<PAGE>

                                  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, 2000

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)

200 Park Avenue, Suite 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  /x/        NO  / /

At November 27, 2000, the number of shares outstanding of the Issuer's Common
Stock par value $.001 per share, was 10,204,637 shares.


<PAGE>


                       THINKING TOOLS, INC. AND SUBSIDIARY
                      10-QSB FOR THE QUARTERLY PERIOD ENDED
                               September 30, 2000
                                      INDEX

Part I -  FINANCIAL INFORMATION                                         PAGE NO.

Item 1.   FINANCIAL STATEMENTS

          Consolidated Balance Sheet as of September 30, 2000................ 1

          Consolidated Statements of Operations for the three month and nine
          month periods ended  September 30, 2000 and 1999................... 2

          Consolidated Statements of Cash Flows for the nine month
          periods ended September 30, 2000 and 1999.......................... 4

          Notes to Consolidated Financial Statements......................... 5

Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS................................ 11

Part II - OTHER INFORMATION

Item 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.......................... 18

Item 6.   EXHIBITS AND REPORTS ON FORM 8 K................................... 18

Signatures................................................................... 19


<PAGE>


PART I - FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

THINKING TOOLS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
     (IN THOUSANDS)                                                     SEPT. 30
(unaudited)                                                               2000
                                                                        --------
ASSETS

CURRENT  ASSETS:
  Cash and equivalents                                                        1
   Accounts Receivable                                                       64
   Less Allowance for Doubtful Accounts                                     (50)
                                                                        -------
       Total current assets                                                  15

PROPERTY AND EQUIPMENT, NET                                                  39
                                                                        -------

OTHER ASSETS
  Deposits and Prepaids - Net                                               285
 Goodwill - Net                                                           2,664
                                                                        -------
      Total other assets                                                  2,949

TOTAL ASSETS                                                              3,003
                                                                        =======

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                        1,045
  Accrued expenses                                                          355

                                                                        -------
       Total current liabilities                                          1,400

COMMITMENTS AND CONTINGENCIES

INVESTOR ADVANCE                                                            426

SHAREHOLDERS' EQUITY
  Preferred convertible stock series "A"                                      1
  Preferred stock, $.001 par value; 3,000,000 shares authorized;             --
    Preferred convertible stock series "A" $.001 par value; 1,148,798        --
    shares issued and outstanding
    Preferred convertible stock Series "B" $.001 par value, 200 shares       --
    issued and outstanding
    Preferred convertible stock Series "C" $.001 par value, no shares
    issued and outstanding
  Common stock, $.001 par value: 20,000,000 shares authorized;               --
    9,704,237 shares issued and outstanding at September 30, 2000            10
  Additional paid-in capital                                             21,030
  Deferred Stock Compensation                                              (218)
  Accumulated deficit                                                   (19,646)
                                                                        -------
    Total shareholders' equity                                            1,177
                                                                        -------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                3,003
                                                                        =======

                 See notes to Consolidated Financial Statements


<PAGE>


THINKING TOOLS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
     (IN THOUSANDS, EXCEPT PER SHARE
      DATA)                            Three Months Ended    Nine Months Ended
(UNAUDITED)                                September 30,        September 30,
                                         2000       1999      2000       1999
                                       -------    ------------------    -------
REVENUES

Product                                $     8    $     3    $    46    $    82
                                       -------    ------------------    -------

OPERATING EXPENSES
        Internet Connectivity              226         --        488         --
        Selling General and                745         45      1,889        232
           Administration

        Software Development               120         --        289
        Research and Development            --          2         --        163
                                       -------    -------    -------    -------

      Total Operating Expense            1,091         47      2,666        395
                                       -------    -------    -------    -------

        Operating Loss                  (1,083)       (44)    (2,620)      (313)
                                       -------    -------    -------    -------

Other Expense                           (1,159)        (9)    (1,530)      (238)
                                       -------    -------    -------    -------

NET LOSS                               $(2,242)   $   (53)   $(4,150)   $  (551)
                                       =======    =======    =======    =======

BASIC AND DILUTED NET LOSS PER SHARE
                                       $ (0.24)   $ (0.01)   $ (0.45)   $ (0.12)
                                       =======    =======    =======    =======

SHARES USED IN CALCULATION
OF NET LOSS PER SHARE                    9,186      4,642      9,186      4,642
                                       =======    =======    =======    =======


                 See notes to Consolidated Financial Statements


<PAGE>

<TABLE>
<CAPTION>
THINKING TOOLS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
     (IN THOUSANDS, EXCEPT PER SHARE DATA)                                               Nine Months Ended
     (UNAUDITED)                                                                           September 30,
                                                                                          2000       1999
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
<S>                                                                                     <C>        <C>
     Net Loss                                                                           $(4,150)   $  (551)
      Adjustments to reconcile net loss to net cash used in operating activities
        Depreciation and amortization,                                                      766          3
        Allowance given for doubtful expense                                                 50
        Stock compensation expense                                                          657
        Interest attributable to beneficial conversion feature on bridge note               874        216
        investor advances
     Changes in assets and liabilities:
        Accounts receivable                                                                 (37)        53
        Deposits and Prepaids                                                                66         --
        Accounts payable                                                                    761        (22)
        Deferred revenues                                                                              (22)
        Accrued Expenses                                                                    147       (102)
                                                                                        =======    =======
     Net cash used in operating activities                                                 (866)      (424)

CASH FLOWS (USED) IN INVESTING ACTIVITIES

     Purchases of property and equipment                                                    (24)        --
     Gain/ (loss) on sale of fixed assets                                                               45
     Direct costs of acquisition                                                           (207)        --
                                                                                        -------    -------
     Net cash provided (used) in investing activities                                      (231)        45

CASH FLOWS FROM FINANCING ACTIVITIES

     Principal payments on capital leases                                                    --         (3)
     Proceeds from issuance of bridge notes                                                 426        386

            Investor Advances

     Proceeds from the issuance of common stock                                             560         --
     Net cash provided by financing activities                                              986        383
                                                                                        -------    -------
Net Increase (Decrease) in cash                                                            (111)         4

CASH AND EQUIVALENTS, beginning of period (1-1-2000)                                        112          2

CASH AND EQUIVALENTS, end of period (9-30-2000)                                         $     1    $     6

SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES:

     Conversion of investor advances to common stock                                    $   600    $    --
     In March 2000, the Company acquired substantially all of the assets and
     assumed specific liabilities of Tritium Network, Inc. ("Tritium")
     The specified liabilities included the $500,000 investor bridge note to Tritium
     The Tritium bridge note was cancelled upon the conversion of the bridge
     note into shares of the Company's common stock on March 7, 2000
     The consideration for the acquisition was paid by the Company
     through issuance of 1,148,798.5 shares of Series A preferred
     convertible stock, as follows:

            Fair value of assets acquired (per independent appraisal)                   $ 3,150    $    --
            Liabilities assumed                                                             552         --
            Series A  preferred convertible stock issued                                  2,598         --
                                                                                        =======
                    Warrants given for prepaid advertising                                  391    $    --
</TABLE>

             See notes to Consolidated Financial Statements


<PAGE>

                       THINKING TOOLS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Basis of Presentation

         These Financial Statements should be read in conjunction with the
Company's 1999 Annual Report on Form 10-KSB and Form 10-KSB/A.

         The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. These financial statements include activity related to
the Company's subsidiary, StartFree.com, Inc. ("StartFree"), which was formed on
March 6, 2000 (see below). All significant inter-company balances and
transactions have been eliminated in consolidation. Interim results are not
necessarily indicative of results for a full year. 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 in the accompanying financial statements.

         The financial statements have been prepared under the assumption that
the Company will continue as a going concern. However, from its inception, the
Company has experienced continuing losses, which total approximately $19,646,000
through September 30, 2000.

         Management has redirected the Company's strategy to reposition itself
as a global information technology and Internet holding company for high
technology companies. The Company intends to continue to locate and enter into
transactions with existing, public or privately held companies in the software
or technology industry which, in Management's view, have growth potential. The
Company is currently engaged in negotiations with several such companies. The
Company's continued existence is dependent on its ability to negotiate
additional acquisitions, raise additional financing and develop successful
future operations. There can be no assurance that the Company will be successful
in such activities and be able to continue as a going concern. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

2.       Common and Preferred Stock Issued

         On November 6, 1998, the Company approved a bridge financing offer from
Thinking Technologies L.P. ("Technologies"), pursuant to which Technologies was
granted the right to purchase up to $350,000 Senior Secured Convertible Notes
("Senior Notes") due within 90 days at 10% interest per annum, and warrants to
purchase shares of the Company' common stock, $.001 par value per share (the
"Common Stock"). Each $1,000 note was convertible into 5,000 shares of Common
Stock, with expiration of the warrants upon conversion. During 1999, the Board
of Directors of the Company (the "Board") approved an increase in the bridge
financing offer to Technologies to include expenses incurred on behalf of the
Company and accumulated interest. Technologies advanced the Company cash and
accumulated interest in the aggregate amount of $392,992 through December 31,
1999. The Senior Notes plus the advances and accumulated interest were converted


<PAGE>

into 1,964,961 shares of Common Stock from November through December 31, 1999.
All warrants expired with the conversions.

         In July 1999, the Company borrowed $150,000 from Gem Management by
issuing an additional unsecured convertible note, with interest of 10% per annum
and warrants to purchase Common Stock at $.20 per share. The note and $5,554 of
accumulated interest were converted into 777,518 shares of Common Stock on
November 16, 1999. All warrants expired with the conversion

         On March 6, 2000, the Company formed a wholly owned subsidiary,
StartFree, which acquired (the "Acquisition") substantially all of the assets
and assumed specified liabilities of Tritium Networks, Inc., a Delaware
corporation ("Tritium"). The consideration for the Acquisition was paid on March
7, 2000 through the issuance of 1,148,798.5 shares of a newly created Series A
convertible preferred stock (the "Series A Preferred Stock"). The Series A
Preferred Stock will be convertible into 11,487,985 shares of Common Stock when
the Company files an amendment to its Certificate of Incorporation with the
Secretary of the State of the State of Delaware increasing its authorized number
of shares of Common Stock to at least 35,000,000 shares.

         Tritium is an Internet service provider based in Cincinnati, Ohio,
which provides free Internet service to subscribers in exchange for the display
of advertisements on the lower portion of the subscriber's screen. AdSmart
Corporation ("AdSmart") agreed to provide Internet-based advertising and pay
royalties to Tritium based on the number of individual advertisements viewed. In
addition, one supplier provides connectivity for Tritium's Internet network
services. These agreements have been assumed by StartFree and continue in
effect.

         The Acquisition is accounted for under the purchase method of
accounting for business combinations. In connection with the accounting for the
Acquisition, a substantial amount of goodwill has been recorded. The Company
anticipates that the amortization of such goodwill will substantially impact
upon the Company's results of operations in future years.

         In November 1999, the Company entered into a financing arrangement for
the amount of $1,000,000 with certain investors for the purchase of 2,000,000
shares of Common Stock for $.50 per share. Upon approval by the Board of the
Acquisition on December 10, 1999, one such investor advanced $100,000 to the
Company and $500,000 to Tritium pursuant to a bridge note (the "Tritium Note").
On the closing date of the Acquisition, (i) the Tritium Note was repaid by
applying the amount owed to the purchase of shares of Common Stock, (ii) the
investors provided the remaining $400,000 under the financing agreement, and
(iii) the balance of the 2,000,000 shares of Common Stock was issued by the
Company to the investors. In March and April 2000, investors also purchased
300,000 and 20,000 additional shares of Common Stock, respectively, at $.50 per
share, yielding an additional $160,000 of financing to the Company.

         In connection with the Acquisition, on March 10, 2000, the Company
issued 200 shares of Series B Convertible Preferred Stock, $.001 par value per
share, to the Company's Chairman of the Board. The Series B Preferred Stock has
certain voting control rights until March 7, 2005.


<PAGE>

         In connection with the Acquisition, the Company intends to effect an
increase in the authorized common and preferred stock to 75,000,000 and
5,000,000 shares, respectively.

         In July 2000, the Board of Directors approved a bridge financing offer
from Technologies pursuant to which Technologies would loan the Company up to
$500,000 (the "Technologies Bridge"). In November 2000, the Board of Directors
approved an increase in the Technologies Bridge to up to $1,000,000 (together
with the Technologies Bridge, the "Technologies Bridge Financing"). These loans
are to be evidenced by a demand note which bears interest at 10% per annum and
is convertible at the option of the holder into shares of the Company's Common
Stock at $0.375 per share commencing in February 2001. Technologies is entitled
to receive warrants to purchase up to 533,333 shares of the Company's Common
Stock at $0.375 per share in connection with these bridge loans. From May 15,
2000 through September 30, 2000, Technologies advanced bridge loans to the
Company in the principal amount of $417,000 and accumulated interest of $9,000.

         In order to induce Technologies to continue its bridge loans with the
Company, in November 2000, Michael Lee, the President of StartFree, and Tritium,
granted Technologies as collateral security for the repayment of bridge loans
made by Technologies to the Company an option to purchase, for nominal
consideration, 600,000 shares of the Company's Series A Preferred Stock owned by
Michael Lee or Tritium, as the case may be, in the event that the Company fails
to repay the Technologies Bridge Financing when due.

         In September 2000, the Company and Rockley International Ltd., a
British Virgin Islands corporation ("Rockley") entered into a purchase agreement
providing for the purchase by Rockley of shares of the Company's Series C
Convertible Preferred Stock (the "Preferred Shares"). Rockley agreed to purchase
400,000 Preferred Shares for an aggregate purchase price of $4,000,000. Each
Preferred Share is initially convertible into twenty shares of the Company's
Common Stock. 200,000 of the Preferred Shares were required to be purchased by
Rockley no later than September 12, 2000, with the balance to be purchased
within sixty days thereafter, unless the parties agreed otherwise. Although
representatives of Rockley continue to assure the Company that Rockley intends
to consummate the transactions contemplated by the purchase agreement, Rockley
is currently in default under the purchase agreement. There can be no assurance
that the transactions contemplated by the purchase agreement will ever be
consummated.

Warrants

         The Company consummated a series of financing transactions in 1996.
Warrants were issued to Technologies 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 Common Stock at an exercise price of $3.90 per
share (156,250 to Technologies and 300,000 to the Company's underwriter and its
designees), expiring August 2001, were also issued. In addition, in October and
November 1996, the Company completed its initial public offering ("IPO") and
issued 1,610,000 shares of Common Stock at $6.50 per share for net proceeds of
approximately $8,470,000. In connection with its IPO, the Company sold options
to purchase 140,000 shares of Common Stock to its underwriter for $.001 per
option. These options are exercisable for a period of five years at $10.40 per


<PAGE>

share. The 300,000 warrants and 140,000 options are subject to anti-dilution
adjustments.

         On December 10, 1999, in connection with the acquisition of Tritium,
the Company issued 2,450,000 warrants (the "Consultant Warrants") to purchase
shares of Common Stock at an exercise price of $.50 per share to a consultant as
compensation for services provided. The Consultant Warrants, however, have no
value. These warrants vested on March 7, 2000 and expire in December 2004.

         In addition, in connection with the Tritium acquisition, the Company
contributed a warrant (the "AdSmart Warrant") to purchase 1,262,275 shares of
Common Stock, at $.01 per share, to the capital of StartFree.com, Inc.
("StartFree") in order for StartFree to deliver the AdSmart Warrant to AdSmart
in connection with StartFree's advertising agreement with AdSmart. As of March
7, 2000, AdSmart can exercise warrants for 500,400 shares of Common Stock and an
additional 584,399 shares of Common Stock are exercisable on the earlier of (i)
61 days after the date that the shares of Series A Preferred Stock of the
Company owned by Tritium are converted into Common Stock or (ii) two years after
the date of the AdSmart Warrant. An additional 177,476 shares of Common Stock
are exercisable from time to time upon the written request of the holder of the
AdSmart Warrant if, as a result of such exercise, such holder will not
beneficially own in excess of five percent (5%) or more of the outstanding
Common Stock. The value of these warrants has been determined to be
approximately $391,000 which has been included in the consolidated balance sheet
under deposits and prepaid-net. The original agreement between AdSmart and
Tritium (the "AdSmart Agreement") was for a period of thirty months beginning
July 15, 1999. Because the AdSmart Warrant was issued on March 7, 2000 in
connection with the Acquisition, the value of the AdSmart Warrant is being
amortized on a straight-line basis over the remaining 22.5 months remaining in
the term of the AdSmart Agreement.

         On December 10, 1999, the Company's Chairman of the Board and its Chief
Executive Officer were granted warrants to purchase 549,800 and 550,000 shares
of common stock, respectively, at an exercise price of $.50 per share. These
warrants were issued for various services related to facilitating the Tritium
acquisition. These warrants vested on December 10, 1999 and are exercisable
until December 2004. For the year ended December 31, 1999, the Company recorded
noncash compensation expense under APB 25 of $1,275,000 in connection with the
issuance and vesting of these warrants. On October 30, 2000, AdSmart exercised
the AdSmart Warrant with respect to 500,400 shares of Common Stock.

Stock Options

Plans

         Under the Company's 1996 and 1997 Stock Option Plans (together, the
"Plans"), options to purchase up to an aggregate of 976,000 shares of Common
Stock may be granted to officers, directors, employees or consultants. The Plans
provide for issuing both incentive stock options and non qualified stock
options, as determined by the Plan administrator.


<PAGE>

         Options granted under the Plans become exercisable as determined by the
Board of Directors and must be exercised within ten years. Options granted are
forfeited 90 days after an employee's separation from the Company.

         Due to the shutdown of the Company's operations in March 1999, all of
the stock options granted to employees under the Plans that were outstanding at
December 31, 1998 have been forfeited, except for 41,036 stock options granted
to four Board members at an exercise price of $1.00 per share which remain
outstanding at September 30, 2000.

Other

         In 1995, options were issued outside of the Plans to Directors and an
unaffiliated person to purchase 58,964 shares of Common Stock and 15,000 shares
of Common Stock at an exercise price of $.79 and $1.00 per share, respectively.

         On December 10, 1999, the Board of Directors granted options outside of
the Plans to Board members and employees for the purchase of 1,690,000 shares of
Common Stock at an exercise price of $.50 per share. Of these options, (i)
100,000 vested in May 2000, (ii) 700,000 will vest in December 2000, and (iii)
the balance vested upon issuance.

         The Board of Directors also granted options outside of the Plans to the
Company's Chairman of the Board to purchase 352,900 shares of Common Stock, at
an exercise price of $.50 per share, in lieu of cash compensation owed for
services of approximately $176,000 as of December 31, 1998. These options were
issued and vested as of December 10, 1999.

         For the nine months ended September 30, 2000, the Company recorded
noncash compensation expense under APB 25 of approximately $657,000 in
connection with the vesting of certain options.


<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 substantial capital
requirements, development of effective internal processes and systems, risks
related to the Internet industry, the ability to attract and retain high quality
employees, changing overall economy, rapid change in technology, the number and
size of competitors in its markets, law and regulatory policy, the mix of
products and services offered in the Company's target markets and other risks
described herein and in the Company's 1999 Annual Report on Form 10-KSB.
<PAGE>

         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.

         From the Company's inception through April 1999, the Company engaged in
research and development activities including the development of its initial
products (developing and marketing simulation software), recruiting personnel,
establishing marketing and manufacturing capabilities and raising capital. To
date, the Company 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.

         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
that the Company funded and brought to a broader market. The Company made a
significant investment in the development and commercialization of Think 2000.
However, change in market conditions resulted in a lack of interest in Y2K
products and thus culminated in the failure to successfully commercialize Think
2000.

         In March 1999, in light of the changes in market conditions and the
Company's failure to commercialize Think 2000, the Company eliminated
substantially all of its operations and terminated all personnel other than
those required to perform certain executive and administrative functions. The
Company has retained the technology underlying the products that it
discontinued.

         During the second half of 1999, the Company moved forward with its new
strategy to establish itself as a global information technology and Internet
holding company. The Company focused on locating and entering into transactions
with existing, public or privately-held companies which, in its view, have
growth potential and may be involved in the software or technology industry (a
"Target Business").

         In March 2000, the Company announced the successful consummation of the
Acquisition.

         The Company intends to continue to locate and enter into additional
transactions with Target Businesses. 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 Common Stock for stock or assets or
any other form which will result in the combined enterprise remaining a
publicly-held corporation. There can be no assurance that any such transaction
will be consummated.


<PAGE>

         Results of Operation

         Comparison of the three months ended September 30, 2000 and September
30, 1999

         Revenues. Revenues for the quarter ended September 30, 2000 increased
by $5,000 or 17% to $8,000 from $3,000 for the quarter ended September 30, 1999.
Revenues during the quarter ended September 30, 2000 consisted of advertising
revenues derived from StartFree.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the quarter ended September 30, 2000 increased by
$700,000 to approximately $745,000 from $45,000 for the quarter ended September
30, 1999. The increase primarily consisted of: (i) approximately $71,000
reflecting the cost of wages; (ii) approximately $218,000 attributable to the
amortization of deferred stock compensation expense; (iii) approximately
$178,000 relating to legal and auditing costs, (iv) $50,000 relating to bad debt
expense; (v) approximately $85,000 relating to advertising costs; and (vi)
approximately $52,000 in connection with amortization expenses related to the
AdSmart Warrant.

         Research and Development. Research and development expenses for the
quarter ended September 30, 2000 decreased by approximately $2,000 to nil from
the quarter ended September 30, 1999. Research and development costs in prior
years were attributable to the Company's software development activity. The
decrease in research and development expenses was due to the elimination of
certain Company software operations in March 1999. StartFree had no research and
development costs during the third quarter ended September 30, 2000.

         Software Development. Software system expenses for the quarter ended
September 30, 2000 increased by approximately $120,000 from nil for the quarter
ended September 30, 1999. This expense is directly related to the maintenance
and prototype development which is required for StartFree's Internet activity.
These expenses are primarily wages and salaries of approximately $93,000 and
outside contract costs of approximately $18,000.

         Internet Connectivity. Internet connectivity expenses for the quarter
ended September 30, 2000 increased by approximately $226,000 from nil for the
quarter ended September 30, 1999. This expense is directly related to the
telephone access lines of StartFree's Internet activity. These costs are unique
and considered an "ongoing" expense of StartFree.

         Other Expense, Net. Other expense for the quarter ended September 30,
2000 increased by approximately $1,150,000 to approximately $1,159,000 from
$9,000 for the quarter ended September 30, 1999. Other expenses, net during the
quarter ended September 30, 2000 were attributed to (1) goodwill amortization
costs of approximately $276,000 arising from the acquisition of Tritium, which
is based on a 36 month period using a straight-line basis; (2) interest of
approximately $874,000, which represents the interest attributable to the
beneficial conversion features in the Senior Note and the Tritium Note; and (3)
interest of approximately $9,000 which relates to interest charged in connection
with the Technologies Bridge Financing at a rate of 10% from May 15, 2000
through September 30, 2000.
<PAGE>

         Net Loss. Net loss for the quarter ended September 30, 2000 increased
by approximately $2,189,000 to $2,242,000 from approximately $53,000 for the
quarter ended September 30, 1999.

Comparison of nine months ended September 30, 2000 and September 30, 1999

         Revenues. Revenues for the nine months ended September 30, 2000
decreased by approximately $36,000 or 44% to $46,000 from $82,000 for the nine
months ended September 30, 1999. Revenues were derived from the "Think 2000"
product during the nine month period ended September 30, 1999. This product line
has been eliminated. Revenues for the nine months ended September 30, 2000
consisted of advertising revenues derived from StartFree.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by approximately $1,657,000 for the nine
months ended September 30, 2000, to $1,889,000 from $232,000 for the nine months
ended September 30, 1999. Selling, general and administrative expenses consisted
of approximately $654,100 attributable to the amortization of deferred stock
compensation expense, approximately $504,300 related to legal and auditing costs
attributed primarily to the costs of the Tritium changeover to StartFree,
approximately $139,000 pertaining to salaries, wages and consulting,
approximately $248,000 relates to marketing and advertising expenses, which
includes approximately $105,000 relating to the AdSmart Agreement and $50,000
relating to the recognition of potential bad debt expense.

         Research and Development. Research and development expenses for the
nine months ended September 30, 2000 decreased by approximately $163,000 to nil
for the nine months ended September 30, 1999. Research and development costs in
prior years were attributable to the Company's software development activity.
The decrease in research and development expenses was due to the elimination of
certain Company software operations in March 1999. StartFree had no research and
development costs during the nine months ended September 30, 2000.

         Software Development. Software operation expenses for the nine months
ended September 30, 2000 increased by approximately $289,000 from nil for the
nine months ended September 30, 1999. This expense is directly related to the
maintenance and prototype development which is required for StartFree's Internet
activity. These expenses are primarily wages and salaries of approximately
$237,000 and outside contractors expense of approximately $36,000.

         Internet Connectivity. Internet connectivity expenses for the nine
months ended September 30, 2000 increased by approximately $488,000 from nil for
the nine months ended September 30, 1999. This expense is directly related to
the telephone access lines of StartFree's Internet activity. These costs are
unique and considered an "ongoing" expense to the StartFree operation.
<PAGE>

         Other Income/Expense, Net. Other income/expense for the nine months
ended September 30, 2000 increased by $1,300,000 to $1,530,000 from $230,000.
The change in income/expense is due primarily to:

         (1)      Interest. Interest expense for the nine months ended September
                  30, 2000 increased by approximately $658,000 to $883,000 from
                  $225,000 for the nine months ended September 30, 1999.
                  Interest expense for 2000 year to date of approximately
                  $875,000 is related directly to the Technologies Bridge
                  Financing to the Company. Interest expense of approximately
                  $225,000 for the nine months ended September 30, 1999 was
                  attributable to the 1998 Bridge Financing between Technologies
                  and the Company.

         (2)      Other Income/Expense. Other expense for the nine months ended
                  September 30, 2000 increased by $646,700 from nil for the nine
                  months ended September 30, 1999. The expense is primarily the
                  amortization of goodwill of approximately $643,000 arising
                  from the Acquisition, which goodwill is being amortized over a
                  36-month period on a straight-line basis.

         Liquidity and Capital Resources. Since its inception and through
September 30, 2000, the Company has incurred cumulative losses aggregating
approximately $19,646,000 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
launching the Tritium business, StartFree.com, and the Company's continued
efforts towards locating Target Businesses. The primary uses of cash during the
first nine months ended September 30, 2000 have been to fund Tritium's and then
StartFree's operations and basic overhead expenses while the Company pursued
Target Businesses and developed potential outside financing sources.

         At September 30, 2000, the Company had cash and equivalents of
approximately $1,000, a negative working capital of approximately $1,385,000 and
a negative shareholders' equity of approximately $1,177,000. At September 30,
2000, the Company had no long-term liabilities.

         The Company's operating activities used cash of approximately $866,000
and $424,000 for the nine months ended September 30, 2000 and 1999,
respectively. The funds were used to fulfill general operating expenses.

         The Company's financing activities generated cash of approximately
$986,000 for the nine months ended September 30, 2000 and $383,000 for the nine
months ended September 30, 1999.

         In July 2000, the Board of Directors approved a bridge financing offer
from Technologies pursuant to which Technologies would loan the Company up to
$500,000. In November 2000, the Board approved an increase in the Technologies
Bridge Financing of up to $1,000,000. These loans are to be evidenced by demand
notes which bear interest at 10% per annum and are convertible at the option of
the holder into shares of the Company's Common Stock at $.375 per share

<PAGE>

commencing in February 2001, except as otherwise provided therein. Technologies
is entitled to receive warrants to purchase up to 533,333 shares of the
Company's Common Stock at $.375 per share in connection with these bridge loans.
From May 15, 2000 through September 30, 2000, Technologies advanced bridge loans
to the Company in the principal amount of $417,000, which has accumulated
interest of approximately $9,000 through September 30, 2000. From October 1,
2000 through November 17, 2000, Technologies advanced bridge loans to the
Company in the principal amount of $380,000.

         In order to induce Technologies to continue its bridge loans with the
Company, in November 2000, Michael Lee, the President of StartFree and Tritium,
granted Technologies an option to purchase, for nominal consideration, as
collateral security for the repayment of bridge loans made by Technologies to
the Company 600,000 shares of the Company's Series A Preferred Stock owned by
Michael Lee or Tritium, as the case may be, in the event that the Company fails
to repay the Technologies Bridge Financing when due.

         In September 2000, the Company and Rockley International Ltd., a
British Virgin Islands corporation ("Rockley") entered into a purchase agreement
providing for the purchase by Rockley of shares of the Company's Series C
Convertible Preferred Stock (the "Preferred Shares"). Rockley agreed to purchase
400,000 Preferred Shares for an aggregate purchase price of $4,000,000. Each
Preferred Share is initially convertible into twenty shares of the Company's
Common Stock. 200,000 of the Preferred Shares were required to be purchased by
Rockley no later than September 12, 2000, with the balance to be purchased
within sixty days thereafter, unless the parties agreed otherwise. Although
representatives of Rockley continue to assure the Company that Rockley intends
to consummate the transactions contemplated by the purchase agreement, Rockley
is currently in default under the purchase agreement. There can be no assurance
that the transactions contemplated by the purchase agreement will ever be
consummated.

         The Company anticipates that its expenses will increase as it attempts
to expand its business and locate and enter into transactions with Target
Businesses. The Company expects to continue to incur losses for the foreseeable
future. The Company's capital requirements will depend on the numerous
contingencies associated with early stage companies, including the ability of
StartFree or any other Target Business to generate revenues. The Company's
continued existence is dependent on its ability to negotiate additional
acquisitions, to raise additional financing and to develop successful future
operations. The Company will continue to incur significant charges to income in
connection with its recent acquisition of Tritium and the warrants issued in
connection therewith. The Company will incur additional costs as a result of the
Technologies Bridge Financing.

         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.
<PAGE>

         The costs that the Company has incurred related to Year 2000 compliance
have not been material to its business, results of operations or financial
condition. The Company has experienced no Year 2000 problems. In the event that
the Company does encounter such problems (either within its own systems or with
regard to a prolonged data communication, telecommunications or electrical
failure), the Company could be required to expend additional resources or lose
revenues.

         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 will seek listing on the Nasdaq SmallCap
Market at such time, if ever, as it complies with Nasdaq's listing requirements.

         In addition, the Company's securities are penny stocks under the
Securities Enforcement Penny Stock Reform Act of 1990. Additional disclosure is
required in connection with trading in the Company's securities, including
determination of a purchaser's suitability and delivery of a disclosure schedule
explaining the nature and risk of the penny stock market. In addition, a broker
or dealer is required to send monthly statements disclosing recent price
information with respect to the penny stock held in a customer's account and
information with respect to the limited market in penny stocks. Such
requirements could severely limit the liquidity of the Company's securities.
There is no assurance that the Company's securities will ever become listed
again on the Nasdaq SmallCap Market.


<PAGE>


PART II - OTHER INFORMATION

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         From May 15, 2000 through November 17, 2000, the Company issued to
Thinking Technologies, L.P. ("Technologies") demand notes in the aggregate
principal amount of $797,000. These notes are convertible into shares of the
Company's Common Stock at $.375 per share commencing in February 2001, except as
otherwise provided therein. In connection with these bridge loans, Technologies
received warrants to purchase up to approximately 425,000 shares of the
Company's Common Stock at $.375 per share.

         On October 30, 2000, AdSmart Corporation exercised the AdSmart Warrant
with respect to 500,400 shares of Common Stock.

         The securities described above were issued in reliance on an exemption
from registration contained in Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act") and were transactions not involving a public
offering within the meaning of the Securities Act.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)   Exhibits

         Exhibit 3.1 - Certificate of Incorporation (1)

         Exhibit 3.2 - Certificate of Designations, Powers, Preferences and
                       Rights of the Series A Convertible Preferred Stock (2)

         Exhibit 3.3 - Certificate of Designations, Powers, Preferences and
                       Rights of the Series B Convertible Preferred Stock (2)

         Exhibit 3.4 - Certificate of Designations, Powers, Preferences and
                       Rights of the Series C Convertible Preferred Stock

         Exhibit 3.5 - By-laws (1)

         Exhibit 27 -- Financial Data Schedule

   (b)   Reports on Form 8-K

         A report on Form 8-K was filed on August 7, 2000.

(1)  Incorporated herein by reference to the Company's Registration Statement on
     Form SB-2 (Registration No. 33-11321), as filed with the Securities and
     Exchange Commission (the "Commission") on September 3, 1996.

(2)  Incorporated herein by reference to the Company's Current Report on Form
     8-K, as filed with the Commission on March 22, 2000.


<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.

Date:   November 27, 2000

                                                    THINKING TOOLS, INC.


                                                    By:  /s/ Moshe Zarmi
                                                       -------------------------
                                                       Name:  Moshe Zarmi
                                                       Title: President