<PAGE>   1



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

                                    FORM 10-Q

(Mark One)

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

    For the quarterly period ended June 30, 1999
                                   -------------

                                            or

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

For the transition period from              to
                               -------------  -------------

Commission File Number: 0-20244
                        -------

                         DATA RESEARCH ASSOCIATES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


MISSOURI                                               43-1063230
--------------------------------------------------------------------------------
(State or other jurisdiction               (I.R.S. Employer Identification No.)
of incorporation or organization)

1276 NORTH WARSON RD.  ST. LOUIS, MISSOURI                          63132
--------------------------------------------------------------------------------
(Address of principal executive offices)                          (Zip Code)

(314) 432-1100
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

  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
                                                                     --    --
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

At July 15, 1999, there were 5,045,458 shares of the registrant's common stock
outstanding.





<PAGE>   2



                                      INDEX

                 DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

         Consolidated balance sheets       -June 30, 1999
                                            and September 30, 1998

         Consolidated statements of income -Three months ended June 30,
                                            1999 and 1998
                                           -Nine months ended June 30,
                                            1999 and 1998

         Consolidated statements of cash flows -Nine months ended June 30,
                                                1999 and 1998


         Notes to the unaudited consolidated financial statements

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


PART II. OTHER INFORMATION



SIGNATURES






<PAGE>   3


Part I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                     (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                       June 30,    September 30,
                                                         1999          1998
                                                      (Unaudited)
                                                      -----------  -------------
<S>                                                       <C>            <C>
                                      ASSETS
CURRENT ASSETS
  Cash and cash equivalents                               $16,008        $8,710
  Short-term investments                                        -         8,493
  Accounts receivable less allowance for doubtful
    accounts of $101 at June 30, 1999
    and September 30,1998:
      Billed                                                5,732         8,092
      Unbilled                                                947         2,445
                                                          -------       -------
                                                            6,679        10,537
  Income taxes receivable                                     361           278
  Inventories                                                 379           136
  Prepaid expenses                                            751           542
  Deferred income taxes                                       268           261
  Other current assets                                        191           202
                                                          -------       -------
        TOTAL CURRENT ASSETS                               24,637        29,159
PROPERTY AND EQUIPMENT
  Land and improvements                                       504           504
  Buildings and improvements                                2,713         2,719
  Data processing equipment                                 7,106         6,525
  Furniture, fixtures, and other                            4,362         3,724
                                                          -------       -------
                                                           14,685        13,472
  Less accumulated depreciation                             8,157         6,752
                                                          -------       -------
                                                            6,528         6,720
NOTE RECEIVABLE                                                14            43
DEFERRED SOFTWARE COSTS (net of accumulated
  amortization of $854 at June 30, 1999
  and $1,711 at September 30, 1998)                         4,968         4,365
INTANGIBLE ASSETS (net of accumulated
  amortization of $2,413 at June 30, 1999
  and $4,221 at September 30, 1998)                           570           443
                                                          -------       -------
                                                          $36,717       $40,730
                                                          =======       =======

</TABLE>



<PAGE>   4


(In thousands, except per share data)

<TABLE>
<CAPTION>

                                                       June 30,    September 30,
                                                         1999          1998
                                                      (Unaudited)
                                                      -----------  -------------

                      LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                       <C>           <C>
CURRENT LIABILITIES
  Accounts payable                                        $ 1,433       $ 1,030
  Employee compensation                                       466           375
  Deferred revenue                                          3,411         4,511
  Customer deposits                                           660           695
  Other accrued liabilities                                   142           595
                                                          -------       -------
        TOTAL CURRENT LIABILITIES                           6,112         7,206
DEFERRED INCOME TAXES                                       2,007         2,019
SHAREHOLDERS' EQUITY
  Preferred stock, par value $.01 per share--
    1,000 shares authorized, no shares issued                   -             -
  Common stock, par value $.01 per share--10,000
    shares authorized, 5,557 shares issued at
    June 30, 1999 and September 30, 1998                       56            56
  Additional paid-in capital                                5,616         5,763
  Accumulated other comprehensive income                     (156)         (239)
  Retained earnings                                        29,316        28,887
                                                          -------       -------
                                                           34,832        34,467
  Less cost of treasury stock, 508 shares
    at June 30, 1999, and 179 shares
    at September 30, 1998                                   6,234         2,962
                                                          -------       -------
        TOTAL SHAREHOLDERS' EQUITY                         28,598        31,505
                                                          -------       -------
                                                          $36,717       $40,730
                                                          =======       =======

</TABLE>






















See notes to unaudited consolidated financial statements.


<PAGE>   5


                        DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                               (In thousands, except share data)

<TABLE>
<CAPTION>

                                          Three months ended   Nine months ended
                                               June 30,            June 30,
                                            1999      1998      1999      1998
                                           -------   -------   -------   -------
<S>                                        <C>       <C>       <C>       <C>
REVENUES
  Hardware                                 $   900   $ 1,151   $ 1,822   $ 4,094
  Software                                   1,874     2,306     5,031     5,856
  Service and other                          4,882     4,854    14,181    14,153
                                           -------   -------   -------   -------
                                             7,656     8,311    21,034    24,103
EXPENSES
  Cost of revenues
    Hardware                                   668       734     1,312     2,788
    Software                                   474       351     1,110     1,142
    Service and other                        1,275     1,270     3,874     3,551
                                           -------   -------   -------   -------
                                             2,417     2,355     6,296     7,481

  Salaries and employee benefits             2,574     2,397     7,913     7,563
  General and administrative expenses        1,273     1,866     4,425     5,285
  Depreciation and amortization                495       454     1,420     1,250
                                           -------   -------   -------   -------
                                             6,759     7,072    20,054    21,579

    INCOME FROM OPERATIONS                     897     1,239       980     2,524

OTHER INCOME                                   193       207       608       700
                                           -------   -------   -------   -------
     Income before income taxes              1,090     1,446     1,588     3,224

PROVISION FOR INCOME TAXES                     354       473       516     1,175
                                           -------   -------   -------   -------
    NET INCOME                             $   736   $   973   $ 1,072   $ 2,049
                                           =======   =======   =======   =======

Basic and Diluted earnings per share       $   .14   $   .18   $   .20   $   .37
                                           =======   =======   =======   =======
Dividends per share                        $   .00   $   .00   $   .12   $   .12
                                           =======   =======   =======   =======

</TABLE>














See notes to unaudited consolidated financial statements.




<PAGE>   6


                 DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                            Nine months ended
                                                                June 30,
                                                            1999         1998
                                                          --------     --------
<S>                                                       <C>          <C>
OPERATING ACTIVITIES
  Net income                                              $  1,072     $  2,049
  Adjustments to reconcile net income
    to net cash provided by operating activities:
      Depreciation and amortization                          2,543        2,607
      Provision for deferred income taxes                      (16)         (54)
      Loss on disposal of property and equipment                 7           --
      Changes in operating assets
        and liabilities:
          Accounts receivable                                3,951       (1,546)
          Inventories                                         (243)         (74)
          Prepaid expenses and
            other current assets                                34          360
          Accounts payable and
            other current liabilities                       (1,444)        (171)
          Note receivable                                       30           28
                                                          --------     --------
            NET CASH PROVIDED BY
                OPERATING ACTIVITIES                         5,934        3,199
                                                          --------     --------

INVESTING ACTIVITIES
  Purchase of property and equipment                        (1,223)      (1,443)
  Purchased software                                          (513)          --
  Deferred software cost                                    (1,339)      (2,110)
  Purchase of short-term investments                       (22,828)          --
  Proceeds from sale of short-term investments              31,321           --
                                                          --------     --------
            NET CASH PROVIDED BY
                (USED IN) INVESTING ACTIVITIES               5,418       (3,553)
                                                          --------     --------

FINANCING ACTIVITIES
  Proceeds from options exercised                              245          158
  Purchase of treasury shares                               (3,664)      (3,016)
  Dividends paid                                              (644)        (665)
                                                          --------     --------
            NET CASH USED IN
              FINANCING ACTIVITIES                          (4,063)      (3,523)
                                                          --------     --------

            EFFECT OF EXCHANGE RATE CHANGES ON
              CASH AND CASH EQUIVALENTS                          9          (67)
                                                          --------     --------

 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            7,298       (3,944)
                                                          --------     --------
            CASH AND CASH EQUIVALENTS
              AT BEGINNING OF PERIOD                         8,710       19,734
                                                          --------     --------
            CASH AND CASH EQUIVALENTS
              AT END OF PERIOD                            $ 16,008     $ 15,790
                                                          ========     ========

</TABLE>

See notes to unaudited consolidated financial statements.

<PAGE>   7




                 DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES
            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                      (In thousands, except per share data)

Note 1.  Basis of Presentation

The unaudited consolidated financial statements of Data Research Associates,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and, therefore, should
be read in conjunction with the Company's consolidated financial statements and
the notes thereto for the year ended September 30, 1998, contained in the
Company's annual report for the year ended September 30, 1998. In the opinion of
management, all adjustments (consisting only of normal recurring items)
considered necessary for a fair presentation have been included. Certain amounts
in prior year financial statements have been reclassified to conform with the
current year presentation. The results of operations for the three and nine
months ended June 30, 1999, are not necessarily indicative of the results that
may be expected for the year ending September 30, 1999.

Note 2.  Inventories

Inventories consist primarily of computer equipment and supplies, which are
stated at the lower of cost (first-in, first-out method) or market. The Company
had only finished goods in inventory at June 30, 1999, and September 30, 1998.

Note 3.  Earnings per share

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

<TABLE>
<CAPTION>

                                           Three Months        Nine Months
                                              Ended               Ended
                                             June 30,            June 30,
                                         ----------------    ----------------
                                          1999      1998      1999      1998
                                         ----------------    ----------------
<S>                                      <C>       <C>       <C>       <C>
Numerator for basic earnings
per share and diluted earnings
per share:
  Net Income                             $  736    $  973    $1,072    $2,049
                                         ======    ======    ======    ======
Denominator:
  Basic earnings per share-
  Weighted-average shares                 5,114     5,446     5,276     5,503

  Effect of dilutive securities:
    Stock options                             2        50        12        27
                                         ------    ------    ------    ------
  Denominator for diluted earnings
  per share--adjusted weighted-
  average shares and assumed
  conversions                             5,116     5,496     5,288     5,530
                                         ======    ======    ======    ======
Basic earnings per share                 $  .14    $  .18    $  .20    $  .37
                                         ======    ======    ======    ======
Diluted earnings per share               $  .14    $  .18    $  .20    $  .37
                                         ======    ======    ======    ======

</TABLE>


<PAGE>   8



                 DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES
      NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4.  Revenue Recognition

As of October 1, 1998, the Company adopted AICPA SOP 97-2, "Software Revenue
Recognition," which was effective for transactions of the Company on or after
that date. Prior years were not restated.

The Company derives revenue from software licenses, hardware sales, maintenance
and other services. Maintenance includes telephone support, software patches and
rights to upgrades on a when-and-if-available-basis. Other services include
installation, training, consulting, data conversion, networking and system
support. In software agreements that include rights to multiple software
products, maintenance, and/or other services, the Company allocates the total
agreement fee among each deliverable based on the relative fair value of each of
the deliverables determined by vendor-specific objective evidence.

Software and Hardware

The Company recognizes the revenue allocable to software licenses upon delivery
of the software product to the end user, unless the fee is not fixed or
determinable or collectibility is not probable. For agreements involving the
sale of hardware and the licensing of software, revenue for the processor
hardware and the software is recognized only upon delivery of both the software
and the processor hardware, which is required to render the software operable.

Revenue for additional hardware, other than the processor, is recognized when
the product is shipped. Software license revenue may include customization or
modification of the Company's software to meet specific customer needs. Revenue
for customization is recognized using contract accounting, which generally
results in using a completed contract basis.


Maintenance

The Company recognizes revenue for maintenance on a straight-line basis over the
period the maintenance is provided.

Other Services

Agreements that include other services are evaluated to determine whether those
services are essential to the functionality of other elements of the agreement.
If a service is considered essential, revenue recognition on the elements whose
functionality depends on the service is deferred until the service is performed.
In multiple element agreements that include software installation, the Company
generally considers software installation to be an essential service. The
Company generally considers other services included in an agreement not to be
essential to the functionality of other elements of the agreement and revenue is
recognized upon completion of the service. Such other services include training,
consulting, data conversion, network installation and network and system
support.






<PAGE>   9



                 DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES
      NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5. Comprehensive Income

As of October 1, 1998, the Company adopted Statement 130, "Reporting
Comprehensive Income." Statement 130 requires that all components of
comprehensive income, including net income, be reported in the financial
statements in the period in which they are recognized. Comprehensive income is
defined as the change in equity during a period from transactions and other
events and circumstances from non-owner sources. The adoption of this Statement
had no impact on the Company's net income or shareholders' equity. Statement 130
requires foreign currency translation adjustments, which prior to adoption were
reported separately in shareholders' equity, to be included in other
comprehensive income. The presentation of prior year financial statements
reflects reclassification of data to conform to the requirements of Statement
130.

The components of comprehensive income, net of related tax, for the three and
nine month periods ended June 30, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                             Three Months         Nine Months
                                                Ended                Ended
                                               June 30,             June 30,
                                           ------------------------------------
                                            1999     1998        1999     1998
                                           ------------------------------------
<S>                                         <C>      <C>        <C>      <C>
Net income                                  $736     $973       $1,072   $2,049
Foreign currency translation adjustment       54      (54)          83      (87)
                                           ------------------------------------
Comprehensive income                        $790     $919       $1,155   $1,962
                                           ====================================

</TABLE>

The components of accumulated other comprehensive income, net of related tax, at
June 30, 1999 and September 30, 1998, are as follows:

<TABLE>
<CAPTION>

                                                  June 30, 1999    Sept 30, 1998
                                                  ------------------------------
<S>                                                    <C>              <C>
Foreign currency translation adjustment                $(156)           $(239)
                                                  ------------------------------
Accumulated other comprehensive income                 $(156)           $(239)
                                                  ==============================

</TABLE>

Note 6. Segment Information

Effective for fiscal year end September 30, 1999 reporting, the Company will
adopt SFAS No. 131, "Segment Information". SFAS No. 131 amends the requirements
for public enterprises to report financial and descriptive information about its
reportable operating segments. Operating segments, as defined in SFAS No. 131,
are components of an enterprise for which separate financial information is
available and is evaluated regularly by the Company in deciding how to allocate
resources and in assessing performance. The financial information is required to
be reported on the basis that it is used internally for evaluating the segment
performance. Management believes the Company operates in one business and
operating segment and that the adoption of this standard will not have a
material impact on the Company's financial statements.

Note 7. New Accounting Standards

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
is required to be adopted for years beginning after June 15, 1999. The FASB has



<PAGE>   10

since delayed the effective date until years beginning June 15, 2000. Because of
the Company's minimal use of derivatives, management does not anticipate that
the adoption of the new Statement will have a significant effect on earnings or
the financial position of the Company.



<PAGE>   11



DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES


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

Overview

  The Company's revenue recognition policy is discussed in Note 5 to the
unaudited consolidated financial statements. The components of the cost for
development of software primarily include salaries and employee benefits and are
expensed as incurred until such costs qualify as deferred software costs which
are amortized over the estimated useful life of the product. The amortization of
capitalized software is allocated as a direct cost of licensing DRA software.
The Company typically experiences greater gross margin on software licenses and
services than on sales of hardware. The Company's profitability depends in part
on the mix of its revenue components and not necessarily on total revenues.

  The Company's revenues and earnings can fluctuate from quarter to quarter
depending upon, among other things, such factors as the complexity of customers'
procurement processes, new product and service introductions by the Company and
other vendors, delays in customer purchases due to timing of library
professional conferences and trade shows, installation scheduling and customer
delays in facilities preparation. In addition, a substantial portion of the
Company's revenues for each quarter is attributable to a limited number of
orders and tends to be realized towards the end of each quarter. Thus, even
short delays or deferrals of sales near the end of a quarter can cause quarterly
results to fluctuate substantially. In the future,the Company's revenues will be
increasingly dependent on sales of its next-generation system which is currently
being developed. The initial version of certain modules of the new system was
released in the fourth quarter of fiscal year 1998. The timing of the completion
of this system, Taos, which is based on object-oriented client/server design,
may be affected by multiple factors, including rapid technological change,
dependence on third-party suppliers and the relative scarcity of qualified
technical staff. The Company recognized the first revenue from Taos in the
fourth quarter of fiscal 1998, additional revenue in the third quarter of fiscal
1999 and currently has a backlog of revenue related to ten contracts for the
Taos system. Recognition of revenue from this backlog is subject to completion
of all required modules mandated by each contract, along with the logistical
considerations that accompany the initial release of a new product. See Exhibit
99.1 "Cautionary Statements - Additional Important Factors To Be Considered", in
the Company's Form 10-K for the year ended September 30, 1998.

Year 2000 Readiness Disclosure

   The arrival of the year 2000 poses certain technological challenges resulting
from a reliance of some computer technologies on two digits rather than four
digits to represent the calendar year (e.g., "99" for "1999"). It is generally
believed that computer technologies programmed in this manner, if not corrected,
may produce inaccurate or unpredictable results or system failures in connection
with the transition from 1999 to 2000, when dates will begin to have a lower
two-digit number than dates in the prior century. This problem, the so-called
"Year 2000 Problem" or "Y2K Problem," could have an adverse effect on the
Company's financial condition, results of operations, business or business
prospects because, in order to function properly, the Company's products must
interface with a multitude of software and hardware products manufactured by
unrelated third parties. The Company has been working diligently to prevent or
mitigate disruptions relating to the year 2000.

   As of June 30, 1999, the Company has reviewed all of its proprietary software
products and believes that all of such software products are currently

<PAGE>   12



capable of accurately processing date data related to the change from 1999 to
2000, if used with third party products that are also capable of accurately
processing such data.

   The Company has formed an oversight committee and has developed a plan to
coordinate identification, evaluation and implementation of any necessary
changes to the computer systems, applications and business processes used by the
Company in the operation of its business. As of June 30, 1999, the oversight
committee had identified the Company's systems that could potentially be
impacted by the Y2K Problem, had prioritized the identified systems and had
undertaken three primary steps to validate systems readiness. The three steps
are (1) obtaining a vendor readiness statement (2) internal testing, and (3)
third-party validation through an authorized organization that has already
tested the systems. The Company has obtained a vendor readiness statement for
all identified systems and is performing internal testing on those identified as
critical to its operations that have not already been validated through a
third-party authorized organization. As it is testing the critical systems, the
Company is compiling a list of identified problems and recommended solutions.
The Company has begun applying solutions, verifying that such solutions make the
system(s) avoid the Y2K Problem, and developing a contingency plan for any
critical system that remains susceptible to the Y2K Problem. The Company plans
to be substantially complete with all Y2K readiness and contingency planning by
September 30, 1999.

  The Company anticipates that its Y2K action plan discussed above will be
carried out solely by existing employees without significantly impacting their
other duties. Accordingly, the Company has not incurred any material incremental
costs and has not identified any incremental future costs associated with the
Y2K Problem.

  No assurances can be given that the Company will be able to completely
identify or address all issues related to the Year 2000 Problem that affect the
Company, or that third parties with whom the Company does business will not
experience system failures as a result of the Year 2000 Problem, nor can the
Company fully predict the consequences of any such failure.

  There is no single customer or product vendor which, in the Company's
assessment, is or may be likely to present any significant exposure due to the
Year 2000 Problem. However, management anticipates that there may be some
negative impact on the timely receipt of accounts receivable due to the failure
of certain customers to prepare adequately for the Year 2000 Problem. In a
worst-case scenario, these accounts receivable related difficulties might
require the Company to draw down its own credit line or to reduce the amount of
available cash on hand.

  The Company also could face some risk from the possible failure of one or more
of its third party vendors to continue to provide uninterrupted service through
the changeover to the year 2000. Because the Company outsources the delivery of
hardware to its customers, such a failure could affect the installation of the
Company's products at customer locations. While an evaluation of the Year 2000
preparedness of its third party vendors has been part of the Company's Y2K
action plan, the Company's ability to evaluate is limited to some extent by the
willingness of vendors to supply information and the ability of vendors to
verify the Y2K preparedness of their own systems or their sub-providers.
However, the Company has received assurances from its significant vendors that
there will not be any such disruption; accordingly the Company does not
currently anticipate that any of its significant vendors will fail to provide
continuing service due to the Year 2000 Problem.

   The Company, like similarly situated enterprises, is subject to certain risks
as a result of possible industry-wide or area-wide failures triggered by the
Year 2000 Problem. For example, the failure of certain utility providers (e.g.,
electricity, gas, telecommunications) to avoid disruption of service in



<PAGE>   13

connection with the transition from 1999 to 2000 could adversely affect the
Company's results of operations, liquidity and financial condition. In
management's estimate, such a system-wide or area-wide failure presents a
significant risk to the Company in connection with the Year 2000 Problem because
the resulting disruption may be entirely beyond the ability of the Company to
cure, and the Company relies on such utilities for the delivery of its own
products, particularly telecommunications. The significance of any such
disruption would depend on its duration and systemic and geographic magnitude.
Of course, any such disruption would likely impact businesses other than the
Company.


<PAGE>   14


Forward Looking Statements

Except for the historical information and statements contained in
Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A"), the matters and items contained in this document,
including MD&A, contain a substantial number of forward-looking statements,
indicated by such words as "expects," "believes," "estimates," "anticipates,"
"plans," "assessment," "should," "will," and similar words. These
forward-looking statements are based on the Company's and management's beliefs,
assumptions, expectations, estimates and projections any or all of which are
subject to future change, depending on unknown developments and facts. These
forward-looking statements should be read in conjunction with the disclosures in
Exhibit 99.1 "Cautionary Statements - Additional Important Factors to Be
Considered," in the Company's Form 10-K for the year ended September 30, 1998.






<PAGE>   15


Results of Operations

Three Months Ended June 30, 1999 compared to Three Months Ended June 30, 1998

  Hardware revenues decreased $.3 million, or 22%, to $.9 million for the three
months ended June 30, 1999, from $1.2 million for the three months ended June
30, 1998. The decrease is primarily due to a $.5 million sale to a single
customer in the three months ended June 30, 1998, with no single large hardware
shipment in the quarter ended June 30, 1999. The magnitude in the decrease in
hardware revenues was lessened by a marketing program to facilitate the
migration of specific current customers to the Taos system, which resulted in
add-on sales of upgraded hardware. The gross margin percentage on hardware was
26% in the three months ended June 30, 1999 and 36% in the three months ended
June 30, 1998. The mix of the types of hardware systems sold was the major
contributor to the margin decline.

  Software license revenues decreased $.4 million, or 19%, to $1.9 million in
the three months ended June 30, 1999, from $2.3 million for the three months
ended June 30, 1998. The decrease is due primarily to a $.6 million sale to a
single customer in the three months ended June 30, 1998, with no similar large
software sales recorded in the three months ended June 30, 1999. The Company had
new contract revenue in the three months ended June 30, 1999, of $.1 million
from two installations. The gross margin percentage on software was 75% in the
three months ended June 30,1999, and 85% in the three months ended June 30,
1998. The decrease in margin is primarily attributed to higher amortization of
software development costs in the three months ended June 30, 1999, over the
three months ended June 30, 1998. The company anticipates that this amortization
of software development costs will continue to rise for the foreseeable future.

  Service and other revenues were $4.9 million in the three months ended June
30, 1999, remaining consistent with the three months ended June 30, 1998. The
continued increase in software maintenance revenue was offset by a decrease in
revenues from the Company's other services, many of which are associated with
new system sales. Management expects that software maintenance revenues, a major
component of service and other revenues, will continue to increase as the base
of licensed software products increases. The gross margin percentage on service
and other revenues was 74% in the three months ended June 30, 1999, remaining
consistent with the three months ended June 30, 1998.

  Salaries and employee benefits increased $.2 million, or 7%, to $2.6 million
in the three months ended June 30, 1999, from $2.4 million in the three months
ended June 30, 1998. This increase is primarily attributable to $.1 million in
additional salaries due to the hiring of additional staff in the development and
testing departments, coupled with $.1 million in annual salary increases.

  General and administrative expenses decreased $.6 million, or 32%, to $1.3
million in the three months ended June 30, 1999, from $1.9 million in the three
months ended June 30, 1998. This decrease is primarily attributable to a
reduction in travel and trade show expenses, coupled with a reduction in
software development consulting expenses for DRA Classic software.

  Income from operations decreased $.3 million, or 28%, to $.9 million in the
three months ended June 30, 1999, from $1.2 million in the three months ended
June 30, 1998. The decrease is primarily attributable to the decrease in
software sales and software margins in the three months ended June 30, 1999,
from the three months ended June 30, 1998.

  The Company's consolidated effective tax rate was 33% for the three month
period ended June 30, 1999, and for the three month period ended June 30, 1998.


<PAGE>   16


Results of Operations

Nine Months Ended June 30, 1999 compared to Nine Months Ended June 30, 1998

  Hardware revenues decreased $2.3 million, or 55%, to $1.8 million for the nine
months ended June 30, 1999, from $4.1 million for the nine months ended June 30,
1998. The decrease is primarily due to the lack of significant new contract
shipments in the nine months ended June 30, 1999, coupled with the continued
decline of prices in the computer hardware market. The Company had two new
contract shipments of hardware in the nine months ended June 30, 1999, with
revenues of $.1 million. The magnitude in the decrease in hardware revenues was
lessened by a new marketing program designed to facilitate the migration of
specific current customers to the Taos system. The gross margin percentage on
hardware was 28% in the nine months ended June 30, 1999 and 32% in the nine
months ended June 30, 1998.

Software license revenues decreased $.9 million, or 14%, to $5.0 million in the
nine months ended June 30, 1999, from $5.9 million in the nine months ended June
30, 1998. The decrease is primarily attributable to the lack of new software
contracts shipped in the nine months ended June 30, 1999, compared with the nine
months ended June 30, 1998, when shipment of several new software contracts
contributed $1.2 million in revenue. The Company had two new contract shipments
of software in the nine months ended June 30, 1999, generating revenue of $.1
million. The gross margin percentage on software was 78% in the nine months
ended June 30,1999, and 80% in the nine months ended June 30, 1998. An increase
in the amortization of software development costs was the major contributor to
this decline in margin for the nine months ended June 30, 1999, from the nine
months ended June 30, 1998. The Company anticipates that this amortization of
software development costs will continue to rise for the foreseeable future.

  Service and other revenues were $14.2 million in the nine months ended June
30, 1999, consistent with the nine months ended June 30, 1998. The continued
increase in software maintenance revenue was offset by a decrease in revenues
from the Company's other services, many of which are associated with new system
sales, in the nine months ended June 30, 1999. Management expects that software
maintenance revenues, a major component of service and other revenues, will
continue to increase as the base of licensed software products increases. The
gross margin percentage on service and other revenues was 73% in the nine months
ended June 30, 1999, and 75% in the nine months ended June 30, 1998. The decline
is primarily attributable to the mix of services provided. The nine months ended
June 30, 1999 showed higher revenue from the Internet services business than the
nine months ended June 30, 1998. Internet services have higher direct costs than
the Company's other services.

  Salaries and employee benefits increased $.3 million, or 5%, to $7.9 million
in the nine months ended June 30, 1999, from $7.6 million in the nine months
ended June 30, 1998. This increase is primarily attributable to $.1 million in
additional salaries due to the hiring of additional staff in the development and
testing departments, coupled with $.2 million in annual salary increases.

  General and administrative expenses decreased $.9 million, or 16%, to $4.4
million in the nine months ended June 30, 1999, from $5.3 million in the nine
months ended June 30, 1998. This decrease is primarily attributable to the
write-off of purchased software, no longer sold by the company, resulting in a
non-recurring expense of $.4 million in the nine months ended June 30, 1998, and
to a lesser extent to a reduction of $.4 million in travel and trade show
expenses in the nine months ended June 30, 1999.

  Income from operations decreased $1.5 million, or 61%, to $1.0 million in the
nine months ended June 30, 1999, from $2.5 million in the nine months ended June
30, 1998. The decrease is primarily attributable to the decrease in hardware and
software sales in the nine months ended June 30, 1999, from June 30, 1998, and


<PAGE>   17

to the less profitable mix of services sold in the nine months ended June 30,
1999.

  The Company's consolidated effective tax rate was 33% for the nine month
period ended June 30, 1999, and 36% for the nine month period ended June 30,
1998. The decrease is a result of additional research and development credits
being generated and utilized in 1999.


<PAGE>   18


Liquidity and Capital Resources

  The Company's cash needs are primarily for working capital and capital
expenditures and historically have been met by cash flows from operations, bank
borrowings, and equipment leases. At June 30, 1999, the Company's working
capital was $18.5 million and its ratio of current assets to current liabilities
was 4.0 to 1, as compared to working capital of $19.7 million and a ratio of
current assets to current liabilities of 3.7 to 1 at June 30, 1998.

  Net cash provided by operating activities was $5.9 million for the nine months
ended June 30, 1999, compared to $3.2 million for the nine months ended June 30,
1998. The increase in net cash provided by operations was due primarily to
increased cash receipts in the nine months ended June 30, 1999, including
receipt of over $1.2 million from one customer.

  Net cash provided by investing activities was $5.4 million for the nine months
ended June 30, 1999, compared to net cash used of $3.6 million for the nine
months ended June 30, 1998. The increase in net cash provided by investing
activities is primarily due to the Company's need to maintain cash with enough
liquidity to fund its repurchase of treasury stock. To accomplish this, the
proceeds from maturing investments were put into instruments whose holding
periods classified them as cash or cash equivalents, rather than short-term
investments.

  Net cash used by financing activities was $4.1 million for the nine months
ended June 30, 1999, compared to $3.5 million for the nine months ended June 30,
1998. Purchases of treasury stock in the amount of $3.7 million for the nine
months ended June 30, 1999, compared to $3.0 million for the nine months ended
June 30, 1998 accounted for most of the increase in cash used. Management
extended the Company's $6.0 million line of credit to January 2000. The line of
credit bears interest at federal funds rate plus 200 basis points payable
monthly on outstanding balances. There have been no borrowings against the
Company's line of credit since May 1991.

  Management believes that, with the current cash position of $16.0 million,
accounts receivable of $6.7 million, continued cash flow from operations, and
the availability of the $6.0 million line of credit, and considering that total
current liabilities are $6.1 million, the Company will be able to meet both its
short-term liquidity needs and short-term capital expenditure needs. In April
1999, the Company's Board of Directors authorized the additional repurchase of
the Company's common stock in an amount of up to $2 million, such purchases to
be made from time to time during the twelve months following the authorization.
No material commitments with respect to capital expenditures have been made for
fiscal 1999. Management believes that with total long-term liabilities of
approximately $2.0 million and no other known long-term commitments or demands,
the Company will be able to satisfy its known long-term liabilities and
liquidity needs through the funding sources identified above.












<PAGE>   19



                 DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES


PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 2. Changes in Securities.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

    (a) Not applicable.

    (b) Not applicable.

    (c) Not applicable.


Item 5. Other Information.

The Company is completing the developmental stage of its next generation system,
Taos. During the development of Taos, the Company has pursued contractual
arrangements with library systems desiring to purchase Taos once it is
completed. Those contracts include terms that are modified from time-to-time by
agreement between the parties, including terms with respect to the anticipated
installation dates for the various modules of the Taos system, but libraries are
not obligated to agree to such amendments. Due to delays in certain contractual
installation schedules, the Company placed one installation project on hold
during the third fiscal quarter, and subsequent to the end of the quarter, the
Company received notice from one customer that it was considering terminating
its contract with the Company. While the Company believes that it will be able
to substantially comply with the Taos installation schedules currently in place
with its customers, a variety of factors could add additional delays in the
final release of Taos, necessitating amendment of various contracts with respect
to the installation dates. Such factors include the difficulties associated with
incorporating rapid technological change into the Taos system, the Company's
dependence on third-party suppliers, and the relative scarcity of qualified
technical staff. For additional risk factors that should be read in conjunction
with this disclosure, see Exhibit 99.1 "Cautionary Statements - Additional
Important Factors to Be Considered" in the Company's Form 10-K for the year
ended September 30, 1998.

Item 6. Exhibits and Reports on Form 8-K.

    (a) Exhibits

        27 Financial Data Schedule

    (b) Reports on Form 8-K

        No reports on Form 8-K were required to be filed during the three months
        ended June 30, 1999.



<PAGE>   20



PART II.  OTHER INFORMATION

                 DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES


                                   SIGNATURES

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


                                            DATA RESEARCH ASSOCIATES, INC.



August 12, 1999                             /s/Michael J. Mellinger
----------------                            ------------------------------
Date                                        Michael J. Mellinger
                                            Chairman, President, and
                                            Chief Executive Officer
                                            (Principal Executive Officer)

August 12, 1999                             /s/Katharine W. Biggs
----------------                            ------------------------------
Date                                        Katharine W. Biggs
                                            Vice President, and
                                            Chief Financial Officer
                                            (Principal Accounting Officer)