SECURITIES AND EXCHANGE COMMISSION

                        Washington, D.C. 20549



                              FORM 10-Q



[X]QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
ACT                            OF 1934

          For the quarterly period ended September 30, 1997



[  ]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
                           800 Douglas Road
                     Executive Tower, Suite #750
                        Coral Gables, FL 33134
                            (305) 567-9990



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

As of October 31, 1997, there were 7,548,494  shares of the Registrant's  Common
Stock, $ .01 par value, outstanding.

                  The exhibit index is on page 13.

                           Page 1 of 15.




<PAGE>



                        EXPERT SOFTWARE, INC.

                          INDEX TO FORM 10-Q

                 Nine Months Ended September 30, 1997





                                                               Page
                                                              ------
Part I - Financial Information
Item 1.  Financial Statements.
  Condensed Consolidated Balance Sheets as of
    September 30, 1997 and December 31, 1996.....................3
  Condensed Consolidated Statements of Operations for the
    Three Months and Nine Months Ended September 30, 1997       
    and 1996.....................................................4
  Condensed Consolidated Statements of Cash Flows for the
    Nine Months Ended September 30, 1997 and 1996................5
  Notes to Condensed Consolidated Financial Statements...........6
Item 2.  Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................7
                                                                 


Part II -- Other Information
Item 5.  Factors That May Affect Future Results.................12
Item 6.  Exhibits and Reports on Form 8-K.......................13

Signatures......................................................13







  This Form 10-Q  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  That May Affect
Future Results" on page 12 of this Form 10-Q.




<PAGE>



                   PART I -- FINANCIAL INFORMATION


Item 1.  Financial Statements.


<TABLE>
                           EXPERT SOFTWARE, INC.
                   CONDENSED CONSOLIDATED BALANCE SHEETS
                               (In thousands)

<S>                                   <C>         <C>
                                      September   December 31,
                                           30,
                                          1997        1996
                                       ---------   ---------
                ASSETS                      (unaudited)
CURRENT ASSETS:
   Cash and equivalents...............  $4,979      $2,959
   Accounts receivable, net...........   4,430       3,775
   Inventories, net...................   2,453       1,256
   Income taxes receivable............   1,864       2,397
   Prepaid expenses...................     534         425
   Deferred income taxes..............   1,874       2,616
                                       --------    --------
      Total current assets............  16,134      13,428
PROPERTY AND EQUIPMENT, net...........   1,344       1,897
DEFERRED INCOME TAXES.................   3,586       3,586
ACQUIRED INTANGIBLES, net.............      63         166
                                       --------    --------  
      Total assets.................... $21,127     $19,077
                                       ========    ========

 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable...................  $3,629      $3,226
   Accrued expenses...................   5,632       5,038
   Current portion of capital lease
   obligations........................      57          88
                                       --------    --------
                                
      Total current liabilities.......   9,318       8,352
                                       --------    --------  
OTHER OBLIGATIONS, net of current                    
portion...............................      --         300
                                       --------    --------  
STOCKHOLDERS' EQUITY:
   Preferred stock....................      --          --
   Common stock.......................      75          75
   Additional paid-in capital.........  23,319      23,198
   Accumulated deficit................ (11,585)    (12,848)
                                       --------    --------  
      Total stockholders' equity......  11,809      10,425
                                       ========    ========  
      Total liabilities and
       stockholders' equity........... $21,127     $19,077
                                       ========    ========  

</TABLE>



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


<PAGE>


<TABLE>

                       EXPERT SOFTWARE, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          (In thousands, except per share and share data)
                            (Unaudited)



<S>                               <C>                    <C>

                                    Three Months          Nine Months
                                       Ended                Ended
                                    September 30,        September 30,
                                    1997     1996        1997     1996
                                  -------- --------    -------- ---------

NET REVENUES...................... $9,035   $6,041     $24,136   $22,778
                                  -------- --------    -------- ---------
OPERATING COSTS AND EXPENSES:
  Cost of revenues................  3,503    2,408       9,287    13,152
  Marketing and sales.............  2,719    2,150       7,414     7,445
  General and administrative......  1,162    3,953       3,485     8,735
  Development.....................    724      978       2,107     2,728
  Loss on impairment of              
   intangible assets..............     --       --          --     5,700
                                  -------- --------    -------- ---------    
    Total operating costs and      
      expenses....................  8,108    9,489      22,293    37,760
                                  -------- --------    -------- --------- 

    Operating income (loss).......    927   (3,448)      1,843   (14,982)

Other income, net.................     84       20         162        89
                                  -------- --------    -------- --------- 

  Income (loss) before provision
   (benefit) for income taxes....   1,011   (3,428)      2,005   (14,893)

Provision (benefit) for income       
    taxes........................     374       --         742    (4,268)
                                  -------- --------    -------- --------- 

  Net income (loss)..............    $637   (3,428)    $ 1,263  $(10,625)
                                  ======== ========    ======== ========= 

  Net income (loss) per share of
    common stock.....             $   .08  $  (.46)    $   .16  $  (1.38)
                                  ======== ========    ======== ========= 

Weighted average number of
  common stock and stock             
  equivalents outstanding........   8,263    7,481       8,059     7,675
                                  ======== ========    ======== ========= 


</TABLE>











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


<PAGE>
<TABLE>
                       EXPERT SOFTWARE, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands)
                            (Unaudited)

<S>                                       <C>          <C>

                                            Nine Months Ended
                                              September 30,
                                          ----------------------
                                             1997        1996
                                          ----------  ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).........................  $1,263    $(10,625)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
  Depreciation of property and equipment..     601         881
  Amortization of acquired intangibles....     103         508
  Loss on impairment of assets............      --       5,700
  Deferred income tax provision (benefit)      742      (3,472)
  Imputed compensation on stock options...      41          --
Changes in current assets and liabilities:
  (Increase) decrease in accounts             
    receivable............................    (655)      2,688
  (Increase) decrease in income tax            
    receivable............................     532      (1,401)
  (Increase) decrease in inventories......  (1,197)      2,199
  (Increase) decrease in prepaid expenses.    (108)       (293)
  (Increase) decrease in other assets.....      --          10
  Increase (decrease) in accounts payable.     402        (873)
  Increase (decrease) in accrued expenses.     595       2,316
  Increase (decrease) in income taxes         
    payable...............................      (1)     (2,144)    
  Increase (decrease) in other               
    obligations...........................    (300)         --
                                          ----------  ----------
    Net cash provided by (used in)
     operating activities.................   2,018      (4,506)
                                          ----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Maturities of marketable securities.....      --       6,222
  Purchases of property and equipment.....     (48)       (750)
                                          ----------  ----------
    Net cash provided by (used in)
      investing activities................     (48)      5,472
                                          ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Stock options exercised.................      81          43
  Borrowings under capital lease                
   obligations............................      --         102
  Payments on capital lease obligations...     (31)       (100)
                                          ----------  ----------
    Net cash provided by financing             
     activities...........................      50          45
                                          ----------  ----------

    Net increase in cash and equivalents     2,020       1,010
CASH AND EQUIVALENTS, beginning of period    2,959         912
                                          ----------  ----------
CASH AND EQUIVALENTS, end of period.......  $4,979     $ 1,922
                                          ==========  ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
  Cash paid during the period for           
   interest............................... $     4     $    27
                                          ========== ==========

  Cash paid during the period for income    
   taxes.................................. $    --    $  2,748
                                          ========== ==========
</TABLE>
  The accompanying notes to condensed consolidated financial statements are an 
  integral part of these statements.

<PAGE>


                        EXPERT SOFTWARE, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 1997
                             (Unaudited)

1.    BASIS OF PRESENTATION

The condensed consolidated balance sheet as of December 31, 1996, which has been
derived from audited financial  statements,  and the unaudited interim condensed
consolidated  financial  statements included herein, have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.  Certain
information  and  note  disclosures   normally   included  in  annual  financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted pursuant to those rules and regulations, although
the  Company  believes  that  the  disclosures  made  are  adequate  to make the
information presented not misleading.  These financial statements should be read
in conjunction  with the financial  statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996.

In the opinion of the Company, the accompanying condensed consolidated financial
statements  contain all  adjustments  necessary to present  fairly the financial
position of the Company as of September 30, 1997,  and the results of operations
and cash flows for the three months and nine months ended September 30, 1997 and
1996. In addition to the normal  recurring  accruals,  as  previously  reported,
material  adjustments  were  recorded to the financial  statements  for the nine
months  ended  September  30, 1996.  As more fully  discussed in Part I, Item 2,
these adjustments  included recognizing a loss from the impairment of intangible
assets,  recording inventory losses, and providing additional allowances against
accounts  receivable for possible future returns from customers and for doubtful
accounts.  Results of operations and cash flows for the period ending  September
30, 1997,  are not  necessarily  indicative  of the results of operations of the
entire fiscal year.

The accounting  policies followed for quarterly financial reporting purposes are
the same as those disclosed in the Company's  audited  financial  statements for
the year ended December 31, 1996, included in the Form 10-K.

2.    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  sells  its  products  directly  to  large  retailers,  as  well  as  to
distributors.

3.    INVENTORIES

Inventories  consisted of the following as of September  30, 1997,  and December
31, 1996, (in thousands):

<TABLE>
<S>                              <C>        <C>

                                   1997      1996
                                ---------- ---------
       Finished goods............ $2,036    $1,101
       Raw materials.............    417       155
                                ---------- ---------
                                  $2,453    $1,256
                                ========== =========


</TABLE>


<PAGE>


4. NEWLY ISSUED ACCOUNTING STANDARD

In March 1997,  the Financial  Accounting  Standards  Board issued SFAS No. 128,
Earnings  Per Share,  which is required to be adopted as of December  31,  1997.
Upon  adoption,  all  prior  earnings  per  share  amounts  are  required  to be
retroactively restated.

The  computation  under SFAS No. 128 differs from the primary and fully  diluted
earnings per share  computed under APB Opinion No. 15 primarily in the manner in
which potential common stock is treated. Basic earnings per share is computed by
dividing net income by the weighted-average number of common shares outstanding.
In the computation of diluted earnings per share, the weighted-average number of
common shares  outstanding  is adjusted for the effect of all  potential  common
stock.

The pro forma basic and diluted  earnings per share  computed  according to SFAS
No. 128 for the quarter ended  September 30, 1997,  are $.08 each. The pro forma
basic and diluted earnings per share computed  according to SFAS No. 128 for the
quarter ended September 30, 1996 are $(.46) each.




Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations.


Results of Operations

The  following  table sets  forth  certain  statement  of  operations  data as a
percentage of net revenues, for comparative purposes, for the periods indicated.

<TABLE>

<S>                                    <C>     <C>     <C>    <C>


                                        Three Months   Nine Months
                                            Ended         Ended
                                        September 30, September 30,
                                        ------------- ---------------
                                         1997   1996   1997   1996
                                        ------ ------ ------ -------

     Net revenues....................... 100%    100%   100%   100%
                                        ------ ------ ------ -------
     Operating costs and expenses:
       Cost of revenues.................  39      40     38      58
       Marketing and sales..............  30      36     31      33
       General & administrative.........  13      65     14      38
       Development......................   8      16      9      12
       Loss on impairment of intangible   
        assets..........................  --      --     --      25
                                        ------ ------ ------  ------ 
                                          90     157     92     166
                                        ------ ------ ------  ------ 

     Operating income (loss)............  10     (57)     8     (66)
                                                      
     Other income (expense).............   1      --     --       1
                                         ----- ------ ------  ------

     Income (loss) before provision       
     (benefit) for income taxes.........  11     (57)     8     (65)
     Provision (benefit) for income        
     taxes..............................   4      --      3     (18)
                                        ------ ------ ------  ------ 

     Net income (loss)..................   7%    (57)%    5%   (47)%
                                        ====== ====== ======  ======  

</TABLE>


<PAGE>


General Comments Regarding 1996 Results of Operations

Results  for the three  months  ended June 30,  1996,  included  provisions  for
potential  excess  inventories  of $2.6 million and a reduction in the estimated
inventory value for product  returned of $1.4 million;  an increase in estimated
product returns that exceeded  expectations by $0.5 million;  an increase in the
provision  for  doubtful  accounts  of $1.0  million;  and  losses  recorded  in
connection  with the Swfte  acquisition  totaling $5.7 million.  The slowdown in
retail  sales  resulted  in the  Company not  meeting  sales  objectives,  which
contributed  to  excess  inventories.   In  addition,  the  Company  experienced
temporary  difficulties  in the  implementation  of new  management  information
systems which  contributed  to purchasing  higher levels of inventory  than were
necessary  in the normal  course of  business.  Additionally,  higher  levels of
returns  resulted in increased  inventory.  Based on the  foregoing,  management
determined  that the value  assigned to the returned  goods should be lower than
that assigned in prior periods,  and reserves for potential  excess  inventories
should be increased, causing an increase in the cost of revenues.

Additionally,  the products  obtained in the Swfte  acquisition  were selling at
levels  substantially  below projected levels.  Together with other developments
which are  described  below under "Loss on  Impairment  of  Intangibles",  these
events led  management  to record  during the second  quarter of 1996 a material
loss  on  the  impairment  of the  intangible  assets  arising  from  the  Swfte
acquisition.  This loss included  additional  reserves for returns and marketing
allowances against the acquired accounts receivable, additional reserves against
the  acquired  inventories,  adjustments  to  fixed  assets,  and  accruals  for
guaranteed royalty agreements entered into prior to the acquisition that are not
expected to be recouped in the ordinary  course of business.  See the discussion
at "Loss on Impairment of  Intangibles"  below for further  information on these
adjustments.


Comparison of Three Months Ended September 30, 1997 and 1996

Net  Revenues.  Net revenues  for the three months  increased to $9.0 million in
1997 from $6.0  million  in 1996,  an  increase  of $3.0  million,  or 50%.  Net
revenues  increased  both  domestically  and  internationally,  due primarily to
increased units sold.  International revenues represented 23% of net revenues in
1997 and 1996.

Cost of  Revenues.  Cost of  revenues  for the three  months  increased  to $3.5
million in 1997 from $2.4 million in 1996, an increase of $1.1 million,  or 46%,
due primarily to increased sales volume.  As a percentage of net revenues,  cost
of  revenues  represented  39%  and  40% of  net  revenues  in  1997  and  1996,
respectively.  Cost of revenues  consists  primarily of product  costs  (printed
material,  boxes,  disk and CD costs,  assembly and shipping),  freight charges,
reserves  for  excess  and  obsolete  inventories,   and  royalties  to  outside
programmers  and  content  providers.  The Company  expects  cost of revenues in
future periods will increase over those in the prior year due to anticipated mix
changes favoring boxed products,  which have higher packaging and freight costs.
The Company  believes  that  retailers  prefer such boxed  products due to their
additional marketing content and appeal.

Marketing and Sales.  Marketing and sales expense for the three months increased
to $2.7 million in 1997 from $2.1 million in 1996,  an increase of $0.6 million,
or 26%, and decreased as a percentage of net revenues to 30% in 1997 from 36% in
1996.  This  decrease  was  primarily  the  result  of  lower   promotional  and
advertising  costs.  As a result  of not  meeting  sales  expectations  in 1996,
marketing  costs  represented  a higher  percentage  of revenues in 1996 than in
1997. The Company's  marketing  spending  consists  principally of activities to
promote the Company's  products and brand name,  including  costs to promote and
support the Company's growing  international  sales,  in-store  promotions,  and
personnel  costs.  The  Company  intends to  continue  to launch  new  marketing
promotions and to hire additional  personnel as needed. As a result, the Company
expects  marketing  and sales  expenses to  increase  in dollar  amount and as a
percentage of revenues in the future.

General and Administrative.  General and administrative  ("G&A") expense for the
three  months  decreased  to $1.1  million in 1997 from $3.9  million in 1996, a
decrease of $2.8 million,  or 71%, and decreased as a percentage of net revenues
to 13% in 1997 from 65% in 1996,  primarily due to decreased legal costs.  Legal
costs  decreased  due to the  settlement  in  the  fourth  quarter  of  1996  of
litigation involving the former owners of Swfte. The Company expects general and
administrative  expenses  to decrease in 1997 as compared to 1996 as a result of
the  settlement  of the  Swfte  litigation,  and  lower  bad debt  expenses  and
personnel costs.

Development.  Development expense for the three months decreased to $0.7 million
in 1997 from $0.9  million in 1996,  a decrease  of $0.2  million,  or 26%,  and
decreased as a percentage of net revenues to 8% of net revenues in 1997 from 16%
in 1996.  Development expense includes expenses related to product upgrades, new
product  activities,  quality control and customer service  support.  During the
fourth quarter of 1996, the Company  reduced  development  personnel and did not
renew the lease for the facilities previously occupied by Swfte, which will help
to  contain  development  expenses  in future  periods.  The  Company  currently
believes  that the steps  taken to reduce  development  expenses in 1996 will be
partially offset by additional costs to develop new brands and titles, including
the  development of products to take advantage of the Internet and other on-line
capabilities.  The Company therefore expects development  expenses will increase
in future periods.

Other Income. Other income, which includes interest income and interest expense,
increased  to  $84,000  in 1997  from  $20,000  in  1996,  primarily  due to the
increased balance of interest bearing deposits and investments.

Provision  (Benefit)  for Income  Taxes.  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.


Comparison of Nine Months Ended September 30, 1997 and 1996

Net  Revenues.  Net revenues for the nine months  increased to $24.1  million in
1997 from $22.8 million in 1996, an increase of $1.3  million,  or 6%.  Domestic
net  revenues  in  1997  increased  due  primarily  to  increased   units  sold.
International net revenues decreased due to lower sales in the United Kingdom as
the  Company  is  transitioning  to a new  distributor.  International  revenues
represented 20% and 24% of net revenues in 1997 and 1996, respectively.

Cost of Revenues. Cost of revenues for the nine months decreased to $9.3 million
in 1997 from $13.2  million in 1996,  a decrease of $3.9  million,  or 29%,  and
decreased as a percentage of net revenues to 38% in 1997 from 58% in 1996.  This
decrease was  primarily  due to the  provisions of $2.6 million and $1.4 million
recorded in 1996 and discussed under General  Comments  above.  Cost of revenues
consists primarily of product costs (printed material, boxes, disk and CD costs,
assembly  and  shipping),  freight  charges,  reserves  for excess and  obsolete
inventories  and royalties to outside  programmers  and content  providers.  The
Company  expects cost of revenues in future  periods will increase over those in
the current  quarter due to anticipated  mix changes  favoring  boxed  products,
which have  higher  packaging  and freight  costs.  The  Company  believes  that
retailers prefer such boxed products due to their additional  marketing  content
and appeal.

Marketing  and Sales.  Marketing and sales expense for the nine months were $7.4
million in 1997 and 1996,  and  decreased as a percentage of net revenues to 31%
of net  revenues  in 1997  from 33% in 1996.  As a result of not  meeting  sales
expectations  in  1996,  marketing  costs  represented  a higher  percentage  of
revenues  in 1996  than in  1997.  The  Company's  marketing  spending  consists
principally  of  activities  to promote the  Company's  products and brand name,
including  costs to promote  and  support the  Company's  growing  international
sales,  in-store promotions and personnel costs. The Company intends to continue
to launch new marketing  promotions and to hire additional  personnel as needed.
As a result,  the Company  expects  marketing and sales  expenses to increase in
dollar amount and as a percentage of revenues in the future.

General and Administrative.  General and administrative  ("G&A") expense for the
nine  months  decreased  to $3.5  million in 1997 from $8.7  million in 1996,  a
decrease of $5.2 million,  or 60%, and decreased as a percentage of net revenues
to 14% from 38%,  respectively.  This  decrease was  primarily  due to decreased
provisions  for  doubtful   accounts,   decreased  legal  costs,  and  decreased
amortization  expense.  Provisions  for doubtful  accounts in 1996  included the
additional $1.0 million adjustment discussed under General Comments above. Legal
costs  decreased  due to the  settlement  in  the  fourth  quarter  of  1996  of
litigation involving the former owners of Swfte.  Amortization  decreased due to
the  write-off  in the second  quarter of 1996 of a  substantial  portion of the
intangible  assets associated with the acquisition of Swfte. The Company expects
general and administrative expenses to decrease in 1997 as compared to 1996 as a
result of the  settlement of the Swfte  litigation,  and lower bad debt expenses
and personnel costs.

Development.  Development  expense for the nine months decreased to $2.1 million
in 1997 from $2.7  million in 1996,  a decrease  of $0.6  million,  or 23%,  and
decreased as a percentage of net revenues to 9% of net revenues in 1997 from 12%
in 1996.  Development expense includes expenses related to product upgrades, new
product  activities,  quality control and customer service  support.  During the
fourth quarter of 1996, the Company  reduced  development  personnel and did not
renew the lease for the facilities previously occupied by Swfte, which will help
to  contain  development  expenses  in future  periods.  The  Company  currently
believes  that the steps  taken to reduce  development  expenses in 1996 will be
partially offset by additional costs to develop new brands and titles, including
the  development of products to take advantage of the Internet and other on-line
capabilities.

Loss on Impairment of Intangibles.  During the three months ended June 30, 1996,
management  reevaluated the carrying value of the intangible  assets recorded in
connection with the November 1995 acquisition of Swfte.  These intangible assets
consisted  of  acquired  software  technology,  a license  agreement  to use the
BicycleAE  brand name in certain card game  software,  the  assembled  workforce
acquired,  and Swfte's customer list. This reevaluation of the intangible assets
was necessitated by management's  determination  based on then-recent results of
operations that the expected sales and cash flows from the acquired assets would
be substantially lower than had been previously expected.

The  acquired  Swfte  products   originally   projected  to  generate  the  most
significant  sales and cash  flows  were  selling  at  substantially  lower than
expected  rates.  Certain  of those  titles  faced new  competition  from  other
publishers,  which had taken market share away from those titles. In particular,
the card games  category  had become more  competitive  as a result of marketing
efforts  by Sierra On Line and  others.  Additionally,  certain  other  acquired
titles were released shortly before the acquisition of Swfte. Based on low sales
rates, some retailers were discontinuing  certain of these titles and management
determined their expected future sales were minimal.

A  significantly  higher  level of returns  was  experienced  with the  products
acquired  in the  acquisition  over the  rate of  returns  experienced  with the
Company's other products. Management believes that certain titles were sold into
the  distribution  and retail  channel prior to the  acquisition at higher rates
than  were  supported  by  sales  through  to  the  end  users.   This  prompted
distributors  and retailers to return these products.  This overstock of product
and  returns  experience  had,  in  management's  judgment,  damaged  the market
receptiveness  to the acquired  products and reduced their expected future sales
levels.

Lower than  expected  acceptance  of the acquired  products,  together  with the
terminations  of personnel in  connection  with closing the Swfte  facilities in
Delaware to consolidate all operations at the Company's headquarters in Florida,
caused management to write-off the value originally ascribed to the workforce in
place.

Value was originally  ascribed to Swfte's customer list based upon  management's
assessment  of  the  value  of  Swfte's   experience  in  dealing  with  certain
educational channels and bookstores.  Due to the lower than expected sales rates
and higher than expected returns rates for the acquired products,  management no
longer believed this to be true, and accordingly wrote-off the costs assigned to
the customer list.

These  factors  were  determined  not to be  short-term  or temporary in nature,
causing management to reduce the carrying value of the intangible assets by $3.5
million.  Management  also  determined  that the lower  demand for the  acquired
products and customer claims for pre-acquisition cooperative marketing and price
protection credits required an additional  provision for reserves for returns of
$1.1  million  higher  than  originally   provided  on  the  acquired   accounts
receivable; and a provision for reserves $0.2 higher than originally provided on
the acquired  inventory.  Such  provisions were recorded during the three months
ended June 30,  1996,  and are  included  in the stated  loss on  impairment  of
intangibles.  Additionally,  the  lower  than  expected  sales and  higher  than
expected  returns  levels on the acquired  products  indicated  that the minimum
royalties  required under certain  contracts and prepaid  royalties would not be
recouped in the ordinary course of business.  Approximately $0.3 million of such
royalties  were  therefore  accrued  as  part  of  the  loss  on  impairment  of
intangibles as of June 30, 1996.  Similarly,  losses 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.

Other Income. Other income, which includes interest income and interest expense,
increased  to  $162,000  in 1997  from  $89,000  in 1996,  primarily  due to the
increased balance of interest bearing deposits and investments.

Provision for Income Taxes. 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 and 1996.


Liquidity and Capital Resources

As of  September  30,  1997,  the Company had $6.8  million in working  capital,
including  $5.0  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
provided by  operating  activities  was $2.0  million for the nine months  ended
September  30, 1997,  primarily  due to  profitable  results of  operations  and
receipt  of $0.5  million  of  income  tax  refunds  from  taxes  paid in  1996.
Management  believes  that it has adequate  financial  resources for its planned
operations through the next twelve months.

The Company  believes that cash  generated by  operations  may be affected by an
increase in working capital  requirements as it continues 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 $5.0 million  through May 31,  1998,  the maturity
date.  The  loan  agreement  contains  restrictive  covenants.  There  can be no
assurance  that the  Company's  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.

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 royalty and amortization
deductions with respect to the acquired  assets.  In June 1997, the IRS proposed
assessments  for additional  taxes and penalties of  approximately  $2.0 million
plus  interest  to date of  payment.  The  Company  and its  special tax counsel
believe  that it has  properly  reported  its  income  and  paid  its  taxes  in
accordance with applicable laws and intends to contest the proposed  adjustments
vigorously.  Management  does not believe that the final  resolution  of the IRS
claims will have a material adverse impact on the Company's financial position.

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.



<PAGE>


                     PART II - OTHER INFORMATION


Item  5.  Factors That May Affect Future 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 that 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.

The Company  wishes to caution  readers that the  following  important  factors,
among others, in some cases have affected,  and in the future could affect,  the
Company's actual results and could cause the Company's actual results throughout
1997 and beyond to differ materially from those expressed 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 required  inventory  levels 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 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  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. The competition for retail space is also likely to
increase due to the proliferation of consumer software products and companies.

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  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 is net  revenues  for the  quarter or to
quickly adapt its spending  levels within a quarter to reflect changes in demand
for its products.

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  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,  evolving  distribution  channels,  and the growth in
popularity  of the  Internet and other new  technologies  which could impact the
distribution and purchase of software.

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,  implementation and
expansion of the Company's  systems and operations to accommodate  the Company's
anticipated future revenues,  the outcome of current and future  examinations by
taxing  authorities,  and the  acquisitions of new businesses by the Company and
related charges and write-offs.  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.


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

(a)Exhibit 11.  Statement regarding computation of earnings per share.

(b)Exhibit 27.  Financial Data Schedule (EDGAR filing only).

(c)Reports on Form 8 K.  None.






                              SIGNATURES

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


                        Expert Software, Inc.

                         /s/ Charles H. Murphy
                         Charles H. Murphy,
                         Chief Financial Officer
                         (Principal Financial and Accounting Officer)


Dated:  November 14, 1997