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 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 000-21295


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

                    Delaware                                      77-0436410
(State or other jurisdiction of Incorporation or              (I.R.S. Employer
                  Organization)                              Identification No.)
            200 Park Avenue Ste 3900
            New York, New York 10166                              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 September 21, 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 JUNE 30, 1999
                                      INDEX

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

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

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

         Condensed Statements of Cash Flows for six months
         ended June 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.................      8


Part II - OTHER INFORMATION
---------------------------

Item 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.....................    13

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>


                                                               June 30, 1999        December 31,
                                                                 (Unaudited)           1998(1)
                                                               -------------        ------------
<S>                                                                 <C>                  <C>
ASSETS
   Current assets:
     Cash and equivalents.....................................  $       13           $        2
     Accounts receivable......................................           1                   53
     Prepaid expenses and other current assets................           -                    -
                                                                ----------           ----------
         Total current assets.................................          14                   55
                                                                ----------           ----------

   Property and equipment, net................................           8                   56
   Other assets...............................................          12                   12
                                                                ----------           ----------
         Total assets.........................................  $       34           $      123
                                                                ==========           ==========

LIABILITIES AND SHAREHOLDERS' (DEFICIENCY)

   Current liabilities:
     Accounts payable.........................................  $      248            $     282
     Accrued expenses.........................................         653                  638
     Notes payable............................................         322                   85
     Deferred revenues........................................           -                   22
     Current portion of capital lease obligations.............           -                    3
                                                                ----------            ---------
         Total current liabilities............................       1,223                1,030

   Long term deposits ........................................          10                   10
                                                                ----------            ---------
         Total liabilities ...................................       1,233                1,040

   Shareholders' (deficiency):
     Common stock.............................................           5                    5
     Additional paid-in capital...............................      11,489               11,288
     Accumulated deficit......................................     (12,708)             (12,210)
                                                                ----------            ---------
         Total shareholders' (deficiency).....................      (1,199)               (917)
                                                                -----------           ---------
         Total liabilities and shareholders' (deficiency).....  $       34            $     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                 Six Months
                                                         Ended June 30,               Ended June 30,
                                                    -----------------------     -----------------------
                                                       1999         1998            1999        1998
                                                    ----------   ----------     ----------   ----------
<S>                                                     <C>          <C>            <C>         <C>

Revenues                                            $      22    $     166      $      79     $    166
Costs                                                       -            1              -            1
                                                    ---------    ---------      ---------     --------
   Gross profit                                            22          165             79          165
                                                    ---------    ---------      ---------     --------

Operating Expenses
   Selling, general, and administrative                    81          687            187        1,159
   Research and development                                12          313            161          647
                                                    ---------    ---------      ---------     --------
         Total operating expenses                         103        1,000            348        1,806
                                                    ---------    ---------      ---------     --------

         Operating loss                                   (81)        (835)          (269)      (1,641)

   Other income/(expense), net                            (22)           1           (229)          27
                                                    ---------    ---------      ---------     --------

         Loss before income taxes                        (103)        (834)          (498)      (1,614)

Net loss                                            $    (103)   $    (834)     $    (498)    $ (1,614)
                                                    =========    =========      =========     ========

Basic and diluted net loss per share                $   (0.02)   $   (0.18)     $   (0.10)    $  (0.35)
                                                    =========    =========      =========     ========

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>

                                                                                      Six Months ended
                                                                                          June 30,
                                                                                   ----------------------
                                                                                      1999        1998
                                                                                   ----------  ----------
<S>                                                                                    <C>          <C>
Cash flows from operating activities:
   Net loss...............................................................              (498)     (1,614)
   Adjustments to reconcile net loss to net cash used in operating
     activities:
     Depreciation and amortization........................................                 3          32
     Additional paid-in capital - (recognition of convertible
       securities at lower of convention rate. See "Results of
       Operations - Interest".............................................               216            -
     Changes in operating assets and liabilities:
       Accounts receivable................................................                52        (114)
       Prepaid expenses and other assets..................................                 -          62
       Other assets.......................................................                 -           7

       Accounts payable...................................................               (35)        (55)
       Accrued expenses...................................................                15        (132)
       Deferred revenues                                                                 (22)          -
                                                                                     --------    -------
            Net cash used in operating activities........................               (269)     (1,814)
                                                                                     --------    -------

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......................                  -        (55)
       Principal payments on capital leases...............................                 (3)        (8)
       Long-term deposits ................................................                  -         15
       Proceeds from issuance of notes payable............................                237          -
                                                                                     --------    -------
           Net cash used in financing activities..........................                235        (48)
                                                                                     --------    -------

Net increase (decrease) in cash and equivalents...........................                 11     (1,845)
Cash and equivalents at beginning of period...............................                  2      2,597
                                                                                     --------    -------
Cash and equivalents at end of period.....................................           $     13    $   752
                                                                                     ========    =======

Supplemental disclosures 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 June 30, 1999, the Company had an accumulated deficit of $12,708,000.  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).

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
September 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.


                                        6

<PAGE>


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.   Aaccounting for convertible securities with 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,  June 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.


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  June 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 June 1999,  resulted in
borrowings under this 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 June 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.


                                        7

<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  marketd 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 June 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.

As  of  June  30,  1999,  the  Company  had  experienced  cumulative  losses  of
$12,708,000 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.

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.

                                        8

<PAGE>


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 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.

Plans 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.

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 material  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 June 30, 1999 and June 30, 1998

Revenues  for the three months  ended June 30, 1999  decreased by $144,000  from
$166,000  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 June 30, 1999 was $22,000
compared to $1,000 for the comparable period ended 1998.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  decreased by  $606,000,  or 88 %, for the three months
ended June 30, 1999,  to $81,000,  from $687,000 for the three months ended June
30, 1998. Selling,  general, and administrative  expenses consisted primarily of
costs associated with labor. 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.

                                        9

<PAGE>


Research and Development. Research and development expenses for the three months
ended June 30, 1999,  decreased by $301,000,  or 55%, to $12,000,  from $313,000
for the three  months ended June 30, 1998.  The  decrease was  primarily  due to
reducing  staff  and all  expenses  as the  Company  closed  all  operations  in
Monterey.

Interest Expense.  Interest  expense  for the three  months  ended June 30, 1999
increased  by  $23,000,  to $22,000,  from an interest  income of $1,000 for the
three months ended June 30, 1998.  There are two factors  regarding the interest
expense and primarily are as follows:

          (i) Interest of approximately  $8,000  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

          (ii)  Interest  expense  of  approximately   $14,000   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
          $14,000 adjustment.

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

Net Loss.   As  a result of the foregoing, net loss  for  the three months ended
June 30, 1999  decreased  by $731,000 or 48%, to $103,000, from $834,000 for the
three months ended June 30, 1998.

Comparison of six months ended June 30, 1999 and June 30, 1998
Revenues  for the six months  ended June 30,  1999  decreased  by  approximately
$87,000,  or 54 % to $79,000  from  $166,000 for six months ended June 30, 1998.
During the six month  period  ending June 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 six months  ended June 30,  1999 was nil as
compared to $1,000 for the six months ended June 30, 1999.  All costs of product
are expensed directly to operations.

Selling, General and Administrative Expenses.   Selling, general and administra-
tive  expenses  decreased by  approximately $972,000, or 84 % for the six months
ended  June 30, 1999, to  $187,000  from  $1,159,000 for  the  six  months ended
June 30, 1998. Selling,  general and administrative expenses consisted primarily
of costs associated with labor and the expense of closing the Monterey facility.

Research and  Development.  Research and development expenses for the six months
ended June 30, 1999 decreased by approximately $486,000, or 75% to $161,000 from
$647,000 for the six months ended June 30, 1998.

Interest.  Expense Interest  expense  for the six  months  ended  June 30,  1999
increased  by $226,000,  to $229,000,  from $3,000 for the six months ended June
30, 1998. There are two factors regarding the interest expense and primarily are
as follows:  (i)  Interest  expense of  approximately  $14,000  represents a 10%
computation  of interest from December 10, 1998  through June 30, 1999 and is in
accordance with the 1998 Bridge Financing between  Technologies 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


                                       10

<PAGE>

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 six months  ended June 30, 1999 was nil
compared  to  $27,000  for the six  months  ended June 30,  1998.  The  earnings
reported at June 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 six months  ended June
30, 1999  decreased by $1,116,000 or 69%, to $498,000,  from  $1,614,000 for the
six months ended June 30, 1998.

Liquidity and Capital Resources
Since its  inception  and  through  June 30,  1999,  the  Company  has  incurred
cumulative losses aggregating  approximately $12,708,000 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 June 30, 1999, the Company had cash and equivalents of approximately $13,000,
a  negative  working  capital  of   approximately   $1,209,000  and  a  negative
shareholders' equity of approximately  $1,199,000. At June 30, 1999, the Company
had long-term liabilities of approximately $10,000 outstanding.

Net cash used in operating  activities  for the three months ended June 30, 1999
and 1998, totaled approximately $269,000 and $1,814,000 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 June 30,
1999 were used primarily to fulfill general operating expenses.

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 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

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<PAGE>


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.

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:  September 20, 1999

                                        By: /s/ Moshe Zarmi
                                            --------------------------------
                                            Moshe Zarmi
                                            President and CEO


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







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