<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q

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

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

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997

                         COMMISSION FILE NUMBER 0-19207

                             QUARTERDECK CORPORATION
             (Exact name of Registrant as specified in its charter)

                     DELAWARE                              95-4320650
         (State or  other jurisdiction of               (I.R.S. Employer
          incorporation or organization)               Identification No.)

   13160 MINDANAO WAY, MARINA DEL REY, CALIFORNIA             90292
     (Address of principal executive offices)              (Zip Code)

       Registrant's telephone number, including area code: (310) 309-3700

        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 periods 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 [ ]

        The number of shares of the Registrant's common stock, $.001 par value,
        outstanding as of January 30, 1998 was 43,370,265.

================================================================================

<PAGE>   2

                    QUARTERDECK CORPORATION AND SUBSIDIARIES

                                    FORM 10-Q

                                DECEMBER 31, 1997

                                      INDEX

<TABLE>
<CAPTION>
                                                                           PAGE NO.
                                                                           --------
<S>      <C>                                                               <C>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

             Consolidated Balance Sheets as of December 31, 1997
             (unaudited) and September 30, 1997                                3

             Consolidated Statements of Operations for the three
             months ended December 31, 1997 and 1996 (unaudited)               4

             Consolidated Statements of Cash Flows for the three
             months ended December 31, 1997 and 1996 (unaudited)               5

             Notes to Consolidated Unaudited Financial Statements              6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS                      11

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                                    19

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                  19

ITEM 5.  OTHER INFORMATION                                                    20

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                     22

SIGNATURES                                                                    23
</TABLE>


                                       2
<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                    QUARTERDECK CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
         (Amounts in thousands, except for share and per share amounts)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,      SEPTEMBER 30,
                                                                                   1997               1997
                                                                               ------------      -------------
                                                                                (UNAUDITED)
<S>                                                                             <C>                <C>       
Current assets:
      Cash and cash equivalents                                                 $   26,903         $   23,651
      Trade accounts receivable                                                      9,985              7,028
      Inventories                                                                    1,252              1,177
      Other current assets                                                           2,560              4,655
                                                                                ----------         ----------
                                                                                 
               Total current assets                                                 40,700             36,511

      Equipment and leasehold improvements, net                                      6,532             14,153
      Capitalized software costs, net                                                1,560              1,790
      Other assets                                                                   3,244              3,427
                                                                                ----------         ----------

                                                                                $   52,036         $   55,881
                                                                                ==========         ==========
                                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Accounts payable                                                          $    2,983         $    3,792
      Accrued liabilities                                                           13,685             14,196
      Accrued acquisition, restructuring and other charges                           3,957              5,385
      Income tax payable                                                               572                627
      Notes payable to bank                                                          1,625              5,579
      Current portion of long-term obligations                                          15                 15
                                                                                ----------         ----------
               Total current liabilities                                            22,837             29,594

      Convertible notes                                                             25,000             25,000
      Long-term obligations, less current portion                                       89                114
                                                                                ----------         ----------
               Total liabilities                                                    47,926             54,708
                                                                                ----------         ----------
Stockholders' equity:
      Series C Preferred stock (Par value $1,000, authorized: 29,000;
         issued and outstanding: 29,000 and 26,025 shares, respectively,
          liquidation preference $29,000,000)                                       27,376             24,594
      Common stock (authorized: 70,000,000 shares; issued
          and outstanding: 43,370,265 and 43,338,838 shares)                            43                 43
      Additional paid-in capital                                                    75,667             75,630
      Accumulated deficit                                                          (97,848)           (98,164)
      Foreign currency translation adjustment                                         (263)              (281)
      Note receivable from directors for sale of stock                                 (18)               (18)
      Net unrealized loss on marketable securities                                    (288)               (72)
      Treasury stock                                                                  (559)              (559)
                                                                                ----------         ----------
                Total stockholders' equity                                           4,110              1,173
                                                                                ----------         ----------
                                                                                $   52,036         $   55,881
                                                                                ==========         ==========
</TABLE>

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


                                       3
<PAGE>   4

                    QUARTERDECK CORPORATION AND SUBSIDIARIES
            CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
                  (Amounts in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                    DECEMBER 31,
                                                             -------------------------
                                                               1997             1996
                                                             --------         --------
<S>                                                          <C>              <C>     
Net revenues                                                 $ 20,626         $ 24,385
Cost of revenues                                                4,709            7,048
                                                             --------         --------
         Gross profit                                          15,917           17,337

Operating expenses:
         Research and development                               4,681            4,119
         Sales and marketing                                    8,378            7,782
         General and administrative                             2,807            4,922
         Acquisition, restructuring and other charges             (51)              --
                                                             --------         --------
         Total operating expenses                              15,815           16,823
                                                             --------         --------
Operating income                                                  102              514

Interest expense, net                                            (267)            (491)
Other income                                                      497               --
                                                             --------         --------
Income before income taxes                                        332               23
Provision for income taxes                                         16                3
                                                             --------         --------
Net income                                                   $    316         $     20
                                                             ========         ========
Net income per share:
   Basic                                                     $   0.01         $   0.00
                                                             --------         --------
   Diluted                                                   $   0.00         $   0.00
                                                             --------         --------
Shares used to compute net income per share:
   Basic                                                       43,363           37,738
                                                             --------         --------
   Diluted                                                     67,628           39,938
                                                             --------         --------
</TABLE>

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


                                       4
<PAGE>   5

                    QUARTERDECK CORPORATION AND SUBSIDIARIES
            CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED
                                                                                 DECEMBER 31,
                                                                           -------------------------
                                                                             1997             1996
                                                                           --------         --------
<S>                                                                        <C>              <C>     
Cash flows from operating activities:
      Net income                                                           $    316         $     20
      Adjustments to reconcile net income to net
         cash used in operating activities:
      Depreciation and amortization of equipment and
         leasehold improvements                                               1,010            1,275
      Amortization of capitalized software costs                                230              662
         Write-off of property and equipment                                     --               48
         Gain on sale of building                                              (497)              --
      Changes in assets and liabilities:
         Trade accounts receivable                                           (2,957)          (2,889)
         Inventories                                                            (75)             802
         Other current assets                                                 1,879            2,017
         Other assets                                                           183              790
         Accounts payable                                                      (809)          (6,729)
         Accrued liabilities                                                   (511)          (1,831)
         Accrued acquisition, restructuring and other charges                (1,328)          (5,599)
         Income tax payable                                                     (55)             175
      Foreign currency translation adjustment                                    18             (196)
                                                                           --------         --------
               Net cash used in operating activities                         (2,596)         (11,455)
                                                                           --------         --------
Cash flows from investing activities:
         Capital expenditures                                                  (692)          (2,675)
         Proceeds from sale of building                                       7,700               --
         Capitalized software costs                                              --              (68)
                                                                           --------         --------
               Net cash provided by (used in) investing activities            7,008           (2,743)
                                                                           --------         --------
Cash flows from financing activities:
         Net proceeds from issuance of preferred stock, Series C              2,782               --
         Principal debt repayments                                           (3,954)              --
         Notes payable to banks                                                  --              168
         Net payments under long-term obligations                               (25)              --
         Net proceeds from issuance of common stock                              37              349
                                                                           --------         --------
               Net cash provided by (used in) financing activities           (1,160)             517
                                                                           --------         --------
               Net increase (decrease) in cash and cash equivalents           3,252          (13,681)
Cash and cash equivalents at beginning of period                             23,651           25,554
                                                                           --------         --------
Cash and cash equivalents at end of period                                 $ 26,903         $ 11,873
                                                                           ========         ========
Supplemental disclosure of cash flow information:
         Cash paid during the period for:
               Interest                                                    $    263         $    472
               Income taxes                                                $     --         $     --
                                                                         
</TABLE>

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


                                       5
<PAGE>   6

                    QUARTERDECK CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

         The accompanying consolidated financial statements of Quarterdeck
Corporation are unaudited (except for the Balance Sheet as of September 30,
1997) and have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission regarding interim
financial reporting. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the consolidated
financial statements and notes thereto included in Quarterdeck's Annual Report
on Form 10-K, for the fiscal year ended September 30, 1997. In the opinion of
management, the accompanying consolidated unaudited financial statements include
all adjustments which are necessary for a fair presentation. The results of
operations for the three month period ended December 31, 1997 are not
necessarily indicative of results to be expected for the full fiscal year.

2.       GENERAL

         Quarterdeck Corporation is a global leader in the development and
marketing of PC helpware -- software designed to prevent and solve PC
performance problems, especially those encountered in networked -- Internet and
Intranet -- environments. The Company's goal is to make personal computing
trouble-free for users and network administrators alike, while reducing the need
for live technical support. Quarterdeck's current product line, which addresses
storage management, system conflict resolution, virus protection, system
updating, and enhanced access to networked information and communications
resources, is marketed to both end-users and businesses via retail distribution,
corporate resellers and OEM's, direct marketing channels, and the Internet.
Quarterdeck's products are available in over 14,000 outlets throughout the
United States and Canada, as well as in over 29 countries worldwide.

         The Company was incorporated in California in 1982 as Quarterdeck
Office Systems. In June 1991, the Company changed its state of incorporation
from California to Delaware and in February 1995 changed its name to Quarterdeck
Corporation.

         The principal offices of the Company are located at 13160 Mindanao Way,
Third Floor, Marina del Rey, California, 90292, telephone number (310) 309-3700.


                                       6
<PAGE>   7

3.       BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,    SEPTEMBER 30,
                                                                           1997             1997
                                                                        ------------    -------------
                                                                               (in thousands)
<S>                                                                      <C>              <C>     
Trade accounts receivable:
  Receivables ...................................................        $ 20,114         $ 16,274
  Less: allowance for doubtful accounts .........................          (1,484)          (1,761)
  Less: allowance for sales returns .............................          (4,497)          (4,243)
  Less: allowance for market development funds ..................          (4,148)          (3,242)
                                                                         --------         --------
                                                                         $  9,985         $  7,028
                                                                         ========         ========
Other current assets:
  Prepaid royalties .............................................        $    386         $    352
  Income tax receivable .........................................             526              520
  Other prepaid expenses ........................................             831              800
  Notes receivable ..............................................              40               51
  Advances to employees .........................................              23               24
  Marketable security - Infonautics .............................             576              792
  Other .........................................................             178            2,116
                                                                         --------         --------
                                                                         $  2,560         $  4,655
                                                                         ========         ========
Equipment and leasehold improvements:
  Building (asset held for sale) ................................        $     --         $  7,359
  Computer equipment ............................................           7,999            7,769
  Office furniture and equipment ................................           6,479            6,575
  Office furniture and equipment under capital leases ...........              99               99
  Leasehold improvements ........................................           2,641            2,638
                                                                         --------         --------
                                                                           17,218           24,440
  Less: accumulated depreciation and amortization ...............         (10,686)         (10,287)
                                                                         --------         --------
                                                                         $  6,532         $ 14,153
                                                                         ========         ========
Capitalized software costs:
  Capitalized software costs ....................................        $  5,498         $  5,498
  Less: accumulated amortization ................................          (3,938)          (3,708)
                                                                         --------         --------
                                                                         $  1,560         $  1,790
                                                                         ========         ========
Other assets:
  Intangible assets acquired, net ...............................           2,572            2,683
  Other .........................................................             672              744
                                                                         --------         --------
                                                                         $  3,244         $  3,427
                                                                         ========         ========
Accrued expenses:
  Accrued expenses, .............................................        $ 11,780         $ 12,291
  Accrued litigation settlement .................................           1,905            1,905
                                                                         --------         --------
                                                                         $ 13,685         $ 14,196
                                                                         ========         ========
Accrued acquisition, restructuring and other charges:
 Acquisition ....................................................        $     50         $     50
 Restructuring ..................................................           3,907            5,335
                                                                         --------         --------
                                                                         $  3,957         $  5,385
                                                                         ========         ========
</TABLE>


                                       7
<PAGE>   8


4.       CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash and cash
equivalents at December 31, 1997 amounted to $26,903,000.

5.       COMPUTATION OF NET INCOME PER SHARE

         In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share." SFAS No. 128 specifies new standards designed to
improve the earnings per share (EPS) information provided in financial
statements by simplifying the existing computational guidelines, revising the
disclosure requirements and increasing the comparability of EPS data on an
international basis. Some of the changes made to simplify the EPS computations
include: (a) eliminating the presentation of primary EPS and replacing it with
basic EPS, for which common stock equivalents are not considered, (b)
eliminating the modified treasury stock method and the three percent materiality
provision and (c) revising the contingent share provision and the supplemental
EPS data requirements. SFAS No. 128 also makes a number of changes to existing
disclosure statements. The Company adopted SFAS No. 128 for the quarter ended
December 31,1997. All prior periods will be restated.

         The following table sets forth the computation of basic and diluted net
income per share:

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                 DECEMBER 31,
                                                                            ----------------------
                                                                             1997           1996
                                                                            -------        -------
<S>                                                                         <C>            <C>    
Numerator:
Net income, net income available to common stockholders
  and net income available to common stockholders after
  required conversion:                                                      $   316        $    20
                                                                            =======        =======
Denominator:
Shares used for basic net income
  per share calculation - weighted average shares outstanding                43,363         37,738

Effect of dilutive securities:
                  Series C convertible preferred shares and warrants         24,234
                  Series B convertible preferred stock                                         276
                  Stock options                                                  31            724
                  Limbex purchase transaction                                                1,200

Shares used for diluted net income                                          -------        -------
  per share calculation                                                      67,628         39,938
                                                                            =======        =======
</TABLE>

         No adjustment was required in calculating net income available to
common stockholders after assumed conversion as there are no dividend
requirements on the Company's preferred stock.

         Options to purchase 6,873,000 shares at a weighted average exercise
price of $3.52 and 3,184,000 shares at a weighted average exercise price of
$12.38 were outstanding during the three months ended December 31, 1997 and
1996, respectively, but were not included in the computation of diluted net
income per share because the options' exercise price was greater than the
average market price of the common shares and therefore, the effect would be
anti-dilutive.

         Warrants to purchase 904,000 shares and 1,704,000 shares at a weighted
average exercise price of $7.44 were outstanding during the three months ended
December 31, 1997 and 1996, respectively, but were not included in the
computation of diluted net income per share because the options' exercise price
was greater than the average market price of the common shares and therefore,
the effect would be anti-dilutive.

         Warrants to purchase 25,000 shares at a weighted average exercise price
of $7.20 were outstanding during the three months ended December 31, 1997 and
1996, but were not included in the computation of diluted net income per share
because the options' exercise price was greater than the average market price of
the common shares and therefore, the effect would be anti-dilutive.


                                       8
<PAGE>   9
         Approximately 1,180,000 shares issuable upon the conversion of
convertible notes were not included in either period as the effect would be
anti-dilutive. The Company had $25,000,000 of convertible notes outstanding at
December 31, 1997 and 1996.

         Series C preferred stock includes 24,234,000 shares relating to the
potential conversion of the Series C preferred stock and warrants based upon the
conversion price at December 31, 1997 which was $1.252. However, the holders of
the Series C preferred stock are contractually held to a minimum of $5.00 per
share conversion price until March 1, 1998.


6.    RESTRUCTURING CHARGES

         During September 1997, the Company implemented a restructuring plan
which was designed to focus the Company on the new corporate strategy which
resulted in charges totaling $11,051,000. As part of the restructuring, the net
book value of the building in Columbia, Missouri was written down by $5,803,000,
to $7,000,000, the Company's estimated fair market value. (This building and
certain furniture and fixtures were sold during the quarter ended December 31,
1997 resulting in a net gain of $497,000.) See subsequent event footnote 8 for
further discussion of business units closed or divested.

         The following is an analysis of the significant components of the
fiscal 1997 restructuring and other charges (in thousands):

<TABLE>
<CAPTION>
                               DISCONTINUANCE AND   SEVERANCE       WRITE-OFF
                                CONSOLIDATION OF       AND         PROPERTY AND
                                    OFFICES           OTHER          EQUIPMENT         TOTAL
                               ------------------   ---------      -------------      --------
<S>                           <C>                   <C>             <C>               <C>  
Accrued, September 30, 1997 ..          569            4,122              100            4,791
Non-cash costs ...............           --              (51)            (100)            (151)
Cash payments ................          (95)          (1,113)              --           (1,208)
                                   --------         --------         --------         --------
Accrued, December 31, 1997....     $    474         $  2,958         $     --         $  3,432
                                   ========         ========         --------         ========
</TABLE>

         Quarterdeck currently expects this restructuring accrual to be
utilized, primarily through cash disbursements, through the quarter ending March
31, 1999. The Company anticipates the cash effect of such disbursements to be of
declining significance until this time.

         The following is an analysis of the significant components of the
fiscal 1996 restructuring (in thousands):

<TABLE>
<CAPTION>
                                               DISCONTINUANCE
                                                     AND           SEVERANCE   
                                                CONSOLIDATION         AND      
                                                 OF OFFICES          OTHER         TOTAL
                                               ---------------     ----------     --------
<S>                                            <C>                 <C>            <C> 
Accrued, September 30, 1997 ...........                454                90           544
Cash payments .........................                (57)              (12)          (69)
                                                  --------          --------      --------
Accrued, December 31, 1997 ............           $    397          $     78      $    475
                                                  ========          ========      ========
</TABLE>

         The remainder of this accrual primarily relates to vacant leased
facilities. The leases for the facilities extend several years, however, the
Company is seeking to obtain subleases for this space.

7.       LEGAL PROCEEDINGS

         Federal and state shareholder actions were brought against the Company
and one former and one current officer of the Company alleging among other
things, violations of certain provisions of California and Federal securities
laws relating to statements made about Quarterdeck. On December 19, 1997, the
Company reached an agreement in principle to settle such actions for a total
amount of $12,500,000, of which the Company will be required to pay
approximately $1,905,000, with the balance of $10,595,000 to be paid under the
Company's directors' and officers' insurance policy. The settlement is subject
to, among other things, court approval. The Company has recorded a charge of
$1,905,000 during its fiscal year ended September 30, 1997.

         In March 1997, a purported class action lawsuit brought on behalf of
all licensees of MagnaRAM2 residing in the United States, Jack Abbott, et al. v.
Quarterdeck Corporation, Case No. 00709198, was filed in the Superior Court of
the State of California, County of San Diego. The complaint alleges, among other
things, that MagnaRAM2 fails to increase Random Access Memory significantly or
otherwise help Windows 95 and Windows 3.x users. The plaintiffs seek
compensatory damages and punitive damages in unspecified amounts, injunctive
relief, and attorney fees and costs. Quarterdeck has filed counterclaims and
intends to defend the case vigorously and to oppose any 


                                       9
<PAGE>   10

effort to certify the claims for class resolution. No assurances can be given
that the ultimate disposition of this case will not have a material adverse
effect on the Company's results of operations, financial condition or liquidity.

         In October 1997, a complaint was filed in the United States District
Court for the District of Utah on behalf of PowerQuest Corporation against the
Company. The complaint alleges that the Company's partitioning software
(Partition-It and Partition-It Extra Strength) violate a patent held by
PowerQuest. In January 1998, PowerQuest obtained a second patent relating to
partitioning and is now seeking to amend its complaint to allege infringement of
that patent as well. The plaintiff seeks an injunction against distribution of
Partition-It and Partition-It Extra Strength and damages. Although the Company
believes the patents are invalid, there can be no assurance as to the actual
outcome of this matter. The ultimate disposition of this matter could have a
material adverse effect on the Company.

         The Company is a defendant in various other pending claims and
lawsuits. Although there can be no assurances, management believes that the
disposition of such matters will not have a material adverse impact on the
results of operations or financial position of the Company.

8.       SUBSEQUENT EVENTS

         On January 12, 1998, the Company completed the divestiture of the
business of StarNine Technologies, Inc., the Company's Berkeley, California
subsidiary specializing in Internet tools for Macintosh users, to Platinum
Equity Holdings. In addition, the Company signed an outsourcing contract with
The Sutherland Group, Ltd., for the Company's Clearwater, Florida consumer and
corporate telesales operations. These transactions will not have a material
impact on the Company's financial position or results of operations and resulted
in a reduction in full time headcount by approximately 115.


                                       10
<PAGE>   11

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         This discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements, the notes thereto and other information, including information set
forth in the Company's 10-K for the fiscal year ended September 30, 1997, and
all other recent filings Quarterdeck has made with the Securities and Exchange
Commission, before making an investment decision with respect to the Company's
stock.

         In addition to an analysis of recent and historical financial results,
this Form 10-Q includes a discussion of certain of Quarterdeck's business risks,
including risks which are inherent to software development as well as specific
trends and uncertainties relating to the competitive environment in which the
Company operates. Quarterdeck has sought to identify and disclose the
significant risks to its business. However, the Company cannot predict where or
to what extent any of such risks may be realized nor can there be any assurance
that Quarterdeck has identified all possible issues which the Company faces now
or may face in the future.

     This Form 10-Q contains forward-looking statements which are made
pursuant to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. Within this Form 10-Q, words such as "believes",
"anticipates", "plans", "expects", "intends", and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such statements. These forward-looking statements involve a
number of risks and uncertainties, including the timely development and market
acceptance of products and technologies, sell-through of products in the sales
channel, successful integration of acquisitions, the effect of conversion of the
Company's convertible preferred stock, the ability to reduce operating expenses
and other factors described throughout this Form 10-Q and in the Company's other
filings with the Securities and Exchange Commission. The actual results that the
Company achieves may differ materially from any forward-looking statements due
to such risks and uncertainties. The Company undertakes no obligations to revise
or update any forward-looking statements in order to reflect events or
circumstances that may arise after the date of this report.

RESULTS OF OPERATIONS

         Net Revenues: The Company's net revenues consist of gross sales of its
products, less provisions for returns and customer allowances. In the retail and
corporate reseller channels, the Company's main sales vehicles, gross sales are
recorded as products are shipped on order to first-tier distributors, with
provisions for returns calculated on the basis of projected sell-through of new
products and demonstrated sell-through experience of established products. These
provisions reflect the industry's practice of often accepting returns from
distributors, resellers, and retailers of products not sold through to final
customers. If projected sell-through does not occur, actual returns may exceed
earlier provisions, and net revenues for a period may suffer significant
declines even when distributor orders for new or replacement products are
meeting expectations.

         Net revenues for the three months ended December 31, 1997 of
$20,626,000 decreased 15.4% or $3,759,000 from net revenues of $24,385,000 for
the three months ended December 31, 1996. This decline reflected reduced sales
for the Company's memory management, and communications products, the
discontinuance during fiscal 1997 of certain non-core product lines (e.g.,
Internet utilities and graphic utilities)and reduced efforts to sell third party
products through the Company's direct mail and telesales units.

         During the December 1997 quarter, a majority of the Company's revenues
were generated by continuing sales of its CleanSweep and ProComm products and
from new products and upgrades including RealHelp, RealHelp Extra Strength,
ViruSweep 1.0 and Partition-It Extra Strength.

         The majority of Quarterdeck's revenues are derived from US sales, but
the relative contribution from international revenues has grown, representing
24.1% and 17.0% of the Company's net revenues, for the three month periods ended
December 31, 1997 and 1996, respectively.

         Cost of Revenues: Cost of revenues include product production,
packaging, documentation and media, amortization of capitalized software costs,
technical support and certain license fees paid to third parties. For the three
months ended December 31,1997, cost of revenues of $4,709,000 decreased 33.2% or
$2,339,000 from cost of revenues of $7,048,000 for the three months ended
December 31, 1996, while declining as a percent of net revenues to 22.8% from
28.9% for the three months ended December 31, 1997 and 1996, respectively. The
dollar decrease in cost of revenues was largely due to reduced sales and to
improved efficiency in production and technical support 


                                       11
<PAGE>   12

activities. The reduction as a percent of net revenues was primarily due to the
consolidation of the purchasing function which allowed the Company to obtain
manufacturing related volume discounts, reduced royalty expense and software
amortization in the current year, continued reduction of technical support costs
and continuing decreases in the manufacturing cost per unit resulting from a
change in the Company's product mix to the CD-Rom format from higher cost floppy
disks.

         Software development and purchased software costs are capitalized once
technological feasibility is achieved and are generally amortized over one to
three year periods, commencing upon initial product release. For the three
months ended December 31, 1997 and 1996, Quarterdeck did not capitalize any
internal software development, judging that costs incurred after achieving
technological feasibility were immaterial. For the three months ended December
31, 1997, amortization of previously capitalized software costs of $230,000
decreased 65.3% or $432,000 from amortization of capitalized software costs of
$662,000 for the three months ended December 31, 1996 due to some previously
capitalized costs having been fully amortized. There were no software
development costs capitalized in the December 1997 quarter.

OPERATING EXPENSES

         Operating expenses for the three months ended December 31, 1997 of
$15,815,000 decreased 6.0% or $1,008,000, from total operating expenses of
$16,823,000 for the three months ended December 31, 1996, but increased as a
percent of net revenues to 76.7% from 69.0% for the three months ended December
31, 1997, and 1996 respectively. This dollar decline in total operating expenses
resulted primarily from the Company's restructuring, consolidation, and
downsizing activities which began late in fiscal 1996. The increase as a percent
of net revenues was primarily due to the reduction in net revenues for the three
months ended December 31, 1997 as compared to the three months ended December
31, 1996.

         Research and Development: Research and development expenses consist
primarily of salaries, benefits and consulting fees to support product
development, including product testing and documentation. For the three months
ended December 31, 1997, research and development expenses of $4,681,000
increased 13.6% or $562,000, from research and development expenses of
$4,119,000 for the three months ended December 31, 1996, while increasing as a
percent of net revenues to 22.7% from 16.9% for the three months ended December
31, 1997 and 1996, respectively. The increase in research and development
expenses was largely due to increased internal research and development
headcount and to payments to third parties for contracted product development
required to support the Company's expanded helpware product development efforts.

         Sales and Marketing: Sales and marketing expenses consist of salaries
and commissions and related costs of sales and marketing and customer service
personnel as well as advertising, trade show and promotional expenses. For the
three months ended December 31, 1997, sales and marketing expenses of $8,378,000
increased 7.7% or $596,000, from sales and marketing expenses of $7,782,000 for
the three months ended December 31, 1996 while increasing as a percent of net
revenues to 40.6% from 31.9% for the three months ended December 31, 1997 and
1996, respectively. This increase was primarily due to an increase in consulting
expenses, promotional activities and packaging occurring as a result of the new
strategic product releases during the December 1997 quarter.

         Quarterdeck believes substantial sales and marketing efforts are
essential to achieve revenue growth and to maintain and enhance the Company's
competitive position. Accordingly, with the continued expansion of its product
lines and international operations, as well as the introduction of new and
updgraded products, Quarterdeck expects the expenses associated with these
efforts to continue to constitute its most significant operating expense. There
can be no assurance that these sales and marketing efforts will be successful in
achieving their intended results.

         General and Administrative: General and administrative expenses consist
of salaries and related costs of support departments, overhead and facilities.
For the three months ended December 31, 1997, general and administrative
expenses of $2,807,000 decreased 43.0% or $2,115,000, from general and
administrative expenses of $4,922,000 for the three months ended December 31,
1996, while decreasing as a percent of net revenue to 13.6% from 20.2% for the
three months ended December 31, 1997 and 1996, respectively. These declines were
largely due to reductions in headcount and consultants. Additionally, facility
related expenses declined significantly due to the restructuring efforts late in
fiscal 1996 and in fiscal 1997, as the Company closed or consolidated seven
office locations, sold the Columbia, Missouri building and subleased 52,000
square feet of the Company's current office space to other tenants.

         Restructuring Costs: For the three months ended December 31, 1997, the
Company reversed $51,000 of restructuring costs no longer required. There were
no restructuring costs for the three months ended December 31, 1996.


                                       12
<PAGE>   13

         Other income: For the three months ended December 31, 1997, net other
income of $497,000 primarily represents the gain realized upon the sale of the
Columbia, Missouri building on December 30, 1997. Net other income for the three
months ended December 31, 1996 was zero.

         Interest expense: For the three months ended December 31, 1997, net
interest expense of $267,000 decreased 45.6% or $224,000 from net interest
expense of $491,000 for the three months ended December 31, 1996, while
decreasing as a percent of net revenues to 1.3% from 2.0% for the three months
ended December 31, 1997 and 1996, respectively. Net interest expense decreased
primarily due to a higher interest rate paid on the Company's previous revolving
line of credit which was closed in fiscal 1997 and an increase in interest
income relating to higher cash balances maintained in interest bearing accounts
as compared to the three months ended December 31, 1996. Additionally, the
Company reduced the outstanding bank debt by $6,824,000, as compared to the
December 1996 quarter, resulting in a reduced interest expense.

         Income Taxes: A valuation allowance was recorded for income tax expense
as it relates to foreign operations to offset 100% of the Company's $33,600,000
net deferred tax asset as of December 31, 1997. The net deferred tax asset of
$33,600,000 (before applying the valuation allowance) is comprised of the
estimated tax effect of expected future reversing temporary differences and tax
net operating losses, relating in part to charges taken for book purposes that
are not deductible for federal income tax purposes until the amounts are paid in
the future. Management believes that due to recent financial results it is
appropriate to record a full valuation allowance until such time as it becomes
more likely than not that the Company will realize some or all of the benefit of
the net deferred tax asset.

Trends and Uncertainties:

         The computer software industry is subject to rapid technological change
often evidenced by new competing products, improvements in existing products and
improvements and/or upgrades to operating systems. The Company depends on the
successful development or acquisition and resulting sales of new products,
including upgrades of existing products, to replace revenues from products
introduced in prior years that have begun to experience reduced revenues or have
become obsolete. If the Company's leading products, such as CleanSweep and
ProComm, become outdated or are rendered obsolete as a result of improvements in
operating systems, hardware or technology, or due to other competitive factors
and lose market share faster than those revenues are replaced by new products or
if new products or existing product upgrades are not introduced in a timely
manner or do not achieve anticipated revenues the Company's operating results
could be materially adversely affected. Even with normal development cycles, the
market environment can change so quickly that features in certain products can
become outdated soon after market introduction. These events may occur in the
future and may have an adverse effect on future revenues and operating results.

         The Company is focusing significant efforts on evolving its core
utilities and communication product lines into a set of products designed to
enhance user performance, simplify system management and reduce the ongoing cost
of ownership for networked personal computing. As part of this effort, the
Company is developing new products, such as RealHelp, which was released in
December, 1997, and adapting its current technology into these products and has
made and may make strategic acquisitions and divestitures. There is no assurance
these efforts will be successful. Other significant risks associated with the
Company's focus on this category of products include the timing of releases in
relation to competitive products, uncertainties surrounding the rate and extent
of development of this new market and one-time losses and charges that may
result from divestitures of non-core assets.

         The Company is also devoting substantial efforts to the development of
software products that are designed to operate on Microsoft's Windows 95 and
Windows NT. Microsoft Corporation may incorporate advanced utilities or other
features in Windows 95 and/or Windows NT and/or their successors that may
decrease the demand for certain of the Company's products including those under
development. Should the Company not be able to timely develop and successfully
market products that offer perceived value to users of these operating systems
beyond that which is offered in the base operating system, future revenues would
be adversely affected.

         Although Quarterdeck believes that its product planning and development
strategies and processes will result in successful development of technology
innovations in the future, there can be no assurance that the Company's software
development efforts will result in successful product introductions or increased
revenues. Even 


                                       13
<PAGE>   14

with normal development cycles, the market environment can change so quickly
that features in certain products can become outdated before or soon after
market introduction.

         Quarterdeck believes that to remain competitive it is necessary to
continue to invest in software development efforts while at the same time
considering the acquisition and/or license of complementary software products.
The Company anticipates that spending for software development and purchased
software will continue as a significant expense in the future. However, because
of the inherent uncertainties of software development projects and the software
market in general, there can be no assurance that software development efforts
or additional purchased software will result in successful product introductions
or increased sales.

         Future competitive product releases may cause disruptions in orders for
the Company's products while users and the marketplace evaluate the competitive
products. The extent of the disruption in orders and the impact on future orders
of the Company's products will depend on various factors that are not fully
known at this time, including the level of functionality, performance and
features included in the final release of these competitive products and the
price thereof and the market's evaluation of competitive products compared to
the then current functionality, performance, features and price of the Company's
products.

         Quarterdeck believes that substantial sales and marketing efforts are
essential to achieve revenue growth and to maintain and enhance the Company's
competitive position. Accordingly, Quarterdeck expects the expenses associated
with these efforts to continue to constitute its most significant operating
expense. There can be no assurance that these sales and marketing efforts will
be successful in achieving their intended results.

         The Company's pattern of revenues and earnings were affected during
prior periods and may be affected in the future by the phenomenon known as
"channel fill." Channel fill occurs following the introduction of a new product
or a new version of a product as distributors buy significant quantities of the
new product or version in anticipation of sales of such product or version.
Following such purchases, the rate of distributors' purchases often declines,
depending on the rates of purchases by end users or "sell-through." The
phenomenon of "channel fill" may also occur in anticipation of price increases
or in response to sales promotions or incentives, some of which may be designed
to encourage customers to accelerate purchases that might otherwise occur in
later periods. Channels may also become filled simply because the distributors
are unable to, or do not, sell their inventories to retail distribution or end
users as anticipated. If sell-through does not occur at a sufficient rate,
distributors will delay purchases or cancel orders in later periods or return
prior purchases in order to reduce their inventories. In addition, between the
date the Company announces a new version or new product and the date of release,
distributors, dealers and end users often delay purchases, cancel orders or
return products in anticipation of the availability of the new version of the
product. Such order delays or cancellations can cause material fluctuations in
revenues from one quarter to the next. Net revenues may be materially affected
favorably or adversely by these effects. Like other manufacturers of package
software products, the Company is exposed to the risk of product returns from
distributors and reseller customers. Quarterdeck's return policy generally
allows its distributors, subject to certain limitations, to return purchased
products in exchange for new products or for credit toward future purchases.
However, competitive factors and/or market conditions often require the Company
to offer expanded rights of return for products that distributors or retailers
are unable to sell. The Company also provides price protection rights to its
distributors which generally give distributors credit for price decreases on
products remaining in the distributors' inventory and on products remaining in
retail customers' inventory. The Company estimates and maintains reserves for
product returns. In addition to detailed historical return rates, the Company's
estimate of return reserves takes into account future product upgrades and new
releases, current market conditions and customer inventories, as well as any
other known factors that could impact anticipated returns. There can be no
assurance that actual returns will not exceed recorded allowances. Such excess
returns can result in a material adverse effect on business, operating results
and financial condition.

         Recruitment of personnel in the computer software industry is highly
competitive. The Company's success depends to a significant extent upon the
performance of its executive officers and other key personnel. The Company
believes its ability to attract and retain highly qualified personnel has been
adversely affected by the Company's recent restructurings and financial
performance. As a result, there can be no assurance that the Company will be
successful in attracting and retaining such personnel. The loss of the services
of key individuals or the inability to attract and retain highly qualified
personnel, including developers, could have a material adverse effect on the
Company.

         The Company's Series C Preferred Stock is convertible into shares of
Common Stock. The exact number of shares of Common Stock issuable upon
conversion of all of the Series C Preferred Stock cannot currently be estimated
but, generally, such issuances of Common Stock will vary inversely with the
market price of the Common Stock. The holders of Common Stock may be materially
diluted by conversion of the Series C 


                                       14
<PAGE>   15
Preferred Stock which dilution will depend on, among other things, the future
market price of the Common Stock and the decisions by holders of shares of
Series C Preferred Stock as to when to convert such shares. Each share of Series
C Preferred Stock is convertible into the number of shares of Common Stock equal
to the quotient of (i) $1000.00 divided by (ii) the Conversion Price. Up until
March 1, 1998, the Conversion Price will be $5.00. Thereafter, subject to the
maximum Conversion Price specified below, the Conversion Price will be equal to
101% of the average of the three lowest daily trading prices for the 22
consecutive trading days immediately preceding the date of conversion (the
"Conversion Date"). If the market price of the Common Stock was $1.00, $2.00 or
$3.00, the aggregate number of shares of Common Stock issuable upon conversion
of the Series C Preferred Stock would be approximately 31,600,000, 15,800,000 or
10,500,000 shares of Common Stock, respectively. The maximum Conversion Price is
$5.125 until March 31, 1999, and thereafter will be the lesser of (i) $5.125,
(ii) 101% of the average daily low trade prices of the Common Stock for all
trading days in March 1999, (ii) 101% of the average daily low trade prices of
the Common Stock for all trading days in September 1999 and (iii) 101% of the
average daily low trade prices of the Common Stock for all trading days in March
2000. To the extent the market price per share of the Common Stock is lower or
higher than the examples set forth above, the Company would issue more or less
shares of Common Stock than reflected in such examples, and such difference
could be material. The Company's stock has experienced wide fluctuations in its
stock price and stock market volatility, whether related to the stock market
generally or the Company specifically. Such fluctuations, if coincident in time
with conversions of Series C Preferred Stock, will impact directly the number of
shares of Common Stock issuable upon conversion thereof. The terms of the Series
C Preferred Stock do not provide for any limit on the number of shares of Common
Stock which the Company may be required to issue in respect thereof.

         During fiscal 1995 and fiscal 1996, the Company consummated a number of
acquisitions which broadened the Company's product portfolio and sales
distribution channels. At the end of fiscal 1996 and during fiscal 1997, the
Company implemented a comprehensive, corporate-wide restructuring plan to focus
the Company in the utilities and communications software categories. The
Company's results for fiscal 1996 and fiscal 1997 were negatively impacted by
the costs of integrations, acquisitions, including severance payments and asset
devaluations. Implementation of these strategic transactions could result in
charges and write-downs having a material adverse effect on the Company's
financial results. In addition, there are significant business risks associated
with acquisitions, including the successful integration of the companies in an
efficient and timely manner, the coordination of research and development and
sales efforts, the retention of key personnel, the diversion of management's
attention from day to day matters and the integration of acquired products.
Acquisitions may result in the Company competing with companies and in markets
where the Company had not previously competed. There may also be an adverse
impact on the revenues of acquired companies due to the transition of products
sales and marketing and research and development activities.

         The Company has made a preliminary assessment of its systems and
operations to ascertain the cost impact to the Company regarding the year
2000 issue. Based on such assessment, the Company believes its computer
servers, customer base systems and telephone systems are either year 2000
compliant or can be upgraded to be year 2000 compliant at minimal cost.  In 
addition, the general accounting and operations systems are under evaluation 
and are expected to be year 2000 compliant at minimal cost. The Company 
believes that the implementation of these changes will not have a material 
impact on the Company's results of operations or liquidity. However, there can
be no assurances that the Company will not experience unanticipated negative 
consequences and/or material cost associated with preparing its internal systems
for the year 2000 caused by undetected errors or defects in its internal
systems.

RECENTLY ISSUED ACCOUNTING STANDARDS

         Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share," is effective for financial statements issued for periods ending
after December 15, 1997. SFAS No. 128 replaces Accounting Principles Board
Opinion ("APB") No. 18 and simplifies the computation of earnings per share
("EPS") by replacing the presentation of primary EPS with a presentation of
basic EPS. Basic EPS includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution from
securities that could share in the earnings of the Company, similar to fully
diluted EPS under APB No. 15. The Statement requires dual presentation of basic
and diluted EPS by entities with complex capital structures. The Company has
adopted SFAS No. 128 for the financial statements for the quarter ended December
31, 1997.

         SFAS No. 130, "Reporting Comprehensive Income" is effective for fiscal
years beginning after December 15, 1997. SFAS No. 130 established standards for
the reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. The Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company is evaluating the Statement's provisions
to conclude how it will present comprehensive income in its financial
statements, and has not yet determined the amounts to be disclosed. The Company
will adopt SPAS No. 130 effective October 1, 1998.

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" is effective for financial statements for periods beginning after
December 15, 1997. SFAS No. 131 establishes standards for the way that public
business enterprises report financial and descriptive information about
reportable operating segments in annual financial statements and interim
financial reports issued to stockholders. SFAS No. 131 supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," but retains the
requirement 

                                       15
<PAGE>   16

to report information about major customers. The Company does not believe they
will be required to make any additional disclosures in its financial statements.
The Company will adopt SFAS No. 131 effective October 1, 1998.

         The AICPA recently issued statement of Position 97-2, "Software Revenue
Recognition," (SOP 97-2) effective for transactions entered into in fiscal years
beginning after December 15, 1997. The Company anticipates adopting SOP 97-2 for
transactions entered into on and after October 1, 1998. While the Company is
still evaluating the impact of this statement, it believes that it is in
substantial compliance with the provisions thereof. In addition, the impact of
SOP 97-2 will depend on terms of future transactions.

FACTORS AFFECTING QUARTERLY RESULTS AND STOCK PRICE

         The Company's future operating results and stock price could be subject
to significant fluctuations and volatility. The Company's revenues and quarterly
operating results may experience significant fluctuations and be unpredictable
as the result of a number of factors including, among others, introduction of
new or enhanced products by the Company or its competitors, rapid technological
changes in the Company's markets, seasonality of revenues, changes in operating
expenses and general economic conditions. The Company's net revenues and net
income (loss) have fluctuated significantly from year to year and from quarter
to quarter since the Company's initial public offering in June 1991.

         The Company also has experienced wide fluctuations in its stock price,
which may be subject to significant fluctuations in the future over a short
period of time. The trading price of the Common Stock increased from
approximately $3.00 in January 1995 to a high of approximately $39.00 in
December 1995 to a low of approximately $1.25 in December 1997. Fluctuations may
be due to factors specific to the Company, to changes in analysts' estimates or
to factors affecting the computer industry or the securities markets in general.
In addition, since diluted net income per share is calculated using the treasury
stock method (see Note 5 of the Notes to Consolidated Unaudited Condensed
Financial Statements), increases in the price of Quarterdeck's stock can have an
adverse impact on the calculation of diluted net income per share in that period
as more outstanding instruments are included as common shares outstanding. This
and other factors, including the existence or conversion of any outstanding
convertible securities, any decline in revenues or quarterly operating results,
or the failure to meet market expectations, could have an immediate and
significant effect on the trading price of the Common Stock in any given period.


                                       16
<PAGE>   17

LIQUIDITY AND CAPITAL RESOURCES

         Cash and cash equivalents increased $3,252,000 to $26,903,000 at
December 31, 1997 from $23,651,000 at September 30, 1997. Working capital, which
is the excess of current assets over current liabilities, at December 31, 1997
was $17,863,000 as compared to $6,917,000 at September 30, 1997 representing an
increase in working capital of $10,946,000.

         Operating activities: Cash used in operating activities of $2,596,000
was primarily due to a net reduction in assets and liabilities of $3,655,000
which resulted from a net reduction in other current assets of $1,879,000 and
other reductions of $201,000, offset by net increases in accounts receivable and
inventories and by net reductions in payables, accrued liabilities, and accrued
acquisition, restructuring and other charges of $5,735,000. Additionally,
$1,059,000 of cash was provided by the Company's net income of $316,000 and non
cash charges of $743,000.

         The reduction in accounts payable and accrued liabilities was due to
payments made to trade vendors and an overall decline in the level of the
Company's operating expenses as a result of the execution of the restructuring
plans. The reduction in accrued acquisition, restructuring and other charges was
due to payments made during the execution of the fiscal 1996 and 1997
restructuring plans. The increase in accounts receivable was due to sales of
newly released products for which invoices were not due for payment prior to the
end of the quarter. The reduction in other current assets was largely due to
cash receipts resulting from both the Series C preferred stock financing and the
divestment of the Company's investment Lernout and Hauspie during fiscal 1997.

         Investing activities: Cash provided by investing activities of
$7,008,000 was largely due the sale of the Columbia, Missouri building on
December 30, 1997 which resulted in an increase of $7,700,000, which was offset
by $692,000 for capital expenditures.

         Financing activities: Cash used in financing activities of $1,160,000
was primarily related to the principal repayment relating to the Columbia
Missouri construction loan as a result of the sale of the building and payments
for long term financing of $3,979,000 which was partially offset by $2,819,000
of net proceeds from the sale of Series C preferred stock and issuance of common
stock.

         On March 28, 1996, the Company issued $25,000,000 principal amount of
6% Convertible Senior Subordinated Notes, due 2001 ("Notes"), to an
institutional investor in a private placement pursuant to the terms of a Note
Agreement, dated March 1, 1996.

         In April 1997, the Company established an asset based line of credit
with Greyrock Business Credit, a division of NationsBank. The Company repaid and
terminated its existing line with Bank of America with proceeds from the new
line. Maximum borrowings under the new line are the lesser of $12,000,000 and
the sum of 85% of eligible accounts receivable plus the value of inventory to a
maximum of $2,000,000. The line can be used for general corporate purposes,
including investments and acquisitions, and bears interest at prime plus 2%. The
line is secured by substantially all assets of Quarterdeck. The Company is
obligated to pay a minimum interest charge of $10,000 per month and comply with
certain other non-financial covenants and restrictions. At December 31, 1997,
the Company had $1,625,000 outstanding under the line and the ability to borrow
up to a maximum amount of $10,375,000. The current term of the agreement matures
on March 31, 1998. This agreement is automatically renewable for successive
additional one year terms unless advance notification is provided by either
party prior to the next maturity date. The Company expects that the agreement
will be extended for another one year term.

         On August 6, 1996, the Company's Datastorm subsidiary secured
construction financing from a bank of up to $5,000,000 with an interest rate
equal to the bank's commercial base rate, currently prime plus 2%, secured by
the newly constructed Columbia, Missouri building. The Columbia, Missouri
building was sold on December 30, 1997 and the remaining balance of $3,500,000
was repaid in full on December 30, 1997.

         In September 1997 and between October 1997 and November 4, 1997, the
Company issued 26,025 and 2,975 shares, respectively of Series C Convertible
Preferred Stock, stated value $1000 per share (the "Series C Preferred Stock"),
of the Company for $24,594,000 and $2,782,000, net of offering fees,
respectively.

         On December 19, 1997, the Company reached an agreement in principle to
settle the shareholder litigation for $12,500,000. The Company will be required
to pay approximately $1,905,000 as part of this settlement. The Company's
directors' and officers' insurance carrier will contribute $10,595,000 to the
settlement.


                                       17
<PAGE>   18

         The Company believes existing working capital and borrowing capacity
under the line of credit will be sufficient to fund the Company's
operations for fiscal 1998. Nevertheless, the Company may explore various
financing alternatives in order to finance an expansion of the business of
the Company and help provide additional working capital for operations. There is
no assurance that additional financing will be available, or if available, will
be available on acceptable terms. Any decision or ability to obtain financing
through debt or equity investment will depend on various factors, including,
among others, revenues, financial market conditions, strategic acquisition and
investment opportunities, and developments in the Company's markets. The sale of
additional equity securities or future conversion of any convertible debt would
result in additional dilution to the Company's stockholders.

         The Company conducts business in various foreign currencies and is
therefore subject to the transaction exposures that arise from foreign exchange
rate movements between the dates that foreign currency transactions are recorded
and the date that they are consummated. The Company is also subject to certain
exposures arising from the translation and consolidation of the financial
results of its foreign subsidiaries. There can be no assurance that actions
taken to manage such exposures will continue to be successful or that future
changes in currency exchange rates will not have a material impact on the
Company's future operating results. The Company does not hedge either its
translation risk or its economic risk.


                                       18
<PAGE>   19

                           PART II. OTHER INFORMATION

ITEM 1.         LEGAL PROCEEDINGS

         Federal and state shareholder actions were brought against the Company
and one former and one current officer of the Company alleging among other
things, violations of certain provisions of California and Federal securities
laws relating to statements made about Quarterdeck. On December 19, 1997, the
Company reached an agreement in principle to settle such actions for a total
amount of $12,500,000, of which the Company will be required to pay
approximately $1,905,000, with the balance of $10,595,000 to be paid under the
Company's directors' and officers' insurance policy. The settlement is subject
to, among other things, court approval. The Company has recorded a charge of
$1,905,000 for its fiscal year ended September 30, 1997.

         In March 1997, a purported class action lawsuit brought on behalf of
all licensees of MagnaRAM2 residing in the United States, Jack Abbott, et al. v.
Quarterdeck Corporation, Case No. 00709198, was filed in the Superior Court of
the State of California, County of San Diego. The complaint alleges, among other
things, that MagnaRAM2 fails to increase Random Access Memory significantly or
otherwise help Windows 95 and Windows 3.x users. The plaintiffs seek
compensatory damages and punitive damages in unspecified amounts, injunctive
relief, and attorney fees and costs. Quarterdeck has filed counterclaims and
intends to defend the case vigorously and to oppose any effort to certify the
claims for class resolution. No assurances can be given that the ultimate
disposition of this case will not have a material adverse effect on the
Company's results of operations, financial condition or liquidity.

         In October 1997, a complaint was filed in the United States District
Court for the District of Utah on behalf of PowerQuest Corporation against the
Company. The complaint alleges that the Company's partitioning software
(Partition-It) violates a patent held by PowerQuest. In January 1998, PowerQuest
obtained a second patent relating to partitioning and is now seeking to amend
its complaint to allege infringement of that patent as well. The plaintiff seeks
an injunction against distribution of Partition-It and damages. Although the 
Company believes the patents are invalid, there can be no assurance as to the 
actual outcome of this matter. The ultimate disposition of this  matter could 
have a material adverse effect on the Company.

         The Company is a defendant in various other pending claims and
lawsuits. Although there can be no assurances, management believes that the
disposition of such matters will not have a material adverse impact on the
results of operations or financial position of the Company.

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

At the Annual Meeting of Stockholders held on February 5, 1998, five proposals
were submitted to the Company's stockholders. The Company's nominees for
directors were elected and each of the other proposals were approved. A brief
description of those proposals and the results of the voting are as follows:

         Proposal One - Election of two directors to serve for a three year term

<TABLE>
<CAPTION>
          Nominee                   Votes For               Votes Withheld
          -------                   ---------               --------------
          <S>                       <C>                     <C>      
          Howard L. Morgan          33,880,040              2,471,035

          Nominee                   Votes For               Votes Withheld
          -------                   ---------               --------------
          Curtis A. Hessler         34,055,689              2,295,386
</TABLE>

         Proposal Two - Approval for the issuance of shares of Common Stock
representing 20% or more of the Common Stock outstanding, which are issuable
upon conversion of shares of the Company's Series C Convertible Preferred Stock
issued in a private placement.

<TABLE>
<CAPTION>
            Voting Results
            --------------
            <S>                              <C>
            For                              14,155,473
            Against                           1,924,740
            Abstain                             281,129
            Broker Non-Votes                 19,989,733
</TABLE>


                                       19
<PAGE>   20

         Proposal Three - Approval of an amendment to the Company's Certificate
of Incorporation to increase the number of shares of Common Stock authorized for
issuance by the Company from 70,000,000 to 100,000,000.

<TABLE>
<CAPTION>
            Voting Results
            --------------
            <S>                              <C>
            For                              33,215,089
            Against                           2,883,941
            Abstain                             252,044
            Broker Non-Votes                          1
</TABLE>

         Proposal Four - Approval of an amendment to the Company's 1990 Stock
Plan to increase the number of shares from 7,500,000 to 9,500,000.

<TABLE>
<CAPTION>
            Voting Results
            --------------
            <S>                              <C>
            For                              30,161,098
            Against                           5,444,275
            Abstain                             305,531
            Broker Non-Votes                    440,171
</TABLE>

         Proposal Five - Ratification of appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending September 30,
1998.

<TABLE>
<CAPTION>
            Voting Results
            --------------
            <S>                              <C>
            For                              35,764,947
            Against                             310,423
            Abstain                             275,705
            Broker Non-Votes                         --
</TABLE>


Item 5.   Other Information

     The following table sets forth the computation of basic and diluted net
income per share for the fiscal years ended September 30, 1995 through
September 30, 1997. Additionally, the basic and diluted net income per share is
disclosed for the years ended September 30, 1993 and 1994.

<TABLE>
<CAPTION>
                                1997      1996      1995      1994      1993
                              --------  --------  --------  --------  -------- 
<S>                           <C>       <C>       <C>       <C>       <C>
Numerator:
Net income, net income
available to common
stockholders and net income
available to common
stockholders after required
conversion:                   $(18,398) $(74,959) $ 11,252

Denominator:
Shares used for basic net
income per share
calculation - weighted
average shares outstanding      43,168    34,894    35,055

Effect of dilutive
securities:

  Stock options and warrants                         1,444

Shares used for diluted net   ----------------------------
income per share calculation    43,168    34,894    36,499
                              ============================

Basic net income per share    $  (0.43) $  (2.15) $   0.32 $  (0.15) $   0.32
Diluted net income per share  $  (0.43) $  (2.15) $   0.31 $  (0.15) $   0.32
</TABLE>

     Options to purchase 6,091,000 shares at a weighted average exercise price
of $3.89 and 6,048,000 shares at a weighted average exercise price of $9.12 and
1,988,000 shares were outstanding as of the fiscal years ended September 30,
1997, 1996 and 1995, respectively, but were not included in the computation of
diluted net income per share because the options exercise price was greater
than the average market price of the common shares and therefore, the effect
would be anti-dilutive.

     Warrants to purchase 904,000 shares and 1,704,000 shares at a weighted
average exercise price of $7.44 were outstanding as of the fiscal years ended
September 30, 1997 and 1996 respectively, but were not included in the
computation of diluted net income per share because the warrants' exercise
price was greater than the average market price of the common shares and
therefore, the effect would be anti-dilutive.

     Series B Convertible Preferred Stock in the amount of $20,000,000 was
outstanding as of September 30, 1996 and was convertible into common stock on
or after November 15, 1996 at a conversion price to be determined using a
specified conversion formula which is based upon the future market price of the
Company's common stock. During fiscal 1997, $10,000,000 of the Series B
Preferred Stock was converted into 3,762,000 shares of common stock at a
weighted average conversion price of $2.66. The Company repurchased all of the
remaining oustanding shares and 800,000 of the related outstanding warrants of
Series B Preferred Stock for $10,000,000 on September 30, 1997. Shares issuable
upon conversion of Series B Convertible Preferred Stock were not included in
the computation of diluted net income per share for 1996 because the effect
would be anti-dilutive.

     Warrants to purchase 25,000 shares at a weighted average exercise price of
$7.20 were outstanding as of the fiscal year ended September 30, 1997 but were
not included in the computation of diluted net income per share because the
warrants' exercise price was greater than the average market price of the
common shares and therefore, the effect would be anti-dilutive.

     Series C Convertible Preferred Stock in the amount of $24,594,000, net of
placement fees, was outstanding as of September 30, 1997. Each share of Series C
Preferred Stock is convertible into the number of shares of Common Stock equal
to the quotient of (i) $1000.00 divided by (ii) the Conversion Price. Until
March 1, 1998, the Conversion Price will be $5.00. Thereafter, subject to the
maximum Conversion Price specified below, the Conversion Price will be equal to
101% of the average of the three lowest daily trading prices for the 22
consecutive days immediately preceding the date of conversion (the "Conversion
Date"). The maximum Conversion Price is $5.125 until March 31, 1999, and
thereafter will be the lesser of (i) $5.125, (ii) 101% of the average daily low
trade prices of the Common Stock for all trading days in March 1999, (iii) 101%
of the average daily low trade prices of the Common Stock for all trading days
in September 1999 and (iv) 101% of the average daily low trade prices of the
Common Stock for all trading days in March 2000. These securities were not
included in the computation of diluted net income per share because the effect
would be anti-dilutive.

     Approximately 1,180,000 shares issuable upon the conversion of convertible
notes were not included as the effect would be anti-dilutive. The Company had
$25,000,000 of convertible notes outstanding at September 30, 1997 and 1996.



                                       21
<PAGE>   21

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits

<TABLE>
             <S>      <C>
               3.1    Certificate of Amendment of Certificate of Incorporation
                      of the Company.

               3.2    Certificate of Amendment of Certificate of Incorporation
                      of the Company.

              10.1    Contract For Sale of Real Estate between Datastorm
                      Technologies, Inc., a subsidiary of the Company, and The
                      Curators of the University of Missouri, dated December 30,
                      1997.

              10.2    Office Lease between Datastorm Technologies, Inc., a
                      subsidiary of the Company, and The Curators of the
                      University of Missouri, dated December 30, 1997.

              10.3    Outbound Telemarketing Exclusive Services Agreement
                      between the Company and The Sutherland Group, Ltd., dated
                      as of January 13, 1998.
</TABLE>

          (b)  Reports on Form 8-K

                  A Form 8-K with respect to the issuance of securities in a
                  private placement pursuant to Regulation D was filed with the
                  Securities and Exchange Commission on October 3, 1997.

                  A Form 8-K with respect to the repurchase and conversion of
                  securities that were issued pursuant to Regulation S was filed
                  with the Securities and Exchange Commission on October 7,
                  1997.


                                       22
<PAGE>   22

                                   SIGNATURES

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

                                      QUARTERDECK CORPORATION
                                          (Registrant)


Date: February 12, 1998              /s/  CURTIS A. HESSLER
                                          --------------------------------------
                                          Curtis A. Hessler
                                          President and Chief Executive Officer


Date: February 12, 1998              /s/  FRANK GREICO
                                          --------------------------------------
                                          Frank Greico
                                          Sr. Vice President and
                                              Chief Financial Officer


                                       23