-2 (File No. 333-34667) relating to the initial
public  offering  ("IPO") of 2,500,000  shares of common stock,  $.001 par value
(the "Common Stock") of the Company at a price per share of $6.00. Subsequent to
the information  provided in the Company's  Annual Report on Form 10-KSB for the
year ended  December  31,  1997,  the  Company  has used  proceeds of the IPO as
follows;  $1,062,000 has been used to fund the Company's  integrated  full scale
sales and marketing  activities and to expand its sales and marketing activities
both domestically and  internationally,  $525,000 has been used for research and
development  including  enhancements to existing features and development of new
functions  for  QueryObject  System and $546,000 of the proceeds of the IPO have
been used for working  capital and general  corporate  purposes.  The  remaining
amount of the proceeds from the IPO, $3,157,000,  have been invested temporarily
in investment grade, short-term, interest bearing instruments.

Item 5.  Other Information

         Pursuant to a separation  agreement (the "Separation  Agreement") dated
as of March 10, 1998, by and between the Company and Mark A. Chroscielewski, Mr.
Chroscielewski's  employment  agreement  and  employment  with the  Company  was
terminated  effective March 10, 1998. Mr.  Chroscielewski will continue to serve
as the  Company's  Chairman  of the Board  until May 26,  1998.  The  Separation
Agreement  provides for a severance  payment of $150,000 payable over a one-year
period  beginning  March 10,  1998 and a payment of $151,896  in  settlement  of
unpaid and accrued salary and vacation owed to Mr.  Chroscielewski.  The Company
also agreed to extend the terms of all of the stock options that had  previously
been  granted to Mr.  Chroscielewski  until  December  31, 1999 and enter into a
reseller  agreement  relating  to the  Company's  products  with an entity to be
formed  by  Mr.  Chroscielewski.  Pursuant  to  the  Separation  Agreement,  Mr.
Chroscielewski  has agreed  until  March 10,  1999 not to (i)  compete  with the
Company  and (ii) take such  actions as  attempting  to  acquire  control of the
Company or  initiating  a tender or  exchange  offer,  merger or other  business
combination.

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

         Separation  Agreement,  as  amended,  between  the  Company and Mark A.
Chroscielewski (Exhibit 10.15)

               Statement of Computation of Net Income Per Share (Exhibit 11.1)

               Financial Data Schedule (Exhibit 27.1)

      Reports of Form 8-K

               No Reports on Form 8-K were filed during the quarter  ended March
31, 1998.



<PAGE>
                                   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.


Dated:  May 13, 1998            CROSSZ SOFTWARE CORPORATION



                           By:  /s/ Daniel M. Pess
                                ------------------------------------------------
                               Senior Vice President and Chief Financial Officer
                               (Duly Authorized Officer and Principal
                                Financial Officer)