<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

(Mark One)
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 0-24372

                            THE THORSDEN GROUP, LTD.
       (Exact name of small business issuer as specified in its charter)


 
          DELAWARE                                      33-0611746
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)



                      4505 SOUTH WASATCH BLVD., SUITE 340
                           SALT LAKE CITY, UTAH 84124
             (Address of principal executive offices and Zip Code)

                                 (801) 424-0044
              (Registrant's telephone number, including Area Code)



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

As of June 30, 1998, there were issued and outstanding 20,207,625 shares of the
Company's Common Stock, par value $.001 per share.


Transitional Small Business Disclosure Format (check one):   Yes     No  X
                                                                 ---    ---
<PAGE>
 
                               TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION
<TABLE> 
<CAPTION> 
                                                                                       Page No.
                                                                                       --------
<S>                                                                                    <C>                       
Financial Statements

1.      Unaudited Condensed Consolidated Balance Sheets as of June 30, 1998
                and March 31, 1998.........................................................3

        Unaudited Condensed Consolidated Statements of Income for the three months
        ended June 30, 1998 and 1997.......................................................4
 
        Unaudited Condensed Consolidated Statements of Cash Flows for the three months
                ended June 30, 1998 and 1997...............................................5
 
        Notes to Unaudited Condensed Consolidated Financial Statements.....................6
 
2.      Management's Discussion and Analysis or Plan of Operation..........................7
 
PART II.  OTHER INFORMATION...............................................................14
</TABLE> 
                                  Page 2 of 15
<PAGE>
 
                                    PART I

ITEM 1 - FINANCIAL STATEMENTS

                           THE THORSDEN GROUP, LTD.
                         (A Development Stage Company)

               Consolidated Condensed Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
 
 
                                          JUNE 30, 1998   MARCH 31, 1998
                                          -------------   -------------- 
<S>                                       <C>             <C>
ASSETS
CURRENT ASSETS
 Cash and cash equivalents                  $   570,872       $  568,612
 Marketable securities - available for          531,718          681,600
  sale
 Accounts receivable                              6,250            8,313
 Prepaid expenses                                     -                -
                                            -----------       ----------
  TOTAL CURRENT ASSETS                        1,108,840        1,258,525
 
 Equipment                                      201,049          199,099
 Less accumulated depreciation                   16,405            6,418
                                            -----------       ----------
  EQUIPMENT, NET                                184,644          192,681
OTHER ASSETS                                    130,257          128,980
                                            -----------       ----------
 
TOTAL ASSETS                                $ 1,423,741       $1,580,186
                                            ===========       ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES
 Accounts payable                           $   118,392       $   93,288
 Deferred income on maintenance                   4,167           10,417
  contracts
 Equipment lease obligations                     34,991           30,653
 Accrued liabilities                             32,580           70,928
                                            -----------       ----------
   TOTAL CURRENT LIABILITIES                    190,130          205,286
                                            -----------       ----------
 EQUIPMENT LEASE OBLIGATIONS                     17,024           26,319
 
STOCKHOLDERS' EQUITY
 Common stock                                    20,208           20,133
 Additional paid-in capital                   2,342,350        2,192,174
 Accumulated unrealized loss on                  (9,570)        (159,010)
  investments
 Accumulated (deficit)                       (1,136,401)        (704,716)
                                            -----------       ----------
 Total stockholders' equity                   1,216,587        1,348,581
                                            -----------       ----------
 TOTAL LIABILITIES AND STOCKHOLDERS'        $ 1,423,741       $1,580,186
  EQUITY                                    ===========       ==========
 
</TABLE>


                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  Page 3 of 15
<PAGE>
 
                            THE THORSDEN GROUP, LTD.
                         (A Development Stage Company)

             Consolidated Condensed Statement of Income (Unaudited)
<TABLE>
<CAPTION>
 
 
 
 
                                                                                From Inception
                                                                               ----------------
                                               Three Months Ended               June 11, 1992
                                               ------------------              ----------------
                                          June 30, 1998      June 30, 1997     To June 30, 1998
                                          -------------      -------------     ----------------
<S>                                       <C>                <C>                  <C>
Net Revenues                                $     6,250        $         -          $   150,521
                                            -----------        -----------          -----------
Costs and expenses:
  Cost of sales                                     851                  -                2,961
  Research and development                      197,638              1,183              482,998
  Marketing, general and administrative         246,113              9,445              825,164
                                            -----------        -----------          -----------
 
Operating costs and expenses                    444,602             10,628            1,311,123
                                            -----------        -----------          -----------
Operating (loss)                               (438,352)           (10,628)          (1,160,602)
 
Interest income                                   7,803                 22               28,647
Interest expense                                 (1,236)                 -               (4,438)
Other expense                                         -                  -                 (110)
Other income                                        100                  -                  100
                                            -----------        -----------          -----------
 
Net (loss)                                  $  (431,685)       $   (10,606)         $(1,136,403)
                                            -----------        -----------          -----------
Net (loss) per share                        $     (0.02)       $     (0.02)         $     (0.05)
Weighted average number of shares            20,207,625            424,600           20,207,625
 outstanding                                -----------        -----------          -----------
 
 
 
</TABLE>



                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  Page 4 of 15
<PAGE>
 
                            THE THORSDEN GROUP, LTD.
                         (A Development Stage Company)

           Consolidated Condensed Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
 
                                                     THREE MONTHS ENDED       CUMULATIVE FROM INCEPTION
                                                    -------------------       --------------------------
                                                          JUNE 30                   JUNE 11, 1992
                                                         ---------            --------------------------
                                                       1998      1997              TO JUNE 30, 1998
                                                       ----      ----         --------------------------
<S>                                                 <C>         <C>            <C>
CASH FLOWS (USED BY) OPERATING
 ACTIVITIES:
    Net (Loss)                                      $(431,685)  $(10,606)           $      (1,136,403)
    Adjustments to reconcile net income
     to net cash used for operating
     activities:
 
    Depreciation                                        9,989          -                       16,405
  Changes in Assets and Liabilities:
    Accounts Receivable                                 2,063    (40,000)                      (6,251)
    Prepaid Expenses                                        -          -                            -
    Accounts Payable                                   25,104     (6,786)                     118,395
    Deferred Income                                    (6,250)         -                        4,167
    Accrued Liabilities                               (38,348)    68,427                       32,580
                                                    --------------------       --------------------------
NET CASH (USED BY) OPERATING ACTIVITIES              (439,127)    11,035                     (971,107)
                                                    --------------------       --------------------------
CASH FLOWS (USED FOR) INVESTING
 ACTIVITIES:
    Additions to Equipment                             (1,952)         -                     (201,049)
    Disposition of Marketable Securities              299,322          -                      299,322
    Lease Deposits                                          -          -                     (107,246)
    Patent costs                                       (1,277)         -                      (23,011)
                                                    --------------------       --------------------------
CASH FLOWS PROVIDED BY FINANCING
 ACTIVITIES                                           296,093          -                 
   Proceeds from Private Placement of                 150,251          -                    1,520,948
    Shares
   Increase in Lease Obligations                       (4,957)         -                       52,015
   Cash Contribution                                                                            1,000
                                                    --------------------       --------------------------
NET CASH PROVIDED BY FINANCING                        145,294          -                    1,573,963
 ACTIVITIES                           
                                                    --------------------       --------------------------
NET INCREASE/(DECREASE) IN CASH AND                     2,260     11,035                      570,872
 CASH EQUIVALENTS
 
Beginning Cash Balance                                568,612     11,614                            -
                                                    --------------------       --------------------------
Ending Cash Balance                                 $ 570,872   $ 22,649            $         570,872
                                                    --------------------       --------------------------
</TABLE>



                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 Page 5 of 15
<PAGE>
                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 
                            THE THORSDEN GROUP, LTD.
                   Notes to Consolidated Financial Statements

Preliminary Note
----------------

     The accompanying condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission.  Certain information and disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the following
disclosures are adequate to make the information presented not misleading.
These condensed consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) that, in the opinion of
management, are necessary to present fairly the financial position and results
of operations of the Company for the periods presented.  It is suggested that
these condensed consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998,
as amended.

Note 1  Concentration
---------------------

The Company is still in the development stage and its revenues to date are from
one customer.  This customer has prepaid on a service contract, which has been
recorded as deferred income on maintenance contract.

Note 2  Intangible Assets
-------------------------

The Company has applied for patent protection for its proprietary software and
has expended $21,734 for these rights.  The patents are still in the process of
being granted but recent communications with the Patent and Trade Mark Office
suggest a favorable outcome.  The Company will begin to amortize these assets
upon completion of patent registration or at the point when the products begin
to generate revenue.

Note 3  New Subsidiary Company
------------------------------

The Board of Directors created a new subsidiary, Qui Vive, Inc., on June 5,
1998, for the development of a new product. This new entity may require a
restructuring of current management and recruitment of new personnel.

Note 4  Cash and Cash Equivalents
---------------------------------

For purposes of the statements of cash flows, the Company considers cash on
deposit in the bank and other unrestricted investments with original maturities
of three months or less at the time of purchase to be cash equivalents.

                                  Page 6 of 15
<PAGE>
 
ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

             PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     All forward-looking statements contained herein are deemed by the Company
to be covered by and to qualify for the safe harbor protection provided by the
Private Securities Litigation Reform Act of 1995.  Shareholders and prospective
shareholders should understand that several factors govern whether any forward-
looking statement contained herein will be or can be achieved. Any one of those
factors could cause actual results to differ materially from those projected
herein. These forward-looking statements include plans and objectives of
management for future operations, including plans and objectives relating to the
products and the future economic performance of the Company.  Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions, future business decisions,
and the time and money required to successfully complete development projects,
all of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of those assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in any of the forward-
looking statements contained herein will be realized. Based on actual experience
and business developments, the impact of which may cause the Company to alter
its marketing, capital expenditure plans or other budgets, which may in turn
affect the Company's results of operations. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of any such statement should not be regarded as a representation by
the Company or any other person that the objectives or plans of the Company will
be achieved.

     The following discussion should be read in conjunction with the
consolidated financial statements and the notes thereto appearing elsewhere in
this Quarterly Report on Form 10-QSB.

GENERAL OVERVIEW

     The Thorsden Group, Ltd. (the "Company") is a Delaware corporation
organized in 1992 for the purpose of seeking and acquiring business
opportunities.  In October 1997, the Company acquired Arkona, Inc., a Utah
corporation, through a wholly owned subsidiary corporation in a reverse
triangular merger, accounted for as a purchase.  Arkona Inc.'s predecessor,
Arkona LLC, a Utah limited liability company, was founded in September 1996 and
had limited business operations prior to the acquisition.  

     On June 5, 1998 the Company formed a new subsidiary company, Qui Vive Inc.,
incorporated in Delaware.  This company is carrying out the business of "Project
Roswell" more fully described below. The core business of the Company is
currently developing, marketing and selling software products for use in
portable and distributed network computing and is conducted through its wholly
owned subsidiary Arkona, Inc.

     During the quarter ended June 30, 1998, and since that date, the Company's
management has directed much of its efforts in securing the engineering talent
and creating the environment required to build world class software products.
Through June 30, 1998, a marketing strategy has been shaped and tested most
recently at the JavaOne Conference in San Francisco, in March 1998.  The Company
is currently in the initial stages of forming technology partnerships as part of
this strategy.  The next stage of the plan is to put in place the sales
professionals necessary to assure the penetration of key target markets with the
products & solutions described below.

DISTRIBUTED COMPUTING

     For more than a decade, the computer industry has been striving to extend
the value of stored information from large enterprise systems to networked
desktop computers. Networked computing allowed corporations to empower knowledge
workers by giving them direct control of information and applications. - As a
result, productivity skyrocketed. In recent years, the Internet has allowed
companies to extend the scope and value of their networks even further. Members
of the Internet's "connected" community can obtain a wide variety of corporate
data.  The Company believes a third iteration of this theme is quietly but
forcefully gaining momentum. Information access is once again being extended
further than ever before - this time to a wave of mobile, disconnected, and
geographically distributed employees, partners, and customers. Organizations
that take advantage of this third wave can finally apply corporate knowledge at
its ultimate and most critical destination - the customer point of service.

                                  Page 7 of 15
<PAGE>
 
Finally, a third iteration of the theme is quietly but forcefully gaining
momentum.

Information access is once again being extended further than ever before - this
time to a wave of mobile, disconnected, and geographically distributed
employees, partners, and customers. Organizations that take advantage of this
third wave can finally apply corporate knowledge at its final and most critical
destination - the customer point of service

INTELLIGENT SYNCHRONIZATION

     Arkona's unique software solutions are helping to bring about this
"Distributed" information wave by extending access to a business's most critical
information and applications - large knowledge databases. These databases are
monolithic in size and complexity making them inherently poor applications for
mobile workers such as field sales and service representatives. However, field
sales and service personnel and other disconnected employees and partners have
an acute and growing need for immediate access to large corporate databases.

     When field personnel visit customers for sales or service calls, it is
paramount that they arrive with all pertinent customer information, including
detailed information data on products, pricing, contracts, and any other
information which might affect the customer. The great challenge is that this
kind of structured information is ideally suited for large corporate databases
and workhorse computers. However, this kind of structured information is ideally
suited for large corporate databases and workhorse computers, rather than
portable devices.  To make matters worse, the information is rarely stored in a
single repository. The result is a complex computing environment difficult to
mobilize for field service professionals.

     Surprisingly, this simple requirement of efficiently extracting information
from larger, disparate databases and seamlessly synchronizing it upon check in
from the field is a struggle that costs corporations millions in lost knowledge
capital, lost sales, and lost customers. This challenge represents enormous
waste and frustration both for corporations and their customers. The need to
resolve this dilemma was the genesis of Arkona's software solutions.  Instead of
aiming to displace large corporate databases, which function very well at the
home office where there is ample computing power, Arkona extends the value of
these databases by cleanly extracting mission critical information for point of
service use. And Arkona's software maximizes existing software investments by
working equally well with any of the widely used database systems including
Oracle, Sybase, Informix, PeopleSoft, BAAN, SAP, Microsoft, and others.The
Company believes that this simple requirement of efficiently extracting
information from larger, disparate databases and seamlessly synchronizing it
upon check in from the field is a struggle that costs corporations millions in
lost knowledge capital, sales and customers. The need to resolve this dilemma
was the genesis of the Company's software solutions.

     Instead of aiming to displace large corporate databases, which function
very well at the home office where there is ample computing power, the Company
extends the value of these databases by cleanly extracting mission critical
information for point of service use.  By doing so, the Company's software
maximizes existing software investments by working equally well with any of the
widely used database systems including Oracle, Sybase, Informix, PeopleSoft,
BAAN, SAP, Microsoft, and others.

HOW THE CUSTOMER BENEFITS

     The Company's products and services help customers to:

     Optimize Synchronization of Data and Applications: Arkona's Universal
     --------------------------------------------------                   
Update/(TM)/ technology optimizes the process of synchronizing distributed and
mobile data sources. The Universal Update Server reduces bandwidth requirements
by distributing and reconciling only incremental differences between client and
server data sources. Administrators may also define profiles for individual
users, groups, or other servers. Information is customized and distributed based
on business logic stored in the user profile.

     Reduce The High Cost of Information And Application Updates: The Company's 
     ------------------------------------------------------------             
synchronization solutions eliminate data "snapshots" mailed to the field, costly
downtime for application updates, and time consuming support of remote
installation procedures. Arkona's technology allows customers to simply,
inexpensively and securely update and synchronize critical information and
distributed applications.

     Simplify the Delivery of Information: End-users can update information and
     -------------------------------------                                     
applications with the click of a button, avoiding data/application
reconciliation problems.

     Profit From Flexible Synchronization Solutions: True object design and
     -----------------------------------------------                       
reusable code libraries allow Arkona the Company to quickly and efficiently
create proven synchronization solutions to a customer's exact specifications.
Arkona's  custom solutions take advantage of multiple data sources, data types,
OS platforms, and various mobile devices.

     Leverage and Revitalize Legacy Systems: Arkona's custom solutions easily
     ---------------------------------------                                 
integrate with existing corporate information and knowledge systems. The 
Company designs distributed applications that extend a company's information
system investments instead of replacing them.

                                  Page 8 of 15
<PAGE>
 
THE ARKONA SOLUTIONS

Universal Update /(TM)/

     The Universal Update client and server represent Arkona's core technology.
These modules work as embedded components within specific vertical solutions.
Arkona's cCustomers and solution providers may choose to license the Universal
Update technology for use in their own products, or can work with Arkona to
build more specific vertical solutions.

Arkona OnSite /(TM)/ Field Service

     Arkona OnSite Field Service is the Company's first vertical solution,
designed specifically for field service engineers. Arkona OnSite gives field
service engineers access to critical customer, product, and inventory
information even when disconnected at the customer's site.  Using this product,
customers can gather data from a legacy database and store a replica of the
database in a laptop used at the customer's site.  The information can be
accessed with this OnSite product without being connected to a network.  Stored
reports and other information can be transmitted later when network connection
is conveniently available.  The system is useful in settings where telephones or
network ports are not readily available or where wireless networking
technologies are not practicable or not allowed (such as hospitals). This
product was developed in collaboration with OEC Medical Systems, Inc. ("OEC"),
an unaffiliated customer of Arkona. Arkona OnSite Field Service was designed
specifically for field service engineers to provide access to critical
customer, product, and inventory information even when disconnected at the
customer's site.

Arkona OnSite /(TM)/ Publisher

     Arkona OnSite Publisher is currently being designed in collaboration with
an Arkona solution provider.  The Company believes that Arkona OnSite Publisher
will allow large reference publishers to virtually eliminate production and
distribution of CD ROM publications in favor of on-line distribution. Electronic
titles will be synchronized automatically with publisher archives and placed
directly into a subscriber's own electronic library solution. It is currently
anticipated that the first implementation will be released to large legal
publishers and law firms in the third quarter of fiscal 1999.

PROJECT ROSWELL

     The digital revolution has evolved around a simple notion: that information
should be permanent.  Unlike other media formats, digital information can be
stored forever, recovered at will, copied with ease, and shared anywhere.
Unfortunately, these attributes also give digital information a more sinister
side.  Digital communication--your email--can just as easily be saved, copied,
recovered, and redistributed by anyone at any time with or without your consent
and frequently without your knowledge.  Once an electronic email message has
been sent, an authors loses all control of his or her their words.  According to
industry analyst Esther Dyson, "The challenge is not to keep everything secret,
but to limit misuse of such information."

     The Company has developed an approach to solving these problems.  Dubbed
"Project Roswell" ("Roswell") the Company's solution is being designed to
facilitate communication and give content control back to the author. The
project is presently in the design and architecture phase of development.  When
the first version of the project is ready for launch, it is expected to give
email users the chance to say direct how their words will be released, who can
see them, how they can be redistributed, and if they can be printed, copied, or
saved.  While tThere can be no assurance that the safeguards of Roswell-enhanced
email will not be abused or circumvented by someone with the requisite degree of
computer sophistication and a n evil or malicious motive.  However, subsequent
versions will continue to raise the bar against potential abuse and compromise
of security that is so easily breached, often accidentally, with current
systems.  The Company has formed QVI to conduct the business related to the
development of Roswell.  It is expected that the development team members will
receive equity ownership interests in QVI as part of their compensation for
successfully developing the project.
 
     The Company expects that the level of security embedded in the first
implementation of Roswell will be sufficient to cover the needs of most of the
users of the product recognizing the trusted communications inherent in most
email. The Company believes that the features of the first version of Roswell
will address the needs of approximately


                                  Page 9 of 15
<PAGE>
 
80% of the market. Enhancements increasing the security and further simplifying
the product's usability will be added over time, as with all software.

The first version is expected to include the following key features:

     Content Restrictions      Authors can decide whether their email messages 
     --------------------      
                               can be copied, saved, or pasted by the recipient.

     Forwarding Restrictions   Authors can prohibit recipients from forwarding 
     -----------------------                                                    
                               their email in whole or in part.

     Lifespan Limits           Messages can be configured to self-destruct 
     ---------------
                               after a predefined period or be accessed only 
                               at certain times.

     Dynamic Self-Destruction  Messages may destroy themselves as they are read.
     ------------------------  

     Persistence Limits        Email authors can define the number of times any 
     ------------------            
                               message can be viewed.

     Message Withdrawal        Authors can retract their Roswell enabled 
     ------------------      
                               messages even after they have been sent over the 
                               Internet.

These essential features of Roswell will include:

     Email is created using the sender's favorite email software.  Roswell is
     currently being designed as an add-on to existing email software.  Secure
     Roswell email will be sent from any Java enabled email client including
     email products from Netscape, Microsoft, Lotus, and many others.  Once an
     email has been authored, the user selects appropriate Roswell security and
     auditing options from a simple, easy to use GUI or relies on either the
     user-preset or embedded defaults.

     Roswell enabled mail server secures the email message.  A Roswell enabled
     mail server encapsulates and encrypts the email message.  The Roswell
     enabled email server can reside within a corporation or with an Internet
     service provider.

     Email recipient is notified.  The Roswell enabled server notifies the email
     recipient that a secured Roswell email has been received.  Each
     notification includes a hypertext link that quickly takes the recipient to
     the secured message.

     Access is granted using a personal password.  Before the recipient can open
     Roswell secured email, the recipient must first be authenticated.  This
     authentication process will employ industry standard authentication
     mechanisms.

     Content is controlled through sender-defined options.  Even after access
     has been granted, Roswell secured email continues to be restricted by the
     sender defined options.  Recipients cannot forward, save, or manipulate the
     original email in any way forbidden by the sender.

Subsequent versions are expected to include some or all of the following
enhancements:

Auditing.  Using Roswell, email users can track the exact date and time their
messages were received and viewed. Authors can receive legal "proof of
delivery."

Anonymity.  Roswell can hide the fact that email messages were ever sent.

Digital Watermark.   Email recipients can be notified if messages have been
compromised.

Standards Compliance.  Roswell will be fully compliant with existing email and
key-certificate standards.

                                 Page 10 of 15
<PAGE>
 
Recipient Protection. Recipients can pre-screen their email by defining
acceptable senders. Email from unacceptable senders is returned unopened.

      Roswell is expected to be a critical solution for a wide variety of
industries, professions, and situations (and may well become the legally
required standard of care). In fact, the Company believes Roswell-secured email
should be used in any situation requiring discretion. Roswell is an ideal
solution for:

      .   Legal communications
      .   Governmental agencies
      .   Contract negotiations
      .   Medical information
      .   Sensitive human resource information
      .   Communication of non-public corporate information
      .   Any information which should not be public
      .   Special Prosecutors

          Roswell is currently in the design and architecture phase of
development.  It is anticipated that the product will evolve from its initial
implementation, which, as described above, will represent a level of
functionality sufficient to cover most email users privacy concerns.  However,
it is the Company's intended goal to implement other designs that eliminate
intermediary services, further simplify the functionality and usability of the
product and simultaneously increase the level of security in the product.

          The ultimate design goal is to meet the most stringent secure
messaging requirements up to and including the standards of the US Department of
Defense. Increasing levels of security will be implemented en route to achieving
this final goal.  In addition, implementations beyond email will be designed and
marketed once the email solution is successfully launched.  Markets to be
targeted after the initial Roswell project is delivered include, but will not
necessarily be limited to voice mail, pagers, databases, Usenet newsgroups, and
web publishing tools.

          The Company currently is seeking to raise additional capital in order
to complete and move from the design and architecture phase of development to
completion, including the securing of all intellectual property protections
available, and marketing of the first version of Roswell.

          The Company believes this can be done and Roswell will be launched in
its initial version by the end of calendar year 1998. However, there can be no
assurance that the Company will successfully complete the project, that as
completed, the product will include all or substantially all of the elements
described above, or that any of the other risks described herein will not
adversely affect the outcome of the Roswell project.

          Roswell is currently in the design and architecture phase of
development. It is anticipated that the product will evolve from its initial
implementation, which, as described above, will represent a level of
functionality sufficient to cover most email users' privacy concerns. However,
it is the Company's intended goal to implement other designs that eliminate
intermediary services, further simplify the functionality and usability of the
product and simultaneously increase the level of security in the product. The
ultimate design goal is to meet the most stringent secure messaging requirements
up to and including the standards of the US Department of Defense. Increasing
levels of security will be implemented en route to achieving this final goal. In
addition, implementations beyond email will be designed and marketed once the
email solution is successfully launched. Markets to be targeted after the
initial Roswell project is delivered include, but will not necessarily be
limited to: voice mail, pagers, databases, Usenet newsreads, and web publishing
tools.

          The Company will seek to raise additional capital in order to complete
and move from the design and architecture phase of development to completion,
including the securing of all intellectual property protections available, and
marketing of the first version of Roswell. Although the Company believes this
can be done and that Roswell will be launched in its initial version by the end
of 1998, with a goal of late fall 1998, there can be no assurance that the
Company will successfully complete the project, that as completed, the product
will include all or substantially all of the elements described above, or that
any of the other risks described in this Report will not adversely affect the
outcome of the Roswell project

RESULTS OF OPERATIONS

Three Months Quarter Ended June 30, 1998 and 1997

          Revenues for the quarter ended June 30, 1998 were $6,250, compared to
$0 for the comparable quarter in 1997. Cost of revenues totaled $444,602 in the
quarter ended June 30, 1998, compared to $10,628 in the quarter ended June 30,
1997.  The 1998 expenses included $197,638 in research and development expense
compared to $1,183.  The increased expenses in 1998 reflect the addition of
personnel and costs associated with the merger of the Company with Arkona.  The
Company had $7,803 in interest income during the quarter ended June 30, 1998
compared to $22 in the same period of 1997.  The net loss for the quarter was
$431,685 (or $.02 per share) compared to a loss $10,606 (or $.02 per share) in
1996.

          Revenues for the quarter were primarily related to an ongoing service
contract with a single customer (OEC Medical Systems, Inc. - "OEC") and cost of
sales reflects the costs associated with delivery of these services.  The
Company is currently bidding for a number of projects utilizing its core
technologies and expects to report successes in subsequent quarters.  Expenses
for the quarter reflect the cost of people, engineering research and marketing
and selling efforts, which will form the foundation of future increased revenue
and profitability growth.

                                 Page 11 of 15
<PAGE>
 
          The Company's primary marketing focus for the quarter was to continue
to establish the Company's identity in the marketplace and to build a secure
platform for future growth.  During the three months ended June 30, 1998, the
Company provided support services for OEC pursuant to a written agreement.  The
Company has entered into a license agreement with this same customer pursuant to
which the Company has agreed to pay a royalty to OEC on revenues generated from
the licensing or use of a software product developed by Arkona in 1997 under an
agreement with OEC.  The royalty will be an amount equal to 5 percent of net
revenues until OEC has recovered the amount paid to Arkona to develop the
product ($125,000), 2 percent of net revenues thereafter until OEC has recovered
twice the amount of its payments to Arkona and 1 percent of revenues thereafter.
No royalties have been paid by the Company to date under this arrangement.

          Research and development expenditures totaled $197,638 during the
three months ended June 30, 1998.  The Company expects that research and
development expenditures will continue to increase during the next 12 months as
development of existing and new products continues.  It is expected that new
personnel in the research and development area will increase these expenses by
approximately 5% in the next quarter.

LIQUIDITY AND CAPITAL RESOURCES

          At June 30, 1998, the Company had cash and cash equivalents of
$570,872, as compared to cash and cash equivalents of $568,612 as of March 31,
1998.

          On July 10, 1998 the Company revised the terms of the Private
Placement of March 4, 1998 to reduce the Common Stock price from $2.00 to $1.50
and the A warrants from $3.00 to $2.00 and the B warrants from $4.00 to $3.00.
This Placement is due to close on August 31, 1998.

          Capital spending of $1,952 was primarily for computer and related
equipment used in the Company's operations.

          The Company also held marketable securities available for sale at June
30, 1998.  The Company does not intend to engage in the business of investing in
or buying and selling securities of other companies.  These securities were
received as consideration in the private placement of the Company's common stock
in October 1997.  They are comprised of 3,000 shares of common stock of Eurogas
Corp. ("EUGS") and 104,057 shares of InterJetNet Corp. ("IJNT").  At June 30,
1998, the last sale prices of these securities as reported by the over-the-
counter ("OTC") electronic bulletin board were $3.81 and $6.90 per share,
respectively.  Shares traded in the OTC market are characterized by volatile
changes in price and thin trading volumes.  The relatively low volume of
securities traded and the dramatic effect that sales of even a few shares can
have on the market price of such securities may have an adverse effect on the
Company's ability to liquidate its holdings or to realize the values shown
above.  This may in turn have an adverse effect on the Company's operations.
104,057 shares of InterJetNet were sold by the Company in July 1998 for $5.00
per share in a private placement.

          Management believes that the cash available to the Company from the
recently completed sales of stock and the forthcoming private placement and cash
provided by operations will be sufficient to meet the business requirements of
the Company for the next twelve months.  If the Company expands its efforts to
develop new products, it may be required to seek additional funding through the
sale of its securities or through borrowing. Presently the Company does not have
an established bank line of credit or similar facility.
 
Year 2000 Issues
----------------

          The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year.  Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900, rather than the year 2000.  This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.



                                 Page 12 of 15
<PAGE>
 
          The Company relies on computer hardware, software and related
technology, together with data, in the operation of its business.  Such
technology and data are used in the Company's internal operations, such as
billing and accounting.  The Company has not completed its investigation of the
technology and data used in its operations and has yet to determine whether Year
2000 Issues will affect its business.  The Company intends to evaluate its
technology and data to determine what, if any, remedial action may be required
to address theses issues.  This includes remediating any Year 2000 Issues that
are related to the Company's customers, suppliers and distributors, but there
can be no assurance that such third parties will successfully remediate their
own Year 2000 Issues over which the Company has no control.

          The Company believes it will substantially complete its evaluation and
remediation prior to the commencement of the year 2000, and that upon
substantial completion of such actions, and assuming that the Company's
customers, suppliers and distributors successfully remediate their own Year 2000
Issues over which the Company has no control, the Company will have no material
business risk from such issues.  The Company has not yet determined the total
cost of such an evaluation and any necessary remediation.

          The Company develops software and designs its products to be Year 2000
compliant.  The Company may be required to certify to its customers that its
products are Year 2000 compliant.   If its products were shown to have been the
cause of a Year 2000 problem in a customer's system or business, the Company
could incur liabilities for breaching the warranty, if any, that it may give its
customers concerning the status of its products under applicable Year 2000
standards.
 
OUTLOOK

          This section contains forward-looking statements, all of which are
based on current expectations.  The purpose of this section is to inform
shareholders of anticipated developments in the Company.  The reader is
cautioned that certain risks applicable to the Company's business and to the
industry in which the Company operates, some of which are outside the Company's
control, may cause actual results may to vary from those anticipated by the
Company.  Such risks and related factors may include, but are not limited to,
potential financial and other effects of future acquisitions, one-time charges
and related operational risks associated with such transactions, moves into new
market segments and the cost of managing growth of the business, business and
economic conditions and growth of the Company's target market segments and of
the economy generally, changes in customer order patterns, including timing of
project initiation and completion, competitive factors, timing of the release of
new products, failure to remediate Year 2000 problems or the cost of such
remediation and possible litigation involving intellectual property matters.

          The key for the Company in successive quarters will be to ensure
financing is available to fund the development timetable established with our
partners.  Should the funding envisaged by the currently outstanding Private
Placement not be available, the Company will have to reevaluate its plans,
particularly with regard to Project Roswell.  Currently it is anticipated that
the first release of Universal Update will be available in the fall of 1998 with
the complete Onsite solution being ready by the end of the calendar year.  The
recruitment of the team to fulfill the Roswell project is well under way and the
anticipated timetable as indicated above will be met.



                                 Page 13 of 15
<PAGE>
 
                         PART II.    OTHER INFORMATION


ITEM 3.      OTHER INFORMATION

          The Company's proxy statement to be sent to shareholders in connection
with the Company's 1998 Annual Meeting of Shareholders will set forth
information for shareholders who may wish to submit proposals pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended ("Exchange Act"),
for inclusion in the Company's proxy materials for its 1999 Annual Meeting of
Shareholders, including dates by which time the proposals must be received by
the Secretary of the Company at its principal offices in order for the
information to be included in the proxy materials.

          In addition, in accordance with recent amendments to Rule 14a-4, 14a-5
and 14a-8 under the Exchange Act, written notice of stockholder proposals
outside the procedures of Rule 14a-8 for consideration at the 1999 annual
meeting of stockholders must be received by the Company on or before June 30,
1999 in order to be considered timely for purposes of Rule 14a-4.  The persons
designated in the Company's proxy statement and management proxy card will be
granted discretionary authority with respect to any stockholder proposal with
respect to which the Company does not receive timely notice.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

      (a)       Exhibits
                --------
                27       Financial Data Schedule


      
                                 Page 14 of 15
<PAGE>
 
                                  SIGNATURES

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


                                       THE THORSDEN GROUP, LTD.
                                       (Registrant)



Date: August 18, 1998                  /s/ John Blumenthal
                                       -------------------
                                       John Blumenthal, Chief Executive Officer



Date: August 18, 1998                  /s/ Stephen Russell
                                       --------------------
                                       Stephen Russell, Chief Financial Officer
                                       and Controller (Principal Financial and
                                       Accounting Officer)





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