UNITED STATES 
                    SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C. 20549
                        __________________________
                               FORM 10-KSB

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
        SECURITIES EXCHANGE ACT OF 1934
        For the fiscal year ended December 31, 1997
                                   OR
[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
        SECURITIES AND EXCHANGE ACT OF 1934

                      Commission File Number: 0-26008

                          MYSOFTWARE COMPANY
            2197 E. Bayshore Road, Palo Alto, California 94303
                           (650) 473-3600

Incorporated in                        I.R.S. Employer Identification No.
Delaware                                             77-0195362
--------                                             ----------

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: Common Stock

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

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

Based on the closing price of $3.563 on February 28, 1998, the aggregate 
market value of the common stock held by non-affiliates of the registrant as 
of February 28, 1998 was $10,277,748.
The number of shares outstanding of the registrant's common stock as of 
December 31, 1997, was 4,235,856.

                 DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement dated April 13, 1998 to be 
delivered to stockholders in connection with the Notice of Annual Meeting of 
Shareholders to be held on May 21, 1998, are incorporated by reference into 
Part III.

<PAGE>


                         TABLE OF CONTENTS

                                                                   Page No.
                              PART 1
Item 1.	Business                                                      3

Item 2.	Properties                                                   18

Item 3.	Legal Proceedings                                            18

Item 4.	Submission of Matters to a Vote of Security Holders          18

                              PART II

Item 5.	Market for Registrant's Common Stock and Related 
        Stockholder Matters                                          19

Item 6.	Management's Discussion and Analysis of Financial
        Condition and Results of Operations                          20

Item 7.	Financial Statements and Supplementary Data                  22

Item 8.	Changes in and Disagreements with Accountants on 
        Accounting and Financial Disclosure                          22

                              PART III

Item  9. Directors and Executive Officers of the Registrant          23

Item 10. Executive Compensation                                      24

Item 11. Securities of Ownership of Certain Beneficial Owners 
         and Management                                              24

Item 12. Certain Relationships and Related Transactions              24

Item 13. Exhibits, Financial Statement Schedules, and Reports 
         on Form 8-K                                                 25

Signatures                                                           26

Financial Statements                                                 28

Exhibits                                                             45

<PAGE>


                                 PART 1
ITEM 1. BUSINESS


MySoftware Company (the "Company" or "MySoftware") designs, markets, and 
supports a family of leading task-specific software applications for small 
businesses, including home-based businesses. MySoftware provides users with 
easy-to-learn and easy-to-use solutions, including tools for managing mail
lists and saving on direct mail postage. MySoftware also provides 
productivity tools for creating brochures, stationery, postcards, labels, 
invoices and estimates, Internet home pages, Web-based resumes and Web-based 
calendars. Headquartered in Palo Alto, California,  the Company was founded 
in 1986 and completed its initial public offering in June 1995.  

In addition to retail software products, MySoftware offers complementary 
annuity-based products and services to its customers, particularly in the 
mailing area, where MySoftware has established a leading market position. 
With an increasing number of small businesses relying on direct marketing to 
grow their businesses, MySoftware is positioned to meet the mailing management 
needs of this important market.  Current services such as address correction,
available through subscriptions to MyAddressChecker CD-ROM, offer customers 
added value and create the opportunity for long-term relationships with 
MySoftware. 

The Company places significant emphasis on consumer marketing techniques in 
developing products and building brand awareness. The Company primarily 
distributes its products through the retail channel, in computer software and 
office supply stores throughout the United States and Canada.  The Company 
has also added new distribution methods, including direct, other equipment 
manufacturer ("OEM"), and international channels.  In addition to retail 
software products and annuity-based mailing products, the Company also offers
complementary paper products and receives commissions from the sales of such 
products by third parties.

The United States Small Business Administration reports that there are 
approximately 22 million small businesses in the United States. According to 
IDC/LINK, income-generating home offices are expected to grow over 27% from 
1995 to 1999, with the fastest growth expected in those companies with fewer 
than 10 employees. According to a Home Office Computing (January, 1995) 
survey, the top three challenges facing small businesses are obtaining new 
business clients, growing their businesses, and promoting their businesses.  
The Company's internal research indicates that small businesses are concerned
about projecting a professional image in their sales and marketing materials 
and in other communications with customers.  The Company's research also 
indicates that many small businesses perceive opportunities for improvement 
in the management of their mailings.  

Historically, small businesses have lacked the tools to create professional-
quality marketing materials and to mail their materials effectively, or they 
have relied on costly third party providers.  Today, small businesses are 
adopting new office productivity technologies in growing numbers.  
Penetration of computers in the small business market increased from 40% in 
1989 to 78% in 1997, according to IDC/LINK.  Moreover, the availability of 
low cost, high resolution laser and inkjet printers, including color 
printers, has made it possible to produce professional-looking materials 
directly from personal computers.  As a result, small businesses are 
increasingly using their computers to combine text, data, and color graphics 
to produce high-quality marketing materials on their own desktops and to mail
these materials via the United States Postal Service ("USPS").

To serve this market, a number of companies have begun to offer marketing and
communications products targeted toward small businesses.  These companies 
include Dun and Bradstreet Corp. and American Business Information, Inc. 
("ABI") which provide targeted mailing lists; PaperDirect, Inc. 
("PaperDirect"), Geographics, Inc., ("Geographics"), and BeaverPrints, Inc. 
("BeaverPrints"), which provide pre-printed papers; Pitney Bowes, Inc. 
("Pitney Bowes"), which provides their Personal Post Office, a desktop 

<PAGE>

postage meter for small businesses including home-based businesses; and 
Kinko's Copies and Alpha Graphics, Inc. which provide production services. 
Although various general purpose software applications, such as word 
processing, database, and desktop publishing applications, have a broad range
of features and can be used to perform many of the sales and marketing tasks 
desired by small businesses, these applications are often complex and 
relatively difficult to use.  Accordingly, the Company believes that there is
a substantial opportunity for task-specific software designed to provide 
cost-effective, easy-to-learn, and easy-to-use solutions to busy, 
results-oriented small business users.  

COMPANY STRATEGY

MySoftware's core software products address the sales and marketing needs of 
small businesses: communicating with customers, attracting new business, and 
managing customer lists.  In order to address this growing market, the 
Company has focused on becoming the leading seller in its core categories, 
including mailing, brochures, labeling, business cards, and invoices/
estimates. Key elements of the Company's strategy are summarized below.  

Provide a family of fully featured, task-specific applications. The Company's
target users are busy and results-oriented.  These users often find general 
purpose software programs cumbersome to learn and to use for a particular 
task.  By developing task-specific applications, MySoftware makes its 
products easy-to-learn and easy-to-use, while incorporating all the 
capabilities needed to successfully perform a focused task.  Users can solve 
other small business marketing challenges by purchasing additional task-
specific software from MySoftware's family of interoperable products.

Build product loyalty and brand name.  The Company believes that building the
MySoftware brand is important to its long-term success.  By offering a family
of related products that complement one another and have similar names and 
packaging, the Company aims to raise brand awareness and increase sales of 
each of its products.  MySoftware also conducts active brand marketing and 
communications campaigns, including public relations efforts, direct 
communications, advertising, and retailer promotions.  To further increase 
consumer exposure to its products, the Company establishes cooperative 
marketing arrangements with companies that offer complementary sales and 
marketing products.  To date, MySoftware has established such arrangements 
with Avery Dennison Corporation ("Avery"), BeaverPrints, iMarket Inc., 
American Express Company ("American Express"), PaperDirect, Geographics, New 
England Business Systems, Inc. ("NEBS"), Pitney Bowes, MindSpring 
Enterprises, Inc. ("MindSpring"), and EarthLink Network, Inc.("EarthLink"). 

Focus on core product categories. MySoftware focuses its marketing and 
development resources on five core product categories: mailing, brochures, 
labeling, business cards, and invoices/estimates.  The Company further 
leverages its leadership position in the mailing category by offering 
annuity-based mailing-related products and services. By maintaining this 
focus, the Company believes that it will continue to be positioned to 
understand customer needs, produce easy-to-learn and easy-to-use products, 
build its brand name, and lead the market in these categories.

Focus on expanding channels of distribution.  The Company's distribution 
efforts are primarily focused on the retail channel, since most small 
businesses and individuals purchase software through retail outlets.  The 
Company actively seeks to increase its visibility in the retail channel by 
conducting periodic retail promotions, monitoring sell-through and inventory 
levels, locating its sales force near major retailers, designing its 
packaging for self-service selling environments, supporting retailers' 
advertising and promotional efforts, and conducting independent public 
relations and advertising efforts. In addition to retail distribution, the 
Company sells its products and services directly to customers through its 
direct channel (including both telephone and Internet sales). The Company also 
distributes products through its OEM channel, through which it has formed 
partnerships with internationally-known companies such as Pitney Bowes, 
Hewlett-Packard Company, Brother, Epson, Samsung, U S WEST, Acer, and other 
industry leaders.  Such relationships enable the Company to generate 
additional revenues, expand its target market for annuity-based products and 
services, and build awareness of the MySoftware brand.  As part of 

<PAGE>

the Company's efforts to expand its product distribution channels, in December
1997, the Company initiated an international sales effort and plans to seek 
out various international partners for localization, marketing, and 
distribution of the Company's products abroad.

Emphasize market-driven product development.  The Company employs extensive 
market research and user feedback to define, develop, and improve its 
products to meet customer needs more effectively.  MySoftware applies an 
integrated four-step consumer marketing process to define, develop, and 
improve its products.  These steps include: performing consumer research to 
identify user needs and behavior; incorporating the research to develop easy-
to-learn, easy-to-use, fully featured, task-specific applications; conducting
both pre- and post-release usability testing to validate these designs; and 
collecting customer support data and product returns feedback to drive future
improvements.

Leverage core competencies.  MySoftware leverages its core competencies in 
product development and in sales and marketing through strategic use of 
third-party service providers.  The Company has chosen to use third-party 
providers to perform functions that it believes can be better or more 
effectively performed by a specialized organization.  These functions include
software coding, assembly, customer technical support, telephone customer 
registration, and some aspects of direct communications to consumers (such as
fax and e-mail distribution).  MySoftware believes that this organizational 
approach allows it to achieve quality and flexibility and to control costs, 
while maintaining effective control over its business operations.

PRODUCTS

The Company's core products are a family of leading task-specific software 
applications that address the specific sales and marketing needs of small 
businesses, usually those with ten or fewer employees.  The Company provides 
users with powerful, easy-to-learn and easy-to-use solutions for creating 
customized, professional-quality mailing lists, brochures, labels, business 
cards, invoices/estimates, and other marketing communications materials.  The
Company also markets annuity-based mailing products and services that 
complement the Company's existing mailing software products. The Company 
backs its products with a 30-day money-back guarantee.  All of MySoftware's 
core applications are available for both Microsoft Windows 3.1 and Windows 95. 

MyAdvancedMailList / MyAddressChecker / MyDeluxeMailList / MyMailManager /
ProVenture Mail Tools /  MyMailList & Address Book
MySoftware's initial mailing list product was introduced in September 1987.  
MyAdvancedMailList, introduced in June 1989, stores and organizes mailing 
list data that can be printed in a variety of forms, including mailing 
labels, envelopes, address books, and Rolodex cards, or used in conjunction 
with other MySoftware applications, such as MyAdvancedBrochures.  
MyAdvancedMailList has a built-in database function that enables MySoftware's
customers to maintain and sort mailing lists and other customer data. 
MyAddressChecker, introduced in 1994, is USPS CASS-certified and enables 
users to qualify for Bulk Mail discounts from the Post Office.  Users must 
subscribe to bi-monthly CD-ROM updates to continue to qualify for postal 
discounts, which can be as great as approximately 51.6%.  The program 
verifies and corrects addresses against the national database of deliverable 
addresses maintained by the Post Office and supplies the appropriate ZIP+4 
codes necessary to print delivery point bar codes and to qualify for these 
discounts.  MyDeluxeMailList, introduced in March 1995, includes Zip Look Up,
a CD-ROM of every valid address in the United States, enabling users to 
correct their addresses and add ZIP+4 codes that help speed delivery of their
mail. MyMailManager, designed for Windows 95, was introduced in December 1996. 
ProVenture Mail Tools, introduced in June 1997, offers similar mailing 
features but works with customers' existing databases. Users with customer or
prospect lists already stored in programs such as ACT!, Access, FileMaker, 
Excel, Word, and FoxPro can use Mail Tools to add mail list management 
and printing features their programs may lack. MyMailList & Address Book, 
introduced in December 1997, provides users with simple features to organize 
names and addresses, at a lower price point than the Company's other mailing
products. MyAdvancedMailList earned  a 1997 "Editors' Pick" award from Home 
Office Computing magazine.  

<PAGE>

MyBrochures / MyAdvancedBrochures / MyProfessionalMarketingMaterials
MyBrochures was originally introduced in April 1994.  MyAdvancedBrochures was
introduced in September 1994.  MyAdvancedBrochures enables users to design 
and produce flyers, postcards, professional-looking color brochures, menus, 
newsletters, and invitations in a variety of formats and sizes.  All these 
brochure programs offer built-in templates, which can be easily customized to
suit users' needs.  The Windows 95 version of the program was introduced in 
September 1995.  MyProfessionalMarketingMaterials, introduced in September 
1996, provides customers with more than 600 color printable designs,
as well as the ability to design from more than 500 pre-printed specialty 
papers.  

MyAdvancedLabelDesigner / MyDeluxeLabelDesigner / MyLabels
MySoftware's initial labeling product was introduced in March 1988. 
MyAdvancedLabelDesigner, introduced in May 1992, enables users to design and 
print professional-looking, color labels in standard and custom sizes, 
including mailing and shipping labels, name cards, Rolodex cards, file 
folders, cassette and video tape labels, and more.  Text, data, and graphics 
can be entered directly into MyAdvancedLabelDesigner or imported from other 
applications such as dBase, Paradox, and Access.  Labels can be enhanced with
special design elements including color, rotated text, and clip art.  In 
March 1996, the Company introduced the Windows 95 version of 
MyAdvancedLabelDesigner, which supports ten different label brands and more 
than 500 label sizes. MyLabels was introduced in March 1996 to provide 
similar features to a more value-conscious consumer.

MyAdvancedInvoices & Estimates / EasyCustomInvoices / ProVenture Billing 
Solution / MyDeluxeInvoices & Estimates
MySoftware's initial invoice product was introduced in December 1990.  The 
Advanced version, introduced in August 1993, is an invoicing, estimating, and
cash management application.  The program easily  produces professional-
looking invoices and estimates on plain paper or on a variety of pre-printed 
forms.  The application also produces a variety of sales and accounts-
receivable reports designed to assist small businesses in analyzing financial
and accounting aspects of their businesses.  EasyCustomInvoices, designed for
Windows 95 and introduced in September 1996, allows users to customize their
forms with different fonts, column widths, column headings, and more.
ProVenture Billing Solution was introduced in June 1997 and was designed to 
help customers manage the entire billing process. It offers enhanced tracking
capabilities, such as the Tracker window that automatically notifies the user
when a customer is overdue. MyDeluxeInvoices, introduced in November 1997, is
the Windows 95 version of MyAdvancedInvoices and offers enhanced usability 
features.  MySoftware also sells pre-printed invoice, estimate, and statement
forms for use with all software products in its invoicing/estimating 
category.  The Company contracts with a third party to manage its private-
label forms business and shares in the sales revenues and marketing costs of 
the business. There can be no assurance that this arrangement can be 
maintained or will benefit the Company.

MyProfessionalBusinessCards / ProVenture Custom Business Stationery
In April 1995, the Company introduced MyProfessionalBusinessCards in its new 
business card product category.  Following its task-specific application 
strategy, MySoftware has given small business owners a tool for creating 
professional-looking business cards in minutes.  This program gives small 
business owners the flexibility to design and print small quantities of 
customized business cards for any occasion. MyProfessionalBusinessCards is 
available in both Windows 3.1 and Windows 95 versions. The Company introduced
Custom Business Stationery in May 1997. This product is designed to create 
custom, matching, professional-quality business cards, letterhead, and 
envelopes.  Custom Business Stationery also gives customers the ability to 
import logos in 15 different formats and to maintain a database of employees 
or contacts.

MyInternetBusinessPage / Pacifica Personal WebPage Designer
In August 1996, the Company introduced MyInternetBusinessPage, its first 
Internet-related product.  The product allows users to create and publish 
Internet Web pages on the World Wide Web.  The product is created 
specifically to address the needs of small businesses, and includes dozens of 

<PAGE>

easy-to-customize templates, including a pre-designed form that customers can
use to communicate via electronic mail with the page owner. In December 1996,
the Company introduced Pacifica Personal WebPage Designer. The program comes 
with more than a dozen templates for showcasing hobbies, interests, and family 
events.  The program allows an entire Web site or portions of it to be 
password-protected to guard the privacy of the author.  Users of both 
MyInternetBusinessPage and Personal WebPage Designer are not required to 
learn the HTML programming language to create their pages, and are able to 
publish their pages on the World Wide Web using SwiftSite or another Internet
publishing site.  MySoftware earns a share of fees that users pay to 
SwiftSite for publishing; revenues to date from this source have not been 
significant.  

Jalapeno Hot Buttons / Hot Banners / Hot Backgrounds
In December 1996, the Company released two products, Hot Buttons and Hot 
Banners, that allow authors of Web sites to easily create graphic images that
enhance the visual impact of their Web pages.  Hot Buttons allows users to 
create customized professional-quality buttons, headers, bullets, page 
breaks, and other Web graphic elements without having to learn complicated 
photo or paint manipulation programs. Hot Banners allows users to create 
banners and other Web graphics containing multiple text and image elements. 
Hot Backgrounds was introduced in August 1997 and enables users to create 
custom background designs for their Web pages. The elements created by all of
these programs can be used with all of the major Web page authoring tools on 
the market, including MyInternetBusinessPage and Pacifica Personal WebPage 
Designer. 

Other Products
The Company sells a simple database program, MyDataBase, and other Internet-
related products, Pacifica Professional WebResume and Pacifica WebCalendar. 
MyDataBase is designed to enable users to easily organize and summarize 
information. WebResume is an all-in-one Web job search and career management 
tool. WebCalendar helps users create a dynamic, customized event calendar and
publish it on the Web in minutes.  The Company also markets the American 
Check Printers line of checks for personal financial programs. These products
are not expected to contribute materially to the Company's future revenues. 

PRODUCT DEVELOPMENT

The software industry is undergoing rapid changes, including evolution of 
industry standards, introduction of new operating systems and environments, 
frequent new product introductions, introduction of new media, and changes in
customer requirements and preferences.  The Company believes that its future 
success will depend in large part upon its ability to keep pace with 
competitive offerings, to adapt to new operating systems, hardware platforms,
media, Internet technologies, and industry standards, and to provide 
additional functionality by enhancing its existing products and introducing 
new products on a timely basis.

The Company focuses on developing and improving its family of core products 
at the same time as it develops products and services in complementary 
software categories.  This focused strategy allows MySoftware to know its 
market and to develop solutions to customer problems.  In order to meet the 
business development needs of small businesses, the Company works with 
current and prospective users to define the functionality of the Company's 
new products and make improvements to its existing products.  The Company's 
development process is organized around multi-functional teams composed of 
product development, marketing, and quality assurance personnel who work 
together in the development of products from an earlier design stage.  This 
team approach ensures a high level of marketing and customer support input 
throughout many stages of product development.

MySoftware conducts systematic usability testing as an integral part of the 
product development process, beginning with the product specification phase, 
continuing during development and beta testing phases, and concluding with 
post-release customer satisfaction audits.  This testing is used to identify 
potential problems quickly and formulate early solutions.  In addition to 

<PAGE>

monitoring customer support calls and requests, the Company has in place a 
mandatory customer registration program that further enhances its ability to 
monitor customer use of its products and to obtain valuable customer feedback.

MySoftware creates all product specifications for both new products and 
updates of its existing products, and maintains internal control over the 
creative and market-driven aspects of product development.  Once a product 
has been defined and a detailed specification has been designed, the Company 
leverages its resources by outsourcing coding functions.  The Company relies 
primarily on three independent firms with which the Company has worked for 
seven, five, and two years, respectively, to perform the majority of the 
coding for its software products, including coding for new products and 
maintenance and bug-fix releases, and updates for existing products.  The 
need to update the Company's products, both for enhanced functionality and 
for ease of use under new operating platforms, increases the Company's 
dependence on these third-party coders.  The Company has entered into 
separate software development agreements for the development of specific 
pieces of software as work-for-hire with its third-party coders.  The Company
compensates third-party coders primarily through payments for software 
production costs and royalty payments.  Royalty expenses have been at 2% of 
net revenues of the relevant products, with a dollar maximum cap on total 
royalty payments for certain products.  The Company generally owns all 
intellectual property rights to products developed by third-party coders with
the exception of the base code for MyBrochures, MyAdvancedBrochures, 
MyProfessionalMarketingMaterials, MyProfessionalBusiness-Cards, and Custom 
Business Stationery.  With respect to these products, the Company owns the 
code for the user interface, while the base code is owned by the third-party 
coder.  The Company holds an irrevocable, non-exclusive license to copy and 
distribute the executable code compiled from the base code and to make 
limited modifications.  Third-party coders have also agreed not to develop or
market any stand-alone desktop publishing software based on the base code 
that competes with the Company's products prior to October 1998.  The 
Company's success depends in part on its continued ability to obtain and 
renew agreements for coding by independent software developers.  There can be
no assurance that the Company will be able to obtain or renew such coding 
agreements on favorable terms, if at all.

The Company has made use of shared code across products.  For example, 
MyAdvancedMailList and MyAdvancedLabelDesigner share portions of the same 
base code, and the code for MyAdvancedBrochures was used to develop 
MyProfessionalBusinessCards and Custom Business Stationery.  The Company 
believes its ability to share and reuse significant blocks of code across 
multiple products has enabled it to shorten development time and reduce 
development costs.

As of December 31, 1997, the Company had 18 full-time and 2 part-time 
professional and technical employees engaged in product development.  During 
the years ended December 31, 1997, 1996, and 1995, product development 
expenses were $2,221,712, $1,988,881, and $1,342,045, respectively, not 
including capitalized software production costs paid to third party coders of
$1,290,180, $1,253,117, and $742,419, respectively, which were capitalized.

SALES AND MARKETING

Sales 
The Company's products are distributed primarily through computer software 
and office supply retailers throughout the United States and Canada, 
including computer superstores (Computer City Super Center; CompUSA Inc.; 
Elek-tek, Inc.; Fry's Electronics, Inc.; MicroCenter), office warehouse clubs
(Office Depot Inc.; OfficeMax; Staples Inc.), software specialty stores 
(Egghead Inc.; Electronics Boutique), mass merchants (Target; Wal-Mart), 
consumer electronics stores (BestBuy Co., Inc.) and general warehouse clubs 
(Price/Costco Inc.; Sam's Club). Of the Company's top twelve retail outlets, 
MySoftware sells directly to eight and services the other four retailers 
through distributors such as Ingram Micro, Inc. ("Ingram"), Merisel, Inc. and
GoodTimes.  Ingram and Office Depot, Inc. accounted for net revenues of 
37% and 20% for 1997, 34% and 29% for 1996, and 28% and 23% for 1995, 
respectively.  The Company has non-exclusive arrangements with its 
distributors and retailers that generally do not require minimum purchases of
the Company's products and may be terminated at any time.

<PAGE>

The Company monitors product sell-through and retail inventory information.  
Most of the Company's distributors and key retailers provide weekly or 
monthly sell-through data as well as current inventory information.  This 
information is analyzed for both positive and negative trends and is used to 
assist the Company's retailers in managing product inventory levels.  This 
information is also used to determine the effectiveness of retail promotions 
and account advertising.  The Company's promotional vehicles are also geared 
toward increasing customer exposure to its products with additional facings 
and high traffic locations. The Company maintains sales forces in the Dallas,
Los Angeles, and Miami metropolitan areas, and has contracted with 
manufacturers' representative firms in the Dallas and Minneapolis 
metropolitan areas. 

The Company's products are also distributed through direct, OEM, and 
international channels. Direct sales to customers are expected to increase as
the Company introduces new, annuity-based products and services to its 
mailing customer base. Sales through the OEM channel, with partners such as 
Pitney Bowes, Brother, U S WEST, and others, enable the Company to generate 
additional revenues, expand the target market for its annuity-based products 
and services, and build awareness of the MySoftware brand. In December 1997, 
the Company hired a Vice President of International Sales to launch its 
international sales efforts.  Revenues from sources outside of North America 
have not been significant to date.

Cooperative Marketing Arrangements
MySoftware has entered into cooperative marketing relationships with 
companies that sell products complementary to the Company's products, 
including paper products and targeted mailing lists.  In exchange for 
inserting these marketing partners' catalogs and product samples inside the 
Company's retail software packages, the Company receives a per-registered-
user fee, per-product-shipped fee, or sales commission on any sales generated
by the Company's activities or other promotional consideration.  MySoftware 
currently has cooperative marketing programs with Geographics, PaperDirect, 
BeaverPrints, MindSpring, and EarthLink.  To date, these activities have not 
produced significant revenues, but the Company believes that these activities 
contribute to its brand-building efforts.  There can be no assurance that any
of these arrangements can be maintained or will benefit the Company.

In addition, the Company has developed custom versions of its products for 
sale by some of its marketing partners. The Company has entered into a resale
contract with NEBS for various MySoftware titles. There can be no assurance 
that any significant revenue will result from these activities or that any of 
these relationships can be maintained.

Marketing
MySoftware's marketing department is responsible for managing products and 
developing new market opportunities; building brand recognition through 
public relations, advertising, and other promotional techniques; and 
communicating directly with current customers to market additional products 
and services. The Company's marketing department has three main areas of 
focus: product marketing, corporate marketing, and direct communications.

The Company's product marketing group is responsible for analyzing the 
marketing needs of small businesses and individuals, specifying product 
features, validating product ease-of-learning and ease-of-use, managing 
package design, coordinating product training, developing sales of 
complementary products and services, and increasing repeat purchases by 
existing customers.  Market research is an integral part of MySoftware's 
customer-focused approach, enabling the Company to continue to improve 
existing products and define new products.  Product marketing personnel work 
closely with product development engineers to develop overall product 
development specifications based on demonstrated customer needs.

The Company's corporate marketing group focuses on building awareness of the 
MySoftware brand and increasing MySoftware product trials.  Its 
responsibilities include external communications, such as public and investor
relations, advertising, the corporate Web site, trademark issues, and 

<PAGE>

promotions.  MySoftware also conducts periodic retail promotions designed to 
increase short-term sales and strengthen relationships with retailers.

The Company formed a direct communications group in 1997 to utilize various 
technologies, including the Internet, to market products and services 
directly to MySoftware customers, who then order these annuity services 
directly from the Company.  This group markets primarily mailing-related 
products and services to the Company's current mailing customers using direct
mail, fax, and e-mail communications.

CUSTOMER SUPPORT

The Company's customer support activities provide valuable services to its 
customers and enhance customer satisfaction, in addition to providing valuable
customer input to the Company's product development process.  MySoftware 
provides customer technical support in-house for certain Internet products 
and through a third party managed by the Company's internal customer support 
group for all other products.  This structure facilitates the Company's 
ability to achieve satisfactory customer support on a cost-effective basis.  
The Company receives daily downloads of data from its customer technical 
support provider, allowing it to monitor service levels and support quality. 
The Company's contract with its customer technical support operator can be 
terminated on 30 days' notice by either party.  This third party provider 
also provides services to several larger companies, and there can be no 
assurance that demands from such companies or other factors will not result 
in termination of this relationship.  The unavailability of such a firm to 
perform customer technical support for the Company could result in 
significant disruption to the Company's operations, could lead to customer 
dissatisfaction, and could have a material adverse effect on the Company.

OPERATIONS

The Company directly performs all purchasing, finished goods inventory 
management and warehousing, scheduling, order processing, and shipping.  The 
Company prepares master software diskettes, CD-ROMs, user manuals, and 
packaging designs, and conducts independent quality control and testing at 
its facilities.  Diskette and CD-ROM duplication, printing of documentation, 
and packaging and assembly are performed by independent contractors to the 
Company's specifications.  To date, the Company has not experienced 
any material difficulties or delays in the manufacture and assembly of its 
products.  However, if such difficulties and delays were encountered and if 
the Company's transition to an alternate vendor were not completed promptly, 
the Company could be adversely affected.

The Company generally ships products within three days  of receipt of an 
order.  As a result, the Company has relatively little backlog at any given 
time, and does not consider backlog to be a significant indicator of future 
performance.

COMPETITION

The market for the Company's small business products is intensely 
competitive, and is characterized by pressure to increase marketing and 
promotional activity, incorporate new features, release new product versions,
and reduce prices.  Existing software companies may broaden or enhance their 
product lines to compete with the Company's products, and other potential new
competitors, including computer hardware manufacturers, diversified media 
companies, and small business service companies, may enter or increase their 
focus on the small business software market, resulting in even greater 
competition for the Company. The Company's software products compete with 
task-specific products sold by Avery (labeling software), Intuit, Inc. 
("Intuit") (invoicing/estimating software), The Learning Company, Inc. ("The 
Learning Company") (business card and labeling software), Broderbund 
Software, Inc. ("Broderbund") (brochure/marketing material software) and 
several other companies of varying size and financial and marketing strength.
The Company's products also compete with general purpose programs, such as 
word processing, database, and desktop publishing products from major 
software companies, including Adobe Systems Incorporated ("Adobe"), Lotus 
Development Corp. ("Lotus"), Microsoft Corp. ("Microsoft"), and Corel 

<PAGE>

Corporation ("Corel").  The Company believes it would face increased 
competition from such general purpose programs if such programs were designed
for greater ease-of-use of task-specific functions.  In addition, new 
operating systems may incorporate features enabling users to accomplish small
business marketing and other tasks currently addressed by the Company's 
software products. 

The Company's strategy of focusing on its core and complementary products 
heightens the competitive risk.  Many of the companies with which the Company
currently competes, or may compete in the future, have greater financial, 
technical, marketing, sales, and customer support resources, as well as 
greater name recognition and access to customers, than the Company.  The 
competition for retail shelf space and direct Internet selling is also likely
to increase due to the proliferation of software products and companies.  
Failure to achieve and maintain unit sales volumes may result in loss of 
shelf space which may, in turn, lead to further reductions in sales volumes.

Only a small percentage of products introduced in the market achieve any 
degree of sustained market acceptance.  Principal competitive factors in the 
marketing of software include product features, quality, reliability, 
technological sophistication, brand recognition, ease-of-learning, ease-of-
use, merchandising, access to distribution channels and retail shelf space, 
marketing, advertising, public relations, price, and the availability and 
quality of support services.  The Company believes that it competes 
effectively in these areas, particularly in the areas of quality, brand 
recognition, ease-of-learning, ease-of-use, merchandising, access to 
distribution channels and retail shelf space.  To the extent that competitors
achieve performance, price, or other selling advantages, the Company could be
adversely affected.  There can be no assurance that the Company will have the
resources required to respond to market or technological changes or to 
compete successfully in the future.  In addition, increasing competition in 
the small business software market may cause prices to fall, which could 
adversely affect the Company.

PROPRIETARY RIGHTS AND LICENSES

The Company relies primarily on a combination of trademark, copyright, and 
trade secret laws, employee and third-party nondisclosure agreements, and 
other methods to protect its proprietary rights.  The Company does not 
include in its products any mechanism to prevent or inhibit unauthorized 
copying.  Unauthorized copying occurs within the software industry, and if a 
significant amount of unauthorized copying of the Company's products were to 
occur, the Company could be adversely affected.  In addition, as the number 
of software products in the industry increases and the functionality of these
products further overlaps, software developers and publishers may 
increasingly become subject to infringement claims.  There can be no 
assurance that third parties will not assert infringement claims against the 
Company in the future with respect to current or future products.  Use of 
third-party coders may increase the risk of infringement of the rights of 
others.  The third-party coders' liabilities to the Company for any 
infringement of copyrights, trade secrets, or patents is contractually 
limited to royalties received from the Company.

Although the Company has not been the target of any actual, pending, or 
threatened intellectual property litigation, there has been substantial 
litigation regarding copyrights, trademark, and other intellectual property 
rights involving other computer software companies.  Any such claims or 
litigation, with or without merit, could be costly and could divert 
management's attention, which could have a material adverse effect on the 
Company.  Adverse determinations in such claims or litigation could also have
a material adverse effect on the Company.

EMPLOYEES

As of December 31, 1997, the Company employed 67 full-time employees and 4 
part-time employees.  Of the Company's full-time employees, 31 are in sales 
and marketing, 18 are in development, 5 are in customer support, 9 are in 
administration and finance, and 4 are in operations.  None of the Company's 
employees is represented by a collective bargaining agreement, nor has the 
Company ever experienced any work stoppage.  The Company believes that it has
good employee relations.

<PAGE>

RISK FACTORS

The following risk factors should be considered carefully in addition to the 
other information contained in this Form 10-KSB.

Emerging Market; Uncertainty of Market Acceptance
The Company's success is dependent on the market acceptance of its new and 
existing products. The majority of the Company's revenues are derived from 
the sale of task-specific software applications for small businesses and
Internet page authors.  The market for such products is relatively 
undeveloped, making it difficult to predict with any assurance the future 
size of the market.  The Company's focus on a small number of core products 
heightens exposure to these market development and product acceptance risks. 
Furthermore, because the success of a majority of the Company's current and 
planned products depends upon continued use by small businesses of 
traditional mailing vehicles in the conduct of their businesses, increased 
use of competing means, such as the Internet and other means of electronic 
communications, could adversely affect the Company. The Company embraces a 
strategy of building brand name recognition primarily through the use of 
consumer marketing techniques.  This strategy is likely to require increased 
sales and marketing expenditures.  There can be no assurance that the Company
will be able to build brand recognition successfully, or that its marketing 
strategy will be successful.  There also can be no assurance that the 
Company's existing products will achieve broad-based market acceptance, that 
sales of such products will continue at historical rates or that the Company 
will introduce new products that achieve significant market acceptance in the 
future.

The Company's success is increasingly dependent upon its ability to secure 
arrangements with OEM partners that distribute the Company's products.  These
relationships allow the Company to generate additional revenues, expand its 
target market for annuity-based products and services, and build awareness 
of the MySoftware brand.  OEM revenues accounted for 8.5% of the Company's 
revenues in 1997.  The market for these relationships is highly competitive, 
and there can be no assurance that the Company will be successful in 
sustaining existing relationships or creating new relationships in the 
future.  Although revenues from international sales of the Company's products
have been insignificant in the past, the Company plans to seek out various 
international partners for the localization, marketing, and distribution of 
the Company's products.  The markets that the Company plans to penetrate are 
highly fragmented and very competitive.  There can be no assurance that the 
Company will be successful in penetrating these international markets.  

Changes in Technology and Industry Standards; Timing and Quality of New 
Product Offerings
The Company believes that its future success will depend in large part upon 
its ability to keep pace with competitive offerings, to adapt to new 
operating systems, hardware platforms, media, and industry standards, and to 
provide additional functionality by enhancing its existing products and 
introducing new products on a timely basis.  The development cycle for 
products utilizing new operating systems or formats may be significantly 
longer than the Company's current development cycle for products on existing 
operating systems and formats.  If the Company were unable to develop such 
products in a timely manner due to resource constraints or technological or 
other reasons, this inability would have a material adverse effect on the 
Company.  Failure to develop and introduce new products and product 
enhancements in a timely fashion could result in significant product returns 
and inventory obsolescence and could have a material adverse effect on the 
Company.  In addition, introduction or anticipation of new or improved 
products by others could also result in lower sales and increased product 
returns.

Dependence on Postal Regulations and Availability of Postal Information 
The Company's line of mailing products, which in the aggregate accounted for 
25.8% of the Company's net revenues from domestic distributors and retailers 
in 1997, have been developed based on current USPS regulations ("Postal 
Service regulations").  Changes in Postal Service regulations, which 
historically have occurred frequently, could necessitate updating these 
products or could eliminate or reduce the usefulness of these products, which

<PAGE>

could adversely affect the Company's operating results.  The Company licenses
from an independent third-party address information and certain software code
embodied in the MyDeluxeMailList, MyMailManager, and Mail Tools products that
perform address corrections, add ZIP+4 Codes and supply delivery point bar 
codes. There can be no assurance that the Company will be able to maintain or
renew its relationship with this third party or that the code and information 
licensed to the Company will be error free or perform to the Company's 
specifications or in accordance with Postal Service regulations.  Significant
changes in Postal Service regulations or the inability to maintain or renew 
its relations with the independent party on acceptable terms or at all could 
have a material adverse effect on the Company.  The Company must also obtain 
Postal Service certification on a bi-monthly basis in order to be able to 
supply MyMailManager, MyDeluxeMailList, MyAdvancedMailList, and Mail Tools 
users with CD-ROM updates in a timely manner.  There can be no assurance that
the Company will be able to continue to secure such certification on a timely
basis, if at all, and the failure to do so could have a material adverse effect
on the Company.  Moreover, increased adoption of facsimile, electronic mail, 
or other alternative communications technologies could result in reduced use 
of the postal system, thereby adversely affecting the market for the Company's 
mailing products.

Fluctuations in Operating Results
The Company has experienced, and may continue to experience, significant 
fluctuations in operating results due to a variety of factors.  These factors
include: the size and rate of growth of the market for task-specific 
applications for small businesses and of the software market generally; 
market acceptance of the Company's products and those of its competitors; the
timing and number of product enhancements and new product introductions by 
the Company and its competitors; the timing and extent of development and 
promotional expenses; product returns; changes in pricing policies by the 
Company and its competitors; accuracy of retailers' forecasts of consumer 
demand; timing of the receipt of orders from major retailer and distributor 
customers; cancellations or terminations by retail or distributor accounts; 
shelf space reductions; and delays in shipment.  Products generally are 
shipped as orders are received, and accordingly, the Company historically 
has operated with little backlog.  As a result, net revenues in any quarter 
are dependent on orders booked and shipped in that quarter.  A significant 
portion of the Company's operating expenses are relatively fixed, and planned
expenditures are based, in part, on expectations with regard to future sales.
As a result, if net revenues do not meet the Company's expectations in any 
given quarter, operating results may be materially adversely affected.  The 
Company's operating results can also be affected substantially by the timing 
of new product introductions, which may result in substantial increases in 
product returns and higher selling and marketing expenses. In response to 
competitive pressure, the Company may also take certain pricing or marketing 
actions that could have a material adverse effect on the Company.  There can 
be no assurance that the Company will achieve consistent profitability on a 
quarterly or annual basis. 

Competition
The market for the Company's products is intensely competitive, and is 
characterized by pressure to increase marketing and promotional activities, 
incorporate new features, release new product versions, and reduce prices.  
Existing software companies may broaden or enhance their product lines to 
compete with the Company's products, and other potential new competitors, 
including computer hardware manufacturers, diversified media companies, and 
small business service companies, may enter or increase their focus on the 
small business software market, resulting in even greater competition for the
Company. The Company's software products compete with task-specific products 
sold by Avery (labeling software), Intuit (invoicing/estimating software), 
The Learning Company (business card and labeling software), Broderbund 
(brochure/marketing material software), and several other companies of 
varying size and financial and marketing strength.  The Company's products 
also compete with general purpose programs, such as word processing, database
and desktop publishing products from major software companies, including 
Adobe, Lotus, Microsoft, and Corel. The Company believes that it would face 
increased competition from such general purpose programs if such programs 
were designed for greater ease-of-use of task-specific functions.  In 
addition, new operating systems or technologies may incorporate features 
enabling users to accomplish small business marketing and other tasks 
currently addressed by the Company's software products. 

<PAGE>

The Company's strategy of focusing on its core and complementary products 
heightens the competitive risk.  Many of the companies with which the Company
currently competes, or may compete in the future, have greater financial, 
technical, marketing, sales and customer support resources, as well as 
greater name recognition and access to customers than the Company.  To the 
extent that competitors achieve performance, price, or other selling 
advantages, the Company could be adversely affected.  There can be no 
assurance that the Company will have the resources required to respond 
effectively to market or technological changes or to compete successfully in 
the future.  In addition, increasing competition in the market for task-
specific applications may cause prices to fall, which may adversely affect 
the Company.  The competition for retail shelf space and direct Internet 
selling is also likely to increase due to the proliferation of software 
products and companies.  Failure to achieve and maintain retail sales volumes
may result in loss of shelf space which may, in turn, lead to further 
reductions in sales volumes. 

Dependence on Limited Distribution and Retail Channels
Sales to a limited number of distributors and retailers have constituted, and
are anticipated to continue to constitute, a significant share of the 
Company's net revenues from software.  There is an increasing number of 
software products competing for access to these channels.  Retailers of the 
Company's products typically have a limited amount of shelf space and 
promotional resources, and there is intense competition for shelf space and 
promotional support from retailers.  Some distributors control access to 
shelf space of certain retailers, and termination of the Company's 
relationship with a particular distributor may prevent the Company from 
obtaining shelf space in some retail outlets.  As a result, retailers and 
distributors increasingly are in a better position to negotiate favorable 
terms of sale, including price discounts and product-return policies.  Since 
task-specific applications for small businesses constitute a relatively small 
percentage of these retailers' sales volumes, there can be no assurance that 
such retailers will continue to purchase the Company's products or provide 
the Company's products with high quality and adequate levels of shelf space 
and promotional support.  The Company has nonexclusive arrangements with its 
distributors and retailers which generally do not require minimum purchases 
of the Company's products and which may be terminated at any time.  In 
addition, other types of retail outlets and methods of product distribution 
may become important in the future, such as the Internet, online services, 
and other electronic distribution services.  The Company's success will 
depend, in part, upon its ability to maintain access to existing channels of 
distribution and gain access to new channels if and when they develop. 

Dependence on the Internet
The success of the Company's future mailing-related products and services may
rely on Internet distribution. The failure of Internet usage to grow could 
have a material adverse effect on the Company.

Customer Concentration; Credit Risk
The Company sells its products principally to a limited number of major 
retailers and to distributors for resale to retailers.  Such sales have 
constituted, and may continue to constitute, a majority of the Company's net 
revenues.  In 1997, one distributor accounted for 61% of net revenues, and 
one retailer accounted for 20% of net revenues.  None of the Company's 
distributors or retailers has a minimum purchase obligation.  The loss of, or
significant reduction in, sales volume attributable to any of the Company's 
principal distributors or retail accounts could materially and adversely 
affect the Company. 

The Company's sales are made on credit terms, and the Company does not hold 
collateral to secure payment.  Although the Company currently maintains 
accounts receivable insurance that covers a portion of its accounts, there 
can be no assurance that the Company will be able to maintain or increase such 
insurance on acceptable terms or at all.  The inability to collect any 
significant receivable in a timely manner could adversely affect the Company.

A majority of the Company's software sales are made through retailers. The 
Company could be adversely affected if an alternative channel for 
distribution of software were to become a major vehicle for distributing 
software.

<PAGE>

Risk of Product Returns
The Company has various stock balancing terms with distributors and retailers
that allow distributors and retailers certain rights to return products.  
There can be no assurance that retailers and distributors will not seek and 
obtain additional return and credit rights.  The Company also provides end 
users with a 30-day money-back guarantee.  It is difficult for the Company to
ascertain current demand for its existing products, predict demand for newly 
introduced products or verify that inventories are appropriate for actual 
demand levels.  Accordingly, the Company is exposed to the risk of product 
returns from retailers and distributors, particularly during times of product
transition. In addition, promotional or other activities of competitors could 
cause returns to increase sharply at any time.  The Company establishes 
reserves based on estimated future returns of products, taking into account 
promotional activities, the timing of new product introductions, distributor 
and retailer inventories of the Company's products, and other factors.  
Product returns that exceed the Company's reserves could adversely affect the
Company's operating results and financial condition.

Dependence on External Coding Contractors
The Company generally develops internally the specifications for both new 
products and updates of its existing products. The Company relies primarily 
on three independent firms to perform the majority of the coding for its 
software products, including coding for new products and bug fixes, 
maintenance and updates for existing products.  While the Company generally 
owns the code that is developed by these firms, the base code used in 
developing the Company's brochures and business cards products is owned by 
the third-party coder, subject to a non-exclusive license to the Company.  
Although the agreement with that firm contains various protective terms, 
there can be no assurance that such provisions will effectively protect the 
Company's interests.  The need to update the Company's products over time, 
both for enhanced functionality and to take advantage of new operating 
platforms, increases the Company's dependence on these third-party coders.  
The Company may have less control over the scheduling and quality of the work
of independent coders than it does over its own employees, and there can be 
no assurance that such coders will complete products for the Company on a 
timely basis, within acceptable guidelines, or at all.  In addition, many 
independent coders have limited financial resources, which exposes the 
Company to the risk that such coders may go out of business prior to 
completing a project or require larger pre-payments from the Company.  
As independent coders are in high demand, there can be no assurance that 
independent coders, including those which have developed products for the 
Company in the past, will be available to provide coding services to the 
Company in the future. The Company has compensated third-party coders
primarily through royalty payments, which have been partially prepaid to 
cover their costs.  Even if the Company is able to secure coding services, 
increased demand for these services may allow third-party coders to negotiate
more advantageous terms.  There can be no assurance that the Company will be 
able to obtain or renew such coding agreements on favorable terms, or at all. 

Capitalized Software Production Costs
The Company makes payments to third party developers for software production 
costs. These payments are capitalized upon the establishment of technological
feasibility, which is defined by the Company as the completion of a detailed 
design specification of the software and are amortized to cost of revenues 
during the period that the related product revenues are recognized. The on-
going assessment of the realizability of these costs requires considerable 
judgment related to anticipated future product revenues, estimated economic 
lives, and changes in hardware and software technology. In the event that the
future product revenues do not meet the anticipated forecasts, the 
unamortized software production costs could adversely affect the Company's 
financial statements.  For example, the Company had a writeoff of $1,296,000
in 1997.

Dependence on Third-Party Service Providers and Supplies
The Company relies on external service providers to perform most of its 
customer technical support and product assembly functions.  One independent 
firm provides substantially all customer technical support for the Company's 
software products.  The Company's agreement with this firm is terminable on 
30 days' notice by either party.  This contractor also provides services to 
several larger companies, and there can be no assurance that demands from 
such companies or other factors will not result in termination by such 

<PAGE>

contractor of its relationship with the Company.  The unavailability of such 
firm to perform customer technical support for the Company would result in 
significant disruption to the Company's operations, could lead to customer 
dissatisfaction and could have a material adverse effect on the Company.  The
Company relies on two printers for packaging and two assembly houses to 
assemble and package its products and has only limited sources for some of 
its supplies.  The Company does not have contracts with such assembly houses 
or suppliers.  All of the Company's inventory of packaging components is 
maintained at third-party facilities.  The Company's ability to assemble and 
package its products is dependent on continued relationships with these third
parties.  The failure of such third-party vendors to continue to provide 
supplies and services to the Company on a timely basis could have a material 
adverse effect on the Company. 

Dependence on Key Personnel
The Company's success depends to a significant extent on the performance and 
continued service of its senior management and certain key employees.  
Competition for highly skilled employees with technical, management, 
marketing, sales, product development, and other specialized skills is 
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel.  In addition, there can be no 
assurance that employees will not leave the Company or, after leaving, 
compete against the Company.  The Company's failure to attract additional 
qualified employees or to retain the services of key personnel could have a 
material adverse effect on the Company. 

Management of Growth
The Company has experienced periods of growth that have placed, and could 
continue to place, a significant strain on the Company's financial, 
management, and other resources.  The Company may attempt to hire additional 
key personnel in high level management positions in the future.  The Company's
ability to manage its growth effectively will require it to continue to 
improve its operations and financial management information systems, and to 
attract, train, motivate, manage, and retain key employees.  If the Company's
management were to become unable to manage growth effectively, the Company 
could be adversely affected. 

Limited Protection of Intellectual Property and Proprietary Rights
The Company relies primarily on a combination of trademarks, copyright and 
trade secret laws, employee and third-party nondisclosure agreements and 
other methods to protect its proprietary rights.  The Company does not 
include in its products any mechanism to prevent or inhibit unauthorized 
copying. Unauthorized copying occurs within the software industry, and if a 
significant amount of unauthorized copying of the Company's products were to 
occur, the Company could be adversely affected.  In addition, as the number 
of software products in the industry increases and the functionality of these
products further overlaps, software developers, and publishers may 
increasingly become subject to infringement claims.  There can be no 
assurance that third parties will not assert infringement claims against the 
Company in the future with respect to current or future products.  Use of 
third-party coders may increase the risk of infringement.  In the event that 
the Company's third party coders were to use infringing code in the Company's
products, the Company could be required to pay damage or be subject to an 
injunction to prevent the Company from shipping its products.  The third-
party coders' liability to the Company for any infringement of copyrights, 
trade secrets, or patents is contractually limited to amounts received from 
the Company.  Although the Company has not been the target of any actual, 
pending, or threatened intellectual property litigation, there has been 
substantial litigation regarding copyright, trademark, and other intellectual
property rights involving computer software companies.  Any such claims or 
litigation, with or without merit, could be costly and a diversion of 
management's attention, which could have a material adverse effect on the 
Company.  Adverse determinations in such claims or litigation could also have
a material adverse effect on the Company.

As part of the Company's general branding strategy, it attempts to limit the 
use of the "My" prefix by others in the software field.  If the Company is 
unsuccessful in these efforts, the value of the Company's brand could be 
materially impacted.

<PAGE>

Possible Volatility of Stock Price
The Company believes factors such as quarterly fluctuations in its revenues 
or results of operations, general conditions in the computer hardware and 
software industries, and announcements of new products by the Company or by 
its competitors may cause the market price of the Common Stock to fluctuate, 
perhaps substantially.  In addition, in recent years the stock market in 
general, and the prices of the stocks of technology companies in particular, 
have experienced large price fluctuations, sometimes without regard to the 
fundamentals of the particular company.  These broad market and industry 
fluctuations may adversely affect the market price of the Company's Common 
Stock.

Anti-Takeover Provisions
The Company's Board of Directors has the authority to issue up to 2,000,000 
shares of Preferred Stock and to determine the price, rights, preferences, 
and privileges of those shares without any further vote or action by the 
stockholders.  The rights of the holders of Common Stock will be subject to 
and may be adversely affected by, the rights of the holders of any Preferred 
Stock that may be issued in the future.  Issuance of shares of Preferred 
Stock could have the effect of making it more difficult for a third party to 
acquire a majority of outstanding voting stock of the Company.  In addition, 
the Company is subject to anti-takeover provisions of Section 203 of the 
Delaware General Corporation Law, which prohibits the Company from engaging 
in a "business combination" with an "interested stockholder" for a period of 
three years after the date of the transaction in which the person became an 
interested stockholder, unless the business combination is approved in a 
prescribed manner.  The application of Section 203 also could have the effect 
of delaying or preventing a change of control of the Company.  Certain other 
provisions of the Company's Certificate of Incorporation may have the effect 
of delaying or preventing changes in control or management of the Company, 
which could adversely affect the market price of the Company's Stock.

<PAGE>


ITEM 2. PROPERTIES

As of December 31, 1997 MySoftware leased approximately 20,000 square feet of
office space in Palo Alto, California, which facility includes its executive 
offices, marketing, sales, product development, and customer support. In 
addition, the Company also leased approximately 3,000 square feet of office 
space in San Francisco for its marketing, product development, and Web 
selling group for its Internet products. The Company entered into an 
agreement to lease its facilities under a certain non-cancelable operating 
lease extending through 2000.


ITEM 3. LEGAL PROCEEDINGS

MySoftware is not a party to any legal proceedings.



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

None.

<PAGE>

                                 PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Since the Company's initial public offering of its Common Stock on June 15, 
1995, the Company's Common Stock has been traded on the Nasdaq National 
Market (Nasdaq") under the symbol "MYSW."  As of December 31, 1997 there were
45 record holders of the Company's Common Stock. As of the same date, 
4,235,856 shares of Common Stock were outstanding out of 20,000,000 shares of
Common Stock authorized.

The following table sets forth the range of high and low sales prices per 
share of Common Stock for each of the periods indicated, as reported by 
Nasdaq.

<TABLE>
<CAPTION>

                                        High        Low
_________________________________________________________
<S>                                    <C>         <C>
1995 by quarter:
Second                                  $14.25      $12.00
Third                                    14.50       10.50
Fourth                                   15.50       10.50
 
1996 by quarter:	
First                                   $13.25      $ 4.63  
Second                                    9.25        5.75
Third                                     6.50        3.50 
Fourth                                    5.25        3.50

1997 by quarter:
First                                   $4.38       $ 2.25
Second                                   3.25         2.06 
Third                                    2.48         1.56
Fourth                                   4.25         1.88

</TABLE>

DIVIDEND POLICY

Prior to its initial public offering, the Company made distributions as a S 
corporation from undistributed earnings to its stockholders, including 
amounts to fund the payments of their individual tax liabilities attributable
to their allocation of the Company's income. Such distributions totaled 
$2,815,000 and $200,000 (less contributions of $200,000) in 1995 and 1994, 
respectively. Upon completion of its initial public offering, the Company 
terminated its S corporation status. Future earnings will be retained for use
in the Company's business, and the Company does not intend to pay any cash 
dividends on its Common Stock for the foreseeable future. 

<PAGE>


ITEM 6. MANAGEMENT'S DISCUSSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
        RESULTS OF OPERATIONS

OVERVIEW
MySoftware designs, markets and supports a family of leading task-specific 
software applications for small businesses, including home-based businesses. 
The Company provides users with powerful, easy-to-learn and easy-to-use 
solutions for business mailers, including tools for mail list management, 
tools for postage cost savings and tools for creating brochures, stationery, 
and postcards. The Company also provides productivity tools for labels, 
invoices/estimates, Internet home pages, Web-based resumes and Web-based 
calendars. The Company's products are fully featured to meet the requirements
of a particular task, yet they are easy to learn and easy to use. MySoftware 
places significant emphasis on consumer marketing techniques in developing 
products and building brand awareness. The Company's products are distributed
primarily through computer software and office supply retailers, and are 
currently sold in approximately 5,000 stores throughout the United States and
Canada.

Fiscal 1997 was a period during which the Company continued to emphasize 
investment in product development and to introduce new products both within 
existing software product categories and in its Internet tools category. 
MySoftware introduced three new products under the ProVenture brand in June 
1997 - Custom Business Stationery, Mail Tools and Billing Solution - and 
introduced MyMailList & Address Book in December 1997. The Company also 
introduced two new Internet-related products under the Pacifica brand: 
Professional WebResume in August 1997 and WebCalendar in November 1997.

Management's Discussion and Analysis of Financial Condition and Results of 
Operations and other parts of this Annual Report contain forward-looking 
statements that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking 
statements. Factors that might cause such a difference include, but are not 
limited to, those discussed elsewhere herein.

NET REVENUES
MySoftware's net revenues decreased 4% to $12.4 million in 1997, compared to 
$12.9 million in 1996. The Company's net revenues decreased 4% in 1996 from 
$13.4 million in 1995. The Company generates revenues primarily through the 
sale of software products to retailers and to distributors for resale to 
retailers. Approximately 5% of software sales are made directly to end-users.
Additional revenues are generated by sales of complementary products, such as
address-correction CD-ROM's, invoice forms and checks, and other supplies and 
related services. The Company also earns revenues from sales of its products 
by strategic partners who typically bundle MySoftware products with their own
to offer their small business customers a premium. Sales of software products
represented 81.3%, 81.6% and 85.2% of net revenues in 1997, 1996 and 1995 
respectively.

The decrease in net revenues in 1997 compared to 1996 was primarily the 
result of softness in the retail market for the Company's products. The 
decrease in net revenues in 1996 compared to 1995 was primarily the result of
uncertainty in the retail channel, which resulted in decreased sales in the 
fourth quarter of 1996.


GROSS PROFITS
The Company's gross profit margins were 53.6% in 1997, compared to 69.3% in 
1996 and 74.7% in 1995. The decline in gross profit margin in 1997 from 1996 
was primarily due to the write-off of software production costs related to 
product development. Software margins declined in 1996 compared to 1995
primarily due to a change in the freight arrangements with certain customers.

<PAGE>

PRODUCT DEVELOPMENT EXPENSES
The Company's product development expenses were $2.2 million in 1997, 
compared to $2.0 million in 1996 and $1.3 million in 1995. As a percent of 
net revenues, product development expenses were 18.0% in 1997, compared to 
15.4% in 1996 and 10.0% in 1995. The increases in both 1997 and 1996 from the
previous years were primarily the result of lower revenues and the increased 
expense of developing new products in both existing and new product 
categories.

Much of the Company's product development costs are coding costs paid to 
outside contractors. These costs have been capitalized and amortized to the 
cost of revenues as the corresponding products are sold.  The Company 
includes the costs of identifying and validating product concepts and 
features in sales and marketing expenses.

SALES AND MARKETING EXPENSES
Sales and marketing expenses were $6.4 million in 1997, compared to $6.3 
million in 1996 and $5.2 million in 1995, representing 51.5%, 48.7% and 39.0%
of net revenues, respectively. Sales and marketing expenses have increased 
over time to support the Company's expansion of products and increase its 
brand name recognition. The increases in these expenses as a percentage of 
net revenues in both 1997 and 1996 from the previous years were primarily 
because of the Company's efforts to introduce new products.

GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $2.2 million in 1997, $1.8 million 
in 1996 and $1.4 million in 1995, representing 17.7%, 14.2% and 10.7% of net 
revenues, respectively. The increases in general and administrative expenses 
in 1997 compared to 1996 and in 1996 compared to 1995 are attributable to 
expenses incurred to support the Company's creation of a division in San 
Francisco to publish Internet-related products. In 1997, the Company incurred
$193,000 of restructuring expenses associated with the closing of the San 
Francisco division.

ACQUIRED TECHNOLOGY
In January of 1996, the Company wrote off acquired technology in the amount 
of $255,000, resulting from the Company's acquisition of technology which had
not reached technological feasibility from MediaTech, Inc., an Internet 
publishing tools company.

INTEREST INCOME
Interest income was $309,000 in 1997, compared to $397,000 in 1996 and 
$277,000 in 1995. The decrease in interest income in 1997 from 1996 was the 
result of lower average cash balances during the year. The increase in 1996 
from 1995 was attributable to the investment of the proceeds of the Company's
initial public offering in June 1995. 

PROVISION FOR INCOME TAXES AND PRO FORMA INCOME TAXES
Based on the results of the current year operations and uncertainty of future
realization of the deferred tax assets, the Company's management does not 
believe that it is likely that the sufficient future taxable income will be 
generated to realize all of the net deferred tax assets.  Accordingly, a full
valuation allowance was established in 1997.

On June 15, 1995, the Company terminated its status as a Subchapter S 
corporation. During the remainder of 1995, the Company was fully subject to 
federal and state income taxes. The pro forma income taxes reflect provisions
for income taxes as if the Company had been a C corporation, fully subject to
federal and state income taxes, during all of 1995 and 1994.

LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of financing have been net cash from 
operations, and in 1995, the proceeds from its initial public offering of 
common stock. Operating activities used cash of $1.3 million in 1997, and 

<PAGE>

generated cash of $1.4 million in 1996 and $1.2 million in 1995. The 
Company's cash and cash equivalents balance was $5.0 million on December 31, 
1997.

RECENT ACCOUNTING PRONOUNCEMENT

In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 97-2, "Software Revenue Recognition."  SOP 97-2
establishes standards relating to the recognition of all aspects of software
revenue.  SOP 97-2 is effective for transactions entered into in fiscal years
beginning after December 15, 1997.  The Company has not yet determined the 
impact of SOP 97-2 on its revenue recognition policy or its results of
operations.

YEAR 2000 ISSUES
The Company has considered the impact of Year 2000 on its computer systems 
and applications and has developed a remediation plan. Conversion and 
testing activities are in process and the Company expects to complete the 
process within a reasonable time. Expenditure in 1997 was not material and 
the expenditures in 1998 and 1999 are also not expected to be material.


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Financial Statements included herein beginning on page 28.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE

None.

<PAGE>

                                PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS
Information with respect to Directors may be found in the section captioned 
"Election of Directors" appearing in the definitive Proxy Statement to be 
delivered to stockholders in connection with the Annual Meeting of 
Stockholders to be held on May 21, 1998. Such information is incorporated 
herein by reference.

EXECUTIVE OFFICERS

The executive officers of the Company as of March 26, 1998 are as follows:

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

Gregory W. Slayton           38     President, Chief Executive Officer and 
                                    Director

Thomas C. Hoster             47     Vice President and Chief Financial Officer
                                    and Secretary


A biography of the principal occupation for the past five years of each of 
the executive officers is provided below.

Gregory W. Slayton joined the Company as President and Chief Executive 
Officer and has served as a member of the Company's Board of Directors since 
December 1997. Mr. Slayton has been a director of Synesis Management 
Consulting since July 1997 and of Digital Oil Technologies since August 1997.
From March 1996 to July 1997, Mr. Slayton was the President, Chief Operating 
Officer, and a member of the Board for ParaGraph International. From December
1995 to March 1996, Mr. Slayton also served as the Interim President and 
Chief Executive Officer of Velocity, Inc. Mr. Slayton co-founded Worlds, Inc.
in August 1994 and served as Senior Vice President and Chief Financial 
Officer from its inception to November 1995. Prior to founding Worlds, Inc., 
Mr. Slayton served as Vice President and Chief Financial Officer at Paramount
Technology Group of Paramount Communications Inc. Prior to that time, Mr. 
Slayton was a management consultant with McKinsey & Company for four years. 
Mr. Slayton holds a Bachelors of Arts in Economics from Dartmouth College 
magna cum laude and a Masters of Business Administration with Honors from 
Harvard Business School.

Thomas C. Hoster has served as Vice President and Chief Financial Officer 
since joining the Company in July 1996 and as its Secretary since May 1997.  
Prior to that time, Mr. Hoster held a number of Finance and Administration 
positions at Octel Communications Corporation, a manufacturer of voice mail 
equipment, including Treasurer, Director of Investor Relations, General 
Manager of Octel Capital, and Director of Customer Administration.  Prior to 
that, Mr. Hoster was Executive Vice President of Mid-America Federal in 
Columbus, Ohio, and Vice President of Chemical Bank in New York.  Mr. Hoster 
has a Bachelors in Electrical Engineering from Princeton University and a 
Masters of Business Administration from Stanford University.  

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

Information with respect to this item will be set forth in the Company's 
Proxy Statement for its Annual Meeting of Stockholders to be held on May 21, 
1998, and is incorporated herein by reference.



ITEM 11. SECURITIES OF OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to this item will be set forth in the Company's 
Proxy Statement for its Annual Meeting of Stockholders to be held on May 21, 
1998, and is incorporated herein by reference.



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to this item will be set forth in the Company's 
Proxy Statement for its Annual Meeting of Stockholders to be held on May 21, 
1998, and is incorporated herein by reference.

<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Documents filed as part of this report

     1.  Financial Statements

         Independent Auditors' Report                         29

         Balance Sheets
         December 31, 1997 and 1996                           30

         Statements of Operations
         Years Ended December 31, 1997, 1996 and 1995         31

         Statements of Stockholders' Equity		
         Years Ended December 31, 1997, 1996 and 1995         32

         Statements of Cash Flows
         Years Ended December 31, 1997, 1996 and 1995         33

         Notes to Financial Statements                        34

	
2.       Exhibits:
       
         See Exhibits Index on page 45. The Exhibits listed in the 
         accompanying Exhibits Index are filed or incorporated by reference 
         as part of this report.

(b)  Reports on Form 8-K:

         No reports on Form 8-K have been filed during the quarter ended 
         December 31, 1997.

<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of 
Palo Alto, California, on the 26th day of March 1998.






                                  MYSOFTWARE COMPANY





                                  BY   /s/  Gregory W. Slayton    
                                        --------------------------
                                        Gregory W. Slayton
                                        President and Chief Executive Officer 




<PAGE>


                                 SIGNATURES
                                 (Continued)

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities indicated on the 26th day of March 1998.


Signature                                          Title                      
--------------------------    -----------------------------------------------
/s/  David P. Mans            Chairman of the Board of Directors
--------------------------
     David P. Mans


/s/  Gregory W. Slayton       President, Chief Executive Officer and Director
--------------------------
     Gregory W. Slayton       (Principal Executive Officer)                    


/s/  Thomas C. Hoster          Vice President and Chief Financial Officer
--------------------------
     Thomas C. Hoster          (Principal Financial and Accounting Officer)
		         

/s/  James F. Willenborg       Director
--------------------------
     James F. Willenborg


/s/  Donald F. Wood            Director
--------------------------
     Donald F. Wood


/s/  John J. Katsaros          Director
--------------------------
     John J. Katsaros

<PAGE>

               

                            FINANCIAL STATEMENTS

As required under Item 7. Financial Statements and Supplementary Data, the 
financial statements of the Company are provided in this separate section. 
The financial statements included in this section are as follows:


                                                              Sequentially
                                                                  Numbered
Financial Statement Description                                       Page
--------------------------------------------------------------------------- 
   Independent Auditors' Report                                        29

   Balance Sheets
   December 31, 1997 and 1996                                          30

   Statements of Operations
   Years Ended December 31, 1997, 1996 and 1995                        31

   Statements of Stockholders' Equity
   Years Ended December 31, 1997, 1996 and 1995                        32


   Statements of Cash Flows
   Years Ended December 31, 1997, 1996 and 1995                        33


   Notes to Financial Statements                                       34


<PAGE>

 
                      INDEPENDENT AUDITOR'S REPORT



The Board of Directors
MySoftware Company:


We have audited the accompanying balance sheets of MySoftware Company as of 
December 31, 1997 and 1996, and the related statements of operations, 
stockholders' equity and cash flows for each of the years in the three-year 
period ended December 31, 1997. These financial statements are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MySoftware Company as of 
December 31, 1997 and 1996, and the results of its operations and its cash 
flows for each of the years in the three-year period ended December 31, 1997,
in conformity with generally accepted accounting principles.


                                         KPMG Peat Marwick LLP


                                         Mountain View, California
                                         February 6, 1998

<PAGE>
<TABLE>


                              MYSOFTWARE COMPANY

                                BALANCE SHEETS

                           DECEMBER 31, 1997 AND 1996
<CAPTION>

                                                    1997          1996
                                                ------------   -----------
<S>                                             <C>            <C>

  Assets
  Current assets:
    Cash and cash equivalents                    $  5,034,828   $  7,718,441 
    Accounts receivable, net                        1,031,286      1,242,226 
    Inventories                                       620,781        596,136 
    Other current assets                            1,019,089        820,588
    Deferred income taxes                               ---          307,733
                                                 ------------   ------------
      Total current assets                          7,705,984     10,685,124

  Property and equipment, net                         278,287        354,482
  Other assets                                        674,131      1,369,593
                                                 ------------   ------------
        Total assets                             $  8,658,402   $ 12,409,199
                                                 ============   ============ 

  Liabilities and Stockholders' Equity 
  Current liabilities:
    Accounts payable                             $    848,045   $    729,467 
    Accrued compensation                              464,379        388,394 
    Other accrued liabilities                       2,654,839      2,550,781
                                                 ------------   ------------  
      Total current liabilities                     3,967,263      3,668,642 
  Deferred income taxes                                ---            25,388

  Stockholders' equity:
    Preferred stock: $0.001 par value; 2,000,000
      shares authorized; none outstanding              ---             ---
    Common stock: $0.001 par value; 20,000,000
      shares authorized; 4,235,856 and 4,233,366
      shares issued and outstanding, respectively       4,236          4,234 
    Additional paid-in capital                      8,568,393      8,561,503 
    Retained earnings (accumulated deficit)        (3,881,490)       149,432
                                                 ------------   ------------ 
      Total stockholders' equity                    4,691,139      8,715,169
                                                 ------------   ------------ 
      Total liabilities and stockholders' equity $  8,658,402   $ 12,409,199
                                                 ============   ============ 
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>

<TABLE>

                                MYSOFTWARE COMPANY

                             STATEMENTS OF OPERATIONS

                    YEARS ENDED DECEMBER 31, 1997, 1996 and 1995

<CAPTION>

                                         1997          1996         1995
                                    ------------- ------------- -------------  
<S>                                <C>           <C>           <C>
Net revenues                        $  12,353,090 $  12,872,575 $  13,398,955 
Cost of revenues                        5,737,570     3,951,241     3,395,783
                                     ------------  ------------  ------------ 
    Gross profit                        6,615,520     8,921,334    10,003,172
                                     ------------  ------------  ------------ 

Operating expenses:
  Product development                   2,221,712     1,988,881     1,342,045 
  Sales and marketing                   6,356,201     6,270,939     5,224,470 
  General and administrative            2,184,769     1,831,183     1,434,058 
  Restructuring charge                    193,000        ---           ---
  Write-off of acquired technology          ---         255,000        ---
                                     ------------  ------------  ------------   
     Total operating expenses          10,955,682    10,346,003     8,000,573 
                                     ------------  ------------  ------------
     Operating income (loss)           (4,340,162)   (1,424,669)    2,002,599
 
Interest income, net                      309,240       397,586       276,726 
                                     ------------  ------------  ------------
    Income (loss) before taxes         (4,030,922)   (1,027,083)    2,279,325 

Income tax expense (benefit)                ---         (72,000)      304,158
                                     ------------  ------------  ------------ 
    Net income (loss)               $  (4,030,922) $   (955,083) $  1,975,167
                                    =============  ============  ============ 
    Net loss per share-basic
     and diluted                    $       (0.95) $      (0.23)
                                    =============  ============
    Shares used in computing net 
     loss per share-basic 
     and diluted                        4,233,366     4,233,486
                                    =============  ============

Pro forma net income data (unaudited):
  Income before taxes as reported                                $  2,279,325  
  Pro forma income taxes                                              809,160
                                                                 ------------
    Pro forma net income                                         $  1,470,165 
                                                                 ============ 
  Pro forma net income per share-basic                           $       0.39
                                                                 ============ 
  Pro forma net income per share-diluted                         $       0.37
                                                                 ============ 
  Shares used in computing pro forma net income
     per share-basic                                                3,711,307
                                                                 ============
  Shares used in computing pro forma net income
     per share-diluted                                              3,937,948
                                                                 ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>

<TABLE>
 

                              MYSOFTWARE COMPANY

                        STATEMENTS OF STOCKHOLDERS' EQUITY

                   YEARS ENDED DECEMBER 31, 1997, 1996 and 1995

<CAPTION>
                                                    Retained
                                       Additional   Earnings        Total
                         Common Stock    Paid-in  (Accumulated) Stockholders'
                        Shares   Amount  Capital    Deficit)       Equity
                      -------------------------------------------------------
<S>                   <C>       <C>     <C>         <C>          <C>  
Balances as of 
 December 31, 1994     3,218,530 $ 3,219 $   250,110 $   730,171  $   983,500 

Stockholder distributions ---       ---   (1,214,560) (1,600,823)  (2,815,383)
Initial public offering, 
 net of issuance costs 1,000,000   1,000   9,439,375       ---      9,440,375 

Exercise of stock 
 options                  12,836      13      22,541       ---         22,554 

Tax benefit from 
 exercise of options      ---       ---       64,037       ---         64,037 
Net income                ---       ---        ---     1,975,167    1,975,167
                      ---------- -------  ----------  ----------  ----------- 
Balances as of 
 December 31, 1995     4,231,366   4,232   8,561,503   1,104,515    9,670,250 

Exercise of stock 
 options                   2,000       2       ---         ---              2 
Net loss                     ---     ---       ---      (955,083)    (955,083)
                      ---------- -------  ----------  ----------  ----------- 
Balances as of 
 December 31, 1996     4,233,366   4,234   8,561,503     149,432    8,715,169

Exercise of stock 
 options                   2,500       2       6,890       ---          6,892
Net loss                     ---     ---         ---  (4,030,922)  (4,030,922)
                      ---------- -------  ----------  ----------  -----------
Balances as of 
 December 31, 1997     4,235,866 $ 4,236 $ 8,568,393 $(3,881,490) $ 4,691,139 
                      ========== =======  ==========  ==========  ===========

<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>

<TABLE>


                              MYSOFTWARE COMPANY

                            STATEMENTS OF CASH FLOWS

                   YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
<CAPTION>

Cash flows from operating activities:        1997        1996        1995
                                        ------------- ----------- -----------
<S>                                    <C>           <C>         <C>
Net income (loss)                       $ (4,030,922) $ (955,083) $ 1,975,167 
Adjustments to reconcile net income 
 (loss) to net cash provided by 
 operating activities:
 Depreciation and amortization             2,117,859     658,478      292,845 
 Provisions for returns and doubtful 
  accounts                                   (57,002)  1,594,777    1,235,000 
 Deferred income taxes                       282,345     149,460     (431,805)
 Changes in operating assets and liabilities:
  Accounts receivable                         35,023     595,256   (2,489,294)
  Inventories                                (24,645)   (147,623)    (168,232)
  Other assets                              (199,001)   (667,438)    (139,833)
  Accounts payable                           118,578     (47,924)     295,530 
  Deferred officers' compensation               ---      (52,922)     (56,778)
  Deferred income taxes                      (25,388)       ---          ---
  Accrued compensation                        75,985      46,323       78,978 
  Other accrued liabilities                  362,364     238,766      593,208
                                          ----------   ---------   ---------- 
    Net cash provided by (used for) 
     operating activities                 (1,344,804)  1,412,070    1,184,786
                                          ----------   ---------   ---------- 

Cash flows from investing activities:
Additions to property and equipment          (55,520)   (234,838)    (219,912)
Software production costs and other assets(1,290,180) (1,253,117)    (742,419)
                                          ----------   ---------   ----------
    Net cash used for investing activities(1,345,700) (1,487,955)    (962,331)
                                          ----------   ---------   ----------

Cash flows from financing activities:
Proceeds from exercise of stock options        6,892           2       22,554 
Stockholder distributions                       ---        ---     (2,815,383)
Proceeds from IPO, net of issuance costs        ---        ---      9,440,375
                                          ----------   ---------   ---------- 
    Net cash provided by financing 
     activities                                6,892           2    6,647,546 
                                          ----------   ---------   ----------
Net increase (decrease) in cash and cash 
 equivalents                              (2,683,612)    (75,883)   6,870,001 

Cash and cash equivalents at beginning 
 of year                                   7,718,441   7,794,324      924,323 
                                          ----------   ---------   ----------

Cash and cash equivalents at end of year $ 5,034,829 $ 7,718,441  $ 7,794,324 
                                         =========== ===========  ===========   

<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>


                            MYSOFTWARE COMPANY

                       NOTES TO FINANCIAL STATEMENTS

               YEARS ENDED DECEMBER 31, 1997, 1996 and 1995


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business 

MySoftware Company (the Company) develops, manufactures and markets small 
business application programs. The Company sells its products primarily 
through distributors and retail dealers.

Principles of Presentation and Preparation

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

Revenue Recognition

Revenue from product sales is recognized upon shipment. The Company provides 
reserves for estimated returns of products sold to distributors and retail 
dealers, and accrues for the estimated costs of providing customer support.

Cash and Cash Equivalents

The Company considers all liquid instruments with an original maturity of 90
days or less to be cash equivalents. Cash equivalents are stated at cost and 
consist primarily of money market securities. The carrying amount of cash and
cash equivalents approximates fair value.

Inventories

Inventories, comprising finished goods and packaging materials, are stated at
the lower of first-in, first-out cost or market.

Property and Equipment

Property and equipment, comprised primarily of computer equipment and 
furniture, are recorded at cost. Depreciation is provided using the straight-
line method over the estimated useful lives of the respective assets, which 
are generally three to five years.

The Company reviews the recoverability of the carrying amount of its property
and equipment assets whenever events or changes in circumstances indicate 
that the carrying amount of an asset might not be recoverable. In the event 
that facts and circumstances indicate that the carrying amount of assets may 
be impaired, an evaluation of recoverability would be performed. If an 
evaluation is required, the estimated future undiscounted cash flows 
associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to fair value is required. Fair value is 
determined by reference to discounted future cash flows over the remaining 
useful life of the related asset.

<PAGE>

                          MYSOFTWARE COMPANY

               NOTES TO FINANCIAL STATEMENTS, CONTINUED


Software Development Costs

In accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
Accounting for the Cost of Capitalized Software to be Sold, Leased, or 
Otherwise Marketed, the Company capitalizes its internal software development
costs after technological feasibility has been established. Such amounts to 
date have not been significant.

The Company makes payments to third party developers for software production 
costs. These payments are capitalized upon the establishment of technological
feasibility, which is defined by the Company as the completion of a detailed 
design specification of the software and are amortized to cost of revenues 
during the period that the related product revenues are recognized. The 
ongoing assessment of the realizability of the costs requires considerable 
judgment related to anticipated future product revenues, estimated economic 
life, and changes in hardware and software technology. The capitalized 
amounts paid to third party developers for the years ended December 31, 1997,
1996 and 1995 aggregated $1,179,660, $1,197,217 and $742,419, respectively. 
Accumulated amortization aggregated $861,303 as of December 31, 1997.

Amortization of these software production costs is provided on a product-by-
product basis. Annual amortization is the greater of the amount computed 
using the ratio of current product revenue to the total of current and 
anticipated future product revenue or the straight-line method over the 
remaining estimated economic lives of two years. Amortization expenses for 
the years ended December 31, 1997, 1996 and 1995, aggregated $1,986,143, 
$538,390 and $241,492, of which a writeoff of $1,296,000 software production 
cost was included in 1997's expense. The writeoff was related to certain 
products that are not strategic to the Company's future strategy.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company maintains cash and cash equivalents with one financial 
institution. Management believes the financial risks associated with such 
deposits are minimal. Substantially all of the Company's accounts receivable 
are derived from sales to computer software distributors and retailers. 
Historically, the Company has not incurred material credit-related losses.

Income Taxes

Income taxes are provided under the asset and liability method, whereby 
deferred tax assets and liabilities are recognized for the future tax 
consequences attributable to differences between the financial statement 
carrying amounts of existing assets and liabilities and their respective tax 
bases. Deferred tax assets and liabilities are measured using enacted tax 
rates expected to apply to taxable income in the years in which those 
temporary differences are expected to be recovered or settled. The effect on 
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

Valuation allowances are established when necessary to reduce deferred tax 
assets to the amounts expected to be realized. 

The Company elected to be treated as an S corporation for federal and state 
income tax reporting purposes through June 15, 1995. Federal and state income
taxes on the income of an S corporation are generally payable by the

<PAGE>
 
                             MYSOFTWARE COMPANY

                   NOTES TO FINANCIAL STATEMENTS, CONTINUED


individual stockholders rather than the corporation. Accordingly, only the 
California S corporation franchise tax has been provided through the 
termination of the S corporation status in June 1995.

The Company's S corporation status terminated upon the closing of the initial
public offering (IPO) of its common stock. The accompanying statement of 
operations for the year ended December 31, 1995 include provisions for income
taxes on an unaudited pro forma basis as if the Company were a C corporation,
fully subject to federal and state income taxes.

Net Income (Loss) Per Share and Pro Forma Net Income Per Share

During 1997, the Company adopted Statement of Financial Accounting Standards 
(SFAS) No. 128, Earnings Per Share. SFAS No. 128 requires the presentation of
basic earnings per share (EPS) and, for companies with potentially dilutive 
securities, such as options, diluted EPS.

Basic earnings per share is computed using the weighted average number of 
shares of common stock and convertible preferred stock outstanding. Diluted 
earnings per share is computed using the weighted average number of shares of
common stock outstanding and when dilutive, common equivalent shares from 
options to purchase common stock using the treasury stock method. In 1995, 
dilutive common equivalent shares amounted to 166,641 shares, of which 86,641
shares related to options outstanding and 80,000 shares related to shares
deemed outstanding to fund final S corporation stockholder distribution. 

Effective February 3, 1998, the Securities and Exchange Commission (SEC) 
issued Staff Accounting Bulletin (SAB) No. 98, which changes the calculation 
of earnings per share in the period prior to initial public offerings as 
previously applied under SAB No. 83. When a registrant issued common stock, 
warrants, options, or other potentially dilutive instruments for 
consideration or with exercise prices below the initial public offering 
price, within a one year period prior to the initial filing of a registration
statement relating to an initial public offering, SAB No. 83 required such 
equity instruments to be treated as outstanding for all prior periods using 
the anticipated initial public offering price and the treasury stock method. 
Under SAB No. 98, when common stock, options, warrants, or other potentially 
dilutive instruments have been issued for nominal consideration during the 
periods covered by income statements in the filing, those nominal issuances 
are to be reflected in earnings per share calculations for all periods 
presented. Based on the Company's current understanding of the definition of 
"nominal consideration," the Company has concluded that during all periods 
prior to the Company's initial public offering, no equity instruments were 
issued for nominal consideration. Net income per share for periods prior to 
the Company's initial public offering have also been restated in accordance 
with SAB No. 98.

Stock-Based Compensation

The Company accounts for its stock option plans using the intrinsic value 
method.

Fair Value of Financial Instruments

The fair value of the Company's cash, receivables, and accounts payable 
approximate the carrying amount due to the relatively short maturity of these
items.

<PAGE>

                          MYSOFTWARE COMPANY

                NOTES TO FINANCIAL STATEMENTS, CONTINUED


Recent Accounting Pronouncements
 
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for 
the manner in which public companies report information about operating 
segments in annual and interim financial statements. The Company is currently
evaluating the operating segment information that it will be required to 
report. The Company will be required to implement SFAS No. 131 for its fiscal
year 1998.

In October 1997, the American Institute of Certified Public Accountants 
issued Statement of Position ("SOP") 97-2, "Software Revenue Recognition." 
SOP 97-2 establishes standards relating to the recognition of all aspects of 
software revenue. SOP 97-2 is effective for transactions entered into in 
fiscal years beginning after December 15, 1997. The Company has not yet 
determined the impact of SOP 97-2 on its revenue recognition policy or its 
results of operations.

Reclassifications

Certain amounts in the 1995 financial statements have been reclassified to 
conform with the 1996 and 1997 financial statement presentation.

2.  BALANCE SHEET COMPONENTS

     Accounts Receivable

     A summary of accounts receivable follows:  
<TABLE>
<CAPTION>
                                                      December 31,
                                             ------------------------------
                                                 1997             1996
                                             -------------    -------------
       <S>                                   <C>              <C>
        Accounts receivable                   $  2,310,338     $  2,345,361
        Allowance for returns and 
         doubtful accounts                      (1,279,052)      (1,103,135)
                                             -------------    -------------
                                              $  1,031,286     $  1,242,226
                                             =============    =============
</TABLE>

     Other Current Assets

     Other current assets consisted 
      of the following:
<TABLE>
<CAPTION>
                                                       December 31,
                                            --------------------------------
                                                  1997              1996
                                             --------------    -------------
       <S>                                   <C>               <C>
        Prepaid income taxes                  $     958,151     $    693,722
        Other                                        60,938          126,866
                                             --------------    -------------
                                              $   1,019,089     $    820,588
                                             ==============    =============
</TABLE>
<PAGE>

                              MYSOFTWARE COMPANY

                   NOTES TO FINANCIAL STATEMENTS, CONTINUED


     Other Assets

     Other assets consisted of the following:
<TABLE>
<CAPTION>
                                                         December 31,
                                                 ---------------------------
                                                      1997           1996
                                                 -------------  ------------
        <S>                                      <C>            <C>
         Software production costs paid to 
          third party contractors, net of 
          accumulated amortization                $   642,047   $  1,307,118 
         Deposits                                      32,084         31,584
         Software development costs                     ---           30,891
                                                 -------------  ------------
                                                  $   674,131    $ 1,369,593
                                                 =============  ============
</TABLE>

     Other Accrued Liabilities

     A summary of other accrued liabilities 
      follows:
<TABLE>
<CAPTION>
                                                          December 31,
                                                 ----------------------------
                                                     1997            1996
                                                 -------------   ------------
         <S>                                     <C>             <C>    
          Customer prepayments                    $    853,196    $ 1,086,115
          Accrued advertising                          250,444        430,392
          Accrued technical support                    151,000        127,000
          Deferred revenue                             516,510        375,114
          Other                                        883,689        532,160
                                                 -------------    -----------
                                                  $  2,654,839    $ 2,550,781
                                                 =============    ===========
	</TABLE>

3.  STOCKHOLDERS' EQUITY

Stockholder Distributions

As an S corporation, the Company made distributions to its stockholders to 
provide them with funds to pay income taxes on corporate earnings. Prior to 
the completion of the IPO in June 1995, the Company declared a distribution 
payable to the current stockholders of the Company for amount representing a 
portion of the previous earned and undistributed S corporation earnings. The 
distribution was paid by the Company following the IPO after the amount of 
such taxes was determined.


Stock Options

In September 1994, the Company granted five key employees an aggregate of 
235,000 common stock options at $1.50 per share, the fair market value of the
Company's common stock on the date of grant. These options vested ratably 
over three years and expire 10 years from the grant date.

The Company adopted the 1995 Equity Incentive Plan (the Plan) in April 1995, 
and reserved 1,000,000 shares thereunder. The Plan provides for the grant of 
incentive stock options to employees of the Company and for the grant of
nonstatutory stock options to employees and consultants of the Company. 

<PAGE>

                           MYSOFTWARE COMPANY

                 NOTES TO FINANCIAL STATEMENTS, CONTINUED


The Board of Directors administers the Plan and has the discretion to grant 
stock options. Exercise prices may not be less than 100% and 85% of the fair 
market value at the date of grant for incentive options and nonstatutory 
options, respectively. Options granted under the Plan generally vest over 
five years and expire after 10 years. 

The Company adopted the 1995 Nonemployee Directors' Plan in April 1995 and 
reserved 200,000 shares thereunder. The Nonemployee Directors' Plan provides 
for the automatic grant of nonstatutory stock options to nonemployee 
directors of the Company at the fair market value of the common stock on the 
date of grant. The term of all options granted under the Nonemployee 
Directors' Plan may not exceed 10 years or the end of the director's status 
as director. In 1997, the Company granted 25,000 options under the 
Nonemployee Directors' Plan. 

On September 12, 1996, the Company offered its employees a stock option 
repricing program that allowed employees to exchange on a one for one share 
basis any options priced above the September 17, 1996 closing price of 
MySoftware stock, which was $4.00. As a result, approximately 189,000 options
were surrendered by eligible employees for repriced options. The vesting term
for all these repriced options was extended by six months.

The following table summarizes all stock option activities for the 1995 
Equity Incentive Plan, the 1995 Nonemployee Directors' Plan and 1994 stock 
option grants:

<TABLE>
<CAPTION>
                                                   
                                                              Weighted
                                                          average exercise
                                         Stock options     price per share
                                       ----------------  -------------------
<S>                                      <C>                <C>
Outstanding as of December 31, 1994           235,000        $     1.50

Granted                                       188,500              8.96
Expired or canceled                            (9,826)             7.73
Exercised                                     (12,836)             1.76
                                          ------------- 
Outstanding as of December 31, 1995           400,838              4.85

Granted                                       380,450              4.68
Expired or canceled                          (220,531)             7.96
Exercised                                      (2,000)             4.00
                                          -------------
Outstanding as of December 31, 1996           558,757              3.51

Granted                                       584,000              2.48
Expired or canceled                          (103,557)             3.73
Exercised                                      (2,500)             1.50
                                          -------------
Outstanding as of December 31, 1997         1,036,700              2.91
                                          =============

Available for grant at:
     December 31, 1997                        380,964
                                          =============
</TABLE>
<PAGE>


                             MYSOFTWARE COMPANY

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED

The following table summarizes information about stock options outstanding as
of December 31, 1997:

<TABLE>
<CAPTION>
                          
                   Options Outstanding                 Options Exercisable
          -----------------------------------------  ------------------------
 Range of             Weighted-Avg.     Weighted-                Weighted-Avg.
 Exercise   Number      Remaining        Average          Number    Exercise
  Prices  Outstanding Contractual Life Exercise Price   Exercisable   Price
--------- ----------- ---------------- --------------   ----------  ---------
<S>         <C>          <C>             <C>             <C>        <C>
$   1.50       210,510    7.50 years      $  1.50         210,510    $   1.50
 1.80 - 2.75   549,969    9.70               2.48          43,748        2.65  
 4.00 - 6.00   256,221    8.67               4.27          82,692        4.25
   12.25        20,000    7.83              12.25          10,833       12.25
             ---------                                    ------- 
$ 1.50-12.25 1,036,700    8.96            $  2.91         347,783    $   2.63

</TABLE>      

	
The Company applies the intrinsic value method in accounting for its stock 
option plans and, accordingly, has not recognized compensation cost. If the 
Company had elected to recognize compensation cost based on the fair value 
of the option granted at grant date as prescribed by SFAS No. 123, net income
(loss) and earnings per share would have been changed to the pro forma 
amounts indicated in the table below (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                              1997         1996       1995
                                           ----------   ----------  ---------
<S>                                        <C>          <C>         <C>  
Net income (loss):
    As reported (pro forma for 1995)        $ (4,031)    $   (955)   $ 1,470
     Pro forma                                (4,514)      (1,277)     1,277

Net income (loss) per share-diluted:
    As reported (pro forma for 1995)        $  (0.95)    $  (0.23)   $  0.37
     Pro forma                                 (1.07)       (0.30)      0.32

</TABLE>

The effects of applying SFAS No. 123 for disclosing compensation cost may not
be representative of the effects on reported net income (loss) for future 
years because pro forma net income (loss) reflects compensation costs only 
for stock options granted in 1997, 1996 and 1995 and does not consider 
compensation cost for stock options granted prior to January 1, 1995.

The fair value of each option grant is estimated on the date of grant using 
the Black-Scholes option pricing model with the following assumptions:

          Expected dividend yield                       -
          Expected stock price volatility             50.00%
          Risk-free interest rate                  5.49 - 6.22%
          Expected life of options                   5 years

The weighted-average fair value of options granted during 1997, 1996 and 1995
is $1.25, $2.44 and $4.54 per share, respectively.

<PAGE>

                          MYSOFTWARE COMPANY

                NOTES TO FINANCIAL STATEMENTS, CONTINUED

4.  INCOME TAXES 

The components of income tax expense (benefit), as presented in the 
accompanying statements of operations, comprise federal taxes and state 
taxes. The pro forma provision for income taxes reflects the income tax 
expense that would have been reported if the Company had been a C corporation 
for all of 1995. The components of income taxes for the years ended December 
31, 1997, 1996 and 1995, and the unaudited pro forma income taxes for the 
year ended December 31, 1995 are as follows:

<TABLE>
<CAPTION>

                                           1997         1996         1995
                                       ------------ ------------ ------------
<S>                                    <C>          <C>          <C> 
Income taxes:
  Current:
     Federal                            $ (282,345)  $ (221,459)  $   518,037
     State                                   ---          ---         153,889
                                       ------------ ------------ ------------
       Total current                      (282,345)    (221,459)      671,926
                                       ------------ ------------ ------------
  Deferred:
     Federal                               282,345       43,482      (325,828)
     State                                   ---        105,977      (105,977)
                                       ------------ ------------ ------------
       Total deferred                      282,345      149,459      (431,805)
                                       ------------ ------------ ------------
       Charge in lieu of income taxes 
       for tax benefit from exercise 
       of stock options                      ---           ---         64,037
                                       ------------ ------------ ------------
       Total income tax expense 
       (benefit)                         $   ---      $ (72,000)   $  304,158
                                       ============ ============ ============
</TABLE>
	
<TABLE>
<CAPTION>
                                                                     1995
                                                                  -----------
<S>                                                              <C>
Unaudited pro forma income taxes:
  Current:
     Federal                                                      $   725,987
     State                                                            166,705
                                                                  -----------
        Total current                                                 892,692
                                                                  -----------
  Deferred:
     Federal                                                         (117,699)
     State                                                            (29,870)
                                                                  -----------
        Total deferred                                               (147,569)
                                                                  -----------
        Charge in lieu of income taxes for tax 
        benefit from exercise of stock options                         64,037
                                                                  -----------
        Total pro forma income taxes                              $   809,160
                                                                  ===========
</TABLE>

The following tables reconcile the expected corporate federal income tax 
expense (benefit) computed by multiplying the Company's income (loss) before 
income taxes by 34% to the Company's income tax expense (benefit) for the 
years ended December 31, 1997, 1996 and 1995 and the unaudited pro forma 
income tax expense for the year ended December 31, 1995:

<PAGE>


                           MYSOFTWARE COMPANY

                NOTES TO FINANCIAL STATEMENTS, CONTINUED

<TABLE>
<CAPTION>

                                            1997         1996        1995
                                        ------------- ----------- -----------
<S>                                    <C>           <C>         <C>
Expected income tax expense (benefit)  	$ (1,307,241) $ (349,208) $  774,971
State income taxes, net of federal 
  tax effect                                     528      70,473      31,622
Utilization of losses                        282,345     281,600         -  
S corporation benefit                            -          -       (182,896)
Establishment of net deferred tax assets      
  in connection with the termination 
  of S corporation status                        -          -       (325,827)
Research and development tax credits             -       (83,711)        -  
Unutilized losses                          1,029,478        -            -
Other                                         57,890       8,846       6,288
                                        ------------- ----------- -----------
Actual income tax expense (benefit)              -    $  (72,000) $  304,158
                                        ============= =========== ===========

Expected pro forma income tax expense                             $  774,971
State income taxes, net of federal tax 
  effect                                                              90,311
Research and development tax credits                                 (62,717)
Other, net                                                             6,595
                                                                  -----------
Pro forma income taxes                                            $  809,160
                                                                  ===========
</TABLE>

The tax effects of temporary differences that give rise to significant 
portion of the net deferred tax assets as of December 31, 1997, 1996 and 1995
are as follows:

<TABLE>
<CAPTION>

                                              1997         1996       1995
                                           ----------- ----------- ----------
<S>                                       <C>          <C>         <C>
Deferred tax assets:
Accruals and reserves                      $ 1,340,235  $  768,770  $ 448,921
Net operating loss carryforwards               489,843       6,314       -
Tax credit carryforwards                       468,533     107,781       -
                                           ----------- ----------- ----------
Total gross deferred tax assets	             2,298,611     882,865    448,921
Less valuation allowance                     2,298,611     575,132       -
                                           ----------- ----------- ----------
Deferred tax assets net of valuation 
  allowance                                      -         307,733    448,921
Deferred tax liabilities:
Fixed assets                                     -          25,388     17,116
                                           ----------- ----------- ----------
Net deferred tax assets                    $     -      $  282,345  $ 431,805
                                           =========== =========== ========== 
</TABLE>

A valuation allowance of $2,298,611 was established in 1997 against deferred 
tax assets. Based on the results of the current year operations and 
uncertainty of future realization of the deferred tax assets, the Company's 
management does not believe that it is likely that the sufficient future 
taxable income will be generated to realize all of the net deferred tax 
assets.

As of December 31, 1997, the Company has federal and California net operating
loss carryforwards of approximately $1,139,000 and $1,756,000, respectively, 
which expire in 2012 and 2002, respectively. The Company also has federal and
California research and development tax credit carryforwards of approximately
$271,000 and $152,000, respectively. The federal credits expire between 2010 
and 2012. The Company also has federal minimum tax credit carryforwards of 
approximately $46,000.

<PAGE>

                           MYSOFTWARE COMPANY

                 NOTES TO FINANCIAL STATEMENTS, CONTINUED


5.  MAJOR CUSTOMERS


The following tables summarizes sales to customers when sales to such 
customers exceeded 10% of revenues as well as the amounts due from these 
customers as a percentage of total gross accounts receivable.

<TABLE>
<CAPTION>
	 
                                            Years ended December 31,
                                     ---------------------------------------	
Percentage of net revenues                1997         1996         1995 
----------------------------------------------------------------------------
<S>                                       <C>          <C>          <C>
Customer A                                 37%          34%          28%
Customer B                                 20%          29%          23%

</TABLE>

<TABLE>
<CAPTION>
	
                                                          December 31,
                                                    ------------------------  	
Percentage of total accounts receivable as of         1997         1996
----------------------------------------------------------------------------
<S>                                                   <C>          <C>
Customer A                                             61%          28%
Customer B                                             17%          43%

</TABLE>


6.  COMMITMENTS 

Leases

The Company entered into agreements to lease its facilities under certain 
noncancelable operating leases extending through 2000. Future minimum lease 
commitments under these leases are as follows: 

<TABLE>
<CAPTION>


           Years ending December 31,
         ----------------------------
                   <S>                    <C>
                    1998                   $    501,023
                    1999                        513,824
                    2000                        164,657
                                            -----------                    
                                           $  1,179,504
                                            ===========

</TABLE>

Rent expense for the years ended December 31, 1997, 1996 and 1995 was 
approximately $419,815, $263,000 and $223,000, respectively.

Royalties 

Royalties are accrued based on net sales pursuant to agreements with external
software developers of software products published by the Company. Royalty 
costs, generally 2% of related revenues subject to certain maximum payment 
amounts, are included in cost of revenues.

<PAGE>

                           MYSOFTWARE COMPANY

                 NOTES TO FINANICAL STATEMENTS, CONTINUED


Profit Sharing Plan

The Company's contributions to its employee profit sharing plan are made at 
the Company's discretion. Contributions amounted to $-0-, $33,000 and 
$164,000 for the years ended December 31, 1997, 1996 and 1995, respectively.

<PAGE>


                              EXHIBITS INDEX

                                                                               
Exhibit                                         Incorporated by Reference
Number	     Exhibit Description               Form        Date       Number
--------  --------------------------------  ---------  ---------   ----------
 3.1      Certificate of Incorporation         S-1       6/20/95       3.3
      
 3.2      Bylaws                               S-1       6/20/95       3.4     

10.1      Form of Indemnity Agreement for 
          officers and directors               S-1       6/20/95      10.1

10.2      Form of Indemnity Agreement for 
          officers and directors               S-1       6/20/95      10.2

10.3      1995 Equity Incentive Plan 
          (the "1995 Plan")                    S-1       6/20/95      10.3

10.4      Form of Incentive Stock Option 
          under the 1995 Plan                  S-1       6/20/95      10.4

10.5      Form of Nonstatutory Stock Option 
          under the 1995 Plan                  S-1       6/20/95      10.5

10.6      1995 Non-Employee Directors' Stock 
          Option Plan (the "Directors' Plan")  S-1       6/20/95      10.6

10.7      Form of Stock Option under the 
          Directors' Plan                      S-1       6/20/95      10.7

10.8      Lease Agreement by and between 
          MySoftware and 2197 E. Bayshore Road 
          Partnership dated February 25, 1993, 
          as amended                           S-1       6/20/95      10.8

10.9      Software Development Agreement by 
          and between MySoftware and Micro-
          Burst, Inc. dated October 11, 1993 
          ("the October 11, 1993 Agreement")   S-1       6/20/95      10.9

10.10     Software Development Agreement by 
          and between MySoftware and Micro-
          Crafts, Inc. dated September 13, 
          1993 ("the September 13, 1991 
          Agreement")                          S-1       6/20/95     10.10

10.11     Amendment to the September 13, 1991 
          Agreement between MySoftware and 
          MicroCrafts, Inc., dated October 10, 
          1994                                 S-1       6/20/95     10.11

<PAGE>


                                EXHIBITS INDEX
                                 (CONTINUED)

Exhibit                                        Incorporated by Reference
Number	     Exhibit Description               Form         Date     Number
-------- ---------------------------------- ----------  --------- ----------
10.12    Software Development Agreement by 
         and between MySoftware and Micro-
         Crafts, Inc. dated October 18, 1992 
         ("the October 18, 1992 Agreement")    S-1       6/20/95    10.12

10.13    Amendment to the October 18, 1992 
         Agreement between MySoftware and 
         MicroCrafts, Inc., dated October 10, 
         1994                                  S-1       6/20/95    10.13      

10.14    Software Development Agreement by 
         and between MySoftware and Micro-
         Crafts, Inc. dated December 10, 1993) S-1       6/20/95    10.14

10.15    Software Purchase Agreement and 
         Assignment of Copyright dated January 
         15, 1996 by and between MySoftware 
         and Mediatech, Inc.                  10-K      12/31/95     44

10.16    Amendment to Lease Agreement dated 
         June 30, 1995                        10-K      12/31/95     54

10.17    Lease Agreement by and between 
         MySoftware and Birmingham Properties, 
         Inc. dated October 8, 1996           10-KSB    12/31/96     46

10.18    Third Amendment to Lease Agreement 
         by and between MySoftware and Holvick 
         Family Trust, dated January 31, 1997 10-KSB    12/31/96     77

23.1     Consent of KPMG Peat Marwick LLP      N/A        N/A       N/A

27.1     Financial Data Schedule               N/A        N/A       N/A

<PAGE>


                             EXHIBIT 23.1

                     CONSENT OF INDEPENDENT AUDITOR




The Board of Directors
MySoftware Company

We consent to incorporation by reference in the registration statement (No. 
33-91898) on Form S-8 of MySoftware Company of our report dated February 6, 
1998, relating to the balance sheets of MySoftware Company as of December 31,
1997, and 1996, and the related statements of operations, stockholders' 
equity, and cash flows for each of the years in the three-year period ended 
December 31, 1997, which report appears in the December 31, 1997 annual 
report on Form 10-KSB of MySoftware Company.




KPMG Peat Marwick LLP

Mountain View, California
March 26, 1998

<PAGE>