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


                                   FORM 10-QSB
(Mark One)

            [X]  Quarterly  Report  Pursuant  to  Section  13 or  15(d)  of  the
                 Securities Exchange Act of 1934

                For the quarterly period ended September 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 000-21295

                              THINKING TOOLS, INC.
        (Exact Name of Small Business Issuer as Specified In Its Charter)

          Delaware                                              77-0436410
(State or other jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                            Identification No.)

    200 Park Avenue Ste 3900
    New York,  New York                                             10166
(Address of principal executive offices)                         (Zip Code)

         Issuer's Telephone Number, Including Area Code: (212) 808-7474

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.001 per share

Check  whether  the issuer (1) has filed all  reports,  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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  [ ]          NO  [ X  ]

At November 15, 1999, the number of shares  outstanding  of the Issuer's  Common
Stock, par value $.001 per share, was 4,641,758 shares.


<PAGE>



                              THINKING TOOLS, INC.
          FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
                                      INDEX


Part I - FINANCIAL INFORMATION                                         PAGE NO.
------------------------------                                         --------

Item 1.  FINANCIAL STATEMENTS
         Condensed Balance Sheets as of
           September 30, 1999 and December 31, 1998.........................3

         Condensed Statements of Operations
           for the quarter and nine months
           ended September 30, 1999 and 1998................................4

         Condensed Statements of Cash Flows
           for nine months ended
           September 30, 1999 and 1998......................................5

         Notes to Condensed Financial Statements............................6

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................9


Part II - OTHER INFORMATION

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.........................15

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K..................................13

Signatures.................................................................14

Financial Data Schedule....................................................15


                                        2

<PAGE>



PART I - FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

                              THINKING TOOLS, INC.
                            CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>


                                                                       September 30,            December 31,
                                                                            1999                   1998 (1)
                                                                      (Unaudited)
<S>                                                                   <C>                        <C>
ASSETS

  Current assets:
     Cash and equivalents                                                $       5                $       2
     Accounts receivable                                                         0                       53
     Prepaid expenses and other current assets                                   -                        -
                    Total current assets                                 ---------                 --------
                                                                                 5                       55


  Property and equipment, net                                                    7                       56
  Other assets                                                                   -                        -
                                                                         ---------                 --------
          Total assets                                                          12                       12
                                                                         ---------                 --------
                                                                                 4                      123
                                                                         =========                 ========


LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

  Current liabilities:
     Accounts payable                                                    $     260                  $   282
     Accrued expenses                                                          527                      638
     Notes payable                                                             481                       85
     Deferred revenues                                                           -                       22
     Current portion of capital lease obligations                                -                        3
                                                                          --------                 --------
          Total current liabilities                                       $  1,268                 $  1,030

   Long term deposits                                                           10                       10
         Total liabilities                                                   1,278                    1,040

  Shareholders' equity (deficiency):
     Common stock                                                                5                        5
     Additional paid-in capital                                             11,502                   11,288

     Accumulated deficit                                                   (12,761)                 (12,210)
                                                                         ---------                 --------
          Total shareholders' equity (deficiency)                           (1,254)                    (917)
                                                                         ---------                 --------
  Total liabilities and shareholders' equity (deficiency)                $      24                 $    123
                                                                         =========                 ========

(1) Derived from the December 31, 1998,  audited  balance sheet  included in the
    Company's 1998 Annual Report on Form 10-KSB
</TABLE>


                   See Notes to Condensed Financial Statements

                                        3

<PAGE>


                              THINKING TOOLS, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>


                                                         Three Months Ended                  Nine Months Ended
                                                            September, 30                      September, 30
                                                     ---------------------------       -----------------------------
                                                       1999              1998             1999               1998
<S>                                                  <C>               <C>              <C>                <C>
Revenues                                             $       3         $    193         $     82           $    358
Costs                                                       --                                --                  1
       Gross profit                                          3              193               82                357

Operating Expenses
        Selling, general, and administrative                45              522              232              1,681
        Research and development                             2              282              163                929
               Total operating expenses                     47              804              395              2,610

               Operating loss                              (44)            (611)            (313)            (2,253)

  Other income/(expense), net                               (9)               2             (238)                29

               Loss before income taxes                    (53)            (609)            (551)            (2,224)

Income tax expense                                          --               --               --                 --
Net loss                                            $      (53)        $   (609)        $   (551)          $ (2,224)
                                                    ===========        =========        =========          =========

Basic and diluted loss per share                    $    (0.01)        $  (0.13)           (0.12)              (0.48)
                                                    ===========        =========        =========          ==========

Shares used in calculating per share data                4,642             4,642            4,642              4,642
                                                    ===========        =========        =========          ==========
</TABLE>


                   See Notes to Condensed Financial Statements


                                        4

<PAGE>



                              THINKING TOOLS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                                                Nine Months ended
                                                                                                   September 30
                                                                                      -----------------------------------
                                                                                          1999                    1998
<S>                                                                                    <C>                     <C>
Cash flows from operating activities:
   Net loss                                                                           $                       $
   Adjustments to reconcile net loss to net cash used in operating activities:             (551)                 (2,224)
       Depreciation and amortization
       Additional paid-in capital - (recognition of convertible securities at                  4                      49
       lower of conventional rate.  See "Results of Operations - Interest").                 216                       -

       Changes in operating assets and liabilities:
          Accounts receivable                                                                 53                   (155)
          Prepaid expenses and other assets                                                    -                     112
          Other assets                                                                         -                      17
          Accounts payable                                                                  (22)                    (17)
          Accrued expenses                                                                 (102)                   (164)
          Deferred revenues                                                                 (22)                       -
             Net cash used in operating activities                                         (424)                 (2,382)
Cash flows from investing activities:
   Gain/(Loss) on sale of fixed assets                                                        45                      17
       Net cash provided by (used in) investing activities                                    45                      17
Cash flows from financing activities:
   Principal payment on short-term notes payable                                               -                    (88)
   Principal payments on capital leases                                                      (3)                     (8)
   Long-term deposits                                                                          -                      15
   Proceeds from issuance of notes payable                                                   386                       -
       Net cash used in financing activities                                                 383                    (81)
Net decrease in cash and equivalents                                                           4                 (2,446)
Cash and equivalents at beginning of period                                                    2                   2,597
Cash and equivalents at end of period                                                 $        6              $      151
                                                                                      ===========             ==========

Supplemental disclosure of cash flow information:
       Cash paid during the period for interest                                                -              $        4
                                                                                      ===========             ===========

</TABLE>

                   See Notes to Condensed Financial Statements


                                        5

<PAGE>


                              THINKING TOOLS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   Basis of Presentation

The accompanying  unaudited condensed financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information,  which  contemplates  the  continuation  of the  Company as a going
concern. In the opinion of management,  all adjustments considered necessary for
a fair presentation of the financial  position and the results of operations and
cash flows for the interim  periods have been included.  Interim results are not
necessarily  indicative  of results for a full year.  The Company  lacks product
revenues and has sustained substantial operating losses.

As of September 30, 1999, the Company had an accumulated deficit of $12,761,000.
The Company  intends to locate and enter into a  transaction  with an  existing,
public  or  privately  held  company  which in  management's  view,  has  growth
potential  and may be involved in the software or technology  industry.  To that
end, the Company is currently engaged in negotiations  with several  candidates.
The Company's  continued existence is dependent on its ability to negotiate such
a transaction and its ability to raise additional financing.

These interim condensed financial  statements should be read in conjunction with
the  information  included in the  Company's  Annual Report on Form 10-KSB filed
with the  Securities  and Exchange  Commission  for the year ended  December 31,
1998.


2.   Common Stock

The Company  consummated a series of financing  transactions  in 1996.  Warrants
were issued to Thinking Technologies,  L.P. to purchase 468,242 shares of common
stock at an exercise price of $1.07 per share,  expiring December 2006. Warrants
to purchase  456,250  shares of the  Company's  common stock at $3.90 per share,
expiring  August 2001,  were also issued.  In addition,  in October and November
1996, the Company  completed its initial public offering (the "IPO")  (including
the exercise of the  underwriter's  over-allotment  option) and issued 1,610,000
shares of common  stock at $6.50 per  share for net  proceeds  of  approximately
$8,470,000. Approximately $1,856,500 of the net proceeds of the IPO were used to
retire outstanding  indebtedness and accrued interest under the promissory notes
issued in the 1996 Bridge  Financing.  The  remainder of the net proceeds of the
IPO were used to fund the Company's sales and marketing and product  development
efforts,  and for working capital and general corporate purposes.  In connection
with its IPO, the Company sold to its  underwriter  options to purchase  140,000
common shares for $.001 per option.  These options are  exercisable for a period
of five years at an exercise price equal to 160% of the initial public  offering
price ($10.40 per share).


                                        6

<PAGE>



On  November  6,  1998,  the  Company  approved  a bridge  financing  offer from
Technologies,  under which  Technologies was granted the right to purchase up to
350 units  for  $1,000  per unit (the  "1998  Bridge  Financing").  Each unit (a
"Bridge Unit") consists of a Secured Convertible Note in the principal amount of
$1,000, payable at 10% interest per annum (each, a "Bridge Note"), and a warrant
to purchase 30 shares of common stock of the Company,  at a conversion  price of
$.20 per share (each, a "Bridge Warrant").  Each Bridge Note is convertible into
5,000 shares of Common Stock at a conversion price of $.20 per share. One Bridge
Warrant  shall be  terminated  upon  each  conversion  of a Bridge  Note.  As of
November  1, 1999,  Technologies  has  purchased  321 Bridge  Units.  This total
includes the reimbursement  with Bridge Units for expenses incurred in obtaining
the 1998 Bridge Financing and for seeking a Target Business for the Company. The
proceeds of the 1998  Bridge  Financing  have been used for working  capital and
general corporate purposes.

In July,  1999,  the Company  completed a bridge  financing in which it sold 150
units (the "Gem Units")  consisting of a 10% Unsecured  Convertible  Note in the
principal  amount of $1,000  (each a "Gem  Note") and a Warrant to  purchase  30
shares of the  Company's  Common Stock at a  conversion  price of $.20 per share
(each,  a "Gem  Warrant") to Gem Management  Limited (the "Gem  Financing")  for
$150,000. Each Gem Note is convertible into 5,000 shares of the Company's Common
Stock at a conversion price of $.20 per share. Upon conversion of each Gem Note,
one Gem Warrant shall be terminated. The proceeds of this financing will be used
for working capital and general corporate purposes.

3.  Accounting for convertible securities and beneficial fixed dollar conversion

In  accordance  with  recent  accounting   standard  consensus  with  regard  to
recognizing the intrinsic value (that is, the difference  between the conversion
price and fair  value of the  common  stock  into  which a debt is  convertible,
multiplied  by the number of shares into which the debt is  convertible)  at the
commitment  date, a portion of the  proceeds  from  issuance of the  convertible
debt,  equal to the intrinsic  value,  is then  allocated to additional  paid-in
capital  (APIC).  Because the debt is convertible  at the date of issuance,  the
date  discount  is  charged to  interest  expense  at the date of  issuance.  In
accordance with this  requirement the 1998 Bridge Financing Notes currently held
by Technologies resulted in a year to date, September 30, 1999, interest expense
recognition of $216,000.

4. Net Loss Per Share

The Company follows Statement of Financial  Accounting  Standards (SFAS) No. 128
"Earnings Per Share." Due to the Company's net loss, all convertible securities,
options and  warrants  are  antidilutive;  hence both basic and diluted loss per
share are  computed  based on the  weighted  average  number of shares of common
stock outstanding during the period.


                                        7

<PAGE>



5.   Reporting Comprehensive Income

In June 1997,  the  Financial  Accounting  Standards  Board  issued SFAS No. 130
"Comprehensive  Income,"  which  requires  that an enterprise  report,  by major
components and as a single total, the change in its net assets during the period
from  non-owner  sources.  The Company's  financial  statements for the quarters
ended  September 30, 1999 and 1998 do not include  amounts which are  considered
components  of  other  comprehensive  income.   Consequently,   net  income  and
comprehensive income are equivalent for both periods as defined.


6.   Notes Payable

In  November  1998  the  Company   approved  a  Bridge   Financing   offer  from
Technologies,  under which  Technologies was granted the right to purchase up to
$350,000 of Senior Secured  Convertible Notes due within 90 days at 10% interest
per annum.  Cash advances and certain expenses through September, 1999, resulted
in borrowings under the arrangement amounting to approximately $321,000.

In July,  1999,  an  additional  unsecured  convertible  note of  $150,000  with
interest  of 10% per annum and with  warrants  to  purchase  common  stock,  was
entered into with Gem Management Ltd. (see note 2).


7.  Related Party Transactions

The Company's Chairman of the Board controls Thinking Technologies,  L.P., which
owns approximately 42% of the Company's  outstanding common stock, owns warrants
to purchase additional shares of common stock, and has made a Bridge Loan to the
Company,  as  discussed  in  Notes 2 and 3.  Included  in  accrued  expenses  at
September 30, 1999,  is $250,000 due to the Company's  Chairman of the Board for
consulting services as approved by the Board of Directors.  This obligation may,
at the Company's  election,  be paid in options to purchase common stock.  These
consulting  services commenced October,  1997 for $150,000 per year less certain
related  expenses.  Consulting  services  for the  third  quarter  have not been
included in the September 30, 1999 financial reports.


8.  Significant Events

On October 13, 1999 Mr. John Hiles  resigned  from the Board of Directors of the
Company.


                                         8

<PAGE>



Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements  contained in this  Quarterly  Report on Form 10-QSB,  other than the
historical financial information, constitute "forward-looking statements" within
the meaning of the Private  Securities  Litigation  Reform Act of 1995. All such
forward-looking  statements  involve known and unknown risks,  uncertainties  or
other factors which may cause actual results,  performance or achievement of the
Company to be  materially  different  from any future  results,  performance  or
achievement  expressed or implied by such  forward-looking  statements.  Factors
that might cause such a  difference  include,  but are not limited to, risks and
uncertainties  related to the Company's  limited  operating  history,  uncertain
future  profitability,  future financing needs, limited marketing experience and
dependence on emerging  markets for business  simulation  software;  competition
risks;  uncertainties  regarding the commercial acceptance of Think 2000 and the
development of additional  products;  risks associated with the Company's growth
strategy,  and other risks  described  herein and in the  Company's  1998 Annual
Report on Form 10-KSB.

The  following  discussion  should  be read in  conjunction  with the  financial
statements and notes thereto appearing elsewhere in the Quarterly Report on Form
10-QSB.


OVERVIEW

The Company commenced operations in December 1993 to develop and market business
simulation  software.  Until April 1999, the Company was engaged in research and
development activities and organizational efforts,  including the development of
its  initial  products,   recruiting  personnel,   establishing   marketing  and
manufacturing capabilities and raising capital.

The Company commenced commercial activities in January 1994, but to date has not
generated substantial revenues from the sale of its products. Revenues generated
through  October 30,  1997 were  primarily  derived  from  software  development
projects completed under contracts with customers.  Historically,  a significant
portion of such revenues were derived from a limited number of relatively  large
development  projects  contracted  for by a  small  number  of  customers.  Such
customers are not affiliated  with the Company.  The Company does not believe it
is  materially  dependent  upon sales to these  customers.  Contracts  with such
customers  have been fully  completed  as of  December  31,  1997.  The  Company
historically  has not had, and at September  30,  1999,  did not have,  any firm
order  backlog.  During  1998,  the Company  sought to continue  its  previously
announced  strategy  to change its focus from  custom  projects  to self  funded
development  of simulation for broader  markets.  The Company sought to leverage
its existing  products  and  technology  platform to become a  product-oriented,
sales-driven company.


                                        9

<PAGE>


During 1998, the Company  focused  primarily on the commercial  introduction  of
Think 2000, a Year 2000 risk simulation  software program,  which was introduced
in  September  1997.  Think 2000 was the first  simulation  product  the Company
internally  funded  and  brought  to  a  broader  market.  The  Company  made  a
significant  investment in the development and  commercialization of Think 2000.
Changes in market  conditions  and the  failure of the  Company to  successfully
commercialize  Think 2000 has had a  material  adverse  effect on the  Company's
business, operating results and financial condition.

On May 5, 1998 the Company received  notification  from The Nasdaq Stock Market,
Inc ("Nasdaq") that the Company was not in compliance with certain  quantitative
requirements  for continued  listing of its Common Stock on the Nasdaq  SmallCap
Market. Nasdaq requires,  among other things that companies listed on the Nasdaq
Small Cap Market maintain (i) net tangible  assets of $2,000,000,  (ii) a market
capitalization of $35,000,000, or (iii) net income (in the latest fiscal year or
two of the last three fiscal years) of $500,000.  After a hearing  before Nasdaq
on July 24, 1998, Nasdaq notified the Company on November 7, 1998 that its stock
had been delisted from the Nasdaq SmallCap  Market due to the Company's  failure
to maintain  compliance  with these  quantitative  requirements.  The  Company's
Common Stock is  currently  traded on the OTC  Bulletin  Board,  but the Company
intends  to be listed on the  Nasdaq  SmallCap  Market  again when it is able to
comply with Nasdaq listing requirements.

In light of the  changes  in market  conditions,  and the  Company's  failure to
commercialize  Think 2000, on April 23, 1999, the Company  announced that it was
eliminating substantially all of its operations and all personnel were separated
from the Company,  other than those  required to perform  certain  executive and
administrative functions. It has since begun to search for candidates with which
to enter into transactions.  The Company has retained the technology  underlying
the products it discontinued.

As of  September  30, 1999,  the Company had  experienced  cumulative  losses of
$12,761,000 and has not experienced  any quarter of profitable  operations.  The
Company's operations to date have been funded primarily through private sales of
debt and equity securities and the IPO.

On October 13, 1999 Mr. John Hiles  resigned  from the Board of Directors of the
Company.


Plan of Business

The Company  intends to locate and enter into a  transaction  with an  existing,
public or privately-held company that in management's view, has growth potential
and  may  be  involved  in  the  software  or  technology  industry  (a  "Target
Business").  To that end, the Company is currently  engaged in negotiations with
several candidates. A combination may be structured as a merger,  consolidation,
exchange  of the  Company's  common  stock for stock or assets or any other form
which  will  result  in the  combined  enterprise's  remaining  a  publicly-held
corporation.


                                       10

<PAGE>



In order to continue the business while  negotiations  are pending,  the Company
may be required to obtain additional  financing in the form of convertible notes
and/or  warrants  to  purchase  common  stock.  Such  financing  is likely to be
obtained from one of the Company's current insiders on similar terms to previous
financings.

Pending  negotiation and consummation of a transaction,  the Company anticipates
that it will have, aside from carrying on its search for a transaction  partner,
no business  activities,  and,  thus,  no source of revenue.  Should the Company
incur any significant liabilities prior to a combination with a Target Business,
it may not be able to satisfy without  additional  financing such liabilities as
are  incurred.  If the  Company's  management  pursues  one or more  combination
opportunities  beyond the preliminary  negotiations stage and those negotiations
are  subsequently  terminated,  it is foreseeable that such efforts will exhaust
the Company's ability to continue to seek such combination  opportunities before
any successful  transaction  can be  consummated.  In that event,  the Company's
common stock will become  worthless  and holders of the  Company's  common stock
will receive a nominal distribution,  if any, upon the Company's liquidation and
dissolution.

Results of Operations
Comparison of the quarter ended September 30, 1999 and September 30, 1998

Revenues.  Revenues for the three months ended  September 30, 1999  decreased by
$190,000  from  $193,000 for three months ended June 30, 1998.  The decrease was
due to the necessity to close operations in April, 1999.

Gross Margin.   Gross margin  for  the three months ended September 30, 1999 was
$3,000 compared to $193,000  for the comparable  period ended 1998.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  decreased by  $477,000,  or 91 %, for the three months
ended  September 30, 1999, to $45,000,  from $522,000 for the three months ended
September 30, 1998.  Selling,  general,  and  administrative  expenses consisted
primarily  of costs  associated  with Audit and Legal.  The decrease in selling,
general and administrative expenses was primarily due to the facility close down
in Monterey when, in April,  1999, the necessity to cease operations was evident
and the decision was made to act promptly and reduce  additional and unnecessary
expenditures.

Research and Development. Research and development expenses for the three months
ended  September  30,  1999,  decreased  by  $280,000,  or 99%, to $2,000,  from
$282,000  for the three  months  ended  September  30,  1998.  The  decrease was
primarily  due to reducing  staff and all  expenses  as the  Company  closed all
operations in Monterey.

Interest  Income/Expense.  Interest expense for the three months ended September
30, 1999  increased by $9,000 from nil for the three months ended  September 30,
1998. There are two factors  regarding the interest expense and primarily are as
follows:

(i) Interest of  approximately  $9,000  represents a 10% computation of interest
from April 1, 1999  through  June 30,  1999 and is in  accordance  with the 1998
Bridge  Financing  between  Technologies  and the Company;  and Interest expense
relating to the Bridge Financing between Gem Management Limited and the Company.
Interest income for three months ended


                                       11

<PAGE>


September  30,  1999 was nil  compared  to  $2,000  for the three  months  ended
September  30,  1998.  The interest  income  reported for the three months ended
September  30, 1998 was  primarily due to the investing of the balance of excess
proceeds raised from the Company's IPO creating interest earnings.

Other Income.    Other income net  for the three months ended September 30, 1999
was nil compared to a nil net activity for the three months ended  September 30,
1998.

Net Loss.  As a result of the  foregoing,  net loss for the three  months  ended
September 30, 1999  decreased by $556,000 or 91%, to $53,000,  from $609,000 for
the three months ended September 30, 1998.

Comparison of nine months ended September 30, 1999 and September 30, 1998.

Revenues.  Revenues for the nine months ended  September  30, 1999  decreased by
approximately  $276,000,  or 77% to $82,000 from  $358,000 for nine months ended
September 30, 1998. During the nine month period ending September 30, 1998 sales
were  derived  from the "Think  2000"  product.  The  decrease  in  revenues  is
primarily due to the Company's not realizing the revenues originally anticipated
from the "Think 2000" product or any other sources. Changes in market conditions
and the Company's failure to successfully  commercialize Think 2000 has had this
adverse effect on the Company. As a result of these facts the Company has closed
the Monterey  facilities  and all employees,  with the exception of three,  have
separated from the Company.

Gross  Margin.  Gross  margin for the nine months ended  September  30, 1999 was
$82,000 as compared to $357,000  for the nine months ended  September  30, 1999.
All costs of product are expensed directly to operations.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative expenses decreased by approximately  $1,449,000,  or 86 % for the
nine months ended  September 30, 1999, to $232,000 from  $1,681,000 for the nine
months ended September 30, 1998.  Selling,  general and administrative  expenses
consisted primarily of costs associated with labor, legal, audit and the expense
of closing the Monterey facility.

Research and Development.  Research and development expenses for the nine months
ended September 30, 1999 decreased by approximately $766,000, or 83% to $163,000
from  $929,000  for the nine months  ended  September  30,  1998.  Research  and
Development expenses consisted primarily of labor and the expense of closing the
Monterey facility.

Interest Expense.  Interest expense for the nine months ended September 30, 1999
increased  by  $234,000,  to  $238,000,  from $4,000 for the nine  months  ended
September 30, 1998.  There are two factors  regarding  the interest  expense and
primarily are as follows:


                                       12


<PAGE>



(i) Interest  expense of approximately  $23,000  represents a 10% computation of
interest from December 10, 1998 through  September 30, 1999 and is in accordance
with the 1998 Bridge  Financing  between  Technologies  and the  Company.  A 10%
computation  of interest from July 8, 1999 through  September 30, 1999 and is in
accordance with the Bridge Financing  between GEM LTD and the Company;  and (ii)
Interest  expense of  approximately  $216,000  represents the recognition of the
Bridge  Notes  at the  lower of their  conversion  rate and a rate  fixed at the
commitment date. The Bridge Notes are convertible into shares of Common Stock at
$.20 per share,  less than the market price on the various dates of  conversion.
Accounting  standards  require the appropriate  reporting of this variance.  The
"Additional  Paid-In-Capital"  area of the Balance  sheet  reflects the $216,000
adjustment.

Other Income.  Other income net for the nine months ended September 30, 1999 was
nil  compared to $29,000 for the nine  months  ended  September  30,  1998.  The
earnings  reported at September  30, 1998 was  primarily due to the investing of
the balance of excess proceeds  raised from the Company's IPO creating  interest
earnings

Net  Loss.  As a result of the  foregoing,  net loss for the nine  months  ended
September 30, 1999 decreased by $1,673,000 or 75%, to $551,000,  from $2,224,000
for the nine months ended September 30, 1998.

Liquidity and Capital Resources

Since its  inception and through  September  30, 1999,  the Company has incurred
cumulative losses aggregating  approximately $12,761,000 and has not experienced
any quarter of profitable  operations.  During the past three fiscal years,  the
Company has  satisfied  its cash  requirements  principally  from  advances from
shareholders,  private and public sales of equity  securities  and, to a limited
extent,  from cash flows from operations.  The primary uses of cash have been to
fund  research  and  development  and  for  sales,  general  and  administrative
expenses.

At  September,  1999,  the Company  had cash and  equivalents  of  approximately
$5,000, a negative  working capital of  approximately  $1,209,000 and a negative
shareholders' equity of approximately  $1,263,000. At June 30, 1999, the Company
had long-term liabilities of approximately $10,000 outstanding.

Net cash used in operating  activities  for the nine months ended  September 30,
1999 and 1998, totaled approximately $424,000 and $2,382,000  respectively.  The
funds from the first quarter  ending March 31, 1998 were used  primarily for the
Company's  product  development.  Funds used during the quarter ending September
30, 1999 were used primarily to fulfill  general  operating  expenses  including
legal and audit.

The  Company is  currently  evaluating  its  financing  options  and is actively
searching for candidates  with which to enter into  transactions.  The Company's
management intends to consider only


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<PAGE>


transaction  candidates which in management's  view, have growth potential.  The
Company's  limited  financial  resources  may make the search  difficult or even
impossible  without  additional  financing.  There can be no assurance  that the
Company will be able to obtain this goal on a timely basis, on favorable  terms,
or at all.  In any such  event,  the  Company  may be  unable to  implement  its
business plan.


Year 2000

Currently,  the  Company  has no active  computer  operations  and will not have
active  operations  until and unless it enters into a transaction  with a Target
Business.  As  part  of its  consideration  of the  merits  of  entering  into a
transaction with a Target Business, the Company will consider the effects on the
Year 2000 problem on such Target  Business and the actions  taken by such Target
Business to be ready for Year 2000.  In assessing  the level of readiness of any
Target  business,  the Company  considers the following to be the most important
factors:  (1) the level of compliance of such Target Business'  central computer
systems;  (ii) the  level of  compliance  of the  software  used in such  Target
Business'  ongoing  operations;  and (iii) the level of readiness of such Target
Business' largest vendors.

There can be no assurance  that either a Target  Business or any  customers  and
suppliers of such Target  Business,  will be year 2000  compliant.  In the event
that any Target Business or any of such Target Business,  customers or suppliers
do not install Year 2000  compliant  systems,  following  such  transaction  the
Company may need additional  clerical staff to perform certain tasks.  There can
be no  assurance  that the Company  will not have to bear  additional  costs and
expenses to the future related to the Year 2000 problem.




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<PAGE>



PART II - OTHER INFORMATION

Item 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

         Pursuant to the 1998 Bridge  Financing,  The Company  issued 236 Bridge
         Units during the six months ending June 30, 1999 and 85 during the last
         quarter of 1998 or a total of 321 issued  through June 30,  1999.  Each
         Bridge Unit consists of a Bridge Note and Bridge Warrant.  During three
         months ended  September 30, 1999,  the Company issued 150 Bridge Units.
         Each Bridge Unit consists of a Bridge Note and Bridge Warrant.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits                       Exhibit 27  Financial Data Schedule




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<PAGE>



SIGNATURES

In accordance with 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.



                                             THINKING TOOLS, INC.



Date:  November 15, 1999                     By:  /s/ Moshe Zarmi
                                                 -------------------------------
                                                  Moshe Zarmi
                                                  President and CEO


                                                  By: /s/ Patricia Kessler
                                                  Patricia Kessler
                                                  Acting Chief Financial Officer



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