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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

       FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended January 31, 1998
     (Mark One)
        [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

                                       OR

        [ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
               SECURITIES EXCHANGE ACT OF 1934

                             Commission File Number
                                     0-24418
                                     -------

                             SYSTEMSOFT CORPORATION
                             ----------------------
             (Exact Name of Registrant as Specified in Its Charter)

         DELAWARE                                       04-3121799
         --------                                       ----------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)

       ONE INNOVATION DRIVE
       NATICK, MASSACHUSETTS                               01760
       ---------------------                               -----
(Address of Principal Executive Offices)                 (Zip Code)

Registrant's telephone number, including area code:    508-651-0088
                                                       ------------

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

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

                     COMMON STOCK, $0.01 PAR VALUE PER SHARE
                     ---------------------------------------
                                (Title of Class)

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

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

At April 27, 1998, the aggregate market value of voting stock held by
non-affiliates of the registrant was $106,777,228.

At April 27, 1998, 26,856,301 shares of the registrant's common stock were
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

(1) SPECIFICALLY IDENTIFIED PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDERS FOR
THE FISCAL YEAR ENDED JANUARY 31, 1998 ARE INCORPORATED BY REFERENCE INTO PARTS
I, II AND IV OF THIS FORM 10-K AND ARE FILED AS AN EXHIBIT HERETO.

(2) SPECIFICALLY IDENTIFIED PORTIONS OF THE COMPANY'S DEFINITIVE PROXY STATEMENT
IN CONNECTION WITH THE COMPANY'S 1998 ANNUAL MEETING OF STOCKHOLDERS, WHICH IS
CURRENTLY EXPECTED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WITHIN 120 DAYS OF JANUARY 31, 1998, ARE INCORPORATED BY REFERENCE INTO PART III
OF THIS FORM 10-K.



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                                     PART 1

ITEM 1.           BUSINESS

CAUTIONARY STATEMENT

         When used anywhere in this Form 10-K and in future filings by
SystemSoft Corporation ("SystemSoft," the "Company," or "the Registrant") with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer of the
Company, the words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "it is believed," "estimated," "projected," or
"outlook" or similar expressions (including confirmations by an authorized
executive officer of the Company of any such expressions made by a third party
with respect to the Company) are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. The Company cautions readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made. The Company advises readers that the various risk factors
described under the caption "Risk Factors" of this Item 1 could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to such future periods.

GENERAL

         The Company designs, develops, markets, and supports a variety of
system-level software technologies and automated problem
resolution/troubleshooting and technical support applications for personal
computers ("PCs"), including desktop computers and mobile computers (comprised
of laptop, notebook and subnotebook computers). The Company is a Delaware
Corporation incorporated in 1990.

         System-level software is the enabling layer of software in the PC
architecture between the PC's hardware and the operating system. The Company's
major products in this market segment include a family of Basic Input/Output
System ("BIOS") firmware and software, Advanced Configuration and Power
Interface ("ACPI") firmware and software, and power-management software that are
primarily marketed to manufacturers of mobile computers.

         Automated problem-resolution/troubleshooting and technical support
applications provide PC users with faster, simpler solutions to common technical
support problems associated with PC usage and lower the total cost of ownership
while simultaneously easing the manufacturer's burden of providing telephone
assistance to the user. The Company actively markets these solutions to PC
manufacturers and software and peripheral makers.


PRODUCTS

         SystemSoft, CardSoft and CardWizard are registered trademarks and
SystemWizard, PowerProfiler, ACPI Builder are trademarks of SystemSoft
Corporation. Microsoft and Windows are registered trademarks of Microsoft
Corporation. All other trademarks, registered trademarks or tradenames are the
property of their respective holders.

MARKET BACKGROUND: SYSTEM-LEVEL SOFTWARE

         Since their introduction in 1981, personal computers based on Intel
Corporation ("Intel") processor hardware and Microsoft Corporation ("Microsoft")
operating systems have grown to dominate the market. There are four basic
technologies in the architecture of these PCs: application software, operating
system software, system-level software and hardware.

         o    APPLICATION SOFTWARE is the software that performs end-user
              tasks, such as word processing and data analysis. Microsoft Word,
              Lotus Notes, and Intuit Quicken are examples of widely used
              application programs.

         o    OPERATING SYSTEM SOFTWARE allows PC hardware to control the
              sequencing and processing of applications and respond to a PC
              user's commands, such as storing data, displaying data, and
              running an application program. Microsoft's Windows 95/98 and
              Windows NT are the dominant operating systems in the market for
              Intel-based PCs.

         o    SYSTEM-LEVEL SOFTWARE is a necessary component in every PC. It
              enables the PC's operating system to recognize, configure, and
              communicate with the hardware and peripherals (such as printers or
              scanners).


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         o    PC HARDWARE consists of microprocessors, also known as central
              processing units ("CPUs"), CPU-support chipsets, memory,
              input-output devices (such as monitors and keyboards) and various
              other peripheral devices (such as printers, modems and CD-ROM
              drives). Intel's family of Pentium processors are the leading CPUs
              in the PC market.

         Mobile computers have given end users additional flexibility in how,
where, and when they work. Greater numbers of business professionals are using
mobile PCs. Mobile computers, however, have historically had limitations in
functionality because size and weight considerations have constrained memory
capacity and restricted use of peripherals. Mobile computers had been
functionally restricted to whatever Original Equipment Manufacturers ("OEMs")
could fit on their main circuit board or "motherboard." The number and variety
of peripherals, including faxes, modems, CD-ROM drives and printers, have grown
with the overall PC market. However, mobile computers have a limited number of
external adapters or "ports" to add on peripheral devices. Moreover, even
sophisticated users of mobile and desktop PCs have difficulty installing and
using these enhancements since the computer operating system must be
reconfigured to eliminate internal conflicts.

         Another limitation for mobile computers is battery life. Each new
generation of CPUs typically consumes more power, and the use of peripherals
demands additional power as well, taxing battery capacity. Accordingly,
sophisticated power management has become critical to the design of all mobile
devices to permit longer use between battery charging.

         Over the life of the PC market, several technologies and initiatives
have emerged that address some of these limitations by enhancing the
functionality and flexibility of both desktop and mobile PCs. These technologies
include:

         o    BIOS SOFTWARE - BIOS software enables PC hardware components to
              accept commands from and deliver commands to the computer's
              operating system software. The Company's BIOS software enables
              OEMs to support the Intel and Intel-compatible standard and helps
              PC OEMs achieve compatibility with Microsoft operating systems.

         o    ADVANCED CONFIGURATION AND POWER INTERFACE (ACPI) - ACPI is a new
              layer in the system-software level that enables the operating
              system to directly control configuration of devices and manage
              power consumption directly, raising certain functions that were
              previously controlled by the BIOS to the operating system level.
              The ACPI specification, developed by Intel, Microsoft and Toshiba
              America Information Systems Inc., allows the PC operating system
              to monitor and control system configuration and power management.
              ACPI is a requirement for Microsoft's PC97 and PC98 designs, and
              is a key element of Microsoft's OnNow and Simply Interactive PC
              (SIPC) Initiatives.

         o    HOT DOCKING - Users are increasingly seeking to use their mobile
              computers as a single, complete replacement for the desktop
              computer, enabling them to use a single machine for office or
              traveling use. This has led to a growing requirement for users to
              insert and remove their powered-up notebook from a "docking
              station" that resides on the desktop. Through a single slide-in
              docking port, a docking station provides instant connection to all
              of the conveniences of desktop computing, including larger
              keyboard, full-size monitor, network connection, and a mouse,
              among others.

         o    POWER MANAGEMENT - Early mobile computers derived their power
              solely by plugging into an AC power source. Today, mobile
              computers can also run on battery-only power as well, improving
              their versatility and ease-of-use. The power requirements of these
              computers, however, have increased with the use of more powerful
              CPUs and a larger number of power-consumptive peripheral devices.
              Accordingly, sophisticated power management has become critical to
              the design of mobile computers and other computerized devices to
              permit longer use between battery charging. Power management
              software reduces power consumption by monitoring a computer's
              operating system and hardware for idle states, stopping or slowing
              a CPU's clock after a predetermined period of inactivity,
              suspending or powering down system components, and turning off all
              unnecessary system components and operations while saving all
              system information to appropriate memory. Power management systems
              have been particularly important for mobile systems to extend
              battery life and to reduce heat generation by powerful CPUs.

COMPANY PRODUCTS: SYSTEM-LEVEL SOFTWARE

     o    MOBILEPRO BIOS - The Company markets MobilePro BIOS, a modular Basic
          Input/Output System software/firmware suite that supports the latest
          desktop and mobile computing standards and platforms. Leading PC
          vendors that shipped SystemSoft's BIOS software in fiscal 1998 include
          Acer Inc., Canon Inc., Compaq Computer Corporation, Digital Equipment
          Corporation, Hitachi Ltd., Hewlett-Packard Company and NEC
          Corporation. MobilePro is the foundation of SystemSoft's system-level
          software suite, which extends to value added firmware layers for
          Peripheral Component Interconnect (PCI), Plug and Play, Hot Docking,
          Power Management, DMI, USB and ACPI support, as well as easily
          customizable system control utilities to enable more technically
          advanced designs. SystemSoft's BIOS products are designed around a
          modular core with customizable source code that allows system
          engineers to easily implement OEM-specific features into the software.
          The 
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          modularity of the Company's BIOS software enables the Company to
          quickly respond to changes in the hardware design provided by each PC
          manufacturer because typically these changes, such as adding a new
          CPU, may only require modifications to a particular module of the
          Company's BIOS software.

     o    ACPI ROM AND ACPI BUILDER - The Company has developed a
          BIOS-independent ACPI firmware solution that provides OEMs with fully
          compliant ACPI 1.0 support for their PCs. ACPI support is part of the
          PC97 specification and is now a requirement for PCs that wish to carry
          Microsoft logo certification. In addition, the Company has also
          created ACPI Builder which simplifies and speeds the development of
          OEM customizations of their ACPI firmware implementation.

     o    KEYPRO KEYBOARD FIRMWARE - SystemSoft's KeyPro family of keyboard
          controller and scanner firmware is compatible with the
          industry-standard 8042 interface and enables PC manufacturers to
          implement keyboard designs based on popular controllers.

     o    POWERPROFILER - PowerProfiler is SystemSoft's solution for managing
          mobile computer power consumption. It includes system-level software
          and an end-user application for configuring various power management
          options and displaying battery-power status, and a Windows NT Advanced
          Power Management (APM) compliant 1.2 kernel that adds power management
          to Windows NT. The Company's power management software for mobile
          computers supports Intel and Intel-compatible CPUs and provides
          support for DOS, Windows, OS/2, and Windows NT operating systems. The
          Company believes that its PowerProfiler software is well positioned to
          add value in the Windows NT 4.0 market, since NT does not offer a high
          level of power management for mobile PC users. In the past fiscal
          year, the Company began licensing PowerProfiler from its Web site
          directly to mobile PC users who have upgraded to Windows NT 4.0 and
          are seeking a greater level of power management.

MARKET BACKGROUND: PC CARD SOFTWARE

         The PC Card standard is an industry standard set by the Personal
Computer Memory Card International Association (PCMCIA) that enables PCs and
other electronic devices to automatically recognize, install and configure
peripherals (i.e., modems, flash memory and network cards) incorporated in
credit card-sized PC Cards. PC Card software provides both a connectivity layer
that facilitates the addition, configuration and use of peripheral devices, and
a hardware adaptation layer that comprises the communication link between a PC's
operating system software and hardware. Each new version of hardware or
operating system software generally requires new system-level software.

         The purpose of PC Cards was to create a standard for sockets and credit
card-sized cards containing memory and peripheral devices that take up less room
and are easily inserted by a user into a mobile computer or electronic device
without the traditional complexities and frustrations of installation. PC Card
technology provides expanded memory and increased flexibility and functionality,
not by changing the computer's motherboard or by installing separate peripheral
circuit boards internally, but rather by inserting credit card-sized PC Cards
into sockets built into the mobile computer. PCMCIA has issued standards for
buses, connectors, silicon chips and software to make PC Cards easy to use in
IBM and IBM-compatible computers. PC Card sockets are currently being offered as
standard equipment by most mobile computer manufacturers.

         Newer versions of Windows 95 and the forthcoming release of Windows 98
have incorporated larger portions of system-level software to facilitate the use
of PC Cards. However, usability and functionality gaps still exist in operating
system support for Flash memory, SRAM and network PC Cards. In addition, Windows
NT 4.0 offers very limited support for PC Card usage.

COMPANY PRODUCTS: PC CARD SOFTWARE

     o    CARDWIZARD - SystemSoft's CardWizard family of PC Card software for
          Microsoft Windows 95/98 and Windows NT 4.0 consists of both
          system-level software that provides card and socket services for
          implementing PC Cards in PCs and an end-user application that
          simplifies the installation, configuration, and usage of PC Cards.
          SystemSoft is the worldwide leader for PC Card Software, licensing
          software to 17 of the top 20 notebook PC vendors worldwide. The
          CardWizard end-user application enables users to automatically
          diagnose and troubleshoot PC Card configuration problems, resolve
          resource conflicts, receive notification of PC Card activities and
          launch applications upon card insertion. In particular, the Company
          believes that it is well positioned to capitalize on the Windows NT
          4.0 market opportunity. CardWizard for Windows NT 4.0 supports more
          than 470 PC Cards - many of which are unsupported solely by Windows NT
          4.0. CardWizard for Windows NT 4.0 is certified under Microsoft's
          Designed for Windows logo program. In the most recent fiscal year, the
          Company began selling CardWizard NT 4.0 from its Web site directly to
          PC users who have notebook PCs that they are upgrading to Windows NT
          4.0 and who need the added PC Card support to which they've been
          accustomed. The product is currently licensed by more than 25 notebook
          PC OEMs including Toshiba, NEC, and IBM and is shipping on 35 new
          systems.



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MARKET BACKGROUND: AUTOMATED SOLUTIONS FOR TECHNICAL SUPPORT PROBLEM RESOLUTION

         Computer and peripheral manufacturers continue to face significant
costs associated with providing telephone technical support to their customers.
Increasing complexity in all areas of the PC architecture - from applications
and operating systems to power-management and peripheral usage - and an
increasingly novice base of customers have combined to drive up both the volume
and length of technical support calls, as well as its associated costs.
According to Dataquest 1996, estimates for providing this assistance approximate
$4 billion annually.

         Automated problem-resolution technologies provide a series of automated
and computer-assisted techniques for resolving technical support problems
through expert diagnosis engines, knowledge bases and automated instrumentation.
The goal of these technologies is to reduce the number of calls to support
manufacturers, or - at minimum - reduce the length of such calls.

         In the consumer PC market, PC price levels continue to drop
dramatically. The Company believes that this dynamic increases the potential
need for technology such as SystemWizard. So-called "Sub-$1,000" PCs are a
fast-growing segment of the market, opening up PC purchases to an increasing
number of less-experienced users. This decrease in PC price has also negatively
impacted profit margins. This is further motivating OEMs to find automated
support solutions.

         Among mobile PC users, the emphasis is on ensuring usability and smooth
operation regardless of where in the world the user may be. Mobile professionals
require top-quality support since downtime is costly to them. The Company
believes that sophisticated product offerings that increase PC usability for
mobile professionals will be an important factor in this market.

         In the larger corporate PC market - for desktops and mobile PCs,
corporate IT managers face renewed concerns regarding stringent management of
the so-called "total cost of ownership" or TCO. The Company believes that
solutions that reduce burdens on corporate support centers and MIS help desks
will be an important market factor.


COMPANY PRODUCTS: AUTOMATED SOLUTIONS FOR TECHNICAL SUPPORT PROBLEM RESOLUTION

     o    SYSTEMWIZARD - SystemWizard is the Company's end-to-end solution that
          automatically detects, diagnoses, and resolves many problems with PCs
          and peripherals by: resolving problems immediately on the PC;
          integrating with remote up-to-date Knowledge Bases; and providing
          support engineers with tools to reduce call lengths and rapidly
          distribute new solutions. The Company has invested heavily to address
          the entire problem-resolution cycle through Internet-based
          extensibility, improved call-processing efficiency, and a dynamic
          architecture for gathering and publishing support knowledge. The key
          components include:

               o      SYSTEMWIZARD CLIENT FOR CALL AVOIDANCE - SystemWizard
                      Client solves problems on-the-spot through a diagnosis
                      engine and local Knowledge Base on the user's PC.
                      SystemWizard Client targets to solve as many as 20 percent
                      of common problems without a call. In the last fiscal
                      year, SystemSoft released a version of SystemWizard Client
                      for mobile PC platforms.

               o      SYSTEMWIZARD SERVER FOR CALL DEFLECTION - SystemWizard
                      can connect to remote SystemWizard Servers to obtain newer
                      Knowledge Bases. This is an automated process requiring no
                      live OEM support intervention. This typically targets an
                      additional 10 percent of problems.

               o      SYSTEMWIZARD TECHNICIAN FOR CALL EFFICIENCY - In the
                      event a solution is not contained on the SystemWizard
                      Server, SystemWizard can connect the user to a support
                      technician and provide that technician with a "trouble
                      ticket" of system information that speeds the resolution
                      process. SystemWizard Technician also enables the support
                      representative - on the same call and on the same phone
                      line - to examine the user's PC online, check
                      configurations and make appropriate changes. This step
                      typically reduces the duration of simple calls by 10-15
                      percent.

               o      SYSTEMWIZARD BUILDER FOR CALL RESOLUTION - SystemWizard
                      Builder enables support technicians to create automated
                      solutions for new problems and publish them on
                      SystemWizard Servers for future automated resolution
                      without intervention from the technician.

     o    SYSTEMALERT - In the last year, SystemSoft released SystemAlert, a
          new OEM application, under license from a third party, for protecting
          the OEM configuration of critical system files, settings and
          configurations from damage or accidental corruption.


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     o    SYSTEMTRAINER - SystemSoft also released a new series of online
          multimedia tutorials for novice users under license from the same
          third party. OEMs can choose from more than 40 animated lessons that
          are targeted at helping users through the first several weeks of PC
          ownership, when learning curves are steepest.


MARKET BACKGROUND: UNIVERSAL SERIAL BUS

         The Universal Serial Bus ("USB") standard is designed to bring new
levels of usability for desktop computer users. Through identical connectors
consolidated into a single port, intrinsic power management and
hot-swappability, USB brings "plug-and-play" ease to desktop peripherals that
connect to the outside of the PC-monitors, scanners, keyboards, mice, modems and
PBX interfaces, among others. This new standard supports up to 127 distinct
devices that roll-up through hub devices to consolidate into a single port on
the PC through standard, small connectors (flat, 4-pin) and thin cables for each
device - no more unwieldy, thick cables with large, difficult connectors. USB
lets users plug and unplug devices without powering down, and its low cost
profile is ideally suited for medium- and low-speed peripherals.

         In the past 18 months, the Company initiated engineering efforts to
develop a suite of USB-supporting firmware, drivers and applets targeted at
makers of PC peripheral devices. The market for USB firmware and software,
however, has grown slower than expected by the Company. PC peripheral
manufacturers are awaiting support for USB in Windows 98 which has been delayed.
As a result of this delay in market adoption, expected royalties on SystemSoft's
USB technology did not keep up with development investments. As a result, at the
close of the fiscal year, SystemSoft licensed its USB technology to a new,
independent corporation led by the former chief technology officer of the
Company. In return for this license, the Company received a 15 percent ownership
in this new venture.


SERVICES

         OEMs frequently engage the Company to provide engineering services to
assist in customizing the Company's software to the unique specifications,
feature sets and requirements of new PC versions. These services are generally
quoted for projects based on estimated time to complete the project. The payment
of fees for such services depends on the achievement of negotiated milestones.
The Company is committed to providing strong technical support to its customers.
The Company generally provides updates, corrections and enhancements to licensed
software at no additional charge for one year following the grant of the
license.


PRIMARY MARKETS

         The Company primarily markets its system-level software products to the
manufacturers of mobile personal computers based on the Intel/Microsoft
standard. The Company is currently focusing on opportunities associated with
Windows 95, Windows 98, Windows NT 4.0 and Windows NT 5.0 deployed on Intel's
family of Pentium and Pentium II as well as compatible processors.

         The Company primarily markets its PC Card software products to
manufacturers of mobile PCs based on the Intel/Microsoft standard.

         In the past year, the Company has successfully marketed its Windows NT
4.0-based PC Card and power management software from its Web site. The move is
in response to corporate users who have upgraded their mobile PCs to Windows NT
4.0 and wish to enjoy the same PC Card and power-management functionality they
enjoyed on Windows 3.1 or Windows 95.

         The Company's automated solutions for technical support problem
resolution are primarily marketed to manufacturers of desktop and mobile PCs in
a variety of segments, depending upon the model of the PC. These include
consumer, small office/home office, corporate desktops, and corporate mobile 
PCs. In addition, the Company has begun to directly target the corporate market
(post-PC purchase) through partnered offerings that address the needs of 
corporate support organizations in larger enterprises.


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LICENSING

         The Company licenses the source code for its software for a fixed fee.
The Company also grants object code licenses entitling its OEM, PC Card and
peripheral manufacturer customers to include the Company's software in their
products. For this license grant, the Company is generally paid a royalty based
on unit volumes and minimum licensing commitments. In addition, the Company also
charges fixed fees for a specific period of time in lieu of per unit royalties.
These manufacturers are authorized to reproduce the software, provided that the
Company's proprietary rights are clearly noted and protected. Accordingly, the
Company does not engage in any significant manufacturing operations.

         Licensees of SystemSoft's software may license subsets of the Company's
technologies as separate modules. This modularity accommodates specific customer
needs and generally permits favorable pricing for customers who license multiple
modules.


RELATIONSHIP WITH INTEL

         As of April 15, 1998, Intel held 1,994,847 shares of the Company's
Common Stock.

         In December 1993, the Company entered into a Development and License
Agreement with Intel (the "Intel Agreement") pursuant to which Intel licenses
certain technologies to the Company. The Company develops, markets and supports
the software developed from Intel's technology. The final payment under the
Intel Agreement was received in September 1995.

         In consideration of Intel's technology provided and licensed to the
Company under the Intel Agreement, the Company is obligated to pay Intel
royalties based on a percentage of revenues generated on all licensed works
developed under the Intel Agreement. Royalties are based upon a percentage of
revenues generated on PC Card software from February 1, 1994 through January 31,
1999 or beyond such dates if the Company's PC Card software contains Intel's
licensed technology. The royalties paid to Intel are included in cost of
revenues. Intel has the right on sixty days notice to convert any exclusive
license to a non-exclusive license, however such conversion would reduce the
royalty payments by fifty percent.

         In October 1995 the Intel Agreement was amended to include engineering
services on additional products. The agreement provides the Company with
engineering service payments up to $3,600,000, which included an initial payment
of $600,000 and subsequent quarterly payments of $375,000 commencing on January
1, 1996, through October 1, 1997. Revenue is recognized as work is performed and
milestones are met. Payments to the Company can be made by offsetting amounts
from royalties due to Intel under the Intel Agreement, to the extent, if any,
that such earned royalties are less than the amounts payable to the Company.
Royalties earned by Intel of $1,164,080, $951,507 and $452,278 were used to
offset amounts owed to the Company in fiscal 1998, 1997 and 1996, respectively.
Included in accounts receivable are amounts due from Intel amounting to $40,570
and $1,466,015 at January 31, 1998 and 1997, respectively.

         In December 1997, the Company entered into an agreement with Intel
which requires the Company to make guaranteed payments of $4,263,000 in lieu of
future royalties which would have been paid over the life of certain of the
Company's call avoidance software products. The guaranteed payments are
comprised of $1,022,000 of cash payments made in fiscal 1998 and $3,241,000 of
cash payments to be paid at various dates during fiscal 1999 and 2000.



SALES AND MARKETING

         SystemSoft uses a direct sales force and consultative sales approach to
provide current and prospective customers information about its products and new
technologies that are offered by providers of CPUs, CPU-support chipsets, and
operating system software. The Company's goal is to become an engineering
partner, working with its customers' engineering teams to assist in their
adoption of the Company's software. The Company has instituted a strategic
account management program to assist key customers in their use of the Company's
software. These key strategic accounts represent a loyal customer base, help
provide strategic product direction and serve as a foundation for future
revenues.

         The Company's sales and marketing organization, consisting of 59
persons as of January 31, 1998, operates from the Company's headquarters in
Natick, Massachusetts and its field sales offices in Santa Clara, California,
Yokohama, Japan and Taipei, Taiwan. The Company's sales and marketing
organization is complemented by two independent manufacturers' representatives
in Asia Pacific and Europe. Representatives generally are compensated by 


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commissions and are paid only when payments are received from customers. The
Company utilizes this supplemental sales channel to improve worldwide sales
coverage without increasing fixed payroll expense. For sales in territories
covered by both representatives and the Company's direct sales force, the
Company pays commissions to each. The Company may also provide end users with
upgrades and enhancements to the Company's PC Card software through indirect
distribution channels.

         In support of its sales efforts, the Company conducts comprehensive
marketing programs aimed at current and prospective customers, including
industry trade shows, seminars, public relations efforts, and participation in
industry committees and communications programs.

CUSTOMERS

         The Company's customers include OEMs, including PC manufacturers and PC
Card manufacturers, hardware component manufacturers, operating system software
companies, and technical support services companies. As of January 31, 1998,
SystemSoft had licensed its software to more than 150 PC manufacturers or
component vendors and its PC Card software or services have been licensed by a
majority of the top 20 notebook PC vendors.

         The Company strives to maintain and develop key customer relationships
with leaders in the PC market, such as Intel, Microsoft, IBM, Packard Bell NEC
and Sykes. For example, the Company's first commercial product was a joint
development project with Intel to develop a low-power device for the portable
computing market. See "Business -- Relationship with Intel." In July 1993,
Microsoft licensed the Company's base-level PC Card software and engaged the
Company to assist in the implementation of the Company's software for the
Windows 95 operating system. See "Business -- SystemSoft Strategy."

         In fiscal 1998, Sykes and Toshiba each accounted for more than 10% of
the Company's revenues; in fiscal 1997 no single customer accounted for more
than 10% of the Company's revenues; and in fiscal 1996 Compaq Computer Corp. and
Intel each accounted for more than 10% of the Company's revenues. In fiscal year
1998, 70% of the Company's revenues were derived from customers in the United
States, 29% from customers in the Asia Pacific Region and 1% from customers in
Europe. Sales to customers in Taiwan are generally denominated in U.S. dollars.
Sales to customers in Japan are denominated in Japanese yen or U.S dollars.

         Revenues attributable to PC Card were $16,425,000, $16,540,000 and
$14,767,000 in fiscal 1998, 1997 and 1996 respectively; revenues attributable to
Platform products were $12,555,000, $9,001,000 and $6,013,000 in fiscal 1998,
1997 and 1996 respectively; revenues attributable to SystemWizard were
$14,767,000 and $6,013,000 in fiscal 1998 and 1997, respectively. SystemWizard
revenues were less than 15% of total revenues in fiscal 1996.

PRODUCT DEVELOPMENT

         The Company's engineering efforts are divided between new product
development and product implementations for particular customers. Because the
needs and priorities of its customers vary, it has been and remains a priority
within the Company's Product Architecture Group to develop modular software
which makes customization efforts faster and easier. Software modularity also
facilitates the continuous upgrade and improvements of the Company's software
required by the rapid evolution of standards and technologies in the PC market.

         New product development efforts usually begin as research and
development projects headed by a member of the Company's Product Architecture
Group. Through active participation in several industry associations, the
members of this group acquire insights into industry trends and requirements.
The Company believes their participation in these committees often allows the
Company's views to be better expressed in the industry standards adopted.

         In addition to industry associations, the Product Architecture Group
maintains close working relationships with similar groups within semiconductor
companies and with product design teams of several of the Company's key
customers. One particularly important relationship, formalized under the Intel
Agreement, is the Company's technology sharing arrangement with the Intel
Architecture Laboratory. When cost-effective and advantageous as a means of
achieving its strategy of being the first to introduce new technologies, the
Company has from time to time purchased certain technologies.

         Over half of the Company's employees are engineering or technical
personnel. Since inception, the Company has made substantial investments in
research and product development. In fiscal years 1998, 1997 and 1996, research
and development expenses were approximately $12,860,000, $8,392,000 and
$5,112,000, respectively net of capitalized software development expenses of
$511,000, $2,116,000 and $1,206,000, respectively, in those years.


                                       8
<PAGE>   9

COMPETITION

         The markets for the Company's software are highly competitive. The
Company faces competition primarily from other system-level software companies
and in-house software development staff of current and prospective customers.
For Automated Technical Support products, the Company's competitors also include
providers of retail applications that provide assistance with some PC problems.
Certain of the companies with which the Company competes or may in the future
compete have substantially greater financial, marketing, sales and support
resources and may have more "brand-name" recognition than the Company. There can
be no assurance that the Company will be able either to develop software
comparable or superior to software offered by its competitors or to adapt to new
technologies, evolving industry standards and changes in customer requirements.

         The Company believes that interdependencies may develop between
system-level software companies and their customers, leading to a "switching"
cost factor which competing system-level software companies must overcome in
order to replace an entrenched competitor. While SystemSoft believes this cost
factor may benefit it in its existing relationships with key participants in the
PC market, switching costs may make it more difficult for the Company to
displace or take market share from competitors, particularly in the desktop
market, where competitors may have strong relationships with certain PC
manufacturers.

         The Company believes that, in the future, operating systems software
vendors could choose to enter the Company's primary markets as direct
competitors or incorporate enough features into their products so as to decrease
revenues from OEMs.

         The Company previously licensed its PC Card software to Microsoft.
Microsoft released this PC Card software in the first release of Windows 95.
Microsoft has continued to provide enhanced functionality in its version of PC
Card software. While SystemSoft's current product provides features and
functions not currently found in Windows95, SystemSoft's ability to grow PC Card
revenues could be impacted by customers deciding that Microsoft's solution meets
their needs and therefore choose not to relicense our software or reduces the
Company's perceived value of its solution resulting in accelerated price
degradation.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

         The Company's success depends in significant part on the development,
maintenance and protection of its intellectual property. The Company regards its
software as proprietary and attempts to protect it with a combination of patent,
copyright, trademark and trade secret laws, employee and third-party
nondisclosure agreements and other methods of protection. The Company has
applied for several U.S. patents and has filed several international patent
applications to protect its proprietary technology. The Company may apply for
additional patents in the future. However, there is no assurance that any of
these applications will issue as enforceable patents, or that the scope of any
patent granted will be sufficient to prevent third-parties from producing
competitive products. Moreover, despite these precautions, it may be possible
for unauthorized third-parties to copy the Company's software or to reverse
engineer or obtain and use information that the Company regards as proprietary.
The Company licenses its object and source code under written license
agreements. Certain provisions of such licenses, including provisions protecting
against unauthorized use, copying, transfer and disclosure of the licensed
programs, may be unenforceable under the laws of certain jurisdictions. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. There
can be no assurance that the protections put in place by the Company will be
adequate.

         Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement.
Moreover, although the Company is not currently involved in any litigation with
respect to intellectual property rights, there can be no assurance that third
party claims alleging infringement will not be asserted against the Company in
the future. Such assertions could require the Company to discontinue the use of
certain software codes or processes, to cease the manufacture, use and sale of
infringing products, to incur significant litigation costs and expenses and to
develop non-infringing technology or to obtain licenses to the alleged
infringing technology. There can be no assurance that the Company would be able
to develop alternative technologies or to obtain such licenses or, if a license
were obtainable, that the terms would be commercially reasonable or acceptable
to the Company.

         The Company's products are licensed to its personal computer
manufacturing customers on a "right to relicense" basis pursuant to the
Company's Master License Agreement or other appropriate contracts or documents.
Certain provisions of such licenses, including provisions protecting against
unauthorized use, copying, transfer and disclosure of the licensed


                                       9
<PAGE>   10

software, may be unenforceable under the laws of certain jurisdictions. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States.

         From time to time the Company is notified of claims by a third party
that a Company product, or the products of others which contain a Company
product, infringe the intellectual property rights of the third party.

EMPLOYEES

         As of January 31, 1998, the Company had 239 full-time employees,
including 155 in engineering and technical positions, 59 in sales and marketing
and 25 in finance and administration. The Company's employees are not
represented by any collective bargaining organization and the Company has never
experienced a work stoppage. The Company believes that its relationship with its
employees is good.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

         Financial Information about Foreign and Domestic Operations and Export
Sales may be found in Note 12 to the Notes to Consolidated Financial Statements
section of the Annual Report to Stockholders for the Fiscal year ended January
31, 1998. Such information is incorporated herein by reference.

RISK FACTORS

The Company operates in a rapidly changing environment that involves certain
risks and uncertainties, some of which are beyond the Company's control. These
risks include:

         Variations in Operating Results. The revenue growth rates experienced
by the Company to date may not be indicative of future growth rates and there
can be no assurance that the Company will remain profitable in the future.
Future results of operations may fluctuate significantly based upon numerous
factors including the timing of new product introductions, product mix, levels
of international sales, activities of competitors and the ability of the Company
to penetrate new markets. In addition, the volume and timing of new contracts
and delays in the achievement of milestones could have a significant impact on
operating results for a particular quarter. Moreover, because many of the
Company's customers do not typically report royalties earned by the Company
until the last month of the calendar quarter, quarterly revenues are difficult
to predict.

         Fluctuations In Quarterly Operating Results. The Company has
experienced and expects to continue to experience fluctuations in its quarterly
results of operations. The Company's revenues are affected by a number of
factors, including the demand for PCs and embedded devices, timing of new
product introductions, product mix, volume and timing of customer orders,
activities of competitors and the ability of the Company to penetrate new
markets. Quarterly revenues and results of operations therefore depend on the
volume and timing of design wins received during the quarter, which are
difficult to forecast. Because the Company's staffing and other operating
expenses are based on anticipated revenues, delays in the receipt of orders can
cause significant variations in results of operations from quarter to quarter.
The Company also may choose to reduce prices, increase spending in response to
competition or pursue new market opportunities, each of which decisions may
adversely affect the Company's business, financial condition and results of
operations. Therefore, the Company believes that period-to-period comparisons of
its revenues and operating results are not necessarily meaningful and should not
be relied upon as indicators of future performance.

         Due to all of the foregoing factors, it is likely that in some future
quarters the Company's operating results will be below the expectations of
public market analysts and investors. Regardless of the general outlook for the
Company's business, the announcement of quarterly results of operations below
analyst and investor expectations is likely to result in a decline in the
trading price of the Company's Common Stock.

         Ability to Respond to Rapid Technological Change. The market for
system-level and call avoidance software is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The trend in the PC market in general is toward shorter product life cycles and
rapid product and technology obsolescence. The life cycle of the Company's
products is highly dependent on the life cycles of the products sold by its
customers. For the Company's core products, such as PC Card, Plug and Play,
Power Management and BIOS products, the life cycle may be as long as five years.
However, for specific adaptations of the Company's core products, the Company
generally expects a life cycle of one year or less. The Company's future success
will depend upon its ability to enhance its current products and to develop and
introduce new products which keep pace with technological developments and
evolving industry standards as well as to respond to changes in customer
requirements. There can be no assurance that the Company will successfully



                                       10
<PAGE>   11

complete the development, or will not experience delays in the introduction, of
new products or enhancements to its existing products. Any delay or failure of
the Company's products to achieve market acceptance would adversely affect the
Company's business and financial condition. In addition, there can be no
assurance that products or technologies developed by others will not render the
Company's products or technologies non-competitive or obsolete.

         Management of Growth. The Company has in the past, experienced periods
of rapid growth which have placed, and could continue to place, a strain on the
Company's financial and other resources. The Company's ability to manage its
staff and facilities growth effectively will require it to continue to improve
its operational, financial, and other internal systems, and to train, motivate
and manage its employees. If the Company's management is unable to manage growth
effectively and new employees are unable to achieve anticipated performance
levels, the Company's results of operations could be adversely affected.

         Dependence on Strategic Business and Customer Relationships. The
Company believes that its success to date has been largely dependent on the
adoption of its software and products by key participants in the PC industry,
including Intel, IBM, Compaq, NEC, Packard Bell NEC, Digital, Toshiba, and
Microsoft. These relationships have enabled the Company to learn about new
technological developments prior to their general release to the computer
industry. The loss of any of these strategic business and customer relationships
could adversely affect the Company's product development efforts and its
business and financial condition.

         Dependence on Key Customers; Concentration of Credit Risk. The loss of
any key customer and the inability of the Company to replace revenues provided
by a key customer could have a material adverse effect on the Company's business
and financial condition. The Company's customer base consists principally of
large OEMs in the PC market and as a result the Company maintains individually
significant receivable balances from major OEMs. If these OEMs fail to meet
their guaranteed minimum royalty payments and other payment obligations, the
Company's operating results could be adversely affected. As of January 31, 1998,
the three largest receivable balances collectively represented approximately
$2,345,000, or 27% of total accounts receivable. In fiscal 1998, Sykes and
Toshiba each accounted for approximately 13% of the Company's revenues; in
fiscal 1997 no single customer accounted for more than 10% of the Company's
revenues; and in fiscal 1996 Compaq Computer Corp. and Intel accounted for
approximately 13% and 10% of the Company's revenues, respectively.

         Securities Class Action Litigation. The Company has been named in
several purported securities law class action lawsuits. See "Item 3. Legal
Proceedings." Although the Company denies all material allegations set forth in
the complaints in those lawsuits and intends to vigorously defend against all
claims brought against it, the ultimate outcome, including amount of possible
loss, if any, of these lawsuits cannot be determined at this time. No provision
for any liability that may result from these lawsuits has been made in the
accompanying Consolidated Financial Statements. While the Company does not
believe that these lawsuits will have a material adverse effect on the Company's
business and results of operations, given the preliminary stages of these
lawsuits there can be no assurance as to the ultimate outcome of these matters.

         Attraction and Retention of Skilled Employees. The Company's success
will depend in large part upon its ability to attract, retain and motivate
highly skilled employees. Competition for qualified sales, technical and other
qualified personnel is intense, and there can be no assurance that the Company
will be able to attract, assimilate or retain additional highly qualified
employees in the future. There can be no assurance that the Company will be able
to continue to attract sufficient numbers of highly qualified employees and the
failure to do so may have a material adverse effect on the Company's business
and financial condition.

         Competition. The markets for the Company's products are highly
competitive. The Company's core products: such as PC Card, Plug & Play, Power
Management and BIOS products face competition primarily from other system-level
software companies and in-house software development staff of current and
prospective customers. The Company's call avoidance software faces competition
primarily from CyberMedia, Inc. and from companies that provide an internal
customer support function. Certain of the companies with which the Company
competes or may in the future compete have substantially greater financial,
marketing, sales and support resources and may have more "brand-name"
recognition than the Company. There can be no assurance that the Company will be
able either to develop products comparable or superior to products offered by
its competitors or to adapt to new technologies, evolving industry standards and
changes in customer requirements.

         The Company believes that interdependencies may develop between
system-level software companies and their customers, leading to a "switching"
cost factor which competing system-level software companies must overcome in
order to replace an entrenched competitor. While SystemSoft believes this cost
factor may benefit it in its existing relationships with key participants in the
PC market, switching costs may make it more difficult for the Company to
displace or take market share from competitors, particularly in the desktop
market, where competitors may have strong relationships with certain PC
manufacturers.



                                       11
<PAGE>   12

         The Company believes that, in the future, operating systems software
vendors could choose to enter the Company's primary markets as direct
competitors or incorporate enough features into their products so as to decrease
revenues from OEMs.

         The Company's software to date has been primarily based on Intel and
Intel-compatible CPUs and Microsoft operating system software. If the market for
Intel and Intel-compatible CPUs is materially diminished, demand for the
Company's current software could be reduced. In addition, most of the Company's
software has been installed on computers using Microsoft's MS/DOS or Windows
operating systems. If Microsoft's operating systems cease to be the dominant
operating system for the PC industry, the Company could experience increased
costs for engineering and/or diminished revenues.

         The Company previously licensed it PC Card software to Microsoft.
Microsoft released this PC Card software in the first release of Windows 95.
Microsoft has continued to provide enhanced functionality in its version of PC
Card software. While SystemSoft's current product provides features and
functions not currently found in Windows95, SystemSoft's ability to grow PC Card
revenues could be impacted by customers deciding that Microsoft's solution meets
their needs and therefore choose not to relicense our software or reduces the
Company's perceived value of its solution resulting in accelerated price
degradation.

         International Revenues. International revenues are subject to a number
of risks, including the following: agreements may be difficult to enforce and
receivables difficult to collect through a foreign country's legal system;
foreign customers may have longer payment cycles; foreign countries could impose
additional withholding taxes or otherwise tax the Company's foreign income,
impose tariffs or adopt other restrictions on foreign trade; fluctuations in
exchange rates could affect product demand and net realizable value of foreign
receivables; U.S. export licenses may be difficult to obtain; and the protection
of intellectual property in foreign countries may be more difficult to enforce.

         The Company opened its first international subsidiary in Taiwan on
March 1, 1995. The Company now licenses software to its customers in Taiwan in
U.S. dollars. The Company opened its first office in Japan in July of 1996 and
now licenses software to its customers in Japan in the local currency and in
U.S. dollars and, as such, the results of some of its operations in Japan are
subject to currency value fluctuations.

         Dependence on Asia Pacific Region. 29% and 28% of the Company's revenue
in Fiscal 1998 and 1997, respectively, were to customers in the Asia Pacific
Region. The Company's business, financial condition or results of operations
could be adversely affected by factors associated with operations in the Asia
Pacific Region such as changes in foreign currency exchange rates, uncertainties
relative to regional economic circumstances, political instability in emerging
markets, and difficulties in staffing and managing foreign operations, as well
as by other risks associated with international activities. In particular, the
recent currency devaluations in the Asia Pacific Region and the general downturn
of the economies in the Asia Pacific Region, including Japan, have had and
could, in the future, have a material adverse effect on the Company's business,
financial condition or results of operations. Any reduction in demand for PCs
would adversely affect the Company's business, financial condition or results of
operation.

         Intellectual Property and Proprietary Rights. The Company's success
depends in significant part on the development, maintenance and protection of
its intellectual property. The Company regards its software as proprietary and
attempts to protect it with a combination of patent, copyright, trademark and
trade secret laws, employee and third-party nondisclosure agreements and other
methods of protection. The Company has applied for several U.S. patents and has
filed several international patent applications to protect its proprietary
technology. The Company may apply for additional patents in the future. However,
there is no assurance that any of these applications will issue as enforceable
patents, or that the scope of any patent granted will be sufficient to prevent
third-parties from producing competitive products. Moreover, despite these
precautions, it may be possible for unauthorized third-parties to copy the
Company's software or to reverse engineer or obtain and use information that the
Company regards as proprietary. The Company licenses its object and source code
under written license agreements. Certain provisions of such licenses, including
provisions protecting against unauthorized use, copying, transfer and disclosure
of the licensed programs, may be unenforceable under the laws of certain
jurisdictions. In addition, the laws of some foreign countries do not protect
the Company's proprietary rights to the same extent as do the laws of the United
States. There can be no assurance that the protections put in place by the
Company will be adequate.

         Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement.
Moreover, although the Company is not currently involved in any litigation with
respect to intellectual property rights, there can be no assurance that third-
party claims alleging infringement will not be asserted against the Company in
the future. Such assertions could require the Company to discontinue the use of
certain software codes or processes, to cease the manufacture, use and sale of
infringing products, to incur significant litigation costs and expenses and to
develop non-infringing technology or to obtain licenses to the alleged
infringing technology. There can be no assurance that the Company would be able
to develop alternative technologies or to obtain such licenses or, if a license
were obtainable, that the terms would be commercially reasonable or acceptable
to the Company.


                                       12
<PAGE>   13

         The Company's products are licensed to its personal computer
manufacturing customers on a "right to relicense" basis pursuant to the
Company's Master License Agreement or other appropriate contracts or documents.
Certain provisions of such licenses, including provisions protecting against
unauthorized use, copying, transfer and disclosure of the licensed software, may
be unenforceable under the laws of certain jurisdictions. In addition, the laws
of some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States.

         From time to time the Company is notified of claims by a third party
that a Company product, or the products of others which contain a Company
product, infringe the intellectual property rights of the third party. The
Company reviews such notices of claims to determine the appropriate response, if
any. There can be no assurances that a third party claim alleging infringement
will not be asserted against the Company in the future.

         Volatility of Stock Price. The trading price of the Company's Common
Stock has been and could continue to be subject to fluctuations in response to
quarterly variations in results of operations, announcements of technological
innovations or new products and services by the Company or its competitors,
changes in financial estimates by securities analysts, changes in management and
other events or factors. In addition, the stock market has experienced
volatility that has particularly affected the market prices of equity securities
of many high technology companies and often that has been unrelated to the
operating performance of such companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock.


ITEM 2.           PROPERTIES

         The Company has entered into a fifteen year lease agreement for its new
corporate headquarters in Natick, Massachusetts with an option to build on
adjacent land. The Company moved into its new Corporate headquarters in October,
1997 and has leased approximately 125,000 square feet, of which approximately
48,000 square feet is being subleased. The Company's also leases two facilities
totaling approximately 64,000 square under leases expiring through September
2002; these facilities were previously used as corporate headquarters and are
currently being subleased to third parties. The Company also leases additional
space, approximately 32,000 square feet in the aggregate, for sales, support and
development in Santa Clara, California, Boulder, Colorado, Yokohama, Japan and
Taipei, Taiwan under leases expiring through 2000.


ITEM 3.           LEGAL PROCEEDINGS

         On March 3, 1998, a purported securities class action lawsuit entitled
Thomas Gorman, Barrett Herriott, Lori Lyman, Albert Halegoua, Ronald Offner and
Fred Cohen, on behalf of themselves and all others similarly situated v.
SystemSoft Corporation, et al., Civil Action No. 98-10367-EFH, was filed in the
United States District Court for the District of Massachusetts (the "Gorman
Action"). Named as defendants are the Company, certain of the Company's officers
and directors, and the Company's outside auditors. Plaintiffs purport to
represent a class of all persons who purchased the Company's common stock
between January 25, 1996 and March 3, 1997. The complaint alleges violations of
United States federal securities law through material misrepresentations and
omissions and seeks an unspecified award of damages. The Company believes that
the allegations in the complaint are without merit and intends to contest them
vigorously.

         On March 27, 1998, a similar lawsuit entitled L.B. Partners, L.P., on
behalf of itself and all others similarly situated v. SystemSoft Corporation, et
al., Civil Action No. 98-10545-EFH, was filed in the United States District
Court for the District of Massachusetts. Named as defendants are the Company and
certain of the Company's officers and directors. Plaintiff purports to represent
the same class of persons that is alleged in the Gorman Action. The complaint
alleges violations of United States federal securities law through material
misrepresentations and omissions and seeks an unspecified award of damages. The
Company believes that the allegations in the complaint are without merit and
intends to contest them vigorously.

         On April 1, 1998, a similar lawsuit entitled Aron I. Glasman v.
SystemSoft Corporation, et al., Civil Action No. 98-10579-EFH, was filed in the
United States District Court for the District of Massachusetts (the "Glasman
Action"). Named as defendants are the Company and certain of the Company's
officers and directors. Plaintiff purports to represent a class of all persons
who purchased the Company's common stock between January 25, 1996 and February
5, 1998. The complaint alleges violations of United States federal securities
law through material misrepresentations and omissions and seeks an unspecified
award of damages. The Company believes that the allegations in the complaint are
without merit and intends to contest them vigorously.


                                       13
<PAGE>   14

         On April 2, 1998, a similar lawsuit entitled Maryann Dean, on behalf of
herself and all others similarly situated v. SystemSoft Corporation, et al.,
Civil Action No. 98-10588-EFH, was filed in the United States District Court for
the District of Massachusetts. Named as defendants are the Company and certain
of the Company's officers and directors. Plaintiff purports to represent the
same class of persons that is alleged in the Gorman Action. On April 17,1998,
Plaintiff filed an amended complaint against the same defendants, but seeking to
represent the same class of persons that is alleged in the Glassman action. Like
the initial complaint, the complaint alleges violations of United States federal
securities law through material misrepresentations and omissions and seeks an
unspecified award of damages. The Company believes that the allegations in the
amended complaint are without merit and intends to contest them vigorously.

         On April 13, 1998, a similar lawsuit entitled Donald R. Villa v.
SystemSoft Corporation, et al., Civil Action No. 98-10639-EFH, was filed in the
United States District Court for the District of Massachusetts. Named as
defendants are the Company and certain of the Company's officers and directors.
Plaintiff purports to represent the same class of persons that is alleged in the
Glasman Action. The complaint alleges violations of United States federal
securities law through material misrepresentations and omissions and seeks an
unspecified award of damages. The Company believes that the allegations in the
complaint are without merit and intends to contest them vigorously.

         On April 15, 1998, a similar lawsuit entitled Randy J. Myshock, on
behalf of himself and all others similarly situated v. SystemSoft Corporation,
et al., Civil Action No. 98-10652-EFH, was filed in the United States District
Court for the District of Massachusetts. Named as defendants are the Company,
certain of the Company's officers and directors and the Company's outside
auditors. Plaintiff purports to represent the same class of persons that is
alleged in the Glasman Action. The complaint alleges violations of United States
federal securities law through material misrepresentations and omissions and
seeks an unspecified award of damages. The Company believes that the allegations
in the complaint are without merit and intends to contest them vigorously.

         On April 21, 1998, a similar lawsuit entitled Echendu Nwanodi v.
SystemSoft Corporation, et al., Civil Action No. 98-10688-EFH, was filed in the
United States District Court for the District of Massachusetts. Named as
defendants are the Company and certain of the Company's officers and directors.
Plaintiff purports to represent the same class of persons that is alleged in the
Glasman Action. The complaint alleges violations of United States federal
securities law through material misrepresentations and omissions and seeks an
unspecified award of damages. The Company believes that the allegations in the
complaint are without merit and intends to contest them vigorously.

         On April 24, 1998, a similar lawsuit entitled John Salemme v.
SystemSoft Corporation, et al., Civil Action No. 98-10707-EFH, was filed in the
United States District Court for the District of Massachusetts. Named as
defendants are the Company and certain of the Company's officers and directors.
Plaintiff purports to represent the same class of persons that is alleged in the
Glasman Action. The complaint alleges violations of United States federal
securities law through material misrepresentations and omissions and seeks an
unspecified award of damages. The Company believes that the allegations in the
complaint are without merit and intends to contest them vigorously.

         On April 27, 1998, a similar lawsuit entitled Donald E. Wallace,
individually and on behalf of all others similarly situated v. SystemSoft
Corporation, et al., Civil Action No. 98-10728-EFH, was filed in the United
States District Court for the District of Massachusetts. Named as defendants are
the Company and certain of the Company's officers and directors. Plaintiff
purports to represent the same class of persons that is alleged in the Glasman
Action. The complaint alleges violations of United States federal securities law
through material misrepresentations and omissions and seeks an unspecified award
of damages. The Company believes that the allegations in the complaint are
without merit and intends to contest them vigorously.



                                       14
<PAGE>   15

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

         Not applicable.

ITEM 4A.          EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by Item 10 of Form 10K with respect to executive officers
of the Company is set forth below. All of the executive officers are elected by
the Board of Directors on an annual basis and serve until their successors have
been duly elected and qualified, or until their earlier resignation or removal.
There are no family relationships among any of the executive officers or
directors of the Company.

<TABLE>
<CAPTION>
Name                                   Age      Position
----                                   ---      --------
<S>                                    <C>      <C>
Robert F. Angelo...................... 51       Chief Executive Officer and Chairman of the Board of Directors
Deborah M. Besemer.................... 43       President, Chief Operating Officer and Director
Jonathan L. Joseph.................... 40       Executive Vice President, Marketing
Paul J. Pedevillano................... 40       Executive Vice President and Chief Financial Officer
</TABLE>

         ROBERT F. ANGELO, a co-founder of the Company, has been Chief Executive
Officer and Chairman of the Board of Directors since November 1997 after having
served as President, Chief Executive Officer and a director of the Company since
its inception in 1990 and Chairman of the Board of Directors since February
1996. From 1986 to 1989, he held various executive positions at Phoenix
Technologies Ltd., a developer of system-level software, including Chief
Operating Officer, Vice President of OEM Operations, Vice President of Product
Engineering and Vice President of Marketing. Prior to 1986, he was Director of
Marketing at Cullinet Software, Inc. and Vice President of Marketing,
Engineering and Sales at Acorn Products, Inc.

         DEBORAH M. BESEMER, has been President, Chief Operating Officer and
Director since joining the Company in November 1997. From 1996 to 1997, Ms.
Besemer was Executive Vice President of Worldwide Field Operations of Lotus
Development Corp. From 1995 to 1996, Ms. Besemer was Senior Vice President of
Worldwide Sales and from 1990 to 1995, Vice President, The Americas at Lotus
Development Corp.

         JONATHAN L. JOSEPH, a co-founder of the Company, has been Executive
Vice President, Marketing since July 1997 after having served as Senior Vice
President, PC Software Division since June 1995, and as Senior Vice President,
Product Engineering and Marketing from May 1990 to June 1995. From 1986 to 1990,
he was employed by Phoenix Technologies Ltd. in the following positions: from
1989 to 1990, he was General Manager of the Compatibility Software Group and
from 1988 to 1989, he was Director of Product Marketing for the Phoenix ROM
BIOS. Prior to 1986, he was a Product Manager at NEC Information Systems and an
Assistant to the President at Harvest Computer.

         PAUL J. PEDEVILLANO has been Executive Vice President and Chief
Financial Officer since July 1997,Vice President, Business Development from
February 1996 through June 1997 and as Vice President, Finance, Secretary and
Chief Financial Officer from April 1993 to January 1996. From September 1990 to
April 1993, he was Chief Financial Officer of Star Semiconductor Corporation.
From September 1981 to April 1990, he served in various positions at Alloy
Computer Products including Chief Financial Officer, Chief Operating Officer and
Acting President.

                                     PART II

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

         Information with respect to stock price information may be found in the
table captioned "Selected Consolidated Quarterly Financial Data" of the Annual
Report to Stockholders for the fiscal year ended January 31, 1998. Information
with respect to the rest of this Item may be found in the section captioned
"Stock Profile" of the Annual Report to Stockholders for the fiscal year ended
January 31, 1998. Such information is incorporated herein by reference.


ITEM 6.           SELECTED FINANCIAL DATA

         Information with respect to this Item may be found in the table
captioned "Selected Consolidated Five-Year Financial Data" of the Annual Report
to Stockholders for the fiscal year ended January 31, 1998. Such information is
incorporated herein by reference.



                                       15
<PAGE>   16

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
                  AND RESULTS OF OPERATIONS

         Information with respect to this Item may be found in the section
captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of the Annual Report to Stockholders for the fiscal year
ended January 31, 1998. Such information is incorporated herein by reference.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Information with respect to this Item may be found in the Report of
Independent Accountants, Consolidated Financial Statements, Notes to the
Consolidated Financial Statements and Selected Consolidated Quarterly Financial
Data sections of the Annual Report to Stockholders for the fiscal year ended
January 31, 1998 and in the consolidated financial statements and schedule set
forth in Item 14 of this 10-K. Such information is incorporated herein by
reference.


ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
                  AND FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this Item will be set forth under the
Captions "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's definitive proxy statement which is
currently expected to be filed with the Securities and Exchange Commission
within 120 days of January 31, 1998 and is incorporated herein by reference
thereto. Information regarding the Company's executive officers is set forth in
Item 4A of Part I hereof, above, under the caption "Executive Officers of the
Registrant" and is incorporated herein by reference thereto.

ITEM 11.          EXECUTIVE COMPENSATION.

         The information required by this Item will be set forth under the
Captions "Director's Compensation" and "Executive Compensation" in the Company's
definitive proxy statement which is currently expected to be filed with the
Securities and Exchange Commission within 120 days of January 31, 1998 and is
incorporated herein by reference thereto.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
                  MANAGEMENT.

         The information required by this Item will be set forth under the
Caption "Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive proxy statement which is currently expected to be filed
with the Securities and Exchange Commission within 120 days of January 31, 1998
and is incorporated herein by reference thereto.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this Item will be set forth under the
Captions "Compensation Committee Interlocks and Insider Participation" and
"Certain Transactions" in the Company's definitive proxy statement which is
currently expected to be filed with the Securities and Exchange Commission
within 120 days of January 31, 1998 and is incorporated herein by reference
thereto.



                                       16
<PAGE>   17

                                     PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON 
                  FORM 8-K

(a) The following documents are filed as part of or are incorporated by
reference into this Annual Report on Form 10K:

         1. The following audited consolidated financial statements of
SystemSoft and its subsidiaries, and the accountant's report relating thereto,
are incorporated by reference in Item 8 of this Report from the Company's 1998
Annual Report to Stockholders:

            Report of Independent Accountants

            Consolidated Balance Sheets as of January 31, 1998 and 1997

            Consolidated Statements of Operations for the Years Ended January
            31, 1998, 1997, and 1996

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

            Consolidated Statements of Cash Flows for the Years Ended January
            31, 1998, 1997, and 1996

            Notes to Consolidated Financial Statements.

         2. The following Consolidated Financial Statement Schedule filed with
this Annual Report on Form 10-K:

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>                                                                                   <C>
            Schedule II:  Valuation and Qualifying Accounts..................         20
</TABLE>

All other schedules are omitted because they are either not required, not
applicable or the information is shown in the Consolidated Financial Statements
or the Notes thereto.

         3. The exhibits listed in the Exhibit Index filed with this Annual
Report on Form 10-K.

(b) Reports on Form 8-K:

         There were no reports on Form 8-K filed during the quarter ended
January 31, 1998.

(c)   Exhibits: See Index to Exhibits.



                                       17
<PAGE>   18

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        SYSTEMSOFT CORPORATION


                                        By: /s/ Robert F. Angelo
                                            -----------------------------------
                                            Robert F. Angelo
 Date:  May 1, 1998                         Chief Executive Officer and
                                            Chairman of the Board of Directors

We, the undersigned officers and directors of SystemSoft Corporation, hereby
severally constitute and appoint Robert F. Angelo, Deborah M. Besemer and Paul
J. Pedevillano, and each of them singly, our true and lawful attorneys, with
full power to them and each of them singly, to sign for us in our names in the
capacities indicated below, amendments to this Report on Form 10-K and to file
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons, on behalf of the
registrant and in the capacities and on the dates stated.

<TABLE>
<CAPTION>
Signature                                   Capacity                                    Date
---------                                   --------                                    ----
<S>                                         <C>                                         <C>
      /s/ Robert F. Angelo                  Chief Executive Officer and                 May 1, 1998
----------------------------------          Chairman of the Board of Directors
       Robert F. Angelo                     (Principal Executive Officer)


       /s/ Deborah M. Besemer               President, Chief Operating Officer          May 1, 1998
----------------------------------          and Director
       Deborah M. Besemer                   


      /s/ Paul J. Pedevillano               Executive Vice President                    May 1, 1998
----------------------------------          and Chief Financial Officer (Principal
       Paul J. Pedevillano                  Financial and Accounting Officer)


      /s/ Robert N. Goldman                 Director                                    May 1, 1998
----------------------------------
       Robert N. Goldman


      /s/ William Frank King                Director                                    May 1, 1998
----------------------------------
       William Frank King


      /s/ David J. McNeff                   Director                                    May 1, 1998
----------------------------------
       David J. McNeff
</TABLE>




                                       18
<PAGE>   19

                        REPORT OF INDEPENDENT ACCOUNTANTS


Our report on the consolidated financial statements of SystemSoft Corporation
has been incorporated by reference in this Form 10-K from the 1998 Annual Report
to Stockholders of SystemSoft Corporation. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule in Item 14(a)2 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.



                                            /S/ Coopers & Lybrand L.L.P.

                                            COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
March 4, 1998, except as to the information presented 
in Note 15 for which the date is April 29, 1998




                                       19
<PAGE>   20

SCHEDULE II

                             SYSTEMSOFT CORPORATION
                        VALUATION AND QUALIFYING ACCOUNTS
              for the years ended January 31, 1996, 1997, and 1998

<TABLE>
<CAPTION>
                                                                                    Additions
                                                                     Balance at     Charged to    Deductions     Balance at
                                                                     Beginning      Costs and        from          End of
Description                                                           of Year        Expenses      Reserves         Year
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>           <C>            <C>    
YEAR ENDED JANUARY 31, 1996:
      Reserve for doubtful accounts                                    571,644        255,744       336,350        491,038

YEAR ENDED JANUARY 31, 1997:
      Reserve for doubtful accounts                                    491,038      1,312,592       885,715        917,915

YEAR ENDED JANUARY 31, 1998:
      Reserve for doubtful accounts                                    917,915      1,970,374     1,321,584      1,566,705
</TABLE>


                                       20
<PAGE>   21

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit Number    Description
--------------    -----------
<S>           <C>
      =2.1    Agreement and Plan of Merger and Reorganization, dated as of
              December 12, 1996, by and among SystemSoft, Black Acquisition
              Corporation and Radish Communications Systems, Inc. ("Radish" and
              now known as SystemSoft Colorado Corporation) (filed as exhibit to
              Form 8-K dated December 19, 1996).

      =2.2    Registration Rights Agreement dated as of December 12, 1996, by
              and among SystemSoft and the stockholders listed on the signature
              block thereto (filed as exhibit to Form 8-K dated December 19,
              1996).

      =2.3    Participation Agreement dated as of December 12, 1996, by and
              among SystemSoft, Black Acquisition Corporation, Radish and
              certain security holders of Radish listed on the signature pages
              thereto (filed as exhibit to Form 8-K dated December 19, 1996).

      =2.4    Escrow Agreement dated as of December 12, 1996 among SystemSoft,
              James Cowie and State Street Bank and Trust Company as escrow
              agent only (filed as exhibit to Form 8-K dated December 19, 1996).

      =3.1    Second Restated Certificate of Incorporation of the Registrant
              (filed as exhibit to Form 10-Q for the quarterly period ended July
              31, 1996).

      =3.2    Certificate of Amendment of Second Restated Certificate of
              Incorporation of the Registrant (filed as exhibit to Form 10-Q for
              quarterly period ended July 31, 1996).

      *3.3    Restated By-laws of the Registrant.

      *4.1    Specimen Stock Certificate.

      =4.2    Common Stock Purchase Agreement dated May 7, 1997 (filed as
              exhibit to Form 8-K dated May 20, 1997). #*10.1 Intel-SystemSoft
              Development and License Agreement dated December 20, 1993 between
              the Registrant and Intel Corporation, as amended.

    #*10.2    Agreement dated March 31, 1993 between the Registrant and Compaq
              Computer Corporation.

     *10.3    Form of Master License Agreement.

    -*10.4    1992 Stock Option Plan.

    -*10.5    Form of Incentive Stock Option.

    -*10.6    1992 Directors' Stock Option Plan.


    -*10.7    Form of Nonqualified Stock Option.

    -*10.8    1993 California Stock Option Plan.

    -*10.9    Form of Incentive Stock Option granted under the 1993 California
              Stock Option Plan.

   -**10.10   1994 Omnibus Stock Plan, as amended.

    -*10.11   1994 Non-Employee Director Stock Option Plan.

   -**10.12   1994 Employee Stock Purchase Plan, as amended.

    -*10.13   Employment Agreement dated June 28, 1991 between the Registrant 
              and Robert F. Angelo.

     *10.14   Agreement dated June 10, 1994 between the Registrant and Intel
              Corporation.

    -*10.15   Amendment No. 1 dated January 31, 1995 to Agreement dated March
              31, 1993 between the Registrant and Compaq Computer Corporation
              (filed as exhibit to Form 10-K for the fiscal year ended January
              31, 1995).

    #=10.16   Amendment No. 2 dated April 27, 1995 to Agreement dated March 31,
              1993 between the Registrant and Compaq Computer Corporation (filed
              as exhibit to Form 10-Q for the three month period ended April 30,
              1995).

     =10.17   Lease agreement dated July 19, 1995 between the Registrant and
              Vision Drive, Inc. (filed as exhibit to Form 10-Q for the three
              month period ended July 31, 1995).

     =10.18   Amendment dated September 11, 1995 to lease agreement dated July
              19, 1995 between the Registrant and Vision Drive, Inc. (filed as
              exhibit to Form 10-Q for the three month period ended October 31,
              1995).

    #=10.19   Amendment No.1 dated October 30, 1995 to the Development and
              License Agreement dated December 20, 1993 between the Registrant
              and Intel Corporation (filed as exhibit to Form 10-Q for the three
              month period ended October 31, 1995).

   -**10.20   Employment Agreement dated January 8, 1998 between the Registrant
              and Deborah M. Besemer.

    =-10.21   Employment Agreement between the Registrant and Thomas W. Higgins
              dated September 20, 1995 (filed as exhibit to Form 10-K for the 
              fiscal year ended January 31, 1996).

    =-10.22   Radish 1992 Stock Option Plan (filed as exhibit to Registrant's
              Registration Statement on Form S-8 (File No. 333-18657)).

    =-10.23   Amended and Restated Non-Qualified Stock Option Agreement dated
              September 1, 1993 between Radish and Robert Baden (filed as
              exhibit to Registrant's Registration Statement on Form S-8 (File
              No. 333-18657)).

    =-10.24   Amendment to Amended and Restated Non-Qualified Stock Option
              Agreement dated December 16, 1996 between Radish and Robert Baden
              (filed as exhibit to Registrant's Registration Statement on Form
              S-8 (File No. 333-18657)).

     =10.25   Lease agreement dated December 20, 1996 between the Registrant and
              DIV Natick, LLC (filed as exhibit to Form 10-K for the fiscal year
              ended January 31, 1997).
</TABLE>



                                       21
<PAGE>   22

<TABLE>
<S>           <C>
    =10.26    Agreement dated December 20, 1996 between the Registrant and DIV
              Natick, LLC (filed as exhibit to Form 10-K for the fiscal year
              ended January 31, 1997).

   -*10.27    Employment agreement dated June 28, 1991 between the Registrant
              and Paul J. Pedevillano.

   **10.28    Agreement dated December 24, 1997 between the Registrant and Intel
              Corporation.

    =10.29    Loan Agreement dated August 27, 1997 between the Registrant and
              Silicon Valley Bank (filed as exhibit to the Form 10-Q dated
              September 15, 1997).

   **10.30    Amended and Restated Loan and Security Agreement dated April 10,
              1998 between the Registrant and Silicon Valley Bank.

    =10.31    Executed lease dated December 20, 1996 between the Registrant and
              DIV Natick, LLC (filed as exhibit to the Form 10-Q dated December
              10, 1997).

  -**10.32    Severance and Release Agreement dated July 16, 1997 between the
              Registrant and David P. Sommers.

  -**10.33    Employment Agreement dated December 28, 1997 between the
              Registrant and William J. O'Connell.

  -**10.34    Amendment dated February 26, 1998 to Employment Agreement between
              the Registrant and William O'Connell.

  -**10.35    Employment agreement dated January 8, 1998 between the Registrant
              and Jonathan L. Joseph.

   **13.1     Portions of the 1998 Annual Report to Stockholders for the fiscal
              year ended January 31, 1998 expressly incorporated by reference
              herein.

   **21.1     Subsidiaries of Registrant.

   **23.1     Consent of Coopers and Lybrand L.L.P.

    =24.1     Power of Attorney (included as part of signature page to this
              Report).

     27.1     Financial Data Schedule (EDGAR Version Only).
</TABLE>
-------------------
 *  Previously filed as an exhibit to the Registrant's Registration  
    Statement on Form S-1 (File No. 33-80620) or an amendment thereto
    and incorporated herein by reference.                            
                                                                     
 #  Confidential treatment requested as to certain portions.         
                                                                     
 -  Management contract or compensatory plan or arrangement.         
                                                                     
 =  Filed with the report or Form indicated and incorporated herein  
    by reference.                                                    
                                                                     
**  Filed herewith                                                   



                                       22