<PAGE>

--------------------------------------------------------------------------------
                                          
                      U.S. SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC  20549
                                          
                                    FORM 10-QSB

  (Mark One)
  
     /X/  Quarterly report under Section 13 or 15(d) of the Securities Exchange
          Act of 1934

     For the quarterly period ended August 31,1998

     / /  Transition report under Section 13 or 15(d) of the Exchange Act

     For the transition period from _________ to __________

Commission File Number 0-11791

                              GREENTREE SOFTWARE, INC.
                              ------------------------
            (Name of Small Business Issuer as Specified in Its Charter)

          NEW YORK                              13-2897997      
---------------------------------            ---------------------------
  (State or Other Jurisdiction               (I.R.S.Employer Identification No.)
of Incorporation or Organization)

                                   7301 OHMS LANE
                                     SUITE 220
                                  EDINA, MN  55439
                             -------------------------
                      (Address of Principal Executive Offices)
                                          
                                   (612) 941-1500
                                   --------------
                  (Issuer's Telephone Number, Including Area Code)

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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   / /

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.

                Class                        Outstanding at October 14, 1998
----------------------------------           -------------------------------
     COMMON SHARES, PAR VALUE                        8,154,761 SHARES
         $0.01 PER SHARE

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

<PAGE>

                              GREENTREE SOFTWARE, INC.

                                       INDEX

<TABLE>
<CAPTION>

  ITEM                                                                     PAGE 
NUMBER                                                                    NUMBER
------                                                                    ------
<S>                                                                       <C>   
PART I.     FINANCIAL INFORMATION

   Item 1.  Financial Statements

               Balance Sheets as of August 31, 1998 and May 31, 1998.......    3

               Statements of Operations for the three months ended 
               August 31, 1998 and August 31, 1997 ........................    4
               
               Statements of Cash Flows for the three months ended
               August 31, 1998 and August 31, 1997.........................    5

               Notes to the Financial Statements...........................    6
     
   Item 2.  Management's Discussion and Analysis of Financial Condition
               and Results of Operations................................... 9-12


PART II.    OTHER INFORMATION

   Item 2.  Changes in Securities..........................................   13

   Item 4.  Submission of Matters to a Vote of Security Holders............   13

   Item 6.  Exhibits and Reports on Form 8-K...............................   14
          
   Signatures   ...........................................................   15

</TABLE>

                                          2
<PAGE>

PART I.   FINANCIAL INFORMATION

     ITEM 1.   FINANCIAL STATEMENTS

          Company for which report is filed:  Greentree Software, Inc. (the
"Company")

                              GREENTREE SOFTWARE, INC.
                                   BALANCE SHEETS

<TABLE>
<CAPTION>
                                                      August 31,      May 31, 
                                                          1998         1998   
                                                          ----         ----   
                                                       (Unaudited)
<S>                                                   <C>          <C>        
Assets
Current Assets:
  Cash and cash equivalents                           $ 2,009,002  $ 2,918,548
  Accounts receivable, net                                169,356      103,145
  Prepaid expenses and other current assets                78,420        5,045
                                                      -----------  -----------
Total Current Assets                                    2,256,778    3,026,738
                                                      -----------  -----------

Property and equipment, net                               243,829       46,067
                                                      -----------  -----------

Other Assets:
  Security deposits                                        39,234        9,124
                                                      -----------  -----------
Total Other Assets                                         39,234        9,124
                                                      -----------  -----------

Total Assets                                          $ 2,539,841  $ 3,081,929
                                                      -----------  -----------
                                                      -----------  -----------

Liabilities and Stockholders' Equity

Current Liabilities:
  Accounts payable                                    $   244,587  $   219,092
  Current obligations under capital lease                  29,730           --
  Accrued expenses                                        352,998      389,781
  Deferred revenues                                       105,554       93,598
                                                      -----------  -----------
Total Current Liabilities                                 732,869      702,471
                                                      -----------  -----------

Noncurrent obligation under capital lease                  29,588           --
                                                      -----------  -----------

Commitments and Contingencies

Stockholders' Equity:
Common stock, $0.01 par value, 15,000,000 
shares authorized, 8,029,761 shares issued 
and outstanding                                            80,298       80,298
Additional paid-in capital                             19,463,982   19,321,482
Accumulated deficit                                   (17,677,864) (16,933,290)
                                                      -----------  -----------
                                                        1,866,416    2,468,490
Less treasury stock (4,780 shares) at cost                (89,032)     (89,032)
                                                      -----------  -----------

Total Stockholders' Equity                              1,777,384    2,379,458
                                                      -----------  -----------

Total Liabilities and Stockholders'
  Equity                                              $ 2,539,841  $ 3,081,929
                                                      -----------  -----------
                                                      -----------  -----------
</TABLE>

                   See accompanying notes to financial statements

                                          3
<PAGE>

                              GREENTREE SOFTWARE, INC.
                              STATEMENT OF OPERATIONS
                                    (UNAUDITED)
<TABLE>
<CAPTION>

                                                  FOR THE THREE MONTHS ENDED
                                                 -----------------------------
                                                   August 31,      August 31,
                                                     1998           1997  
                                                    -------        --------
<S>                                           <C>               <C>
Net revenues:
  Product                                         $   66,250   $     88,775
  Services                                            93,429         36,267
                                                  ----------   ------------
Total net revenues                                   159,679        125,042
                                                  ----------   ------------

Costs and expenses:
  Cost of revenues                                    32,782        138,144
  Selling expenses                                   330,209        143,348
  General and administrative                         443,987        355,819
  Research and development                           128,173         27,325
                                                  ----------   ------------
Total costs and expenses                             935,151        664,636
                                                  ----------   ------------
Operating loss                                      (775,472)      (539,594)

Interest income (expense), net                        30,898         (4,410)
                                                  ----------   ------------

Net loss                                          $ (744,574)  $   (544,004)
                                                  ----------   ------------
                                                  ----------   ------------


Net loss per common share                         $    (0.09)  $      (0.21)
   (Basic and diluted)                            ----------   ------------
                                                  ----------   ------------



Weighted average shares outstanding                8,029,761      2,564,803
                                                  ----------   ------------
                                                  ----------   ------------
</TABLE>




                                          
                                          
                   See accompanying notes to financial statements

                                          4
<PAGE>

                              GREENTREE SOFTWARE, INC.
                              STATEMENTS OF CASH FLOWS
                                    (UNAUDITED)

<TABLE>
<CAPTION>

                                                     FOR THE THREE MONTHS ENDED
                                                   ----------------------------
                                                     August 31,    August 31,
                                                         1998          1997 
                                                        ------       --------
<S>                                                <C>            <C>
Cash Flow From Operating Activities:
  Net loss                                         $  (744,574)   $ (544,004)
  Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
    Depreciation and amortization                       12,047        10,816
    Amortization of deferred software costs                 --       124,145
    Decrease (increase) in accounts receivable         (71,237)       23,086
    Decrease (increase) in prepaid expenses            (68,349)        2,569
    Increase in accounts payable                        25,495       120,573
    Increase (decrease) in accrued expenses            (36,783)       71,854
    Increase in deferred income                         11,956        20,768
                                                    ----------    ----------
Cash Used in Operating Activities                     (871,445)     (170,193)
                                                    ----------    ----------

Cash Flow From Investing Activities:
  Additions to property and equipment                 (148,276)           --
  Additions to security deposits                       (30,110)           --
  Additions to capitalized software 
    development costs                                       --       (44,107)
                                                    ----------    ----------
Cash Provided (Used) in Investing Activities          (178,386)      (44,107)  
                                                    ----------    ----------

CASH FLOW FROM FINANCING ACTIVITIES:  
  Proceeds from exercise of warrant                    142,500            --
  Payment on capital lease                              (2,215)           --
  Payment on note payable                                   --       (30,000)
                                                    ----------    ----------
Cash (Used) Provided by Financing Activities           140,285       (30,000)
                                                    ----------    ----------

Increase (decrease) in Cash                           (909,546)     (244,300)
Cash balance - beginning                             2,918,548       245,649
                                                    ----------    ----------

Cash balance - ending                              $ 2,009,002    $    1,349
                                                    ----------    ----------
                                                    ----------    ----------

Supplemental disclosure of cash 
flow information:
  Cash paid for interest                           $       769    $    4,797
  Cash paid for income taxes                       $        --    $       --
                                                    ----------    ----------
                                                    ----------    ----------

Supplemental disclosure of
non-cash transaction:
   Capital lease obligation incurred               $    61,533    $       --
                                                    ----------    ----------
                                                    ----------    ----------

</TABLE>

                    See accompanying notes to financial statements

                                          5
<PAGE>


                              GREENTREE SOFTWARE, INC.
                           NOTES TO FINANCIAL STATEMENTS
                                  AUGUST 31, 1998


     NOTE 1.  GENERAL INFORMATION:

     The Financial Statements included herein have been prepared by the Company
without audit except the May 31, 1998 balance sheet, which was audited.  The
Statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments, consisting of
only normal recurring accruals which are, in the opinion of management,
necessary for a fair statement of the results of operations for the periods
shown.  These statements do not include all information required by Generally
Accepted Accounting Principles to be included in a full set of Financial
Statements.  These Financial Statements should be read in conjunction with the
Financial Statements and notes thereto included in the Company's latest report
on Form 10-KSB, dated May 31, 1998.

     The Company is considered a Small Business (SB) filer pursuant to
Securities and Exchange Commission (SEC) regulations.  As such, the accompanying
financial statements, are not intended to, nor do they, include all disclosures
required by the SEC's Regulation S-X.


     NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES:

     (a)  Accounting Estimates

     Management is required to make estimates and assumptions during the
preparation of financial statements in conformity with Generally Accepted
Accounting Principles.  These estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements.  They also affect the
reported amounts of net income (loss) during the period.  Actual results could
differ materially from these estimates and assumptions.

     (b)  Revenue Recognition and Accounts Receivable

     The Company recognizes revenue in accordance with the provisions of
Statement of Position (SOP) No. 97-2, "Software Revenue Recognition."  The
Company recognizes software license revenue at the time products are shipped
provided that no significant Company obligations remain outstanding and
collection of the resulting receivable is deemed probable by management. 
Insignificant obligations remaining at the time of shipment are accrued. 
Revenues related to software licenses for which there are significant remaining
performance obligations are deferred and recognized once such obligations are
fulfilled.

                                          6
<PAGE>

     Service revenues are comprised of revenues derived from software
maintenance agreements and professional services.  Maintenance fees are recorded
as deferred revenue and recognized ratably over the maintenance period which is
usually 12 months.  Professional service revenue is recognized as the services
are performed.

     Accounts receivable is presented net of an allowance for uncollectible
accounts of $30,000 at August 31, 1998, and May 31, 1998.

     (c)  Software Development Costs

     The Company is engaged in research and development activities in the area
of computer software.  In accordance with Generally Accepted Accounting
Principles, costs incurred prior to determination of technological feasibility
are considered research and development and expensed as incurred.  Once
technological feasibility has been established, development costs are
capitalized and amortized over the shorter of an economic life of one to three
years or the proportion of current period product revenues to total expected
product revenues.  Amortization charged to cost of revenues amounted to $0 and
$124,145 during the three months ended August 31, 1998 and 1997, respectively.

     (d)  Property and Equipment

     Property and equipment are stated at cost, less accumulated depreciation. 
Depreciation is charged to operations over the estimated useful lives of the
related assets, generally five to seven years, using the straight-line method. 
Depreciation was $12,047 and $9,483 for the three months ended August 31, 1998
and 1997, respectively.

     (e)  Cash and Cash Equivalents

     The Company considers all highly liquid investments with original
maturities of 90 days or less to be cash equivalents for financial statement
purposes.

     (f)  Income Taxes

     The Company accounts for income taxes using the liability method in
accordance with the provisions of the Statement of Financial Accounting Standard
(SFAS) No. 109, "Accounting for Income Taxes."  SFAS No. 109 requires that
deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts.

                                          7
<PAGE>

     (g)  Loss Per Common Share

     The Company follows the guidelines of the Financial Accounting Standards
Board Statement No. 128, "Earnings Per Share.  SFAS No. 128 requires dual
presentation of basic and diluted earnings per share for entities with complex
capital structures.  Basic earnings per share includes no dilution and is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period.  Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar too fully diluted earnings per
share.  Due to the Company's continued net losses there has been no impact from
unexercised stock options and warrants on diluted net loss per share as the
effect would be anti-dilutive. 

     (h)  Reclassifications

     Certain prior year balances have been reclassified to conform with current
year presentation.  There was no impact on the prior year's net loss or total
stockholders' equity from the reclassification.

                                          8
<PAGE>

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

     Except for the historical information contained herein, this Quarterly
Report on Form 10-QSB may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including but not limited to (i) the Company's belief in
the growth of the purchasing and procurement systems software market and (ii)
expectations for the Company's strategy and future performance.  Investors are
cautioned that forward-looking statements are inherently uncertain.  Actual
performance and results of operations may differ materially from those projected
or suggested in the forward-looking statements due to certain risks and
uncertainties, including, but not limited to, the following risks and
uncertainties:  (i) the Company's history of losses, limited revenues, and the
uncertainty of future profitability; (ii) the uncertainty of market acceptance
of PurchaseSoft software; (iii) new management and ability to recruit sales,
service, and implementation personnel; (iv) the intense competition in the
software field; (v) the dependence on one product and rapid technological change
in the industry; and (vi) fluctuations in quarterly operating results. 
Additional information concerning certain risks and uncertainties that would
cause actual results to differ materially from those projected or suggested in
the forward-looking statements is contained in the Company's filings with the
Commission, including those risks and uncertainties discussed under the caption
"Risk Factors" in the Company's Annual Report on Form 10-KSB for the year ended
May 31, 1998.  The forward-looking statements contained herein represent the
Company's judgment as of the date of this Quarterly Report on Form 10-QSB, and
the Company cautions readers not to place undue reliance on such statements. 


                                          9
<PAGE>

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1997

REVENUES

     Total revenues for the three months ended August 31, 1998 were $159,679
compared to revenue of  $125,042 for the three months ended August 31, 1997, an
increase of $34,637 or 27.7%.  Product revenues for the three months ended
August 31, 1998, were $66,250 compared to revenues of $88,775 for the three
months ended August 31, 1997, a decrease of $22,525 or 25.4%.  Service revenues
were $93,429 for the three months ended August 31, 1998, compared to $36,267 for
the three months ended August 31, 1997, an increase of $57,162 or 157.6%. 
Service revenues reflect increases in both maintenance revenue recognized and
professional services performed as the Company continues to emphasize these
activities as value added services.

EXPENSES

     The cost of revenues for the three months ended August 31, 1998 was $32,782
compared to $138,144 for the three months ended August 31, 1997, a decrease of
$105,362 or 76.3%. This decrease resulted from the elimination of amortization
of software development costs during the three months ended August 31, 1998 as
all capitalized software costs were fully amortized as of May 31, 1998.  This
decrease was offset in part by increased personnel costs in the area of customer
support, installation and training.
     
     Selling expense for the three months ended August 31, 1998 was $330,209
compared to $143,348 for the three months ended August 31, 1997, an increase of
$186,861 or 130.4%. This increase was primarily due to the addition of executive
sales management, increased costs of sales personnel and increased marketing
expenses.
     
     General and administrative expense for the three months ended August 31,
1998 was $443,987 compared to $355,819 for the three months ended August 31,
1997, an increase of $88,168 or 24.8%.  This increase was primarily due to
increased legal fees associated with the Company's reincorporation in the state
of Delaware and other legal matters, increased occupancy costs associated with
the Company's relocation of its corporate office from Eden Prairie, MN to its
new corporate office in Edina, MN in August 1998 and increased travel expenses
associated with senior management promoting the Company's software to
prospective customers and other general corporate matters.

                                          10
<PAGE>

     Research and development expense for the three months ended August 31, 1998
was $128,173 compared to $27,325 for the three months ended August 31, 1997, an
increase of $100,848 or 369.1%.  This increase was primarily due to the addition
of a manager of research and development at the Company's office located in
Westborough, MA, additional R&D personnel and higher compensation costs for R&D
personnel and the expensing of certain development costs in the three month
period ended August 31, 1998 rather than capitalizing these costs as was done in
the three month period ended August 31, 1997.
     
NET LOSS
     
     For the three months ended August 31, 1998, the Company reported a net loss
of $744,574 (or $.09 per share) as compared to a net loss of $544,004 (or $.21
per share) for the three months ended August 31, 1997. This loss was caused by
the continuation of low sales volumes and increases in selling expenses, general
and administrative expenses, research and development expenses and offset by a
reduction in cost of revenues and an increase in interest income.  The decrease
in the loss per share resulted from an increase in the average outstanding
shares for the three months ended August 31, 1998 to 8,029,761 as compared to
average outstanding shares for the three months ended August 31, 1997 of
2,564,803.

LIQUIDITY AND CAPITAL RESOURCES
     
     The Company had working capital of $1,523,909 at August 31, 1998 as
compared with $2,324,267 at May 31, 1998, a decrease in working capital of
$800,358. This decrease resulted primarily from the loss for the three month
period of $744,574, the use of working capital to acquire property and equipment
of $148,276 and proceeds received from the exercise of a warrant of $142,500. 
Cash decreased from $2,918,548 at May 31, 1998, to $2,009,002 at August 31,
1998, a decrease of $909,546.
     
     During the three month period ended August 31, 1998, the Company raised
$142,500 upon the exercise of a warrant.  On September 1, 1998, 125,000 common
shares were issued in exchange for this warrant.  The Company also financed
certain equipment and entered into a twenty-four month capital lease in the
amount of $61,533.  The Company made $209,809 in capital expenditures during the
three month period ended August 31, 1998 and had no capital expenditures in the
three month period ended August 31, 1997.

                                          11
<PAGE>

     The Company believes that its existing capital resources, interest income,
and revenue from software sales and services will be sufficient to fund its
planned operating expenses and capital requirements for the next twelve months. 
However, there can be no assurance that such funds will be sufficient to meet
the Company's operating expenses and capital requirements during such period. 
The Company's actual cash requirements may vary materially from those now
planned and will depend upon numerous factors, including the results of the
Company's software development efforts, the level of resources the Company
commits to marketing and sales efforts, the ability of the Company to maintain
existing and develop new customers, and activities of competitors and other
factors.

YEAR 2000 ISSUES

     The Company has and will continue to evaluate year 2000 issues and their
potential impact on its information systems and computer technologies.  All
evaluation costs will be expensed as incurred.  Year 2000 issues are not
expected to have a significant impact on the Company's ongoing results of
operations, however, there can be no assurance that the Company will not suffer
adverse effects from the failure of any of its vendors, suppliers or partners to
be year 2000 compliant.

                                          12
<PAGE>

PART II.  OTHER INFORMATION

Item 2.   Changes in Securities

     On September 1, 1998, the Company issued 125,000 of the Company's Common 
Shares upon the exercise of a warrant by TIS Group Managers, Inc., at an 
exercise price of $1.14 per share, for the aggregate sum of $142,500. The 
issuance of the Common Shares was made in reliance on section 4(2) of the 
Securities Act of 1933, as amended.

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

     On September 17, 1998, the Company held the 1999 Annual Meeting of
Shareholders.  At this meeting, the security holders re-elected Joseph D.
Mooney, Brad I. Markowitz, and Jeffrey B. Pinkerton as directors for the Company
to serve until the next annual meeting of shareholders.  In addition, J. Murray
Logan and Donald S. LaGuardia were elected as directors for the Company to serve
until the next annual meeting of shareholders.  The security holders also voted
upon and approved the following matters: (i) to consider and vote upon a
proposal to approve a plan of merger to reincorporate the Company in Delaware;
(ii) to consider and vote upon a proposal to increase the maximum number of
shares which may be made available upon exercise of stock options under the
Greentree Software, Inc. 1997 Stock Option Plan from 1,500,000 to 3,500,000; and
(iii) to consider and vote upon a proposal to amend the Company's Certificate of
Incorporation to increase the number of authorized capital shares of the Company
from 15,000,000 to 25,000,000.

At the meeting, a total of 6,567,669 shares were present or by proxy which
represented 81.8% of the shares qualified to vote.  The tabulation of the voting
for the matters submitted for a vote was as follows:

<TABLE>
<CAPTION>
 

                                                   Votes Cast        For            Against       Abstain
                                                    ----------      -----           --------      -------
<S>                                                 <C>           <C>               <C>           <C>
1.   To elect directors:
     LaGuardia                                     6,567,669      6,563,860          3,809             --
     Logan                                         6,567,669      6,563,860          3,809             --
     Markowitz                                     6,567,669      6,563,818          3,851             --
     Mooney                                        6,567,669      6,563,818          3,851             --
     Pinkerton                                     6,567,669      6,563,818          3,851             --

2.   To approve a plan of merger  
     to reincorporate the Company 
     in Delaware.                                  5,658,300      5,649,402          8,854             44

3.   To approve an increase in the 
     Company's 1997 Stock Option Plan
     from 1,500,000 to 3,500,000 shares.           5,658,300      5,625,128         32,574            598

4.   To approve an amendment to the 
     Company's Certificate of Incorporation
     to increase the authorized shares from 
     15,000,000 to 25,000,000 shares.              6,567,669      6,541,893         25,519            257
 
</TABLE>

                                          13
<PAGE>

Item 6.   Exhibits and Reports on Form 8-K

     (a)  Exhibits

          10.1 Lease between the Company and Racotek, Inc.
          27.1 Financial Data Schedule filed herewith

     (b)  Reports on Form 8-K

          None

                                          14
<PAGE>

                                     SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                              GREENTREE SOFTWARE, INC.

                              
                              /s/ Joseph D. Mooney
Date:  October 15, 1998       ------------------------------------------
                              Joseph D. Mooney
                              Chairman, Chief Executive Officer and Director



                              /s/ Philip D. Wolf
                              ------------------------------------------
                              Philip D. Wolf
                              Chief Financial Officer and Secretary

                                          15