<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

--------------------------------------------------------------------------------

                                   FORM 10-QSB

                Quarterly report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

--------------------------------------------------------------------------------

                        For Quarter Ended: June 30, 1999

                           Commission File No. 1-14559

                             MUSE TECHNOLOGIES, INC.
        (Exact name of small business issuer as specified in its charter)

--------------------------------------------------------------------------------


               Delaware                                85-0437001
         (State of Incorporation)           (IRS Employer Identification No.)

                                1601 Randolph, SE
                             Albuquerque, New Mexico
                                      87106
                     (Address of principal executive office)
                                   (Zip code)

                                 (505) 843-6873
                 Issuer's telephone number, including area code

--------------------------------------------------------------------------------



         Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                  Yes    X                  No
                      ------                   ------

         As of August 12, 1999 there were issued and outstanding 10,177,883
shares of Common Stock, $.015 par value per share, and Class A Redeemable Common
Stock Purchase Warrants to purchase 1,113,881 shares of Common Stock.

                  Transitional Small Business Disclosure Format

                  Yes                       No    X
                      ------                   ------

<PAGE>

                             MUSE TECHNOLOGIES, INC.

                                      INDEX
                                      -----

                                                                     PAGE NUMBER
                                                                     -----------

PART I.  FINANCIAL INFORMATION
         ---------------------

Item 1.  Condensed consolidated financial statements
                  (unaudited)

         Balance sheet as of June 30, 1999                                     3

         Statements of operations for the three and nine months
                  ended June 30, 1999 and 1998                                 4

         Statements of cash flows for the nine months
                  ended June 30, 1999 and 1998                                 5

         Notes to financial statements                                         6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                   7

PART II.  OTHER INFORMATION                                                   10
          -----------------

INDEX TO EXHIBITS                                                             12

SIGNATURES                                                                    13



                                        2
<PAGE>


                             MUSE TECHNOLOGIES, INC.

                                  BALANCE SHEET
                                  JUNE 30, 1999
                                   (UNAUDITED)

                                     ASSETS

<TABLE>
<S>                                                                        <C>
CURRENT ASSETS:

         Cash                                                              $          14,161,401

         Accounts receivable                                                            503,128

         Prepaids                                                                       119,420
                                                                           ----------------------
                  TOTAL CURRENT ASSETS                                               14,783,949

         PROPERTY AND EQUIPMENT - NET                                                   973,132

         NOTES RECEIVABLE (including $225,000 from officers)                          1,330,000

         OTHER ASSETS                                                                    82,337
                                                                           ----------------------
                  TOTAL ASSETS                                             $         17,169,418
                                                                           ======================
                      LIABILITIES AND STOCKHOLDERS' EQUITY

         CURRENT LIABILITIES:

         Accounts payable                                                  $             78,100

         Accrued liabilities                                                            243,559

         Due to shareholder                                                             600,000

         Current portion lease payable                                                   10,090
                                                                           ----------------------
                  TOTAL CURRENT LIABILITIES                                             931,749

         LONG TERM LIABILITIES

         Lease payable less current portion                                              50,835
                                                                           ----------------------
                  TOTAL LIABILITIES                                                     982,584
                                                                           ======================
         STOCKHOLDERS' EQUITY:

         Common stock, $.015 par value, authorized 50,000,000 shares;                   154,997
         issued and outstanding 10,333,140 shares

         Additional paid-in capital                                                  23,610,856

         Stock subscription receivable                                                  (87,500)

         Accumulated deficit                                                         (6,715,204)

         Less treasury stock at cost                                                   (776,315)
                                                                           ----------------------
                  TOTAL STOCKHOLDERS' EQUITY                                         16,186,834
                                                                           ----------------------
                  TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                $         17,169,418
                                                                           ======================
</TABLE>

                        See notes to financial statements


                                        3

<PAGE>


                             MUSE TECHNOLOGIES, INC.

                            STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                  Three Months Ended                     Nine Months Ended
                                                                       June 30,                              June 30,
                                                          --------------------------------------------------------------------------

                                                               1999                1998                1999              1998
                                                          --------------      ---------------   ---------------    ----------------
<S>                                                       <C>                 <C>               <C>                <C>
REVENUE                                                   $    341,866        $   1,237,420     $   1,113,206      $    1,761,251
                                                          --------------      ---------------   ---------------    ----------------

EXPENSES:
         Selling, general and administrative                   936,153            1,546,822         3,168,169           2,269,373
         expenses
         Research and development                              609,406              165,732           949,547             710,068
         Depreciation                                          136,233              100,388           395,669             343,334
                                                          --------------      ---------------   ---------------    ----------------
         TOTAL EXPENSES                                      1,681,792            1,812,942         4,513,385           3,322,775
                                                          --------------      ---------------   ---------------    ----------------
         NET OPERATING LOSS                               $ (1,339,926)       $    (575,522)    $  (3,400,179)     $   (1,561,524)
                                                          --------------      ---------------   ---------------    ----------------
         OTHER INCOME (EXPENSE)

         Costs in excess of value of                              --                    --           (563,685)                --
         repurchased stock
         Interest expense                                         --               (112,004)          (29,903)           (554,876)
         Interest income                                       210,980                3,145           553,515                 --
                                                          --------------      ---------------   ---------------    ----------------
         TOTAL OTHER INCOME (EXPENSE)                          210,980             (108,859)          (40,073)           (554,876)
                                                          --------------      ---------------   ---------------    ----------------
         NET LOSS                                         $ (1,128,946)       $    (684,381)    $  (3,440,252)     $   (2,116,400)
                                                          ==============      ===============   ===============     ===============
         NET LOSS PER SHARE:

         Basic and assuming dilution                      $      (0.11)       $       (0.08)            $(0.35)            $(0.29)
                                                          --------------      ---------------   ---------------    ----------------

         WEIGHTED AVERAGE NUMBER OF
         COMMON SHARES OUTSTANDING:                           10,145,350        8,600,850            9,892,069           7,418,768
                                                          --------------      ---------------   ---------------    ----------------
</TABLE>



                        See notes to financial statements


                                                         4

<PAGE>


                             MUSE TECHNOLOGIES, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                                 Nine Months Ended
                                                                                                      June 30,

                                                                                   ----------------------------------------------
                                                                                           1999                     1998
                                                                                   --------------------     ---------------------
<S>                                                                                   <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES
         Net loss                                                                     $  (3,440,252)           $  (2,116,400)
         Adjustment to reconcile net loss to net cash provided by (used in)
                  Depreciation                                                              395,669                  343,334
                  Amortization of discount                                                   25,521                  491,575
                  Cost in excess of repurchased stock                                       563,685                      --
                  Non-cash imputed compensation expense                                         --                   948,355
                  Issuance of shares under consulting agreement                                 --                    30,841
Changes in assets and liabilities:
         Decrease in accounts receivable                                                  3,860,872                   52,982
         Decrease (increase) in prepaid assets                                              (96,543)                  10,007
         (Increase) decrease in other assets                                                (53,095)                   3,600
         (Decrease) in accounts payable                                                     (56,999)                (175,611)
         Increase in accured interest                                                           --                    48,921
         Decrease (increase) in accrued liabilities                                        (608,100)                (116,684)
                                                                                   --------------------     ---------------------
         NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                               $590,758             $   (479,080)
                                                                                   --------------------     ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES
         Purchase of property and equipment                                                (930,638)                 (25,780)
                                                                                   --------------------     ---------------------
         NET CASH USED IN INVESTING ACTIVITIES                                             (930,638)                 (25,780)
                                                                                   --------------------     ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
         Net proceeds from sale of stock                                                  9,553,167                1,658,748
         Net proceeds from issuance of notes                                                    --                   568,749
         Deferred offering costs                                                                --                   (91,270)
         Increase in notes receivable                                                    (1,275,000)                     --
         Collection of stock subscription receivable                                      4,000,000                      --
         (Repayments) increases on capital leases                                            48,711                   (6,955)
         Repayments of notes payable-affiliates                                            (625,000)                     --
         Repayments of notes payable - others                                                   --                  (937,500)
         Repayments of line of credit                                                           --                   (50,000)
         Acquisition of treasury stock                                                     (740,000)                     --
                                                                                   --------------------     ---------------------
         NET CASH PROVIDED BY FINANCING ACTIVITIES                                       10,961,878                1,141,772
                                                                                   --------------------     ---------------------
NET INCREASE IN CASH                                                                     10,621,998                  636,912
CASH - BEGINNING OF PERIOD                                                                3,539,403                  287,436
                                                                                   --------------------     ---------------------
CASH - END OF PERIOD                                                                  $  14,161,401              $   924,348
                                                                                   ====================     =====================
</TABLE>


                        See notes to financial statements

                                                         5

<PAGE>



                          NOTES TO FINANCIAL STATEMENTS

1.       THE COMPANY

         MUSE Technologies, Inc. (the "Company") was incorporated in Delaware on
October 24, 1995 to develop and market software products designed to enhance the
user's ability to understand and analyze data and information and to provide
solutions to complex data integration and data management problems. The
multisensory capabilities of the software ("MuSE"), enables the user to present
information in real time using visual, auditory, tactical and other analytical
tools. MuSE is based on software licensed to the Company by Sandia Corporation
("Sandia") pursuant to a license agreement dated October 9, 1995 (the "License
Agreement"). The Company has also developed a proprietary software product,
"Continuum", designed for multiuser, real-time collaboration within the MuSE
environment.

2.       BASIS OF PRESENTATION

         The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and Rule 10-01 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 (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended June 30,
1999 are not necessarily indicative of the results that may be expected for the
full fiscal year ended September 30, 1999. For further information, refer to the
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1998.

3.       NOTES RECEIVABLE

         In December 1998 and January 1999, the Company loaned an aggregate of
$225,000 to two executive officers pursuant to their employment contracts in
connection with their relocation to New Mexico.

4.       COSTS IN EXCESS OF VALUE OF REPURCHASED STOCK

         In March 1999, the Company's Chief Technical Officer resigned as an
employee and director of the Company and entered into a consulting arrangement
with the Company. Pursuant to the terms of the Termination Agreement with such
officer, the Company paid such officer an aggregate of $1,340,000 in exchange
for, among other things, certain restrictions relating to such officer's common
stock, a non-compete provision, repurchase of 155,263 shares of common stock and
a right of first refusal on future sales of common stock by such officer. The
excess of the consideration paid over the value of the shares purchased of
$563,685 is reflected as costs in excess of the value of repurchased stock on
the Statement of Operations.


                                        6

<PAGE>



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

         The following presentation of management's discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the Company's financial statements, the accompanying notes
thereto and other financial information appearing elsewhere in this Report. This
section and other parts of this Report contain forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Readers are encouraged to review the section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Factors Affecting
Operating Results and Market Price of Stock" commencing on page 9 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended December 31,
1998 for a discussion of these risks and uncertainties.

Operational Overview

         The Company receives revenues from sales and licensing of its products
and providing consulting and maintenance services related thereto and from its
strategic reselling partner ("SRP") program. The Company attributes the lower
than expected results for the quarter ended June 30, 1999 to a longer roll-out
period by several of its SRP's and a strategic price reduction of the Muse
Development System to meet the competitive demands of the marketplace.

         In June 1998, the Company entered into an SRP agreement (the "CRI
Agreement") with Continuum Resources International ASA, a Norwegian Company
("CRI"), with respect to distribution of the Company's products and services in
the oil and gas industry worldwide. In exchange for such exclusive rights, CRI
paid the Company a non-refundable license fee of $5,000,000 and will pay minimum
sales commitments totaling $12,000,000 through 2001, which minimum commitments
are currently in the process of being reduced as a result of price decreases in
the Company's products and services. The Company has recognized the $5,000,000
license fee under the CRI Agreement as revenue for the fiscal year ended
September 30, 1998. CRI's minimum commitment for 1999 was not met, however, the
Company has determined not to take any action with respect thereto at this time
and is currently in discussions regarding CRI's commitments for the balance of
the contract term.

         In December 1998, the Company entered into a non-exclusive SRP
agreement with Intergraph Corp., an automated business solutions company with
customers worldwide in a variety of commercial sectors and government. The
agreement with Intergraph provides Intergraph with the non-exclusive right to
resell the Company's products and services worldwide in exchange for minimum
annual sales commitments aggregating $4 million through 2001.

         In February 1999, the Company entered into non-exclusive reseller
agreements under its SRP program with Analytical Mechanics Associates, a
technical consulting firm, and Federal Data Corporation, an information
technology provider serving primarily the Federal government. Each agreement is
for a term of three years with minimum sales commitments of $3 million over the
term of the agreement.

         In June, 1999, the Company entered into a three-year agreement with The
Goodyear Tire & Rubber Company ("Goodyear") to develop applications using the
Company's advanced visualization and network collaboration software. The Company
will provide software, system design, consulting, and technical support services
to Goodyear on a project-by-project basis. The agreement includes a three-year
renewal option and provides Goodyear with exclusivity for consulting or
application design services within the tire and rubber manufacturing business
throughout its term, provided that minimum annual project commitments are
satisfied. Sales activities in the tire and rubber manufacturing industry by the
Company's SRP's are not affected by this agreement.

         Although the Company's existing SRP agreements provide for minimum
annual sales commitments, failure to satisfy such commitments will permit the
Company to terminate such SRP agreement. Accordingly, there can be no assurance
that the threat of termination of any SRP agreement will be an effective
deterrent against any breach thereof or that such minimum sales commitments will
be realized.

         The Company's primary strategy is to seek to enter into similar SRP
arrangements in other markets. As a result of the significant lead time
necessary to market and consummate such distribution and reseller agreements,
the Company's quarterly results are expected to fluctuate significantly
depending on the timing of completion of such


                                        7

<PAGE>



arrangements and any up front fees and sales commitments associated therewith.
Accordingly, results in any one quarter are not indicative of results to be
experienced in subsequent quarters.

         In March 1999, the Company's Chief Technical Officer and Chairman of
the Board resigned as an employee and director of the Company and entered into a
consulting arrangement with the Company. Pursuant to the terms of the
Termination Agreement with such officer, the Company paid such officer an
aggregate of $1,340,000 in exchange for, among other things, certain
restrictions relating to such officer's common stock, a non-compete provision,
repurchase of 155,263 shares of common stock and a right of first refusal on
future sales of common stock by such officer. The excess of the consideration
paid over the value of the shares purchased of $563,685 is reflected as costs in
excess of the value of repurchased stock on the Statement of Operations.

         In June 1999, the Company opened an office in Houston, Texas to support
the development and distribution of its products and services in the oil and gas
industry. This office is currently staffed with six personnel, two in sales and
marketing and four technical software developers, and is expected to require
capital expenditures of approximately $300,000 during the fourth quarter of
fiscal 1999.

Results of Operations

         Revenues for the three and nine month periods ended June 30, 1999 were
$341,866 and $1,113,206, respectively, as compared to revenues of $1,237,420 and
$1,761,251, respectively, for the three and nine months ended June 30, 1998. The
decrease in revenue of $895,554 or 72% for the three month period and $648,045
or 37% for the nine month period was due to the entering into of the CRI
Agreement and the receipt of $1,000,000 in connection therewith in the third
quarter of fiscal 1998, which was not duplicated in fiscal 1999. Actual product
and contract sales increased by $104,446 or 44% and $351,955 or 46% for the
three and nine month periods, respectively. The Company also received interest
income for the three and nine month periods in fiscal 1999 of $210,980 and
$553,515, respectively.

         Total operating expenses for the three and nine month periods ended
June 30, 1999 were $1,681,792 and $4,513,385, respectively, as compared to total
operating expenses of $1,812,942 and $3,322,775, respectively, for the three and
nine month periods ended June 30, 1998. The decrease of $131,150 or 7% for the
three month period reflects reductions in sales commissions and expenses related
to the Company's initial public offering ("IPO") in November 1998. Additionally,
research and development expenditures for the three month period ended June 30,
1999 increased $443,674 or 268% over the same period in 1998 and for the nine
month period ended June 30, 1999 increased $239,479 or 34% over the same period
in 1998 due to increases in engineering personnel and equipment purchases.
Selling, general and administrative expenses for the nine month period ended
June 30, 1999 increased $898,796 or 40% over the same period in 1998 due
primarily to increases in sales and marketing personnel and increased costs for
trade shows and advertising.

         Other income (expense) for the three and nine month periods ended June
30, 1999 were $210,980 and ($40,073), respectively, compared to ($108,859) and
($554,876), respectively, for the three and nine month periods ended June 30,
1998. The increase in income of $319,839 for the three month period was due to
interest income generated from prior equity investments and the net proceeds
from the IPO and the elimination of interest expenses due to the repayment of
notes payable. The reduction in other expenses of $514,803 for the nine month
period was due to the aforementioned interest income and reduction of interest
expense. In addition, a charge of $563,685 was incurred in fiscal 1999 related
to costs in excess of the value of repurchased stock.

         Accordingly, the net loss for the three and nine month periods ended
June 30, 1999 of $1,128,946 and $3,440,252, respectively, as compared to the net
loss of $684,381 and $2,116,400, respectively, for the three and nine month
periods ended June 30, 1998, reflected the significant increases in costs
related to the Company's IPO, the hiring of additional personnel, increased
capital expenditures for equipment and the $563,685 charge related to costs in
excess of the value of repurchased stock without a proportional increase in
revenues for such periods.

                                        8

<PAGE>



Liquidity and Capital Resources

         The Company's capital needs have been funded through a series of debt
and equity financings and revenues received through the SRP program.

         In July 1998, the Company sold 1,000,000 shares of Common Stock and
warrants to purchase 1,000,000 shares of Common Stock (the "CRI Warrants") to
CRI for an aggregate purchase price of $8,000,000.

         In October, 1998, in order to assist CRI with its short term cash
requirements in connection with CRI's commencement of marketing efforts with
respect to the Company's products, the Company approved certain loans to CRI in
the principal amount of up to $1,000,000 payable on demand with interest at 12%
per annum accruing and payable monthly following 60 days from the draw-down
date. As of the date hereof, $1,000,000 is outstanding under such loan
arrangement and interest is accruing on such principal amount.

         On November 19, 1998, the Company consummated its IPO through the sale
of 1,200,000 shares of Common Stock and warrants to purchase 600,000 shares of
Common Stock (the "Warrants") and received gross proceeds of $9,600,000.
Additionally, on December 2, 1998, the underwriter of the Company's IPO
exercised its over-allotment option in full and the Company received gross
proceeds of $1,440,000. Total net proceeds to the Company approximated
$9,000,000.

         Pursuant to their employment agreements, in December 1998 and January
1999, respectively, Curtiz J. Gangi, the Company's President, and Brian Clark,
the Company's Chief Financial Officer, were given loans in the principal amounts
of $150,000 and $75,000, respectively, in connection with their relocation to
New Mexico. The loans bear interest at the rate of 5% per annum and are secured
by a pledge of vested stock options having a value equal to the principal amount
of the loans.

         The Company anticipates that it will expend approximately $300,000 for
the purchase of computer hardware and software during the fourth quarter of
fiscal 1999 in connection with its recently opened office in Houston, Texas.

         The Company's capital requirements depend on numerous factors,
including the progress of its product development programs, the ability of the
Company to enter into strategic arrangements or other marketing arrangements
which result in the commercialization of its products, the need to purchase or
lease additional capital equipment and the cost of filing, prosecuting,
defending and enforcing any patent claims and other intellectual property
rights. Based upon its current plans, the Company believes that the net proceeds
of its IPO, together with the net proceeds from the sale of securities to CRI in
July 1998 and funds generated from operations, including payments and royalties
under the Company's various strategic reselling partner agreements, will be
sufficient to satisfy the Company's operations for at least the next 12 months.
The foregoing sentence is considered a forward-looking statement for purposes of
the Private Securities Litigation Reform Act of 1995 and is subject to the risks
and factors set forth under "Factors Affecting Operating Results and Market
Price of Securities" commencing on page 9 of the Company's Quarterly Report of
Form 10-QSB for the quarter ended December 31, 1998. However, if the Company's
current and projected needs change due to unanticipated events or otherwise, the
Company may be required to obtain additional capital and there can be no
assurance that additional financing will be available or that the terms of any
financing will be acceptable to the Company.

         The Company continually explores strategic, joint venture and
acquisition opportunities both in the United States and abroad. From time to
time, the Company may be involved in negotiations for SRP arrangements, other
strategic relationships, joint ventures or possible acquisitions, however,
current negotiations, if any, are too preliminary to warrant disclosure at this
time. The Company will keep investors informed as such negotiations mature.

Year 2000 Compliance

         There are issues associated with the programming code in existing
computer systems as the year 2000 approaches. The "year 2000 problem" is
pervasive and complex, as virtually every computer operation will be affected in
some way by the rollover of the two digit year value of 00. The issue is whether
computer systems will properly

                                        9

<PAGE>



recognize date sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
cause a system to fail. The Company has not verified that companies doing
business with it or devices that may be used with the Company's products by an
end-user are year 2000 compliant. The Company does not anticipate that it will
incur significant operating expenses or be required to invest heavily in
computer systems improvements to be year 2000 compliant. The Company believes
that its products are currently year 2000 compliant. However, significant
uncertainty exists concerning the potential costs and effects associated with
year 2000 compliance. Any year 2000 compliance problem of either the Company or
its customers or strategic partners could have a material adverse effect on the
Company's business, results of operations and financial condition.

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         The Company is not a party to any legal proceedings.

Item 2.  Changes in Securities And Use of Proceeds

(c)      The information required by this item is incorporated by reference to
         Item 26 of Part II of the Company's Registration Statement No.
         333-62495 filed with the SEC on November 13, 1998.

(d)      The following information is provided with respect to the use of
         proceeds from the Company's IPO:

1.       Name of issuer: Muse Technologies, Inc.
2.       a.   Effective date of the registration statement: November 16, 1998
         b.   Commission file number assigned to issuer: 333-62495
3.       Offering commencement date: November 16, 1998
4.       Managing underwriter: H.D. Brous & Co., Inc.
5.       Title of each class of security:
         a.   Common Stock, par value $.015 per share ("Common Stock").
         b.   Class A Redeemable Common Stock Purchase Warrants (the
              "Warrants"). Each Warrant is exerciseable into one-half share of
              Common Stock at an exercise price of $9.60 per whole share at any
              time up until November 15, 2003.
6.       Amount and aggregate offering price:
         a.   Common Stock and Warrants:
                    Amount registered:(1)                       2,250,000 Shares
                    Aggregate price of offering
                      amount registered:(2)                   $11,040,000
                    Amount sold:                                1,200,000 Units
                    Aggregate offering price of amount
                      sold:(2)                                $11,040,000

----------------

         (1) Includes 1,200,000 units (the "Units") (consisting of 1,200,000
shares of Common Stock and Warrants to purchase 600,000 shares of Common Stock),
the underwriter's over-allotment option (which was exercised) for 180,000 Units,
and an option to purchase 120,000 Units at $13.20 per Unit that was issued to
the underwriter. The amount registered includes 750,000 shares of Common Stock
underlying Warrants contained in the Units (including the over-allotment
option). Does not include 423,881 shares of Common Stock and Warrants to
purchase 423,881 shares of Common Stock registered on behalf of certain selling
stockholders, none of which may be sold prior to November 16, 1999.

         (2) Does not include exercise price of Warrants outstanding, none of
which have been exercised to date.

                                       10

<PAGE>


<TABLE>
<CAPTION>

                                        For the period ending June 30, 1999
-----------------------------------------------------------------------------------------------------------------------
                                                         Direct or indirect payments
                                                           to directors, officers,
                                                           general partners of the
                                                        issuer or their associates; to
                                                          persons owning ten percent
                                                           or more of any class of
                                                           equity securities of the           Direct or indirect
                                                          issuers; and to affiliates          payments to others
-----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                                   <C>
7.  Costs of offering:

-----------------------------------------------------------------------------------------------------------------------
       (01) Underwriting discounts and
       commissions                                             |_|                              |_|        $1,104,000
-----------------------------------------------------------------------------------------------------------------------
       (02) Finder's fees                                      |_|                              |_|                 0
-----------------------------------------------------------------------------------------------------------------------
       (03) Expenses paid to or for underwriters               |_|                              |_|        $  331,200
-----------------------------------------------------------------------------------------------------------------------
       (04) Other expenses                                     |_|                              |_|        4  603,000
-----------------------------------------------------------------------------------------------------------------------
       (05) Total expenses                                     |_|                              |_|        $2,038,200
-----------------------------------------------------------------------------------------------------------------------
8.  Net offering proceeds after expenses in item 7:                                             |_|        $9,001,800

-----------------------------------------------------------------------------------------------------------------------
9.  Use of net offering proceeds:

-----------------------------------------------------------------------------------------------------------------------
       (01) Construction of plants, building and
       facilities                                              |_|                              |_|                 0
-----------------------------------------------------------------------------------------------------------------------
       (02) Purchase of machinery and equipment                |_|                              |_|        $  930,638
-----------------------------------------------------------------------------------------------------------------------
       (03) Purchase of real estate                            |_|                              |_|                 0
-----------------------------------------------------------------------------------------------------------------------
       (04) Acquisition of other business(es)                  |_|                              |_|                 0
-----------------------------------------------------------------------------------------------------------------------
       (05) Repayment of indebtedness                          |_|                              |_|        $  270,000
-----------------------------------------------------------------------------------------------------------------------
       (06) Working capital                                    |_|                              |_|        $1,225,516
-----------------------------------------------------------------------------------------------------------------------
       (07) Government securities-greater than 90
       days                                                    |_|                              |_|                 0
-----------------------------------------------------------------------------------------------------------------------
       (08) Cash and investments-less than 90
       days                                                    |_|                              |_|        $4,948,099
-----------------------------------------------------------------------------------------------------------------------
       (09) Research & development                             |_|                              |_|        $  949,547
-----------------------------------------------------------------------------------------------------------------------
       (10) Relocation Loans to Officers                       |_|       $  225,000             |_|
</TABLE>

                                       11

<PAGE>

<TABLE>
<S>                                                            <C>                              <C>
-----------------------------------------------------------------------------------------------------------------------
       (11) Marketing Activities                               |_|                              |_|          $453,000
-----------------------------------------------------------------------------------------------------------------------
10. Do the use(s) of proceeds in Item 9 represent
    a material change in the use(s) of proceeds
    described in the prospectus?
                                                                Yes      |_|                     No     |X|
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Item 3. Defaults Upon Senior Securities

       Not applicable

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

       Not applicable

Item 5. Other Information

       Not applicable

Item 6. Exhibits and Reports on Form 8-K

       (a)    Exhibit Index:

              27.1  Financial Data Schedule

       (b)    The following Current Reports on Form 8-K have been filed during
the period:

              (i)   Current Report on Form 8-K filed on June 9, 1999 amending
                    the Current Report on Form 8-K filed on April 13, 1999
                    reporting the resignation of an executive officer and the
                    terms and conditions relating thereto.


                                       12
<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.

Dated: August 13, 1999

                         MUSE TECHNOLOGIES, INC.

                         By:    /s/ Curtiz J. Gangi
                             -------------------------------------------------
                                Curtiz J. Gangi, President and Chairman

                         By:    /s/ Brian Clark
                             --------------------------------------------------
                                Brian Clark, Chief Financial Officer (Principal
                                Financial and Accounting Officer)

                                       13