SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                                     FORM 10-K

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

                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
                                         OR,

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

               FROM THE TRANSITION PERIOD FROM                     TO

                           COMMISSION FILE NUMBER 0-27012

                               INSIGNIA SOLUTIONS PLC
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          ENGLAND AND WALES                            NOT APPLICABLE
   (State or other jurisdiction of                    (I.R.S. employer
    incorporation or organization)                 identification number)

                                  ----------------
          41300 CHRISTY STREET                         INSIGNIA HOUSE
                 FREMONT                             THE MERCURY CENTRE
          CALIFORNIA 94538-3115                  WYCOMBE LANE, WOOBURN GREEN
        UNITED STATES OF AMERICA                 HIGH WYCOMBE, BUCKS HP10 0HH
             (510) 360-3700                            UNITED KINGDOM
                                                      (44) 1628-539500

   (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL
                                 PLACES OF BUSINESS)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                        NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                        ORDINARY SHARES (L0.20 NOMINAL VALUE)

                                   (TITLE OF CLASS)

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

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

     The aggregate market value of the voting stock held by non-affiliates of 
the Registrant was approximately $41,974,000 as of March 8, 1999 based upon 
the closing sale price on the Nasdaq National Market reported for such date. 
Ordinary shares held by each officer and director and by each person who owns 
5% or more of the outstanding Ordinary share capital have been excluded in 
that such persons may be deemed to be affiliates. This determination of 
affiliate status is not necessarily conclusive determination for other 
purposes.

     As of March 8, 1999, there were 12,737,700 Ordinary shares of L0.20 each 
nominal value, outstanding.



                                 TABLE OF CONTENTS





PART I                                                                      PAGE
                                                                            ----
                                                                         
         ITEM 1.  BUSINESS ...............................................    3

         ITEM 2.  FACILITIES .............................................   12

         ITEM 3.  LEGAL PROCEEDINGS ......................................   13

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ....   13

         ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT ...................   13

PART II.

         ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS ....................................   14

         ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA ...................   15

         ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..........   15

         ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   26

         ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE ....................   26

PART III.

         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .....   27

         ITEM 11. EXECUTIVE COMPENSATION .................................   29

         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT .........................................   33

         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .........   34

PART IV.

         ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                  REPORTS ON FORM 8-K ....................................   35



                                       2


PART I

     THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF 
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") 
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE 
"EXCHANGE ACT") REGARDING THE COMPANY AND ITS BUSINESS, FINANCIAL CONDITION, 
RESULTS OF OPERATIONS AND PROSPECTS.  WORDS SUCH AS "EXPECTS," "ANTICIPATES," 
"INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES" AND SIMILAR EXPRESSIONS 
OR VARIATIONS OF SUCH WORDS ARE INTENDED TO IDENTIFY FORWARD-LOOKING 
STATEMENTS, BUT ARE NOT THE EXCLUSIVE MEANS OF IDENTIFYING FORWARD-LOOKING 
STATEMENTS IN THIS REPORT. ADDITIONALLY, STATEMENTS CONCERNING FUTURE MATTERS 
SUCH AS THE DEVELOPMENT OF NEW PRODUCTS, ENHANCEMENTS OR TECHNOLOGIES, 
PARTICULARLY THE DEVELOPMENT OF JEODE-TM-, THE TIMING OF THE AVAILABILITY OF 
JEODE, THE JEODE PRODUCT AND SERVICE OFFERINGS, THE REVENUE MODEL AND MARKET 
FOR JEODE, THE FEATURES, BENEFITS AND ADVANTAGES OF JEODE, INTERNATIONAL 
SALES, THE AVAILABILITY OF LICENSES TO THIRD-PARTY PROPRIETARY RIGHTS, 
BUSINESS AND SALES STRATEGIES, MATTERS RELATING TO PROPRIETARY RIGHTS, 
COMPETITION, YEAR 2000 COMPLIANCE, FACILITIES NEEDS, EXCHANGE RATE 
FLUCTUATIONS AND THE COMPANY'S LIQUIDITY AND CAPITAL NEEDS AND OTHER 
STATEMENTS REGARDING MATTERS THAT ARE NOT HISTORICAL ARE FORWARD-LOOKING 
STATEMENTS.

     ALTHOUGH FORWARD-LOOKING STATEMENTS IN THIS REPORT REFLECT THE GOOD 
FAITH JUDGMENT OF THE COMPANY'S MANAGEMENT, SUCH STATEMENTS CAN ONLY BE BASED 
ON FACTS AND FACTORS CURRENTLY KNOWN BY THE COMPANY.  CONSEQUENTLY, 
FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, 
AND ACTUAL RESULTS AND OUTCOMES MAY DIFFER MATERIALLY FROM THE RESULTS AND 
OUTCOMES DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.  FACTORS THAT COULD 
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES IN RESULTS AND OUTCOMES INCLUDE 
WITHOUT LIMITATION THOSE DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED 
ELSEWHERE IN THIS REPORT.  READERS ARE URGED NOT TO PLACE UNDUE RELIANCE ON 
THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS 
REPORT.  THE COMPANY UNDERTAKES NO OBLIGATION TO REVISE OR UPDATE ANY 
FORWARD-LOOKING STATEMENTS IN ORDER TO REFLECT ANY EVENT OR CIRCUMSTANCE THAT 
MAY ARISE AFTER THE DATE OF THIS REPORT.  READERS ARE URGED TO REVIEW AND 
CONSIDER CAREFULLY THE VARIOUS DISCLOSURES MADE BY THE COMPANY IN THIS 
REPORT, WHICH ATTEMPTS TO ADVISE INTERESTED PARTIES OF THE RISKS AND FACTORS 
THAT MAY AFFECT THE COMPANY'S BUSINESS, FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS.

ITEM 1--BUSINESS

OVERVIEW

     The Company, which commenced operations in 1986, develops, markets and 
supports virtual machine technology which enables software applications and 
operating systems to be run on various computer platforms. 

     The Company's principal product line in recent years has been 
SoftWindows-TM-.  This product enables Microsoft Windows 
("Windows"-Registered Trademark-) applications to be run on most Apple 
Computer Inc. ("Apple"-Registered Trademark-) Macintosh computers and many 
UNIX workstations. Revenues from this product line have been declining since 
1995 as a result of two factors.  One factor is the declining Macintosh 
market.  The other factor is increased competition which has led to reduced 
prices and margins.  In late 1997, the Company began a strategic review of 
its business and explored new markets that would leverage the Company's 10 
years of emulation software development experience.

     In January 1998, the Company announced its intention to launch a new 
product line.  This product line, called Jeode-TM-, is based on the Company's 
Embedded Virtual Machine ("EVM"-TM-) technology.  Jeode is the Company's 
implementation of Sun Microsystems, Inc.'s ("Sun") Java technology developed 
specifically for embedded systems. The Jeode platform is enabled by the 
Company's EVM and is designed to enable software developers to create 
reliable, efficient and predictable embedded products.  In November 1998, the 
Company delivered beta versions of the Jeode platform. The product became 
available for sale in March 1999 and is expected to be the principal product 
line in 1999 and the foreseeable future.

     Between December 1995 and May 1998, the Company shipped NTRIGUE-TM-, a 
Windows compatibility client/server product that supported multiple 
X-terminals, workstation clients, Macintosh computers, PCs, network computers 
and Net PCs from a Windows NT-based server.  The Company disposed of its 
NTRIGUE technology in February 1998.

                                      3


PRODUCTS AND SUPPORT

SUMMARY

     In 1998, the Company shipped two principal product lines: SoftWindows 
and NTRIGUE.  In February 1998, the Company disposed of its NTRIGUE 
technology for $17.687 million.  SoftWindows accounted for 92% of revenues in 
the year.

     The Company derived its revenues from the shipment of products and from 
offering support services.  The majority of revenues are derived from the 
shipment of products. 

     The Company delivered beta versions of its new Jeode product in late 
1998. The product has been available for sale since March 16, 1999.

JEODE PLATFORM

     The Company's Jeode product line is a software development system for 
engineers who build embedded products that are enabled by the Java 
environment.  Embedded systems are specialized pre-programmed computers that 
run real-time operating systems where the system has to respond to inputs 
rapidly and predictably.  This occurs without taking time to load a program, 
input data, process data and provide output.  The Company believes there are 
hundreds of companies, developing thousands of embedded products, and 
delivering millions of units of these various products each year.

     There is a growing demand in the embedded systems market for Java 
technology because the Java language is simple, robust, object oriented, and 
multi-threaded--meaning it supports applications that do more than one thing 
at a time.  Among the Java platform's biggest advantages are its "write once, 
run anywhere" architecture and its ability to deliver virus-free code.  In 
addition, the Java technology platform is interpreted and dynamically 
extensible and is easy to connect to the Internet. Embedded devices, if 
programmed in Java technology, could be dynamically downloaded with new 
functionality over the Internet instead of requiring consumers to purchase an 
entire new device or taking the device to a repair shop. 

     However, existing implementations of Java technology are designed for 
medium to large computing environments, and do not scale down to meet the 
resource constraints of embedded systems. 

     There is a significant opportunity for Java technology that can scale 
down to be within the restraints of an embedded system. With the Company's 
ten years of experience developing virtual machine technology to function 
under severe systems resource restrictions, the Company is uniquely suited 
with its technology to transition from the PC compatibility market to the 
Java market. The Company has leveraged its virtual machine expertise and 
algorithms and developed its EVM, which is the Company's brand of a Java 
Virtual Machine.  This EVM fits within the constraints of an embedded system. 
The Company believes its EVM incorporates unique technologies, including 
adaptive optimizing dynamic compilation and precise, concurrent garbage 
collection to achieve optimal performance in limited memory embedded devices. 
Consequently, the Company believes it is in a unique position to take 
advantage of the opportunity and demand that now exists.

     The Company's Jeode platform is comprised of two primary and 
complementary components: JeodeRUNTIME and JeodeSUITE.  JeodeRUNTIME consists 
of a highly configurable Jeode EVM and embedded class libraries called 
JeodeCLASS.  These two technologies provide the runtime environment for 
executing the Java application in the embedded system.  JeodeSUITE is used 
during the development of software for embedded systems, and consists of 
JeodeBUILD AND JeodeDEBUG.  JeodeBUILD provides build-time tools for editing, 
compiling and browsing Java applications. JeodeDEBUG delivers runtime debug 
utilities and includes utilities that monitor and analyze memory use and code 
coverage and also profile performance.

     A vital component of the Company's Jeode platform is the highly 
configurable and tunable EVM, which optimizes the performance of embedded 
application software in resource constrained embedded systems.  The 

                                       4


Company believes the Jeode platform addresses the specific requirements of 
embedded developers, making Java technology viable for the embedded systems 
market for the first time.

     The Jeode platform is available for x86, MIPS, ARM, and Hitachi SH 
processors, and Windows CE, Windows NT and various UNIX operating systems, 
with additional processor/operating system platforms planned for introduction 
later in 1999. The Company also offers various services and will license 
technology for porting the Jeode platform to other platforms to help 
developers migrate their applications to their platforms more easily.

     The Company has filed an application with the Patent Office of the 
United Kingdom for international protection of innovative technologies 
related to the Jeode platform.

SOFTWINDOWS

     SoftWindows, the Company's principal product line for 1998, is a 
software-based, Windows and MS-DOS compatibility solution first introduced by 
the Company in December 1993.  This product line enables Apple, Sun, HP and 
IBM UNIX workstation customers to run Windows applications.  Windows is 
pre-installed and ready to run.

     The Company also offers RealPC, a low cost software product that allows 
consumers to play games and other applications designed for Intel-based PCs 
on their Power Macintosh computers.  This product was first introduced in 
September 1997.

     SoftWindows is integrated with the host environment and has many 
features that make it easy for the user to operate in both the Windows and 
the host environment simultaneously on a Macintosh or UNIX platform. 

     SoftWindows has advanced networking support, supporting multiple network 
protocols and topologies. SoftWindows works cooperatively with the host 
operating system so that SoftWindows can share the network card.  On a 
supported LAN, a Macintosh with SoftWindows appears like a PC to a server or 
to other computers.

NTRIGUE

     In December 1995, the Company introduced and began shipping NTRIGUE, a 
Windows compatibility client/server product that supports multiple 
X-terminals, workstation clients, Macintosh computers, PCs, network computers 
and NetPCs from a Windows NT-based server.  NTRIGUE is built upon Citrix 
Systems Inc.'s ("Citrix") WinFrame product.

     In February 1998, the Company sold its NTRIGUE technology to Citrix.  
Under the arrangement, Citrix acquired the Company's X-11 technology, Keoke 
technology, Macintosh and UNIX ICA clients and all NTRIGUE modifications and 
enhancements to WinFrame.  

     The Company discontinued selling NTRIGUE in May 1998, but provided 
technical support to its existing NTRIGUE customers through September 1998.

SUPPORT - JEODE PLATFORM

          The Company offers both pre and post sales support to its Jeode 
customers.  Pre sales support is free.  Each customer is required to commit 
to at least one year of annual maintenance which will entitle the customer to 
receive standard support, including: web-based support, access to FAQs, 
on-line publications and documentation, email assistance, limited telephone 
support, and critical bug fixes and product updates (collective bug fixes and 
minor enhancements).  Annual maintenance is also required during the time 
that the customer is developing and/or shipping products that include any of 
the Jeode technology.

                                       5


SUPPORT - SOFTWINDOWS

     The Company offers each SoftWindows customer 30 days of free first line 
technical support through Startek, a third party support organization.  The 
Company provides second line support to Startek.  The Company also provides 
free SoftWindows technical support through on-line services such as America 
Online and CompuServe, Internet e-mail, a Worldwide Web server, an electronic 
bulletin board and a 24-hour facsimile response service. 

DEPENDENCE ON JEODE REVENUE

     In 1998, the Company derived 92% of its revenue from its SoftWindows 
product line.  However, since 1995, revenues and margins from SoftWindows 
have been declining, primarily as a result of competitive pricing pressure.  
Revenues and margins on the SoftWindows product line are at a level where the 
Company's future can no longer depend on them.

     The Company is entering the embedded systems market for the first time 
with its Jeode product.  There can be no assurance that the Jeode product 
line will achieve or sustain acceptance by the marketplace or provide the 
desired revenue levels.  Any errors or "bugs" found in Jeode after commercial 
shipment could result in loss of or delay in market acceptance of the new 
product.  In addition, the Company intends to develop additional 
functionality for Jeode in 1999, particularly to provide compatibility with 
additional processor/operating platforms.  There can be no assurance that the 
Company will successfully and timely complete development of these 
enhancements to the Jeode product line. The inability of the Company, due to 
resource constraints, technological or other reasons, to market and enhance 
the Jeode product in a timely manner would have a material adverse effect on 
the Company's business, financial condition and results of operations.

SALES AND MARKETING

JEODE PRODUCTS

     Jeode customers are expected to be original equipment manufacturers 
("OEMs") of embedded devices located primarily in North America, Europe and 
Japan.  The Company has established a specialized direct sales force to sell 
the Jeode product line in North America and Europe.  The Company plans to 
open a Japanese sales office in 1999.  Currently, members of the North 
American sales force regularly visit potential customers in Japan.  The 
Company is also assisted in developing business relations in Japan by Japan 
Entry, a third party consulting company.  The Jeode product line revenue 
model is based on OEM customer transactions.  The timing of such transactions 
is difficult to predict and revenues may vary significantly from quarter to 
quarter as a result. The failure to conclude a substantial OEM transaction 
during a particular quarter can have a material adverse effect on the 
Company's revenues and results of operations.

     MARKETING.  There are many different markets for embedded products. 
According to a December 1997 survey and analysis conducted by Venture 
Development Corporation the market for embedded software tools and run-times 
will approach $1.15 billion in 1999, and will grow to approximately $1.9 
billion in 2002.  Embedded systems incorporating Java-based tools and 
run-times currently represent only a minimal portion of this market.  
However, many developers have expressed their desire to use a viable 
implementation of Java technology, and embedded systems using Java-based 
tools and run-times are expected to grow rapidly over the next few years.

     The Company is initially concentrating on selling to markets that it 
believes will be early adopters of this technology.  These early adopters 
include manufacturers of smart cell phones, personal digital assistant 
(PDA's), handheld PC's (HPC's), mass storage devices and car navigation 
systems.

     MARKET ACCEPTANCE.  The Company's performance depends upon sales of 
products within the Jeode product line, which is a new product.  There can be 
no assurance that the Company's Jeode product will achieve or sustain 
acceptance by the marketplace or provide the desired revenue levels.  The 
failure of the Jeode product to provide an adequate level of performance and 
functionality, or the lack of market acceptance of this product for any 
reason, would have a material adverse effect on the Company's business, 
financial condition and results of operations.

                                       6


     If the Jeode product is successful and developed on a timely basis, the 
Company will be required to further develop direct sales channels in the 
embedded systems market and to hire and train more direct sales personnel.  
For example, the Company plans to open a sales office in Japan during 1999. 
Competition for qualified sales personnel is intense and there can be no 
assurance that the Company will be able to attract the personnel needed to 
market and sell products in the embedded systems market.  The Company 
anticipates increased operating expenses as it introduces the product and 
develops the organization to market, sell and support the product, before any 
revenue is recognized from sales of the product.

     SALES CYCLE.  The sales model for the Jeode product line is different 
from that of prepackaged consumer software.  The Company must develop a 
direct sales organization to convince OEMs to design the Company's products 
into their embedded systems.  The sales cycle for an embedded systems 
design-win can range from six months to a year.  Customers make product 
decisions only after extensive product review and hands-on evaluation.  
Because customers in the embedded systems market tend to remain with the same 
vendor over time, the Company believes that it must devote significant 
resources to each potential sale.  To the extent potential customers do not 
design the Company's products into their systems, the resources the Company 
has devoted to the sales prospect would be lost.

     International operations are subject to a number of risks, including 
longer payment cycles, unexpected changes in regulatory requirements, import 
and export restrictions and tariffs, difficulties in staffing and managing 
operations, greater difficulty or delay in accounts receivable collection, 
potentially adverse tax consequences, the burdens of complying with a variety 
of laws and political and economic instability.  In addition, fluctuations in 
exchange rates could affect demand for the Company's products. If for any 
reason exchange or price controls or other currency restrictions are imposed, 
the Company's business, financial condition and results of operations could 
be materially adversely affected.  The Company plans to market its Jeode 
product line to embedded systems manufacturers in Japan.  Economic conditions 
in Japan generally, as well as fluctuations in the value of the Japanese yen 
against the U.S. dollar and British pound sterling could have a negative 
effect on the Company's revenues and results of operations.  As the Company 
increases its international sales, its total revenues may also be affected to 
a greater extent by seasonal fluctuations resulting from lower sales that 
typically occur during the summer months in Europe and other parts of the 
world.

SOFTWINDOWS

     The Company sells SoftWindows through a multiple channel distribution 
system that currently includes distributors and resellers. 

     DISTRIBUTOR AND RETAIL SALES.  The Company has established a worldwide 
two-tier distribution channel for its SoftWindows products.  Its distributor 
relationships include Sun, Ingram Micro and Merisel in North America, Sun and 
HP Germany in Europe and Mitsubishi Corporation ("Mitsubishi") in Japan.  
Certain of these distributors, in turn, sell to major retailers such as 
CompUSA, Fry's and MicroCenter.  In addition, the Company's products are 
carried by major national Macintosh catalog channels, such as MacWarehouse 
and MacConnection.

     During 1998, the Company had a distribution arrangement with Sun, under 
which Sun could market and distribute SoftWindows on selected configurations 
of its platforms to provide compatibility benefits on these platforms.  This 
agreement expired on December 31, 1998, and is unlikely to be renewed.

     Sales to distributors represented approximately 92%, 42% and 40% of the 
Company's total revenues in 1998, 1997 and 1996, respectively.  Sales to Sun 
and Ingram Micro U.S. each accounted for 27% of total revenues in 1998.  
Sales to Mitsubishi accounted for 12% of total revenues in 1996.  No other 
distributor accounted for 10% or more of the Company's total revenues in 
1998, 1997 or 1996. In 1998, the majority of the Company's sales through the 
distributor channel were Macintosh products.  Mitsubishi, Ingram Micro and 
the Company's other distributors carry multiple product lines and could 
reduce their support of the Company's products in favor of a competitive 
product or for any other reason. There can be no assurance that Mitsubishi, 
Ingram Micro or any other distributor of the Company's products will continue 
to purchase the Company's products or provide adequate levels of support.

                                       7


     In addition, the Company has limited control over the extent to which 
products sold to distributors and resellers are sold through to end-users.  
The Company provides sales returns provisions based on the Company's 
estimates of expected sell-through by distributors and resellers of its 
products.  Actual results could differ from these estimates.

     OEM BUNDLING.  In prior years the Company participated in a number of 
OEM bundling arrangements.  In 1998 the Company did not participate in any 
OEM arrangements, and consequently did not receive any revenue from such 
arrangements.  In 1997 and 1996 license revenues from OEMs represented 27% 
and 24%, respectively, of the Company's total revenues.  Sales to SGI 
represented 19% and 14% of the Company's total revenues in 1997 and 1996, 
respectively.

     INTERNATIONAL SALES.  Sales to customers outside the United States, 
derived mainly from customers in Europe and Asia, represented approximately 
24%, 27% and 31% of total revenues in 1998, 1997 and 1996, respectively.  The 
Company's European headquarters is located in the United Kingdom.  The North 
American sales organization is responsible for the remainder of the world, 
including Asia, Australia and South America. 

     The Company offers its latest SoftWindows products in English and 
Japanese.  The Company has an agreement with Mitsubishi under which 
Mitsubishi assists the Company in localizing its products and distributes the 
Japanese language version of SoftWindows for Power Macintosh.  The Company 
has limited experience in adapting its software for certain non-English 
speaking markets, particularly where there are double-byte computer languages 
and where an alphabet is not intrinsic to the language, and there can be no 
assurance that the Company's efforts to adapt its products for such markets 
will be successful.

STRATEGIC ALLIANCES

JEODE PLATFORM

     A key component of the Company's Jeode product line strategy involves a 
strategic alliance with Sun.  In the first quarter of 1999, the Company 
signed a five-year agreement with Sun under which Sun established the Company 
as a Sun authorized Virtual Machine provider.  The agreement also authorizes 
immediate access to the Java compatibility test suite and the Java technology 
source code. The agreement includes technology sharing and compatibility 
verification.

     Under the agreement, the Company will pay Sun a per unit royalty on each 
Jeode-enabled embedded product shipped by the Company's customers, plus a 
royalty on all development licenses put in place between the Company and its 
customers.

SOFTWINDOWS

     A key component of the Company's SoftWindows business involves 
agreements with Microsoft and major UNIX system vendors. 

     MICROSOFT DISTRIBUTION AGREEMENT.  Since 1988, the Company has licensed 
first MS-DOS, and later Windows, from Microsoft.  Under the Company's current 
agreement with Microsoft ("the Microsoft Distribution Agreement"), Microsoft 
granted to the Company a non-exclusive, worldwide license to reproduce, adapt 
and distribute the currently available versions of Windows that are included 
as a component of the Company's products.  The Company pays Microsoft a per 
unit royalty for copies of the Company's products sold that include a version 
of Windows.  The current royalty amounts are based upon certain estimates of 
the volume of the Company's sales of SoftWindows.  The current Microsoft 
Distribution Agreement expires on September 30, 1999. Termination or 
expiration without renewal of the Microsoft Distribution Agreement would 
result in the inability of the Company to sell its SoftWindows products.  
Microsoft has audit rights to inspect the Company's records related to 
royalties paid under the Microsoft Distribution Agreement.  In January 1999, 
Microsoft commenced an audit of the royalties the Company paid in 1997 and 
1998.  The Company has not been notified of the outcome of the audit.  It is 
possible, however, that Microsoft could claim underpayment of royalties by 
the Company.  If Microsoft claims a discrepancy over $10,000, the Company 
would be obligated under the Microsoft Distribution 

                                       8


Agreement to reimburse Microsoft for the cost of the audit.  In addition, the 
Microsoft Distribution Agreement provides for an additional royalty of 25% of 
the royalty due for each unreported unit that is over 5% of the number of 
units reported.

     MICROSOFT SOFTWARE TRADEMARK LICENSE.  Microsoft has granted the Company 
a non-exclusive, non-transferable personal license to use the trademark 
"SoftWindows" during the term of the Microsoft Distribution Agreement.

     MICROSOFT SOURCE CODE AGREEMENT.  Effective May 4, 1993, the Company 
entered into an agreement with Microsoft ("the Source Code Agreement"), under 
which Microsoft granted the Company access to the source code for certain 
then current and future versions of Windows and the right to enhance and 
compile Windows using this source code to produce optimized versions of 
Windows for specified operating systems.  Under the Source Code Agreement, 
the Company licensed such rights to the source code for both Windows 3.11 and 
Windows95. All modifications that the Company made to Windows were assigned 
to Microsoft. However, Microsoft agreed not to use or to license others to 
use such modifications in a standalone emulation product that competes 
directly with the Company's emulation business.  The Source Code Agreement 
expired in May 1996, except that the Source Code Agreement provided that the 
Company maintained the right to use the licensed source code until May 30, 
1998 for product support purposes. The Company has not entered and does not 
anticipate that it will enter into a renewal or replacement of the Source 
Code Agreement for future Windows products.  The Company has developed an 
alternative approach to the code in the Company's products for future 
versions of Windows.  SoftWindows 98 was developed using this alternative 
approach.

     The distribution and license rights that Microsoft has granted to the 
Company are non-exclusive.  Microsoft has granted to other companies certain 
rights to its Windows source code.  The Company is aware of at least one of 
these Microsoft licensees that currently offers a product that competes 
directly with SoftWindows.  There can be no assurance that Microsoft will not 
grant to other competitors or potential competitors of the Company rights to 
Microsoft technology similar to or more extensive than the rights Microsoft 
has granted to the Company. 

          SUN DISTRIBUTION AGREEMENT.  In December 1997, the Company signed a 
distribution agreement with Sun (the "Sun Distribution Agreement") under 
which Sun agreed to offer SoftWindows95 as an option for its Ultra 
Workstation customers.  In January 1998, Sun introduced two new low-priced, 
power desktop systems, the Ultra 5 and Ultra 10 workstations, and a new 
high-end workstation, the Ultra 60.  Under the Sun Distribution Agreement, 
Sun agreed to sell the Company's version of SoftWindows95 for the 
Solaris-Registered Trademark-operating system as an option for Ultra 
customers.  SoftWindows95 for Solaris also runs on the new 
UltraSPARC-Registered Trademark- IIi processor-based workstations.  This 
agreement expired on December 31, 1998 and has not been renewed.

COMPETITION

JEODE PRODUCTS

     The markets in which the Company competes are characterized by rapid 
technological change and aggressive competition.  The Company believes that 
the embedded systems marketplace has hundreds of companies, developing 
thousands of embedded products, and delivering millions of units of these 
various products each year. The Company believes the Jeode platform addresses 
the specific requirements of embedded developers, making Java technology 
viable for this market for the first time.  The Jeode product line is 
targeted to the emerging Java-based embedded products marketplace, which is 
rapidly changing and is characterized by an increasing number of new entrants 
whose products compete with the product under development by the Company.  
Competitors in the Java-based embedded products market, such as Sun, HP, 
Integrated Systems, Inc. and Wind River Systems, Inc., have significantly 
greater resources than the Company.  Moreover, much of the industry 
infrastructure supporting the product under development by the Company for 
this market is new and evolving, and it is difficult to predict the future 
growth of this market.  It is possible that a viable market for the Company's 
Jeode product will not develop or be sustainable.  If the market fails to 
develop, develops more slowly than expected or becomes saturated with 
competitors, or if the Company's new product does not achieve or sustain 
market acceptance, the Company's business, financial condition and results of 
operations would be materially affected.

                                       9


SOFTWINDOWS

     SoftWindows competes primarily with three compatibility solutions: 
purchasing an additional personal computer, installing certain types of 
software and/or installing a PC compatibility hardware card.  The Company's 
SoftWindows revenues and margins have declined significantly in recent years 
primarily as a result of these competitive alternatives.

     The availability of low-cost PCs has led users in many organizations to 
purchase a PC in addition to their Macintosh computer or Unix workstation for 
those situations in which they must operate in the organization-wide PC 
network.

     In June 1997, Connectix Corporation introduced a software product, 
Virtual PC, that competes against SoftWindows for the Macintosh.  The Company 
accordingly reduced its prices for SoftWindows for the Macintosh, and in 
September 1997 introduced a new product, RealPC, to compete against Virtual 
PC. RealPC is a low cost software product that allows consumers to play 
DOS-based games and other applications designed for Intel-based PCs on their 
Power Macintosh computers.

     In addition, demand for the Company's SoftWindows products for Macintosh 
computers has declined as a result of decreased demand for Macintosh 
computers and price competition.

     In the UNIX market, the Company faces competition from products such as 
WinCenter Pro from NCD, Inc., WinDD from Tektronix, Inc., HP500 from HP, 
WinFrame from Citrix and NTerprise from Exodus.  There can be no assurance 
that these or new competitors will not introduce improved products in the 
future.  

PRODUCT DEVELOPMENT

     In January 1998, the Company announced it was developing an EVM for the 
emerging Java-based embedded products marketplace.  The new Jeode product is 
based upon the Company's virtual machine technology and is geared toward 
providing current embedded systems developers with a feature-rich EVM that is 
supported by tools compatible with embedded system environments, such as 
configuration and remote debugging tools.  In November 1998, the Company 
delivered beta versions of the Jeode product.  The Company released Jeode in 
March 1999.  The Company intends to develop additional functionality for 
Jeode in 1999, particularly to provide compatibility with additional 
processor/operating platforms.  Product development is subject to a number of 
risks, including development delays, product definition, marketing and 
competition.  It is possible that development of the enhancements to the 
Company's Jeode product will not be completed in a timely manner and, even if 
they are developed, that the product line will not achieve or maintain 
customer acceptance.  The failure of the Company to commercialize its virtual 
machine technology successfully and in a timely manner would have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

     The Company must continually change and improve its products in response 
to changes in operating systems, application software, computer hardware, 
networking software, programming tools and computer language technology.  The 
introduction of products embodying new technologies and the emergence of new 
industry standards can render existing products obsolete and unmarketable.  
For example, the Company has had to respond to the decline in the Macintosh 
market. In addition, performance of the Company's SoftWindows products 
depends upon the performance of the underlying hardware and software 
platforms.  If the performance of these underlying platforms does not improve 
over time at a rate at least equal to the rate of performance improvements of 
the platforms that the Company's products emulate, then the Company's 
products may be rendered unmarketable.  

     The Company's success will depend upon its ability on a timely and 
cost-effective basis to enhance its current products and to develop new 
products that meet changing market conditions, which consist of changing 
customer needs, new competitive product offerings, emerging industry 
standards and changing technology.  For example, the Company's performance 
depends upon timely development and sale of its Jeode product line.  There 
can be no assurance that the Company will be successful in developing and 
marketing, on a timely basis or at all, fully functional and compatible 
product enhancements or new products that respond to changing market 
conditions, or that its new products will be accepted by customers.  In the 
past, the Company has experienced material delays 

                                      10


and materially increased expenses in adapting its compatibility software to 
address specific changes in the operating systems, application software and 
hardware platforms that the Company's products support.  Any failure by the 
Company to anticipate or respond adequately to changing market conditions, or 
any significant delays in the development or introduction of additional 
functionality for Jeode, would have a material adverse effect on the 
Company's business, financial condition and results of operations.

     In 1998, 1997 and 1996, the Company spent approximately $6.2 million, 
$9.1 million and $10.6 million, respectively, on Company-sponsored research 
and development.  At December 31, 1998, the Company had 47 full-time 
employees engaged in research and development, all of whom were located at 
the Company's facility in the United Kingdom.  The geographic distance 
between the Company's engineering personnel in the United Kingdom on the one 
hand and the Company's principal offices in California and its primary 
markets in the United States on the other hand has in the past led and could 
in the future lead to logistical and communication difficulties.  To address 
these issues, the Company has upgraded its communications infrastructure, 
which includes high-speed data and telephone lines and improved e-mail and 
other communications systems.  There can be no assurance, however, that the 
geographic and cultural differences between the Company's United States and 
United Kingdom personnel and operations will not result in problems that 
materially adversely affect the Company's business, financial condition and 
results of operations.  Further, because the Company's research and 
development operations are located in the United Kingdom, its operations and 
expenses are directly affected by economic and political conditions in the 
United Kingdom.

     Software products as complex as those offered by the Company may contain 
undetected errors or failures when first introduced or when new versions are 
released.  There can be no assurance that, despite testing by the Company and 
testing and use by current and potential customers, errors will not be found 
in the Company's products after commencement of commercial shipments.  The 
occurrence of such errors, particularly with respect to Jeode, could result 
in loss of or delay in market acceptance of the Company's products, which 
could have a material adverse effect on the Company's business, financial 
condition and results of operations.

ENGLISH CORPORATION

     The Company is incorporated under English law.  One of the Company's 
executive officers and one of its directors reside in England.  All or a 
substantial portion of the assets of such persons, and a significant portion 
of the assets of the Company, are located outside of the United States.  As a 
result, it may not be possible for investors to effect service of process 
within the United States upon such persons or to enforce against them or 
against the Company, in United States courts, judgments obtained in United 
States courts predicated upon the civil liability provisions of the federal 
securities laws of the United States.  There is doubt as to the 
enforceability in England, in original actions or in actions for enforcement 
of judgments of United States courts, of civil liabilities predicated solely 
upon United States securities laws.  In addition, the rights of holders of 
Ordinary Shares and, therefore, certain of the rights of ADS holders, are 
governed by English law, including the Companies Act 1985, and by the 
Company's Memorandum and Articles of Association. These rights differ in 
certain respects from the rights of shareholders in typical United States 
corporations.

EMPLOYEES

     As of December 31, 1998, the Company employed 89 regular full-time 
persons, comprising 18 in sales, marketing and related staff activities, 47 
in research and development and 24 in management, manufacturing, 
administration and finance. Of these, all research and development employees, 
3 sales and marketing employees and 9 administration and finance employees 
are located in the United Kingdom.  None of the Company's employees is 
represented by a labor union, and the Company has experienced no work 
stoppages.  The Company believes that its employee relations are good.

     As part of the Company's disposal of its NTRIGUE technology in February 
1998, 45 employees located in the United Kingdom were transferred to Citrix.  
Of these, 43 were research and development employees and 2 were in 
administration and finance.

                                      11


     The Company's success depends to a significant degree upon the continued 
contributions of members of the Company's senior management and other key 
research and development, sales and marketing personnel.  The loss of any of 
such persons could have a material adverse effect on the Company's business, 
financial condition and results of operations.  The Company believes that its 
future success will depend upon its ability to attract and retain highly 
skilled managerial, engineering, sales and marketing personnel, the 
competition for whom is intense.  In particular, the Company must recruit and 
retain marketing and sales personnel with expertise in embedded systems.  
There can be no assurance that the Company will be successful in attracting 
and retaining such personnel, and the failure to attract and retain key 
personnel could have a material adverse effect on the Company's business, 
financial condition and results of operations.

PROPRIETARY RIGHTS

     The Company relies on a combination of copyright, trademark and trade 
secret laws and confidentiality procedures to protect its proprietary rights. 
The Company holds one United States patent and one European patent on its 
SoftWindows technology and has filed in the United Kingdom an application for 
innovative technologies incorporated into its Jeode platform.  As part of its 
confidentiality procedures, the Company generally enters into non-disclosure 
agreements with its employees, consultants, distributors and corporate 
partners, and limits access to and distribution of its software, 
documentation and other proprietary information.  Despite these precautions, 
it may be possible for a third party to copy or otherwise to obtain and use 
the Company's products or technology without authorization, or to develop 
similar technology independently.  In addition, effective protection of 
intellectual property rights may be unavailable or limited in certain 
countries.  The Company licenses technology from Sun, Microsoft and various 
other third parties.

     The Company may, from time to time, receive communications in the future 
from third parties asserting that the Company's products infringe, or may 
infringe, on their proprietary rights.  There can be no assurance that 
licenses to disputed third-party technology would be available on reasonable 
commercial terms, if at all.  In addition, the Company may initiate claims or 
litigation against third parties for infringement of the Company's 
proprietary rights or to establish the validity of the Company's proprietary 
rights.  Litigation to determine the validity of any claims could result in 
significant expense to the Company and divert the efforts of the Company's 
technical and management personnel from productive tasks, whether or not such 
litigation is determined in favor of the Company.  In the event of an adverse 
ruling in any such litigation, the Company may be required to pay substantial 
damages, discontinue the use and sale of infringing products, expend 
significant resources to develop non-infringing technology or obtain licenses 
to infringing technology.  In the event of a successful claim against the 
Company and the failure of the Company to develop or license a substitute 
technology, the Company's business, financial condition and results of 
operations would be adversely affected.  As the number of software products 
in the industry increases and the functionality of these products further 
overlaps, the Company believes that software developers may become 
increasingly subject to infringement claims.  Any such claims against the 
Company, with or without merit, as well as claims initiated by the Company 
against third parties, can be time consuming and expensive to defend or 
prosecute and to resolve.

ITEM 2--FACILITIES

     The Company's headquarters and principal management, sales and marketing 
and support facility is located in Fremont, California, and consists of 
approximately 18,400 square feet under a lease that will expire in February 
2003.  The Company's principal European sales, research and development and 
administrative facility is located in High Wycombe, in the United Kingdom, 
and consists of approximately 10,700 square feet under a lease that will 
expire in August 2013.  During 1998, the Company sub-let until March 2002 
facilities it formerly occupied in the United Kingdom, on substantially the 
same terms as those applied to the Company.  The Company's lease on the 
subleased premises expires in September 2017, except that with seven months' 
notice the Company can terminate the lease in September 2002, 2007 and 2012.  
During 1997, the Company vacated its Boston, Massachusetts facility.  In 
January 1998, the Company sublet this facility through August 2001, the month 
the Company's lease on the facility expires.  The Company also leases a sales 
office in Issy-les-Moulineaux, France. The Company does not anticipate 
expanding the size of its facilities in California, the United Kingdom or 
France in the foreseeable future.  The Company plans to lease a sales and 
support office in Japan in 1999, specifically to meet the needs of potential 
Japanese Jeode customers. 

                                      12


ITEM 3--LEGAL PROCEEDINGS

     None

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

     None

Item 4A--Executive Officers of the Registrant

   The executive officers of the Company as of March 31, 1999 are as follows:




NAME                    AGE    POSITION
- ----                    ---    --------
                         
Richard M. Noling....    50    President, Chief Executive Officer, and Director

Stephen M. Ambler....    39    Chief Financial Officer, Company Secretary and a
                               Senior Vice President

George Buchan........    46    Senior Vice President of Engineering and UK
                               General Manager

Ronald C. Workman....    44    Senior Vice President of Marketing



     Richard M. Noling was named President and Chief Executive Officer and a 
director of the Company in March 1997.  He also served as Chief Financial 
Officer, Senior Vice President of Finance and Operations and Company 
Secretary between April 19, 1996 and October 1, 1997 and Chief Operations 
Officer between February and March 1997.  From August 1995 to February 1996, 
Mr. Noling was Vice President and Chief Financial Officer at Fast Multimedia, 
Inc., a German-based computer software and hardware developer.  From November 
1994 to August 1995, he was Chief Financial Officer for DocuMagix Inc., a 
personal paper management software company.  From June 1991 to October 1994, 
Mr. Noling served as Senior Vice President and Chief Financial Officer for 
Gupta Corporation.  He received a Bachelor of Arts degree in aerospace and 
mechanical engineering science from the University of California (San Diego) 
in 1970.  He received an M.A. degree in theology from the Fuller Theological 
Seminary in 1972, and an M.S. degree in business administration in 1979 from 
the University of California (Irvine).

     Stephen M. Ambler is Chief Financial Officer, Company Secretary and a 
Senior Vice President of the Company.  He joined the Company in April 1994 as 
Director of Finance and Administration, Europe.  In April 1997, he was 
appointed Worldwide Corporate Controller and became Chief Financial Officer, 
Company Secretary and a Vice President in October 1997.  He became a Senior 
Vice President in January 1999.  Prior to joining the Company Mr. Ambler 
served as Financial Controller and Company Secretary at Ampex Great Britain 
Limited and before that served as Finance Director at Carlton Cabletime 
Limited in Newbury, England between May 1988 and December 1992.  Mr. Ambler 
is a member of the Institute of Chartered Accountants in England and Wales. 

     George Buchan is Senior Vice President of Engineering and UK General 
Manager for the Company.  He joined the Company in September 1991 as 
Development Manager, was appointed Vice President of Engineering in July 1992 
and was appointed Senior Vice President and UK General Manager in September 
1993. Before joining the Company, Mr. Buchan was with Prime Computer UK, a 
computer systems company, as Manager of the customer support center from June 
1980 to August 1991.  Mr. Buchan has been involved in high technology 
companies for more than 25 years in general and technical management 
positions in the project management and UNIX areas.  He graduated from 
Aberdeen University, Scotland in 1974 with a Bachelors degree in pure 
mathematics.

     Ronald C. Workman is Senior Vice President of Marketing for the Company. 
He joined the Company in July 1998.  Before joining the Company, Mr. Workman 
served as Vice President of Marketing from January 1998 to June 1998 at 
Cygnus Systems, Inc., an embedded systems software tools company.  From June 
1989 to December 1997 Mr. Workman was employed at Mentor Graphics Inc., an 
embedded systems software tools and real time operating company, serving in 
several roles, including Vice President and Business Unit Manager of their 
run time solutions business unit and Vice President VAR/OEM sales.  Mr. 
Workman has been involved in high technology companies for more than 20 years 
in sales, marketing and engineering positions.  He graduated from California 
Polytechnic State University with a Bachelors degree in Biological Sciences 
in 1977.

                                      13


                                   PART II

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

PRICE RANGE OF ORDINARY SHARES

     The Company's American Depositary Shares ("ADSs"), each ADS representing 
one Ordinary Share, have been traded on the Nasdaq National Market under the 
symbol INSGY since the Company's initial public offering in November 1995.  
The following table sets forth, for the periods indicated, the high and low 
sales prices for the Company's ADSs as reported by Nasdaq:



               1997                     HIGH            LOW
               ----                     ----            ---
                                                 
               First Quarter            $4.93          $1.68
               Second Quarter           $3.18          $1.43
               Third Quarter            $3.75          $2.00
               Fourth Quarter           $3.00          $2.00

               1998                     HIGH            LOW
               ----                     ----            ---
               First Quarter            $2.62          $1.00
               Second Quarter           $2.06          $0.94
               Third Quarter            $1.31          $0.50
               Fourth Quarter           $2.00          $0.56



     As of December 31, 1998, there were approximately 142 holders of record 
of the Company's Ordinary Shares and ADSs, excluding holders of ADSs whose 
ADSs are held in nominee or street name by brokers.

DIVIDENDS

     The Company has not declared or paid any cash dividends on its ordinary 
shares.  The Company anticipates that it will retain any future earnings for 
use in its business and does not anticipate paying any cash dividends in the 
foreseeable future.  Any payment of dividends would be subject, under English 
law, to the Companies Act 1985, and to the Company's Articles of Association, 
and may only be paid from the retained earnings of Insignia Solutions plc, 
determined on a pre-consolidated basis.  As at December 31, 1998 Insignia 
Solutions plc had a deficit of $10,635,000 on a pre-consolidated basis.

                                      14


ITEM 6--SELECTED FINANCIAL DATA

                      SELECTED CONSOLIDATED FINANCIAL DATA
                      (in thousands, except per share data)



                                                                                   YEAR ENDED DECEMBER 31,
                                                               ----------------------------------------------------------------
                                                                  1998           1997          1996        1995        1994
                                                               ------------   ------------  ----------- ----------- -----------
                                                                                                     
STATEMENT OF OPERATIONS DATA

Net revenues                                                     $  14,096      $  38,869    $  44,246   $  55,095   $  39,361
Cost of net revenues                                                 9,375         17,062       17,415      14,912      11,260
                                                               ------------   ------------  ----------- ----------- -----------
Gross profit                                                         4,721         21,807       26,831      40,183      28,101
                                                               ------------   ------------  ----------- ----------- -----------

Operating expenses:
       Sales and marketing                                           7,946         15,804       21,782      19,118      12,540
       Research and development                                      6,228          9,129       10,613       9,822       5,508
       General and administrative                                    4,213          6,761        6,268       4,615       3,995
       Restructuring                                                     -          1,995            -           -           -
                                                               ------------   ------------  ----------- ----------- -----------
Total operating expenses                                            18,387         33,689       38,663      33,555      22,043
                                                               ------------   ------------  ----------- ----------- -----------

Operating income (loss)                                            (13,666)       (11,882)     (11,832)      6,628       6,058
Interest and other income (expense), net                            15,871            504        1,396         882        (103)
                                                               ------------   ------------  ----------- ----------- -----------

Income (loss) before income taxes                                    2,205        (11,378)     (10,436)      7,510       5,955
Provision (benefit) for income taxes                                 1,783           (720)         330       2,253       1,200
                                                               ------------   ------------  ----------- ----------- -----------
Net income (loss)                                                $     422      $ (10,658)   $ (10,766)  $   5,257   $   4,755
                                                               ------------   ------------  ----------- ----------- -----------
                                                               ------------   ------------  ----------- ----------- -----------

Net income (loss) per share:
 Basic                                                           $   (0.03)     $   (0.91)   $   (0.95)  $    1.31   $    2.48
                                                               ------------   ------------  ----------- ----------- -----------
                                                               ------------   ------------  ----------- ----------- -----------
 Diluted                                                         $   (0.03)     $   (0.91)   $   (0.95)  $    0.45       $0.47
                                                               ------------   ------------  ----------- ----------- -----------
                                                               ------------   ------------  ----------- ----------- -----------
Weighted average shares and share equivalents
 Basic                                                               12,159         11,690      11,342       4,010       1,919
                                                               ------------   ------------  ----------- ----------- -----------
                                                               ------------   ------------  ----------- ----------- -----------
 Diluted                                                             12,378         11,690      11,342      11,635      10,189
                                                               ------------   ------------  ----------- ----------- -----------
                                                               ------------   ------------  ----------- ----------- -----------

BALANCE SHEET DATA AT DECEMBER 31,                                    1998           1997         1996        1995        1994
- -------------------------------------------------------------- ------------   ------------  ----------- ----------- -----------

Cash, cash equivalents and short-term investments                $  16,334      $  14,461    $   21,772  $   36,999  $   14,218
Working capital                                                      9,712          7,816        15,777      25,673       3,518
Total assets                                                        21,011         25,457        34,571      47,782      19,491
Long-term obligations under capital leases                               -            111           259         307         387
Total shareholders' equity                                          11,418         10,523        20,215      30,398       6,508



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

     THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT REFLECT THE 
COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE MATTERS SUCH AS GROSS PROFIT, 
GROSS MARGINS, SPENDING LEVELS, INTERNATIONAL OPERATIONS, RESTRUCTURING 
BENEFITS AND CAPITAL NEEDS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE 
RESULTS AND OUTCOMES DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS 
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES IN RESULTS AND OUTCOMES 
INCLUDE WITHOUT LIMITATION THOSE DISCUSSED BELOW AS WELL AS THOSE DISCUSSED 
ELSEWHERE IN THIS REPORT.

                                      15



OVERVIEW

     The Company, which commenced operations in 1986, develops, markets and 
supports virtual machine technology which enables software applications and 
operating systems to be run on various computer platforms.

     In January 1998, the Company announced its intention to launch a new 
product line. This product line, called Jeode, is based on the Company's EVM 
technology. Jeode is the Company's implementation of Sun's Java technology 
developed specifically for embedded systems. The Jeode platform is enabled by 
the Company's EVM and is designed to enable software developers to create 
reliable, efficient and predictable embedded products. In November 1998, the 
Company delivered beta versions of the Jeode platform. The product is 
available for sale and is expected to be the principal product line in 1999 
and the foreseeable future.

     In December 1993, the Company introduced its Windows product line, 
SoftWindows, which enables Windows applications to run on Apple Macintosh 
computers and most UNIX workstations. The SoftWindows product line has 
accounted for a substantial portion of the Company's revenue. However, 
revenue generated by SoftWindows has been diminishing since 1995 and future 
substantial revenues are not expected. The following table lists the 
SoftWindows product releases from 1993 through 1998.




          Year                        Product name:                   Emulation software for:
- ---------------------------------------------------------------------------------------------------
                                                                
         1993                       SoftWindows 1.0                   Macintosh and UNIX
         1995                       SoftWindows 2.0                   Macintosh and UNIX
         1996                       SoftWindows 3.0                   Power Macintosh
         1996                       SoftWindows95                     Power Macintosh
         1997                       SoftWindows95 4.0                 Power Macintosh and UNIX
         1997                       RealPC                            Power Macintosh
         1998                       SoftWindows95 5.0                 Power Macintosh
         1998                       SoftWindows 98                    Power Macintosh


     In December 1995, the Company introduced and started shipping NTRIGUE, a 
Windows compatibility client/server product that supports multiple 
X-terminals, workstation clients, Macintosh computers, PCs and network 
computers from a Windows NT-based server. In February 1998, the Company 
disposed of its NTRIGUE technology.

     The Company's operations outside of the United States are primarily in 
the United Kingdom, where the majority of the Company's research and 
development operations and its European sales activities are located. The 
Company distributes its SoftWindows product through independent distributors. 
The Company's revenues from customers outside the United States are derived 
primarily from Europe and Asia and are generally affected by the same factors 
as its revenues from customers in the United States. The operating expenses 
of the Company's operations outside the United States are mostly incurred in 
Europe and relate to its research and development and European sales 
activities. Such expenses consist primarily of ongoing fixed costs and 
consequently do not fluctuate in direct proportion to revenues. The Company's 
revenues and expenses outside the United States can fluctuate from period to 
period based on movements in currency exchange rates. Historically, movements 
in currency exchange rates have not had a material effect on the Company's 
revenues.

     The Company operates with the United States dollar as its functional 
currency, with a majority of revenues and operating expenses denominated in 
dollars. Although the Company engages in short-term currency option and 
forward exchange contracts in order to hedge short-term pound sterling net 
cash flows, pound sterling exchange rate fluctuations against the dollar can 
cause European revenues and United Kingdom expenses, which are translated 
into dollars for financial statement reporting purposes, to vary from 
period-to-period.

                                       16


DISPOSAL OF NTRIGUE TECHNOLOGY

     On February 5, 1998 the Company completed the disposal of its NTRIGUE 
technology to Citrix for $17.687 million. As part of the disposal, the 
Company transferred 45 employees to Citrix, of which 43 were development 
engineers.

     Under the terms of the disposal agreement $8.937 million was paid to the 
Company in cash on February 5, 1998, and the remainder is being held in 
escrow for the sole purpose of satisfying any obligations to Citrix arising 
from or in connection with an event against which the Company would be 
required to indemnify Citrix. Of this amount, Citrix released $2.5 million to 
the Company in February 1999.

     In January 1999 the Company received an indemnity claim from Citrix for 
an amount estimated by Citrix to not exceed $6.25 million. The claim is based 
on a declaratory relief action that Citrix filed against GraphOn Corp. 
("GraphOn") in November 1998 in the United States District Court, Southern 
District of Florida. Citrix' action against GraphOn seeks a declaratory 
judgement that Citrix does not infringe any GraphOn proprietary rights and 
that Citrix has not misappropriated any trade secrets or breached an 
agreement to which GraphOn is a party. Citrix filed the action in response to 
and to resolve unsubstantiated assertions first made by GraphOn, and 
disclosed to Citrix in January 1998, that the Company used GraphOn 
confidential information to develop certain of the Company's products, 
possibly including products the Company sold to Citrix in February 1998. 
GraphOn has not filed an action against either the Company or Citrix relating 
to its assertions and the Company believes such assertions by GraphOn are 
without merit or basis. Accordingly, the Company intends to contest Citrix' 
indemnity claim.

REVENUES




                                                        1998            1997            1996
- --------------------------------------------------------------------------------------------------
                                                                   (In thousands)
                                                                             
 License revenue                                      $ 12,998        $ 36,744        $ 40,102

 Service revenue                                         1,098           2,125           4,144
- --------------------------------------------------------------------------------------------------

 Total revenues                                       $ 14,096        $ 38,869        $ 44,246
- --------------------------------------------------------------------------------------------------


     The Company derives its revenues from the sale of packaged software 
products and annual maintenance contracts, and in 1997 and 1996, from 
royalties received from bundling agreements with OEMs and customer-funded 
engineering activities under OEM contracts. Revenues from the sale of 
packaged products and royalties received from OEMs are classified as license 
revenue, while revenues from customer-funded engineering activities and 
annual maintenance contracts are classified as service revenue.

     In 1998, the Company shipped two principal product lines: SoftWindows 
and NTRIGUE. Total revenues and license revenues declined 64% and 65%, 
respectively in 1998 compared to 1997. In 1998, total revenues from 
SoftWindows for Macintosh declined 40% compared to 1997 primarily as a result 
of increased competition and resulting price reductions of the product and 
declining market share for Apple Macintosh compatible computers. In 1998, 
1997 and 1996, license revenue from the sale of the Company's products for 
Macintosh computers accounted for 52%, 32% and 39% of total revenues, 
respectively.

     The Company expects its Jeode product line to generate revenue in 1999. 
Revenue from the Jeode product line will initially be derived from three main 
sources: the sale of a development license, the sale of annual maintenance 
and support, and a commercial use royalty based on shipments of products that 
include Jeode technology.

     UNIX total revenues declined 55% in 1998 compared to 1997 as a result of 
a decline in the number of large OEM transactions. In 1998, 1997 and 1996 total 
revenues from the Company's product for UNIX computers accounted for 40%, 32% 
and 34% of total revenues, respectively.

                                      17


     Total NTRIGUE revenues declined 93% in 1998 compared to 1997 as a result 
of the disposal of the product line. In 1998, 1997 and 1996 total revenues 
from the Company's NTRIGUE products accounted for 7%, 34% and 16% of total 
revenues, respectively.

     Service revenues in 1998 declined 48% compared to 1997, primarily 
because the Company performed fewer customer-funded engineering activities 
than in the previous year. Similarly, in 1997, service revenues declined 49% 
compared to 1996.

     The Company distributes its SoftWindows and RealPC packaged products 
within the United States and internationally through distributors and 
resellers and, in 1997 and 1996, also through OEMs. The Company offers 
certain return privileges to its customers including product exchange 
privileges and price protection. The Company recognizes revenues from 
packaged products upon shipment with provisions for estimated future returns, 
exchanges and price protection being recorded as a reduction of total 
revenues. A significant portion of the Company's revenue in 1997 and 1996 was 
derived from large OEM customer transactions, particularly in the UNIX and 
NT-related product lines.

     Sales to distributors representing more than 10% of total revenue in 
each period accounted for the following percentages of total revenue.




                                                        1998            1997            1996
- --------------------------------------------------------------------------------------------------
                                                                               
Ingram Micro                                            27%                *              *
Sun Microsystems                                        27%               -%             -%
Silicon Graphics                                         -%              19%            14%
Mitsubishi                                              11%                *            12%
- --------------------------------------------------------------------------------------------------

All Distributors                                        92%              42%            40%
- --------------------------------------------------------------------------------------------------


     *Less than 10%

     Sales to customers outside the United States, derived mainly from 
customers in Europe and Asia, represented approximately 24%, 27% and 31% of 
total revenues in 1998, 1997 and 1996, respectively. Movements in currency 
exchange rates did not have a material impact on total revenues in 1998, 1997 
or 1996. However, there can be no assurance that movements in currency 
exchange rates will not have a material adverse effect on the Company's 
future revenues and results of operations.

COST OF REVENUES AND GROSS MARGIN




                                                        1998              1997            1996
- ----------------------------------------------------------------------------------------------------
                                                         (In thousands, except percentages)
                                                                               
Cost of license revenue                                $ 8,329          $ 15,068        $ 14,814

Gross margin: license revenue                              36%               59%             63%
- ----------------------------------------------------------------------------------------------------

Cost of service revenue                                $ 1,046           $ 1,994          $2,601

Gross margin: service revenue                               5%                6%             37%
- ----------------------------------------------------------------------------------------------------

Total cost of revenues                                 $ 9,375          $ 17,062        $ 17,415

Gross margin: total revenues                               33%               56%             61%
- ----------------------------------------------------------------------------------------------------


                                      18


     Cost of license revenue primarily includes Windows, PC-DOS and WinFrame 
royalties paid to Microsoft, IBM and Citrix, respectively, and costs of 
documentation, duplication and packaging. Cost of service revenue includes 
costs associated with customer-funded engineering activities and end-user 
support under maintenance contracts.

     The Company's distribution agreement with Microsoft Corporation expired 
on March 31, 1997, but was extended until September 30, 1998 on substantially 
the same terms. The Company subsequently entered into a new distribution 
agreement dated October 1, 1998 on substantially the same terms, effective 
for one year. Termination or expiration without renewal of the Microsoft 
Distribution Agreement would result in the inability of the Company to sell 
its SoftWindows products.

     The Company's gross margin for license revenue is significantly affected 
by many factors, including pricing of the Company's products, royalties paid 
to third parties, the mix of products licensed, the channels through which 
the Company's products are distributed and product maturity. The Company's 
gross margin for license revenue can also be affected in particular periods 
by pricing strategies and return privileges employed in connection with new 
product introductions and upgrades. License gross margins in 1998 declined to 
36% from 59% in 1997 as a result of pricing strategies, increased third party 
royalties, rebate programs, and obsolescence of inventory. License gross 
margins in 1997 declined to 59% from 63% in 1996 as a result of lower prices 
introduced in mid 1997 as a result of increased competition in the 
SoftWindows for the Macintosh market and fewer high margin OEM customer 
transactions.

     The Company believes that the significant factors affecting the Jeode 
gross margin will include pricing of the development license, pricing of the 
unit usage and royalties to third parties such as Sun Microsystems. In early 
1999, the Company signed a five-year agreement with Sun Microsystems under 
which Sun established the Company as an authorized Virtual Machine provider. 
Under this agreement the Company will pay Sun a per unit royalty on each 
Jeode-enabled embedded product shipped by the Company's customers, plus a 
royalty on all development licenses put in place between the Company and its 
customers.

     Gross margin for service revenue is impacted by the level of and pricing 
terms of customer funded engineering activities, which can vary from customer 
to customer, from contract to contract, the level of maintenance contracts 
sold and the level of SoftWindows license revenue earned. In 1998 and 1997, 
the Company earned little revenue from customer-funded engineering 
acitivities, and saw a decline in UNIX maintenance agreements sold. This, 
combined with the high cost of providing support under NTRIGUE maintenance 
contracts, resulted in the Company achieving service revenue gross margins of 
5% in 1998, and 6% in 1997. Gross margins in 1996 for service revenues were 
37%.

     Service revenue gross margins for 1999 are expected to increase due to 
the required maintenance and upgrade contracts for each Jeode product sale.

                                      19



OPERATING EXPENSES



                                                       1998             1997            1996
- ---------------------------------------------------------------------------------------------------
                                                        (In thousands, except percentages)
                                                                             
Sales and marketing                                   $ 7,946         $ 15,804        $ 21,782

Percentage of total revenues                              56%              41%             49%
- ---------------------------------------------------------------------------------------------------

Research and development                              $ 6,228          $ 9,129        $ 10,613

Percentage of total revenues                              44%              23%             24%
- ---------------------------------------------------------------------------------------------------

General and administrative                            $ 4,213          $ 6,761         $ 6,268

Percentage of total revenues                              30%              17%             14%
- ---------------------------------------------------------------------------------------------------


     Sales and marketing expenses include advertising and promotional 
expenses, trade shows, personnel and related overhead costs, and salesperson 
commissions. Sales and marketing expenses decreased in 1998 by 50% as a 
result of reduced advertising and promotional expenditures, and a reduction 
in personnel costs. In 1997, sales and marketing costs decreased by 27% over 
1996 primarily due to reduced advertising and promotional expenditures, and a 
reorganization of the sales force resulting in a reduction in personnel 
costs. The Company anticipates sales and marketing expenses to increase in 
1999 as the Company develops a marketing and direct sales organization for 
its Jeode product line.

     Research and development expenses consist primarily of personnel costs, 
overhead costs relating to occupancy and equipment depreciation. Research and 
development expenses decreased in 1998 by 32% over 1997 as a result of 
reductions in personnel associated with the disposal of the NTRIGUE product 
line. During the last half of 1998, the Company invested the majority of its 
development expense in its Jeode technology to accelerate the release of this 
product. Research and development costs decreased by 14% in 1997 over 1996 as 
a result of reductions in personnel. In accordance with Statement of 
Financial Accounting Standards No. 86, software development costs are 
expensed as incurred until technological feasibility is established, after 
which any additional costs are capitalized. In 1998, 1997 and 1996, no 
development expenditures were capitalized. Development costs will increase in 
1999 as the Company further develops its Jeode technology.

     General and administrative expenses consist primarily of personnel and 
related overhead costs for finance, information systems, human resources and 
general management. General and administrative expenses decreased by 38% in 
1998 over 1997 as a result of reduced headcount, reduced legal fees and 
reduced facility costs. General and administrative expenses increased by 8% 
in 1997 over 1996 as a result of significant legal expenses incurred in 
defending certain legal actions taken against the Company. Offsetting such 
fees were personnel cost reductions resulting from the Company reorganizing 
its finance and administrative groups, and reduced facilities costs as a 
result of the Company closing its Boston office. General and administrative 
costs are not expected to change significantly in 1999 compared to 1998.

RESTRUCTURING



                                                         1998             1997            1996
- ----------------------------------------------------------------------------------------------------
                                                          (In thousands, except percentages)
                                                                                 
Restructuring                                             $-             $ 1,995           $-

Percentage of total revenues                               -                  5%            -
- -----------------------------------------------------------------------------------------------------


         In 1997, the Company completed two restructurings. In the first 
restructure, the Company reduced headcount by 11 persons and integrated 
product development, product marketing and the sales organization into two 
business units. In the second restructure, the Company combined the two sales 
organizations into one unit, reducing 

                                      20


headcount by 53 persons, reorganized the sales force such that direct sales 
inquiries are now referred to distributors, and reduced the number of 
facilities it operates from. Restructuring expenses, which represented 5% of 
total revenues in 1997, consist principally of costs related to terminated 
employees, including serverance payments and stock option related expenses, 
and future rents on facilities no longer used by the Company. As a result 
of the two restructurings, the Company saved approximately $3 million in 1998.

INTEREST INCOME (EXPENSE), NET



                                                          1998             1997            1996
- -----------------------------------------------------------------------------------------------------
                                                          (In thousands, except percentages)
                                                                                
Interest income, net                                     $ 984            $ 667          $ 1,379

Percentage of total revenues                                7%               2%               3%
- -----------------------------------------------------------------------------------------------------


         Interest income, net increased in 1998 over 1997 due primarily to 
increased interest income earned on the Company's cash, cash equivalents and 
investments, which increased from $14.5 million at December 31, 1997 to $16.3 
million at December 31, 1998. Interest income, net decreased in 1997 over 
1996 due primarily to decreased interest income earned on the Company's cash, 
cash equivalents and investments, which declined from $21.7 million at 
December 31, 1996 to $14.5 million at December 31, 1997.

OTHER INCOME (EXPENSE), NET



                                                         1998             1997            1996
- -----------------------------------------------------------------------------------------------------
                                                          (In thousands, except percentages)
                                                                                 
Other income (expense), net                            $ 14,887          $(163)           $ 17

Percentage of total revenues                               106%               *              *
- -----------------------------------------------------------------------------------------------------


     *Less than 1%

     Other income (expense), net increased from an expense of $163,000 in 
1997 to income of $14.887 million in 1998, of which 99% was the net gain on 
the disposal of the Company's NTRIGUE product line and the majority of the 
remainder was foreign exchange gains.

     Over 80% of the Company's total revenues and approximately 50% of its 
operating expenses are denominated in United States dollars. Most of the 
remaining revenues and expenses of the Company are pound sterling denominated 
and consequently the Company is exposed to fluctuations in pound sterling 
exchange rates. To hedge against this currency exposure, the Company enters 
into foreign currency options and forward exchange contracts for periods and 
amounts consistent with the amounts and timing of its anticipated pound 
sterling denominated operating cash flow requirements. Unrealized gains and 
losses on foreign currency option contracts are deferred and were not 
material at December 31, 1998 and December 31, 1997. There can be no 
assurance that such fluctuations will not have a material effect on the 
Company's results of operations in the future.

     The Company has an investment portfolio of fixed income securities that 
are classified as "available-for-sale-securities". These securities, like all 
fixed income instruments, are subject to interest rate risk and will fall in 
value if market interest rates increase. The Company attempts to limit this 
exposure by investing primarily in short-term securities.

PROVISION (BENEFIT) FOR INCOME TAXES



                                                          1998             1997             1996
- ------------------------------------------------------------------------------------------------------
                                                           (In thousands, except percentages)
                                                                                   
Provision (benefit) for income taxes                    $ 1,783           $ (720)           $330

Effective income tax rate                                   81%               N/A            N/A
- ------------------------------------------------------------------------------------------------------


                                      21


     The Company recorded a tax provision in 1998 reflecting certain non-U.S. 
taxes arising upon the disposal of the Company's NTRIGUE product line, net of 
offsetting operating losses. The Company recorded a tax benefit in 1997 
reflecting the utilization of United Kingdom operating tax losses against 
prior year taxes paid. In 1996 the Company had a tax provision in spite of 
its pretax loss, primarily due to foreign withholding taxes related to U.S. 
royalties from Japanese customers. Normally, the Company receives a U.S. 
federal tax credit to offset such foreign withholding taxes but could not do 
so in 1996 due to being in a net operating loss tax position.

     A more complete analysis of the differences between the federal 
statutory rate and the Company's effective income tax rates is presented in 
Note 5 to the Consolidated Financial Statements. At December 31, 1998, the 
Company has recorded a full valuation allowance against all deferred tax 
assets, primarily comprising net operating losses, on the basis that 
significant uncertainty exists with respect to their realization.

LIQUIDITY AND CAPITAL RESOURCES



                                                            1998              1997             1996
- ---------------------------------------------------------------------------------------------------------
                                                                         (in thousands)
                                                                                    
Cash, cash equivalents and investments                    $ 16,334          $ 14,461         $ 21,772
- ---------------------------------------------------------------------------------------------------------
Working capital                                           $  9,712          $  7,816         $ 15,777
- ---------------------------------------------------------------------------------------------------------
Net cash used in operating activities                     $(13,687)         $ (7,371)        $(13,810)
- ---------------------------------------------------------------------------------------------------------


     The Company is in the process of transitioning its product focus from 
Windows emulation and Windows compatability products to its Jeode product 
line based on the Company's EVM technology. This change in product focus has 
resulted in a redirection of available resources from the Company's 
historical revenue base towards the development and marketing efforts 
associated with the Jeode platform, which was not released for general 
availability until March 1999. As a result of this change in product strategy 
and associated redirection of resources to new product development, the 
Company's financial position weakened significantly during 1998.

     At December 31, 1998, the Company's working capital totaled $9.712 
million, of which $9.1 million was restricted and held in escrow, as compared 
to working capital of $7.816 million at December 31, 1997. During 1998, cash 
used in operating activities totaled $13.687 million and the principle source 
of cash funding came from the sale in February 1998 of the NTRIGUE product 
line for $17.687 million. $8.937 million of the NTRIGUE sales proceeds was 
received in February 1998, $2.5 million was received in February 1999 and the 
remaining $6.25 million is being held in escrow pending resolution of the 
Citrix indemnity claim. Capital additions totaled $0.9 million, $0.8 million 
and $2.0 million during the years ended December 31, 1998, 1997 and 1996, 
respectively.

     The Company continues to face significant risks associated with the 
successful execution of its new product strategy. These risks include, but 
are not limited to continued technology and product development, introduction 
and market acceptance of new products, changes in the marketplace, liquidity, 
competition from existing and new competitors which may enter the marketplace 
and retention of key personnel. Due to the generally longer sales cycles 
expected to be associated with the Jeode platform, the Company does not 
currently have accurate visibility of future order rates and demand for its 
products generally. There can be no assurance that Jeode platform products 
will achieve market acceptance.

     The Company believes that additional financing will be necessary before 
December 31, 1999, as its existing cash and cash equivalents are insufficient 
to meet the Company's operating and capital requirements for the next twelve 
months. The Company to date has made no commitments nor agreed to any 
arrangements to obtain additional financing, but is currently considering 
various financing alternatives. There can be no assurance that the Company 
will be able to obtain such funding when needed, on acceptable terms or at 
all. The failure to raise additional funds on a timely basis and on 
sufficiently favorable terms could have a material adverse effect on the 
Company's business, operating results and financial condition.

     The Company's liquidity may be adversely affected in the future by 
factors such as higher interest rates, inability to borrow without 
collateral, availability of capital financing and continued operating losses. 
Further, significant fluctuations in quarterly operating results has had and, 
in the future, may continue to have a negative affect on the Company's 
liquidity. Factors such as price reductions, the introduction and market 
acceptance of new products and product returns have contributed to this 
quarterly variability. Moreover, the Company's expense levels are based in 
part on expectations of future sales levels, and a shortfall in expected 
sales could therefore result in a disproportionate decrease in results of 
operations. As such, the results of operations in some future period may be 
below the expectations of investors, which would likely result in a 
significant reduction in the market price of the Company's shares. A decline 
in the market price of the Company's shares would have a negative effect on 
the Company's ability to raise needed capital on terms and conditions 
acceptable to management.

YEAR 2000 COMPLIANCE

     It is generally anticipated that many organizations will experience 
operational difficulties at the beginning of the Year 2000 as a result of the 
fact that many currently installed computer systems, embedded systems, and 
software products are coded to accept only two digit entries in the date code 
field. Significant uncertainty exists in the software and other industries 
concerning the scope and magnitude of problems associated with the century 
change.

     The Company's assessment of the impact of this issue has encompassed 1) 
software held for resale; 2) internally utilized systems; 3) computerized 
information and software provided by third parties which might be integral to 
customer usage of the Company's products; 4) compliance issues related 
entirely to the state of readiness by customers and vendors and 5) Year 2000 
cost. Set forth below is the status of each review and the estimated impact, 
to the extent management can determine at this time.

SOFTWARE HELD FOR RESALE

     Based on the Company's assessment to date, the Company believes that all 
versions of Jeode, SoftWindows 98 products, SoftWindows95 products, RealPC 
and NTRIGUE, a product the Company no longer ships, are Year 2000 compliant. 
Earlier versions of SoftWindows and all versions of Soft PC, a product the 
Company no longer ships, are not Year 2000 compliant, but all such versions 
are upgradable to Year 2000 compliant products. 

                                      22


However, there can be no assurance that all of the Company's customers will 
install the Year 2000 compliant version of the Company's products in a timely 
manner, which could lead to failure of customer systems and product liability 
claims against the Company. Even if the Company's products are Year 2000 
compliant, the Company may in the future be subject to claims based on Year 
2000 issues in the products of other companies, or issues arising from the 
integration of multiple products within a system. The costs of defending and 
resolving Year 2000 related disputes, and any liability of the Company for 
Year 2000 damages, including consequential damages, could have a material 
adverse effect on the Company's business, financial condition and results of 
operations.

INTERNAL SYSTEMS

     The Company has carried out an assessment of its own internal systems 
and believes that they are all Year 2000 compliant.

THIRD-PARTY SYSTEMS

     The Company has reviewed its material third-party relationships such as 
key suppliers and distributors. The Company believes all computerized 
information and software provided by third parties that might be integral to 
customer usage of the Company's products is Year 2000 compliant.

     Although the Company believes that its internal critical processes are 
Year 2000 ready, the Company also recognizes that it is vulnerable, as are 
most organizations, to the inability of third-party external interface 
suppliers, and utility organizations to achieve Year 2000 readiness. The most 
reasonable worst case scenario could include failure of power and water 
supplies, major transportation disruptions, and failures of communications 
and financial systems - any one of which could have a major and material 
effect on the Company's ability to produce its products and deliver services 
to its customers. While the Company has contingency plans in place to address 
most issues under its control, a problem outside its control could result in 
a delay in product shipments depending on the nature and severity of the 
problems.

CUSTOMERS AND VENDORS

     The Company's products are generally used with systems and software 
involving complicated software products developed by other vendors, which may 
not be Year 2000 compliant. Failure of the information systems of the 
Company's customers because of the failure of such noncompliant systems or 
software or for any other reason, could also affect the perceived performance 
of the Company's products, which could have a negative effect on the 
Company's competitive position. In addition, the Company believes that the 
purchasing patterns of customers and potential customers may be affected by 
Year 2000 issues as companies expend significant resources to correct or 
patch their current software systems for Year 2000 compliance. These 
expenditures may result in reduced funds available to purchase software 
products such as those offered by the Company, which could result in a 
material adverse effect on the Company's business, financial condition and 
results of operations.

YEAR 2000 COST

     The total cost associated with preparation for the Year 2000 has not 
been, and is not expected to be, material to the Company's business, 
financial condition or results of operations. Nevertheless, the Company may 
not timely identify and remediate all significant Year 2000 problems and 
remedial efforts may involve significant time and expense. There can be no 
assurance that any Year 2000 compliance problems of the Company or its 
customers or suppliers will not have a material adverse effect on the 
Company's business, financial condition and results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

     In October 1997, the American Institute of Certified Public Accountants 
(the "AICPA") issued Statement of Position No. 97-2 ("SOP 97-2"), "Software 
Revenue Recognition", which the Company has adopted for transactions entered 
into during the fiscal year beginning January 1, 1998. SOP 97-2 provides 
guidance for recognizing revenue on software transactions and supersedes 
Statement of Position No. 91-1, "Software Revenue 

                                      23


Recognition". In March 1998, the AICPA issued Statement of Position No. 98-4 
("SOP 98-4"), "Deferral of the Effective Date of a Provision of SOP 97-2, 
Software Revenue Recognition". SOP 98-4 deferred, for one year, the 
application of certain passages in SOP 97-2 which limit what is considered 
vendor-specific objective evidence necessary to recognize revenue for 
software licenses in multiple-element arrangements when undelivered elements 
exist. In December 1998, the AICPA issued Statement of Position No. 98-9 
("SOP 98-9"), "Modification of SOP 97-2, Software Revenue Recognition, With 
Respect to Certain Transactions". SOP 98-9 extends the effective date of SOP 
98-4 and provides additional interpretive guidance. SOP 98-9 is effective for 
fiscal years beginning after March 15, 1999. The Company will determine the 
impact, if any, of SOP 98-9 on current revenue recognition practices when 
adopted. Adoption of the remaining provisions of SOP 97-2 did not have a 
material impact on revenue recognition during 1998.

     In June 1998, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standard No. 133 "Accounting for Derivative 
Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes 
accounting and reporting standards for derivative instruments and for hedging 
activities. This statement becomes effective for all fiscal quarters of 
fiscal years beginning after June 15, 1999. The Company will adopt FAS 133 in 
2000. The Company expects that FAS 133 will not have a material impact on the 
results of operations when adopted.

      In March 1998, the AICPA issued Statement of Position No. 98-1, 
"Accounting for the Costs of Computer Software Developed or Obtained for 
Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on accounting for the 
costs of computer software developed or obtained for internal use and is 
effective for financial statements for fiscal years beginning after December 
15, 1998. The Company will adopt SOP 98-1 in 1999. The Company expects that 
SOP 98-1 will not have a material impact on the results of operations when 
adopted.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS

     The Company's revenues, margins and operating results are subject to 
quarterly and annual fluctuations due to a variety of factors, including 
demand for the Company's products, acceptance and demand for Java technology 
in the embedded products market, demand for Macintosh computers and UNIX 
workstations, product life cycles, the introduction, acceptance and delivery 
of new products and product enhancements by the Company, Apple, Microsoft, 
UNIX workstation vendors or their competitors, customer order deferrals in 
anticipation of new products, changes in the mix of distribution channels 
through which the Company's products are offered, purchasing patterns of 
distributors and retailers, quality control of products sold, competitive 
conditions in the industry and economic conditions generally or in various 
geographic areas. Although the Company's primary functional currency is the 
United States dollar, a significant portion of the Company's operating 
expenses are incurred by its United Kingdom operations and paid in pounds 
sterling. The Company enters into short-term currency option and forward 
exchange contracts to hedge the short-term impact of exchange rate 
fluctuations on pound sterling net operating cash flows, but there can be no 
assurance that such fluctuations will not have a material adverse effect on 
the Company's business, financial condition or results of operations in the 
future. A relatively high percentage of the Company's expenses is fixed over 
the short term and, as a result, if anticipated revenues in any quarter do 
not occur or are delayed, expenditure levels could be disproportionately high 
as a percentage of total revenues and the Company's operating results for 
that quarter would be adversely affected. The Company historically has 
operated with little backlog because its products are generally shipped as 
orders are received. As a result, revenues in any quarter are substantially 
dependent on orders booked and shipped in that quarter and on sales by 
distributors and other resellers. In addition, the Company has at times 
recognized a substantial portion of its revenues from sales booked and 
shipped in the last month of the quarter such that the magnitude of quarterly 
fluctuations may not become evident until late in, or at the end of, a 
particular quarter. Some orders for the Company's UNIX products are 
significant in size and orders for the Company's Jeode product are expected 
to be significant in size. If sales forecasted from a specific customer for a 
particular quarter are not realized in that quarter, the Company is unlikely 
to be able to generate revenue from alternate sources in time to compensate 
for the shortfall. As a result, and due to the relatively large size of some 
orders, a lost or delayed sale could have a material adverse effect on the 
Company's quarterly operating 

                                      24


results. Moreover, to the extent that significant sales occur earlier than 
expected, operating results for subsequent quarters may be adversely 
affected. There can be no assurance that the Company will be able to achieve 
profitability on a quarterly or annual basis. The Company intends to make a 
significant investment in its marketing, sales, customer support and research 
and development infrastructure to support its Jeode product line. The timing 
of this expansion and the rate at which Jeode generates revenue could cause 
material fluctuations in the Company's results of operations. As a result, 
the Company believes that period-to-period comparisons of its results of 
operations are not necessarily meaningful and should not be relied upon as 
indications of future performance. Although historically the Company's 
business has not been subject to seasonal variations, sales of the Company's 
products in certain international markets, such as Europe, are typically 
slower in the summer months. Due to all of the foregoing factors, it is 
possible that in some future quarters the Company's operating results will be 
below the expectations of stock market analysts and investors. In such event, 
the price of the Company's ADSs would likely be materially adversely affected.

FUTURE OPERATING RESULTS

     Except for the historical information contained in this Annual Report, 
the matters discussed herein are forward-looking statements. These 
forward-looking statements concern matters which include, but are not limited 
to, the development of new products, enhancements or technologies, 
particularly the development of Jeode, the timing of the availability of 
Jeode, the Jeode product and service offerings, the revenue model and market 
for Jeode, the features, benefits and advantages of Jeode, international 
sales, the availability of licenses to third-party proprietary rights, 
business and sales strategies, matters relating to proprietary rights, 
competition, Year 2000 compliance, facilities needs, exchange rate 
fluctuations and the Company's liquidity and capital needs and other 
statements regarding matters that are not historical are forward-looking 
statements. These matters involve risks and uncertainties that could cause 
actual results to differ materially from those in the forward looking 
statements. In addition to the factors discussed above, among other factors 
that could cause actual results to differ materially are the following: the 
Company's ability to deliver on time, and market acceptance of Jeode or other 
new products or upgrades of existing products; the timing of, or delay in, 
large customer orders; continued availability of technology and intellectual 
property license rights; product life cycles; the demand for Macintosh 
computers and UNIX workstations; the introduction, acceptance and delivery of 
hardware and/or operating systems by Macintosh and UNIX vendors, Microsoft 
Corporation or their competitors; customer order deferrals in anticipation of 
new products; changes in the mix of distribution channels through which the 
Company's products are offered; purchasing patterns of distributors and 
retailers; quality control of products sold; competitive conditions in the 
industry; economic conditions generally or in various geographic areas; and 
the risks listed from time to time in the reports that the Company files with 
the U.S. Securities and Exchange Commission. There can be no assurance that 
the Company will experience growth in revenues and net income in any 
particular period when compared to prior periods. Any quarterly or annual 
shortfall in net revenues and/or net income from the levels expected by 
securities analysts and shareholders would result in a substantial decline in 
the trading price of the Company's shares.

RESTATEMENT OF 1996 QUARTERLY RESULTS

     The Company determined that certain individuals in its U.S. channel 
sales organization violated Company policy by entering into unauthorized 
agreements with certain distributors and resellers, and by failing to report 
those agreements to the Company's finance department. In addition, the 
Company discovered that certain individuals in its U.S. channel sales 
organization did not accurately report to its finance department the amount 
and status of unsold inventories of the Company's products at certain of the 
Company's resellers. The individuals who were involved in these events were 
disciplined or are no longer with the Company. At the direction of the Audit 
Committee of its Board of Directors, the Company implemented additional 
accounting and reporting controls to help prevent future breaches of Company 
policies.

     Upon the discovery of the aforementioned, the Company conducted a review 
of the Company's compliance with its revenue recognition policy. As a result 
of this review, the Company identified certain transactions in which revenue 
and related expenses were recognized other than in accordance with its 
accounting policies. As part of this review, the Company also reversed 
certain sales to a new distributor that had been granted broad rights of 
return. Accordingly, the Company restated its unaudited condensed 
consolidated financial statements for the first and 

                                      25


second quarters of 1996 to reflect these adjustments. All quarterly 
information presented in this Annual Report reflect the restated quarterly 
information for 1996.

ITEM 8--CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements required by this Item are set forth at the 
pages indicated in Item 14 of Part IV of this Report on Form 10-K.

     The following table provides selected quarterly consolidated financial 
data (in thousands, except per share data):



                                                                  QUARTER ENDED
                                  -------------------------------------------------------------------------------
                                      MARCH 31             JUNE 30           SEPTEMBER 30          DECEMBER 31
                                  ----------------   ------------------   ------------------   ------------------
                                                                                   
1998:
 Revenues                              $  4,982             $  2,334              $  3,620            $  3,160
 Gross profit                             2,063                  410                 1,296                 952
 Net income (loss)                        7,632               (3,677)                 (667)             (2,866)
 Basic net income (loss) per share         0.63                (0.30)                (0.05)              (0.23)
 Diluted net income (loss) per share       0.62                (0.30)                (0.05)              (0.23)


1997:
 Revenues                              $  9,221             $  9,659              $ 13,377            $  6,612
 Gross profit                             4,815                5,409                 8,323               3,260
 Net loss                                (4,689)              (2,536)                 (641)             (2,792)
 Basic loss per share                     (0.41)               (0.22)                (0.05)              (0.23)
 Diluted loss per share                   (0.41)               (0.22)                (0.05)              (0.23)

1996:
 Revenues                              $ 13,063            $  14,930              $  9,081            $  7,172
 Gross profit                             8,854               10,418                 4,496               3,063
 Net income (loss)                         (225)                 569                (4,991              (6,119)
 Basic net income (loss) per share        (0.02)                0.05                 (0.44)              (0.53)
 Diluted net income (loss) per share      (0.02)                0.04                 (0.44)              (0.53)
 



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

     Not applicable.

                                      26




                                  PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     (A) DIRECTORS OF THE COMPANY

     The names of the directors of the Company, and certain information about 
them, are set forth below:



                                                                                                DIRECTOR
        NAME OF DIRECTOR                          AGE    PRINCIPAL OCCUPATION                     SINCE
        ----------------                          ---    --------------------                   --------
                                                                                       
        Richard M. Noling                         50     President and Chief Executive Officer    1997

        Nicholas, Viscount Bearsted (1)           49     Chairman of the Board of the Company     1988

        Albert E. Sisto (1) (2)                   49     Independent Consultant                   1997

        Vincent S. Pino (2)                       50     President of Alliance Imaging            1998


(1)  Member of the Audit Committee.
(2)  Member of the Compensation Committee.

     Richard M. Noling was named President and Chief Executive Officer and a 
director of the Company in March 1997. He also served as Chief Financial 
Officer, Senior Vice President of Finance and Operations and Company 
Secretary between April 19, 1996 and October 1, 1997 and Chief Operations 
Officer between February and March 1997. From August 1995 to February 1996, 
Mr. Noling was Vice President and Chief Financial Officer at Fast Multimedia, 
Inc., a German-based computer software and hardware developer. From November 
1994 to August 1995, he was Chief Financial Officer for DocuMagix Inc., a 
personal paper management software company. From June 1991 to October 1994, 
Mr. Noling served as Senior Vice President and Chief Financial Officer for 
Gupta Corporation. He received a Bachelor of Arts degree in aerospace and 
mechanical engineering science from the University of California (San Diego) 
in 1970. He received an M.A. degree in theology from the Fuller Theological 
Seminary in 1972, and an M.S. degree in business administration in 1979 from 
the University of California (Irvine).

     Nicholas, Viscount Bearsted has served as Chairman of the Board of 
Directors of the Company since March 1997 and as a director of the Company 
since January 1988. He also served as Chairman of the Board from January 1988 
to March 1995, and he was the Company's Chief Executive Officer from 
September 1988 until September 1993. From January 1996 to May 1996, he served 
as Chief Executive Officer and a director, and from April 1994 to January 
1996, as Deputy Chief Executive Officer and a director, of Hulton Deutsch 
Collection Ltd., a photographic content provider. He founded Alliance Imaging 
Inc. in 1984 and served as a senior executive until 1987 and as a director 
until 1988. Since 1980, he has been a corporate and computer consultant. He 
received a Bachelors degree in chemistry from Oxford University in 1972. He 
also serves as a Director of Mayborn Group plc.

     Albert E. Sisto was appointed as a director of the Company in March 
1997. He is currently an independent consultant. He served as Chief Operating 
Officer of RSA Data Security, Inc., a wholly owned subsidiary of Securities 
Dynamics Technologies, Inc., from December 1997 to February 1999. He served 
as the President, Chief Executive Officer and Chairman of the Board of 
Directors of DocuMagix Inc. from October 1994 until December 1997. From 
September 1989 to September 1994, Mr. Sisto served as President and Chief 
Executive Officer of PixelCraft, an imaging software and equipment company. 
He received a B.E. degree in engineering from the Stevens Institute of 
Technologies in 1971.

     Vincent S. Pino was appointed a director of the Company in October 1998. 
He has served as President of Alliance Imaging, Inc. since February 1998. 
Mr. Pino began his association with Alliance in 1988 as Chief Financial 
Officer. From 1991 through 1993 Mr. Pino held the position of Executive Vice 
President and Chief Financial Officer. From 1986 to 1988, Mr. Pino was 
President of Pacific Capital, where he provided financial consulting 

                                      27


services to corporations and publicly registered real estate limited 
partnerships. Prior to joining Pacific Capital, Mr. Pino held executive staff 
positions with Petrolane Incorporated, a diversified  services company. Mr. 
Pino received an MBA and a B.S. degree in finance from the University of 
Southern California in 1972 and 1970, respectively.

     (B) EXECUTIVE OFFICERS

     The information required by this Item with respect to the executive 
officers of the Company is incorporated by reference from "Item 4A--Executive 
Officers of the Registrant" in Part I of this Report.

     (C) SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Exchange Act requires the Company's directors and 
officers, and persons who own more than 10% of the Company's Ordinary Shares 
to file initial reports of ownership and reports of changes in ownership with 
the SEC. Such persons are required by SEC regulations to furnish the Company 
with copies of all Section 16(a) forms that they file. Based solely on its 
review of the copies of such forms furnished to the Company and written 
representations from the executive officers and directors, the Company 
believes that all Section 16(a) filing requirements were met.

                                      28


ITEM 11--EXECUTIVE COMPENSATION

     The following table sets forth all compensation awarded to or earned or 
paid for services rendered in all capacities to the Company and its 
subsidiaries during each of 1998, 1997 and 1996 by the Company's Chief 
Executive Officer and each of the Company's other executive officers who were 
serving as executive officers at the end of 1998, as well as the Company's 
former Senior Vice President of Sales and Marketing who left the Company 
during 1998 (the "Named Officers"). This information includes the dollar 
values of base salaries and bonus awards, the number of shares subject to 
options granted and certain other compensation, whether paid or deferred.

                            SUMMARY COMPENSATION TABLE



                                                                                           LONG TERM
                                                                                          COMPENSATION
                                                         ANNUAL COMPENSATION                 AWARDS
                                               -----------------------------------------   SECURITIES
                                                                          OTHER ANNUAL     UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITIONS           YEAR    SALARY($)    BONUS($)(1)  COMPENSATION($)    OPTIONS(#)    COMPENSATION($)(2)
- ----------------------------           ----    ---------    -----------  ---------------  ------------    ------------------
                                                                                        
Richard M. Noling (3)...........       1998    $217,875       $75,171       $   --            20,000           $1,080
President and Chief Executive          1997     203,947        93,184           --           415,000              360
  Officer                              1996     128,792         9,800           --            85,000              405

Stephen M. Ambler (4) ..........       1998     145,250        40,345           --            20,000               --
Chief Financial Officer, Company       1997     122,556         8,889       19,777(5)         88,750            4,338
  Secretary and Senior Vice President  1996      84,072            --        8,932(6)          3,750            4,203

George Buchan ..................       1998     167,000        54,827       22,044(7)         20,000           16,700
Senior Vice President of               1997     158,650        51,671       20,265(7)         55,000           15,865
  Engineering and UK General Manager   1996     141,300        13,168       12,740(7)             --           14,130

Ronald C. Workman (8)...........       1998      82,500        22,442           --           100,000              405
Senior Vice President of Marketing

David B. Winterburn(9)..........       1998      59,006        25,734       57,000(10)       130,000              135
Former Senior Vice President of
  Business Development and Chief
  Technology Officer

Joseph A. Taglia (11)...........       1998     103,125        28,833       60,072(12)        10,000              495
Former Senior Vice President of        1997     108,811        26,747           --           100,000              292
  Sales and Marketing



(1)  Bonuses paid to the executive officers (other than the Chief Executive
     Officer) are based on a target bonus set for each officer each
     quarter, adjusted by the Company's operating results over plan and the 
     executive officer's performance against quarterly qualitative goals.
     The Chief Executive Officer's bonus is at the discretion of the 
     Compensation Committee of the Board.

(2)  Represents Company contributions to defined contribution employee 
     benefit plans.

(3)  Mr. Noling joined the Company in April 1996 as Senior Vice President 
     of Finance and Operations, Chief Financial Officer and Company Secretary. 
     He was appointed President and Chief Executive Officer of the Company 
     in March 1997.

(4)  Mr. Ambler joined the Company in April 1994 as Director of Finance and
     Administration, Europe. He was appointed Chief Financial Officer, Company
     Secretary and Vice President in October 1997. He became a Senior Vice
     President in January 1999.

(5)  $8,111 of this sum represents the incremental cost to the Company of the
     use of a Company car and $11,666 represents a bonus for relocation to the
     Company's United States facility.

(6)  Represents the incremental cost to the Company of the use of a Company car.

(7)  Represents the payment of a Company car allowance.

(8)  Mr. Workman joined the Company in July 1998.

(9)  Mr. Winterburn joined the Company in August 1998. He served as Senior Vice
     President of Business Development and Chief Technology Officer until March
     1999. Mr. Winterburn provided consultancy services to the Company between
     June 1998 and August 1998.

(10) $15,000 of this sum represents a relocation reimbursement, and $42,000
     represents amounts paid for consulting services provided immediately prior
     to joining the Company.

(11) Mr. Taglia joined the Company in May 1997 as Senior Vice President and
     General Manager of the SoftWindows Business Group. He was appointed Senior
     Vice President of Sales and Marketing in October 1997, and left the
     employment of the Company in June 1998.

                                      29


(12) Represents a payment upon severance of employment.

     The following table sets forth further information regarding individual 
grants of rights to purchase Ordinary Shares during 1998 to each of the Named 
Officers. In accordance with the rules of the Securities and Exchange 
Commission (the "SEC"), the table sets forth the hypothetical gains or 
"option spreads" that would exist for the options at the end of their 
respective ten-year terms. These gains are based on assumed rates of annual 
compounded share price appreciation of 5% and 10% from the dates the options 
were granted to the end of the respective option terms. Actual gains, if any, 
on option exercises depend upon the future performance of the Ordinary Shares 
and ADSs. There can be no assurance that the potential realizable values 
shown in this table will be achieved.

                             OPTION GRANTS IN 1998



                                                                                                POTENTIAL REALIZABLE VALUE
                              NUMBER OF          PERCENT OF                                     AT ASSUMED ANNUAL RATES OF
                             SECURITIES            TOTAL                                       SHARE PRICE APPRECIATION FOR
                             UNDERLYING        OPTIONS GRANTED                                         OPTION TERM(1)
                           OPTIONS GRANTED     TO EMPLOYEES IN   EXERCISE PRICE   EXPIRATION   -----------------------------
NAME                             (#)                1998             ($/SH)          DATE           5%($)         10%($)
- ----                       ---------------     ---------------   --------------   ----------      ---------     ---------
                                                                                              

Richard M. Noling ...          10,000 (2)           0.1%            $1.625         04/28/08       $  10,219     $  25,898
                               10,000 (2)           0.1%             0.688         10/19/08           4,327        10,965

Stephen M. Ambler....          10,000 (2)           0.1%             1.625         04/28/08          10,219        25,898
                               10,000 (2)           0.1%             0.688         10/19/08           4,327        10,965

George Buchan........          10,000 (2)           0.1%             1.625         04/28/08          10,219        25,898
                               10,000 (2)           0.1%             0.688         10/19/08           4,327        10,965

Ronald C. Workman....          90,000 (3)           0.9%             1.000         07/06/08          56,600       143,436
                               10,000 (2)           0.1%             0.688         10/19/08           4,327        10,965

David B. Winterburn..         120,000 (3)           1.2%             1.000         07/06/08          75,467       191,249
                               10,000 (2)           0.1%             0.688         10/19/08           4,327        10,965

Joseph A. Taglia.....          10,000 (2)(4)        0.1%             1.625         04/28/08          10,219        25,898



(1)  The 5% and 10% assumed annual compound rates of share price appreciation
     are mandated by rules of the SEC and do not represent the Company's
     estimate or projection of future Ordinary Share or ADS prices.

(2)  These incentive options were granted pursuant to the Company's 1995
     Incentive Stock Option Plan for U.S. employees. These options vest and
     become exercisable at the rate of 2.0833% of the shares for each full
     month that the optionee renders service to the Company. The option
     exercise price is equal to the fair market value of the Company's Ordinary
     Shares on the date of grant and the options expire ten years from the date
     of grant, subject to earlier termination upon termination of employment.
     25% of options granted will be subject to accelerated vesting upon
     termination or constructive termination following a change of control of
     the Company.

(3)  These incentive options were granted pursuant to the Company's 1995
     Incentive Stock Option Plan for U.S. Employees. These options vest and
     become exercisable as to 25% of the shares on the first anniversary of the
     date of grant and thereafter at the rate of 2.0833% of the shares for each
     full month that the optionee renders services to the Company. The option
     exercise price is equal to the fair market value of the Company's Ordinary
     Shares on the date of grant and the options expire ten years from the date
     of grant, subject to earlier termination upon termination of employment.
     25% of options granted will be subject to accelerated vesting upon
     termination or constructive termination following a change of control of
     the Company.

(4)  These options lapsed on September 28, 1998.

                                      30


     The following table sets forth certain information concerning the 
exercise of options by each of the Named Officers during 1998, including the 
aggregate amount of gains on the date of exercise. In addition, the table 
includes the number of shares covered by both exercisable and unexercisable 
rights to acquire shares as of December 31, 1998. Also reported are values of 
"in-the-money" options that represent the positive spread between the 
respective exercise prices of outstanding rights to acquire shares and $2.00 
per share, which was the closing price of the ADSs as reported on the Nasdaq 
National Market on December 31, 1998.

                   AGGREGATED OPTION EXERCISES IN 1998 AND
                           YEAR-END OPTION VALUES



                                                                 NUMBER OF SECURITIES           VALUE OF UNEXERCISED
                                                                UNDERLYING UNEXERCISED          IN-THE-MONEY OPTIONS
                                                                OPTIONS AT YEAR-END (#)           AT YEAR-END($)(2)
                           SHARES ACQUIRED  VALUE REALIZED    ---------------------------    ---------------------------
NAME                       ON EXERCISE (#)     ($)(1)         EXERCISABLE   UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
- ----                       --------------   -------------     -----------   -------------    -----------   -------------
                                                                                         
Richard M. Noling.....             --             --            290,000         230,000       $  5,628       $  17,442

Stephen M. Ambler.....             --             --             38,198          78,052       $  9,097       $  21,575

George Buchan.........             --             --            111,979          50,521       $ 45,160       $  15,698

Ronald C. Workman.....             --             --                417          99,583       $    547       $ 102,573

David B. Winterburn...             --             --                417         129,583       $    547       $ 132,573

Joseph A. Taglia......             --             --                 --              --             --              --



(1)  "Value Realized" represents the fair market value of the shares underlying
     the options on the date of exercise less the aggregate exercise price of
     the options.

(2)  For purposes of the table, all amounts in pounds sterling were converted 
     to U.S. dollars using $1.67 per pound sterling, the exchange rate in 
     effect as of December 31, 1998.

EMPLOYMENT AGREEMENTS

     Effective March 25, 1997, Mr. Noling entered into an employment 
agreement with the Company, which is terminable by either party upon six 
month's notice and by the Company for cause at any time. In connection with 
such agreement, Mr. Noling was granted options to purchase (i) 100,000 
Ordinary Shares at an exercise price of $1.969, such options being 100% 
vested and immediately exercisable, (ii) 100,000 Ordinary Shares at an 
exercise price of $1.969, such options to vest and become exercisable at the 
rate of 2.0833% of the shares on the first day of each month following the 
date of grant and (iii) 200,000 Ordinary Shares on the day of the 1997 Annual 
General Meeting, such options to vest and become exercisable at the rate of 
2.0833% of the shares on the first day of each month following the date of 
grant. The Annual General Meeting was held on May 29, 1997 and the options 
were granted at an exercise price of $2.375. 100,000 of these options are 
subject to accelerated vesting and exercisability should the Company meet 
certain earnings per share ("EPS") targets as follows: (a) 25,000 options are 
accelerated should the EPS exceed $0.07 for 2 consecutive quarters (b) 37,500 
options are accelerated should the EPS exceed $0.14 for 2 consecutive 
quarters and (c) 37,500 options are accelerated should the EPS exceed $0.21 
for 2 consecutive quarters, with a maximum of one early vesting event per 
quarter. These 100,000 options fully vest upon a takeover or merger of the 
Company.

     The employment agreement continues through May 31, 2001, and is 
automatically extended for an additional year at the end of the term unless 
either party gives notice six months prior to November 30, 2000 to terminate 
effective upon the expiration of the then current term. In the event of any 
business combination resulting in a change of control of the Company or in 
the event of disposal of a majority of the assets of the Company, and the 
termination or constructive termination of Mr. Noling's employment, Mr. 
Noling shall receive his then current full salary for a period of twelve 
months following such termination. In addition he shall be entitled to 
continued vesting and exercisability of his options for a period of twelve 
months after termination and shall be entitled to participate in the 
Company's employee benefits on the same basis as if he were an employee.

                                      31


     With effect from April 1, 1997, Nicholas, Viscount Bearsted, Chairman of 
the Company, entered into a Consulting Agreement with the Company whereby he 
acts as consultant to the Company providing advice and assistance as the 
Board may from time to time request. Nicholas, Viscount Bearsted shall be 
available to perform such services for at least thirteen days per quarter and 
shall receive a fee of $1,000 for each day services are provided, subject to 
a minimum thirteen days per quarter, plus reimbursement of reasonable 
expenses. The agreement is terminable by either party upon six month's 
advance written notice and by the Company for cause at any time. In the event 
of any business combination resulting in a change of control of the Company 
or in the event of disposal of a majority of the assets of the Company, and 
termination or constructive termination of his consultancy, Nicholas, 
Viscount Bearsted will be entitled to receive an additional twenty-six week's 
consultancy fees.

     In January 1993, Mr. Buchan entered into an employment agreement with 
the Company, which may be terminated by either party upon six months' notice 
and by the Company for cause at any time. In the event of any business 
combination, change in control or disposal of a majority of the assets of the 
Company, Mr. Buchan's employment may be terminated with three months' notice, 
and upon such termination Mr. Buchan will be entitled to a payment equivalent 
to his current annual salary plus estimated bonus for the year following 
termination and all his outstanding share options will become exercisable.

     In July 1998, the Company loaned Mr. Winterburn $70,000 to assist in the 
purchase of a house. The loan is represented by a promissory note, and bears 
interest at the prime rate. Provided Mr. Winterburn remains an employee of 
the Company, the Company agreed to forgive 25% of unpaid principal on January 
10, 1999 and 25% each January 10 thereafter up to and including January 10, 
2002. Mr. Winterburn's employment terminated in March 1999, and the remaining 
unpaid principal and interest is repayable to the Company within 30 days.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Compensation Committee of the Board (the "Committee") makes all 
decisions involving the compensation of executive officers of the Company. 
The Committee consists of the following non-employee directors: Vincent S. 
Pino and Albert E. Sisto. Paul L. Borrill served on the Committee until he 
resigned as a director in January 1999. John R. Johnston served on the 
committee until he resigned as a director in July 1998.

     The Company entered into a consulting agreement with Albert Sisto, dated 
December 28, 1998, whereby Mr. Sisto will provide sales consulting, sales 
training, advice and assistance as the Company may from time to time request 
over a term of six months. Mr. Sisto shall receive a fee of $500 for each 
half-day of service provided, subject to a maximum of $35,000. Mr. Sisto 
shall also receive a bonus fee for each qualifying Jeode customer contract 
signed in his assigned geographic region. A qualifying customer contract is 
defined as a contract with a value in excess of $500,000 over two years after 
signing by Insignia and the customer. The agreement is terminable by either 
party upon ten days written notice and by the Company for any reason with 
written notice.

DIRECTOR COMPENSATION

     The Company pays each outside director $1,000 for every regular meeting 
attended, $2,500 per quarter of service on the Board, $500 per quarter for 
service on each committee, plus $500 for each committee meeting attended, and 
reimburses outside directors for reasonable expenses in attending meetings of 
the Board. The Chairman of the Board receives an additional $1,500 per 
quarter. In addition, each new outside director will be granted an option to 
purchase 15,000 shares and each outside director will be granted an option to 
purchase 5,000 shares annually for so long as he serves as an outside 
director. For information concerning the compensation of Mr. Noling and 
Nicholas, Viscount Bearsted, see "Employment Agreements."

                                      32


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

     The following table sets forth certain information, as of March 8, 1999, 
with respect to the beneficial ownership of the Company's Ordinary Shares by 
(i) each shareholder known by the Company to be the beneficial owner of more 
than 5% of the Company's Ordinary Shares, (ii) each director, (iii) each 
Named Officer, and (iv) all directors and executive officers as a group.



                                                                    AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER                                           BENEFICIAL OWNERSHIP(1)      PERCENT OF CLASS
- ------------------------                                           -----------------------      ----------------
                                                                                          
RIT Capital Partners plc (2)..............................                2,032,897                    16.0%

Technology Venture Investors IV (3).......................                1,438,808                    11.3%

Nicholas, Viscount Bearsted (4)...........................                  790,904                     6.1%

Robert H. Siteman and Barbara L. Siteman (5)..............                  641,500                     5.0%

Richard M. Noling (6).....................................                  357,333                     2.7%

George Buchan (7).........................................                  153,537                     1.2%

Stephen M. Ambler (8) ....................................                   47,354                     *

Vincent S. Pino (9) ......................................                   23,000                     *

Albert E. Sisto (10)......................................                   16,666                     *

Ronald C. Workman (11)....................................                    2,083                     *

David B. Winterburn (12) .................................                    1,250                     *

Joseph A. Taglia (13) ....................................                        -                     *

All directors and executive officers
as a group (8 persons)(14)................................
                                                                          1,392,128                    10.4%


*    Less than 1%

(1)  Unless otherwise indicated below, the persons and entities named in the
     table have sole voting and sole investment power with respect to all
     shares beneficially owned, subject to community property laws where
     applicable. Shares subject to options that are currently exercisable or
     exercisable within 60 days of March 8, 1999 are deemed to be outstanding
     and to be beneficially owned by the person holding such option for the
     purpose of computing the percentage ownership of such person but are not
     treated as outstanding for the purpose of computing the percentage
     ownership of any other person.

(2)  The address of RIT Capital Partners plc is 27 St. James's Place, London 
     SW1A 1NR, United Kingdom. 

(3)  Represents 1,278,376 shares held by Technology Venture Investors-4, L.P. 
     ("TVI"), 149,416 shares held by TVI Partners-4, L.P. and 11,016 shares 
     held by TVI Affiliates-4, L.P. The address of TVI is 2480 Sand Hill Road, 
     Suite 101, Menlo Park, California 94025.

(4)  Includes 153,958 shares subject to options that were exercisable within
     60 days of March 8, 1999. Nicholas, Viscount Bearsted is Chairman of the
     Board of the Company. His address is 9 Acacia Road, London, NW8 6AB,
     United Kingdom.

(5)  Mr. & Mrs. Siteman's principal address is 1657 Wicklow Court, Westlake
     Village, California. 

(6)  Includes 325,313 shares subject to options that were exercisable within 
     60 days of March 8, 1999. Mr. Noling is the President, Chief Executive 
     Officer, and a director of the Company.

(7)  Includes 121,875 shares subject to options that were exercisable within
     60 days of March 8, 1999. Mr. Buchan is Senior Vice President of
     Engineering and UK General Manager of the Company.

(8)  Represents shares subject to options that were exercisable within 60 days
     of March 8, 1999. Mr. Ambler is Chief Financial Officer, Company
     Secretary and a Senior Vice President of the Company.

(9)  Mr. Pino is a director of the Company.

(10) Represents shares subject to options that were exercisable within 60 days 
     of March 8, 1999. Mr. Sisto is a director of the Company.

(11) Represents shares subject to options that were exercisable within 60 days 
     of March 8, 1999. Mr. Workman is Senior Vice President of Marketing.

                                      33


(12) Represents shares subject to options that were exercisable within 60 days
     of March 8, 1999. Mr. Winterburn served as Senior Vice President of
     Business Development and Chief Technology Officer of the Company from
     August 1998 to March 1999.

(13) Mr. Taglia served as Senior Vice President of Sales and Marketing from
     October 1997 to June 1998. 

(14) Includes the shares indicated as included in footnotes (4) and (6) 
     through (11).

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Since January 1, 1998, there has not been, nor is there currently 
proposed, any transaction or series of transactions to which the Company or 
any of its subsidiaries was or is to be a party in which the amount involved 
exceeds $60,000 and in which any executive officer, director or holder of 
more than 5% of the Company's Ordinary Shares had or will have a direct or 
indirect material interest other than (i) normal compensation arrangements, 
which are described under Item 11 above, (ii) the transactions described 
under "Compensation Committee Interlocks and Insider Participation" in Item 
11 above, and (iii) the transactions described under "Employment Agreements" 
in Item 11 above.

                                      34


                                    PART IV

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

     (a)  1. Financial Statements

          The following documents are filed as part of this Annual Report 
          on Form 10-K:



                                    DOCUMENT                                             PAGE
                                    --------                                             ----
                                                                                      
         Consolidated Balance Sheet as of December 31, 1998 and 1997.............         38
         Consolidated Statement of Operations for each of the three years in the
                  period ended December 31, 1998.................................         39
         Consolidated Statement of Shareholders' Equity for each of the three 
                  years in the period ended December 31, 1998....................         40
         Consolidated Statement of Cash Flows for each of the three years in the
                  period ended December 31, 1998.................................         41
         Notes to Consolidated Financial Statements..............................         42
         Report of Independent Accountants.......................................         57



          2. Financial Statement Schedule

          The following financial statement schedule is filed as a part of this
          Annual Report on Form 10-K and should be read in conjunction with the
          Financial Statements:



                                     DOCUMENT                                             PAGE
                                     --------                                             ----
                                                                                       
          Schedule II--Valuation and Qualifying Accounts.........................          56



          All other schedules are omitted because they are not applicable, or
          because the required information is included in the financial
          statements or notes thereto.

     (b)  Reports on Form 8-K

          No reports on Form 8-K were filed during the quarter ended December 
          31, 1998.

                                      35


     (c)  Exhibits

          The following exhibits are filed as part of this Report:




      EXHIBIT
      NUMBER                         EXHIBIT TITLE
      ------- -----------------------------------------------------------------
           
       2.01 --Asset Purchase Agreement dated as of January 10, 1998, by and
              among Citrix Systems, Inc., Citrix Systems UK Limited and Insignia
              Solutions plc. (7)**
       2.02 --Amendment No. 1 to Asset Purchase Agreement dated as of February
              5, 1998, by and among Citrix Systems, Inc., Citrix Systems UK
              Limited and Insignia Solutions plc. (7)**
       3.02 --Registrant's Articles of Association. (1)
       3.04 --Registrant's Memorandum of Association. (1)
       4.01 --Form of Specimen Certificate for Registrant's Ordinary Shares. (1)
       4.02 --Registration Rights Agreement, dated as of June 5, 1992, as
              amended. (1)
       4.03 --Deposit Agreement between Registrant and The Bank of New York. 
              (2)
       4.04 --Form of American Depositary Receipt (included in Exhibit 4.03). 
              (2)
      10.01 --Registrant's 1986 Executive Share Option Scheme, as amended, 
              and related documents. (1)*
      10.02 --Registrant's 1988 U.S. Stock Option Plan, as amended, and 
              related documents. (1)*
      10.03 --Registrant's 1995 Incentive Stock Option Plan for U.S. Employees 
              and related documents. (6)*
      10.05 --Insignia Solutions Inc. 401(k) Plan. (1)*
      10.06 --Registrant's Small Self-Administered Pension Plan Definitive 
              Deed and Rules. (1)*
      10.10 --Executive's Employment Agreement dated January 1, 1993 between 
              Registrant and George Buchan. (1)*
      10.14 --Form of Indemnification Agreement entered into by Registrant 
              with each of its directors and executive officers. (1)*
      10.15 --Lease Agreement between Insignia Solutions Inc. and Shoreline 
              Investments I dated March 10, 1993. (1)
      10.16   --Lease between Registrant and The Standard Life Assurance 
              Company dated November 3, 1992 and related documents. (1)
      10.17 --License Agreement between Insignia Solutions Inc. and Microsoft 
              Corporation dated January 1, 1991, as amended. (1)**
      10.21 --Distribution Agreement between Insignia Solutions Inc. and 
              Micro D, Inc. dated October 27, 1988, as amended. (1)**
      10.22 --Form of Indemnification Agreement entered into between Insignia 
              Solutions Inc. and each of Registrant's directors and executive 
              officers. (1)*
      10.25 --Authorized International Master Distributor Agreement between 
              Insignia Solutions Inc. and Mitsubishi Corporation dated May 16, 
              1995, as amended. (2)**
      10.27 --Microsoft Software Distribution License Agreement for Desktop 
              Operating Systems dated March 1, 1996, between Microsoft 
              Corporation and Insignia Solutions Inc. (4)**
      10.28 --U.K. Employee Share Option Scheme 1996, as amended. (6)*
      10.29 --License and Distribution Agreement effective February 24, 1995, 
              between Silicon Graphics, Inc. and Insignia Solutions Inc., as 
              amended. (3)**
      10.30 --Amendment Number 1 and Amendment Number 2 to Microsoft OEM 
              License Agreement for Desktop Operating Systems between the 
              Company and Microsoft Corporation. (5)**
      10.33 --Employment Agreement effective March 25, 1997 between Registrant 
              and Richard M. Noling. (6)*
      10.34 --Consulting Agreement effective April 1, 1997 between Registrant 
              and Nicholas, Viscount Bearsted. (6)*
      10.35 --Volume Purchase Agreement dated as of September 29, 1997 between 
              Registrant and Silicon Graphics, Inc. (6)
      10.36 --Source Code License and Binary Distribution Agreement dated as
              of September 29, 1997 between Registrant and Silicon Graphics,
              Inc. (6)
      10.37 --Amendment Number 4 dated March 15, 1998 to Microsoft OEM License
              Agreement for Desktop Operating Systems between the Company and
              Microsoft Corporation. (8)
      10.38 --Lease Agreement between Insignia Solutions, Inc. and 
              Lincoln-Whitehall Pacific, LLC, dated December 22, 1997. (8)

                                      36


      EXHIBIT
      NUMBER                         EXHIBIT TITLE
      ------- -----------------------------------------------------------------
      10.39 --Trademark License between Insignia Solutions, Inc. and Microsoft 
              Corporation dated March 16, 1998. (8)
      10.40 --Distribution Agreement between Insignia Solutions, Inc. and Sun 
              Microsystems, Inc. dated December 24, 1997. (8)**
      10.41 --Microsoft License Agreement for Desktop Operating System Products 
              dated October 1, 1998 between Microsoft Licensing, Inc. and 
              Insignia Solutions, Inc. (9)**
      10.42 --Registrant's 1995 Employee Share Purchase Plan, as amended. (9)*
      10.43 --Promissory Note dated July 1, 1998 between Insignia Solutions, 
              Inc. and David Winterburn. (9)*
      10.44 --Lease agreements(s) between Insignia Solutions plc and Comland 
              Industrial and Commercial Properties Limited dated August 12th, 
              1998 for the Apollo House premises and the Saturn House premises.
      10.45 --Consulting agreement between Insignia Solutions Inc. and Albert 
              Sisto dated December 28, 1998. *
      21.01 --List of Registrant's subsidiaries. (2)
      23.01 --Consent of PricewaterhouseCoopers LLP, Independent Accountants.
      27.01 --Financial Data Schedule.



     *    Management contract or compensatory plan.
     **   Confidential treatment has been granted with respect to certain
          portions of this agreement. Such portions were omitted from this 
          filing and filed separately with the Securities and Exchange 
          Commission.

(1)  Incorporated by reference to the exhibit of the same number from
     Registrant's Registration Statement on Form F-1 (File No. 33-98230)
     declared effective by the Commission on November 13, 1995.

(2)  Incorporated by reference to the exhibit of the same number from
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1995.

(3)  Incorporated by reference to the exhibit of the same number from
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1996.

(4)  Incorporated by reference to Exhibit 10.27 from Registrant's Quarterly 
     Report on Form 10-Q for the quarter ended March 31, 1996.

(5)  Incorporated by reference to Exhibit 10.30 from Registrant's Quarterly 
     Report on Form 10-Q for the quarter ended March 31, 1997.

(6)  Incorporated by reference to the exhibit of the same number from
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1997.

(7)  Incorporated by reference to the exhibit of the same number from
     Registrant's Current Report on Form 8-K dated February 5, 1998.

(8)  Incorporated by reference to the exhibit of the same number from
     Registrant's Quarterly Report on Form 10-Q for the quarter ended March
     31, 1998.

(9)  Incorporated by reference to the exhibit of the same number from
     Registrant's Quarterly Report on Form 10-Q for the quarter ended
     September 30, 1998.

                                      37


                             INSIGNIA SOLUTIONS PLC
                           CONSOLIDATED BALANCE SHEET
                    (amounts in thousands, except share data)



                                                                                                         DECEMBER 31,
                                                                                                 -----------------------------
                                                                                                     1998            1997
                                                                                                 -------------    ------------
                                                                                                            
                                  A S S E T S

Current assets:
       Cash and cash equivalents                                                                   $   6,798         $ 10,391
       Short-term investments                                                                              -            3,820
       Restricted cash                                                                                   186                -
       Cash and cash equivalents held in escrow                                                        9,100                -
       Accounts receivable, net                                                                        1,706            6,754
       Inventories                                                                                        82              185
       Prepaid expenses                                                                                  990              608
       Prepaid income taxes                                                                                -              864
       Deposits                                                                                          443                -
                                                                                                 -------------    ------------
                   Total current assets                                                               19,305           22,622
Property and equipment, net                                                                            1,074            2,175
Restricted cash                                                                                          250              250
Other noncurrent assets                                                                                  382              410
                                                                                                 -------------    ------------
                                                                                                   $  21,011        $  25,457
                                                                                                 -------------    ------------
                                                                                                 -------------    ------------

       L I A B I L I T I E S    A N D    S H A R E H O L D E R S '   E Q U I T Y

Current liabilities:
       Accounts payable                                                                            $   1,608        $   1,683
       Accrued liabilities                                                                             2,265            2,685
       Accrued royalties                                                                               4,309            8,874
       Income taxes payable                                                                              994               -
       Deferred revenue                                                                                  262              843
       Customer deposits                                                                                 104              617
       Current obligations under capital leases                                                           51              104
                                                                                                 -------------    ------------
                   Total current liabilities                                                           9,593           14,806
Long-term obligations under capital leases                                                                 -              111
Noncurrent liabilities                                                                                     -               17
                                                                                                 -------------    ------------

                                                                                                       9,593           14,934
                                                                                                 -------------    ------------
Commitments and contingencies (Note 8)
Shareholders' equity:
       Preferred shares, L0.20 par value:  3,000,000 shares authorized;
          no shares issued                                                                                 -                -
       Ordinary shares, L0.20 par value:  30,000,000 shares authorized;
          12,590,316 shares and 11,971,213 shares issued and outstanding
          in 1998 and 1997, respectively                                                               4,164            3,954
       Additional paid-in capital                                                                     34,725           34,462
       Accumulated deficit                                                                           (27,010)         (27,432)
       Accumulated other comprehensive loss                                                             (461)            (461)
                                                                                                 -------------    ------------
                   Total shareholders' equity                                                         11,418           10,523
                                                                                                 -------------    ------------
                                                                                                   $  21,011        $  25,457
                                                                                                 -------------    ------------
                                                                                                 -------------    ------------


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

                                      38


                             INSIGNIA SOLUTIONS PLC
                      CONSOLIDATED STATEMENT OF OPERATIONS
                  (amounts in thousands, except per share data)




                                                                                       YEAR ENDED DECEMBER 31,
                                                                       ---------------------------------------------------------
                                                                           1998                  1997                  1996
                                                                       -------------        --------------        --------------
                                                                                                         
Net revenues:
         License                                                         $ 12,998              $ 36,744              $ 40,102
         Service                                                            1,098                 2,125                 4,144
                                                                       -------------        --------------        --------------

               Total net revenues                                          14,096                38,869                44,246
                                                                       -------------        --------------        --------------

Costs of net revenues:
         License                                                            8,329                15,068                14,814
         Service                                                            1,046                 1,994                 2,601
                                                                       -------------        --------------        --------------

               Total cost of net revenues                                   9,375                17,062                17,415
                                                                       -------------        --------------        --------------

               Gross profit                                                 4,721                21,807                26,831
                                                                       -------------        --------------        --------------

Operating expenses:
         Sales and marketing                                                7,946                15,804                21,782
         Research and development                                           6,228                 9,129                10,613
         General and administrative                                         4,213                 6,761                 6,268
         Restructuring                                                          -                 1,995                     -
                                                                       -------------        --------------        --------------

               Total operating expenses                                    18,387                33,689                38,663
                                                                       -------------        --------------        --------------

               Operating loss                                             (13,666)              (11,882)              (11,832)

Interest income, net                                                          984                   667                 1,379
Other income (expense), net                                                14,887                  (163)                   17
                                                                       -------------        --------------        --------------

               Income (loss) before income taxes                            2,205               (11,378)              (10,436)

Provision (benefit) for income taxes                                        1,783                  (720)                  330

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

               Net income (loss)                                         $    422              $(10,658)             $(10,766)
                                                                       -------------        --------------        --------------
                                                                       -------------        --------------        --------------
Net income (loss) per share:
  Basic                                                                  $   0.03              $  (0.91)             $  (0.95)
                                                                       -------------        --------------        --------------
                                                                       -------------        --------------        --------------
  Diluted                                                                $   0.03              $  (0.91)             $  (0.95)
                                                                       -------------        --------------        --------------
                                                                       -------------        --------------        --------------
Weighted average shares and share equivalents:
  Basic                                                                    12,159                11,690                 11,342
                                                                       -------------        --------------        --------------
                                                                       -------------        --------------        --------------
  Diluted                                                                  12,378                11,690                 11,342
                                                                       -------------        --------------        --------------
                                                                       -------------        --------------        --------------


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

                                      39



                              INSIGNIA SOLUTIONS PLC
                  CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                    (amounts in thousands, except share data)



                                                                                ACCUMULATED
                                  ORDINARY SHARES     ADDITIONAL                   OTHER         TOTAL
                               ---------------------   PAID-IN    ACCUMULATED  COMPREHENSIVE  SHAREHOLDERS'
                                  SHARES     AMOUNT    CAPITAL      DEFICIT        LOSS          EQUITY
                               -----------  --------  ----------  -----------  -------------  -------------
                                                                            
Balance at December 31, 1995    11,142,246   $ 3,706   $ 33,161    $ (6,008)    $   (461)       $   30,398

  Shares issued under employee
    stock plans                    335,790        89        494           -            -               583
  Net loss                               -         -          -     (10,766)           -           (10,766)
                               -----------  --------  ----------  -----------  ------------   -------------
Balance at December 31, 1996    11,478,036     3,795     33,655     (16,774)        (461)           20,215

  Shares issued under employee
    stock plans                    493,177       159        807           -            -               966
  Net loss                               -         -          -     (10,658)           -           (10,658)
                               -----------  --------  ----------  -----------  ------------   -------------
Balance at December 31, 1997    11,971,213     3,954     34,462     (27,432)        (461)           10,523

  Shares issued under employee
    stock plans                    619,103       210        263           -            -               473
  Net income                             -         -          -         422            -               422
                               -----------  --------  ----------  -----------  ------------   -------------
Balance at December 31, 1998    12,590,316   $ 4,164  $  34,725    $(27,010)    $   (461)       $   11,418
                               -----------  --------  ----------  -----------  ------------   -------------
                               -----------  --------  ----------  -----------  ------------   -------------



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

                                      40


                              INSIGNIA SOLUTIONS PLC
                         CONSOLIDATED STATEMENT OF CASH FLOWS
                              (amounts in thousands)




                                                                                    YEAR ENDED DECEMBER 31,
                                                                          --------------------------------------------
                                                                              1998           1997            1996
                                                                          -------------  -------------   -------------
                                                                                                
Cash flows from operating activities:
       Net income (loss)                                                   $       422    $   (10,658)     $  (10,766)
Adjustments to reconcile net income (loss) to net cash
    used in operating activities:
       Depreciation                                                                767          2,239           2,165
       Other                                                                   (14,731)           206             206
       Net changes in assets and liabilities:
           Restricted cash                                                        (186)          (250)              -
           Accounts receivable, net                                              5,048            183          (2,769)
           Inventories                                                             103            230             (81)
           Prepaid expenses                                                       (382)           (66)            687
           Deposits                                                               (443)             -               -
           Prepaid income taxes                                                    864           (673)         (2,207)
           Other noncurrent assets                                                  28            501             129
           Accounts payable                                                        (75)          (474)           (968)
           Accrued liabilities                                                    (420)        (1,797)            (36)
           Customer deposits                                                      (513)           160              38
           Accrued royalties                                                    (4,565)         5,084           1,535
           Deferred revenue                                                       (581)        (2,056)         (1,534)
           Income taxes payable                                                    994              -               -
           Noncurrent liabilities                                                  (17)             -              (3)
                                                                          -------------  -------------   -------------
               Net cash used in operating activities                           (13,687)        (7,371)        (13,810)
                                                                          -------------  -------------   -------------
Cash flows from investing activities:
       Proceeds from the sale of property and equipment                            140            188             288
       Purchases of property and equipment                                        (937)          (753)         (1,985)
       Sales (purchases) of short-term investments, net                          3,820          2,411          18,819
       Proceeds from sale of product line                                       15,862              -               -
       Product line sale proceeds held in escrow                                (9,100)             -               -
                                                                          -------------  -------------   -------------
               Net cash provided by investing activities                         9,785          1,846          17,122
                                                                          -------------  -------------   -------------
Cash flows from financing activities:
       Payments made under capital leases                                         (164)          (385)           (303)
       Proceeds from issuance of shares, net of issuance costs                     473            760             583
                                                                          -------------  -------------   -------------
               Net cash provided by financing activities                          309             375             280
                                                                          -------------  -------------   -------------
Net increase (decrease) in cash and cash equivalents                           (3,593)         (5,150)          3,592
Cash and cash equivalents at beginning of the year                             10,391          15,541          11,949
                                                                          -------------  -------------   -------------
Cash and cash equivalents at the end of the year                           $    6,798     $    10,391      $   15,541
                                                                          -------------  -------------   -------------
                                                                          -------------  -------------   -------------
Supplemental disclosure of cash flow information:
  Income taxes paid                                                        $        0     $         0      $    2,943
  Interest paid                                                            $       22     $        55      $       77

Non-cash investing and financing activities:
  Equipment acquired under capital lease                                   $        0     $        46      $      259




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

                                      41


                             INSIGNIA SOLUTIONS PLC
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION AND BUSINESS

     Insignia Solutions plc (the "Company") is a public limited company 
incorporated in England and Wales. The Company develops, markets and supports 
virtual machine technology which enables software applications to be run on 
various computer platforms.

     The Jeode platform, the Company's new product line released in the first 
quarter of 1999, is the Company's implementation of Sun's Java technology 
specifically designed for embedded products intended to allow software 
developers to create reliable, efficient and predictable embedded products 
that are enabled by the Company's Embedded Virtual Machine ("EVM").

     SoftWindows, the Company's current product line, enables Macintosh and 
UNIX platforms to run substantially all Windows and DOS applications by 
emulating the underlying hardware and peripherals of an x86-based PC and 
incorporating a version of Windows and DOS optimized for use on these 
platforms.

     The Company sold its NTRIGUE product line to Citrix in February 
1998 for $17.687 million. NTRIGUE was a Windows compatibility client/server 
product that supported multiple X-terminals, workstation clients, Macintosh 
computers, PCs, network computers and NetPCs from a Windows NT-based server.

     The principal markets for the Company's products are North America, 
Europe and Far East Asia. The Company distributes its products through 
multiple distribution channels, including direct sales, distributors, 
resellers and original equipment manufacturers.

BASIS OF PRESENTATION

     The Company's consolidated financial statements have been presented on a 
going concern basis, which contemplates the realization of assets and the 
satisfaction of liabilities in the normal course of operations. During the 
past two years, the Company has incurred an aggregate loss from operations 
totaling $25.5 million. At December 31, 1998, the Company's working capital 
totaled $9.712 million, of which $9.1 million was restricted and held in 
escrow, as compared to working capital of $7.816 million at December 31, 1997.

     The Company is in the process of transitioning its product focus from 
Windows emulation and Windows compatibility products to its Jeode product 
line based on the Company's EVM technology. This change in product focus has 
resulted in a redirection of available resources from the Company's 
historical revenue base towards the development and marketing efforts 
associated with the Jeode platform, which was not released for general 
availability until March 1999. As a result of this change in product strategy 
and associated redirection of resources to new product development, the 
Company's financial position weakened significantly during 1998.

     The Company continues to face significant risks associated with the 
successful execution of its new product strategy. These risks include, but 
are not limited to continued technology and product development, introduction 
and market acceptance of new products, changes in the marketplace, liquidity, 
competition from existing and new competitors which may enter the marketplace 
and retention of key personnel. Due to the generally longer sales cycles 
expected to be associated with the Jeode platform, the Company does not 
currently have accurate visibility of future order rates and demand for its 
products generally. There can be no assurance that Jeode platform products 
will achieve market acceptance.

     The Company believes that additional financing will be necessary before 
December 31, 1999, as its existing cash and cash equivalents are insufficient 
to meet the Company's operating and capital requirements for the next twelve 
months. The Company to date has made no commitments nor agreed to any 
arrangements to obtain additional financing, but is currently considering 
various financing alternatives. There can be no assurance that the Company 
will be able to obtain such funding when needed, on acceptable terms or at 
all. The failure to raise additional funds on a timely basis and on 
sufficiently favorable terms could have a material adverse effect on the 
Company's business, operating results and financial condition. The Company's 
liquidity may also be adversely affected in the future by factors such as 
higher interest rates, inability to borrow without collateral, availability 
of capital financing and continued operating losses. Moreover, the Company's 
expense levels are based in part on expectations of future sales levels, and 
a shortfall in expected sales could therefore result in a disproportionate 
decrease in results of operations.

     The Company follows accounting policies that are in accordance with 
principles generally accepted in the United States. The Company conducts most 
of its business in U.S. dollars. All amounts included in the financial 
statements and in the notes herein are in U.S. dollars unless designated "L", 
in which case they are in pounds sterling. The exchange rates between the 
U.S. dollar and the pound sterling were $1.67, $1.67 and $1.71 (expressed in 
U.S. dollars per pound sterling) at December 31, 1998, 1997 and 1996, 
respectively.

USE OF ESTIMATES

     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.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Insignia 
Solutions plc and its wholly owned subsidiaries. All intercompany accounts 
and transactions have been eliminated.

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND SHORT-TERM INVESTMENTS

     The Company considers all highly liquid investments with an original 
maturity of three months or less to be cash equivalents. Cash, cash 
equivalents, restricted cash and short-term investments at December 31, 1998 
and 1997 comprise cash, restricted cash and certificates of deposit. 
Restricted cash, including $9.1 million of cash and cash equivalents held in 
escrow at December 31, 1998, aggregated $9.5 million and $0.2 million at

                                      42


                             INSIGNIA SOLUTIONS PLC
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

December 31, 1998 and 1997, respectively. Cash of $0.4 million and $0.3 
million at December 31, 1998 and 1997, respectively, was restricted due to 
obligations under service contracts. Of the $9.1 million of cash and cash 
equivalents held in escrow at December 31, 1998, $2.5 million was released in 
February 1999. The balance is scheduled to be released in August 1999, 
pending resolution of the indemnity claim (see Note 10 to the Consolidated 
Financial Statements). Certificates of deposit aggregated $4.2 million and 
$6.2 million at December 31, 1998 and 1997, respectively.

     The Company has classified all its securities as "available-for-sale." 
The fair value of these securities, comprised primarily of certificates of 
deposit with commercial banks, approximates cost. These securities mature 
within one year.

REVENUE RECOGNITION

     In October 1997, the American Institute of Certified Public Accountants 
(the "AICPA") issued Statement of Position No. 97-2 ("SOP 97-2"), "Software 
Revenue Recognition", which the Company has adopted for transactions entered 
into during the fiscal year beginning January 1, 1998. SOP 97-2 provides 
guidance for recognizing revenue on software transactions and supersedes 
Statement of Position No. 91-1, "Software Revenue Recognition". In March 
1998, the AICPA issued Statement of Position No. 98-4 ("SOP 98-4"), "Deferral 
of the Effective Date of a Provision of SOP 97-2, Software Revenue 
Recognition". SOP 98-4 deferred, for one year, the application of certain 
passages in SOP 97-2 which limit what is considered vendor-specific objective 
evidence necessary to recognize revenue for software licenses in 
multiple-element arrangements when undelivered elements exist. In December 
1998, the AICPA issued Statement of Position No. 98-9 ("SOP 98-9"), 
"Modification of SOP 97-2, Software Revenue Recognition, With Respect to 
Certain Transactions". SOP 98-9 extends the effective date of SOP 98-4 and 
provides additional interpretive guidance. SOP 98-9 is effective for fiscal 
years beginning after March 15, 1999. The Company will determine the impact, 
if any, of SOP 98-9 on current revenue recognition practices when adopted. 
Adoption of the remaining provisions of SOP 97-2 did not have a material 
impact on revenue recognition during 1998.

     The Company's license revenues are derived from product licensing fees 
relating to the sale of packaged software products and royalties from 
distributors, original equipment manufacturers ("OEMs") and site licensees. 
The Company's service revenues are derived from OEMs for customer funded 
engineering and from annual maintenance contracts.

     Product licensing fees are recognized upon shipment if no significant 
vendor obligations remain and if collection of the resulting receivable is 
deemed probable. The Company grants distributors and resellers certain rights 
of return and price protection on unsold merchandise held by those 
distributors and resellers. Accordingly, provisions for estimated future 
returns, exchanges and credits for price protection are accrued upon product 
shipment.

     The Company has limited control over the extent to which products sold 
to distributors and resellers are sold through to end users. Accordingly, a 
portion of the Company's sales may from time to time result in increased 
inventory at its distributors and resellers. The Company provides sales 
returns allowances for distributor and reseller inventories. These allowances 
are based on the Company's estimates of expected sell-through by distributors 
and resellers of its products. Actual results could differ from these 
estimates.

     The Company provides a limited amount of free telephone technical 
support to customers. These activities are generally considered insignificant 
postcontract customer support obligations. Estimated costs of these 
activities are accrued at the time of product shipment. Revenues from annual 
maintenance contracts are recognized ratably over the term of the contract.

                                      43


                             INSIGNIA SOLUTIONS PLC
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

     Revenues from OEMs for customer-funded engineering are recognized on a 
percentage of completion basis, which is computed using the input measure of 
labor cost. Minimum guaranteed royalty revenues not subject to significant 
future obligations are generally recognized upon shipment of the software. 
Royalty revenues that are subject to significant future obligations are 
recognized when earned. Royalty revenues that exceed the minimum guarantees 
are recognized when reported.

     Payments from OEMs and maintenance contracts received in advance of 
revenue recognition are recorded as deferred revenue.

INVENTORIES

     Inventories, principally finished software products, manuals and related 
supplies, are stated at the lower of cost or market value. Cost is determined 
using the first-in, first-out method. Provisions are made in each period for 
excess and obsolete inventories.

EQUIPMENT AND DEPRECIATION

     Property and equipment is recorded at cost. Depreciation is provided 
using the straight-line method over the estimated useful lives which range 
from three to four years or the lease term if shorter.

FOREIGN CURRENCY TRANSLATION

     The Company's primary functional currency for its non-U.S. operations is 
the U.S. dollar. Non-U.S. dollar denominated monetary assets and liabilities 
are remeasured using the exchange rate in effect at the balance sheet date, 
while nonmonetary items are remeasured at historical rates. Revenues and 
expenses are translated at the average exchange rates in effect during each 
period, except for those expenses related to balance sheet amounts which are 
translated at historical exchange rates. Remeasurement adjustments and 
transaction gains or losses are recognized in the income statement during the 
period of occurrence. During its early years of existence, the Company used 
the pound sterling as the functional currency for its non-U.S. operations. 
Accordingly, translation gains and losses recognized during such periods have 
been included in the cumulative currency translation adjustments account.

FOREIGN CURRENCY FINANCIAL INSTRUMENTS

     The Company enters into currency option contracts to hedge against 
exchange risks associated with the pound sterling denominated operating 
expenses of its U.K. operations. The gains and losses on these contracts are 
generally included in the statement of operations when the related operating 
expenses are recognized. At December 31, 1998 and 1997, currency options of 
$0 and $2.0 million, respectively, were outstanding. Deferred gains and 
losses on such agreements at December 31, 1997 were not material. All 
contracts mature within one year of purchase. From time to time, the Company 
also enters into short-term forward exchange contracts. The Company generally 
does not use hedge accounting for the forward exchange contracts. Such 
contracts are marked to market at period ends. No forward exchange contracts 
were outstanding at December 31, 1998 or December 31, 1997.

                                      44


                              INSIGNIA SOLUTIONS PLC
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

SOFTWARE DEVELOPMENT COSTS

     The Company capitalizes internal software development costs incurred 
after technological feasibility has been demonstrated. The Company defines 
establishment of technological feasibility as the completion of a working 
model. Such capitalized amounts are amortized commencing with the 
introduction of that product at the greater of the straight-line basis 
utilizing its estimated economic life, generally six months to one year, or 
the ratio of actual revenues achieved to the total anticipated revenues over 
the life of the product. At December 31, 1998 and 1997, capitalized software 
development costs were fully amortized.

STOCK-BASED COMPENSATION

     The Company accounts for its employee stock option plans and employee 
stock purchase plan in accordance with provisions of the Accounting 
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" 
("APB 25"), but has made the disclosures required under Statement of 
Financial Accounting Standards No. 123, "Accounting for Stock-Based 
Compensation" ("FAS 123") in these notes to consolidated financial statements.

INCOME TAXES

     The Company accounts for income taxes under an asset and liability 
approach that requires the recognition of deferred tax assets and liabilities 
for the expected future tax consequences of events that have been recognized 
in the Company's financial statements or tax returns. In estimating future 
tax consequences, the Company generally considers all expected future events 
other than enactments of changes in the tax law or rates.

CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially subject the Company to 
significant concentrations of credit risk consist principally of cash, cash 
equivalents, restricted cash, short-term investments and trade accounts 
receivable. The Company places its cash, cash equivalents, restricted cash 
and short-term investments primarily in bank accounts and certificates of 
deposit with high credit quality financial institutions.

     The Company sells its products primarily to distributors and original 
equipment manufacturers. The Company performs ongoing credit evaluations of 
its customers' financial condition and generally requires no collateral from 
its customers. The Company maintains an allowance for uncollectible accounts 
receivable based upon the expected collectibility of all accounts receivable. 
At December 31, 1998, two customers accounted for 25% and 16%, respectively, 
of gross trade receivables. At December 31, 1997, two customers accounted for 
26% and 11%, respectively, of gross trade receivables.

NET INCOME (LOSS) PER SHARE

     Net income (loss) per share ("EPS") is presented on a basic and diluted 
basis, and is based upon the weighted average number of ordinary and ordinary 
equivalent shares outstanding during the period. Ordinary equivalent shares 
consist of warrants and stock options (using the modified treasury stock 
method). Under the Basic method of calculation of EPS, ordinary equivalent 
shares are excluded from the computation. Under the Diluted method of 
calculation of EPS, ordinary share equivalents are excluded from the 
computation if their effect is anti-dilutive.

                                      45


                              INSIGNIA SOLUTIONS PLC
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

COMPREHENSIVE INCOME

     In 1998, the Company adopted Statement of Financial Accounting Standards 
No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130 requires that 
all items recognized under accounting standards as components of 
comprehensive earnings be reported in an annual statement that is displayed 
with the same prominence as other annual financial statements. FAS 130 also 
requires that an entity classify items of other comprehensive earnings by 
their nature in an annual financial statement. The accumulated other 
comprehensive loss at December 31, 1998 and 1997, related to cumulative 
currency translation adjustments. There were no other comprehensive income 
items in 1998, 1997 or 1996.

RECLASSIFICATIONS

     Certain previously reported amounts have been reclassified to conform 
with the current period presentation.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standard No. 133 "Accounting for Derivative 
Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes 
accounting and reporting standards for derivative instruments and for hedging 
activities. This statement becomes effective for all fiscal quarters of 
fiscal years beginning after June 15, 1999. The Company will adopt FAS 133 in 
2000.

     In March 1998, the AICPA issued Statement of Position No. 98-1, 
"Accounting for the Costs of Computer Software Developed or Obtained for 
Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance on accounting for the 
costs of computer software developed or obtained for internal use and is 
effective for financial statements for fiscal years beginning after December 
15, 1998. The Company will adopt SOP 98-1 in 1999. The Company expects that 
SOP 98-1 will not have a material impact on the results of operations when 
adopted.

                                      46



                              INSIGNIA SOLUTIONS PLC
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--BALANCE SHEET DETAIL:

     The following table provides details of the major components of the 
indicated balance sheet accounts (in thousands):



                                                                         DECEMBER 31,
                                                            ----------------------------------------
                                                                   1998                  1997
                                                            ------------------    ------------------
                                                                            
Accounts receivables, net:
  Trade accounts receivable, gross..................            $   3,155              $   9,572
    Less allowance for doubtful accounts............                 (459)                  (344)
    Less allowance for sales returns................                 (990)                (2,474)
                                                            ------------------    ------------------
                                                                $   1,706              $   6,754
                                                            ------------------    ------------------
                                                            ------------------    ------------------
Property and equipment, net:
  Computers and other equipment.....................            $   2,700              $   8,615
  Leasehold improvements............................                  458                  1,435
  Furniture and fixtures............................                  108                    810
                                                            ------------------    ------------------
                                                                    3,266                 10,860
  Less accumulated depreciation.....................               (2,192)                (8,685)
                                                            ------------------    ------------------
                                                                $   1,074              $   2,175
                                                            ------------------    ------------------
                                                            ------------------    ------------------
Accrued liabilities:
  Accrued legal and professional services...........            $     829              $     574
  Accrued compensation and payroll taxes............                  495                    585
  Accrued marketing programs........................                  165                    437
  Other.............................................                  776                  1,089
                                                            ------------------    ------------------
                                                                $   2,265              $   2,685
                                                            ------------------    ------------------
                                                            ------------------    ------------------



NOTE 3--STOCK PLANS:

     The Company has four stock option plans, which provide for the issuance 
of stock options to employees of the Company to purchase Ordinary shares of 
L0.20 par value. At December 31, 1998 and 1997, respectively, approximately 
453,011 and 245,290 Ordinary shares were available for future grants of stock 
options. Stock options are generally granted at prices of not less than 100% 
of the fair market value of the Ordinary shares on the date of grant, as 
determined by the Board of Directors.

     In March 1995, the Company's shareholders adopted the 1995 Employee 
Share Purchase Plan (the "Purchase Plan") with 275,000 Ordinary shares 
reserved for issuance thereunder. On July 21, 1998 the number of shares 
reserved for issuance was increased to 525,000. The Purchase Plan became 
effective November 17, 1995 and enables employees to purchase Ordinary shares 
at approximately 85% of the fair market value of the Ordinary shares at the 
beginning or end of each six month offering period. The Purchase Plan 
qualifies as an "employee stock purchase plan" under section 423 of the U.S. 
Internal Revenue Code. During 1998, 1997 and 1996 the Company issued 128,103, 
116,053 and 94,229 shares under the Purchase Plan, respectively. At December 
31, 1998 approximately 186,615 ordinary shares were reserved for future 
Purchase Plan issuances.

                                      47


                              INSIGNIA SOLUTIONS PLC
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--STOCK PLANS: (CONTINUED)

     The following table summarizes activity on stock options:



                                        1986 AND 1996    1988 AND 1995
                                            U.K.              U.S.                          WEIGHTED
                                        SHARE OPTION      STOCK OPTION                      AVERAGE
                                           SCHEMES           PLANS             TOTAL      EXERCISE PRICE
                                       ----------------  ---------------  --------------  ---------------
                                                                              
Outstanding at December 31, 1995....       1,217,343         1,096,976       2,314,319       $   1.96

Granted in 1996.....................          72,125           344,225         416,350       $   5.76
Exercised in 1996...................        (155,953)          (85,608)       (241,561)      $   1.34
Lapsed in 1996......................         (27,267)         (112,852)       (140,119)      $   5.61
                                       ----------------  ---------------  --------------  ---------------
Outstanding at December 31, 1996....       1,106,248         1,242,741       2,348,989       $   2.46

Granted in 1997.....................         187,000         1,671,925       1,858,925       $   2.30
Exercised in 1997...................         (74,756)         (302,368)       (377,124)      $   1.26
Cancelled/surrendered in 1997.......        (141,375)         (202,736)       (344,111)      $   6.32
Lapsed in 1997......................         (50,598)         (465,227)       (515,825)      $   2.84
                                       ----------------  ---------------  --------------  ---------------
Outstanding at December 31, 1997....       1,026,519         1,944,335       2,970,854       $   2.00

Granted in 1998.....................         143,250           888,750       1,032,000       $   1.11
Exercised in 1998...................        (396,000)          (95,000)       (491,000)      $   0.81
Lapsed in 1998......................        (205,977)       (1,033,744)     (1,239,721)      $   2.15
                                       ----------------  ---------------  --------------  ---------------
Outstanding at December 31, 1998....         567,792         1,704,341       2,272,133       $   1.77
                                       ----------------  ---------------  --------------  ---------------
                                       ----------------  ---------------  --------------  ---------------



     Options granted under the Company's option plans generally vest over a 
four year period. Options are exercisable until the tenth anniversary of the 
date of grant unless they lapse before that date. Options to purchase 755,031 
and 1,677,062 shares were exercisable at December 31, 1998 and 1997, 
respectively.

                                      48


                              INSIGNIA SOLUTIONS PLC
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--STOCK PLANS: (CONTINUED)

     The following table summarizes information about the Company's stock 
options outstanding and exercisable at December 31, 1998:

     Options outstanding at December 31, 1998:



                                                                        WEIGHTED
                                                                         AVERAGE                  WEIGHTED
                                              NUMBER                    REMAINING             AVERAGE EXERCISE
RANGE OF EXERCISE PRICES                    OUTSTANDING             CONTRACTUAL LIFE                PRICE
- ----------------------------------     ----------------------     ----------------------      ----------------
                                                                                     
$0.01 - $2.00.....................           1,578,958                  8.1 years                   $ 1.29
$2.01 - $4.00.....................             588,363                  8.5 years                   $ 2.37
$4.01 - $6.00.....................             103,625                  7.3 years                   $ 5.67
$6.01 - $11.00....................               1,187                  6.4 years                   $10.08
                                       ----------------------     ----------------------     --------------------
                                             2,272,133                  8.2 years                   $ 1.77
                                       ----------------------     ----------------------     --------------------
                                       ----------------------     ----------------------     --------------------


     Options exercisable at December 31, 1998:



                                                                      WEIGHTED
                                              NUMBER              AVERAGE EXERCISE
RANGE OF EXERCISE PRICES                    EXERCISABLE                PRICE
- ----------------------------------     ----------------------     ----------------
                                                            
$0.01 - $2.00.....................             464,000                  $ 1.58
$2.01 - $4.00.....................             221,725                  $ 2.37
$4.01 - $6.00.....................              68,125                  $ 5.69
$6.01 - $11.00....................               1,181                  $10.09
                                       ----------------------     ----------------------
                                               755,031                  $ 2.20
                                       ----------------------     ----------------------
                                       ----------------------     ----------------------


FAIR VALUE DISCLOSURES

     Had the compensation cost for the Company's stock option plans and the 
Purchase Plan been determined based on the fair value at the grant dates, as 
prescribed in FAS 123, the net income (loss) and net income (loss) per share 
would have been adjusted to the pro-forma amounts indicated below (in 
thousands, except per share data):



                                                                 YEAR ENDED DECEMBER 31,
                                            -------------------------------------------------------------------
                                                  1998                    1997                     1996
                                            ------------------    ----------------------    -------------------
                                                                                   
Net income (loss):
  As reported.........................           $  422                 $ (10,658)               $ (10,766)
  Pro forma...........................             (756)                  (11,495)                 (11,275)
Basic net income (loss) per share:
  As reported.........................           $ 0.03                 $   (0.91)               $   (0.95)
  Pro forma...........................             (.06)                    (0.98)                   (0.99)
Diluted net income (loss) per share:
  As reported.........................           $ 0.03                 $   (0.91)               $   (0.95)
  Pro forma...........................             (.06)                    (0.98)                   (0.99)



                                      49


                              INSIGNIA SOLUTIONS PLC
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--STOCK PLANS: (CONTINUED)

     In accordance with the disclosure provisions of FAS 123, the fair value 
of employee stock options granted during fiscal 1998, 1997 and 1996 was 
estimated at the date of grant using the Black-Scholes model and the 
following weighted average assumptions:



                                                                 YEAR ENDED DECEMBER 31,
                                                  -------------------------------------------------------
                                                        1998               1997              1996
                                                  -----------------  ----------------- ------------------
                                                                              
     Volatility range...........................            171%       64.0% - 66.9%      63.2% - 64.3%
     Risk-free interest rate range..............     4.2% - 5.6%         5.7% - 6.7%        5.3% - 6.6%
     Dividend yield.............................              0%                  0%                 0%
     Expected option term.......................           4 yrs               4 yrs              4 yrs



NOTE 4--RESTRUCTURING:

         In 1997, the Company completed two reorganizations. In the first 
reorganization the Company reduced headcount by 11 persons and integrated 
product development, product marketing and the sales organization into two 
business units. In the second reorganization, the Company combined the two 
sales organizations into one unit, reducing headcount by 53 persons, 
reorganized the sales force such that direct sales inquiries are now referred 
to distributors, and reduced the number of facilities it operated from. 
Restructuring expenses consist principally of costs related to terminated 
employees, including serverance payments and stock option related expenses, 
and future rents on facilities no longer used by the Company. At December 
31, 1997, approximately $500,000 of the restructuring charge was included in 
accrued expenses.

NOTE 5--INCOME TAXES:

     The components of income (loss) before income taxes are as follows (in 
thousands):



                                                             YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------
                                                         1998          1997          1996
                                                     ------------  ------------  -----------
                                                                        
United States................................          $(4,241)      $ (2,286)     $ (8,733)
United Kingdom and other countries...........            6,446         (9,092)       (1,703)
                                                     ------------  ------------  -----------
                                                       $ 2,205       $(11,378)     $(10,436)
                                                     ------------  ------------  -----------
                                                     ------------  ------------  -----------


     The components of the provision (benefit) for income taxes are as 
follows (in thousands):



                                                            YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------
                                                         1998          1997          1996
                                                     ------------  ------------  -----------
                                                                        
Current:
     U.S. federal.............................         $   (76)      $    174       $   (200)
     U.S. state and local.....................             100             -               -
     United Kingdom and other countries.......           1,759           (894)           530
                                                     ------------  ------------  -----------
          Total current.......................           1,783           (720)           330
                                                     ------------  ------------  -----------
Deferred:
     U.S. federal.............................              -              -               -
     U.S. state and local.....................              -              -               -
     United Kingdom and other countries.......              -              -               -
                                                     ------------  ------------  -----------
          Total deferred......................              -              -               -
                                                     ------------  ------------  -----------
Total provision (benefit).........................     $ 1,783       $  (720)     $      330
                                                     ------------  ------------  -----------
                                                     ------------  ------------  -----------


                                      50


                              INSIGNIA SOLUTIONS PLC
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--INCOME TAXES: (CONTINUED)

     A reconciliation of the Company's effective tax rate to the U.S. federal 
statutory rate follows:



                                                            YEAR ENDED DECEMBER 31,
                                                     ---------------------------------------
                                                         1998         1997          1996
                                                     ------------  ------------  -----------
                                                                        
U.S. federal statutory rate........................     (34.0)%      (34.0)%       (34.0)%
State and local taxes, net of U.S. federal benefit.       4.5            -             -
Foreign income taxes at other than U.S. rate.......      86.4         (6.3)          3.2
Utilization of operating loss carryforwards........     (10.0)           -             -
Reserve for net deferred tax assets................      34.0         34.0          34.0
                                                     ------------  ------------  -----------
     Effective tax rate............................      80.9%        (6.3)%         3.2%
                                                     ------------  ------------  -----------
                                                     ------------  ------------  -----------



Deferred tax assets were comprised of the following (in thousands):



                                                                         DECEMBER 31,
                                                                  -------------------------
                                                                      1998         1997
                                                                  ------------  -----------
                                                                          
Net operating loss carryforwards...............................     $  6,947      $  4,342
Tax credit carryforwards.......................................        1,082           789
Sales return allowance.........................................          384           684
Accrued expenses, allowance and other temporary differences....          657         1,584
                                                                  ------------  -----------
Net deferred tax assets before valuation allowance.............        9,070         7,399
Deferred tax asset valuation allowance.........................       (9,070)       (7,399)
                                                                  ------------  -----------
Net deferred taxes.............................................     $      -      $      -
                                                                  ------------  -----------
                                                                  ------------  -----------


    At December 31, 1998, the Company had net operating loss carryforwards of 
approximately $18.6 million, $9.3 million and $1.8 million for U.S. Federal, 
State and United Kingdom tax purposes, respectively. If unutilized, these net 
operating loss carryforwards will completely expire in 2018, 2003 and 
unlimited, respectively. Should the Company incur substantial changes in 
ownership, the U.S. federal and state net operating losses may be subject to 
an annual utilization limitation.

     At December 31, 1998, the Company's deferred tax assets relate primarily 
to its United States operations. Management believes that, based on such 
factors as recent and potential fluctuations in operating results, it is more 
likely than not that the United States operations will not generate 
sufficient future taxable income, and thus a full valuation allowance has 
been recorded at December 31, 1998. If the Company generates taxable income 
in future years, the valuation allowance may be reduced, which 
correspondingly may reduce the Company's tax provision.

NOTE 6--EMPLOYEE PENSION PLANS:

     The Company has a 401(k) plan covering all of its U.S. employees and a 
defined contribution pension plan covering all its United Kingdom employees. 
Under both these plans, employees may contribute a percentage of their 
compensation and the Company makes certain matching contributions. Both the 
employees' and the Company's contributions are fully vested and 
nonforfeitable at all times. The assets of both these plans are held 
separately from those of the Company in independently managed and 
administered funds. The Company's contributions to these plans aggregated 
$182,000 in 1998, $315,000 in 1997 and $340,000 in 1996.

                                      51



                              INSIGNIA SOLUTIONS PLC
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--NET INCOME (LOSS) PER SHARE:



                                                              YEAR ENDED DECEMBER 31,
                                                  ------------------------------------------------
                                                      1998              1997             1996
                                                  -------------     -------------    -------------
                                                        (in thousands, except per share data)
                                                                            
Net income (loss)                                   $      422        $  (10,658)      $  (10,766)
                                                  -------------     -------------    -------------
                                                  -------------     -------------    -------------

CALCULATION OF BASIC NET INCOME (LOSS) PER SHARE:
Weighted average number of shares
  outstanding used in computation                       12,159            11,690           11,342
                                                  -------------     -------------    -------------
                                                  -------------     -------------    -------------

Basic net income (loss) per share                   $     0.03        $    (0.91)      $    (0.95)
                                                  -------------     -------------    -------------
                                                  -------------     -------------    -------------

CALCULATION OF DILUTED NET INCOME (LOSS) PER SHARE:
Weighted average number of shares
  outstanding used in computation                       12,159            11,690           11,342
Net effect of dilutive stock options
  outstanding                                              219                 -                -
                                                  -------------     -------------    -------------

Weighted average number of shares
  and share equivalents                                 12,378            11,690           11,342
                                                  -------------     -------------    -------------
                                                  -------------     -------------    -------------

Diluted net income (loss) per share                 $     0.03        $    (0.91)      $    (0.95)
                                                  -------------     -------------    -------------
                                                  -------------     -------------    -------------



NOTE 8--COMMITMENTS AND CONTINGENCIES:

LEASE COMMITMENTS

     The Company is party to a number of noncancelable operating and capital 
lease agreements.

     Computer and other equipment under capital leases were as follows (in 
thousands):



                                                                           DECEMBER 31,
                                                                  --------------------------------
                                                                       1998              1997
                                                                  ---------------   --------------
                                                                              
Computer and other equipment, at cost.......................         $     593        $     769
Less accumulated amortization...............................              (546)            (561)
                                                                  ---------------   --------------
Computer and other equipment, net...........................         $      47        $     208
                                                                  ---------------   --------------
                                                                  ---------------   --------------


                                      52


                              INSIGNIA SOLUTIONS PLC
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8--COMMITMENTS AND CONTINGENCIES: (CONTINUED)

     Amortization of leased computers and other equipment under capital 
leases was $50,000, $252,000 and $273,000 in 1998, 1997 and 1996, 
respectively.

     The following are future minimum payments under capital and operating 
leases as of December 31, 1998 (in thousands):



                                                                     CAPITAL     OPERATING
                                                                      LEASES       LEASES
                                                                    ----------- -------------
                                                                          
Year ending December 31,
1999..............................................                    $    55      $     739
2000..............................................                           -           642
2001..............................................                           -           631
2002..............................................                           -           995
2003..............................................                           -           418
Thereafter........................................                           -         2,175
                                                                    ----------- -------------
Total minimum lease payments......................                          55     $   5,600
                                                                                -------------
Less amount representing interest.................                          (4) -------------
                                                                    -----------
Present value of minimum obligations under capital
  leases..........................................                          51
Less current portion of obligations under capital
  leases..........................................                         (51)
                                                                    -----------
Long-term obligations under capital
  leases..........................................                    $      -
                                                                    -----------
                                                                    -----------


     Operating lease commitments above are net of sublease income of 
$832,000, $832,000, $792,000 and $188,000 in 1999, 2000, 2001 and 2002, 
respectively. The rental expense under all operating leases was $791,000, 
$921,000, and $1,770,000 in 1998, 1997 and 1996, respectively. Rental expense 
was net of sublease rental income of $559,000 in 1998, $407,000 in 1997 and 
$356,000 in 1996.

ROYALTY AGREEMENT

     The Company has a non-exclusive, worldwide license from Microsoft 
("Microsoft Distribution Agreement") to reproduce, adapt and distribute the 
currently available versions of Windows and MS-DOS that are included as a 
component of the Company's products. The Company pays Microsoft a per unit 
royalty for copies of the Company's products sold that include a version of 
Windows and MS-DOS. The current royalty amounts are based upon certain 
estimates of the volume of the Company's sales of SoftWindows. The Microsoft 
Distribution Agreement expired on March 31, 1997, but was extended until 
September 30, 1998 on substantially the same terms. The Company subsequently 
entered into a new distribution agreement dated October 1, 1998 on 
substantially the same terms, effective for one year.

     In January 1999, pursuant to this agreement, Microsoft began an audit of 
the royalties paid in 1997 and 1998. The Company has not been notified of the 
outcome of the audit. If Microsoft claims underpayment of royalties, under 
this agreement, the Company may be subject to penalties in addition to the 
repayment of the underpaid royalties.

EMPLOYMENT AGREEMENTS

     The Company has entered into several employment agreements with key 
executives which would require the Company to continue to pay salary for up 
to one year if any of these employees is terminated under certain 
circumstances as specified in the agreements.

                                      53


                              INSIGNIA SOLUTIONS PLC
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--SEGMENT INFORMATION:

     In 1998, the Company adopted Statement of Financial Accounting Standards 
131, "Disclosures about Segments of an Enterprise and Related Information" 
("FAS 131"). FAS 131 supersedes FAS 14, "Financial Reporting for Segments of 
a Business Enterprise", replacing the "industry segment" approach with the 
"management" approach. The management approach designates the internal 
organization that is used by management for making operating decisions and 
assessing performance as the source of the Company's reportable segments. FAS 
131 also requires disclosures about products and services, geographic areas, 
and major customers. The adoption of FAS 131 did not affect results of 
operations but did affect the disclosure of segment information.

    The Company operates in a single industry segment providing virtual 
machine technology which enables software applications and operating systems 
to be run on various computer platforms.  In 1998, Ingram Micro U.S. and Sun  
Microsystems  Inc. each accounted for 27% of total revenues. In 1997, Silicon 
Graphics, Inc. accounted for 19% of total revenues. In 1996, Silicon 
Graphics, Inc. and Mitsubishi Corporation accounted for 14% and 12%, 
respectively of total revenues. No other customer accounted for 10% or more 
of the Company's total revenues during 1998, 1997 or 1996.

GEOGRAPHIC INFORMATION

     Financial information by geographical region is summarized below (in 
thousands):



                                                        YEAR ENDED DECEMBER 31,
                                               ------------------------------------------
                                                   1998           1997           1996
                                               ------------   ------------   ------------
                                                                    
Revenues from unaffiliated customers:
     United States...........................    $ 11,960       $ 32,458       $ 36,371
     International...........................       2,136          6,411          7,875
                                               ------------   ------------   ------------
Consolidated.................................    $ 14,096       $ 38,869       $ 44,246
                                               ------------   ------------   ------------
                                               ------------   ------------   ------------
Intercompany revenues:
     United States...........................    $  1,637       $  4,929       $    913
     International...........................       1,280          3,250          9,104
                                               ------------   ------------   ------------
Consolidated.................................    $  2,917       $  8,179       $ 10,017
                                               ------------   ------------   ------------
                                               ------------   ------------   ------------
Operating loss:
     United States...........................    $ (4,168)      $ (2,005)      $ (8,666)
     International...........................      (9,498)        (9,877)        (3,166)
                                               ------------   ------------   ------------
Consolidated.................................    $(13,666)      $(11,882)      $(11,832)
                                               ------------   ------------   ------------
                                               ------------   ------------   ------------
Identifiable assets:
     United States...........................    $  4,366       $ 13,380       $  9,982
     International...........................      26,077         21,162         30,060
     Intercompany items and eliminations.....      (9,432)        (9,085)        (5,471)
                                               ------------   ------------   ------------
Consolidated.................................    $ 21,011       $ 25,457       $ 34,571
                                               ------------   ------------   ------------
                                               ------------   ------------   ------------
Long-lived assets:
     United States...........................    $    794       $  1,573       $  2,371
     International...........................      10,344         10,347          7,814
     Intercompany items and eliminations.....      (9,432)        (9,085)        (5,471)
                                               ------------   ------------   ------------
Consolidated.................................     $ 1,706       $  2,835       $  4,714
                                               ------------   ------------   ------------
                                               ------------   ------------   ------------



                                      54


     All of the international revenues and substantially all of the 
international identifiable assets relate to the Company's operations in the 
United Kingdom. Intercompany sales are accounted for at prices intended to 
approximate those that would be charged to unaffiliated customers.

     Revenues from United States operations included export sales of 
$1,290,000, $3,087,000 and $5,795,000 in 1998, 1997 and 1996, respectively, 
which were primarily to customers in Asia and Australia.

    Revenue reports based on geographic area were prepared for the first time 
in fiscal 1998. Management believes that, given its systems' constraints, the 
cost to develop comparative segment information for prior years would be 
excessive. Accordingly, comparative information for all prior years will not 
be presented.

     Revenue by geographic area for the year ended December 31, 1998 is as 
follows (in thousands):



                        U.S.              JAPAN              EUROPE             TOTAL
                    --------------    ---------------     --------------    ---------------
                                                                
Distributor             $ 9,525           $  1,306            $ 2,119            $12,950
End user                  1,033                  -                  9              1,042
Other                        96                  -                  8                104
                    --------------    ---------------     --------------    ---------------
Total                   $10,654           $  1,306            $ 2,136           $ 14,096
                    --------------    ---------------     --------------    ---------------
                    --------------    ---------------     --------------    ---------------
% of Total revenue          76%                9%                 15%               100%
                    --------------    ---------------     --------------    ---------------
                    --------------    ---------------     --------------    ---------------



     There were no European countries that accounted for more than 10% of 
total revenue.

NOTE 10--SUBSEQUENT EVENTS:

     On January 29, 1999, the Company received an indemnity claim from Citrix 
for an amount estimated by Citrix to not exceed $6.25 million. The claim was 
made pursuant to the Asset Purchase Agreement between the Company and Citrix 
under which Citrix purchased the Company's NTRIGUE product line in February 
1998.

     Citrix' indemnity claim is based on a declaratory relief action that 
Citrix filed against GraphOn Corp. ("GraphOn") in November 1998 in the United 
States District Court, Southern District of Florida. Citrix' action against 
GraphOn seeks a declaratory judgement that Citrix does not infringe any 
GraphOn proprietary rights and that Citrix has not misappropriated any trade 
secrets or breached an agreement to which GraphOn is a party. Citrix filed 
the action in response to and to resolve assertions first made by GraphOn, 
and disclosed to Citrix in January 1998, that the Company used GraphOn's 
confidential information to develop certain of the Company's products, 
possibly including products the Company sold to Citrix in February 1998. 
GraphOn has not filed an action against either the Company or Citrix relating 
to its assertions and the Company believes such assertions by GraphOn are 
without merit or basis. Accordingly, the Company intends to contest Citrix' 
indemnity claim.

                                      55


                              INSIGNIA SOLUTIONS PLC
                                   SCHEDULE II
                          VALUATION AND QUALIFYING ACCOUNTS



                                               BALANCE AT
                                                BEGINNING                            DEDUCTIONS       BALANCE AT END
                                                OF PERIOD          ADDITIONS        (WRITE-OFFS)        OF PERIOD
                                            -----------------  -----------------  ----------------  -----------------
                                                                         (in thousands)
                                                                                        
Allowance for doubtful accounts:
Year ended December 31, 1998                       $344              $209             $ (94)               $459
Year ended December 31, 1997                        298                94               (48)                344
Year ended December 31, 1996                        228               127               (57)                298



                                      56


                         REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
    and Shareholders of Insignia Solutions plc:

     In our opinion, the consolidated financial statements listed in the 
index appearing under Item 14 (a) (1) and (2) of this Annual Report on Form 
10-K present fairly, in all material respects, the financial position of 
Insignia Solutions plc and its subsidiaries (the "Company") at December 31, 
1998 and 1997 and the results of their operations and their cash flows for 
each of the three years in the period ended December 31, 1998, in conformity 
with generally accepted accounting principles. These financial statements are 
the responsibility of the Company's management; our responsibility is to 
express an opinion on these financial statements based on our audits. We 
conducted our audits of these statements in accordance with generally 
accepted auditing standards, which require that we plan and perform the audit 
to obtain reasonable assurance about whether the financial statements are 
free of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements, 
assessing the accounting principles used and significant estimates made by 
management, and evaluating the overall financial statement presentation. We 
believe that our audits provide a reasonable basis for the opinion expressed 
above.

/s/ PricewaterhouseCoopers LLP
- ------------------------------


San Jose, California
March 30, 1999

                                      57


                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized on March 30, 1999.

                                       INSIGNIA SOLUTIONS PLC

                                       By: /s/ Richard M. Noling
                                       -------------------------------------
                                       President and Chief Executive Officer

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




        SIGNATURE                        CAPACITY                        DATE
        ---------                        --------                        ----
                                                                
/s/ Richard M. Noling              President, Chief Executive         March 30, 1999
- -------------------------------    Officer, and a Director
Richard M. Noling                  (Principal Executive Officer,
                                   and Director)

/s/Stephen M. Ambler               Chief Financial Officer,           March 30, 1999
- -------------------------------    Company Secretary and Senior
Stephen M. Ambler                  Vice President (Principal
                                   Financial Officer and Principal
                                   Accounting Officer)
ADDITIONAL DIRECTORS:

/s/ Albert E. Sisto                Director                           March 30, 1999
- -------------------------------
Albert E. Sisto

/s/ Vincent S. Pino                Director                           March 30, 1999
- -------------------------------
Vincent S. Pino

/s/ Nicholas, Viscount Bearsted    Director                           March 30, 1999
- -------------------------------
Nicholas, Viscount Bearsted


                                      58



                               INDEX TO EXHIBITS

     The following exhibits are filed as part of this Report:




  EXHIBIT
  NUMBER                               EXHIBIT TITLE
 --------  -----------------------------------------------------------------------
        
    2.01 --Asset Purchase Agreement dated as of January 10, 1998, by and
           among Citrix Systems, Inc., Citrix Systems UK Limited and Insignia
           Solutions plc. (7)**
    2.02 --Amendment No. 1 to Asset Purchase Agreement dated as of February
           5, 1998, by and among Citrix Systems, Inc., Citrix Systems UK
           Limited and Insignia Solutions plc. (7)**
    3.02 --Registrant's Articles of Association. (1)
    3.04 --Registrant's Memorandum of Association. (1)
    4.01 --Form of Specimen Certificate for Registrant's Ordinary Shares. (1)
    4.02 --Registration Rights Agreement, dated as of June 5, 1992, as
           amended. (1) 
    4.03 --Deposit Agreement between Registrant and The Bank of New York. (2) 
    4.04 --Form of American Depositary Receipt (included in Exhibit 4.03). (2)
   10.01 --Registrant's 1986 Executive Share Option Scheme, as amended, and 
           related documents. (1)*
   10.02 --Registrant's 1988 U.S. Stock Option Plan, as amended, and related 
           documents. (1)*
   10.03 --Registrant's 1995 Incentive Stock Option Plan for U.S. Employees 
           and related documents. (6)*
   10.05 --Insignia Solutions Inc. 401(k) Plan. (1)*
   10.06 --Registrant's Small Self-Administered Pension Plan Definitive Deed 
           and Rules. (1)*
   10.10 --Executive's Employment Agreement dated January 1, 1993 between 
           Registrant and George Buchan. (1)*
   10.14 --Form of Indemnification Agreement entered into by Registrant with 
           each of its directors and executive officers. (1)*
   10.15 --Lease Agreement between Insignia Solutions Inc. and Shoreline 
           Investments I dated March 10, 1993. (1)
   10.16 --Lease between Registrant and The Standard Life Assurance Company
           dated November 3, 1992 and related documents. (1)
   10.17 --License Agreement between Insignia Solutions Inc. and Microsoft 
           Corporation dated January 1, 1991, as amended. (1)**
   10.21 --Distribution Agreement between Insignia Solutions Inc. and Micro 
           D, Inc. dated October 27, 1988, as amended. (1)**
   10.22 --Form of Indemnification Agreement entered into between Insignia 
           Solutions Inc. and each of Registrant's directors and executive 
           officers. (1)*
   10.25 --Authorized International Master Distributor Agreement between 
           Insignia Solutions Inc. and Mitsubishi Corporation dated May 16, 
           1995, as amended. (2)**
   10.27 --Microsoft Software Distribution License Agreement for Desktop 
           Operating Systems dated March 1, 1996, between Microsoft Corporation 
           and Insignia Solutions Inc. (4)**
   10.28 --U.K. Employee Share Option Scheme 1996, as amended. (6)*
   10.29 --License and Distribution Agreement effective February 24, 1995, 
           between Silicon Graphics, Inc. and Insignia Solutions Inc., as 
           amended. (3)**
   10.30 --Amendment Number 1 and Amendment Number 2 to Microsoft OEM License 
           Agreement for Desktop Operating Systems between the Company and 
           Microsoft Corporation. (5)**
   10.33 --Employment Agreement effective March 25, 1997 between Registrant 
           and Richard M. Noling. (6)*
   10.34 --Consulting Agreement effective April 1, 1997 between Registrant 
           and Nicholas, Viscount Bearsted. (6)*
   10.35 --Volume Purchase Agreement dated as of September 29, 1997 between 
           Registrant and Silicon Graphics, Inc. (6)
   10.36 --Source Code License and Binary Distribution Agreement dated as
           of September 29, 1997 between Registrant and Silicon Graphics,
           Inc. (6)
   10.37 --Amendment Number 4 dated March 15, 1998 to Microsoft OEM License
           Agreement for Desktop Operating Systems between the Company and
           Microsoft Corporation. (8)



  EXHIBIT
  NUMBER                               EXHIBIT TITLE
 --------  -----------------------------------------------------------------------
        
   10.38 --Lease Agreement between Insignia Solutions, Inc. and Lincoln-Whitehall 
           Pacific, LLC, dated December 22, 1997. (8)
   10.39 --Trademark License between Insignia Solutions, Inc. and Microsoft 
           Corporation dated March 16, 1998. (8)
   10.40 --Distribution Agreement between Insignia Solutions, Inc. and Sun 
           Microsystems, Inc. dated December 24, 1997. (8)**
   10.41 --Microsoft License Agreement for Desktop Operating System Products dated 
           October 1, 1998 between Microsoft Licensing, Inc. and Insignia Solutions, 
           Inc. (9)**
   10.42 --Registrant's 1995 Employee Share Purchase Plan, as amended. (9)*
   10.43 --Promissory Note dated July 1, 1998 between Insignia Solutions, Inc. and 
           David Winterburn. (9)*
   10.44 --Lease agreements(s) between Insignia Solutions plc and Comland Industrial 
           and Commercial Properties Limited dated August 12th, 1998 for the Apollo 
           House premises and the Saturn House premises.
   10.45 --Consulting agreement between Insignia Solutions Inc. and Albert Sisto 
           dated December 28, 1998. *
   21.01 --List of Registrant's subsidiaries. (2)
   23.01 --Consent of PricewaterhouseCoopers LLP, Independent Accountants.
   27.01 --Financial Data Schedule.



*    Management contract or compensatory plan.
**   Confidential treatment has been granted with respect to certain
     portions of this agreement. Such portions were omitted from this filing
     and filed separately with the Securities and Exchange Commission.

(1)  Incorporated by reference to the exhibit of the same number from
     Registrant's Registration Statement on Form F-1 (File No. 33-98230)
     declared effective by the Commission on November 13, 1995.

(2)  Incorporated by reference to the exhibit of the same number from
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1995.

(3)  Incorporated by reference to the exhibit of the same number from
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1996.

(4)  Incorporated by reference to Exhibit 10.27 from Registrant's Quarterly 
     Report on Form 10-Q for the quarter ended March 31, 1996.

(5)  Incorporated by reference to Exhibit 10.30 from Registrant's Quarterly 
     Report on Form 10-Q for the quarter ended March 31, 1997.

(6)  Incorporated by reference to the exhibit of the same number from
     Registrant's Annual Report on Form 10-K for the year ended December 31,
     1997.

(7)  Incorporated by reference to the exhibit of the same number from
     Registrant's Current Report on Form 8-K dated February 5, 1998.

(8)  Incorporated by reference to the exhibit of the same number from
     Registrant's Quarterly Report on Form 10-Q for the quarter ended March
     31, 1998.

(9)  Incorporated by reference to the exhibit of the same number from
     Registrant's Quarterly Report on Form 10-Q for the quarter ended
     September 30, 1998.