<PAGE>



                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                             FORM 10-Q

                            (Mark One)

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

           For the quarterly period ended April 30, 1998

                                OR

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

    For the transition period from ____________ to ____________

                   Commission File Number 0-9747


                EXCALIBUR TECHNOLOGIES CORPORATION
      (Exact name of registrant as specified in its charter)



                     Delaware                          85-0278207
         (State or other jurisdiction of            (I.R.S.Employer
         incorporation or organization)            Identification No.)

          1921 Gallows Road, Suite 200, Vienna, Virginia    22182
              (Address of principal executive offices)   (Zip Code)


     Registrant's telephone number, including area code: (703)761-3700



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  period that the  registrant  was
required  to file  such  reports),  and  (2)  has  been  subject  to the  filing
requirements for the past 90 days. Yes |X| No __

As of June 5, 1998,  13,268,833  shares of the  registrant's  Common Stock,  par
value $.01 per share, were outstanding.



<PAGE>
 




              EXCALIBUR TECHNOLOGIES CORPORATION

                  QUARTERLY REPORT ON FORM 10-Q
             FOR THE QUARTER ENDED APRIL 30, 1998

                       TABLE OF CONTENTS


                PART I .  FINANCIAL INFORMATION


Item 1.  Financial Statements:                                 Page

         Consolidated Balance Sheets
         April 30, 1998 and January 31, 1998.................... 3

         Consolidated Statements of Operations
         Three month periods ended April 30, 1998 and 1997...... 4

         Consolidated  Statements  of Cash Flows 
         Three month periods ended April 30, 1998 and 1997...... 5

         Notes to Consolidated Financial Statements............. 6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations................... 10



                    PART II. OTHER INFORMATION

Items 1. - 6................................................... 19


Signatures..................................................... 20



                                       2

<PAGE>
<TABLE>
<CAPTION>
                       EXCALIBUR TECHNOLOGIES CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)

                                                       April 30,    January 31,
                ASSETS                                    1998         1998
                                                       (unaudited)
                                                         --------     --------
<S>                                                      <C>          <C>     
Current Assets:
   Cash and cash equivalents ........................    $  4,837     $  4,939
   U.S. government securities, at cost ..............        --          1,496
   Accounts receivable, net of allowance for doubtful
      accounts of $656 and $527,respectively ........       7,790        9,189
   Prepaid expenses and other .......................       1,774        1,071
                                                         --------     --------
       Total current assets .........................      14,401       16,695

Equipment and leasehold improvements, net
   of accumulated depreciation of
   $5,659 and $5,614, respectively ..................       2,233        2,267
Other assets ........................................       1,034        1,083
                                                         --------     --------
                                                         $ 17,668     $ 20,045
                                                         ========     ========
   LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
   Accounts payable .................................    $  2,071     $  2,106
   Accrued expenses .................................       1,609        1,886
   Deferred revenues ................................       2,714        2,708
   Deferred compensation ............................         247          247
                                                         --------     --------
       Total current liabilities ....................       6,641        6,947
                                                         --------     --------
Shareholders' Equity:
   5% Cumulative convertible preferred stock,
      $0.01 par value, preference in liquidation
      $10 per share, 1,000 shares authorized
      27 shares issued and outstanding ..............         317          271
   Common stock, $0.01 par value, 40,000 Shares
      authorized; 13,256 and 13,179 Shares
      issued and outstanding, respectively ..........         133          132
   Additional paid-in capital .......................      65,026       64,714
   Accumulated deficit ..............................     (54,335)     (51,945)
   Cumulative translation adjustment ................        (114)         (74)
                                                         --------     --------
       Total shareholders' equity ...................      11,027       13,098
                                                         --------     --------
                                                         $ 17,668     $ 20,045
                                                         ========     ========
</TABLE>
     The accompanying notes to the consolidated financial statements are an
               integral part of these consolidated balance sheets.

                                       3
<PAGE>
<TABLE>
<CAPTION>
                  EXCALIBUR TECHNOLOGIES CORPORATION

                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (unaudited)
                 (in thousands, except per share data)

                                              Three Months Ended
                                                   April 30,
                                               1998         1997
                                             --------     --------
<S>                                          <C>          <C>     
REVENUES:
  Software ..............................    $  3,731     $  2,259
  Maintenance ...........................       1,324        1,194
                                             --------     --------                                             
                                                5,055        3,453
                                             --------     --------
EXPENSES:
  Sales and marketing ...................       3,228        3,592
  Research and product development.......       1,898        1,701
  General and administrative ............       1,223        1,102
  Cost of software revenues .............         681          752
  Cost of maintenance revenues ..........         314          301
   Restructuring costs ..................        --            577
                                             --------     --------
                                                7,344        8,025
                                             --------     --------

Operating loss ..........................      (2,289)      (4,572)

OTHER INCOME / (EXPENSES):
  Interest income, net ..................          62          118
  Equity in net loss of affiliate .......        (117)        (103)
                                             --------     --------
Net loss ................................      (2,344)      (4,557)

Dividends on preferred stock ............           3            3
                                             ========     ========

Net loss applicable to common stock......    $ (2,347)    $ (4,560)
                                             ========     ========
Basic and diluted
  net loss per common share .............    $  (0.18)    $  (0.36)
                                             ========     ========
Weighted-average number of
  common shares outstanding .............      13,219       12,520
                                             ========     ========
</TABLE>

     The accompanying notes to the consolidated financial statements are an
                 integral part of these consolidated statements.

                                       4

<PAGE>
<TABLE>
<CAPTION>
                       EXCALIBUR TECHNOLOGIES CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                 (in thousands)
                                                     For the Three Months Ended
                                                               April 30,
                                                            1998        1997
                                                          --------    --------
<S>                                                       <C>         <C>     
Cash Flows from Operating Activities:
   Net loss ..........................................    $(2,344)    $(4,557)
   Adjustments to reconcile net loss to net
      cash used in operating activities:
       Depreciation and amortization .................        370         399
       Equity in net loss of affiliate ...............        117         103
   Changes in operating assets and liabilities:
       Accounts receivable, net ......................      1,505       1,968
       Prepaid expenses and other ....................       (689)        347
       Accounts payable and accrued expenses .........       (335)       (576)
       Deferred revenues .............................        (31)       (121)
                                                          -------     -------
   Net cash used in operating activities .............     (1,407)     (2,437)
                                                          -------     -------
Cash Flows from Investing Activities:
   Purchase of investments ...........................         --      (3,474)
   Proceeds from maturities of investments ...........      1,496       6,422
   Loan to affiliate .................................        (96)         --
   Purchases of equipment and leasehold improvements..       (306)       (215)
                                                          -------     -------
   Net cash provided by investing activities .........      1,094       2,733
                                                          -------     -------
Cash Flows from Financing Activities:
   Proceeds from the issuance of common stock ........        312         107
   Repayment of notes payable ........................         --         (25)
                                                          -------     -------
   Net cash provided by financing activities .........        312          82
                                                          -------     -------
The Effect of Exchange Rate Changes on Cash ..........       (101)        (49)
                                                          -------     -------
Net Increase (Decrease) in Cash and Cash Equivalents..       (102)        329
      
Cash and Cash Equivalents, beginning of period .......      4,939       2,685
                                                          -------     -------
Cash and Cash Equivalents, end of period .............    $ 4,837     $ 3,014
                                                          =======     =======

Supplemental Disclosures of Noncash Investing
   and Financing Activities:
    Use of deferred compensation to purchase
    common stock .....................................    $    --     $   394
                                                          =======     =======
</TABLE>
     The accompanying notes to the consolidated financial statements are an
                 integral part of these consolidated statements.

                                       5
<PAGE>





                EXCALIBUR TECHNOLOGIES CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          April 30, 1998


(1)   THE COMPANY

The  consolidated   financial  statements  include  the  accounts  of  Excalibur
Technologies Corporation ("Excalibur") and its wholly-owned subsidiaries.  These
entities  are  collectively  referred  to  hereinafter  as  the  "Company."  All
significant intercompany transactions and accounts have been eliminated.

The Company designs,  develops and markets knowledge retrieval software products
capable of supporting  paper,  text,  image and video data.  The Company  offers
consulting, training, product maintenance and systems implementation services in
support of its software  products.  The Company  licenses its software  products
directly to commercial  businesses  and  government  agencies  throughout  North
America,  Europe and other parts of the world and also  distributes its software
products to end users through  license  agreements with  value-added  resellers,
system  integrators,   original  equipment  manufacturers  and  other  strategic
partners.

The Company  incurred a net loss of  $2,344,000  in the three months ended April
30, 1998, and incurred net losses that totaled  $16,383,000  over the last three
complete fiscal years. The accumulated  deficit of the Company at April 30, 1998
was  $54,335,000.  The  Company's  operations  are subject to certain  risks and
uncertainties  including,  among others,  the dependence  upon the timing of the
closing of large software licenses; actual and potential competition by entities
with  greater  financial  resources,  experience  and market  presence  than the
Company;  rapid  technological  changes;  the success of the  Company's  product
marketing  and  product  distribution  strategies;  the  risks  associated  with
acquisitions and international expansion; the need to manage growth; the need to
retain key personnel and protect intellectual  property; and the availability of
additional capital financing on terms acceptable to the Company.


(2)   SIGNIFICANT ACCOUNTING POLICIES

Financial Statement Presentation

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.


                                       6

<PAGE>

These consolidated  financial statements are unaudited 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 it is suggested
that these  consolidated  financial  statements be read in conjunction  with the
consolidated  financial  statements,  and the  notes  thereto,  included  in the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998.
In the  opinion  of  management,  the  comparative  and  consolidated  financial
statements for the fiscal periods  presented herein include all adjustments that
are normal and recurring which are necessary for a fair statement of the results
for the interim  periods.  The results of operations  for the three months ended
April 30,  1998 are not  necessarily  indicative  of the  results for the entire
fiscal year ending January 31, 1999.


Revenue Recognition

Revenues  from  the sale of  computer  software  licenses  are  recognized  upon
shipment of product provided that the fee is fixed and determinable,  persuasive
evidence of an agreement  exists and  collection of the resulting  receivable is
considered probable.  Revenues related to agreements with customers that contain
future performance requirements are recognized when the performance requirements
are satisfied.  Revenues related to customer support agreements are deferred and
recognized  ratably  over the  terms of the  respective  agreements,  which  are
usually one year in length.

The American  Institute of Certified Public  Accountants has issued Statement of
Position 97-2,  "Software  Revenue  Recognition,"  ("SOP 97-2") that  supersedes
Statement of Position 91-1. The Company has  implemented SOP 97-2 and it has not
had a material financial impact on the Company.


Research and Development Costs

No product  development  costs were  capitalized,  and there were no capitalized
costs not yet amortized, during the three month periods ended April 30, 1998 and
1997.


Cash, Cash Equivalents and Marketable Securities

For purposes of the balance  sheets and  statements  of cash flows,  the Company
considers all highly liquid  investments  purchased with an original maturity of
three months or less to be cash equivalents.  Cash equivalents  consist of funds
deposited in money market accounts.  U.S.  government  securities are considered
investments  and  are  excluded  from  cash  equivalents   regardless  of  their
maturities.  Under the Statement of Financial  Accounting  Standard ("SFAS") No.
115,  "Accounting For Certain  Investments in Debt and Equity  Securities,"  the
Company  considers its  marketable  securities as  held-to-maturity  securities.
Accordingly,  marketable  securities,  consisting  entirely  of U.S.  government
securities, are carried at cost, adjusted for premium and discount amortization.
At April 30, 1998 there were no marketable securities held. At January 31, 1998,
the aggregate fair value of the  securities  based upon quoted market prices was
$1,497,000.


                                       7
<PAGE>
Net Loss Per Common Share

In February 1997, the Financial Accounting Standards Board, ("FASB") issued SFAS
No.  128,  "Earnings  Per  Share."  SFAS  No.  128 is  effective  for  financial
statements  issued for periods  ending after  December 15, 1997.  The  financial
statements  presented  have been prepared in accordance  with SFAS No. 128. SFAS
No. 128  requires  dual  presentation  of basic and diluted  earnings  per share
("EPS").  Basic EPS  includes no dilution  and is computed by dividing  net loss
available to common stockholders by the weighted average number of common shares
outstanding  for the  period.  Diluted  loss per share  includes  the  potential
dilution that would occur if securities or other contracts to issue common stock
were  exercised or  converted  into common  stock.  Stock  options,  warrants to
purchase common stock and cumulative  convertible  preferred stock were excluded
from the  computation  of  diluted  loss per  share  as  their  effect  would be
anti-dilutive.  As a result,  the basic and diluted  loss per share  amounts are
identical.


Translation of Foreign Financial Statements

Assets and  liabilities  of foreign  operations are translated at the period-end
rate of exchange.  Statements of operations  are translated at the average rates
of exchange during the period. Gains or losses from translating foreign currency
financial  statements are accumulated in a separate  component of  shareholders'
equity.


(3)   INVESTMENT IN AFFILIATE

In  July  1996,  the  Company  authorized  the  use of  its  name  by  Excalibur
Technologies N.V. ("ETNV"),  a Belgian company incorporated in June 1996 for the
purpose of selling and marketing the  Company's  products and services  within a
large territory including most of Northern Europe and Italy. The Company granted
to ETNV an exclusive license to distribute  certain of the Company's products to
other authorized resellers and customers in the territory for approximately five
(5) years.  The Company  contributed  approximately  $488,000 in cash to ETNV in
order to purchase 13.2% of ETNV's voting capital stock.  In connection  with the
organization  of ETNV,  the  Company  also issued  warrants to purchase  148,500
shares of the  Company's  common  stock to  certain  shareholders  of ETNV.  The
warrants are  exercisable  at a price of $22.00 per share for seven  years,  but
only if ETNV achieves certain financial objectives.

The Company's  investment in ETNV is accounted for using the equity method.  The
investment  exceeded the Company's share of the underlying net assets of ETNV by
approximately  $827,000,  including  $758,000  attributable  to the value of the
warrants  discussed in the preceding  paragraph.  The excess is being  amortized
over a five-year period.

The  amortization  of the excess,  as well as the Company's  share of ETNV's net
loss for the current fiscal quarter and the  elimination of the Company's  share
of gross profit  included in ETNV's  prepaid  license fees at April 30, 1998 and
April  30,  1997,  is  included  in  equity  in net  loss  of  affiliate  in the
accompanying  consolidated  statement of  operations  for the three months ended
April 30, 1998 and April 30, 1997.  At April 30,  1998,  the balance of advances
and the investment,  included in other assets in the accompanying balance sheets
net of accumulated amortization and the Company's share of the net loss of ETNV,

                                       8
<PAGE>
was $523,000.  At January 31, 1998, the balance of advances and the  investment,
included in other assets in the  accompanying  balance sheets net of accumulated
amortization and the Company's share of the net loss of ETNV, was $544,000.

For the three months ended April 30, 1998,  the Company  recorded total revenues
of $330,000 related to the software license with ETNV. No revenue was recognized
for the comparable period in the prior fiscal year.

In the first quarter of the current fiscal year, the Company  amended the Master
Distribution  Agreement  (the  "Agreement")  between the  Company and ETNV.  The
parties agreed to amend certain sections,  affecting the structure and timing of
ETNV's minimum license fee payments.  The Company does not expect that the terms
of the amendment will have a material effect on its financial results.


(4)   ISSUANCES OF COMMON STOCK

During  the first  quarter  of the  current  fiscal  year,  the  Company  issued
approximately 72,000 shares of common stock upon the exercise of options ranging
in price from $2.07 to $5.88 per share,  resulting in total cash proceeds to the
Company of approximately $261,000. In addition, the Company issued approximately
4,700 shares of common stock to  participants  of the  employee  stock  purchase
plan.   The  exercise  of  stock  options   provided   total  cash  proceeds  of
approximately $60,000 in the first quarter of last fiscal year.


(5)   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 130,
"Reporting  Comprehensive  Income,"  ("SFAS  130"),  during the first quarter of
fiscal 1999. SFAS 130 requires  companies to report as comprehensive  income all
changes in equity during a period,  except those resulting from  investments and
distributions  to owners,  in financial  statements for the period in which they
are recognized.  Included within accumulated other comprehensive  income are the
cumulative  amounts for foreign currency  translation  adjustments.  The foreign
currency translation adjustment was $(40,000) and $(16,000) for the three months
ended  April  30,  1998  and  April  30,  1997,   respectively.   The  Company's
comprehensive  income for the three  months in the period  ending April 30, 1998
and 1997 was $(2,384,000) and $(4,573,000), respectively.

In 1997, SFAS No. 131,  "Disclosure  about Segments of an Enterprise and Related
Information"  was issued and is effective for the fiscal year ending January 31,
1999 year-end  reporting.  The Company is evaluating this statement to determine
the impact on its reporting and disclosure requirements.


(6)   SUBSEQUENT EVENTS

On May 15, 1998,  the Company  completed a private  placement of 325,000  shares
(the "Shares") of its common stock to an unaffiliated financial institution. The
Company  sold the shares at a purchase  price of $10.00 per share,  resulting in
proceeds to the Company of $3,250,000.  The  transaction  was placed directly by
the Company. The Company plans to use the proceeds to finance ongoing operations
and for general corporate purposes.  Subsequent to May 15, 1999, the investor in
the private  placement has the right to cause the Company to file a registration
statement under the Securities Act of 1933 covering the Shares.  The Shares were
sold  pursuant  to an  exemption  from  the  registration  requirements  of  the
Securities Act of 1933.
                                       9
<PAGE>

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

The  statements  contained  in this  report that are not purely  historical  are
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934,  including
without  limitation  statements  about  the  Company's  expectations,   beliefs,
intentions or strategies  regarding the future. All  forward-looking  statements
included in this report are based on information available to the Company on the
date  hereof  and  the  Company   assumes  no  obligation  to  update  any  such
forward-looking  statements.  The  forward-looking  statements  contained herein
involve  risks and  uncertainties.  The  Company's  actual  results could differ
materially  from those  anticipated  in these  forward-looking  statements  as a
result of certain factors, including those set forth in this report.

The Company  principally  earns  revenues  from the  licensing  of its  software
products to commercial  businesses  and  government  agencies  throughout  North
America,  Europe and other parts of the world. The Company licenses its software
to end users directly and also distributes its software products through license
agreements with value-added  resellers,  system integrators,  original equipment
manufacturers and other strategic partners. Revenues are provided under software
licenses with new  customers  and from the related sale of product  maintenance,
training  and  implementation  support  services.  Additions  to the  number  of
authorized users,  upgrades to newer product versions and the renewal of product
maintenance arrangements by customers pursuant to existing licenses also provide
revenues to the Company.  Under software  maintenance  contracts,  customers are
typically  entitled to receive  telephone  support,  software  bug fixes and new
releases of particular software products.

The Company  believes that it is the  technology  leader in providing  accurate,
scalable, secure,  knowledge-retrieval  software solutions capable of supporting
knowledge assets of most media types including paper documents, text, images and
video.  Excalibur's  products enable users to search and retrieve these types of
data through  intranets,  local-area and wide-area  networks,  extranets and the
Internet.  It believes that these qualities  differentiate its software products
from other search engines,  toolkits and text retrieval products.  The Company's
Excalibur  RetrievalWare and Excalibur Visual  RetrievalWare  products deliver a
unified software solution for text and visual knowledge  retrieval.  The Company
is  committed  to  empowering  organizations  by  enabling  people to  transform
information  into  knowledge  and is focused on the  high-end  of the market for
knowledge retrieval.

The Company's  software  products are designed to enable  individuals to quickly
search and  retrieve  relevant  information  residing  on a  LAN/WAN,  intranet,
paper-based archive,  extranet,  video archive or the Internet. The market today
for the Company's products  generally  consists of two segments,  text knowledge
retrieval  and video  indexing  and  retrieval.  The market  for text  knowledge
retrieval  products  consists  of  electronic  publishing,   online  information
services, global corporate intranets,  paper archival systems as well as market,
business  and  government  intelligence.  The  market  for  video  indexing  and
retrieval  solutions  includes  application  and  website  developers,   certain
government agencies as well as commercial media,  entertainment and broadcasting
companies.

                                       10
<PAGE>

The Company  analyzes its business  based on these two business  segments.  Text
knowledge  retrieval  products include the RetrievalWare  family of products and
EFS. Visual products  include Visual  RetrievalWare,  VAE and the suite of video
applications to be released later in the current fiscal year.

The following chart  represents  revenues and expenses (in thousands of dollars)
attributable to the text and visual businesses for the three months ending April
30, 1998 and 1997.  Expenses  for each  business  consist of  expenses  directly
attributable   to  the  business  unit  and   allocated   expenses  and  exclude
restructuring   costs,   merger  costs  and  acquired  in-process  research  and
development costs.


                               Text Business         Visual Business
                             ------------------     ------------------
                             Three months ended     Three months ended
                                  April 30,              April 30,
                                1998     1997         1998      1997
                             ------------------     ------------------
     Total Revenue             $4,861   $3,411      $   194   $    42
     Operating Expenses         5,881    6,261        1,463     1,187
                             ------------------     ------------------
     Operating Income (Loss)  $(1,020) $(2,850)     $(1,269)  $(1,145)
                             ==================     ================== 

The Company believes that in addition to other competitive advantages,  it holds
a competitive  advantage in that the Company's products accommodate the indexing
and  retrieval of multiple  data types.  The Company  expects that over time, if
video becomes a more common data type, these two markets may merge.

The Company  reorganized  its sales force and made other  changes to the overall
organization  at the end of the first quarter of fiscal year 1998. In connection
with these changes,  the Company reduced its workforce by approximately  10% and
recorded a  restructuring  charge of $577,000 in the first  quarter.  The charge
consisted of severance pay and benefits for terminated  employees.  All payments
associated with the restructuring charge have been paid.


Results of Operations

Total  revenues  for  the  first  fiscal  quarter  ended  April  30,  1998  were
$5,055,000,  a 46% increase over total  revenues of $3,453,000  reported for the
same quarter last fiscal year.  The Company  incurred a net loss for the quarter
ended April 30, 1998 of $2,344,000, or $0.18 per common share, compared to a net
loss of $4,557,000, or $0.36 per common share, for the first quarter last fiscal
year.

Total  expenses  for the Company were  $7,344,000  in the first  quarter,  which
represented  an 8%  decrease  from total  expenses  of  $8,025,000  in the first
quarter last fiscal  year.  Total  expenses  for the first  quarter in the prior
fiscal  year  included  the  restructuring  charge of  $577,000.  Excluding  the
restructuring  charge,  expenses in the first quarter of the current fiscal year
decreased approximately 1% from the first quarter in the prior fiscal year.

                                       11
<PAGE>

The chart that follows  summarizes the components of revenues and the categories
of expenses,  including the amounts expressed as a percentage of total revenues,
for the three month  periods ended April 30, 1998 and 1997,  and the  percentage
change in the amounts between fiscal quarters (dollars in thousands).

                            Components of Revenue and Expenses     Increase  
                               Three Months Ended April 30,       (Decrease)
                                  1998               1997
                                $       %          $       %          %
                             ---------------     --------------    --------
   Revenues:
     RetrievalWare            $3,434    68 %     $1,835    53 %       87 %
     EFS                         112     2          403    12        (72)
     Visual Products Group       185     4           21     1        781
                             ---------------     --------------    --------
   Total Software              3,731    74        2,259    65         65
   Maintenance                 1,324    26        1,194    35         11
                             ---------------     --------------    --------
       Total revenues         $5,055   100 %     $3,453   100 %       46 %
                             ---------------     --------------    --------

   Expenses:
     Sales and marketing      $3,228    64 %     $3,592   104 %      (10)
     Research and product
        development            1,898    38        1,701    49         12
     General and
        administrative         1,223    24        1,102    32         11
     Costs of sales              995    20        1,053    30         (6)
     Restructure costs            --    --          577    --         --
 -------------------------   ---------------     --------------    --------
       Total expenses         $7,344   145 %     $8,025   232 %       (8)%
 -------------------------   ---------------     --------------    --------

While overall first quarter  revenues  increased 46% over the first quarter last
year,  software product revenue  increased 65%. The Company  attributes  revenue
increases  to  a  combination  of  factors  including  increasing  revenue  from
pilot-to-enterprise  accounts;  expanded sales into the online services  market,
and new customers in the growing market for highly  accurate and scalable search
and  retrieval  systems.  Product  revenue from the Company's  flagship  product
Excalibur  RetrievalWare increased 87% in the current quarter to $3,434,000 from
$1,835,000 in the comparable quarter last fiscal year.  RetrievalWare sales were
92% of  software  revenue in the  current  quarter  compared to 81% in the first
quarter last year.  The  Company's  transition  to the  Excalibur  RetrievalWare
product line and the  introduction  of  RetrievalWare  Fileroom  during the last
fiscal year resulted in the  continued  downward  trend of EFS software  product
revenue.  EFS software  revenue was 3% of total software  product revenue in the
first quarter of the current fiscal year compared to 18% in the same period last
year. Software revenue from the Visual Products Group of $185,000 in the current
quarter  represented 5% of software  product revenue  compared to 1% in the same
period last year. The Company did not recognize any revenue in the first quarter
of the  current  year from the VAE product or video  applications  which will be
released later this year. Expansion of the Excalibur RetrievalWare customer base
resulted in an 11% increase in  maintenance  revenues to $1,324,000 in the first
quarter  this year from  $1,194,000  in the first  quarter  last  year.  Revenue
results in the first quarter of this year were primarily a result of the efforts
of a direct sales force.

                                       12
<PAGE>


Software  revenues  for  the  current  quarter  included  revenue  from  several
customers  who started out as either  pilot or  departmental  installations  and
converted to  enterprise-wide  implementations.  Most notably was the ICI Group,
one of the  world's  largest  chemical  companies,  which  expanded  the  use of
RetrievalWare  to form the  basis  for a  corporate  initiative  into  knowledge
management on a worldwide basis.

A second key area of revenue  growth in the  quarter,  as well as a  significant
opportunity for increased sales in the future,  was the online services  market.
LEGI-SLATE,  an expert  legislative  and  regulatory  intelligence  service  and
wholly-owned  subsidiary of The Washington Post Company,  selected RetrievalWare
to enhance its online  service that provides  clients with  in-depth,  real-time
analysis  of  recent  legislative  and  political  developments.   Other  online
providers who executed new or expanded licensing agreements in the first quarter
included Gazette Newspapers, Federal Filings, Laser Tech and Aspen Systems.

A third key area contributing to revenue growth was new customers in the growing
market for highly  accurate and scalable  search and retrieval  systems.  In the
first  quarter,  Excalibur  was  chosen  as  the  key  retrieval  technology  by
multi-national  corporate customers  including  Hoffmann-La Roche, Xerox and the
Capital Group. In addition to these corporate  customers,  the Company continued
to expand its  government  market  presence  both in the U.S.  and abroad.  This
included  new  installations  supporting  the U.S.  Army,  Navy,  Air  Force and
intelligence  community,  along with new  installs  for several  state and local
government entities.  Overall, Excalibur North American sales increased 28% over
the same period a year ago and represented 67% of total revenue in the quarter.

The Company  continued its overseas  expansion with new customer  agreements and
significant  customer upgrades  throughout Europe and South America. In the U.K.
and France, notable agreements in addition to ICI, were David Lloyds,  Yorkshire
Water, and Sesin. Total revenue from international sales increased 109% compared
to the same  period  a year ago and  represented  33% of  total  revenue  in the
quarter. International software revenue increased 128% in the first quarter from
the comparable period last year.

Sales and marketing  costs  decreased  10% in the quarter,  to $3,228,000 in the
current year compared to $3,592,000 last year.  Salaries,  benefits,  travel and
other employee  related costs were reduced as a result of the  restructuring  in
the first quarter of fiscal year 1998.  Telephone and other office expenses also
declined as a result of the lower head count.  The Company employed 64 people in
the sales and  marketing  areas at April 30,  1998  compared  to 71 at April 30,
1997.  Marketing  program expenses  declined 13% due to reduced public relations
and international marketing expenditures.

Research and product  development costs increased 12% to $1,898,000 in the first
quarter of the current  fiscal year  compared with  $1,701,000  last year due to
increased  investment in both Text and Visual  research and  development  as the
Company prepares to release  RetrievalWare  version 6.6 and new visual products.
Text  expenses  increased  14%,  primarily  due to  increases  in  salaries,  as
headcount  in the Text  department  increased to 44 at April 30, 1998 from 40 at
April 30,  1997.  Visual  expenses  increased  10% in the first  quarter  of the
current  year  compared  to the same period  last year.  The  increase in Visual
expenses was due to the use of  consultants  as the Company  prepares to release
its new visual products.


                                       13
<PAGE>

General and  administrative  expenses  increased  11% in the current  quarter to
$1,223,000 from $1,102,000 in the comparable  quarter last year. The increase in
general and  administrative  expenses in absolute  dollars was due in part to an
increase in the amount taken as reserve for bad debt. Consulting,  equipment and
depreciation   costs  increased   between  quarters  due  to  corporate  network
communications and database upgrades.  General and administrative  expenses as a
percentage of total  revenue  decreased to 24% in the first quarter of this year
from 32% last year.

Costs of sales decreased by 6% between  quarters to $995,000 in the current year
from $1,053,000 last year.  Electronic  media,  documentation and shipping costs
were  higher in the first  quarter  last year due to the  release  of  Excalibur
RetrievalWare  6.0  and  an  updated  version  of  the  Excalibur  EFS  product.
Subcontracted  training  and related  expenses  were also reduced in the current
quarter.

In the first quarter of fiscal year 1998, the Company implemented changes to its
organization  by  reorganizing  its sales force and forming a new business unit,
the Visual  Business  Group.  In  connection  with  these  changes  the  Company
committed to a reduction of its  workforce by  approximately  10% and recorded a
restructuring charge of $577,000. The charge primarily consists of severance pay
for terminated  employees.  All cost associated with the restructuring have been
paid.

Net interest  income declined to $62,000 in the current quarter from $118,000 in
the  comparable  quarter last year due to a decrease in the level of  investment
securities  held. The Company's  equity in the loss of its affiliate,  ETNV, was
$117,000 in the first  quarter of the current  year  compared to $103,000 in the
first quarter last year.



























                                       14
<PAGE>

Liquidity and Capital Resources

In the three months  ended April 30, 1998,  the  Company's  combined  balance of
cash, cash  equivalents and  investments in marketable  securities  decreased by
$1,598,000  to $4,837,000 as  summarized  below (in  thousands).  At January 31,
1998, investments in marketable securities consisted of U.S. Treasury Bills with
maturities of less than one year.

                                 April 30,   January 31,
                                   1998         1998       Change
                                  -------     --------    ---------
    Cash and cash equivalents     $ 4,837     $ 4,939     $  (102) 
    Investments..............        --         1,496      (1,496)
                                  -------     -------     --------
                    Total         $ 4,837     $ 6,435     $(1,598)
                                  =======     =======     ========


During the three months ended April 30, 1998,  cash of  $1,407,000  used to fund
operating activities was less than the net loss of $2,344,000 due primarily to a
significant  reduction  in the level of  accounts  receivable.  The  balance  of
accounts  receivable  declined by $1,505,000.  Other non-cash charges offsetting
cash used in operations were  depreciation  and amortization of $370,000 and the
Company's  share of the net loss of ETNV and  amortization  of the excess of the
Company's  investment  over  the  underlying  net book  value  of ETNV  totaling
$117,000.  Increased  prepaid  expenses and reductions in accounts  payable used
$1,024,000.

For the quarter ended April 30, 1998,  net cash of $1,496,000  was provided from
the  maturity  of  Treasury   Bills.   Purchases  of  equipment   and  leasehold
improvements  used $306,000.  Cash of $312,000 was provided from the exercise of
employee  stock options and issuances of stock under the employee stock purchase
plan.

Despite the reduction in the balance of accounts  receivable during the quarter,
the number of days sales  outstanding  ("DSO") at April 30, 1998  increased from
January  31,  1998.  This can be  attributed  to the  large  amount  of  revenue
generated  near the end of the quarter.  Management  believes that the allowance
for doubtful accounts of $656,000 at April 30, 1998 is adequate.


Factors That May Affect Future Results

The Company's  business  environment is  characterized  by intense  competition,
rapid technological  changes,  changes in customer requirements and emerging new
market segments.  Consequently,  to compete  effectively,  the Company must make
frequent  new  product  introductions  and  enhancements  while  protecting  its
intellectual  property,  retain its key personnel and deploy sales and marketing
resources  to take  advantage of new business  opportunities.  Future  operating
results  will be  affected  by the  ability of the Company to expand its product
distribution  channels and to manage the expected growth of the Company.  Future
results may also be impacted by the  effectiveness  of the Company in  executing
future  acquisitions  and integrating the operations of acquired  companies with
those of the Company.  Failure to meet any of these  challenges  could adversely
affect future operating results.


                                       15
<PAGE>

The Company's quarterly operating results have varied  substantially in the past
and are likely to vary  substantially  from quarter to quarter in the future due
to a variety of factors. In particular, the Company's period-to-period operating
results  are  significantly  dependent  upon the timing of the  closing of large
license  agreements.  In this regard, the purchase of the Company's products can
require a significant  capital  investment  from a potential  customer which the
customer  generally  views  as a  discretionary  cost  that can be  deferred  or
canceled due to budgetary or other  business  reasons and can involve long sales
cycles of six  months or more.  Estimating  future  revenues  is also  difficult
because the Company  ships its  products  soon after an order is received and as
such does not have a significant  backlog.  Thus, quarterly license fee revenues
are  heavily  dependant  upon a  limited  number of  orders  for large  licenses
received  and  shipped  within  the same  quarter.  Moreover,  the  Company  has
generally  recorded a  significant  portion of its total  quarterly  license fee
revenues in the third month of a quarter, with a concentration of these revenues
occurring in the last half of that third month.  This  concentration of revenues
is influenced by customer tendencies to make significant capital expenditures at
the end of a fiscal  quarter.  The Company  expects  these  revenue  patterns to
continue for the foreseeable future.

Despite the  uncertainties  in its revenue  patterns,  the  Company's  operating
expenses  are based  upon  anticipated  revenue  levels  and such  expenses  are
incurred on an approximately ratable basis throughout a quarter. As a result, if
expected  revenues are  deferred or otherwise  not realized in a quarter for any
reason, the Company's business,  operating results and financial condition would
be materially adversely affected.

Primarily due to large operating losses incurred by the Company,  its balance of
cash, cash  equivalents and  investments  has declined  substantially  since the
proceeds of approximately $8,388,000 from a private placement in March 1996 were
received.  As a result,  subsequent to the end of the first quarter this year as
described  in  Note 6 of the  Consolidated  Financial  Statements,  the  Company
completed a private placement sale of 325,000 shares of common stock for $10 per
share, resulting in proceeds of $3,250,000.

Various factors,  including those discussed above,  have somewhat  inhibited the
overall revenue growth that management had expected in the prior fiscal year. As
a result,  near the end of the first quarter of fiscal year 1998, the short-term
revenue  expectations of management were moderated and planned expenditures were
reduced.  As  discussed  previously,   the  Company  reduced  its  workforce  by
approximately  10% from the number of employees at April 30, 1997.  In addition,
the Company postponed certain  long-range  programs and curtailed other expenses
in order to achieve an overall reduction in expenditures. Marketing efforts were
focused on the  increase  of  current  year  revenues.  The  Company  made other
organizational  changes in order to sharpen the focus of product development and
business  development  efforts on selected video  applications  of the Excalibur
Visual RetrievalWare technology.









                                       16
<PAGE>

Management  believes that the changes and  initiatives  discussed  above and the
investments of time and money in the training of the sales force, improved sales
productivity  and  the  overall  financial  performance  of  the  Company  since
inception of such changes.  Quarterly  revenues  increased  steadily  throughout
fiscal year 1998 and first quarter revenues in the current fiscal year increased
46% from the first quarter of fiscal year 1998. The level of quarterly costs and
expenses  was  reduced  and  have  remained  relatively  flat  over the past few
quarters.  However, some increases in expenses are expected as revenues increase
and the Company begins to ship new video products later this year. Including the
receipt of $3,250,000  in proceeds  from the private  placement on May 15, 1998,
the current balance of cash, cash  equivalents and investments is expected to be
sufficient to fund the Company's  current  projected  cash needs for the current
fiscal year. Historically, the Company has used primarily cash provided by sales
of its  common  stock to fund its  operating  losses.  If the  actions  taken by
management  are not effective in achieving  profitable  operating  results,  the
Company may be required to pursue  additional  external  sources of financing in
the future to support its operations and capital  requirements.  There can be no
assurances that external sources of financing will be available if required,  or
that such financing will be available on terms acceptable to the Company.

As of  January  31,  1998,  the  Company  had  significant  net  operating  loss
carryforwards  ("NOLs") of  approximately  $68 million.  The deferred tax assets
representing the benefits of the NOLs have been offset completely by a valuation
allowance due to the Company's lack of an earnings history. The Company incurred
a net loss of  $2,344,000  for the quarter ended April 30, 1998 and has incurred
cumulative losses of approximately $16,383,000 over the last three fiscal years.
The accumulated  deficit of the Company at April 30, 1998 was  $54,335,000.  The
realization  of the  benefits of the NOLs is  dependent  on  sufficient  taxable
income in future  fiscal  years.  Lack of  future  earnings,  or a change in the
ownership  of the  Company,  could  adversely  affect the  Company's  ability to
utilize  the NOLs.  Further,  because  there was a change  in the  ownership  of
ConQuest in fiscal year 1996, the Company's  ability to utilize NOLs relating to
ConQuest  of   approximately   $3,233,000  may  be  limited.   Despite  the  NOL
carryforwards,  the Company may have income tax liability in future years due to
the  application of the  alternative  minimum tax rules of the Internal  Revenue
Code.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

The Company believes that inflation has not had a material effect on the results
of its operations to date.








                                       17
<PAGE>


Other Factors

The Company is in the process of identifying  operating and application software
challenges  related to the year 2000.  While the Company expects to resolve year
2000 compliance issues substantially  through normal replacement and upgrades of
software,  there can be no  assurance  that  there will not be  interruption  of
operations or other limitations of system functionality or that the Company will
not  incur  substantial  costs  to  avoid  such  limitations.   Any  failure  to
effectively monitor, implement or improve the Company's operational,  financial,
management and technical support systems could have a material adverse effect on
the Company's business and consolidated results of operations.


New Accounting Pronouncements

In 1997, SFAS No. 131,  "Disclosure  about Segments of an Enterprise and Related
Information"  was issued and is effective for the fiscal year ending January 31,
1999 year-end  reporting.  The Company is evaluating this statement to determine
the impact on its reporting and disclosure requirements.

The American  Institute of Certified Public  Accountants has issued Statement of
Position 97-2,  "Software  Revenue  Recognition,"  ("SOP 97-2") that  supersedes
Statement  of  Position  91-1.  SOP 97-2,  "Software  Revenue  Recognition,"  is
effective  for revenue  transactions  entered  into by the Company in its fiscal
year ending  January 31, 1999. The Company has  implemented  SOP 97-2 and it has
not had a material financial impact on the Company.





























                                       18
<PAGE>



                    PART II-- OTHER INFORMATION

Item 1.    Legal Proceedings                           None.


Item 2.    Changes in Securities                       None.


Item 3.    Defaults upon Senior Securities             None.


Item 4.    Submission of Matters to Vote 
               of Security Holders                     None.


Item 5.    Other Information                           None.


Item 6.    Exhibits and Reports on Form 8-K            None.



































                                       19
<PAGE>




                                   SIGNATURES



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

                       EXCALIBUR TECHNOLOGIES CORPORATION



June 12, 1998                  By: /s/ Patrick C. Condo
                                   --------------------
                               Patrick C. Condo
                               President and Chief Executive Officer
                               (Principal Executive Officer)


June 12, 1998                  By: /s/ James H. Buchanan
                                   ---------------------
                               James H. Buchanan
                               Chief Financial Officer
                               (Principal Financial and Accounting Officer)

























                                       20