<PAGE>
                                       
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q



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

For the quarterly period ended October 31, 1998
                               ----------------

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
---  EXCHANGE ACT OF 1934

For the transitional period from                      to 
                                 --------------------    --------------------

Commission File Number: 00-1033864
                        ----------

                                       
                          DocuCorp International, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                              75-2690838
-------------------------------                           ----------------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           identification number)


     5910 North Central Expressway, Suite 800, Dallas, Texas        75206
     ----------------------------------------------------------------------
           (Address of principal executive offices)              (Zip Code)

                                       
                                 (214) 891-6500
               ---------------------------------------------------
               (Registrant's telephone number including area code)


        ---------------------------------------------------------------
        (Former name, former address and former fiscal year, if changed 
                                since last report)



     Indicate by check mark whether the registrant (1) 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 the number of shares outstanding of each of the issuer's 
classes of common stock, as of the latest practicable date: Common Stock, 
$.01 par value, 16,233,535 shares outstanding as of October 31, 1998.

<PAGE>
                                       
                                 DOCUCORP INTERNATIONAL, INC.
                                      TABLE OF CONTENTS
                                         FORM 10-Q
                                      October 31, 1998
                                              
<TABLE>
<S>                                                                                         <C>
                               PART I - FINANCIAL INFORMATION
                                                                                            Page
                                                                                            ----
Item 1.  Financial Statements (Unaudited)

         Consolidated Balance Sheets as of October 31, 1998 and July 31, 1998                 2

         Interim Consolidated Statements of Operations for the three months
                ended October 31, 1998 and 1997                                               3

         Interim Consolidated Statements of Cash Flows for the three months
                ended October 31, 1998 and 1997                                               4

         Notes to Interim Consolidated Financial Statements                                   5


Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                            7


                                PART II - OTHER INFORMATION

Item 3.  Exhibits and Reports on Form 8-K                                                    13


Signatures                                                                                   14
</TABLE>

<PAGE>
                                       
                          DOCUCORP INTERNATIONAL, INC.
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                      (Unaudited)
                                                                                      October 31,        July 31,
                                                                                         1998              1998
                                                                                    -------------    -------------
<S>                                                                                 <C>              <C>
ASSETS
     Current assets:
         Cash and cash equivalents                                                  $  13,576,906    $  14,439,807
         Short-term investments                                                         2,000,000                0
         Accounts receivable, net of allowance
              of $625,000 and $950,000, respectively                                   12,617,009       11,926,007
         Other current assets                                                           2,230,263        2,419,819
                                                                                    -------------    -------------
                  Total current assets                                                 30,424,178       28,785,633
     Fixed assets, net of accumulated depreciation
         of $3,574,402 and $3,257,705, respectively                                     2,987,029        2,979,648
     Software, net of accumulated amortization of $7,503,062
         and $7,047,098, respectively                                                   8,128,064        8,136,574
     Goodwill, net of accumulated amortization of $1,473,178 and
         $1,126,924, respectively                                                      10,675,739       11,021,993
     Other assets                                                                         884,077          996,653
                                                                                    -------------    -------------
                                                                                    $  53,099,087    $  51,920,501
                                                                                    -------------    -------------
                                                                                    -------------    -------------
LIABILITIES AND STOCKHOLDERS' EQUITY 
     Current liabilities:
         Accounts payable                                                           $   1,892,794    $   1,750,098
         Accrued liabilities                                                            3,139,697        2,284,525
         Deferred revenue                                                               8,686,336        8,476,022
         Other current liabilities                                                        321,747          287,018
                                                                                    -------------    -------------
                  Total current liabilities                                            14,040,574       12,797,663
     Obligations under capital leases                                                      14,442           23,909
     Other long-term liabilities                                                          665,227          666,149

     Stockholders' equity:
         Common stock, 50,000,000 shares authorized at
               $.01 par value, 16,593,849 and 16,525,561
               shares issued, respectively                                                165,938          165,256
         Additional paid-in capital                                                    47,773,355       47,561,714
         Treasury stock, 360,314 shares at cost                                        (1,251,964)               0
         Retained deficit                                                              (8,246,810)      (9,228,765)
         Notes receivable from stockholders                                               (61,675)         (65,425)
                                                                                    -------------    -------------
                  Total stockholders' equity                                           38,378,844       38,432,780
                                                                                    -------------    -------------
                                                                                    $  53,099,087    $  51,920,501
                                                                                    -------------    -------------
                                                                                    -------------    -------------
</TABLE>

      SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.

                                       2
<PAGE>

                          DOCUCORP INTERNATIONAL, INC.
                  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            Three months ended
                                                                October 31,
                                                      ----------------------------  
                                                           1998            1997
                                                      ------------    ------------  
<S>                                                   <C>             <C>
REVENUES
         Professional services                        $  6,393,004    $  6,688,010
         License                                         2,714,101       1,575,817
         Maintenance and other recurring                 3,102,738       2,582,446
                                                      ------------    ------------  
                Total revenues                          12,209,843      10,846,273
                                                      ------------    ------------  
EXPENSES
         Professional services                           4,844,423       4,841,694
         Product development and support                 2,298,727       1,878,499
         Selling, general and administrative             3,458,953       2,766,963
                                                      ------------    ------------  
                Total expenses                          10,602,103       9,487,156
                                                      ------------    ------------  
                Operating income                         1,607,740       1,359,117
         Other income (expense), net                       198,903        (155,912)
                                                      ------------    ------------  
                Income before income taxes               1,806,643       1,203,205
         Provision for income taxes                        788,000         484,000
                                                      ------------    ------------  
                Net income                            $  1,018,643   $     719,205
                                                      ------------    ------------  
                                                      ------------    ------------  
Net income per share:
         Basic                                        $       0.06   $        0.07
                                                      ------------    ------------  
                                                      ------------    ------------  
         Diluted                                      $       0.06   $        0.06
                                                      ------------    ------------  
                                                      ------------    ------------  
Weighted average shares outstanding used 
   in the net income per share calculations:
         Basic                                          16,471,006      10,759,954
                                                      ------------    ------------  
                                                      ------------    ------------  
         Diluted                                        17,955,195      12,839,546
                                                      ------------    ------------  
                                                      ------------    ------------  
</TABLE>

          SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.

                                             3
<PAGE>

                          DOCUCORP INTERNATIONAL, INC.
                  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   Three months ended 
                                                                       October 31,
                                                                -------------------------- 
                                                                   1998           1997
                                                                -----------    ----------- 
<S>                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                    $ 1,018,643    $   719,205   
  Adjustments to reconcile net income to
    net cash provided by operating activities:
      Stock option compensation expense                               2,525          5,327   
      Depreciation                                                  316,697        336,323   
      Amortization of capitalized software                          455,964        404,954   
      Amortization of goodwill                                      346,254        192,627   
      Increase (decrease) in allowance for doubtful accounts       (325,000)        25,000   
      Changes in assets and liabilities:
        Increase in accounts receivable                            (366,002)       (93,871)  
        Decrease in other assets                                    302,132         21,228   
        Increase (decrease) in accounts payable                     142,696       (461,457)  
        Increase (decrease) in accrued liabilities                  855,172       (332,493)  
        Increase in deferred revenue                                210,314        429,437   
        Increase in other liabilities                                67,776         36,764   
                                                                -----------    -----------   
              Total adjustments                                   2,008,528        563,839   
                                                                -----------    -----------   
              Net cash provided by operating activities           3,027,171      1,283,044   
                                                                -----------    -----------   
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of short-term investments                             (2,000,000)             0   
  Purchase of fixed assets                                         (324,078)      (199,282)  
  Capitalized software development costs                           (447,454)      (436,276)  
                                                                -----------    -----------   
              Net cash used in investing activities              (2,771,532)      (635,558)  
                                                                -----------    -----------   
CASH FLOWS FROM FINANCING ACTIVITIES
  Repayment of debt                                                       0     (1,926,547)  
  Principal payments under capital lease obligations                (43,436)      (150,830)  
  Proceeds from exercise of stock options                           210,881          3,380   
  Proceeds from repayment of note receivable from stockholder         3,750              0   
  Purchase of treasury stock                                     (1,289,735)             0   
                                                                -----------    -----------   
              Net cash used in financing activities              (1,118,540)    (2,073,997)  
                                                                -----------    -----------   
Net decrease in cash and cash equivalents                          (862,901)    (1,426,511)  
Cash and cash equivalents at beginning of period                 14,439,807      2,869,458   
                                                                -----------    -----------   
Cash and cash equivalents at end of period                      $13,576,906    $ 1,442,947   
                                                                -----------    ----------- 
                                                                -----------    ----------- 
</TABLE>

          SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.

                                             4

<PAGE>

                        DOCUCORP INTERNATIONAL, INC.
              NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION


The accompanying unaudited interim consolidated financial statements include the
accounts of DocuCorp International, Inc. and its subsidiaries (collectively,
"DocuCorp" or the "Company"). DocuCorp was formed in connection with the
acquisition of FormMaker Software, Inc. ("FormMaker") by Image Sciences, Inc.
("Image Sciences") (the "Merger"). Consolidated results of FormMaker and its
subsidiary are included from the effective date of the Merger, May 15, 1997.

The financial information presented should be read in conjunction with the
Company's annual consolidated financial statements for the year ended July 31,
1998. The foregoing unaudited interim consolidated financial statements reflect
all adjustments (all of which are of a normal recurring nature) which are, in
the opinion of management, necessary for a fair presentation of the results of
the interim periods. The results for interim periods are not necessarily
indicative of results to be expected for the year.

NOTE 2 - NET INCOME PER SHARE

The Company's basic and diluted net income per share are computed in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). Concurrent with the completion of the Company's initial public
offering in April 1998, all outstanding shares of Class B common stock were
converted into shares of Common Stock on a one-for-one basis. Both basic and
diluted net income per share have been computed assuming the conversion of Class
B common stock occurred as of the date of original issuance. Due to the adoption
of SFAS 128 and the conversion feature of Class B common stock into Common
Stock, which conversion occurred on April 9, 1998, the historical basic and
diluted calculations include the effect of conversion of Class B common stock as
of the date of original issuance, which were previously reported in pro forma
computations prior to conversion.

Basic net income per share is computed using the weighted average number of
common shares outstanding. Diluted net income per share is computed using the
weighted average number of common shares outstanding and the assumed exercise of
dilutive stock options and warrants. Following is a reconciliation of the shares
used in computing basic and diluted net income per share for the periods
indicated:

<TABLE>
<CAPTION>
                                                              Three months ended
                                                                  October 31,
                                                           --------------------------
                                                              1998           1997
                                                           ----------      ---------- 
<S>                                                        <C>             <C>
Shares used in computing basic net income per share        16,471,006      10,759,954

Dilutive effect of stock options and warrants               1,484,189       2,079,592
                                                           ----------      ---------- 
Shares used in computing diluted net income per share      17,955,195      12,839,546
                                                           ----------      ---------- 
                                                           ----------      ---------- 
</TABLE>

Options to purchase 157,958 shares of Common Stock at an average exercise price
of $5.58 per option and expiration dates ranging from 2000-2008 at October 31,
1998 were anti-dilutive and not included in the


                                       5
<PAGE>

                          DOCUCORP INTERNATIONAL, INC.
           NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                   (UNAUDITED)



computation of diluted net income per share because the options' exercise prices
were greater than the average market price of the Common Stock for the period.

NOTE 3 - STOCK SPLIT

In December 1997, the Company declared a six-for-five stock split effected in
the form of a stock dividend to stockholders of record on December 9, 1997. All
references in the unaudited interim consolidated financial statements to shares,
share prices, and per share amounts have been retroactively adjusted for the
six-for-five stock split.

NOTE 4 - ACQUISITIONS

On March 31, 1998, the Company completed the acquisitions of EZPower Systems,
Inc. ("EZPower") and Maitland Software, Inc. ("Maitland"). EZPower develops,
markets, and supports flexible Internet and client/server solutions for document
management, workflow, and web content management software products. Maitland has
developed and recently commenced marketing a data acquisition and transformation
program which allows users the ability to more easily interface existing
applications and databases with document printing and publishing software. Both
acquisitions were recorded under the purchase method of accounting, and
accordingly, the results of operations of EZPower and Maitland for all periods
subsequent to the acquisition date are included in the unaudited interim
consolidated financial statements. The excess of the purchase price over the
fair value of the net identifiable assets acquired of $4,753,306 and $583,373
related to the acquisitions of EZPower and Maitland, respectively, has been
recorded as goodwill and is being amortized on a straight-line basis over eight
years.


                                       6
<PAGE>

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

CERTAIN INFORMATION CONTAINED HEREIN MAY INCLUDE "FORWARD-LOOKING STATEMENTS" 
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, 
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL 
STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS FORM 
10-Q, ARE FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN 
RISKS AND UNCERTAINTIES, WHICH INCLUDE, BUT ARE NOT LIMITED TO, TECHNOLOGICAL 
ADVANCES, DEPENDENCE UPON THE INSURANCE INDUSTRY, INTEGRATION OF OPERATING 
SUBSIDIARIES, FLUCTUATIONS IN OPERATING RESULTS, AND THE OTHER RISK FACTORS 
AND CAUTIONARY STATEMENTS LISTED FROM TIME TO TIME IN THE COMPANY'S PERIODIC 
REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ALL 
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q AND ALL SUBSEQUENT ORAL 
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON 
ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THESE CAUTIONARY 
STATEMENTS.

OVERVIEW

DocuCorp develops, markets, and supports a portfolio of open-architecture,
enterprise-wide document automation software products that enable its customers
to produce complex, high-volume, individualized documents. In addition, the
Company provides document automation consulting, systems integration, and
document processing and printing services through a 170-person service
organization. Document processing and printing services utilize the Company's
software to provide solutions for handling high-volume, complex print, finish,
and mailing for customers who outsource this activity.

DocuCorp was formed in connection with the acquisition of FormMaker Software,
Inc. ("FormMaker") by Image Sciences, Inc. ("Image Sciences") (the "Merger").
The Merger was treated as an acquisition of FormMaker by Image Sciences, and
accordingly, the Merger transaction was recorded under the purchase method of
accounting. The accompanying unaudited interim consolidated financial statements
include the accounts of the Company and its subsidiaries. Consolidated results
of FormMaker and its subsidiary are included from the effective date of the
Merger, May 15, 1997.

In March 1998, the Company acquired all of the capital stock of EZPower Systems,
Inc. ("EZPower") and Maitland Software, Inc. ("Maitland"). EZPower develops,
markets, and supports flexible Internet and client/server solutions for document
management, workflow, and web content management software products. Maitland has
developed a data acquisition and transformation program which allows users the
ability to more easily interface existing applications and databases with
document printing and publishing software. Both of these acquisitions were
recorded under the purchase method of accounting, and accordingly, the results
of operations of EZPower and Maitland for all periods subsequent to the
acquisition date are included in the accompanying unaudited interim consolidated
financial statements.

The Company derives its revenues from license fees, recurring maintenance fees,
and professional services fees related to its software products. License
revenues are generally derived from perpetual and term licenses of software
products. Maintenance and other recurring revenues consist primarily of
recurring license fees and annual maintenance contracts. Professional services
revenues include fees for consulting, implementation, print outsourcing, and
education services.


                                       7
<PAGE>

HISTORICAL OPERATING RESULTS OF THE COMPANY

The following table sets forth selected unaudited interim consolidated
statements of operations data of the Company expressed as a percentage of total
revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                     Three months ended
                                                          October 31,
                                                     -------------------- 
                                                      1998           1997 
                                                     -----          ----- 
<S>                                                  <C>            <C>
Revenues
         Professional services                          53%            62%
         License                                        22             14
         Maintenance and other recurring                25             24
                                                     -----          -----
                Total revenues                         100            100
Expenses
         Professional services                          40             45
         Product development and support                19             17
         Selling, general and administrative            28             26
                                                     -----          -----
                Total expenses                          87             88
                                                     -----          -----
         Operating income                               13             12
         Other income (expense), net                     2             (1)
                                                     -----          -----
                Income before income taxes              15             11
         Provision for income taxes                      7              4
                                                     -----          -----
                Net income                               8%             7%
                                                     -----          -----
                                                     -----          -----
</TABLE>


COMPARATIVE ANALYSIS OF QUARTERLY RESULTS FOR THE THREE MONTHS ENDED OCTOBER 31,
1998 AND 1997

REVENUES

Total revenues increased 13% mainly due to the 72% increase in license revenues.
The increased license revenues are primarily the result of additional licenses
in the insurance market. Maintenance revenues increased 20% due to an expanding
customer base, as well as the one-time effect of reinstatement of several
previously expired maintenance contracts. Professional services revenues
decreased 4% as anticipated due to the termination of the Policy Management
Systems Corporation ("PMSC") print outsourcing contract in May of 1998. The
decrease in PMSC-based print outsourcing revenues was partially offset by an 
increase in more profitable services business.

Backlog for the Company's products and services of approximately $28.8 million
as of October 31, 1998, of which approximately $17.0 million is scheduled to be
satisfied within one year, is primarily comprised of recurring software license
fees and maintenance revenues for ongoing maintenance and support, software
implementation and consulting services, and print outsourcing services. Software
agreements for recurring license fees generally have non-cancelable terms of up
to five years. Annual maintenance contracts may generally be terminated upon 30
days notice; however, the Company has not historically experienced material
cancellations of such contracts. Software implementation and consulting services
backlog is principally performed under time and material agreements of which
some have cancellation provisions. Print outsourcing services agreements
generally provide that fees are charged on a per transaction basis. The
estimated future revenues with respect to software implementation and print
outsourcing services are based on management's estimate of revenues over the
remaining life of the respective contracts.


                                       8
<PAGE>

FormMaker, which was acquired by the Company in connection with the Merger,
historically distributed its line of DAP software products to the insurance
industry in North America through an exclusive marketing agreement with PMSC.
Revenues from PMSC under this agreement for the three months ended October 31,
1997 were approximately $1.8 million. In September 1998, both parties agreed to
terminate the marketing agreement and enter into a new non-exclusive marketing
agreement. The new marketing agreement between DocuCorp and PMSC allows PMSC to
market all of the Company's software products to insurance and financial
services companies worldwide. As of October 31, 1998, the Company has not
received any material revenues under the new agreement.

In addition, PMSC terminated its print outsourcing agreement effective May 1998.
Revenues from PMSC under this agreement for the three months ended October 31,
1997 were approximately $1.7 million. Print outsourcing revenues have declined
from fiscal year 1998 levels while the Company replaces these revenues with new
business.

PROFESSIONAL SERVICES EXPENSE

Professional services expense is composed primarily of personnel expenses
related to both consulting and print outsourcing services. Postage and supplies
expense associated with the print outsourcing business decreased approximately
$850,000 due to the decrease in print outsourcing revenues. This decrease in
expense was offset by increased personnel costs as the professional services
department expanded. For the three months ended October 31, 1998 and 1997,
professional services expense represented 76% and 72% of professional services
revenues, respectively. The increase in cost as a percentage of professional
services revenues is mainly due to higher profit margins earned under a
short-term print outsourcing agreement in the three months ended October 31,
1997 and increased costs related to the Company's services expansion
internationally in the three months ended October 31, 1998. The Company expects
professional services expenses to increase in order to meet additional resource
requirements as professional services activities increase domestically and
internationally.

PRODUCT DEVELOPMENT AND SUPPORT EXPENSE

Product development and support expense consists primarily of research and
development efforts, amortization of capitalized software development costs,
customer support, and other product support costs. For the three months ended
October 31, 1998, product development and support expense increased 22%. The
majority of the increase is related to additional personnel expenses associated
with the acquisitions of EZPower and Maitland in March of 1998. The Company
anticipates continued acceleration of development efforts, including Internet
applications, integration of its newly acquired document management and workflow
solutions with its existing offerings, further development of systems for use in
industries such as utilities and financial services, development of new software
products utilizing object-oriented technology, and continued support of its
existing product lines. Accordingly, expenditures in this area are expected to
increase in relation to the anticipated growth in revenues.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

Selling, general and administrative expense increased 25% largely due to
third-party selling costs due PMSC associated with one significant contract
during the three months ended October 31, 1998, as well as increased sales
commissions as a result of the 72% increase in license revenues. In addition,
goodwill amortization increased as a result of the acquisitions of EZPower and
Maitland in March of 1998.


                                       9
<PAGE>

OTHER INCOME (EXPENSE), NET

The 228% increase in other income (expense), net was due to a significant 
amount of interest income in the three months ended October 31, 1998, 
compared with interest expense in the comparable period of the prior year. As 
a result of the receipt of approximately $18.5 million of Initial Public 
Offering ("IPO") proceeds in April 1998, interest income increased in the 
first quarter and is expected to continue to increase as compared to 
corresponding periods of fiscal 1997 due to significant cash and cash 
equivalent balances maintained by the Company. With the IPO proceeds, the 
Company repaid the Company's debt in April of 1998 leaving minimal interest 
expense which is solely related to capital lease obligations.

PROVISION FOR INCOME TAXES

The effective tax rates for the three months ended October 31, 1998 and 1997
were approximately 44% and 40%, respectively. Goodwill amortization related to
the recent acquisitions is non-deductible, which increased the effective tax
rate for the three months ended October 31, 1998. The majority of goodwill
amortization related to the Merger is also non-deductible. The Company used a
portion of its net operating loss carryforwards and outstanding tax credits to
offset its current tax liability for the three months ended October 31, 1998 and
1997.

NET INCOME

Net income increased 42% for the three months ended October 31, 1998. This is
due to increased revenue and increased interest income, partially offset by
additional expenses needed to meet the revenue levels.

YEAR 2000

The Year 2000 computer issue is primarily the result of Information 
Technology (IT) or non-IT systems and programs with date sensitive devices, 
such as embedded chips or code using a two digit format, as opposed to four 
digits, to indicate the year. Such systems and programs may be unable to 
correctly interpret dates beyond the year 1999, which could cause a system 
failure or other errors, with the resultant disruption in the operation of 
such systems.  The Company has assembled an internally staffed team to 
address and manage the Year 2000 project related to the Company's products 
and services offerings, as well as any IT and non-IT internal systems 
supporting the Company's operations.  

With respect to the Company's product line and services offerings, current 
versions of the Company's products are designed to be "Year 2000" compliant.  
The Company is currently in the process of testing and upgrading, if 
necessary, its product offerings.  Customers using pre-Year 2000 compliant 
versions of the Company's software products are entitled to receive upgraded 
Year 2000 compliant software as part of their software support agreements 
with the Company, as long as the customer support agreement remains in force. 
The Company is currently in the process of assessing the extent to which its 
services  implementations are Year 2000 compliant.  To the extent the Company 
is directly involved in resolving any non-compliant services implementations, 
generally the customer will be responsible for the fees associated with such 
services.  Accordingly, the Company does not currently believe that the 
effects of any Year 2000 non-compliance in the Company's installed base of 
products or services offerings will result in any material adverse impact on 
the Company's business or financial condition.  

With respect to the Company's internal IT and non-IT software systems and 
hardware, the Company has identified non-compliant hardware and software
systems and is currently in the remediation phase.  The Company believes there 
is no significant exposure to the Company related to non-compliant internal IT 
and non-IT software systems and hardware and that the majority of identified 
non-compliant systems are planned to be upgraded as part of its normal 
upgrade process within the next 12 months.

Although the Company is undertaking efforts to ensure that all its systems 
and programs are Year 2000 compliant, the Company has no control over 
services, functions, and data provided by third-party vendors and others 
which may result in the inability to provide services. The Company is
contacting and working with its material customers and vendors to verify 
their Year 2000 compliance.  The Company has no control over third-parties 
and if they will be Year 2000 compliant.  Further, the Company is unable to 
predict the impact, if any, on the Company's revenues as a result of its 
customers being distracted from their document automation needs as their 
attention is re-directed, or customer resources are diverted, to becoming 
Year 2000 compliant. The extent to which third-party customers and vendors do 
not become Year 2000 compliant on a timely basis or may be indirectly 
impacted by the Year 2000 issue may have a material adverse effect on the 
Company.

The Company is in the early phase of developing contingency plans and 
determining the extent of such plans.

No assurance can be given that the Company will not be exposed to potential 
claims resulting from system problems associated with the century change.  
However, the Company believes its Year 2000 compliance project will be 
substantially completed by the end of fiscal year 1999 and will not have a 
material adverse effect on the Company.

LIQUIDITY AND CAPITAL RESOURCES

At October 31, 1998, the Company's principal sources of liquidity consisted of
cash and cash equivalents of $13.6 million. The Company completed an IPO in the
form of a rights offering to Safeguard Scientifics, Inc. stockholders in April
1998. Net proceeds to the Company from this offering, after deduction of the
underwriting discount and IPO expenses, were approximately $18.5 million.


                                      10
<PAGE>

Cash and cash equivalents for the three months ended October 31, 1998 decreased
$863,000 due to cash used by various investing and financing activities, and was
partially offset by cash provided by operating activities. Cash flows provided
by operating activities were $3.0 million as the result of profitable operations
and various other cash operating activities. Cash flows used in investing
activities of $2.8 million was the result of the purchase of short-term
investments, development of capitalized software, and purchase of fixed assets.
Cash flows from financing activities used $1.1 million primarily as the result
of the repurchase of treasury stock under the Company's stock repurchase
program. As of October 31, 1998, the Company had repurchased 360,314 shares at
an average per share cost of $3.47.

Working capital was $16.4 million at October 31, 1998, compared with $16.0
million at July 31, 1998.

In connection with the Merger, the Company assumed a $10.0 million revolving
credit facility from FormMaker. This credit facility was renegotiated in
September 1997. In September 1998, the Company allowed $6.5 million of the
credit facility to expire under its normal terms. The remaining $3.5 million
bears interest at the bank's prime rate less 0.25%, or 7.75%, as of October 31,
1998 and is due and payable in March 1999. Under the credit facility, the
Company is required to maintain certain financial covenants. As of October 31,
1998 there were no borrowings under this credit facility.

The Company's liquidity needs are expected to arise primarily from funding the
continued development, enhancement, and support of its software offerings, and
the selling and marketing costs associated principally with continued entry into
new vertical and international markets.

The Company currently anticipates that amounts available from the IPO proceeds,
its existing credit facility, and cash generated from operations will be
sufficient to satisfy its operating cash needs for the foreseeable future.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130") and No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"), were issued. SFAS 130
establishes standards for reporting comprehensive income and its components with
the same prominence as other financial statements. The Company adopted SFAS 130
on August 1, 1998; however, the Company does not have any items of comprehensive
income in the periods presented. SFAS 131 establishes standards for reporting
information about operating segments in annual and interim financial statements,
although this statement need not be applied to interim financial statements in
the initial year of its application. SFAS 131 is effective for fiscal years
beginning after December 15, 1997, and therefore the Company will adopt its
requirements in connection with its annual reporting for the year ending July
31, 1999.

Also, effective August 1, 1998, the Company adopted Statement of Position No.
97-2 , "Software Revenue Recognition" ("SOP 97-2") issued by the Accounting
Standards Executive Committee of the American Institute of Certified Public
Accountants, which supersedes Statement of Position No. 91-1 "Software Revenue
Recognition". The adoption of SOP 97-2 did not have a material effect on the
Company's financial position or results of operations for the first three months
of fiscal 1999 and the Company does not anticipate it will have a material
impact in the future.

In March 1998, the Accounting Standards Executive Committee issued Statement of
Position No. 98-1, "Accounting for Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP 98-1"). 


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<PAGE>

SOP 98-1 requires costs related to internal use software that are incurred in 
the preliminary project stage to be expensed as incurred. SOP 98-1 is 
effective for financial statements for fiscal years beginning after December 
15, 1998. Accordingly, the Company will adopt SOP 98-1 for the year ending 
July 31, 2000. The Company does not believe the adoption of SOP 98-1 will 
have a material effect on the Company's financial position or results of 
operations.
















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<PAGE>

                           PART II - OTHER INFORMATION


ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K


     (a)  Exhibits.

          11.  Computation of Earnings Per Share.

          27.  Financial Data Schedule (for EDGAR filing purposes only).

     (b)  Reports on Form 8-K.

          No reports on Form 8-K have been filed by the Registrant during the
          three months ended October 31, 1998.










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                                   SIGNATURES


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


DocuCorp International, Inc.
------------------------------------
       (Registrant)


/s/ Todd A. Rognes                                      Date  December 15, 1998
------------------------------------                          -----------------
Senior Vice President, Finance
(Duly Authorized Officer and Principal Financial Officer)



















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