SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                 FORM 10-K

   [X] Annual Report Pursuant to Section 13 or 15 (d) of the Securities
                           Exchange Act of 1934

                For the fiscal year ended December 31, 1998

                                    or

       [ ] Transition Report Pursuant to Section 13 or 15(d) of the
                      Securities Exchange Act of 1934

            For the transition period from _______ to ________

                      Commission File Number 0-25646


                           EXPERT SOFTWARE, INC.

    State of Delaware - I.R.S. Employer Identification No.: 65-0359860

                             802 Douglas Road
                                Sixth Floor
                          Coral Gables, FL 33134
                              (305) 567-9990

     Securities Registered Pursuant to Section 12(b) of the Act: None

        Securities Registered Pursuant to Section 12(g) of the Act:

                Common Stock (par value of $0.01 per share)





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

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

The aggregate market value of shares of Common Stock held by
non-affiliates of the Registrant as of February 26, 1999 was
approximately $8,249,000. For purposes of this computation, all executive
officers, directors and 5% owners of the Registrant's Common Stock have
been deemed to be affiliates.

As of February 26, 1999, there were 7,627,881 shares of the Registrant's
Common Stock, $ .01 par value, outstanding.


                   DOCUMENTS INCORPORATED BY REFERENCE:

None.

                               Page 1 of 50.
                     The exhibit index is on page 45.


<PAGE>

                              Index to Items
<TABLE>
<S>     <C>                                               <C>
Part I                                                     Page

Item 1.  Business.........................................    3

Item 2.  Properties.......................................    9

Item 3.  Legal Proceedings................................    9

Item 4.  Submission of Matters to a Vote of Security      
         Holders..........................................    9


Part II

Item 5.  Market for the Registrant's Common Equity and    
         Related Stockholder Matters......................   10

Item 6.  Selected Financial Data..........................   11

Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations....   12

Item 8.  Consolidated Financial Statements and            
         Supplementary Data...............................   20

Item 9.  Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure..............   34


Part III

Item 10. Directors and Executive Officers of the          
         Registrant.......................................   35

Item 11. Executive Compensation...........................   38

Item 12. Security Ownership of Certain Beneficial Owners  
         and Management...................................   41

Item 13. Certain Relationships and Related Transactions...   42


Part IV

Item 14. Exhibits, Financial Statement Schedules, and     
         Reports on Form 8-K..............................   43

Signatures...............................................    45
</TABLE>


This Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The Company's actual
results could differ materially from those set forth in the
forward-looking statements. Factors that might cause such a
difference are discussed in the section entitled "Factors
Affecting Future Operating Results" on page 18 of this Form 10-K.


<PAGE>

                                  PART 1

Item 1.                         Business

General

Expert Software, Inc. ("Expert" or the "Company") is a leading publisher
of high-quality, value-priced consumer software that addresses a broad
range of consumer interests and everyday tasks. The Company currently
sells over 170 products in the productivity, lifestyle, small office/home
office, entertainment and education market categories. The Company
promotes the Expert brand name in order to generate customer loyalty,
encourage repeat purchases and differentiate the Expert products to
retailers and consumers. Expert targets the growing audience of home PC
users who value fully-featured and easy-to-use software. Expert brand
products sell primarily for under $15, a price point intended to generate
impulse purchases in mass market environments.

The Company seeks to develop a broad line of products in categories in
which a leading market share can be attained. The Company also creates
product franchises by upgrading successful products and developing
product line extensions and complementary products. The Company's titles
are primarily available on the Windows operating system, and
substantially all are available on CD-ROM. Over 29.3 million units of
Expert products have been sold since 1989, with more than 5.4 million
units sold in 1998 and more than 5.6 million units sold in 1997. Expert
products are currently available at retailers such as Babbages Etc, Best
Buy, CompUSA, Electronics Boutique, K Mart, Microcenter, Office Depot,
OfficeMax, PriceCostco, Sam's Club, Staples and Walmart. Expert products
are also available at the Company's on-line store site on the world wide
web.

"Expert Software", "Swfte" and all of Expert's logos and product names
are trademarks of the Company. This annual report also contains
trademarks of companies other than those of the Company. The Company
includes its wholly-owned subsidiaries, Swfte International, Ltd. and ES
International, Inc.

On March 3, 1999, Expert announced the execution of an Agreement and Plan
of Merger dated as of March 3,1999 (the "Merger Agreement") by and among
Expert,  Activision, Inc., a Delaware corporation ("Activision") and
Expert Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Activision ("Expert Acquisition Sub"), pursuant to which,
among other things, Expert will be merged with and into Expert
Acquisition Sub and will become a wholly owned subsidiary of Activision
(the "Merger").

Pursuant to the terms of the Merger Agreement, Activision has the right,
exercisable until April 1, 1999, to elect whether the merger
consideration will be entirely cash or entirely stock (subject to a cash
component in certain situations described below). If Activision chooses
cash consideration, holders of shares of Expert Common Stock ("Expert
Shares") will receive $2.65 per Expert Share. If Activision chooses stock
consideration, holders of Expert Shares will receive that number of
shares of Activision Common Stock ("Activision Shares") equal to the
quotient of (i) $2.65 divided by (ii) the arithmetic average of the per
share closing sales prices of an Activision Share as reported on the
Nasdaq National Market on the ten (10) trading days ending on and
including the trading day which is two (2) trading days immediately prior
to the date of the special meeting of Expert stockholders that will be
convened to consider and vote upon the approval of the Merger Agreement
and the transactions contemplated thereby (such arithmetic average, the
"Activision Per Share Market Value"); provided, however, that, if the
Activision Per Share Market Value is less than $10.00 per Activision
Share, holders of Expert Shares will be entitled to receive for each
Expert Share (A) 0.265 of an Activision Share and (B) cash in an amount
equal to the product of (x) the Activision Per Share Market Value
multiplied by (y) the number that remains when 0.265 is subtracted from
the quotient of 2.65 divided by the Activision Per Share Market Value.

The Merger is currently anticipated to be consummated in the summer of
1999.

Industry Background

In recent years, the installed base of PCs in homes has grown
substantially as prices have declined and as power and capability have
improved. Such PCs have improved enabling technologies and standards,
such as graphical user interfaces and the Windows operating system, which
have made PCs easier to use for a broad range of applications resulting
in the transformation of PCs into general-purpose tools. These advanced
capabilities have allowed software developers to produce more engaging
software with advanced three-dimensional graphics, realistic sound and
full motion video. Well-equipped PCs are now available for $1,000 and
less. Today's lower-priced PCs feature high-speed microprocessors, large
amounts of memory, high-speed CD-ROM technology, and enhanced sound and
graphics capabilities.

The increased penetration of PCs into the home has created a large and
growing mass market for consumer software as consumers wish to maximize
the utility of their PCs. The distribution of consumer software has
expanded beyond traditional software retailers and computer stores to
include general mass merchandisers. In response to these developments,
increasing numbers of consumer software products are being developed to
address a broad range of consumer interests and everyday tasks.
Consequently, the Company believes that consumers are more frequently
purchasing software on impulse in the same way that they buy books, music
CDs and movie videos and the distribution channels for consumer software
could continue to expand to include book and music stores, video outlets
and supermarkets. Consumer preferences for software products, however,
are difficult to predict, and few consumer software products achieve
sustained market acceptance.

As consumer software becomes more of a mass market product, it will
become increasingly important for consumer software companies to have
direct relationships with retailers and to effectively market their
products to consumers. Competition for retail shelf space is also likely
to increase due to the proliferation of consumer software products and
competition from large consumer product companies. As a result, the
Company believes that, in order to be successful, consumer software
companies must have a consumer-driven focus, a broad offering of
category-leading products, close relationships with retailers, a
recognized brand name and a cost-efficient business model.

The use of the Internet by home and business PC users has increased
dramatically in recent years.  Sales of products on the Internet,
including software, have increased and the Internet is likely to become
an important sales channel for software.

The Company maintains a web site that offers its products for sale
on-line.  Expert encourages its customers to visit its web site through
its CD ROM installation process and advertising messages on its packaging
and printed materials. Visitors to the site may browse through the
Company's catalog of products, and place an order on-line, by telephone or
by fax.

The Internet provides companies such as Expert the opportunity to offer a
broader range of products on the Internet than is available at retail
stores. Generally, direct sales of product on the Internet currently are
at higher prices than the Company realizes when selling to its retail and
distribution channels.  Internet sales currently do not involve certain
of the selling and promotional costs the Company incurs when selling to
its traditional channels, however other types of marketing and
advertising costs may be required to promote the site and draw traffic.

Consumer buying habits may be influenced by the availability of products
on the Internet, however the Company believes it is not possible to
predict the impact of such changes on its business. For example,
customers might purchase more impulse products because they are easier to
buy, but electronic commerce on the Internet is also new, rapidly
evolving and highly competitive.  As more content, products and services
become available on the Internet, it may become increasingly difficult to
garner the attention of prospective shoppers.

Business Strategy

The Company's objective is to be a leading publisher of high-quality,
value-priced consumer software and plans to pursue the following
strategies:

Maintain Consumer-Driven Focus.  The Company seeks to develop creative
and innovative products with mass appeal. The Company believes that many
consumers base their software purchasing decisions largely on recognized
brands, quality, value and ease of use. As a result, the Company is
committed to providing products that are high quality and value priced,
and require minimal technical expertise to operate. The Company's
consumer-oriented marketing strategy combines attractive and informative
packaging with promotional campaigns to encourage impulse purchases. To
enhance customer satisfaction, the Company also provides technical
support for all of its products. In addition, the Company revises
products in response to consumer feedback and upgrades products to
utilize new technologies, such as upgraded graphical user interfaces and
the Internet, as those technologies gain broader acceptance in the
consumer market.

Develop Diversified Titles with Strong Franchise Value.  The Company
seeks to develop a broad line of products in sustainable categories in
which a leading market share can be obtained. The Company currently has
over 170 products available for sale in stores in the productivity,
lifestyle, small office/home office, entertainment and education market
categories. The Company creates franchises by upgrading successful
products and developing product line extensions and complementary
products. For example, Home Design became the foundation of a product
franchise that includes Home Design 3D(R), Home Design Premier(TM), Landscape
Design 3D(R), CAD 3-D(TM), and Complete Home Gardener. The Company also seeks
to create evergreen titles with extended life cycles by upgrading
successful products to incorporate new features and to adapt to new
technologies. Such titles include the Bicycle(R) line of card games,
Championship Chess(TM), Forms(TM) and Labels(TM).

Leverage Distribution Strengths.  The Company has established a
distribution network based largely upon direct sales to, and established
relationships with, a broad base of retailers, including office supply
stores, software specialty stores, warehouse clubs, consumer electronic
stores, mall-based chains and mass merchants, which it believes to be one
of its major strengths. The Company believes that its broad product line,
self-supporting packaging, consumer-oriented marketing programs, and
retail support enable it to effectively sell directly to retailers.
Direct sales to retailers allow the Company to assist retailers in
offering a suitable mix of Expert products and tracking inventory levels
and sell-through rates. In addition, direct sales to retailers allow the
Company to tailor marketing efforts, promotions and merchandising
displays to fit the needs of specific retailers. This strategy enables
the Company to identify and react to trends in the retail consumer market
and to help build incremental sales. The Company believes that its
attention to detail at the retail level and careful execution have been
the key factors to its successful marketing programs and have contributed
to the sales growth of its products. The Company also promotes its
products via the Internet and, beginning in February 1999, offers a wide
assortment of products at its on-line storefront on the world wide web.
 
Promote Brand Names. The Company currently promotes its products under
three brands: Expert, Bicycle(R) , and the Sega PC Collection(TM). The Company
promotes these brand names in order to encourage customer loyalty and
repeat purchases. Expert believes that its brand name products are
recognized by consumers as high-quality, fully-featured software that
consistently exceed consumer expectations. Drawing upon established
consumer marketing techniques, the Company uses its brand names and
easily identifiable packaging which emphasizes high-impact design and
concise, non-technical product information.

The Company believes that by promoting recognizable brand names and
consistent packaging, satisfied consumers are more likely to purchase
additional products when faced with multiple options in a software
category. The Company also has an established public relations effort
which seeks to broaden consumer awareness and acceptance of the Expert,
Bicycle(R), and Sega PC Collection(TM) brand names. As the consumer software
industry becomes more of a mass market, the Company believes that brand
name recognition will become an increasingly important means of product
differentiation among retailers and consumers.

Manage Development Process.  The Company seeks to carefully manage its
development process to provide consistent product quality, shorter and
more predictable delivery schedules, and lower investment risks and
overall development costs. Historically, the Company's internal
development efforts have been focused primarily on product design and
features, consistent user interfaces, ease of use, and product quality
and consistency to supplement its externally developed programming and
content. This process allows the Company to maintain internal control
over the creative and market-driven aspects of its product development
efforts, while using outside resources to lessen its development risks.

Operate Profitably at Consumer Price Points.  To maintain its ability to
profitably deliver value-priced consumer software, the Company seeks to
carefully manage its development process, control its component costs
while out sourcing its production and warehousing overhead, and invest in
systems that permit efficient management of high sales volume. As
consumer software becomes more of a mass market driven by consumer demand
and lower price points, the Company believes that the ability to
profitably develop, produce, market and support value-priced products
will be an important competitive factor.

Acquire Complementary Products, Technologies and Businesses.  The Company
believes that the consumer software industry will continue to consolidate
in response to pressures to expand market offerings and develop broad
distribution channels. The Company intends to explore opportunities to
expand its business by acquiring or licensing products or technologies or
acquiring businesses that are consistent with its overall business
strategy. The Company anticipates that its future acquisitions may be
structured as purchases for accounting purposes. As a result, the Company
expects that any such acquisitions will create intangible assets which
will be amortized over time and may be accompanied by write-offs of
purchased research and development and other intangible assets.

Prior to consummation of the Company's pending merger with Activision,
the Company intends to continue to pursue these strategies in conducting
its business.  Following consummation of the Merger, some or all of these
strategies may change or be revised as the two companies are integrated.
In the event that the Merger is not consummated for any reason, Expert
currently intends to continue to pursue its historical business
objectives and strategies.

Products

The Expert product line addresses a wide range of interests and hobbies.
The Company's products sell in retail stores primarily for under $15, a
price point intended to generate impulse purchases in high-traffic mass
market environments. Currently, the Company's product line includes over
170 titles. Expert introduced over 50 new titles in 1998, and over 60 new
titles in 1997.

The Company currently targets five consumer software market categories:
productivity, lifestyle, small office/home office, entertainment and
education. Due to the diversity of its product offerings, the Company is
not dependent on any single product. In addition, the Company seeks to
develop products with long life cycles; as a result, approximately 81% of
its sales in each of 1998 and 1997 came from existing and upgraded
products. Most of the Company's titles are compatible with Windows, and
substantially all are available on CD-ROM.

Entertainment.  Expert entertainment products target users who seek
entertainment which can be easily mastered and can provide gratification
in short periods of time. For example, Casino is an entertainment product
that includes blackjack, roulette, draw poker, baccarat, craps and slot
machine games, using graphics, animation and sound effects to simulate
actual game play. Entertainment products also include the Bicycle(R) brand
playing card series, and the Sega PC Collection(TM) brand of game software.

Productivity.  Expert productivity products enable users to more
efficiently accomplish a wide variety of tasks using their PCs. The
Company has focused on productivity tasks such as designing personalized
calendars, adding clip art to an Internet web site, creating personalized
greeting cards, or creating a family newsletter. For example, Calendar
Shop(TM) allows users to organize events daily, weekly, monthly or yearly
for events related to home, business, school or clubs and organizations.

Lifestyle.  Expert lifestyle products are designed to provide enrichment
for all family members. The lifestyle products include an astronomy
product that allows users to plot the night sky, a diet and nutrition
advisor, a home design product, a wedding planner and engaging screen
savers. For example, Home Design 3D(R) is a simple-to-use design program
that can be used to lay out a three-dimensional building plan complete
with furniture objects that are provided with the program. Designs can be
tested with various color schemes and movable walls, rooms and furniture
that can be resized or modified with simple design tools; and the user
can "walk through" the three-dimensional design.

Small Office/Home Office.  Small office and home office ("SOHO") users
require powerful, easy-to-use and inexpensive software for business
functions such as creating simple forms, printing labels and generating
standard business agreements. For example, Resume Writer is a SOHO
product that provides a variety of tools for a job search, including
video clips of interviewing advice and examples, resume templates, sample
resumes, and a word processor for creating cover letters. Resume Writer
also includes a contact database to track where resumes were sent and an
appointment calendar to assist in tracking appointments and follow up.

Education.  Expert education products are designed to make learning an
interactive adventure for children and adults. Typing provides
personalized lessons and tests designed for varying skill levels. Speak
Spanish offers an interactive immersion into a 3D city where the user
builds vocabulary and pronunciation skills, while Algebra provides
animated examples to allow a student to review and practice algebra at
their own pace.

Sales and Marketing

Consumers can purchase Expert products at over 25,000 retail stores
worldwide. Expert sells its products primarily on a direct basis to
office supply stores, software specialty stores, warehouse clubs,
consumer electronics stores, mall-based chains and mass merchants, as
well as to distributors. Retailers selling the Company's products include
Babbages Etc, Best Buy, CompUSA, Electronics Boutique, K Mart,
Microcenter, Office Depot, OfficeMax, PriceCostco, Sam's Club, Staples
and Walmart.

The Company's customers are not contractually required to make future
purchases of the Company's products and therefore could discontinue
carrying the Company's products in favor of a competitor's products or
for any other reason. There can be no assurance that the Company will be
able to increase or sustain its current amount of retail shelf space or
promotional resources, and as a result, the Company's operating results
could be adversely affected.

In 1998, Office Depot and OfficeMax each represented 10% or more of the
Company's sales. In 1997, Office Depot represented more than 10% of the
Company's sales. The Company believes that mass market retailers will
increasingly be significant outlets for consumer software.

International sales represented approximately 24%, 24%, and 25% of
Expert's sales in fiscal years ended 1998, 1997and 1996, respectively.
International sales have been primarily to customers in the United
Kingdom, Canada, Australia and Western Europe. The Company conducts its
international sales efforts primarily by establishing relationships with
foreign publishers and distributors.

Internet sales and electronic commerce through sales on its web site may
become increasingly important to the Company.  Expert established its
on-line store in February 1999. Sales to date have not been significant,
but management believes that sales through this channel will increase as
consumers become increasingly aware of the convenience of shopping from
this site, the breadth of product available there, and promotions and
sales incentives the Company plans to offer to its on-line shoppers.

The Company is exposed to the risk of product returns, primarily from
retailers and distributors. The Company establishes reserves for returns
that it believes to be adequate based upon historical return data and its
analysis of current customer inventory levels and sell-through rates.
Nonetheless, the Company may accept substantial product returns to
maintain its relationships with retailers and its access to distribution
channels. The Company's policies also allow for returns of defective
merchandise for credit. Any significant amount of product returns could
have a material adverse effect on the Company's business, operating
results and financial condition. Sales are typically made on credit with
varying terms, and the Company does not hold collateral to secure
payment. If a significant portion of the Company's accounts receivable
was to become uncollectible or subject to extended payment terms, the
Company's business, operating results and financial condition could be
adversely affected.

Development

Expert believes that its efficient development model has certain key
advantages including consistent product quality, reliable delivery
schedules, cost containment and low investment risk. The Company depends
primarily upon third parties for the acquisition or licensing of software
products or technologies. Development costs associated with externally
licensed technology are generally paid by royalties based on sales, which
are included in cost of revenues in the accompanying consolidated
financial statements. The Company may also acquire products through the
acquisition of other software companies. Development expenses, including
technical support to customers, totaled $2.4 million, $2.7 million, and
$3.3 million in 1998, 1997, and 1996, respectively.

The Company's product managers oversee the development of various
products from conception through completion, and control the content,
design, scope and schedule of the project. New product ideas are
evaluated based upon market research on the subject area, the type and
demographics of the target consumer, and the existence and
characteristics of competitive products. The Company seeks to design new
products which incorporate all of the important functions and features of
the leading competitive products and to add innovative, helpful concepts
and upgrades.

The Company provides technical support to customers by telephone and
facsimile machine at no additional charge. The Company has a call
handling center to facilitate its response to customer inquiries. The
Company offers technical support on its web page on the Internet at
http://www.expertsoftware.com.

There can be no assurance that the Company will be successful in
developing and marketing products for emerging operating systems and
media formats, including the Internet, and the introduction of new
technologies could render the Company's existing products obsolete or
unmarketable.

Operations

The Company controls all purchasing, inventory, scheduling, order
processing and accounting functions related to its operations, with all
production and warehousing performed by independent contractors in
accordance with the Company's specifications. The Company invests in
computer systems to handle high sales volumes, including order
processing, inventory management, purchasing and tracking of shipments.
The Company has electronic data interchange (EDI) links with key
customers to increase the efficiency and accuracy of order processing as
well as to shorten order turnaround time. By investing in automated
systems to efficiently process high sales volumes, the Company believes
it can minimize out-of-stock positions. The Company has invested in, and
intends to continue to invest in, management information systems and
other capital equipment which it believes are necessary to achieve
operational efficiencies and support increasing sales volumes.

The Company intends to manage and maintain inventory levels to support
shipments within 48 hours of receiving an order. The Company has
relatively little backlog at any given date, and its backlog is not
indicative of potential sales for any future period.

Disk and CD-ROM duplication, printing of documentation and packaging, as
well as the assembly of purchased components and the shipment of finished
products, are performed by third parties in accordance with the Company's
specifications. The Company has multiple sources for substantially all
components, with assembly and shipping of the Company's products
currently performed by three independent fulfillment houses. To date, the
Company has not experienced any material difficulties or delays in the
production and assembly of its products. To the extent that the Company's
fulfillment houses do not continue to perform assembly and shipping
functions in a cost-efficient and timely manner, and transition to
substitute fulfillment houses is not completed in a timely fashion, the
Company's business, operating results and financial condition could be
adversely affected.

<PAGE>

Competition

The market for the Company's consumer software products is intensely and
increasingly competitive. The Company's competitors range from small
companies with limited resources to large companies with substantially
greater financial, technical and marketing resources than those of the
Company. Existing consumer software companies may broaden their product
lines to compete with the Company's products, and potential new
competitors, including computer hardware and software manufacturers,
diversified media companies and book publishing companies, may enter or
increase their focus on the consumer software market, resulting in
greater competition for the Company. Although the Company competes with a
number of different companies across its product lines, the Company
regards GT Interactive Software Corp., Havas Interactive, Inc., The
Learning Company, Inc. and Electronic Arts Inc. as its closest
competitors based upon price points and product offerings. In addition,
the Company believes that new competitors, including large software
companies and diversified media companies, are increasing their focus on
the consumer software market, resulting in greater competition for the
Company.

Only a small percentage of products introduced in the consumer software
market achieve any degree of sustained market acceptance. Principal
competitive factors in marketing consumer software include product
features, quality, reliability, brand recognition, ease of use,
merchandising, access to distribution channels and retail shelf space,
marketing, 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 use,
merchandising, access to distribution channels and retail shelf space and
price. 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 consumer software
market may cause prices to fall, which could adversely affect the
Company's business, operating results and financial condition.

Proprietary Rights and Licenses

The Company regards its software as proprietary and 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's business, operating results and financial condition could be
adversely affected. Also, 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. Any such claims, with
or without merit, can be time consuming and expensive to defend and
resolve.

The Company has in the past received communications suggesting that its
products may incorporate material covered by the copyrights, trademarks
or other proprietary rights of third parties. All such communications
were, in the Company's judgment, without merit or immaterial in nature.
However, there can be no assurance that there will not be any such
communications in the future. The Company's policy is to investigate the
factual basis of such communications and to resolve such matters promptly
by negotiating licenses, enforcing its rights or taking other appropriate
actions.

The Company licenses software from third party developers under standard
format software license agreements for multi-year terms, typically five
years with provisions for renewal. In a few instances, however, certain
third party developer licenses contain other provisions. For example, the
Company's January, 1997 license with McDonald's Corporation for use of
McDonald's Marks on family-oriented software has a five year term, and
requires the Company to pay minimum royalty guarantees during the term.
The Company's December 31, 1997 license with The United States Playing
Card Company for use of the trademark Bicycle(R) on software card games
continues in effect until August 2001, with provisions for renewal.

Employees

As of December 31, 1998, the Company had 101 employees, including 33 in
sales and marketing, 13 in development, 17 in customer support and 38 in
operations, administration and finance. None of the Company's employees
is represented by a labor union or is subject to a collective bargaining
agreement. The Company has never experienced a work stoppage and believes
that its relations with its employees are good.




<PAGE>

Item 2.                        Properties

Expert subleases approximately 20,000 square feet of office space in
Coral Gables, Florida. Subleases for this space expire in August, 2000.
The Company currently expects that these facilities will be sufficient
for its needs at least through that time.


Item 3.                     Legal Proceedings

The Company's federal tax filings with respect to the year ended December
31, 1992 and subsequent years are presently being reviewed by the
Internal Revenue Service ("IRS"). The IRS has questioned the allocation
of the purchase price made by the Company in connection with the
acquisition of assets and business of the Predecessor from Bloc in
October 1992, and related amortization and other deductions with respect
to the acquired assets. In June 1997, the IRS proposed assessments for
additional taxes of $442,000, $553,000 and $857,000 for the tax years
1992, 1993 and 1994, respectively, plus penalties totaling $371,000 and
interest to the date of payment. If the IRS prevailed on all issues, such
interest through December 31, 1998 would total approximately $700,000.
The preliminary adjustments proposed by the IRS would also reduce the
Company's federal income taxes for the years 1995, 1996 and 1997 by
$242,000, $68,000 and $55,000, respectively. The IRS has not yet issued a
notice of deficiency assessing actual additional taxes and penalties. The
Company believes that it has properly reported its income and paid its
taxes in accordance with applicable laws and intends to contest the
proposed adjustments vigorously. Additionally, the Company's federal
income tax return for 1996 reported a net operating loss of approximately
$17.8 million, which is available as a carryback subject to statutory
limitations to offset a substantial portion of the proposed tax
assessments. The Company believes that the ultimate resolution of this
matter will not have a material adverse effect on its financial position.

The Company's federal tax filing with respect to the year ended December
31, 1996 is presently being reviewed by the  IRS, which has questioned
the allocation of the purchase price made by the Company in connection
with the acquisition of  Swfte International, Ltd. in November 1995, and
related amortization and other deductions. The IRS has not proposed any
assessment from its review, nor has it indicated when it expects to
conclude its audit or if it intends to propose adjustments to the
Company's federal income tax returns claiming additional tax due. At this
time, it is not possible to quantify the amount of additional taxes, if
any, the IRS will claim are due. There can be no assurance that the
Company will prevail in its position, or that the appeals, if any, and
final resolution of any IRS claims will not have a material adverse
impact on the Company's liquidity, financial position, or results of
operations.


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

None.


<PAGE>

                                  PART II

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

The Company's common stock is traded on the Nasdaq National Market under
the symbol XPRT.  On February 26, 1999, there were approximately 100
registered holders of record of the Company's common stock, although the
Company believes that the number of beneficial owners of its common stock
as of that date was substantially greater.  The Company does not
currently pay dividends on its common stock and is generally restricted
from paying dividends pursuant to the terms of its revolving credit
agreement. The Company currently intends to retain its earnings for
future growth and, therefore, does not anticipate paying any cash
dividends in the foreseeable future. The following table sets forth the
high and low sales prices for the Common Stock as reported by the Nasdaq
National Market for each of the periods indicated.

<TABLE>
<S>                                      <C>     <C>
                                           High     Low
                                          ------- --------
Fiscal Year Ended December 31, 1998

Fourth Quarter........................... 3-1/8    11/16
Third Quarter............................ 4-1/2    1-3/8
Second Quarter........................... 5-3/4    3-7/8
First Quarter............................     5    2-1/2

Fiscal Year Ended December 31, 1997

Fourth Quarter........................... 8-1/4    2-7/8
Third Quarter............................ 7-11/16  3-3/4
Second Quarter........................... 4-5/8    1-1/2
First Quarter............................ 4-1/4    1-3/4
</TABLE>


As discussed in Item 1 above, the Company has entered into a Merger
Agreement with Activision, Inc., whose common stock trades on the Nasdaq
National Market under the symbol ATVI.

<PAGE>

Item 6.                  Selected Financial Data

The selected financial data set forth has been derived from the
consolidated financial statements of the Company and should be read in
conjunction with the consolidated financial statements of the Company and
the related notes.
<TABLE>
                                          Year Ended December 31,
                                 ------------------------------------------
                                    1998    1997    1996    1995     1994
   <S>                          <C>       <C>    <C>     <C>     <C>
                                 ------------------------------------------
    Statement of Operations
    Data:
    Net revenues................  $30,896  $33,208 $31,012 $27,638 $19,727
                                 ------------------------------------------
    Operating costs and
    expenses:
       Cost of revenues (1).....   13,692   12,985  16,420  10,121   8,066
       Marketing and sales......   12,446   10,489   9,888   6,180   4,303
       General and   
        administrative..........    6,271    4,554  10,124   4,293   2,824
       Development..............    2,367    2,744   3,320   2,192   1,328
       Purchased research and
        development.............      --       --     --     8,392     --
       Loss on impairment of
        assets..................      --       --    5,700     --      --
       Amortization of
        non-compete agreement...      --       --     --       338     417
                                 ------------------------------------------
                                   34,776   30,772  45,452  31,516  16,938
                                 ------------------------------------------
       Operating income (loss)..   (3,880)   2,436 (14,440) (3,878)  2,789
      Other income (expense), net     289      268      92     369    (366)
                                 ------------------------------------------
       Income (loss) before
        provision (benefit)     
        for income taxes........   (3,591)   2,704 (14,348) (3,509)  2,423
    Provision (benefit) for 
      income taxes..............    4,927    1,001  (4,067) (1,324)     90
                                 ------------------------------------------
       Net income (loss)........  $(8,518)  $1,703$(10,281)$(2,185) $2,333
                                 ==========================================
       Diluted  earnings  (loss)
       per share of                 
       common stock............. $ (1.12)   $ .21  $(1.37)  $(.33)  $ .38
                                 ==========================================

    Balance Sheet Data:
       Working capital..........  $3,247   $7,916  $5,076   $10,651 $5,283
       Total assets.............  11,614   22,233  19,077    29,069 10,682
       Subordinated debt........      --      --      --      --     2,200
       Total stockholders
       equity (deficit).........   4,106   12,532  10,425    20,634    355
</TABLE>
    -----------------------------

(1) Includes amortization of software technology which amounted to
    $33,000 in 1998, $98,000 in 1997, $404,000 in 1996, $283,000 in
    1995, $477,000 in 1994, and $4,362,000 in 1993.


<PAGE>

Item 7.Management's Discussion and Analysis of Financial Condition and
       Results of Operations

Results of Operations

Expert operates as a single business segment, publishing and distributing
consumer computer software. The following table sets forth, for the
periods indicated, the percentages of net revenues represented by each
item reflected in the Company's statements of operations.

<TABLE>

                                           Years Ended
                                           December 31,
                                       ---------------------
                                        1998   1997   1996
 <S>                                  <C>    <C>    <C>
                                       ---------------------
   Net revenues........................ 100.0% 100.0%100.0%
   Operating costs and expenses:
      Cost of revenues.................  44.3   39.1  52.9
      Marketing and sales..............  40.3   31.6  31.9
      General and administrative.......  20.3   13.7  32.7
      Development......................   7.7    8.3  10.7
      Loss on impairment of assets.....  --     --    18.4
                                       ---------------------
                                        112.6   92.7 146.6
                                       ---------------------
      Operating income (loss).......... (12.6)   7.3 (46.6)
   Other income (expense), net.........   1.0    0.8   0.3
                                       ---------------------
   Income  (loss)  before  provision   
   (benefit) for income taxes.......... (11.6)   8.1 (46.3)
   Provision (benefit) for income taxes  16.0    3.0 (13.1)
                                       ---------------------
      Net income (loss)................ (27.6)%  5.1%(33.2)%
                                       =====================
</TABLE>

Comparison of Years Ended December 31, 1998 and 1997

Net Revenues.  Net revenues decreased 7.0% to $30.9 million in 1998 from
$33.2 million in 1997, due primarily to higher provisions for returns,
particularly in the third quarter of 1998, and lower average sales prices, 
partially offset by broader distribution of product and increased unit
shipments. Provisions for returns in the third quarter of 1998 increased
primarily due to higher promotional sales on which returns occurred at
rates higher than usually experienced by the Company. Average selling
prices declined due to increased competition for shelf space at retail
outlets. Average selling prices may continue to decline as the Company
expands its distribution network, particularly in the mass merchandising
channel. International sales were approximately 24% of net revenues in
each of 1998 and 1997. International markets have been subject to
economic trends, including currency exchange rate fluctuations, outside
of the Company's control and, as a result, there can be no assurance as
to whether international activity will increase or decrease in the
future.

Net revenues consist of gross sales net of allowances for returns and
discounts, and royalty income related to licensing of products, primarily
to publishers in Europe. The Company adjusts its allowance for returns as
it deems appropriate. The Company may accept substantial product returns
or make other concessions to maintain its relationships with retailers
and distributors and its access to distribution channels. If the Company
chooses to accept product returns, some of that product may be defective,
shelf-worn or damaged and may not therefore be salable in the ordinary
course of business. At December 31, 1998, the Company's allowance for
potential returns and doubtful accounts was $3.4 million. See Note 1 of
Notes to the Company's Consolidated Financial Statements. There can be no
assurance, however, that the Company will not experience significant
returns, which could be greater than the Company's provision for returns
or could have a material adverse affect on the Company's results of
operations. In accordance with its policy, the Company will continue to
reassess market conditions and adjust its provision for returns as it
deems appropriate. Due in part to the high level of returns experienced
on recent promotional sales, the Company limited such sales in the third
and fourth quarters of 1998. The Company may pursue additional
promotional sales in the future when it believes market conditions make
it appropriate to do so.

Cost of Revenues.  Cost of revenues increased to $13.7 million in 1998
from $13.0 million in 1997 and increased as a percentage of net revenues
to 44.3% from 39.1%. This higher percentage was due primarily to the
higher provisions for returns noted under Net Revenues above. This dollar
increase was primarily due to higher costs associated with increased
sales volume and higher provisions for excess and obsolete inventories.
The Company expects cost of revenues may vary from period to period based
on the relative mix of products sold, the level of promotional sales in a
given period and other market factors.

Cost of revenues consists primarily of product cost, freight charges,
royalties to outside programmers and content providers, as well as
amortization of software licenses and an inventory provision for damaged
and obsolete products, if any. Product costs consist of the costs to
purchase the underlying materials and print both boxes and manuals, media
costs (disks and CD-ROMs) and fulfillment (assembly and shipping).

Marketing and Sales.  Marketing and sales expenses increased to $12.4
million in 1998 from $10.5 million in 1997 and increased as a percentage
of net revenues to 40.3% from 31.6%. The increase was primarily due to
increased marketing activities to promote the Company's products and
brand names, costs associated with the design and release of new and
revised packaging for products, and increased personnel. In response to
increased competition for shelf space in retail outlets, the Company
intends to continue to launch new and innovative marketing promotions. As
a result, the Company expects marketing and sales expenses to increase in
dollar amount, and expects competition for shelf space to continue.

General and Administrative.  General and administrative expenses
increased to $6.3 million in 1998 from $4.6 million in 1997 and increased
as a percentage of net revenues to 20.3% from 13.7%. This increase was
primarily due to the provision of $1.3 million for doubtful accounts,
primarily related to amounts due from a distributor which are unlikely to
be collectible in the near term; and approximately $0.4 million for costs
of computer systems conversions, including costs to address the "Year
2000" issue. The systems conversions were substantially completed early in
1999.

Development.  Development expenses decreased to $2.4 million in 1998 from
$2.7 million in 1997 and decreased as a percentage of net revenues to
7.7% from 8.3%, mainly due to reduced outside development costs.
Development expenses include costs relating to product upgrades, new
products development activities, quality control and expanded customer
service support. The Company currently believes that  development
expenses will increase in future periods due to additional costs to
develop new brands and titles, including the development of products to
take advantage of the Internet and other on-line capabilities, operating
systems upgrades such as Windows 98, and the localization of product for
international sales.

Other Income (Expense).  Net interest income increased to $289,000 in
1998 from $268,000 in 1997, primarily due to the receipt of interest of
approximately $117,000 in connection with the refund of prior years'
income tax payments, partially offset by lower balances of
interest-bearing assets.

Tax Provision (Benefit). The Company accounts for income taxes under SFAS
No. 109, Accounting for Income Taxes, which requires that deferred income
taxes be recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their
financial reporting basis at rates based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. A valuation allowance was recorded to offset
100% of the Company's net deferred tax asset as of September 30, 1998,
resulting in a deferred provision for income taxes of $4.7 million in the
third quarter of 1998. The net deferred tax asset is comprised of tax
basis net operating losses and the estimated tax effect of expected
future temporary differences related to charges taken for book purposes
that are not deductible for federal income tax purposes until the amounts
are realized in the future.  Management believes that, due to recent
financial results, it is appropriate to record a full valuation allowance
until such time as it becomes more likely than not that the Company will
realize some or all of the benefit of the net deferred tax assets.

Comparison of Years Ended December 31, 1997 and 1996

Net Revenues.  Net revenues increased 7.1%  to $33.2 million in 1997 from
$31.0 million in 1996, due primarily to broader distribution of product,
partially offset by lower average sales prices. Average selling prices
declined due to increased competition for shelf space at retail outlets.
Net revenues for the fourth quarter of 1997 were affected by lower
McDonaldland(R) software sales than anticipated and higher returns of such
products than usually experienced by the Company's other brands.
International sales were approximately 24% of net revenues in 1997 and
25% of net revenues in 1996.

Cost of Revenues.  Cost of revenues decreased to $13.0 million in 1997
from $16.4 million in 1996 and decreased as a percentage of net revenues
to 39.1% from 52.9%. This decrease was primarily due to provisions of
$2.6 million and $1.4 million recorded in 1996, partially offset by
higher costs associated with increased sales volume.

Marketing and Sales.  Marketing and sales expenses increased to $10.5
million in 1997 from $9.9 million in 1996 and decreased as a percentage
of net revenues to 31.6% from 31.9%. The increase in dollar amount was
primarily due to increased marketing activities to promote the Company's
products and brand names, increased personnel and increased competition
for shelf space in retail outlets. The Company intends to continue to
launch new and innovative marketing promotions and to hire additional
personnel as needed.
<PAGE>

General and Administrative.  General and administrative expenses
decreased to $4.6 million in 1997 from $10.1 million in 1996 and
decreased as a percentage of net revenues to 13.7% from 32.7%. This
decrease was primarily due to lower provision for doubtful accounts and
legal costs. Legal costs decreased due to the settlement in the fourth
quarter of 1996 of litigation involving the former owners of Swfte.

Development.  Development expenses decreased to $2.7 million in 1997 from
$3.3 million in 1996 and decreased as a percentage of net revenues to
8.3% from 10.7%, mainly due to lower personnel costs. Development
expenses include costs relating to product upgrades, new products
development activities, quality control and expanded customer service
support.  During the fourth quarter of 1996, the Company reduced
development personnel and did not renew the lease for facilities
previously occupied by Swfte, which contributed to the decrease in
expenses in 1997.

Other Income (Expense).  Net interest income increased to $268,000  in
1997 from $92,000 in 1996, due primarily to higher balances of
interest-bearing assets.

Tax Provision (Benefit). The Company accounts for income taxes under SFAS
No. 109, Accounting for Income Taxes, which requires that deferred income
taxes be recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their
financial reporting basis at rates based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. The effective tax rate used in recording the
provision for income taxes was approximately 37% in 1997.


<PAGE>

Quarterly Results of Operations

The following tables set forth certain unaudited financial data for the
Company's eight most recent financial quarters, as well as such data
expressed as a percentage of the Company's net revenues. This data has
been derived from unaudited financial statements that, in the opinion of
management, include all adjustments (consisting of normal recurring
adjustments and the charges recorded in the third quarter of 1998 and the
fourth quarter of 1997 discussed above) necessary for a fair presentation
of such quarterly information when read in conjunction with the Company's
Consolidated Financial Statements and the related Notes thereto included
in Item 8. The operating results for any quarter are not necessarily
indicative of results for any future period.
<TABLE>
                                          Three Months Ended
                        ------------------------------------------------------- 
                           Dec. Sept.  June   March  Dec.  Sept.  June   March
                           31,   30,    30,    31,    31,    30,    30,    31,
                          1998  1998   1998   1998   1997   1997   1997   1997
<S>                   <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
                        ------------------------------------------------------- 
  Net revenues......... $8,732 $5,020 $7,854 $9,290 $9,071 $9,035 $7,075 $8,027
                        ------------------------------------------------------- 
  Operating costs and
  expenses:
    Cost of revenues...  3,669  2,765  3,515  3,743  3,699  3,503  2,649  3,134
    Marketing and sales  3,107  3,424  3,163  2,752  3,075  2,719  2,268  2,427
    General and 
     administrative....  1,039  2,757  1,178  1,297  1,068  1,162  1,109  1,215
    Development........    581    589    584    613    636    724    743    641
                        ------------------------------------------------------- 
                         8,396  9,535  8,440  8,405  8,478  8,108  6,769  7,417
                        ------------------------------------------------------- 
 Operating income (loss)   336 (4,515)  (586)   885    593    927    306    610
 0ther (expense)
  income, net..........     18     40     62    169    106     84     50     28
                        ------------------------------------------------------- 
 Income (loss) before
  provision (benefit)
  for income taxes.....    354 (4,475)  (524) 1,057    699  1,011    356    638
 Provision (benefit) for
  income taxes.........     --  4,731   (194)   390    259    374    132    236
                        ------------------------------------------------------- 
    Net income (loss)..   $354$(9,206) $(330)  $664   $440   $637   $224   $402
                        =======================================================
 Diluted earnings (loss)
  per share of
  common stock........    $.04$(1.21) $(.04)   $.08   $.05   $.08   $.03  $.05
                        =======================================================

 As  a  Percentage   of  Net
  Revenues:
  Net revenues........     100%  100%   100%   100%   100%   100%   100%  100%
  Operating costs and
  expenses:
    Cost of revenues..      42    55     45     40     41     39     37    39
    Marketing and sales     36    68     40     30     34     30     32    30
    General and
     administrative..       12    55     15     14     12     13     16    15
    Development......        7    12      7      6      7      8     10     8
                        ------------------------------------------------------- 
                            96   190    107     90     94     90     96    92
                        ------------------------------------------------------- 
    Operating income.        4   (90)    (7)    10      6     10      4     8
  Other (expense)
   income, net              --     1      1      1      1      1      1    --
                        ------------------------------------------------------- 
 Income  before
  provision (benefit)
  for income taxes...        4   (89)    (6)    11      7     11      5     8
 Provision (benefit) for
  income taxes.......       --    94     (2)     4      2      4      2     3
                        ------------------------------------------------------- 
  Net income (loss)..        4% (183)%   (4)%    7%     5%     7%     3%    5%
                        =======================================================
</TABLE>
<PAGE>

The Company has experienced, and may continue to experience, fluctuations
in operating results due to a variety of factors, including, but not
limited to market acceptance of the Company's products and those of its
competitors, development and promotional expenses, new versions of
existing products or operating systems, product returns, acquisitions of
new businesses by the Company and related charges and write-offs, and
those items included in "Factors Affecting Future Operating Results"
discussed below. The Company's expense levels are based, in part, on its
expectations as to future sales and, as a result, operating results would
be disproportionately affected by a reduction in sales or a failure to
meet the Company's sales expectations.

The consumer software business is seasonal. Typically, net revenues are
the highest during the fourth calendar quarter and decline sequentially
in the first and second calendar quarters. The seasonal pattern is due
primarily to the increased demand for consumer software during the
year-end holiday buying season. The Company expects its net revenues and
operating results to continue to reflect seasonality.


Liquidity and Capital Resources

As of December 31, 1998, the Company had $3.2 million in working capital,
including $1.6 million in cash. To date, the Company has not invested in
any financial instruments that involve a high level of complexity or
risk. Net cash used by operating activities was $3.7 million for the year
ended December 31, 1998, primarily due to payments of accounts payable
and accrued expenses and losses during the period, partially offset by
collections on accounts receivable and the receipt of income tax refunds
related to prior years' taxes paid. Management has responded by reducing
expenses, including, among other actions, reducing personnel. Longer
term, management believes that its expense reduction efforts, together
with its efforts to focus on its core business, should return the Company
to profitability and provide for positive cash flow sufficient to fund
future operations.

The Company's working capital requirements increased as personnel and
other costs were incurred in an effort to expand operations. In response
to such growth in working capital requirements, the Company entered into
a loan agreement with a bank which provides for a revolving line of
credit collateralized by substantially all of the Company's assets.
Borrowings under the line are limited to a percentage of eligible
receivables as defined in the agreement and may not exceed $2.5 million
through May 31, 1999, the maturity date. The loan agreement contains
restrictive covenants. The Company is in compliance with the bank line of
credit covenants. There can be no assurance that the Company's future
results of operations will continue to be in compliance with the line of
credit covenants which, among other things, prohibit two consecutive
quarterly losses, or that the line of credit would be otherwise available
to the Company. To date, there have been no borrowings under the line.
Even if the bank line of credit is unavailable, the Company believes
there are alternative sources of capital available which will be
sufficient to meet working capital and capital expenditures requirements
through the next twelve months. At this time, the Company has not sought
financing from any such alternative source and, accordingly, cannot give
any assurances that such financing will be available, if at all, on
acceptable terms. Without any additional financing, management believes
the Company's existing capital resources are sufficient to meet working
capital and capital expenditure requirements through at least the first
half of 1999.

The Company's federal tax filings with respect to the year ended December
31, 1992 and subsequent years are presently being reviewed by the
Internal Revenue Service ("IRS"). The IRS has questioned the allocation
of the purchase price made by the Company in connection with the
acquisition of assets and business of the Predecessor from Bloc in
October 1992, and related amortization and other deductions with respect
to the acquired assets. In June 1997, the IRS proposed assessments for
additional taxes of $442,000, $553,000 and $857,000 for the tax years
1992, 1993 and 1994, respectively, plus penalties totaling $371,000 and
interest to the date of payment. If the IRS prevailed on all issues, such
interest through December 31, 1998 would total approximately $700,000.
The preliminary adjustments proposed by the IRS would also reduce the
Company's federal income taxes for the years 1995, 1996 and 1997 by
$242,000, $68,000 and $55,000, respectively. The IRS has not yet issued a
notice of deficiency assessing actual additional taxes and penalties. The
Company believes that it has properly reported its income and paid its
taxes in accordance with applicable laws and intends to contest the
proposed adjustments vigorously. Additionally, the Company's federal
income tax return for 1996 reported a net operating loss of approximately
$17.8 million, which is available as a carryback subject to statutory
limitations to offset a substantial portion of the proposed tax
assessments. The Company believes that the ultimate resolution of this
matter will not have a material adverse effect on its financial position,
although there can be no assurance that an adverse resolution will not
have such an effect.

The Company's federal tax filing with respect to the year ended December
31, 1996 is presently being reviewed by the IRS, which has questioned the
allocation of the purchase price made by the Company in connection with
the acquisition of  Swfte International, Ltd. in November 1995, and
related amortization and other deductions. The IRS has not proposed any
assessment from its review, nor has it indicated when it expects to
conclude its audit or if it intends to propose adjustments to the
Company's federal income tax returns claiming additional tax due. At this
time, it is not possible to quantify the amount of additional taxes, if
any, the IRS will claim are due. There can be no assurance that the
Company will prevail in its position, or that the appeals, if any, and
final resolution of any IRS claims will not have a material adverse
impact on the Company's liquidity, financial position, or results of
operations.

From time to time, the Company evaluates potential acquisitions of
products, businesses and technologies that would complement or expand the
Company's business. The Company currently does not have any commitments
or agreements with respect to any such acquisitions. There can be no
assurance that any such acquisitions will be made or, if made, will be
successfully integrated.

As previously disclosed, the Company engaged a financial advisor to
assist it in assessing strategic alternatives to enhance shareholder
value. In March 1999, the Company entered into the Merger Agreement with
Activision discussed in Item 1 above. In connection with the negotiations
and due diligence procedures leading to that agreement, the Company has
incurred, and will continue to incur, costs related to its financial
advisor and other professionals. Currently, the Company has incurred such
costs totaling approximately $0.5 million. Additional costs will be
incurred as the Company undertakes the proxy solicitation and other
regulatory and other filings required in connection with submitting the
proposed merger to the Company's shareholders and regulatory authorities
for approval, likely in the summer of 1999.


Year 2000 Readiness

The statements in the following section include "Year 2000 readiness
disclosures" within the meaning of the Year 2000 Information and
Readiness Disclosure Act.

The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year.
Software that is not compliant with the Year 2000 issue is
time-sensitive and may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations resulting in disruptions of operations, including,
among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

The Company has established a comprehensive Year 2000 compliance
program designed to (1) identify information technology ("IT") and
non-information technology ("non-IT") systems that may fail at the
turn of the century, (2) upgrade or replace non-compliant systems, and
(3) evaluate the Year 2000 readiness of key customers, suppliers and
service providers. IT systems include computer systems (hardware and
software) used to process business data such as customer orders and
accounting information. Non-IT systems include technology such as
telephone switching systems and other devices that employ embedded
chip technology in the function and design. The progress of the Year
2000 program is as follows.

Phase I, the identification of IT and non-IT systems that may fail at
the turn of the century, is substantially completed. The Company's
primary computer system and its phone switching system were identified
as the most critical systems for upgrading to be Year 2000 compliant.

Phase II, upgrading or replacing non-compliant systems, is
approximately 80% complete. The Company recently converted to a Year
2000 compliant version of the same application software it has been
using since 1995. The same version of the software is operating
successfully at other companies. Upgraded hardware and software will
be installed on the phone switch during 1999 to make it Year 2000
compliant. The Company is currently assessing the potential effects
of, and costs of remediating, the Year 2000 problem on its office
equipment, however, such costs are not expected to be material.

Phase III, evaluating the Year 2000 readiness of critical suppliers
and service providers, has begun and is less than 50% complete. The
Company is soliciting input from its key customers, suppliers and
service providers regarding their Year 2000 status. The Company will
determine which, if any, pose a threat to the uninterrupted operation
of its business in the event that they experience system errors or
failures.

The Company estimates that it is approximately 80% complete with
regard to Year 2000 remediation. To date, the Company has incurred
about $500,000 in connection with such remediation, and anticipates
additional costs of approximately $100,000 to complete this work. All
expenditures related to the Year 2000 issue have been and likely will
continue to be made from internally generated funds.

The Company believes it has no material exposure to contingencies
related to the Year 2000 issue for products it has sold.

Management has assessed the most reasonably likely worst case Year
2000 scenario. Given its efforts to minimize the risk of Year 2000
failure by its internal systems, the Company believes the worst case
scenario would occur if its primary telecommunications vendors and/or
its electric supplier experiences a Year 2000 failure which results in
an outage. The Company is in the process of developing a contingency
plan and anticipates having such a plan in place by the third quarter
of 1999.

While the Company believes that it has an effective program in place
to resolve the Year 2000 in a timely manner, there can be no assurance
that the failure of the Company or of the third parties with whom the
Company transacts business to adequately address their respective Year
2000 issues will not have a material adverse affect on the Company's
business, financial condition, cash flows and results of operations.


Factors Affecting Future Operating Results

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is providing the following
cautionary statements identifying important factors, some of which are
beyond the Company's control, that in the past have caused or in the
future could cause the Company's actual results to differ materially from
its historical operating results and from those projected in any
forward-looking statements made by, or on behalf of, the Company.

General Business and Economic Conditions

General business and economic conditions have an impact on the Company's
financial results. The Company's customer base, which is largely
retailers and distributors for resale to retailers, may be impacted by
weak economic conditions and, as a result, may reduce their inventories
of products purchased from the Company. The Company's customers are not
contractually required to make future purchases of the Company's products
and therefore could discontinue carrying the Company's products in favor
of a competitor's products or for any other reason. The Company's
financial results could be affected by the size and rate of growth of the
consumer software market and consumer PC market. The consumer software
business is seasonal due primarily to the increased demand for consumer
software during the year-end holiday buying season. General business and
economic conditions and consumer confidence, both domestically and
internationally, may impact retail sales of consumer software. Currency
fluctuations associated with international sales and accounts receivable
may also affect the Company's financial results.

Competition

The market for the Company's products is intensely and increasingly
competitive. Existing consumer software companies may broaden their
product lines to compete with the Company's products and potential new
competitors, including computer hardware and software manufacturers,
diversified media companies and book publishing companies, may enter or
increase their focus on the consumer software market, resulting in even
greater competition for the Company. There has been a consolidation among
competitors in the market for the Company's products, and 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 better access
to consumers, than the Company. Competition for retail space has
increased as retailers continue to focus on sales per square foot of
shelf space and other measures of product performance. The competition
for retail space is also likely to increase due to the proliferation of
consumer software products and companies.

The Company also competes with other developers for access to quality products
developed by third parties.  The Company's results of operations and financial
position are also dependent upon satisfactory relationships with independent
developers and other parties through whom Expert acquires propriety rights.

Dependence on Retailers and Distributors

Retailers and distributors compete in a volatile industry that is subject
to rapid change, consolidation, financial difficulty and increasing
competition from new distribution channels. Due to increased competition
for limited shelf space, retailers and distributors are increasingly in a
better position to negotiate favorable terms of sale, including price
discounts, promotional support and product return policies. The Company's
financial results may be impacted by the accuracy of retailers' forecasts
of consumer demand, the timing of the receipt of orders from major
customers, account cancellations or delays in shipment, competitors'
marketing strategies and promotions, changes in pricing strategies by the
Company or its competitors and the collectibility of accounts receivable.
Furthermore, a significant portion of sales within a quarter is typically
not realized until late in that quarter. As a result, it may be difficult
for the Company to predict its net revenues for the quarter or to quickly
adapt its spending levels within a quarter to reflect changes in demand
for its products.

<PAGE>

Uncertainty of Market Acceptance; Changes in Technology and Industry
Standards

The consumer software industry is undergoing rapid changes, including
evolving industry standards, frequent product introductions and changes
in consumer requirements and preferences. Consumer preferences are
difficult to predict, and few consumer software products achieve
sustained market acceptance. The Company's financial results will be
impacted by market acceptance of the Company's products and those of its
competitors, development and promotional expenses relating to the
introduction of new products, new versions of existing products or new
operating systems, and evolving distribution channels. The growth in
popularity of the Internet and other new technologies has impacted the
distribution and purchase of software and there can be no assurance that
the Company will utilize such new technologies in the most effective
manner.

Other Factors

In addition to the important factors discussed above, the Company's
financial results, financial position and cash flows may be impacted by,
among other factors, future cash flow and working capital requirements,
continued listing of the Company's Common Stock on the Nasdaq National
Market, the outcome of current and future examinations by taxing
authorities, and the stockholder vote and other approvals relating to the
pending Merger. The market price of the Company's Common Stock has been,
and in the future will likely be, subject to significant fluctuations in
response to variations in quarterly operating results and other factors,
such as announcements of technological innovations or new products by the
Company or its competitors, or other events. The stock prices for many
companies in the technology sector have experienced wide fluctuations
which often have been unrelated to their operating performance. Such
fluctuations may adversely affect the market price of the Company's
Common Stock.



<PAGE>

Item 8. Consolidated Financial Statements and Supplementary Data



<TABLE>
                INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                    Page
                                                                    -----
<S>                                                                <C>
Reports of Independent Certified Public Accountants..............     21

Consolidated  Balance  Sheets as of December  31, 1998 and December
31, 1997.........................................................     22

Consolidated  Statements of Operations for the Years Ended December  
31, 1998, 1997 and 1996..........................................     23

Consolidated  Statements  of  Stockholders'  Equity  for the  Years
Ended December 31, 1998, 1997 and 1996...........................     24

Consolidated  Statements of Cash Flows for the Years Ended December
31, 1998, 1997 and 1996..........................................     25

Notes to Consolidated Financial Statements.......................     26
</TABLE>

<PAGE>

            REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
Expert Software, Inc.

We have audited the  consolidated  balance sheet of Expert  Software,  Inc.
and  Subsidiaries,  (a Delaware  corporation)  as of December 31, 1998, and
the related consolidated  statements of operations,  stockholders'  equity,
and cash flows for the year then  ended.  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 audit.  The
financial  statements of Expert  Software,  Inc. and Subsidiaries as of and
for the two years ended  December 31, 1997,  were audited by other auditors
whose report dated February 6, 1998,  expressed an  unqualified  opinion on
those statements.

We conducted  our audit 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 audit
provides a reasonable basis for our opinion.

In our opinion,  the 1998  financial  statements  referred to above present
fairly, in all material  respects,  the consolidated  financial position of
Expert  Software,  Inc.  and  Subsidiaries  as of December 31, 1998 and the
consolidated  results  of their  operations  and  their  consolidated  cash
flows  for the year then  ended,  in  conformity  with  generally  accepted
accounting principles.



GRANT THORNTON LLP

Miami, Florida
February 17, 1999


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


To the Stockholders of
  Expert Software, Inc.:

We have audited the accompanying consolidated balance sheet of Expert
Software, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the two years in the
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 consolidated financial position of
Expert Software, Inc. and subsidiaries, as of December 31, 1997, and the
results of their operations and their cash flows for each of the two
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.



ARTHUR ANDERSEN LLP

Miami, Florida,
  February 6, 1998.


<PAGE>

                           EXPERT SOFTWARE, INC.
                        CONSOLIDATED BALANCE SHEETS
                        December 31, 1998 and 1997
                     (in thousands, except share data)
<TABLE>
                                                        1998     1997

                                                       ------------------
<S>                                                   <C>     <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents...........................  $1,595   $5,685
  Accounts receivable, net............................   5,411    4,636
  Income taxes receivable.............................      65    1,924
  Inventories.........................................   2,830    2,922
  Prepaid expenses....................................     854      834
  Deferred income taxes...............................      --    1,616
                                                       ------------------
   Total current assets...............................  10,755   17,617

PROPERTY AND EQUIPMENT, net...........................     854    1,270

ACQUIRED SOFTWARE TECHNOLOGY, net.....................      --       30
DEFERRED INCOME TAXES.................................      --    3,311
OTHER ASSETS..........................................       5        5
                                                       ==================
   Total assets....................................... $11,614  $22,233
                                                       ==================


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable....................................  $3,914   $4,755
  Accrued expenses....................................   3,594    4,900
  Current portion of capital lease obligations........      --       46
                                                       ------------------
   Total current liabilities..........................   7,508    9,701
                                                       ------------------

NONCURRENT LIABILITIES................................      --       --
                                                       ------------------

COMMITMENTS and CONTINGENCIES (Note 12)

STOCKHOLDERS' EQUITY:
  Preferred  stock,  $.01 par value,  1,000,000  shares
   authorized; 975,000 shares undesignated,               
   25,000   shares   designated   as  Series  A  Junior
   Participating Cumulative; none outstanding..........     --       --
  Common stock, $.01 par value, 30,000,000 shares
   authorized; 7,627,881 and 7,604,775                
   shares issued and outstanding in 1998 and 1997,
   respectively........................................      76       76
  Additional paid-in capital...........................  23,693   23,601
  Accumulated deficit.................................. (19,663) (11,145)
                                                       ------------------
   Total stockholders' equity..........................   4,106   12,532
                                                       ==================
   Total liabilities and stockholders' equity.......... $11,614  $22,233
                                                       ==================
</TABLE>




 The accompanying notes to consolidated financial statements are an integral
                        part of these balance sheets.

<PAGE>

                           EXPERT SOFTWARE, INC.
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share data)

<TABLE>
                                      Years Ended December 31,
                                  ----------------------------------
                                  1998           1997       1996
                                  ----------------------------------
<S>                              <C>         <C>        <C> 
  NET REVENUES.................... $30,896     $33,208    $31,012
                                  ----------------------------------
  OPERATING COSTS AND EXPENSES:
    Cost of revenues.............. 13,692      12,985     16,420
    Marketing and sales........... 12,446      10,489      9,888
    General and administrative....  6,271       4,554     10,124
    Development...................  2,367       2,744      3,320
    Loss on impairment of assets..     --          --      5,700
                                  ----------------------------------
                                   34,776      30,772     45,452
                                  ----------------------------------
     Operating income (loss)...... (3,880)      2,436     (14,440)
                                  ----------------------------------
  OTHER INCOME (EXPENSE):
    Interest and other expense....    (14)         (5)       (26)
    Interest income...............    303         273        118
                                      289         268         92
                                  ----------------------------------

    Income (loss) before
    provision (benefit)
    for income taxes.............  (3,591)      2,704    (14,348)

  PROVISION  (BENEFIT)  FOR INCOME
  TAXES...........................  4,927       1,001     (4,067)
                                  ----------------------------------
     Net income (loss)............ $(8,518)    $1,703   $(10,281)
                                  ==================================

  Earnings (Loss) per Share:
    Basic......................... $ (1.12)    $ .23    $ (1.37)
                                  ==================================

    Diluted....................... $ (1.12)    $ .21    $ (1.37)
                                  ==================================
</TABLE>




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

<PAGE>

                           EXPERT SOFTWARE, INC.
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     (in thousands, except share data)
<TABLE>
                             Common Stock   Additional Accum-     
                            --------------- Paid-in    ulated
                             Shares  Amount Capital    Deficit   Total
                            ------------------------------------------
<S>                        <C>       <C>  <C>      <C>       <C>
  Balance, December 31, 1995 7,470,451 $75  $23,126  $(2,567)  $20,634
    Issuance of common
    stock in connection
    with exercise of
    stock options...........    37,353  --       65       --        65
    Compensation  expense on
    stock option grants.....     --     --        7       --         7
    Net loss................     --     --       --  (10,281)  (10,281)
                            ------------------------------------------
  Balance, December 31, 1996 7,507,804  75   23,198  (12,848)   10,425
    Issuance of common
    stock in connection
    with exercise of
    stock options..........     96,971   1      349       --       350
    Compensation  expense on
    stock option grants....      --     --       54       --        54
    Net income.............      --     --      --     1,703     1,703
                            ------------------------------------------
  Balance, December 31, 1997 7,604,775  76   23,601  (11,145)   12,532
    Issuance of common
    stock in connection
    with exercise of
    stock options..........     23,106  --        8       --         8  
    Compensation  expense on
    stock option grants....      --     --       84       --        84
    Net loss...............      --     --      --    (8,518)   (8,518)
                            ------------------------------------------
  Balance, December 31, 1998 7,627,881 $76  $23,693 $(19,663)   $4,106
                            ==========================================

</TABLE>







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


<PAGE>

                           EXPERT SOFTWARE, INC.
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)

<TABLE>
                                                 Years Ended December 31,
                                              -------------------------------
                                                 1998      1997      1996
                                              -------------------------------
<S>                                         <C>         <C>     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................$(8,518)    $1,703  $(10,281)
Adjustments to reconcile net income (loss)
to net cash  provided  by (used in)  operating
activities:
  Depreciation of property and equipment......    730        818     1,105
  Amortization of acquired software technology     30        133       544
  Compensation expense on stock option grants.     84         54         7
  Loss on impairment of assets................     --         --     5,700
  Deferred income tax provision (benefit).....  4,927      1,275    (2,100)
Changes in net assets and liabilities :
  (Increase) decrease in accounts receivable..   (775)      (861)    1,899
  (Increase) decrease in income taxes
   receivable.................................  1,858        473    (2,397)
  (Increase) decrease in inventories..........     91      (1,666)   2,556
  (Increase) decrease in prepaid expenses.....    (19)      (409)      (31)
  (Increase) decrease in other assets.........     --         (2)       10
  Increase (decrease) in accounts payable.....   (841)     1,529       405
  Increase (decrease) in accrued expenses..... (1,398)      (138)      934
  Increase (decrease) in income taxes payable.     93         --    (2,125)
  Increase (decrease) in noncurrent
   liabilities................................     --       (300)      300
                                              -------------------------------
    Net cash  provided by (used in)  operating
    activities................................  (3,738)    2,609    (3,474)
                                              -------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment..........   (314)      (191)     (644)
  Maturities and sales of marketable
  securities..................................     --         --     6,222
                                              -------------------------------
    Net cash  provided by (used in)  investing
    activities................................   (314)      (191)    5,578
                                              -------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Stock options exercised.....................      8        350        65
  Payments on capital lease obligation........    (46)       (42)     (122)
                                              -------------------------------
    Net cash  provided by (used in)  financing  
    activities................................    (38)       308       (57)
                                              -------------------------------
    Net increase (decrease) in cash and
    equivalents............................... (4,090)     2,726     2,047
CASH AND EQUIVALENTS, beginning of period.....  5,685      2,959       912
                                              -------------------------------

CASH AND EQUIVALENTS, end of period........... $1,595     $5,685    $2,959
                                              ===============================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
  Cash paid during the period for interest....  $ --        $  5     $  26
                                              -------------------------------
  Cash paid during the period for income taxes  $ 11        $ --    $2,555
                                              -------------------------------

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
  Fixed assets obtained under capital leases..    --         --     $ 102
                                              ===============================
</TABLE>

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

<PAGE>

                           EXPERT SOFTWARE, INC.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998 and 1997

1.  OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

The Organization --

Expert Software, Inc. (the "Company") publishes and distributes computer
software under the "Expert" trade name.  The Company's products address a
broad range of consumer interest and everyday tasks for the productivity,
lifestyle, small office/home office, entertainment and education market
categories. The Company's titles are primarily available on the Windows
operating system, and substantially all are available on CD-ROM. The
Company sells its products directly to retailers, as well as to
distributors.

Principles of Consolidation --

The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, Swfte International,
Ltd. ("Swfte") and ES International, Inc. All intercompany transactions
and balances have been eliminated in consolidation. The Company operates
as a single business segment.

Use of Estimates --

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 the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.

Financial Instruments --

The carrying  amounts of cash and cash  equivalents,  accounts  receivable,
accounts  payable  and  accrued  expenses  reflected  in  the  consolidated
financial statements approximate fair value.

Cash Equivalents --

The Company considers all highly liquid investment instruments with a
maturity of three months or less when purchased to be cash equivalents.
Cash equivalents include investments in repurchase agreements and
tax-exempt bond instruments.

Accounts Receivable and Concentration of Credit Risk--

Accounts receivable are principally from retailers and distributors of
the Company's products. The Company performs periodic credit evaluations
of its customers and maintains allowances for potential credit losses and
potential returns of $3,352,000 and $4,361,000 at December 31, 1998 and
1997, respectively.

The Company's customers are invoiced upon shipment, at which time a
provision is recorded for expected future returns. The Company estimates
returns based on management's evaluation of historical experience and
current industry trends and charges such estimates against gross
revenues. Retailers and distributors compete in a volatile industry that
is subject to rapid change, consolidation, financial difficulty and
increasing competition from new distribution channels. Due to increased
competition for limited shelf space, retailers and distributors are
increasingly in a better position to negotiate favorable terms of sale,
including price discounts, promotional support and product return
policies. The Company's financial results may be impacted by the accuracy
of retailers' forecasts of consumer demand, the timing of the receipt of
orders from major customers, account cancellations or delays in shipment,
competitors' marketing strategies and promotions, changes in pricing
strategies by the Company or its competitors and the collectibility of
accounts receivable. Furthermore, a significant portion of sales within a
quarter is typically not realized until late in that quarter. As a
result, it may be difficult for the Company to predict its net revenues
for the quarter or to quickly adapt its spending levels within a quarter
to reflect changes in demand for its products.

<PAGE>

Sales to the Company's customers which represented 10% or more of gross
sales less actual returns in any of the periods shown below are as
follows:

<TABLE>
                               Years Ended December 31,
                           ----------------------------------
                              1998       1997       1996
    <S>                  <C>         <C>         <C>  
                           ----------------------------------
      Customer A...........    14.1%      15.2%      19.6%
      Customer B...........    11.1        7.7       --
      Customer C...........     1.8        4.5       10.4
</TABLE>

The two major customers at December 31, 1998 and 1997 also account for
10.8% and 19.1% of gross outstanding accounts receivable at December 31,
1998 and 1997, respectively.

Inventories --

Inventories, which consist primarily of software media, manuals and
related packaging materials, are stated at the lower of cost or market
with cost determined on a first-in, first-out ("FIFO") basis. Management
performs periodic assessments to determine the existence of obsolete,
slow-moving and nonsalable inventories and records necessary provisions
to reduce such inventories to net realizable value.

During the years ended December 31, 1998 and 1997 the Company had one
supplier which accounted for approximately 56.3% and 42.8%, respectively,
of total purchases. A second supplier accounted for 8.1% and 22.3% of
total purchases in 1998 and 1997, respectively.

Property and Equipment --

Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets.  Depreciation expense
includes the amortization of capital lease assets.

Maintenance and repairs are charged to expense when incurred; betterments
are capitalized. Upon the sale or retirement of assets, the cost and
accumulated depreciation are removed from the accounts and any gain or
loss is recognized currently.

Revenue Recognition --

Sales are recognized at the time the product is shipped, net of
allowances for returns, in accordance with the provisions of the AICPA
Statement of Position 97-2, "Software Revenue Recognition." While the
Company has no other obligation to perform future services subsequent to
shipment, the Company provides telephone customer support as an
accommodation to purchasers of its products as a means of fostering
customer loyalty. Costs associated with this effort are insignificant and
immaterial to the consolidated financial statements, and accordingly, are
expensed as incurred.

Amortization --

Acquired software technology related to the 1995 acquisition of Swfte
discussed in Note 2 represents the fair value of certain software
technology and licenses acquired.  The recorded value of $3,835,000 was
based on independent appraisal and was being amortized on a straight-line
basis over two to two and one-half years, the anticipated period of
benefit.  As discussed in Note 2, a loss on impairment of these
intangibles was recorded during the second quarter of 1996.
Additionally, amortization of $98,000 and $459,000 on these assets was
recorded during 1997 and 1996, respectively.  Accumulated amortization on
acquired software technology totaled $4,454,000 and $3,672,000 at
December 31, 1997 and 1996, respectively.

Royalties --

Royalties are accrued based on net revenues pursuant to agreements with
external software developers of software products published by the
Company. Royalty costs, which are included in cost of revenues, were
$2,789,000, $3,012,000, and $2,715,000, during the years ended December
31, 1998, 1997, and 1996, respectively.

<PAGE>

Software Development Costs --

In accordance with Statement of Financial Accounting Standards No. 86
("SFAS 86"), Accounting for the Cost of Capitalized Software to be Sold,
Leased or Otherwise Marketed, the Company examines its software
development costs after technological feasibility has been established to
determine the amount of capitalization that is required. For all periods
presented herein, software development costs incurred subsequent to the
establishment of technological feasibility have been immaterial and
therefore expensed as incurred.

Stock-Based Compensation --

Beginning in 1996, the Company implemented the provisions of SFAS 123,
Accounting for Stock-Based Compensation, in accounting for stock-based
transactions with non-employees and accordingly records compensation
expense in the consolidated statements of operations for such
transactions.  The Company continues to apply the provisions of APB 25
for transactions with employees, as permitted by SFAS 123.

Income Taxes --

The Company accounts for income taxes under SFAS 109, Accounting for
Income Taxes, which requires that deferred income taxes be recognized for
the tax consequences in future years of differences between the tax basis
of assets and liabilities and their financial reporting basis at rates
based on enacted tax laws and statutory tax rates applicable to the
periods in which the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Current income tax
expense represents the tax payable for the period. The deferred income
tax expense (benefit) represents the change during the period in the
balance of deferred taxes.

Earnings Per Share of Common Stock --

In February 1997, the Financial Accounting Standards Board (the "FASB")
issued SFAS 128, Earnings Per Share. This statement simplifies the
standards for computing and presenting earnings per share ("EPS") and
makes them comparable to international EPS standards. SFAS 128 replaces
the presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures. SFAS
128 became effective for financial statements issued for periods after
December 15, 1997 and requires restatement of all prior periods
presented. Basic EPS is calculated by dividing income available to common
shareholders by the weighted average number of common shares outstanding
during each period. Diluted EPS includes the potential impact of
convertible securities and dilutive common stock equivalents using the
treasury stock method of accounting. For periods in which the Company
reports a loss from continuing operations, diluted earnings per share do
not include stock options as their effect would be antidilutive.

2.  ACQUISITION AND LOSS ON IMPAIRMENT OF ASSETS:

In November 1995, the Company acquired all of the outstanding common
stock of Swfte International, Ltd., a developer of consumer software for
the education and entertainment markets. Total consideration paid was
$7.0 million in cash, subject to post-closing adjustments, and 320,630
unregistered shares of the Company's common stock which were
independently valued at approximately $4.4 million. Additionally, the
Company assumed $1.3 million of Swfte's bank debt which was repaid by the
Company subsequent to the consummation of the transaction.

The acquisition of Swfte was accounted for using the purchase method of
accounting and, accordingly, the results of Swfte since November 2, 1995
are included in the accompanying consolidated statements of operations.
Based on an independent appraisal, of the excess of purchase price over
the fair value of the net assets acquired, approximately $8.4 million or
approximately 65% of the purchase price was expensed during the Company's
1995 fourth quarter as incomplete purchased research and development
projects that had not reached technological feasibility as defined by
SFAS No. 86.

During the second quarter of 1996, management reevaluated the carrying
value of the intangible assets recorded in connection with the
acquisition of Swfte.  This reevaluation was necessitated by management's
determination based on recent results of operations that the expected
sales and cash flows from the acquired assets would be substantially
lower than had been previously expected by management.  Since these
factors were not expected to be short-term or temporary in nature, the
carrying value of the intangible assets was reduced by $3,478,000 in
accordance with SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of.  Management also
determined that the lower demand for the acquired products and claims
from customers arising during 1996 for pre-acquisition cooperative
marketing and price protection credits required an additional provision
for returns of $1,065,000 higher than originally provided on the acquired
accounts receivable; and a provision for reserves $150,000 higher than
originally provided on the acquired inventories.  The lower than expected
sales and higher than expected returns levels on the acquired products
indicate that the minimum royalties will not be recouped in the ordinary
course of business and $339,000 of such royalties were accrued as part of
the loss on impairment of intangibles during the second quarter.
Similarly, losses totaling $668,000 on fixed assets and certain other
assets determined to have lower values than originally assigned were
accrued as part of the loss on impairment of intangibles as of June 30,
1996.  Such losses totaled $5,700,000 and are reflected as "Loss on
impairment of assets" in the accompanying consolidated statements of
operations.

3.  INVENTORIES:

Inventories consisted of the following at December 31 (in thousands):
<TABLE>
                                            1998     1997
                                          -------------------
    <S>                                   <C>      <C>   
      Finished goods......................  $2,009   $2,439
      Raw materials.......................     821      483
                                          -------------------
                                            $2,830   $2,922
                                          ===================
</TABLE>
4.  PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following at December 31 (in
thousands):
<TABLE>
                                                               Useful
                                                                Life
                                            1998     1997     in Years
                                          ------------------- ---------
    <S>                                   <C>      <C>       <C>
      Equipment...........................  $3,466   $3,280     3-5
      Furniture and fixtures..............     705      716     5-10
                                          -------------------
                                             4,171    3,996
      Less: Accumulated depreciation......  (3,317)  (2,726)
                                          -------------------
                                            $  854   $1,270
                                          ===================
</TABLE>
Equipment includes $102,000 and $147,000 of capital lease assets at
December 31, 1998 and 1997, respectively.  Amortization of such costs is
computed by the straight-line method over the primary lease terms and is
included in depreciation expense in the accompanying consolidated
financial statements.

5.  ACCRUED EXPENSES:

Accrued expenses consisted of the following at December 31 (in thousands):
<TABLE>
                                            1998     1997
                                          -------------------
    <S>                                   <C>      <C>   
      Royalties.............................$ 964    $1,271
      Marketing.............................1,502    1,953
      Settlement costs (Note 10).............  --      300
      Other.................................1,128    1,376
                                          -------------------
                                            $3,594   $4,900
                                          ===================
</TABLE>
6.  REVOLVING LINE OF CREDIT

The Company has entered into a loan agreement with a bank (also a
shareholder of the Company) which provides for a revolving line of credit
collateralized by substantially all of the Company's assets. Borrowings
under the line of credit are limited to a percentage of eligible accounts
receivable as defined in the agreement and may not exceed $2,500,000
through May 31, 1999, the maturity date. Interest is payable at the
bank's base rate plus 1%. To date, there have been no borrowings under the
line.

The loan agreement contains restrictive covenants, including the
achievement of certain earnings, as defined in the agreement, and the
maintenance of a minimum net worth and various financial ratios. At
December 31, 1998, the Company was in compliance with the agreement.

<PAGE>

7.  STOCKHOLDERS' EQUITY AND PROPOSED MERGER:

In November 1995, the Company adopted a Shareholder Rights Plan and the
Board of Directors declared a dividend distribution of one preferred
stock purchase right for each outstanding share of common stock to
stockholders of record as of the close of business on November 29, 1995.
Initially, these rights will not be exercisable and will trade with the
shares of the Company's common stock.  Under the Shareholder Rights Plan,
the rights become exercisable if a person becomes an "acquiring person"
by acquiring 15% or more of the common stock of Expert Software, if a
person who owns 10% or more of the common stock of the Company is
determined to be an "adverse person" by the Board of Directors, or if a
person commences a tender offer that would result in that person owning
15% or more of the common stock of the Company.  In the event that a
person becomes an "acquiring person" or is declared an "adverse person"
by the Board, each holder of a right (other than the acquiring person or
the adverse person) would be entitled to acquire such number of shares of
preferred stock which are equivalent to Expert Software common stock
having a value of twice the then-current exercise price of the right.  If
the Company is acquired in a merger or other business combination
transaction after any such event, each holder of a right would then be
entitled to purchase, at the then current purchase price, shares of the
acquiring company's common stock having a value of twice the exercise
price of the right. The rights will expire at the close of business on
November 9, 2005, unless previously redeemed or exchanged by the Company.
In connection with the Shareholder Rights Plan, the Board of Directors
authorized the designation of 25,000 shares of Series A Junior
Participating Cumulative Preferred Stock, $0.01 par value, none of which
are outstanding at December 31, 1998 or 1997.

On March 3, 1999, Expert announced the execution of an Agreement and Plan
of Merger dated as of March 3,1999 (the "Merger Agreement") by and among
Expert,  Activision, Inc., a Delaware corporation ("Activision") and
Expert Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Activision ("Expert Acquisition Sub"), pursuant to which,
among other things, Expert will be merged with and into Expert
Acquisition Sub and will become a wholly owned subsidiary of Activision
(the "Merger").

Pursuant to the terms of the Merger Agreement, Activision has the right,
exercisable until March 25, 1999, to elect whether the merger
consideration will be entirely cash or entirely stock (subject to a cash
component in certain situations described below); provided, however, that
Activision has the right to extend the March 25, 1999 deadline to April
1, 1999 if Activision has made and continues to make good  faith efforts
to secure any financing  required for payment of the merger consideration
in  cash. If Activision chooses cash consideration, holders of shares of
Expert Common Stock ("Expert Shares") will receive $2.65 per Expert
Share. If Activision chooses stock consideration, holders of Expert
Shares will receive that number of shares of Activision Common Stock
("Activision Shares") equal to the quotient of (i) $2.65 divided by (ii)
the arithmetic average of the per share closing sales prices of an
Activision Share as reported on the Nasdaq on the ten (10) trading days
ending on and including the trading day which is two (2) trading days
immediately prior to the date of the special meeting of Expert
stockholders that will be convened to consider and vote upon the approval
of the Merger Agreement and the transactions contemplated thereby (such
arithmetic average, the "Activision Per Share Market Value");provided,
however, that, if the Activision Per Share Market Value is less than
$10.00 per Activision Share, holders of Expert Shares will be entitled to
receive for each Expert Share (A) 0.265 of an Activision Share and (B)
cash in an amount equal to the product of (x) the Activision Per Share
Market Value multiplied by (y) the number that remains when 0.265 is
subtracted from the quotient of 2.65 divided by the Activision Per Share
Market Value.

As contemplated by the Merger Agreement, on March 3, 1999, Expert
executed a first amendment (the "Amendment No. 1") to that certain
Shareholders' Rights Agreement dated as of November 9, 1995 between
Expert and The First National Bank of Boston (the "Rights Agreement"),
which Amendment No. 1 modified the Rights Agreement to provide that such
Rights Agreement would not be triggered by the execution of the Merger
Agreement.

<PAGE>

8.  STOCK OPTIONS:

The Company has reserved 2,250,000 shares of its common stock for
issuance under its 1992 Stock Option Plan (the "1992 Plan"), 1,000,000
shares under its 1997 Stock Option Plan for Officers and Employees (the
"1997 Plan"), and 250,000 shares under the 1997 Stock Option Plan for
Directors (the "Directors' Plan"), (the 1992 Plan, the 1997 Plan and the
Directors' Plan are referred to herein collectively as the "Plans").
Under the Plans, options may be granted to purchase common stock at
exercise prices generally determined by a committee of the Board of
Directors. Incentive stock options may be granted at exercise prices not
less than the fair market value of the common stock at the date of grant,
and in certain instances, at prices in excess of the current fair market
value. Non-employee members of the Board of Directors are granted
non-qualified options annually at a price equal to the fair market value
of the common stock at the date of the grant. Incentive stock options are
available to officers, directors who are also employees and other
full-time employees and non-qualified options are available to the same
group and consultants and other key persons who provide services to the
Company. The terms and vesting schedule of each option agreement are
determined by the Board of Directors; vesting typically is ratably over
four years. All options expire on the date specified in the agreement and
in no event later than the tenth anniversary of the date which the option
was granted. A summary of stock option activity is as follows:
<TABLE>
                                                                  Weighted
                                                                  Average
                                         Options      Options     Exercise
                                        Available    Outstanding  Price ($)
                                        ----------------------------------
    <S>                               <C>          <C>          <C>
      Balance at December 31, 1995......1,090,179      685,770      2.40
      Options granted................... (544,000)     544,000      9.80
      Options exercised.................       --      (37,353)     1.76
      Options canceled..................  137,000     (137,000)    12.49
                                        ----------------------
      Balance at December 31, 1996......  683,179    1,055,417      4.97
      Options authorized................1,250,000           --
      Options granted................... (605,000)     605,000      2.44
      Options exercised.................       --      (96,971)     3.60
      Options canceled..................  364,556     (364,556)    10.75
                                        ----------------------
      Balance at December 31, 1997......1,692,735    1,198,890      2.05
      Options granted..................(1,250,000)   1,250,000      1.56
      Options exercised.................       --      (23,106)     0.36
      Options canceled..................  249,212     (249,212)     3.57
                                        ----------------------
      Balance at December 31, 1998......  691,947    2,176,572      1.26
                                        =========== ===========
</TABLE>

A summary of currently outstanding and exercisable options is as follows:
<TABLE>
                     Options Outstanding        Options Exercisable
                ------------------------------- --------------------

                          Weighted
                          Average
                          Remaining Weighted              Weighted 
      Range of  Number    Contrac-  Average     Number    Average 
      Exercise  Outstan-  tual Life Exercise    Exercis-  Exercise
      Prices    ding      (Years)   Price       able      Price
      ----------------------------------------- -------- -----------
<S> <C>       <C>         <C>       <C>       <C>       <C>  
      $0.10 -     460,070     4.6      $0.51    451,737     $0.50
        $0.85

      $1.00 -   1,554,651     9.3      $1.31    247,880     $1.32
        $1.32

      $2.00        88,401     8.3      $2.00     52,802     $2.00

      $3.05 -      73,450     8.5      $4.13     45,607     $4.04
        $5.38
                =============================== ====================
                2,176,572     8.3      $1.26    798,026     $1.26
                =============================== ====================
</TABLE>

In December 1998, the Board of Directors authorized the repricing of
options to purchase approximately 739,000 shares of common stock
previously granted to officers and employees to a revised exercise price
of $1.32 per share. The revised exercise price represented the average
market price of the Company's common stock for a period of five days
ending on the repricing date. Such options previously were granted at
exercise prices ranging from $2.00 to $6.63 per share.

The Company applied APB Opinion 25 and related interpretations in
accounting for its stock option plans.  Accordingly, no compensation cost
for stock options granted to employees has been recognized under the
Plans.  Had compensation been recorded based on the fair value at the
grant dates for awards under the Plans consistent with the method of SFAS
123, the Company's proforma net income (loss) and diluted income (loss)
per share would have been as follows (in thousands, except per share
data):
<TABLE>
                                               1998    1997    1996
                                           ------------------------
    <S>                                    <C>      <C>    <C>      
      Net income (loss), as reported......   $(8,518) $1,703 $(10,281)
      Net income (loss), proforma.........   $(8,857) $1,237 $(10,469)

      Diluted earnings per share, as
      reported............................   $(1.12)  $  .21 $(1.37)
      Diluted earnings per share, proforma   $(1.16)  $  .15 $(1.40)
</TABLE>

The fair value of each option grant is estimated on the date of grant
using the Black-Sholes option pricing model with the following weighted
average assumptions: expected volatility ranging from 40% to 70%,
risk-free interest rate of 5%, expected dividends of $0 and expected
lives of five years.  In 1998 and 1997, the Company recorded compensation
expense of $84,000 and $54,000, respectively, related to options to
purchase common stock granted to non-employees of the Company accounted
for under the provisions of SFAS 123.

9.  INCOME TAXES:

The components of the provision (benefit) for income taxes are as follows
(in thousands):
<TABLE>
                                           1998    1997    1996
    <S>                                 <C>      <C>     <C> 
                                          ------------------------
      Current:
         Federal.........................   $--    $(243)  $(1,711)
         State...........................    --      (31)     (256)
                                          ------------------------
                                            --      (274)   (1,967)
                                          ------------------------
      Deferred:
         Federal.........................   4,272   1,132   (1,930)
         State...........................     655     143     (170)
                                          ------------------------
                                            4,927   1,275   (2,100)
                                          ------------------------
                                            $4,927  $1,001 $(4,067)
                                          ========================
</TABLE>
A reconciliation of the provision for income tax expense (benefit) with
the expected income tax (benefit) computed by applying the federal
statutory income tax rate to income (loss) before income taxes is as
follows:
<TABLE>
                                           1998    1997    1996
                                          ------------------------ 
    <S>                                  <C>     <C>     <C> 
      Income tax (benefit) computed at
      federal statutory tax rate........   (34.0)%  34.0%  (34.0)%
      State and local  taxes (net of
      federal benefit)..................    (3.6)    3.6    (3.6)
      Increase  in valuation allowance..   171.7      --     7.4
      Other, net........................    (3.1)   (0.6)    1.9
                                          ------------------------
                                           137.2%   37.0%  (28.3)%
                                          ========================
</TABLE>

<PAGE>

The components of the net deferred tax asset recorded in the accompanying
consolidated balance sheets are as follows (in thousands):
<TABLE>
                                          1998     1997
                                          ----------------
    <S>                                  <C>    <C> 
      Allowance for doubtful  accounts and
      potential returns...................  $896  $1,147
      Inventory reserves..................   275     381
      Net operating loss carryforward..... 6,105   4,311
      Other, net..........................    49     248
                                          ----------------
        Gross deferred tax assets.........  7,325  6,087
      Valuation allowance................. (7,325)(1,160)
                                          ----------------
        Net deferred tax assets...........    --  $4,927
                                          ================
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized.  The net deferred
assets reflects management's estimate of the amount which will be
realized from future profitability which can be predicted with reasonable
certainty.

10. EARNINGS PER SHARE

Basic earnings per common share were computed by dividing income
available to common shareholders by the weighted average number of shares
of common stock outstanding during the year. Diluted earnings per share
were determined by including assumptions of stock option conversions,
except for periods in which the Company reported a loss from continuing
operations. Effective December 31, 1997, the Company adopted SFAS 128. As
a result, the earnings (loss) per share of common stock for the year
ended December 31, 1996 have been restated in accordance with the
requirements of SFAS 128.
<TABLE>
      (In thousands, except per share amounts)   Income           Per-Share
      Year Ended December 31,                    (Loss)   Shares   Amount
      ---------------------------------------------------------------------
    <S>                                       <C>       <C>      <C>
      1998
      Basic and Diluted Earnings Per Share
         (Loss) available to common
         shareholders.........................   $(8,518) 7,608    $(1.12)
                                                ===========================

      1997
      Basic Earnings Per Share
         Income available to common            
         shareholders.........................    $1,703   7,533    $ .23
                                                                  =========
         Options assumed to be converted......               635
                                                ------------------
      Diluted Earnings Per Share
         Income available to common
         shareholders plus assumed
         conversions..........................    $1,703   8,168    $ .21
                                                ===========================

      1996
      Basic and Diluted Earnings Per Share
         (Loss) available to common           
         shareholders.......................... $(10,281)  7,480   $(1.37)
                                                ===========================
</TABLE>

Options to purchase approximately 172,300 shares of common stock at
prices from $5.375 to $6.625 were outstanding during 1997 but were not
included in the computation of diluted EPS because the options' prices
were greater than the average market price of the common shares.  The
options, which expire between January 1999 and December 2001, were still
outstanding at December 31, 1997. No options were included in the
computation of diluted EPS for 1998 as options are antidilutive for
periods in which losses are incurred.

11. LEGAL PROCEEDINGS:

In October 1996, the Company settled litigation with David H. Goodman,
the former Chairman and Chief Executive Officer of Swfte International,
Ltd., and others.  The original dispute involved the contingent purchase
price to the Agreement and Plan of Merger among Expert, ES I Acquisition
Corp., Swfte and the Stockholders of Swfte, dated as of October 16,
1995.  The results for the third quarter of 1996 include expenses of
$1,900,000 for the settlement, as well as related legal and associated
costs.  A portion of the settlement was paid in agreed-upon installments
through April 1, 1998.

12. COMMITMENTS AND CONTINGENCIES:

The Company leases office space under operating leases. Rent expense
under operating leases was $415,000, $510,000, and $661,000 for the years
ended December 31, 1998, 1997, and 1996, respectively. Future minimum
lease payments under non-cancelable operating leases at December 31, 1998
are approximately $331,000 and $201,000 in 1999 and 2000, respectively.
 
The Company is subject to minimum royalty guarantees under certain
agreements with developers and licensers. Minimum royalty guarantees
under such contracts are approximately $150,000, $175,000 and $200,000
for the years ended December 31, 1999, 2000 and 2001, respectively.

The Company's federal tax filings with respect to the year ended December
31, 1992 and subsequent years are presently being reviewed by the
Internal Revenue Service ("IRS"). The IRS has questioned the allocation
of the purchase price made by the Company in connection with the
acquisition of assets and business of the Predecessor from Bloc in
October 1992, and related amortization and other deductions with respect
to the acquired assets. In June 1997, the IRS proposed assessments for
additional taxes of $412,000, $553,000 and $857,000 for the tax years
1992, 1993 and 1994, respectively, plus penalties totaling $371,000 and
interest to the date of payment. If the IRS prevailed on all issues, such
interest through December 31, 1998 would total approximately $700,000.
The preliminary adjustments proposed by the IRS would also reduce the
Company's federal income taxes for the years 1995, 1996 and 1997 by
$242,000, $68,000 and $55,000, respectively. The IRS has not yet issued a
notice of deficiency assessing actual additional taxes and penalties. The
Company believes that it has properly reported its income and paid its
taxes in accordance with applicable laws and intends to contest the
proposed adjustments vigorously. Additionally, the Company's federal
income tax return for 1996 reported a net operating loss of approximately
$17.8 million, which is available as a carryback subject to statutory
limitations to offset a substantial portion of the proposed tax
assessments. The Company believes that the ultimate resolution of this
matter will not have a material adverse effect on its financial position.

The Company's federal tax filing with respect to the year ended December
31, 1996 is presently being reviewed by the IRS, which has questioned the
allocation of the purchase price made by the Company in connection with
the acquisition of  Swfte International, Ltd. in November 1995, and
related amortization and other deductions. The IRS has not proposed any
assessment from their review, nor has it indicated when it expects to
conclude its audit or if it intends to propose adjustments to the
Company's federal income tax returns claiming additional tax due. At this
time, it is not possible to quantify the amount of additional taxes, if
any, the IRS will claim are due. There can be no assurance that the
Company will prevail in its position, or that the appeals, if any, and
final resolution of any IRS claims will not have a material adverse
impact on the Company's liquidity, financial position, or results of
operations.


Item 9. Changes and Disagreements With Accountants on Accounting and 
        Financial Disclosure

On January 15, 1999, Arthur Andersen LLP resigned as auditors of Expert
Software, Inc. (the "Company"), and, concurrently, management of the
Company engaged Grant Thornton LLP to audit the consolidated financial
statements of Expert Software, Inc. and Subsidiaries as of and for the
year ending December 31, 1998.  The decision to change auditors was
approved by the Audit Committee of the Company's Board of Directors.

The reports of Arthur Andersen LLP on the Company's consolidated
financial statements for the past two fiscal years ended December 31,
1997 and 1996 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit
scope, or accounting principles. In connection with the audits of the
Company's financial statements for each of the two fiscal years ended
December 31, 1997 and 1996, and in the subsequent interim periods, there
were no disagreements with Arthur Andersen LLP on any matters of
accounting principles or practices, financial statement disclosure, or
auditing scope and procedures which, if not resolved to the satisfaction
of Arthur Andersen LLP, would have caused Arthur Andersen LLP to make
reference to the matter in their reports.

During the two most recent fiscal years ended December 31, 1997 and
during the subsequent interim period prior to engaging Grant Thornton
LLP, neither the Company nor someone on the Company's behalf consulted
with Grant Thornton LLP regarding either the application of accounting
principles to a specified transaction, either completed or proposed, or
the type of audit opinion that might be rendered on the Company's
financial statements.

The predecessor auditor informed the Company of the existence of no
reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.

Arthur Andersen LLP furnished a letter addressed to the Commission
agreeing with the above statements. A copy of that letter, dated January
19, 1999, was filed as Exhibit 16 to the Company's Form 8-K dated January
15, 1999 .
<PAGE>

                                 PART III

Item 10.   Directors and Executive Officers of the Registrant

                      Information Regarding Directors

Set forth below is certain information regarding the Directors of the
Company, based on information furnished by them to the Company.
<TABLE>
                                                   Director
      Name                                   Age    Since
      ------------------------------------- ----- ---------
    <S>                                   <C>    <C>
      Class I - Term Expires 1999

      Kenneth P. Currier..................   50     1992
      A. Bruce Johnston...................   39     1992

      Class II-Term Expires 2000

      Douglas G. Carlston.................   51     1998
      Michael S. Murray...................   36     1998

      Class III-Term Expires 1998

      Susan A. Currier....................   49     1992
      William H. Lane III.................   60     1997
</TABLE>
      -------------------------------------

The principal occupation and business experience during at least the last
five years for each Director of the Company is set forth below.

Kenneth P. Currier, a co-founder of the Company, has served as a
Director, Chief Executive Officer and Secretary of the Company since its
inception in October 1992.  Mr. Currier also co-founded the Company's
predecessor, Softsync, Inc. ("Softsync") a publisher of consumer
software, in 1982, and served as President of Softsync from 1990 until
formation of the Company in 1992.  Mr. Currier is the spouse of Susan A.
Currier, President and a Director of the Company.

A. Bruce Johnston has served as a Director of the Company since October
1992.  Mr. Johnston has been a Principal of TA Associates, a private
equity investor, since January 1996 and was a Vice President of TA
Associates from June 1992 to December 1995.  Prior to that, Mr. Johnston
was a General Manager of Lotus Development Corporation, a software
publisher, from June 1988 to June 1992.  Mr. Johnston serves as a
director of Restrac, Inc., a client-server application company, as well
as a number of privately-held companies.

Douglas G. Carlston has served as a Director of the Company since October
1998.  Mr. Carlston previously served on the Company's Board of Directors
from December 1993 until December 1996.  He was the Chief Executive
Officer and Chairman of the Board of Broderbund Software, Inc., a
publisher of consumer software, which was acquired by The Learning
Company Inc. in August 1998.  Mr. Carlston co-founded Broderbund
Software, Inc. in 1980 and served there in executive capacities until its
acquisition in 1998.

Michael S. Murray has served as a Director of the Company since October
1998.  Mr. Murray has been General Partner of New Millennium Venture
Partners, LLC since September 1998.  Prior to that, Mr. Murray served as
the General Manager of Broderbund Software's Online Business Unit and was
the Managing Director of that company's Online Venture Fund.  Prior to
joining Broderbund in 1996, Mr. Murray was managing the Broadband product
development group for Pacific Telesis, where he served in various
management positions from 1984 to 1996.

Susan A. Currier, a co-founder of the Company, has served as a Director
and President of the Company since its inception in October 1992.  Ms.
Currier also co-founded the Company's predecessor, Softsync, in 1982, and
served as Vice President responsible for sales and marketing of Softsync
from 1990 until formation of the Company in 1992.  Ms. Currier is the
spouse of Kenneth P. Currier, Chief Executive Officer and a Director of
the Company.

William H. Lane III has served as a Director of the Company since his
appointment by the  Board of Directors on January 29, 1997. Mr. Lane
retired as Vice President, Chief Financial Officer, Secretary and
Treasurer of Intuit, Inc. a software publisher, in July 1996. He held the
same positions at ChipSoft, Inc. from July 1991 until Intuit acquired
ChipSoft in December 1993. He also served as Vice President, Finance and
Administration for Honeywell Information Systems.  Mr. Lane also serves
as a director of International Microcomputer Software, Inc., a developer
and publisher of visual productivity software for businesses and
consumers, and Metacreations Corporation, a developer and publisher of
graphics software for use in print and computer graphics applications.
<PAGE>

                            Executive Officers

The names and ages of all current executive officers of the Company and
the principal occupation and business experience during at least the last
five years for each are set forth below.

<TABLE>
      Name                           Age    Position
      ----------------------------   ----   ------------------------
<S>                                <C>    <C>                                                      
      Kenneth P. Currier.........    50     Chief Executive Officer and
                                            Secretary

      Susan A. Currier ..........    49     President

      Timothy R. Leary...........    47     Executive Vice President of Sales

      Katherine A. Brunn.........    51     Vice  President of North
                                            American Sales

      Anne E. Aitken.............    40     Vice President of Marketing

      David R. Turner............    33     Vice President of Development

      Michael A. Appel...........    54     Vice President of Operations

      Steven R. Mountain.........    42     Chief Financial Officer
      ----------------------------
</TABLE>

Mr. Currier has held the positions of Chief Executive Officer and
Secretary of the Company since the Company's inception in October 1992.
Mr. Currier has also been a Director of the Company since 1992.  See
"Information Regarding Directors" above.

Ms. Currier has held the position of President of the Company since the
Company's inception in October 1992.  Ms. Currier has also been a
Director of the Company since 1992.  See "Information Regarding
Directors" above.

Timothy R. Leary has served as Executive Vice President of Sales of the
Company since January 1998, and as Vice President of Sales of the Company
from its formation in October 1992 until December 1997.

Katherine A. Brunn has served as Vice President of North American Sales
of the Company since January 1998.  Prior to that, Ms. Brunn was the
President and Chief Executive Officer of MicroTech Marketing Services,
Inc., a sales, marketing and consulting firm serving the computer
industry, since June 1984.

Anne E. Aitken has served as Vice President of Marketing of the Company
since March 1997.  Prior to that, Ms. Aitken served as Senior Director of
Marketing at Blockbuster Entertainment Inc. from September 1995 to
January 1997.  Prior to Blockbuster, Ms. Aitken was Director of
Advertising with Burger King Corporation from September 1992 to September
1995.

David R. Turner has served as Vice President of Development of the
Company since December 1997. Prior to that, Mr. Turner was Director,
External Applications Engineering for Walt Disney Interactive from April
1995 to December 1997. Prior to Disney, Mr. Turner was Vice President and
Director of Development for IntraCorp, Inc., from October 1987 to March
1995.

Michael A. Appel has served as Vice President of Operations of the
Company since March 1996.  Prior to that, Mr. Appel was Director of
Manufacturing for Bleyer Industries from January 1992 through February
1996. Prior to that, Mr. Appel was Vice President of Operations for
Superior Toy from June 1990 through December 1991.

Steven R. Mountain has served as Chief Financial Officer of the Company
since September 1998, and previously served the Company as Controller,
and as Manager of Financial Reporting and Analysis, since December 1995.
Prior to that, Mr. Mountain was Controller at Tiger Direct, Inc., a
catalog reseller of computer software and hardware, from June 1995 to
November 1995.  Prior to Tiger Direct, Mr. Mountain was Manager, Investor
Relations, and Manager, Financial Reporting and Analysis, of Equinox
Systems Inc., which designs and markets server-based communications
products for remote access, industrial and commercial point-of-sale
systems, from August 1992 to June 1995. Mr. Mountain has indicated that
he will leave the Company near the end of March 1999, and has agreed to
assist with transition issues on a consulting basis. The Company has
engaged an interim chief financial officer to provide continuity in this
function.


Each of the officers holds his respective office until the regular annual
meeting of the Board of Directors following the annual meeting of
stockholders and until his successor is duly elected and qualified or
until his earlier resignation or removal.


    Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of the
Company's outstanding shares of Common Stock, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and
Nasdaq.  Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Section
16(a) reports were required for those persons, the Company believes that
during the fiscal year ended December 31, 1998, all filing requirements
were complied with, except in the case of Susan A. Currier who failed to
timely file one report regarding a scheduled sale of the Common Stock.

<PAGE>

Item 11.                 Executive Compensation

The following sections of this Annual Report set forth and discuss the
compensation paid or awarded during the last three years to the Company's
Chief Executive Officer and the four other most highly compensated
executive officers who earned in excess of $100,000 during the year ended
December 31, 1998 (collectively, the "Named Executives").


Summary Compensation Table

The following table shows for the fiscal years ended December 31, 1998,
1997, and 1996 compensation paid by the Company to the Named Executives.

<TABLE>
                                             Long Term Compensation
                                             -----------------------
                     Annual Compensation        Awards        Payouts
                     --------------------    -------------    ------
                                  Other       Rest-  Securities      All
                                  Annual      ricted Under-    LTIP  Other
Name and        Year Salary Bonus Compens-    Stock  lying     Pay-  Compen-
Principal                         ation       Awards Options   out   sation  
Position              ($)   ($)    ($)        ($)    (#)       ($)  ($) (2)
-------------- ----- ------- ----- --------- ------ --------  ----- --------
<S>           <C>  <C>     <C>   <C>       <C>    <C>        <C>   <C>  
Kenneth P.      1998 200,000 32,564 --         --   90,000     --    5,079
Currier
Chief           1997 170,000  --    --         --   70,000     --    5,579
Executive
Officer
and Secretary   1996 170,000  --    --         --   130,000(1) --       --

Susan A.        1998 200,000 32,564 --         --   90,000     --    5,079
Currier
President       1997 170,000  --    --         --   70,000     --    5,579
                1996 170,000  --    --         --   130,000(1) --       --

Timothy R.      1998 150,000 17,948 --         --   75,000     --       --
Leary
Executive       1997 100,000  7,551 --         --   65,000     --       --
Vice President
of Sales        1996 100,000 26,332 --         --   10,000     --       --

Katherine A.    1998 130,0024,874   --         --   95,000     --       --
Brunn
Vice
President of
North
American Sales

Anne E. Aitken  1998 124,000  9,695 --         --   75,000     --    2,100
Vice            1997  97,308 10,146 --         --   40,000     --    1,620
President of
Marketing
----------------
</TABLE>

(1) The options granted to Mr. and Mrs. Currier during 1996 were canceled
    by the Board of Directors in April 1997.

(2) Represents matching contributions to the accounts of each Named
    Executives participating under the Company's 401(k) savings plan,
    which was implemented January 1, 1997.



<PAGE>

Option Grants in Last Fiscal Year

The following table sets forth each grant of stock options during 1998 to
the Named Executives.  No stock appreciation rights ("SARs") have been
granted.
<TABLE>
                                                        Potential
                                                       Realizable
                                                        Value at
                      Individual Grants              Assumed Annual
                                                     Rates of Stock
                                                          Price
                                                      Appreciation
                                                       for Option
                                                        Term (3)
              --------------------------------------  --------------
              Number     % of
              of         Total
              Securities Options/SARs Exercise
              Underlying Granted      or Base  Expir-     
Name          Options    to           Price    ation   5%($)  10% ($)
              Granted    Employees    ($/Sh)   Date            
              (#) (1)    in
                         Fiscal
                         Year (2)
------------- --------- ----------    ----- --------- -------- ------
<S>         <C>          <C>         <C>  <C>        <C>     <C>
Kenneth P.    90,000        8.2%       1.32 02/25/08   74,713  189,337      
Currier                                       --     
                                            12/11/08

Susan A.      90,000        8.2        1.32 02/25/08   74,713  189,337      
Currier                                       --     
                                            12/11/08

Timothy    R. 75,000        6.9        1.32 04/06/08   62,261  157,781      
Leary                                         --     
                                            12/11/08

Katherine A.  95,000        8.7        1.32 01/14/08   78,863  199,855      
Brunn                                         --     
                                            12/11/08

Anne E.       75,000        6.9        1.32 04/06/08   62,261  157,781 
Aitken                                        --             
                                            12/11/08
--------------
</TABLE>
(1)  All options were granted pursuant to the Amended and Restated 1992
     Stock Option Plan (the "1992 Option Plan") and vest in equal quarterly
     increments over a four year period.  Unvested shares accelerate and
     become vested upon a change of control of the Company.

(2)  Percentages are based on a total of shares of Common Stock underlying
     all options granted to employees of the Company in 1998.

(3)  This column shows the hypothetical gains or option spreads of the
     options granted based on assumed annual compound stock appreciation
     rates of 5% and 10% over the full 10-year terms of the options.  The
     5% and 10% assumed rates of appreciation are mandated by the rules of
     the Securities and Exchange Commission and do not represent the
     Company's estimate or projection of future Common Stock prices.


Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values

The following table sets forth the shares acquired and the value realized
upon exercise of stock options during 1998 by the Named Executives and
certain information concerning the number and value of unexercised options.
<TABLE>
                                     Number of           Value of
                                     Securities        Unexercised
                                     Underlying        In-the-Money
                                    Unexercised         Options at
                                     Options at       FY-End ($) (1)
                                     FY-End (#)
                                 ----------------- ---------------------
               Shares   Value
Name           Acquired Realized Exercis-  Unexer-  Exercis-  Unexer-
               on         ($)    able      cisable  able      cisable
               Exercise
                 (#)
-------------- -------- -------- --------- -------- --------- ----------
<S>             <C>    <C>      <C>      <C>      <C>        <C>   
 Kenneth P.     20,000      --    233,775  124,975  312,981    90,816
 Currier......
 Susan A.           --      --    253,775  124,975  351,601    90,816
 Currier......
 Timothy R.         --      --     83,130  114,440  111,041    81,367
 Leary........
 Katherine A.       --      --     18,437   87,563   13,109    62,257
 Brunn........
 Anne E.            --      --     22,314   92,686   15,865    65,900
 Aitken.......
---------------
</TABLE>
(1)  Based on the fair market value of the Common Stock on December 31,
     1998 ($2.031 per share), less the aggregate option exercise price.
     Options are in-the-money if the market value of the shares covered
     thereby is greater than the option exercise price.


Compensation of Directors

The compensation plan for non-employee directors was amended by the Board
on February 3, 1997. In accordance with the plan, such outside directors
receive an annual retainer of $5,000, $1,500 per Board meeting except for
telephonic meetings, $250 per each telephonic Board meeting, and
additional compensation to members of the Audit and Compensation
Committees in the amount of $500 per meeting attended in person, and $250
per each telephonic committee meeting. All directors are reimbursed for
expenses incurred in connection with attendance at meetings.

The Company has an Amended and Restated 1992 Stock Option Plan (the "1992
Option Plan") pursuant to which eligible non-employee directors are
entitled to receive options to purchase shares of Common Stock in
accordance with the formula provisions thereof. Although the non-employee
directors are eligible to receive options pursuant to certain formula
provisions of the 1992 Option Plan, no options have been granted to date
pursuant to such formula provisions.

The Company also has the 1997 Stock Option Plan for Directors (the "1997
Directors Plan") pursuant to which eligible non-employee directors
receive non-qualified options to purchase 30,000 shares of Common Stock
upon their election or appointment as a director, which options shall
vest in calendar quarterly installments over four years; and options to
purchase 5,000 shares of Common Stock each January 1 during his/her
service as a director, which options shall vest in quarterly installments
over one year. All options granted under the 1997 Directors Plan have a
per share exercise price equal to the per share fair market value of the
Common Stock on the date of grant.


Employment Agreements and Change-in-Control Arrangements

As of February 23, 1995, the Company entered into employment agreements
with each of Kenneth P. Currier and Susan A. Currier pursuant to which
they are employed as Chief Executive Officer and President of the Company,
respectively.  These employment agreements currently provide for the
payment of an annual salary to each of the Curriers, which is subject to
change by the Compensation Committee of the Board of Directors.

These employment agreements also entitle each of the Curriers to receive
annual cash bonuses in amounts, and based upon the achievement of Company
objectives, established from year-to-year by the Compensation Committee.
These agreements are subject to automatic one-year extensions on each
December 31st unless earlier terminated by either the executive or the
Company.  Under the employment agreements, each of the Curriers is
entitled to severance benefits equal to six months salary and benefits
plus a pro rated cash bonus in the event of either a termination of their
employment by the Company without cause or a termination by the executive
in response to certain changes in the executive's employment
circumstances, subject to increase to one-year's salary and benefits plus
a pro rated cash bonus after a change in control of the Company (as
defined in the agreements) in the event of either a termination of
employment by the Company without cause or a termination by the executive
in response to certain changes in the executive's employment
circumstances. On February16, 1999, the Compensation Committee also
approved a bonus equal to one-year's salary to each of the Curriers in the
event the Company is sold during 1999, and the transaction closes at terms
acceptable to the Board of Directors. Employment Agreements executed in
connection with the Merger provide that the Curriers will receive a
portion of these bonuses in restricted stock.

Under the terms of his employment, Mr. Mountain would receive three
months' severance pay in the event his employment is terminated without
cause, or six month's salary in the event his employment is terminated due
to change of control.

Effective February 18, 1998, all employees of the Company qualify under a
program which entitles any employee who might lose their employment as a
result of a change in control to receive three months base compensation
at the time of separation, provided the employee has performed their
duties to the date of separation. This policy was extended for all
employees until February 17, 2000.

Since April 1997, options granted to officers, employees and directors
under the Company's stock option plans have provided for acceleration of
unvested shares in the event of a change of control of the Company (as
defined in the option plans). At December 31, 1998, there were options to
purchase approximately 1,299,000 shares of the Company's common stock
that would become vested in the event of such a change in control of the
Company.


Compensation Committee Interlocks and Insider Participation

From January 1998 to October 1998, the members of the Compensation
Committee of the Board of Directors were Stephen J. Clearman and A. Bruce
Johnston. Since October 1998, the Compensation Committee consists of
Douglas G. Carlston and William H. Lane III.  Messrs. Clearman and
Johnston are each associated with investment partnerships which own or
previously owned Common Stock and which previously held shares of
preferred stock of the Company and subordinated notes issued by the
Company. During 1995, the Company redeemed all of the outstanding
preferred stock and repaid all of its subordinated indebtedness. See
"Certain Relationships and Related Transactions". No executive officers of
the Company serve on the Compensation Committee.


Item 12.Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the
Company's Common Stock as of February 28, 1999 by (i) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) each of the Company's Directors, (iii) each of the
Named Executive Officers and (iv) all of the Company's executive officers
and Directors as a group.
<TABLE>
                                             Shares
                                             Beneficially Percent
     Directors,  Executive  Officers  and    Owned        of
     Stockholders                              (1)        Class (2)
     -------------------------------------- ----------    -------- 
   <S>                                     <C>          <C> 
     TA Associates Group.................... 2,241,914 (3)  29.4%
       High Street Tower, Suite 2500
       125 High Street
       Boston, MA  02110

     Special Situations Group............... 1,121,100 (4)  14.7%
       153 East 53  Street, Floor 51
       New York, NY  10022

     Kenneth P. Currier.....................   816,053 (5)  10.0%
     Susan A. Currier.......................   816,053 (6)  10.0%
     A. Bruce Johnston......................    26,517 (7)      *
     William H. Lane III....................    31,720 (8)      *
     Douglas G. Carlston....................     6,399 (9)      *
     Michael S. Murray......................     6,399 (10)     *
     Timothy R. Leary.......................   139,935 (11)  1.8%
     Katherine A. Brunn.....................    41,519 (12)     *
     Anne E. Aitken.........................    36,689 (13)     *
     All directors  and  executive  officers 1,173,811 (14) 13.9%
     as a group (12 persons)................
     ----------------------------------------
     *  Represents   less  than  1%  of  the outstanding shares.
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
    Securities and Exchange Commission and generally includes voting or
    investment power with respect to securities.  Shares of Common Stock
    subject to options that are currently exercisable or exercisable
    within 60 days of February 28, 1999 are deemed to be beneficially
    owned by the person holding such options for the purpose of computing
    the percentage of ownership of such person, but are not treated as
    outstanding for the purpose of computing the purpose of an other
    person.

(2) Applicable percentage of ownership is based on 7,627,881 shares of
    Common Stock outstanding as of February 28, 1999 together with
    applicable options for each stockholder.

(3) Includes 1,121,304 shares of Common Stock held by Advent VI L.P., 503,329
    shares held by Advent Atlantic and Pacific II L.P., 181,759 shares held by
    Advent Industrial II L.P., 139,814 shares held by Advent New York
    L.P., 197,138 shares held by Chestnut II Limited Partnership, 81,792
    shares held by Chestnut Capital International III L.P., and 16,778
    shares held by TA Venture Investors, L.P.  The respective general
    partners of Advent VI L.P., Advent Atlantic and Pacific II L.P.,
    Advent Industrial II L.P., Advent New York L.P. and TA Venture
    Investors L.P. (collectively, the "TA Associates Group") exercise sole
    investment and voting power with respect to shares of Common Stock
    held by such entities.  A. Bruce Johnston, a Director of the Company,
    is a Principal of TA Associates.

(4) Includes 768,800 shares of Common Stock held by Special Situations
    Fund III, L.P., 90,900 shares of Common Stock held by Special
    Situations Technology Fund, L.P., and 261,400 shares of Common Stock
    held by Special Situations Cayman Fund, L.P.  The respective general
    partners of Special Situations Fund III, L.P., Special Situations
    Technology Fund, L.P., and Special Situations Cayman Fund, L.P
    (collectively, the "Special Situations Group") exercise sole
    investment and voting power with respect to shares of Common Stock
    held by such entities.

(5) Includes 385,976 shares of Common Stock beneficially owned by Mr.
    Currier's wife, Susan A. Currier, as to which Mr. Currier disclaims
    beneficial ownership, 76,000 shares beneficially owned by Mr. and Ms.
    Currier jointly, and 263,777 shares which Mr. Currier may acquire upon
    the exercise of stock options within 60 days of February 28, 1999.

(6) Includes 354,077 shares of Common Stock beneficially owned by Ms.
    Currier's husband, Kenneth P. Currier, as to which Ms. Currier
    disclaims beneficial ownership, 76,000 shares beneficially owned by
    Mr. and Ms. Currier jointly, and 283,776 shares which Ms. Currier may
    acquire upon the exercise of stock options within 60 days of February
    28, 1999.

(7) Includes 3,117 shares of Common Stock beneficially owned by A. Bruce
    Johnston through TA Venture Investors L.P. which are included in the
    16,778 shares described in footnote (3) above as being owned by TA
    Venture Investors L.P.  Does not include any shares beneficially owed
    by Advent VI L.P., Advent Atlantic and Pacific II L.P., Advent
    Industrial II L.P. or Advent New York L.P., or the remainder of the
    shares described in footnote (2) above as being owned by TA Venture
    Investors L.P., as to which Mr. Johnston disclaims beneficial
    ownership. Also includes 23,400 shares of Common Stock which Mr.
    Johnston may acquire upon the exercise of stock options within 60 days
    of February 28, 1999.

(8) Includes 27,720 shares of Common Stock which Mr. Lane may acquire upon the
    exercise of stock options within 60 days of February 28, 1999, and 4,000
    shares of Common Stock owned by Mr. Lane's wife and grandchildren.

(9) Consists of 6,399 shares of Common Stock which Mr. Carlston may
    acquire upon the exercise of stock options within 60 days of February
    28, 1999.

(10)Consists of 6,399 shares of Common Stock which Mr. Murray may acquire upon
    the exercise of stock options within 60 days of February 28, 1999.

(11)Includes 102,505 shares of Common Stock which Mr. Leary may acquire upon the
    exercise of stock options within 60 days of February 28, 1999.

(12)Consists of 9,831 shares beneficially owned by Ms. Brunn's husband, as to
    which Ms. Brunn disclaims beneficial ownership, and 31,688 shares which Ms.
    Brunn may acquire upon the exercise of stock options within 60 days of
    February 28, 1999.

(13)Consists of 36,689 shares of Common Stock which Ms. Aitken may acquire upon
    the exercise of stock options within 60 days of February 28, 1999.

(14)Includes 869,366 shares of Common Stock which may be acquired upon the
    exercise of stock options within 60 days of February 28, 1999.


Item 13.     Certain Relationships and Related Transactions

A. Bruce Johnston, a Director of the Company, is a Principal of TA
Associates.  Stephen J. Clearman, until October 1998 a Director of the
Company, is a general partner of the general partner of Geocapital II,
L.P.  Charles E. Noell III, until October 1998 a Director of the Company,
is a general partner of the general partner of JMI Equity Fund, L.P.
Kenneth and Susan Currier, who are married to one another, are Directors
and the Chief Executive Officer and President of the Company, respectively.

Katherine A. Brunn, Vice President of North American Sales since January
1998, was the President and Chief Executive Officer of MicroTech Marketing
Services, Inc. Ms. Brunn has retained her interest and position in
MicroTech. This firm provided sales and marketing services to the Company
in each of the last five years, and continues to provide such services.
During 1998 and 1997, the Company paid MicroTech commissions totaling
$140,000 and $221,000, respectively, for services performed on its behalf.

The Company has a policy whereby all transactions between the Company and
its officers, directors and affiliates (other than employment and
compensation matters) will be reviewed by the Audit Committee of the
Company's Board of Directors or a comparable committee.


                                  PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

       (a)(1) Financial statements:

       Reference is made to the Index set forth on page 20 of this Annual
Report on Form 10-K.

          (2) Financial Statements Schedules:
                                                       Page

       Reports of Independent Certified Public 
       Accountants on Schedules........................S-1

       Schedule II- Valuation and Qualifying Accounts..S-2

      All other schedules for which provision is made in the applicable
      accounting regulations of the Securities and Exchange Commission
      are not required under the related instructions or are not
      applicable and therefore have been omitted.

          (3) Exhibits
<TABLE>
       Exhibit No.  Description                               
       <S>   <C>  <C>
               2.1  Agreement and Plan of Merger, dated as of March 3,
                    1999, by and among the Expert, Activision, Inc. and
                    Expert Acquisition Corp., a Delaware corporation and
                    wholly owned subsidiary of Activision (11)
               3.1  Restated Articles of Incorporation of the Company (5)
               3.2  Amended and Restated By-Laws of the Company (5)
               4.1  Shareholders Rights Agreement between the Company and
                    The First National Bank of Boston dated November 9,
                    1995 (10)
               4.2  Amendment No. 1 to Shareholder Rights Agreement, dated
                    as of November 2, 1995, between Expert and The First
                    National Bank of Boston (12)
              10.1  Employment Agreement between the Company and Kenneth
                    Currier dated as of February 23, 1995 (2)
              10.2  Employment Agreement between the Company and Susan
                    Currier dated as of February 23, 1995 (2)
              10.3  Amended and Restated Stockholders Agreement among the
                    Company and certain stockholders dated as of October
                    31, 1995 (5)
              10.4  Lease between the Company and Douglas Entrance
                    Holdings Limited Partnership dated February 25, 1994
                    (3)
              10.5  Sublease Agreement between the Company and Commodore
                    Cruise Line, Limited dated May 9, 1994 (3)
              10.6  1992 Stock Option Plan, as amended (3)
              10.7  Revolving Credit Agreement between the Company and the
                    First National Bank of Boston dated as of October 23,
                    1992, as amended in December 1993 and on May 19, 1994,
                    June 30, 1994 and August 1, 1994 (3)
              10.8  Summary of the Company's Management Incentive Plan (3)
             10.10  Agreement and Plan of Merger among the Company, ESI
                    Acquisition Corp., Swfte and the stockholders of Swfte
                    dated as of October 16, 1995 (5) (#)
             10.11  Registration Rights Agreement by and among the Company
                    and certain stockholders dated as of November 2, 1995
                    (5)
             10.13  Amended and Restated Licensing Agreement between Swfte
                    and The United States Playing Card Company dated as of
                    May 1993, as amended on July 14, 1994, July 7, 1995
                    and July 21, 1995  (5) (#)
             10.14  Licensing and Royalty Agreement between the Company
                    and McDonald's Corporation dated as of January 2, 1997
                    (6)
             10.15  Sublease Agreement Between the Company and Enterprise
                    Consulting, Inc. dated as of May 1, 1996 (7)
             10.16  Announcement of Preliminary Fourth-Quarter Results (9)
             10.17  1997 Stock Option Plan for Directors (8)
             10.18  1997 Stock Option Plan for Officers and Employees (8)
                21  Subsidiaries of the Company (5)
              23.1  Consent of Grant Thornton LLP (1)
              23.2  Consent of Arthur Andersen LLP (1)
                27  Financial Data Schedule (EDGAR filing only)
       ------------

               (1)  Filed herewith.
               (2)  Incorporated by reference to the designated exhibit of
                    Amendment No. 1 to the Registration Statement on Form
                    S-1 (No. 33-89758 filed March 30, 1995).
               (3)  Incorporated by reference to the designated exhibit of
                    the Registration Statement on Form S-1 (No. 33-89758
                    filed February 24, 1995).
               (4)  Incorporated by reference to the designated exhibit of
                    registrant's Form 8-K (filed November 12, 1995).
               (5)  Incorporated by reference to the designated exhibit of
                    registrant's Annual Report on Form 10-K for the year
                    ended December 31, 1995.
               (6)  Incorporated by reference to the designated exhibit of
                    registrant's Form 8-K (filed February 26, 1997).
               (7)  Incorporated by reference to the designated exhibit of
                    registrant's Annual Report on Form 10-K for the year
                    ended December 31, 1996.
               (8)  Incorporated by reference to addenda to registrant's
                    Proxy Statement on Schedule 14A (filed May 23, 1997).
               (9)  Incorporated by reference to the designated exhibit of
                    registrant's Form 8-K (filed February 10,1998).
              (10)  Incorporated by reference to Exhibit 10.12 of
                    registrant's Form 8-K (filed November 12, 1995).
              (11)  Incorporated by reference to the designated exhibit of
                    Form  8-K (filed March 9, 1999).
              (12)  Incorporated by reference to Exhibit 4.1 of
                    registrant's Form 8-K (filed March 9, 1999).
               (#)  Confidential treatment granted as to portions of this
                    document.
</TABLE>

      (b) Reports on Form 8-K

      No Forms 8-K were filed during the last quarter of the year ended
      December 31, 1998. Subsequent to such time, two Forms 8-K have been
      filed.

      On January 15, 1999, the Company filed a report on Form 8-K in
      regard to its announcement of a change in its auditing firm (Item
      4).

      On March 9, 1999, the Company filed a report on Form 8-K in regard
      to its announcement of an Agreement and Plan of Merger dated as of
      March 3, 1999 by and among Expert, Activision, Inc. and Expert
      Acquisition Corp., a Delaware corporation and wholly owned
      subsidiary of Activision, Inc. (Items 5, 7).

      (c) Exhibits required by Item 601 of Regulation S-K

      The index to exhibits that are listed in Item 14(a)(3) of this
      report and not incorporated by reference follows the "Signatures"
      section hereof and is incorporated by reference.

      (d) Financial Statement Schedules required by Regulation S-X

      Reference is made to Item 14(a)(2).


                                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.

                                          EXPERT SOFTWARE, INC.

Date:  March 30, 1999                     By:  /s/ KENNETH P. CURRIER   
                                               Kenneth P. Currier
                                               Chief Executive Officer


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 in the capacities and on the dates indicated.

           Signature                     Title               Date
                                Director, Chief         March 30, 1999
    /s/ KENNETH P. CURRIER      Executive Officer and
      Kenneth P. Currier        Secretary (Principal
                                Executive Officer)

                                Chief Financial         March 30, 1999
    /s/ STEVEN R. MOUNTAIN      Officer (Principal
      Steven R. Mountain        Financial Officer and
                                Principal Accounting
                                Officer)


     /s/ SUSAN A. CURRIER       Director, President     March 30, 1999
       Susan A. Currier


    /s/ DOUGLAS G. CARLSTON     Director                March 30, 1999
      Douglas G. Carlston


     /s/ A. BRUCE JOHNSTON      Director                March 30, 1999
       A. Bruce Johnston


    /s/ WILLIAM H. LANE III     Director                March 30, 1999
      William H. Lane III


     /s/ MICHAEL S. MURRAY      Director                March 30, 1999
       Michael S. Murray




<PAGE>



      REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE



Board of Directors and Stockholders
Expert Software, Inc.

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements as of and for the year ended
December 31, 1998 included in this Form 10-K and have issued our report
thereon dated February 17, 1999.  Our audit was made for the purpose of
forming an opinion on those statements taken as a whole.  The schedule
listed under Item 14(a) of this Form 10-K is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.




GRANT THORNTON LLP

Miami, Florida,
  February 17, 1999



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


To the Stockholders
  of Expert Software, Inc.:

We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements as of and for the two years ended
December 31, 1997 included in this Form 10-K and have issued our report
thereon dated February 6, 1998.  Our audit was made for the purpose of
forming an opinion on those statements taken as a whole.  The schedule
listed under Item 14(a) of this Form 10-K is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.




ARTHUR ANDERSEN LLP

Miami, Florida,
  February 6, 1998.







                                    S-1

<PAGE>


                           EXPERT SOFTWARE, INC.

                                SCHEDULE II
                     VALUATION AND QUALIFYING ACCOUNTS
           FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                              (in thousands)


<TABLE>

                                Balance    Charged              
                                at         to Costs              Balance at
                                Beginning  and                   End
          Description           of Period  Expenses  Deductions  of Period
----------------------------------------------------------------------------
<S>                           <C>        <C>       <C>         <C>
Allowance for doubtful 
accounts and returns:

Fiscal year ended December 31,
1998  ..........................  $ 4,361    $10,976   $(11,985)  $ 3,352
                                ============================================
Fiscal year ended December 31,  
1997  ..........................  $ 5,061    $6,868    $ 7,568    $ 4,361
                                ============================================
Fiscal year ended December 31, 
1996............................  $ 1,659    $7,311    $ 3,909    $ 5,061
                                ============================================


</TABLE>






























                                    S-2

<PAGE>

                             INDEX TO EXHIBITS




                                                                      Sequential
                                                                      Page
        Exhibit    Description                                        Number
              No.

             23.1  Consent of Grant Thornton LLP......................    49
             23.2  Consent of Arthur Andersen LLP.....................    50