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, 1996

                                       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 Identification No.)
Incorporation or Organization)         


    One Lower Ragsdale Drive, 1-250
           Monterey, California                                        93940
(Address of principal executive offices)                           (Zip Code)


         Issuer's Telephone Number, Including Area Code: (408) 373-8688

        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 27, 1996, 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, 1996
                                      INDEX


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

Item 1.   FINANCIAL STATEMENTS

          Condensed Balance Sheets as of September 30, 1996 and
          December 31, 1995 ..........................................      3

          Condensed Statements of Operations for the three month and
          nine month periods ended September 30, 1996 and 1995........      4

          Condensed Statements of Cash Flows for the nine month period
          ended September 30, 1996 and 1995 ..........................      5

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

Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS ..................................      7


PART II OTHER INFORMATION
-------------------------

Item 2.   CHANGES IN SECURITIES........................................     11

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........     11

Item 5.   OTHER INFORMATION............................................     11

          Signatures...................................................     12


                                 - 2 -

<PAGE>


Item 1. FINANCIAL STATEMENTS

                          THINKING TOOLS, INC.
                        CONDENSED BALANCE SHEETS
                              (UNAUDITED)
                             (IN THOUSANDS)


                                                     September 30,  December 31,
ASSETS                                                        1996         1995

Current assets:
   Cash                                                   $   618       $   152
   Accounts receivable                                         43           146
   Costs in excess of billings on uncompleted contracts         3            11
   Prepaid expenses and other current assets                  742            10
                                                          -------       -------
        Total current assets                                1,406           319
                                                                      
Property and equipment, net                                    94           102
Other assets                                                   11            11
                                                          -------       -------
        Total assets                                      $ 1,511       $   432
                                                          =======       =======
                                                                      
LIABILITIES AND SHAREHOLDERS' EQUITY                                  
                                                                      
Current liabilities:                                                  
   Accounts payable                                       $   167       $     5
   Due to related party                                        42            34
   Accrued expenses                                           281           124
   Billings in excess of costs on uncompleted contracts        12           210
   Deferred revenue                                             0            30
   Notes payables                                              29           201
   Current portion of capital lease obligations                18            13
   Bridge notes payable                                     1,825             0
                                                          -------       -------
        Total current liabilities                           2,374           617
                                                                      
Long term liabilities:                                                
   Note payable                                                 0         1,200
   Interest payable                                            19           155
   Long term portion of capital lease obligations              16            18
                                                          -------       -------
        Total liabilities                                   2,409         1,990
                                                                      
Stockholders' deficit:                                                
   Preferred stock                                              0             0
   Common stock                                                 3             3
   Additional paid in capital                               2,234            89
   Accumulated deficit                                     (3,135)       (1,650)
                                                          -------       -------
        Total stockholders' deficit                          (898)       (1,558)
                                                          -------       -------
        Total liabilities and stockholders' deficit       $ 1,511       $   432
                                                          =======       =======
                                                                      

              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,
                                                1996        1995        1996        1995
<S>                                          <C>         <C>         <C>         <C>    
Contract revenues                            $   138     $   158     $   772     $   933
Contract costs                                   164         140         519         506
                                             -------     -------     -------     -------
   Gross profit                                  (26)         18         253         427

Operating expense:
   Selling, general, and administrative          423         170         954         547
   Research and development                       30          98          91         271
                                             -------     -------     -------     -------
                                                 453         268       1,045         818
                                             -------     -------     -------     -------
      Operating loss                            (479)       (250)       (792)       (391)

Interest expense                                 675          34         752          94
Other income, net                                (16)         (2)        (60)        (11)
                                             -------     -------     -------     -------
      Total other expenses                       659          32         692          83
                                             -------     -------     -------     -------
      Loss before income taxes                (1,138)       (282)     (1,484)       (474)

Income tax expense                                 0           0           1           1
                                             -------     -------     -------     -------
      Net loss                               $(1,138)    $  (282)    $(1,485)    $  (475)
                                             =======     =======     =======     =======

Net loss per share                           $ (0.36)    $ (0.09)    $ (0.47)    $ (0.15)
                                             =======     =======     =======     =======

Shares used in calculating per share data      3,141       3,141       3,141       3,141
                                             =======     =======     =======     =======
</TABLE>


              See notes to condensed financial statements.

                                 - 4 -

<PAGE>

<TABLE>
<CAPTION>

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

                                                                                               Nine months ended
                                                                                                 September 30,
                                                                                               1996        1995
<S>                                                                                          <C>         <C>    
Cash flows from operating activities:
   Net loss                                                                                  $(1,485)    $  (475)
   Adjustments to reconcile net loss to net
   cash used in operating activities:
      Depreciation and amortization                                                               22          13
      Non-cash interest charges                                                                  625          --
      Stock compensation                                                                         200          --
      Changes in operating assets and liabilities:
         Accounts receivable                                                                     103        (362)
         Prepaid expenses and other current assets                                              (732)         37
         Costs in excess of billings on uncompleted contracts                                      8          36
         Due to related party                                                                      8          (1)
         Accounts payable                                                                        162          53
         Accrued expenses                                                                         21         105
         Billings in excess of costs on uncompleted contracts and deferred revenue           $  (228)    $   226
                                                                                             -------     -------
                Net cash provided by operating activities                                     (1,296)       (368)

Cash flows used in investing activities:
   Purchase of equipment                                                                          (2)         (9)
                                                                                             -------     -------
                Net cash used in investing activities                                             (2)         (9)

Cash flows from financing activities:
   Proceeds from issuance of short-term notes payable                                            409         124
   Principal payment on short-term notes payable                                                (581)         --
   Principal payments on capital leases                                                           (9)         (3)
   Proceeds from issuance of bridge notes                                                      1,825          --
   Proceeds from issuance of long-term debt                                                      120          --
                                                                                             -------     -------
                Net cash provided in financing activities                                      1,764         121
                                                                                             -------     -------

Net increase (decrease) in cash                                                                  466        (256)
Cash at beginning of period                                                                      152         268
                                                                                             -------     -------
Cash at end of period                                                                        $   618     $    12
                                                                                             =======     =======

Supplemental disclosures of cash flow information: 
   Cash paid during the period:
      Income taxes                                                                           $     1     $     1
                                                                                             =======     =======
      Interest                                                                               $   198     $     3
                                                                                             =======     =======
   Noncash investing and financing activities:
      Equipment acquired under capital leases                                                $    12     $    23
                                                                                             =======     =======
      Conversion of long term debt to equity                                                 $ 1,320          --
                                                                                             =======     =======
</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 and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial position and the results of
operations for the interim periods have been included.

       These financial statements should be read in conjunction with the
unaudited interim financial statements for the six month period ended June 30,
1996 and the audited financial statements for the years ended December 31, 1995
and 1994, included in the Company's Registration Statement on Form SB-2
(Registration No. 333-11321) filed with the Securities and Exchange Commission.

   2.  Common Stock

          In August 1996, Thinking Technologies, L.P., a principal stockholder
of the Company, converted $1,200,000 aggregate principal amount of outstanding
indebtedness, plus an aggregate of approximately $120,000 of accrued interest
into an aggregate of 263,158 shares of common stock.

       On October 30, 1996, the Company completed its initial public offering
and sold an aggregate of 1,400,000 shares of common stock generating net
proceeds to the Company of approximately $7,417,000, after deducting
underwriting discounts, commissions and other costs. On November 20, 1996, the
Company issued an additional 210,000 shares of common stock generating
additional net proceeds to the Company of approximately $1,187,550, pursuant to
the exercise of an over-allotment option granted to the underwriter of the
initial public offering. Approximately $1,856,500 of the net proceeds from the
initial public offering were used to retire outstanding indebtedness under
certain promissory notes issued in August 1996.


   3.  Net Loss Per Share

       Net loss per share is computed based upon the weighted average number of
shares of common stock outstanding. In accordance with certain Securities and
Exchange Commission Staff Accounting Bulletins, common and common equivalent
shares from stock options and warrants (using the treasury stock method) and
convertible debt (using the if-converted method) issued by the Company at prices
below the offering price during the twelve month period prior to the Company's
initial public offering have been included in the calculation through September
30, 1996 as if they were outstanding for all periods presented prior to the
effective date of the initial public offering regardless of whether they are
antidilutive.


                                 - 6 -

<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 risks and uncertainties related to
the Company's dependence on the emerging market for business simulation
software, development of additional products, protection of its intellectual
property, limited marketing experience, limited number of customers, and need
for additional personnel, as well as risks and uncertainties associated with the
Company's growth strategy, technological changes affecting the Company,
competitive factors affecting the Company, and other risks described herein and
in the Company's Prospectus dated October 25, 1996 filed with the Securities and
Exchange Commission.

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

     Overview

       The Company commenced operations in December 1993 to develop and market
business simulation software. Since its inception, the Company has been 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.
Initially, the Company focused its development efforts on developing programming
tools, which were then used internally. Upon completion, the Company directed
its efforts towards custom development completed under contracts with customers
from which revenues generated to date have been primarily derived. Historically,
a significant portion of such revenues have been derived from a limited number
of relatively large development projects contracted for by a small number of
customers. Sales to Systems Engineering Solutions, Inc. ("SES"), SHL SystemHouse
Inc., a division of MCI Communications Corp. ("SystemHouse"), and the Office of
Research and Development ("ORD"), during the three months ended September 30,
1996 accounted for 21%, 11% and 58%, respectively, of the Company's sales for
such period. Sales to SES, SystemHouse and ORD during the nine months ended
September 30, 1996 accounted for 33%, 30% and 26%, respectively, of the
Company's sales for such period. Such customers are not affiliated with the
Company. The Company does not believe that it is materially dependent upon sales
to these customers. Contracts with such customers have been fully or
substantially completed as of September 30, 1996. The Company historically has
not had, and at September 30, 1996 did not have, any substantial firm order
backlog. To the extent that the Company's business continues to be derived from
a limited number of large customer orders, any inability by the Company as it
completes such orders to obtain new orders could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company's current strategy is to change its focus from custom projects to
self-funded development of simulations for broader markets by leveraging its
existing products and technology platform to become a product-oriented,
sales-driven company.

       As of September 30, 1996, the Company had experienced cumulative losses
of $3,135,000 and had not experienced any quarter of profitable operations. The
Company expects to incur additional operating losses for the foreseeable future.
Through September 30, 1996, the Company's operations have been funded primarily
through private sales of debt and equity securities.

       Pursuant to a plan of reorganization, in August 1996, Thinking
Technologies, L.P. ("Technologies"), a principal stockholder of the Company,
converted $1,200,000 aggregate principal amount of outstanding indebtedness,
plus an aggregate of approximately $120,000 of accrued interest into an
aggregate of 263,158 shares of common stock.


                                 - 7 -

<PAGE>


       On August 28, 1996, the Company closed a bridge financing (the "Bridge
Financing") which provided gross proceeds of $1,825,000 to the Company from the
issuance of promissory notes and warrants to purchase 456,250 shares of common
stock. The Company repaid $502,000 principal amount plus $123,000 of accrued
interest related to loans from Technologies from a portion of such proceeds.
Technologies purchased $625,000 aggregate principal amount of promissory notes
pursuant to the Bridge Financing.

       On October 30, 1996, the Company received net proceeds of approximately
$7,417,000 (net of underwriting discounts and commissions and approximately
$773,000 of related expenses payable by the Company) from the issuance of
1,400,000 shares of common stock at $6.50 per share, pursuant to the Company's
initial public offering (the "Offering"). On November 20, 1996, the Company
received additional net proceeds of approximately $1,187,550 from the issuance
of 210,000 shares of common stock, pursuant to the exercise in full of the
underwriter's over-allotment option granted as part of the Offering.
Approximately, $1,856,500 of the net proceeds of the Offering were used to
retire outstanding indebtedness under the promissory notes issued in the Bridge
Financing. The remainder of the net proceeds of the Offering are intended to be
used to fund the Company's sales and marketing and product development efforts,
and for working capital and general corporate purposes.

       The Company expects to incur substantial operating expenses in the future
to support its development costs, expand its sales and marketing capabilities
and organization, expand its work force and for other general and administrative
expenses. The Company's results of operations may vary significantly from
quarter to quarter during this period of development.

     Results of Operations

     Comparison of three months ended September 30, 1996 and September 30, 1995

       Revenues. Revenues for the three months ended September 30, 1996
decreased by $20,000, or 13%, to $138,000, from $158,000, for the three months
ended September 30, 1995. During each of such periods the Company's revenues
were derived primarily from a relatively small number of development contracts.

       Gross Margin. Gross margin for the three months ended September 30, 1996
was (19%) of revenues as compared with 11% of revenues for the three months
ended September 30, 1995.

       Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $253,000, or 149%, for the three months
ended September 30, 1996 to $423,000, or 307% of revenues, from $170,000, or
108% of revenues, for the three months ended September 30, 1995. Selling
expenses included costs of preparing project proposals and software
demonstrations. General and administrative expenses consisted primarily of
employee benefits and labor costs. The increase in selling, general and
administrative expenses was primarily due to compensation related to employee
stock options granted in July and August and increased involvement by the
Company's technical development team in the preparation of Company's proposals
and presentations.

       The Company intends to hire additional personnel to expand the Company's
marketing and sales capabilities. Additionally, the Company expects general and
administrative expenses to increase in future periods as the Company incurs
additional costs related to being a public company and expands its staff and
facilities.

       Research and Development. Research and development expenses for the three
months ended September 30, 1996 decreased by $68,000, or 69%, to $30,000, or 22%
of revenues, from $98,000, or 62% of revenues, for the three months ended
September 30, 1995. This decrease was primarily due to the shifting of
development efforts from initial internal software development to customer
software development contracts.

       As the Company's business strategy shifts from custom development
projects to product sales, the Company expects that research and development
expenses will increase.

       Interest Expense. Interest expense for the three months ended September
30, 1996 increased by $641,000, or 1885%, to $675,000, or 489% of revenues, from
$34,000, or 22% of revenues, for the three months ended September 30, 1995. This

                                      - 8 -

<PAGE>


increase was primarily due to non-cash charges of $350,000, resulting from the
issuance of warrants to Technologies in connection with advances made to the
Company between January and July 1996, and $275,000, resulting from the issuance
of warrants in the Bridge Financing in August 1996.

       Other Income. Other income for the three months ended September 30, 1996
increased by $14,000, or 700%, to $16,000, or 12% of revenues, from $2,000, or
1% of revenues, for the three months ended September 30, 1995. This increase was
primarily due to an increase in fees received for assisting customers with
product presentations and demonstrations in connection with the resale by such
customers of the Company's products.

       Net Loss. As a result of the foregoing, net loss for the three months
ended September 30, 1996 increased by $856,000, or 304%, to $1,138,000, from
$282,000 for the three months ended September 30, 1995.

     Comparison of nine months ended September 30, 1996 and September 30, 1995

       Revenues. Revenues for the nine months ended September 30, 1996 decreased
by $161,000, or 17%, to $772,000, from $933,000, for the nine months ended
September 30, 1995. During each of such periods the Company's revenues were
derived primarily from a relatively small number of development contracts.

       Gross Margin. Gross margin for the nine months ended September 30, 1996
was 33% of revenues as compared with 46% of revenues for the nine months ended
September 30, 1995.

       Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $407,000, or 74%, for the nine months ended
September 30, 1996 to $954,000, or 124% of revenues, from $547,000, or 59% of
revenues, for the nine months ended September 30, 1995. Selling expenses
included costs of preparing project proposals and software demonstrations.
General and administrative expenses consisted primarily of employee benefits and
labor costs. The increase in selling, general and administrative expenses was
primarily due to compensation related to employee stock options granted in July
and August and increased involvement by the Company's technical development team
in the preparation of the Company's proposals and presentations

       Research and Development. Research and development expenses for the nine
months ended September 30, 1996 decreased by $180,000, or 66%, to $91,000, or
12% of revenues, from $271,000, or 29% of revenues, for the nine months ended
September 30, 1995. This decrease was primarily due to the shifting of
development efforts from initial internal software development to customer
software development contracts.

       Interest Expense. Interest expense for the nine months ended September
30, 1996 increased by $658,000, or 700%, to $752,000, or 97% of revenues from
$94,000, or 10% of revenues, for the nine months ended September 30, 1995. This
increase was primarily due to non-cash charges of $350,000, resulting from the
issuance of warrants to Technologies in connection with advances made to the
Company between January and July 1996, and $275,000, resulting from the issuance
of warrants in the Bridge Financing in August 1996.

       Other Income. Other income for the nine months ended September 30, 1996
increased by $49,000, or 446% to $60,000, or 8% of revenues, from $11,000, or 1%
of revenues, for the nine months ended September 30, 1995. This increase was
primarily due to an increase in fees received for assisting customers with
product presentations and demonstrations in connection with the resale by such
customers of the Company's products.

       Net Loss. As a result of the foregoing, net loss for the nine months
ended September 30, 1996 increased by $1,010,000, or 213%, to $1,485,000, from
$475,000 for the nine months ended September 30, 1995.

     Liquidity and Capital Resources

       Since its inception and through December 31, 1995 and September 30, 1996,
the Company has incurred cumulative losses aggregating approximately $1,650,000
and $3,135,000, respectively, and has not experienced any quarter of profitable
operations. The Company expects to continue to incur operating losses for the
foreseeable future, principally as a result of expenses associated with the
Company's product development efforts and anticipated sales, marketing and
general and

                                      - 9 -

<PAGE>


administrative expenses. During the nine months ended September 30, 1996 and
September 30, 1995, the Company has satisfied its cash requirements principally
from advances from stockholders and private sales of equity and debt 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 30, 1996, the Company had cash of approximately $618,000 and
a working capital deficit of approximately $968,000. In October 1996, the
Company received net proceeds of approximately $7,417,000 from the Offering. In
November 1996, the Company received additional net proceeds of approximately
$1,187,550, pursuant to the exercise in full of the underwriter's over-allotment
option in connection with the Offering. Approximately $1,856,500 of the net
proceeds of the Offering were used to retire outstanding indebtedness.

       Net cash used in operating activities for the nine months ended September
30, 1996 and September 30, 1995 totaled approximately $1,296,000 and $368,000,
respectively. Net cash provided by financing activities for the nine months
ended September 30, 1996 and September 30, 1995 totaled approximately $1,764,000
and $121,000, respectively, reflecting the proceeds from borrowings from
Technologies, proceeds from the Bridge Financing, and the conversion of interest
payable to debt, offset by principal repayments of $581,000 in the nine months
ended September 30, 1996.

       Based on the Company's operating plan, the Company believes that the net
proceeds of the Offering, together with revenues from continuing operations,
will be sufficient to satisfy its capital requirements and finance its
operations for the foreseeable future. Such belief is based upon certain
assumptions, and there can be no assurance that such assumptions are correct.
The Company may be required to raise substantial additional capital in the
future in order to carry out its business plan. In addition, contingencies may
arise which may require the Company to obtain additional capital. Accordingly,
there can be no assurance that such resources will be sufficient to satisfy the
Company's capital requirements. The Company anticipates that any additional
financing required to meet its current plans for expansion may take the form of
the issuance of common or preferred stock or debt securities, or may involve
other debt financing. Such financing may involve secured or unsecured debt
financing. To the extent that the Company elects to obtain debt financing, the
lender may impose certain restrictive covenants on the Company and upon any
default by the Company on such debt financing, and a liquidation of the Company,
the rights of such lender would be superior to the rights of the holders of
common stock. There can be no assurance that the Company will be able to obtain
such additional capital on a timely basis, on favorable terms, or at all. In any
of such events, the Company may be unable to implement its business plan.

     Inflation

       The impact of general inflation on the Company's business has been
insignificant to date and the Company believes that it will continue to be
insignificant for the foreseeable future.



                                     - 10 -

<PAGE>

Part II - Other Information

Item 2.   Changes in Securities

          See Note 2 in the Notes to Condensed Financial Statements in Part
          I--Financial Information of this Quarterly Report on Form 10-QSB.

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

          Pursuant to Section 228(a) of the General Corporation Law of the State
          of Delaware, the holders of the Company's common stock unanimously
          approved, by a written consent dated as of August 10, 1996, the
          actions taken by the sole incorporator and directors of the Company,
          with respect to, among other things, (i) the adoption of the Company's
          Certificate of Incorporation and By-Laws, (ii) the election of the
          Company's Board of Directors, (iii) the merger of Thinking Tools,
          Inc., a California corporation, with and into the Company, and (iv)
          the adoption of the Company's 1996 Stock Option Plan (the "Plan").

Item 5.   Other Information

          Effective as of December 1, 1996, Philip F. Whalen, Jr. will join the
          Company as its President, Chief Executive Officer and as a director.
          Mr. Whalen will receive a salary of $175,000 per year, and will be
          eligible to receive an annual bonus based upon the achievement of
          certain objectives to be determined by the Company's Board of
          Directors. In connection with his employment by the Company, Mr.
          Whalen was granted certain stock options as follows: (i) an option to
          purchase 230,000 shares of common stock at an exercise price of $7.65
          per share was granted under the Plan, subject to vesting over three
          years; (ii) an option to purchase 150,000 shares of common stock at an
          exercise price of $9.00 per share was granted outside of the Plan,
          which option will become exercisable at the earlier of (x) such time
          as the market price of the Company's common stock is $20.00 per share
          or higher for 20 consecutive trading days and (y) three years from the
          date of the commencement of Mr. Whalen's employment; and (iii) an
          option to purchase 50,000 shares of common stock at an exercise price
          of $9.00 per share was granted outside of the Plan, which option will
          become exercisable at the earlier of (x) such time as the market price
          of the Company's common stock is $30.00 per share or higher for 20
          consecutive trading days and (y) three years from the date of the
          commencement of Mr. Whalen's employment. Mr. Whalen has agreed to
          enter into a two-year lock-up agreement with Barington Capital Group,
          L.P., the underwriter of the Offering, with respect to the shares of
          common stock underlying all such stock options, pursuant to which, Mr.
          Whalen will not sell, contract to sell, or otherwise dispose of such
          shares for a period of two years from the date of the Offering
          without the underwriter's written consent.

          From 1992 until joining the Company, Mr. Whalen served in various
          positions with Digital Tools, Inc., a project management software
          company, including Managing Director of Digital Tools Europe, and Vice
          President of Sales, Marketing & Services. While with Digital Tools,
          Mr. Whalen created and implemented a business plan for Digital Tools'
          European division and restructured the sales operations of Digital
          Tools. From 1990 to 1992, Mr. Whalen served as Vice President of
          Marketing and then Vice President of Sales for Clarity Software, a
          developer of business software for UNIX Workstations, of which he was
          a member of the founding team. From 1985 to 1990, Mr. Whalen was Vice
          President of Sales and Marketing for cc:Mail INC., where he
          established telemarketing, distribution and major accounts sales
          departments. Mr. Whalen holds a B.A. in Chemistry from Denison
          University and an M.B.A. from Stanford University.



                                     - 11 -

<PAGE>


                                   SIGNATURES

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


                                             THINKING TOOLS, INC.



Date: November 27, 1996                       By: /s/ John Hiles
                                                 -----------------
                                                 John Hiles, President
                                                (Principal Executive, Accounting
                                                 and Financial Officer)


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