<PAGE>

Heartsoft, Inc.
Financial Statement on Form 10Q
for the fiscal quarter ending September 30, 1997

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC  20549

                                 FORM 10-QSB

                     QUARTERLY REPORT UNDER SECTION 13

                OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

       FOR QUARTER ENDING SEPT. 30, 1997   COMMISSION FILE NUMBER 33-23138-D

                                HEARTSOFT, INC.
            (Exact name of registrant as specified in its charter)

                  Delaware                        87-0456766
           (State of Incorporation)   (IRS Employer Identification No.)

       3101 Hemlock Circle, Broken Arrow, Oklahoma         74012
        (Address of principal executive offices)         (Zip Code)

Registrant's telephone number, including area code:  918/251-1066

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

As of September 30, 1997, there were 5,521,324 shares of Heartsoft, Inc. Common
Stock, $0.0005 par value outstanding.

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

<PAGE>

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

HEARTSOFT, INC. - QUARTERLY REPORT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                   Page
<S>                                                                <C>
PART I.   Financial Information

Item 1:   Balance Sheet as of September 30, 1997                     3

          Statement of Income Six Months ending Sept. 30, 1997       4

          Statement of Cash Flow 6 Months Ending Sept. 30, 1997      5

          Notes to Financial Statements                              6

          Management's Discussion, Analysis of Financial
            Condition, and Results of Operations                     7

PART II.  Other Information

          Signature Page                                             8
</TABLE>

<PAGE>

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

Part I.  FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

                              BALANCE SHEET

<TABLE>
<CAPTION>

                                             Sept. 30, 1997      Sept. 30, 1996
                                             ==============      ==============
<S>                                          <C>                 <C>
ASSETS
   Cash & Cash Equivalents                    $   979,395           $   607,132
   Inventory                                       13,735               (18,907)
   Prepaid Expenses and Deposits                  110,924               205,678
                                              -----------           -----------
   Total Current Assets                       $ 1,104,054           $   793,903

   Fixed Assets-Net                               141,595               170,061
   Developed Software (See Note 2)                611,466               606,973
   Deferred income tax benefit                    193,448                64,201
                                              -----------           -----------
   Total Other Assets                         $   946,509               941,235
                                              -----------           -----------
   Total Assets                                 2,050,563           $ 1,735,138
                                              ===========           ===========
LIABILITIES
   Accounts Payable - Trade                   $   144,401           $   128,141
   Notes Payable-current portion                   40,000                89,479
   Lease obligations-current portion               30,126                34,768
   Taxes Payable                                   70,749                70,750
                                              -----------           -----------
   Total Current Liabilities                  $   285,277           $   292,692
   Long Term Liabilities                          364,173                25,152
                                              -----------           -----------
   Total Liabilities                          $   649,450           $   348,290

STOCKHOLDERS EQUITY
   Retained Earnings                           (1,346,198)             (941,633)
   Common Stock                                     2,512                 2,512
   Preferred Stock                                 11,380                 6,550
   Paid-In Capital                              2,599,281             2,423,116
   Net Profit (Loss)                              134,138              (103,697)
                                              -----------           -----------
   Total Stockholders Equity                  $ 1,401,138           $ 1,386,848
                                              -----------           -----------
   Total Liabilities And
   Stockholders Equity                        $ 2,050,563           $ 1,735,138
                                              ===========           ===========
</TABLE>

<PAGE>

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

Part I.  FINANCIAL INFORMATION

                        STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                          Six months ended
                                Sept. 30, 1997      Sept. 30, 1996
                                ==============      ==============
<S>                             <C>                 <C>
REVENUE
   Gross Sales                        $423,471           $661,476
                                 -------------      -------------
   Sales Returns & Discounts           (39,986)           (21,649)
                                 -------------      -------------
   Net Sales                           383,485            639,827
   Total Cost of Good                  119,225            327,404
                                 -------------      -------------
   GROSS MARGIN                        264,260            312,423

EXPENSES
   Payroll Expense                     109,910            169,107
   Administrative Expense              326,969            265,313
                                 -------------      -------------
   Total Operating Expenses            436,879            434,420
                                 -------------      -------------
   Net Operating Income               $134,138          ($103,679)
   Gain on Sale of Assets              306,757                  0
                                 =============      =============
   Net Income                         $134,138          ($103,679)

   EARNINGS (LOSS) PER SHARE*             0.02              (0.02)
</TABLE>

*Primary weighted average common shares outstanding during the period
1997 = 5,507,357 and 1996 = 5,249,340

<PAGE>

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

Part I.  FINANCIAL INFORMATION

                     STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                   Six months ended
                                           Sept. 30, 1997      Sept. 30, 1996
                                           ==============      ==============
<S>                                        <C>                 <C>
CASH FLOW FROM OPERATING ACTIVITIES
   Net Income (Loss)                         $ 134,138           $(103,697)
   Change in Current Assets
   Net Receivables                             (34,093)            229,765)
      Inventory                                 (5,875)             30,123
      Prepaid Expenses                           3,254            (155,183)
   Change in Current Liabilities
   Accounts Payable                             17,528               5,290
   Loan Payable                                 54,121            (172,322)
   Other Current Liabilities                  (287,199)             28,955
                                             ---------           ---------
Total Cash Flow from operating act            (118,126)           (596,599)

Cash Flow from investing activities
   Developed Software                           22,664            (124,833)
   Property, Plant & Equipment                  10,592             (75,583)
   Depreciation on Disposed Assets               5,200              60,000
                                             ---------           ---------
Total Cash Flow from invest. act                88,456            (158,716)

Cash Flow from financing activities
   Long-Term Debt                               59,031             (13,253)
   Paid-In Capital                              55,950             962,153
   Retained Earnings                           (89,149)            (57,166)
   Preferred Stock                                   0               5,000
                                             ---------           ---------
Total Cash Flow from financing act              25,832             896,734
                                             ---------           ---------
Net Increase (Decrease) in Cash              $  (3,838)          $ 141,419
                                             =========           =========
Beginning Cash Balance                           5,156           $  19,922
Net Increase (Decrease) in Cash              $  (3,838)            141,419
                                             ---------           ---------
Ending Cash Balance                          $   1,318           $ 161,341
                                             =========           =========
</TABLE>

<PAGE>

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

                    NOTES TO FINANCIAL STATEMENTS
                        September 30, 1996
                           (unaudited)

Note 1.  Basis of Presentation.

The accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation have been
included.

Note 2. Developed Software

Capitalization of software development costs begins when the project reaches
technological feasibility and includes the costs incurred until the project is
ready for release. Software development costs are amortized on the straight-line
method over a maximum of seven years or the expected life of the product,
whichever is less. As of March 31, 1996, this policy represents a change in the
Company's accounting treatment for amortization of its development costs.

Note 3. Deferred Income Tax

The Company reports the deferred tax benefit in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Income
tax expense reflects federal and state income taxes on current earnings. No
actual current income taxes were paid due to the application of the tax loss
carryforward. Therefore, tax expense for both years is deferred to a future
date.

<PAGE>

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

Item 2  HEARTSOFT, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        September 30, 1997

OVERVIEW

Heartsoft, Inc. is a publicly held Delaware Corporation, incorporated January
15, 1988, and traded OTC (Symbol:  HTSF).  Presently, 30 million shares of
stock are authorized, with 5,521,324 shares issued and outstanding.  Over the
past ninety days, the Company's stock has traded in the $0.43 to $0.71 range.

The mission of Heartsoft, Inc. is to create value for its shareholders
through the development, acquisition, and distribution of advanced multimedia
technologies for education in schools and homes.

To date, Heartsoft's Core Products Division has designed and published more than
50 educational software titles. These proprietary titles range in price from
$34.95 to $995 depending on the configuration. These titles are targeted to both
public and private U.S. Schools with children in Pre-Kindergarten through the
8th grades.

Since the company's initial formation in 1989, the shareholders and management
of Heartsoft, Inc. have contributed over $2.5 million in capital and assets to
the Company. The continued financial strategy of Heartsoft emphasizes
reinvestment of income for continued growth during the next few years of
operations.

RESULTS OF OPERATIONS

Net Revenues

Net Sales of the Company's educational computer software for the 6 months ending
September 30, 1997, were $383,485 compared to $639,827 for the same period one
year ago representing a 40% decrease. For the quarter ended September 30, 1997,
total sales were $151,254 compared to $272,217 for the previous quarter. The
September quarter is traditionally a seasonal lowpoint as schools are out of
session for the bulk of the quarter. Sales returns increased slightly as a
percentage of sales, although it was not radically different from historical
norms.

The variance in results are primarily caused by the 1996 inclusion of the
Dallas Heartsoft Advanced Technologies Division, which was closed as of March
31, 1997. The gross margin improvement, as well as the decrease in revenues,
can both be attributed to the difference in operating environments, as the
1997 results reflect only the Tulsa Core Products Division's efforts.

Cost of Goods Sold

The Company includes in cost of goods sold all costs associated with the
acquisition of components, assembly of finished products, shipping and
amortization.

The Gross Margin declined to $264,260, a 15% decline from year previous levels.
Gross Margin as a percentage of sales improved to 69% of Net Sales, compared to
49% in the year earlier period, as the product mix featured higher margin
products as a percentage of sales.

Operating Expenses

General operating expenses were essentially flat for the six months ended
September 30, 1997 to $436,879 compared to $434,420 for period ending September
30, 1996.

Net Income

The Company recorded a net income of $134,138, or two cents per share, for the 6
months ending September 30, 1997, compared to net loss of $103,697 for the year
earlier period. The improvement included a net gain on the sale of asset through
the licensing and joint venture agreement the Company entered into during the
period.

Liquidity and Capital Resources

As of September 30, 1996, the Company's principle sources of liquidity included
cash and accounts receivable of $979,395, which includes a revolving line of
credit with a current limit of $250,000. Management believes that its existing
sources of liquidity and anticipated funds from operations will satisfy the
working capital and capital expenditures requirements for the foreseeable
future.

<PAGE>

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

Part II.  OTHER INFORMATION

                                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.


                                            HEARTSOFT, INC.
                                            (Registrant)


    November 18, 1997                       /s/ Benjamin P. Shell
----------------------------                ------------------------------
          Date                                  Benjamin P. Shell,
                                                    Chairman