SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934

                   FOR THE FISCAL YEAR ENDED JUNE 30, 2001

                         COMMISSION FILE NUMBER: 0-24077

                       Mobius Management Systems, Inc.
            (Exact name of registrant as specified in its charter)


           Delaware                                            13-3078745
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                          Identification Number)


      120 Old Post Road, Rye, New York                           10580
(Address of registrant's principal executive offices)         (Zip code)


                                 914-921-7200
             (Registrant's telephone number, including area code)


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                   Name of Each Exchange
     Title of Each Class                            on Which Registered
     -------------------                           ---------------------

Common Stock, $.0001 par value                             NASDAQ


SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act:  NONE

     Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities  Exchange Act of
1934  during the  preceding  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 | |

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K ||

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based upon the closing sale price of Common Stock on September  17,
2001 as reported on NASDAQ,  was approximately  $17.7 million.  Shares of Common
Stock held by each  officer and  director and by each person who owns 5% or more
of the  outstanding  Common Stock have been excluded in that such persons may be
deemed  affiliates.  This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

As of September 17, 2001, Registrant had 18,126,113 outstanding shares of Common
Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None
<PAGE>


                         MOBIUS MANAGEMENT SYSTEMS, INC.
                   FISCAL YEAR 2000 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS


PART I.

ITEM 1.     Business
ITEM 2.     Properties
ITEM 3.     Legal Proceedings
ITEM 4.     Submission of Matters to a Vote of Security Holders

PART II.

ITEM 5.     Market for Registrant's Common Equity and Related Stockholder
            Matters
ITEM 6.     Selected Consolidated Financial Data
ITEM 7.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations
ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk
ITEM 8.     Financial Statements and Supplementary Data
ITEM 9.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure

PART III.

ITEM 10.    Directors and Executive Officers of the Registrant
ITEM 11.    Executive Compensation
ITEM 12.    Security Ownership of Certain Beneficial Owners and Management
ITEM 13.    Certain Relationships and Related Transactions

PART IV.

ITEM 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

SIGNATURES

<PAGE>


FORWARD LOOKING STATEMENTS

      Statements   contained  in  this  annual  report,  other  than  historical
financial results, may contain forward-looking  statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks and uncertainties.  In particular, any statements contained herein
regarding  expectations with respect to future sales and profitability,  as well
as product  development and/or  introductions,  are subject to known and unknown
risks,  uncertainties and contingencies,  many of which are beyond the Company's
control,  which may cause actual results,  performance or achievements to differ
materially from those projected or implied in such  forward-looking  statements.
Factors that might affect actual results,  performance or achievements  include,
among other things, those discussed in "Factors Affecting Future Performance" in
Item 1 - Business.  Mobius accepts no obligation to update these forward-looking
statements and does not intend to do so.


ITEM 1.    BUSINESS

     Mobius   Management   Systems,   Inc.   (together  with  its   consolidated
subsidiaries,  "Mobius" or the  "Company")  is a leading  provider of  Web-based
software  solutions  that  manage and  present  enterprise  content.  Mobius was
incorporated  in New York in 1981 and  reincorporated  in Delaware in 1997.  The
Company has foreign subsidiaries in the United Kingdom,  France, Germany, Italy,
Sweden,  Australia,   Switzerland,  Japan  and  the  Benelux.  Mobius's  company
headquarters  are located at 120 Old Post Road,  Rye, NY 10580 and the telephone
number is (914) 921-7200.

     For over two  decades,  Mobius has  delivered  innovative  technology  that
provides access through a common portal to mission-critical  documents,  reports
and images. Mobius solutions have achieved  industry-wide  recognition for their
ability   to   support   high-volume,   high-performance,    simultaneous-access
requirements  in  distributed  environments  that range from the  desktop to the
mainframe. Today, our ViewDirect(R) technology stores and integrates information
in virtually any format,  presenting and  distributing  it over the Internet and
corporate  networks.  Personalized  views  and  automated  distribution  options
deliver information in the format needed by each employee, customer and partner.

    This versatile technology supports a broad range of e-business requirements,
including corporate portals, customer service, customer relationship management,
electronic bill presentment and payment, and archiving and output management for
enterprise   resource  planning  systems.   Nearly  1,300  major   organizations
worldwide,  including more than half of the Fortune 100, use Mobius  software to
manage enterprise content and enable e-relationships.


Industry Background

      Organizations  need to retain information for long periods of time to meet
operational,  regulatory and legal requirements or to satisfy customer and other
inquiries.  For  example,  credit card  companies  store  records of each charge
transaction;  brokerage  firms  store  records  of every  trade;  and  telephone
companies store records of individual  telephone calls. This information must be
quickly  and  accurately  retrieved  to  support  customer  service,  meet legal
requirements  and to reach more  informed  business  decisions.  Customers  have
become dependent upon  organizations to accurately  account for transactions and
other  information  and demand  rapid and  consistent  access to their  records.
Increasingly,  customers  expect  self-service  access  via the  Internet  using
readily available Web-browser technology.

      Organizations  are also faced with the need to store and distribute  large
volumes  of  report  output  produced  by  various  applications,   particularly
enterprise resource planning ("ERP") systems. Furthermore, organizations wish to
present  customized views of this information to their employees,  customers and
suppliers  over intranets  with easy to learn common  graphical user  interfaces
such as Web-browsers.

<PAGE>


      Traditional approaches such as paper, microfiche, and relational databases
are  usually  cumbersome  and do not  lend  themselves  to a  fully  integrated,
comprehensive   information   management   system   solution.   Moreover,   many
organizations  maintain a number of discrete,  non-integrated  systems,  each of
which  provides  access  to  only  a  portion  of  the   organization's   stored
information.  When the  organization  needs to access  all  information  about a
particular  customer or  transaction,  these  disparate  systems make  retrieval
costly and time consuming.

      Mobius's  ViewDirect(R)   technology  is  an  integrated  architecture  to
capture,  index,  store,  distribute and  Web-enable  all enterprise  documents,
reports and images. Its versatile  architecture  interfaces with all back-office
systems,   capturing  scanned  documents  as  well  as  output  from  enterprise
applications,  including  many  major  ERP  systems.  ViewDirect(R)  creates  an
integrated   repository   of   documents,   reports  and  images  from  multiple
applications and sources.  It makes these documents available for online access,
delivered via fax or e-mail,  or Web-enabled for use with  front-office  systems
such as customer service, electronic statement presentment (ESP), and electronic
bill  presentment  and payment  (EBPP).  Capabilities  include  powerful  search
functions,  personalized views of enterprise documents,  automated distribution,
and tools for data analysis and export.

      The  ViewDirect(R)  architecture is scalable and open,  supporting a broad
range  of   information   formats,   computing   platforms  and  storage  media.
Technological innovation provides uniquely robust functionality,  efficiency and
ease-of-use.


Products

     Mobius's   primary   products  are   ViewDirect(R),   e-Search  &  View(R),
DocumentDirect(R)   for  the   Internet,   Click-n-Done(TM),   DocumentDirect(R)
Application Suite, DocumentDirect(R), DocuAnalyzerTM and Infopac-ABS.

      ViewDirect(R)  is   market-leading   software  for  high-volume   storage,
high-speed indexed access and electronic distribution of enterprise information.
It is the document server of the ViewDirect technology product suite, capturing,
indexing, and storing information in multiple formats from multiple sources.

      e-Search & View(R) is a powerful Web-based tool for searching any document
stored in high-volume,  indexed enterprise archives:  application report output,
bills,   statements,   scanned  forms,  e-mail,   policies,   images,   customer
correspondence,  and more.  e-Search & View is the ideal Web searching  solution
for customer-support and customer-relationship systems management.

      DocumentDirect(R)  for  the  Internet  makes  all  the  documents  in  the
enterprise available over the  Internet/intranet  using generic Web browsers. It
is ideal for both internal users who require only browsing  capability,  and for
customers and suppliers,  who want "self-service"  access in a completely secure
environment.  It offers robust  functionality  for Web presentment of enterprise
information, providing the ability to produce a replica of the original document
or to extract data from a document and embed it in a customized Web page.

      Click-n-Done(TM)  is application  software that supports  electronic  bill
presentment and payment ("EBPP") and electronic  statement  presentment ("ESP.")
Click-n-Done    supports    multiple   billing   models   including    "consumer
consolidation,"  in which bills and  statements  are presented on the consumer's
desktop processor. Click-n-Done's distributed architecture offers the enterprise
maximum  flexibility for centralized or  decentralized  processing.  Its primary
components -- the document repository,  presentment server and payment server --
are  designed  to  operate  independently,   supporting  both  self-hosting  and
outsourcing.

      DocumentDirect(R)   Application  Suite  supports  fast  implementation  of
personalized document search, retrieval, and processing applications.  Its fully
configurable  interface  provides the flexibility to deliver  powerful  customer
care applications and support ad-hoc searching needs.

<PAGE>


      DocumentDirect(R) is a Windows-based portal to information stored anywhere
in the enterprise.  Its robust functionality supports the "power" user who needs
maximum  flexibility  in navigating  the document  repository  and  manipulating
documents.

      DocuAnalyzerTM is an analytical tool that turns the data in documents into
information  that supports the  decision-making  process.  It can help highlight
trends, discover patterns and uncover opportunities.

      Infopac-ABS is an automated  balancing tool that enforces  quality control
and ensures data integrity  throughout the computing  complex.  Complex computer
systems  with  multiple  sources  of  input  can and do  become  unsynchronized.
INFOPAC-ABS  provides  continuous and automatic  cross-application  balancing of
numerical  data  resident  in  databases  and files to detect  and assist in the
correction of  out-of-balance  situations.  It eliminates slow and costly manual
balancing,  speeding  procedures such as item  reconciliation  and control-total
balancing.


Sales and Marketing

      The  Company  sells and markets its  products  primarily  through a direct
sales force based in Chicago, IL, with 12 additional sales offices in the United
States.  In  addition,  Mobius  has  international  subsidiaries  in the  United
Kingdom, France, Germany, Italy, Australia,  Switzerland,  Sweden, Japan and the
Benelux.  These subsidiaries  provide Mobius with an international  direct sales
force.


Customer Satisfaction

      Mobius provides  twenty-four hour,  seven-day-a-week  support services for
all of its  products  through  its United  States and foreign  support  centers.
Complex diagnostics and product corrections are provided exclusively through the
United States support center.


Research and Development

      The  Company  intends  to  continue  to make  substantial  investments  in
research  and  development  to maintain  and enhance its product  lines.  Mobius
believes that its future  success will, in large part,  depend on its ability to
maintain and improve  current  products  and develop new products  that meet the
emerging  needs of the  marketplace.  The  Company's  research  and  development
efforts focus on designing and  developing  reliable and  easy-to-use  products.
Mobius's product  development cycle (from funding a product  development project
until the new product is shipped to the marketplace)  typically is less than six
months to take advantage of market  opportunities  and be responsive to customer
demands.  Larger projects are broken down so that a specific  product or product
enhancement  can be available  in the  marketplace  as quickly as possible.  The
Company  divides  its  development  team  into  groups   delineated  by  product
functionality and employs advanced Rapid Application  Development  ("RAD") tools
to  facilitate  short  development  cycles  for  functional  enhancements  while
maintaining product reliability.


Employees

      As of June  30,  2001,  Mobius  employed  415  people:  207 in  Sales  and
Marketing; 51 in Customer Satisfaction;  99 in Research and Development;  and 58
in General and Administrative.  None of the employees are represented by a labor
union or are subject to a collective bargaining  agreement.  The Company has not
experienced any work stoppages and believes it has a good  relationship with its
employees.  The Company  believes  that its future  success will depend upon its
ability to attract, train and retain highly skilled technical, management, sales
and marketing personnel.


Customers

      No single customer  accounted for 10% or more of consolidated  revenues in
fiscal years 1999, 2000 or 2001.

<PAGE>


Competition

      The market for  Mobius's  products is  intensely  competitive,  subject to
rapid change and significantly  affected by new product  introductions and other
market   activities  of  industry   participants.   "Factors   Affecting  Future
Performance"  below,  includes a description of the  competitive  environment in
which the Company does business.


                      FACTORS AFFECTING FUTURE PERFORMANCE

Fluctuations in Period to Period Results; Seasonality; Uncertainty of Future
Operating Results

      Mobius's   quarterly   revenues   and   operating   results   have  varied
significantly in the past and are likely to vary  substantially  from quarter to
quarter in the future.  Quarterly revenues and operating results are expected to
fluctuate as a result of a variety of factors,  including  lengthy product sales
cycles,  changes  in the  level  of  operating  expenses,  demand  for  Mobius's
products,  introductions  of new products and product  enhancements by Mobius or
its  competitors,  changes in customer  budgets,  competitive  conditions in the
industry and general domestic and international economic conditions.

      The  timing,  size and  nature  of  individual  license  transactions  are
important  factors in Mobius's  quarterly  operating  results.  Many of Mobius's
license  transactions  involve large dollar  commitments  by customers,  and the
sales cycles for these transactions are often lengthy and  unpredictable.  There
can be no assurance  that Mobius will be  successful  in closing  large  license
transactions within the fiscal period in which they are budgeted, if at all.

      Mobius's   business  has  experienced  and  is  expected  to  continue  to
experience significant seasonality, with revenues typically peaking primarily in
the fourth (June) fiscal quarter and to a lesser extent in the second (December)
fiscal quarter.  These fluctuations are caused primarily by customer  purchasing
patterns and Mobius's sales force incentive programs, which recognize and reward
sales  personnel  on the  basis of  achievement  of annual  and  other  periodic
performance quotas, as well as by the factors described above.

      Due to all of the  foregoing  factors and other factors  described  below,
revenues  for any  period  are  subject  to  significant  variation,  and Mobius
believes that  period-to-period  comparisons  of its  operating  results are not
necessarily meaningful and may not be reliable indicators of future performance.


Technological Change

      The market for  Mobius's  software  is  characterized  by a high degree of
technological  change,  frequent new product  introductions,  evolving  industry
standards  and changes in customer  demands.  The  introduction  of  competitive
products  embodying new technologies and the emergence of new industry standards
could render Mobius's  existing  products  obsolete and  unmarketable.  Mobius's
future success will depend in part on its ability to enhance existing  products,
to develop and  introduce  new products to meet  diverse and  evolving  customer
requirements,  and to keep pace with  technological  developments  and  emerging
industry  standards  such as web-based  functionality,  new  operating  systems,
hardware  platforms,  user interfaces and storage media.  The development of new
products  or  enhanced  versions  of  existing  products  and  services  entails
significant  technical  risks.  There can be no  assurance  that  Mobius will be
successful in developing and marketing product enhancements or that new products
will respond to technological  change or evolving  industry  standards,  or that
Mobius  will  not  experience  difficulties  that  could  delay or  prevent  the
successful  development,  introduction,  implementation  and  marketing of these
products and  enhancements,  or that any new  products and product  enhancements
Mobius may introduce will achieve market acceptance.

<PAGE>


Product Concentration

      To date, a substantial portion of Mobius's revenues have been attributable
to  the  licensing  and  related  maintenance  service  of  its  ViewDirect  and
DocumentDirect suite of products.  Mobius currently expects this to continue for
the foreseeable future. As a result, factors adversely affecting the pricing of,
or demand for, these products and services, such as competition or technological
change, could have a material adverse effect on its business,  operating results
or financial condition.


Competition

      The market for  Mobius's  products is  intensely  competitive,  subject to
rapid change and significantly  affected by new product  introductions and other
market  activities  of  industry  participants.  Mobius  believes  that the most
important  competitive  factors  in  the  market  for  storage,   retrieval  and
presentation  software are scalability,  breadth of supported  operating systems
and document formats,  ease of use, product  reputation,  quality,  performance,
price,  sales and  marketing  effort  and  customer  service.  Mobius  currently
encounters  direct  competition  from a number of public and  private  companies
including Computer Associates  International,  Computron Software, Inc., FileNet
Corporation,  International  Business Machines Corp., BMC Software,  Inc., Quest
Software,  Inc. and RSD S.A. Due to the  relatively low barriers to entry in the
software  market,  additional  competition  from other  established and emerging
companies  is likely as the  market  for  storage,  retrieval  and  presentation
software  continues  to  develop  and  expand.   Some  of  these  companies  are
substantially  larger  than  Mobius and have  significantly  greater  financial,
technical and marketing  resources,  and a larger  installed  base of customers,
than Mobius.  Some of such  competitors  also have extensive direct and indirect
channels of distribution.  As a result, they may be able to respond more quickly
to new or emerging  technologies  and changes in  customer  requirements,  or to
devote  greater  resources  to the  development,  promotion  and  sale of  their
products  than  Mobius.  In addition,  current and  potential  competitors  have
established or may establish  cooperative  relationships  among  themselves with
prospective  customers.  Accordingly,  it is possible  that new  competitors  or
alliances among  competitors may emerge and rapidly acquire  significant  market
share.  Increased  competition  may result in price  reductions,  reduced  gross
margins and loss of market  share,  any of which  would have a material  adverse
effect on Mobius's business, operating results or financial condition. There can
be no assurance that Mobius will be able to compete successfully against current
or future  competitors  or that  competitive  pressures will not have a material
adverse effect on Mobius's business, operating results or financial condition.


International Sales and Operations

      Mobius believes that its revenues and future operating results will depend
in part on its ability to increase sales in international  markets.  As a group,
Mobius's  international  subsidiaries  have not achieved budgeted sales and have
been  unprofitable  to date, and Mobius  expects  achieving  profitability  will
continue to require significant  management  attention and financial  resources.
There can be no  assurance  that  Mobius  will be able to  maintain  or increase
international  market  demand  for its  products  or hire  additional  qualified
personnel who will successfully be able to market its products  internationally.
Mobius's  international sales are subject to the general risks inherent in doing
business  abroad,  including  unexpected  changes  in  regulatory  requirements,
tariffs and other trade barriers,  costs and difficulties of localizing products
for foreign  countries,  lack of  acceptance  of  localized  products in foreign
countries,  longer accounts receivable payment cycles,  difficulties in managing
international operations, potentially adverse tax consequences,  restrictions on
the  repatriation  of earnings,  the burdens of complying with a wide variety of
foreign  laws and  economic  instability.  There can be no  assurance  that such
factors will not have a material adverse effect on Mobius's future international
revenues  and,  consequently,  on its business,  operating  results or financial
condition.

      An increase in the value of the U.S. dollar relative to foreign currencies
could make Mobius's products more expensive,  and,  therefore,  potentially less
competitive  in those  markets.  Although  Mobius does not  currently  engage in
international currency hedging transactions, we are exploring the possibility of
doing so in the future. To the extent that the U.S. dollar  strengthens  against
foreign   currencies  in


<PAGE>


international markets in which Mobius maintains operations,  its net assets that
are  denominated  in such foreign  currencies  will be devalued,  resulting in a
foreign currency  translation  loss. For more  information on its  international
operations, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 2 of this annual report on Form 10-K.


Expansion of Indirect Channels

      To date,  sales through  indirect sales channels have not been significant
although  Mobius  continues  to invest  resources  to  develop  these  channels.
Mobius's ability to achieve revenue growth in the future will be affected by its
success in expanding  existing and establishing  additional  relationships  with
strategic  partners.  Mobius  expects to receive  lower unit prices when selling
through  indirect  channels;  therefore,  if Mobius  is  successful  in  selling
products through indirect channels, its gross margins as a percentage of revenue
will decrease.


Extended Payment Risk

      Terms of sale are a competitive factor in Mobius's markets.  Mobius offers
extended  payment  terms to some of its  customers,  generally  three  years for
server  products  and five years for client  products.  The license  revenue for
these extended payment agreements is recorded at the time of sale as the present
value of the contract payments  expected over the life of the agreement,  net of
bundled  maintenance  fees.  Interest income from these agreements is recognized
over the term of the  financing  based on the  discount  rate  used by Mobius to
determine  present  value.  Although  Mobius has  established  reserves  against
possible  future bad debts and believes  that these  installment  contracts  are
enforceable and that ultimate collection is probable, there can be no assurances
that customers will not default under such financing  arrangements,  or that any
such  default  would not have a material  adverse  effect on Mobius's  business,
operating results or financial condition.


<PAGE>


Protection of Intellectual Property

      Mobius's   success  is  heavily   dependent  upon  its   confidential  and
proprietary intellectual property.  Mobius has no patents covering any aspect of
its software products and it has two patent applications pending in the U.S. and
one patent  application  pending  internationally.  Mobius relies primarily on a
combination of confidentiality agreements, copyright, trademark and trade secret
laws and  confidentiality  procedures to protect its proprietary  rights.  Trade
secret and  copyright  laws afford only  limited  protection.  Despite  Mobius's
efforts to protect its proprietary rights,  unauthorized  parties may attempt to
copy aspects of its products or obtain and use  information  that Mobius regards
as proprietary.  In addition,  the laws of some foreign countries do not protect
its  proprietary  rights  to as great  an  extent  as do the laws of the  United
States.  There can be no  assurance  that its  means of  attempting  to  protect
Mobius's  proprietary  rights will be adequate or that its competitors  will not
independently develop similar or competitive technology.

      Mobius's  products  are  generally  provided to  customers  in object code
format only.  However,  Mobius enters into  arrangements with its customers that
releases the source code to the customer upon the occurrence of certain  events,
such as bankruptcy or insolvency of Mobius or certain  material  breaches of the
license  agreement  by Mobius.  In the event of any  release of the source  code
pursuant to these  arrangements,  the customer's license is generally limited to
use of the source code to maintain, support and configure its software products.
Notwithstanding  such  provision,  the delivery of source code to customers  may
increase the likelihood of  misappropriation or other misuse of its intellectual
property.

      Mobius is not aware that any of its products  infringe on the  proprietary
rights of third  parties.  From time to time,  however,  third parties may claim
infringement  by Mobius with respect to current or future  products.  Defense of
any such  claims,  with or without  merit,  could be  time-consuming,  result in
costly litigation, cause product shipment delays or require Mobius to enter into
royalty or  licensing  agreements.  Such  royalty or  licensing  agreements,  if
required,  may not be available on terms  acceptable to Mobius or at all,  which
could have a  material  adverse  effect on its  business,  operating  results or
financial condition.


Dependence on Licensed Technology

      Mobius relies on certain  software and other  information that it licenses
from third parties, including software that is used to perform certain functions
in its products.  Although Mobius believes that there are alternatives for these
products,  any significant  interruption in the availability of such third-party
software  could have a  material  adverse  impact on its sales  unless and until
Mobius can replace the  functionality  provided by these products.  In addition,
Mobius is to a certain extent  dependent  upon such third parties'  abilities to
enhance  their  current  products,  to  develop  new  products  on a timely  and
cost-effective  basis and to respond to emerging  industry  standards  and other
technological  changes.  There can be no assurance  that Mobius would be able to
replace the functionality provided by the third party software currently offered
in  conjunction  with its  products  in the  event  that such  software  becomes
obsolete or  incompatible  with future  versions of its products or is otherwise
not adequately maintained or updated. The absence of or any significant delay in
the replacement of that  functionality  could have a material  adverse effect on
its business, operating results or financial condition.


Risk of Product Defects; Product Liability

      Software products as complex as those offered by Mobius frequently contain
defects,  especially  when first  introduced  or when new versions are released.
Although  Mobius  conducts  extensive  product  testing,  Mobius has in the past
discovered  software  defects in certain of its new  products  and  enhancements
after their introduction.  Mobius could in the future lose, or delay recognition
of, revenues as a result of software errors or defects. Mobius believes that its
customers  and potential  customers are highly  sensitive to defects in Mobius's
software.  Although Mobius's business has not been materially adversely affected
by any such errors to date,  there can be no assurance that,  despite testing by
Mobius and by current and potential  customers,  errors will not be found in new
products or releases after  commencement of commercial

<PAGE>


shipments, resulting in loss of revenue or delay in market acceptance, diversion
of development  resources,  damage to Mobius's reputation,  or increased service
and warranty  costs,  any of which could have a material  adverse  effect on its
business, operating results or financial condition.

      Mobius's  license   agreements  with  its  customers   typically   contain
provisions designed to limit its exposure to potential product liability claims.
However, it is possible that the limitation of liability provisions contained in
its  license  agreements  may  not  be  effective  under  the  laws  of  certain
jurisdictions.  Although Mobius has not experienced any product liability claims
to date,  the sale and support of products by Mobius may entail the risk of such
claims,  and there can be no  assurance  that Mobius will not be subject to such
claims in the future.  Mobius does not maintain product liability  insurance.  A
successful  product liability claim brought against Mobius could have a material
adverse effect on its business, operating results or financial condition.


Management of Growth; Dependence on Senior Management and Other Key Employees

      Mobius's  ability to effectively  manage its future  growth,  if any, will
require it to continue to improve Mobius's operational, financial and management
controls,  accounting and reporting systems, and other internal processes. There
can be no  assurance  that Mobius will be able to make such  improvements  in an
efficient or timely manner or that any such  improvements  will be sufficient to
manage its growth, if any. If Mobius is unable to manage growth effectively, its
business, operating results or financial condition would be materially adversely
affected.

      Mobius's  success  depends  to  a  significant   extent  upon  its  senior
management and certain other key employees of Mobius. The loss of the service of
senior management or other key employees could have a material adverse effect on
Mobius. Furthermore, Mobius believes that its future success will also depend to
a  significant  extent  upon its  ability to  attract,  train and retain  highly
skilled technical,  management,  sales and marketing personnel.  Competition for
such  personnel  is  intense,  and Mobius  expects  that such  competition  will
continue for the foreseeable  future.  Mobius has from time to time  experienced
difficulty in locating candidates with appropriate  qualifications.  The failure
to attract or retain  such  personnel  could have a material  adverse  effect on
Mobius's business, operating results or financial condition.

<PAGE>


If Widespread Internet Adoption Does Not Continue, or if the Internet Cannot
Accommodate Continued Growth, Mobius's Business Will Be Harmed.

            Acceptance  of  Mobius's   Internet-based   products   depends  upon
continued adoption of the Internet for commerce. As is typical in the case of an
emerging  industry  characterized  by  rapidly  changing  technology,   evolving
industry  standards and frequent new product and service  introductions,  demand
for and  acceptance  of recently  introduced  e-commerce  enabling  products and
services  is  subject  to a  high  level  of  uncertainty.  To the  extent  that
businesses or consumers do not consider the Internet a viable commercial medium,
Mobius's  customer  base  for  its  Internet-based  products  may not  grow.  In
addition,  critical issues  concerning the commercial use of the Internet remain
unresolved  and may affect the  growth of  Internet  use.  The  adoption  of the
Internet for commerce,  communications  and access to content,  particularly  by
those who have historically relied upon alternative methods,  generally requires
understanding and acceptance of a new way of conducting  business and exchanging
information. In particular,  companies and consumers may be reluctant or slow to
adopt a new,  Internet-based  bill  payment  system  that  may  render  existing
practices obsolete. If the use of the Internet fails to develop or develops more
slowly than expected, Mobius's business may be harmed.

            To the extent that there is an increase in Internet use, an increase
in  frequency  of use or an increase in the  required  bandwidth  of users,  the
Internet  infrastructure  may not be able to support the demands placed upon it.
In addition, the Internet could lose its viability as a commercial medium due to
delays in  development  or adoption of new  standards or  protocols  required to
handle  increased  levels of  Internet  activity.  Changes  in, or  insufficient
availability of,  telecommunications or similar services to support the Internet
also could result in slower response times and could adversely impact use of the
Internet  generally.  If the Internet  infrastructure,  standards,  protocols or
complementary products, services or facilities do not effectively or efficiently
support any growth in Internet usage that may occur, our business may be harmed.


Concerns about Transaction Security on the Internet May Hinder Mobius's
Internet Product Sales.

            A significant  barrier to electronic  commerce and communications is
the secure  transmission of private  information over public networks.  Mobius's
products for the Internet rely on encryption and authentication  technology some
of which it has  developed  and some of which may be licensed from third parties
to provide the  required  security and  authentication  to ensure the privacy of
Internet transactions. Advances in computer capabilities, new discoveries in the
field of cryptography or other events or developments may result in a compromise
or breach of the algorithms  Mobius's  Internet products use to protect customer
transaction data. Any breaches in security could cause a significant decrease in
Mobius's Internet products, which could undermine future Internet product sales.


The Internet Industry Is Characterized by Rapid Technological Change.

            Rapid  technological  developments,  evolving industry standards and
user  demands,   and  frequent  new  product   introductions   and  enhancements
characterize  the  market for  Internet  products  and  services.  These  market
characteristics  are  exacerbated  by the emerging  nature of the market and the
fact that many  companies  are expected to introduce  new Internet  products and
services in the near future.  Mobius's future success will depend on its ability
to continually improve its Internet product offerings and services.

<PAGE>


ITEM 2.    PROPERTIES

      Mobius is  headquartered in Rye, New York, where it leases an aggregate of
70,500 square feet of space. Administrative,  marketing, product development and
customer  support and  service  operations  are located in the Rye space.  Sales
operations  are  based in  Chicago,  Illnois.  Mobius  leases  an  aggregate  of
approximately   90,000  additional   square  feet  of  space   domestically  and
internationally  for  its  other  sales  offices.  Mobius  believes  that  these
facilities  are adequate to meet its current needs and that suitable  additional
space  will be  available  as  needed  to  accommodate  physical  expansions  of
corporate operations and for additional sales and service field offices.


ITEM 3.    LEGAL PROCEEDINGS

      From time to time,  Mobius is  involved in  litigation  relating to claims
arising out of its operations in the normal course of business.  Mobius is not a
party to any legal proceedings, the adverse outcome of which, individually or in
the aggregate,  would have a material adverse effect on its business,  operating
results or financial condition.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security  holders during the fourth
quarter of fiscal 2001.


PART II.
ITEM 5(a). MARKET FOR THE REGISTRANT'S  COMMON EQUITY AND RELATED  STOCKHOLDER
MATTERS

      Mobius's  common stock has been quoted on the NASDAQ National Market under
the  symbol of MOBI  since  its  initial  public  offering  on April  27,  1998.
According to records of Mobius's  transfer agent,  Mobius had  approximately  54
stockholders of record as of September 17, 2001. Because many of such shares are
held by brokers  and other  institutions  on behalf of  stockholders,  Mobius is
unable to estimate the total number of  stockholders  represented  by the record
holders.  The  following  table  sets  forth  the high and low  sales  prices of
Mobius's common stock on the NASDAQ National Market for the periods indicated.

       Quarter ended:                    High        Low
                                         ----        ---
      September 30, 1999                 $9.25      $4.38
      December 31, 1999                 $10.38      $3.25
      March 31, 2000                    $16.88      $5.81
      June 30, 2000                     $13.63      $3.75
      September 30, 2000                 $5.00      $2.75
      December 31, 2000                  $5.13      $1.13
      March 31, 2001                     $5.25      $2.00
      June 30, 2001                      $4.03      $2.19

      Mobius has never paid any cash  dividends on its common stock and does not
anticipate paying any cash dividends in the foreseeable future. Mobius currently
intends to retain  future  earnings  to fund the  development  and growth of its
business.  Payment of future dividends, if any, will be at the discretion of its
Board of Directors after taking into account various factors, including Mobius's
financial condition,  operating results,  current and anticipated cash needs and
plans for expansion.

      5(b). On April 27, 1998, the Securities and Exchange  Commission  declared
effective the Company's  Registration Statement on Form S-1 (File No. 333-47117)
with respect to the Company's public offering.  To date, of the $33.0 million of
proceeds  received from the offering,  the Company has used  approximately  $3.0
million for working capital.  The remaining  proceeds are currently  invested in
cash and short term, investment grade, interest bearing securities.

<PAGE>


ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

      The  selected  consolidated  financial  data  presented  below  under  the
captions "Consolidated Statement of Income Data" and "Consolidated Balance Sheet
Data" as of and for each of the years in the five  year  period  ended  June 30,
2001 are derived from the  consolidated  financial  statements of Mobius,  which
statements  have  been  audited  by  KPMG  LLP,  independent   certified  public
accountants.  The consolidated financial statements as of June 30, 2000 and 2001
and for each of the years in the three-year  period ended June 30, 2001, and the
report  thereon,  are included  elsewhere in this Form 10-K.  The data set forth
below should be read in  conjunction  with,  and are  qualified by reference to,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and  the  Consolidated  Financial  Statements  and  Notes  thereto,
included elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                                 Years Ended June 30,
                                                         1997           1998           1999           2000           2001
                                                       --------       --------       --------       --------       --------
<S>                                                    <C>            <C>            <C>            <C>            <C>
Consolidated Statement of Income Data
  (in thousands, except per share data):
Revenues:
  Software license revenues                             $26,112        $37,929        $48,811        $31,018        $39,321
  Maintenance and other revenues                         15,215         18,598         25,025         29,187         34,891
                                                       --------       --------       --------       --------       --------
          Total revenues                                 41,327         56,527         73,836         60,205         74,212
Costs of revenues:
  Software license revenues                               1,336          1,443          1,223            946          1,219
  Maintenance and other revenues                          2,923          3,593          5,011          6,070          6,148
                                                       --------       --------       --------       --------       --------
         Total costs of revenues                          4,259          5,036          6,234          7,016          7,367
                                                       --------       --------       --------       --------       --------
Gross profit                                             37,068         51,491         67,602         53,189         66,845
Operating expenses (1):
  Sales and marketing                                    21,971         28,613         41,877         44,289         44,886
  Research and development                                5,904          8,013         10,674         14,823         16,267
  General and administrative                              4,350          6,542          9,409         12,086         10,460
                                                       --------       --------       --------       --------       --------
Total operating expenses                                 32,225         43,168         61,960         71,198         71,613
                                                       --------       --------       --------       --------       --------
Income (loss) from operations                             4,843          8,323          5,642        (18,009)        (4,768)
License and other interest income                           922          1,871          2,920          2,930          2,689
Interest expense                                            (22)           (14)           (16)           (58)            (9)
Foreign currency transaction gains (loss)                   (12)           (15)          (191)            44            102
Other income                                                 --             --             --             --            109
Investment impairments                                       --             --             --         (2,220)          (718)
                                                       --------       --------       --------       --------       --------
Income (loss) before income taxes                         5,731         10,165          8,355        (17,313)        (2,595)
Provision (benefit) for income taxes                      3,348          5,500          4,057         (5,417)          (605)
Accretion on Preferred Stock                                 --            102             --             --             --
                                                       --------       --------       --------       --------       --------
Net income (loss) available to common stock              $2,383         $4,563         $4,298       $(11,896)       $(1,990)
                                                       ========       ========       ========       ========       ========
Basic earnings (loss) per share(2)                        $0.17          $0.38          $0.24         $(0.66)        $(0.11)
Basic weighted average shares                            14,318         12,156         17,813         17,988         18,225
outstanding(2)
Diluted earnings (loss) per share(2)                      $0.15          $0.27          $0.23         $(0.66)        $(0.11)
Diluted weighted average shares outstanding(2)           15,882         16,738         18,964         17,988         18,225
Consolidated Balance Sheet Data (in thousands):
Total assets                                            $28,502        $78,800        $89,201        $78,393        $75,515
Total long-term obligations                               5,176          8,776          7,612          3,698          1,398
Convertible preferred stock                              11,898             --             --             --             --
Stockholders' equity (deficit)                           (4,344)        46,122         51,528         40,591         38,470
</TABLE>

----------
(1) Included  within sales and marketing,  research and  development and general
    and administrative expense is stock compensation expense associated with the
    granting of stock  options to employees  immediately  prior to the Company's
    IPO for the years ended June 30, 1998, 1999, 2000 and 2001 aggregating $642,
    $1,046, $537 and $277, respectively.

(2) For a  description  of the  basic and  diluted  earnings  per share  ("EPS")
    calculations and the basic and diluted weighted average shares  outstanding,
    see Note 2 of Notes to Consolidated Financial Statements.

<PAGE>


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

      In this  section,  readers  are given a more  detailed  assessment  of the
Company's  operating results and changes in financial  position over the periods
discussed.  This  section  should  be read in  conjunction  with  the  Company's
Consolidated Financial Statements and related Notes. Please note that references
in this  section to "this year" and "last year"  refer to the  Company's  fiscal
years ended June 30, 2001 and June 30, 2000, respectively.


Overview

     Mobius is a leading  provider of Web-based  software  solutions that manage
and present  enterprise  content.  For over two  decades,  Mobius has  delivered
innovative   technology   that  provides  access  through  a  common  portal  to
mission-critical  documents,  reports and images. Mobius solutions have achieved
industry-wide   recognition   for  their   ability   to   support   high-volume,
high-performance,  simultaneous-access  requirements in distributed environments
that  range  from  the  desktop  to  the  mainframe.  Today,  our  ViewDirect(R)
technology stores and integrates information in virtually any format, presenting
and distributing it over the Internet and corporate networks. Personalized views
and automated  distribution  options deliver information in the format needed by
each employee,  customer and partner. This versatile technology supports a broad
range of e-business requirements, including corporate portals, customer service,
customer relationship  management,  electronic bill presentment and payment, and
archiving and output management for enterprise resource planning systems.

      The Company's  total revenues  decreased from $73.8 million in fiscal 1999
to $60.2  million in fiscal 2000 and  increased to $74.2 million in fiscal 2001.
Mobius  believes  that Year  2000  ("Y2K")  issues  significantly  affected  the
purchasing patterns of its customers and potential customers during fiscal 2000.
Many  companies  expended  significant  resources  to  correct  or modify  their
existing  software  systems to be Y2K compliant and the Company  believes  these
expenditures  resulted in reduced  funds to purchase  software  products such as
those that Mobius  offers.  The Company  believes  that  although  the  software
marketplace remains turbulent, the market for Mobius's products may be returning
to its pre-Y2K conditions and accordingly,  total revenues  increased  primarily
because  Mobius  sold  more  licenses  for  its  products  to new  and  existing
customers.

      Mobius  derives its  revenues  primarily  from  product  license  fees and
related  annual  maintenance  fees.  This  year  53.0%  of total  revenues  were
generated by software  license fees and 47.0% were generated by maintenance  and
other fees.

      License   revenues  of  ViewDirect   and   DocumentDirect   products  have
historically  accounted for a majority of the Company's license revenues and for
a significant  portion of total revenues.  This year license  revenues for these
products accounted for approximately 89.5% of license revenues and approximately
47.4% of total revenues. Last year license revenues for these products accounted
for  approximately  93.0% of license revenues and  approximately  47.4% of total
revenues. The Company anticipates in the foreseeable future that license revenue
from these  products  will  continue  to account  for a  significant  portion of
license and total revenues.

      Mobius's  growing customer base has led to continued growth in maintenance
and other revenues, from $25.0 million in fiscal 1999 to $29.2 million last year
to $34.9 million this year.  Maintenance  revenue consists primarily of customer
support  services  and  enhancements  provided by the Company for its  products.
Other revenue consists of professional  services  provided to Mobius  customers.
Other revenues for all periods were not significant.

      International  revenues  increased  this year to $12.8  million  from $9.9
million last year and $9.6 million in fiscal 1999. In fiscal 2001, international
revenues increased due to Mobius's continued  investment in developing its sales
infrastructure.  As a group, the Company's international  subsidiaries have been
unprofitable to date, and Mobius expects achieving  profitability  will continue
to require significant management attention and financial resources. The Company
intends to expand its

<PAGE>

international sales activities as part of its business strategy. The majority of
Mobius's current  international  revenues are derived from the operations of its
wholly-owned  subsidiaries  and through agents.  The Company  receives a royalty
that is a  percent  of  agent  or  subsidiary  sales of  software  licenses  and
maintenance  contracts to international  customers.  The Company's  subsidiaries
conduct business in the currency of the country in which they operate,  exposing
Mobius to currency  fluctuations and currency transaction losses or gains, which
are  outside of  Mobius's  control.  To date,  most of these  subsidiaries  have
operated at a loss, which losses prior to fiscal 2001, had not been consolidated
for United States income tax purposes. Consequently, the Company has experienced
a substantially higher effective tax rate in fiscal 1999 and a reduced effective
tax  benefit  in fiscal  2000  than the U.S.  Federal  statutory  rate as no tax
benefit had been  provided  for the  majority of these  foreign  losses.  During
fiscal 2001, the Company made certain U.S.  Federal  income tax elections  which
allow certain of these foreign tax losses to be included within its U.S. Federal
consolidated  income  tax  return.  These  elections  will,  in part,  cause the
Company's  effective  tax rate to begin to approach the U.S.  Federal  statutory
rate.  To  the  extent  the  Company  is  successful  at  bringing  its  foreign
subsidiaries  to  profitability,  the  Company's  effective tax rate could again
exceed  the  U.S.  Federal  statutory  rate  depending  on the  availability  of
operating loss  carryforwards in the profitable  foreign  jurisdictions  and the
operation of foreign tax credit limitations.

      Capitalization  of internally  developed  software  costs is required once
technological   feasibility  is  established.   The  period  between   achieving
technological  feasibility,  which we have  defined  as the  establishment  of a
working model, and the general availability of such software has been short and,
therefore,  software  development costs qualifying for capitalization  have been
insignificant.  Accordingly,  the  Company  has  not  capitalized  any  software
development  costs  and  currently  does  not  anticipate   having   significant
development  costs  that are  eligible  for  capitalization  in the  foreseeable
future.  Software  development  costs are included in research  and  development
expenses.  For more  information  on the  Company's  capitalization  of software
development costs see Note 2 of Notes to Consolidated Financial Statements.


Results of Operations

      The   following   table  sets  forth  certain  items  from  the  Company's
Consolidated  Statement of Operations as a percentage of total  revenues for the
fiscal years indicated:

                                                   Years Ended June 30,
                                                 1999      2000     2001
                                                -----     -----     -----
Revenues:
  Software license revenues                      66.1%     51.5%     53.0%
  Maintenance and other revenues                 33.9      48.5      47.0
                                                -----     -----     -----
          Total revenues                        100.0     100.0     100.0
Costs of revenues:
  Software license revenues                       1.6       1.6       1.6
  Maintenance and other revenues                  6.8      10.1       8.3
                                                -----     -----     -----
         Total costs of revenues                  8.4      11.7       9.9
                                                -----     -----     -----
Gross profit                                     91.6      88.3      90.1
Operating expenses:
  Sales and marketing                            56.7      73.6      60.5
  Research and development                       14.5      24.6      21.9
  General and administrative                     12.7      20.1      14.1
                                                -----     -----     -----
Total operating expenses                         83.9     118.3      96.5
                                                -----     -----     -----
Income (loss) from operations                     7.7     (30.0)     (6.4)
License and other interest income                 3.9       4.9       3.6
Interest expense                                 --        (0.1)     --
Foreign currency transactions                    (0.3)      0.1       0.1
Other income                                     --        --         0.2
Investment impairments                           --        (3.7)     (1.0)
                                                -----     -----     -----
Income (loss) before income taxes                11.3     (28.8)     (3.5)
Provision (benefit) for income taxes              5.5      (9.0)     (0.8)
                                                -----     -----     -----
Net income (loss) available to common stock       5.8%    (19.8)%    (2.7)%
                                                =====     =====     =====

<PAGE>


Year Ended June 30, 1999 Compared to Year Ended June 30, 2000 Compared to Year
Ended June 30, 2001

Revenues

o  Total  revenues  decreased  18.4% from $73.8  million in fiscal 1999 to $60.2
   million in fiscal 2000 and  increased  23.3% to $74.2 million in fiscal 2001.
   Domestic revenues  decreased 21.8% from $64.3 million in fiscal 1999 to $50.3
   million in fiscal 2000 and  increased  22.1% to $61.4 million in fiscal 2001.
   International  revenues  increased  3.1% from $9.6  million in fiscal 1999 to
   $9.9 million in fiscal 2000 and  increased  29.3% to $12.8  million in fiscal
   2001.

o  Software license  revenues  decreased 36.5% from $48.8 million in fiscal 1999
   to $31.0  million  in fiscal  2000 and  increased  26.8% to $39.3  million in
   fiscal  2001.  The  decrease in fiscal  2000 was  primarily  attributable  to
   decreased  sales of licenses.  Mobius  believes that Year 2000 ("Y2K") issues
   significantly affected the purchasing patterns of its customers and potential
   customers. Many companies expended significant resources to correct or modify
   their existing  software  systems to be Y2K compliant and these  expenditures
   resulted in reduced  funds to purchase  software  products such as those that
   Mobius offers.  The Company  believes that although the software  marketplace
   remains  turbulent,  the market for Mobius's products may be returning to its
   pre-Y2K  conditions  and  accordingly,  total  revenues  increased  primarily
   because  Mobius  sold more  licenses  for its  products  to new and  existing
   customers.

o  Maintenance  and other revenues  increased 16.8% from $25.0 million in fiscal
   1999 to $29.2 million in fiscal 2000 and increased  19.5% to $34.9 million in
   fiscal 2001.  The increases in maintenance  and other  revenues  during these
   years were  primarily  attributable  to the growth in the amount of  licensed
   software  covered by maintenance  agreements and increases in the maintenance
   fees  charged  by the  Company.  Other  revenues  for all  periods  were  not
   significant.


Costs of Revenues.

o  Costs of  software  license  revenues  decreased  22.7% from $1.2  million in
   fiscal 1999 to $900,000 in fiscal 2000 and increased 28.9% to $1.2 million in
   fiscal 2001,  representing  2.5%,  3.0% and 3.1%,  respectively,  of software
   license revenues in those years. The costs of software license revenues are a
   function of license sales which were subject to royalties.

o  Costs of maintenance and other revenues  increased 20.0% from $5.0 million in
   fiscal 1999 to $6.0 million in fiscal 2000 and increased 1.3% to $6.1 million
   in fiscal  2001,  representing  20.0%,  20.8%  and  17.6%,  respectively,  of
   maintenance  and other revenues in those years. In fiscal 2000, the increases
   in costs of  maintenance  and other  revenues was primarily  attributable  to
   increased  staffing  and  personnel-related  costs  and  subcontractor  costs
   associated  with post sales  assistance.  In fiscal 2001, the decrease in the
   percentage  of cost of  maintenance  and other  revenues  in  relation to the
   maintenance and other revenues was primarily  attributable to supporting more
   maintenance agreements with an insignificant increase in maintenance costs.


<PAGE>


Operating Expenses.

o  Sales and  marketing  expenses  consist  primarily  of the cost of  personnel
   associated  with the selling and  marketing of Mobius's  products,  including
   salaries,   commissions,   performance   based   bonuses,   and   travel  and
   entertainment  costs.  Sales and  marketing  costs also  include  the cost of
   branch sales offices, marketing, promotional materials and advertising. These
   expenses increased 5.7% from $41.9 million in fiscal 1999 to $44.3 million in
   fiscal 2000 and increased 1.3% to $44.9 million in fiscal 2001,  representing
   56.7%, 73.6% and 60.5%,  respectively,  of total revenues in those years. The
   increase  in  fiscal  2000  is  related  to   additional   spending  for  the
   Click-n-Done  products,  and increased personnel related costs for marketing,
   partially  offset by a  decrease  in sales  commissions  and  bonuses  due to
   decreased  sales of software  licenses.  In fiscal 2001,  sales and marketing
   expenses  increased  slightly since Mobius paid more  commissions and bonuses
   for selling more software licenses and hired additional  marketing personnel,
   offset  by a  decrease  in  sales  and  marketing  expenses  related  to  the
   consolidation of dedicated  Click-n-Done sales and marketing departments into
   Mobius's established sales and marketing structures.

o  Research and  development  expenses  consist  primarily  of  personnel  costs
   attributable to the development of new software  products and the enhancement
   of existing products.  Research and development expenses increased 38.3% from
   $10.7  million in fiscal 1999 to $14.8  million in fiscal 2000 and  increased
   9.7% to $16.3 million for fiscal 2001,  representing  14.5%, 24.6% and 21.9%,
   respectively,  of total revenues in those years.  The increase in expenses in
   fiscal 2000,  including the development  costs associated with  Click-n-Done,
   were  primarily  attributable  to increased  subcontractor  costs,  increased
   staffing  and  personnel-related  costs.  In fiscal  2001,  the  increase  in
   research   and    development    expenses   was    attributable   to   higher
   personnel-related costs. Research and development expenses as a percentage of
   total revenues fluctuate with the changes in development  projects and annual
   revenues.

o  General and  administrative  expenses  consist of personnel  costs related to
   general   management,   accounting,   human  resources,   network   services,
   administration   and  associated   overhead   costs,  as  well  as  fees  for
   professional  services.  General and administrative  expenses increased 28.7%
   from  $9.4  million  in  fiscal  1999 to $12.1  million  in  fiscal  2000 and
   decreased 13.5% to $10.5 million in fiscal 2001,  representing  12.7%,  20.1%
   and 14.1%,  respectively,  of total revenues in those years.  The increase in
   expenses in fiscal 2000 was primarily attributable to additional staffing and
   personnel-related  costs, including costs to administer Click-n-Done and also
   the depreciation of improvements  made to the Company's  infrastructure.  The
   decrease in fiscal 2001 was attributable to the elimination of Click-n-Done's
   administration department,  decreased bonuses, completion of special projects
   and the  implementation  of  administrative  cost savings  strategies.  These
   decreases were partially  offset by increased  depreciation  for  capitalized
   infrastructure projects.


License and other interest income; interest expense; foreign currency
transaction gains (losses).

      License and other interest income was $2.9 million,  $2.9 million and $2.7
million in fiscal 1999, 2000, and 2001,  respectively.  During fiscal 1999, 2000
and  2001  interest  expense  and  foreign  currency   transaction   gains  were
insignificant.


Income Taxes.

      The provision  (benefit) for income taxes was $4.0 million in fiscal 1999,
$(5.4)  million in fiscal 2000 and  $(605,000)  in fiscal 2001.  The Company had
effective tax rates of approximately  48.6%, (31.3)% and (23.3)% in fiscal years
1999,  2000 and 2001,  respectively.  The difference  between the Company's 1999
effective tax rate and the U.S. Federal statutory rate is primarily attributable
to the Company not being able to consolidate  certain foreign  subsidiary losses
for U.S. tax purposes.  The effective tax rate for fiscal 2000 and 2001 reflects
the  statutory  tax  benefit  for the  losses  in the  United  States  offset by
limitations  on the tax  benefit,  which can be taken  from  losses in  Mobius's
foreign subsidiaries.

<PAGE>


Investments

      In June 1999, Mobius invested  $1,501,000 in Home Account Network ("HAN"),
a  privately-held,  information  technology  company  providing  processing  and
Internet outsourcing to financial services companies. During fiscal 2000, Mobius
provided an additional  $750,000 to HAN in short term loans that were  converted
to preferred  stock in May 2000. In fiscal 2001,  Mobius  provided an additional
$375,000 to HAN as short term loans.

      Mobius regularly assessed the recoverability of the HAN investment and had
concluded   that  an  other  than  temporary   impairment   loss  had  occurred.
Accordingly,  impairment losses were recorded in connection with this investment
aggregating  $2.2  million  and  $218,000  for the years ended June 30, 2000 and
2001, respectively.

      In  January   2001,   HAN  was   purchased  by   Intelidata   Technologies
("Intelidata").  The merger agreement established a fixed number of shares to be
allocated  between  debt holders and all  shareholders,  including  Mobius.  The
Intelidata shares will be released at specified time periods beginning after the
Intelidata  shares are  registered.  The number of shares to be received by debt
holders  will be  based  upon a  formula  that  utilizes  the  market  value  of
Intelidata  stock on each  release  date.  After the  debtors  are  repaid,  any
remaining shares will be distributed to HAN's management and shareholders  based
on  percentages  in the  merger  agreement.  Once the stock is  released  to the
debtors and shareholders, it is subject to a variety of trading restrictions. As
of June 30, 2001, Mobius has not received any Intelidata shares.

      As of June 30, 2001,  the carrying value of the HAN investment is $188,000
and is included within other current  assets.  Mobius believes that the carrying
value is recoverable  based on estimates of the amount and value of shares to be
received from the  transaction,  discounted for the  restrictions  and estimated
time until the Intelidata shares are expected to be received.

      In January 2000,  Mobius made an  investment  of $500,000 in Flooz.com,  a
startup Internet company. This was an investment in preferred stock, which would
convert into common stock if Flooz.com had completed an initial public offering.
Mobius  held a minority  ownership  position,  which,  if the  preferred  shares
converted to common stock, would be less than 5%. The Chief Executive Officer of
Flooz.com is  currently a member of the Board of Directors of Mobius.  Flooz.com
has ceased operations and filed for bankruptcy protection.  Accordingly,  Mobius
recorded an impairment loss of $500,000 in the year ended June 30, 2001.


<PAGE>


Selected Quarterly Operating Results

      The following table presents certain consolidated  statement of operations
data for the eight fiscal  quarters in the two-year  period ended June 30, 2001.
In  management's  opinion,  this unaudited  information has been prepared on the
same basis as the audited Consolidated  Financial Statements appearing elsewhere
in this  Form  10-K and  includes  all  adjustments  (consisting  only of normal
recurring  adjustments) necessary for a fair presentation of the information for
the quarters presented,  when read in conjunction with the audited  Consolidated
Financial Statements and Notes thereto included elsewhere herein. The results of
operations  for any quarter are not  necessarily  indicative  of results for any
future period.

<TABLE>
<CAPTION>
                                                                                             Quarters Ended
                                             Sept. 30,   Dec. 31,   March 31,  June 30,   Sept. 30,  Dec. 31,   March 31,  June 30,
                                                1999       1999       2000       2000       2000       2000        2001     2001
                                             --------------------------------------------------------------------------------------
<S>                                            <C>        <C>        <C>        <C>        <C>        <C>         <C>      <C>
Revenues:
  Software license revenues                     6,430      7,256      6,522     10,810     10,406     10,479       7,719   10,717
  Maintenance and other revenues                6,953      7,089      7,478      7,667      8,124      8,625       8,931    9,211
                                             --------------------------------------------------------------------------------------
Total revenues                                 13,383     14,345     14,000     18,477     18,530     19,104      16,650   19,928
Costs of revenues:
  Software license revenues                       185        305        109        347        417        326         122      354
  Maintenance and other revenues                1,634      1,340      1,497      1,599      1,561      1,404       1,526    1,657
                                             --------------------------------------------------------------------------------------
Total costs of revenues                         1,819      1,645      1,606      1,946      1,978      1,730       1,648    2,011
                                             --------------------------------------------------------------------------------------
Gross profit                                   11,564     12,700     12,394     16,531     16,552     17,374      15,002   17,917
Operating expenses (1):
  Sales and marketing                           9,868     10,102     11,388     12,932     11,682     11,764      10,616   10,824
  Research and development                      2,991      3,281      4,134      4,415      4,330      3,953       4,109    3,875
  General and administrative                    2,970      2,982      3,033      3,102      2,582      2,531       2,732    2,615
                                             --------------------------------------------------------------------------------------
Total operating expenses                       15,829     16,365     18,555     20,449     18,594     18,248      17,457   17,314
                                             --------------------------------------------------------------------------------------
Income (loss) from operations                  (4,265)    (3,665)    (6,161)    (3,918)      (874)       603
License and other interest income                 726        759        717        729        696        748         650      597
Interest expense                                   (1)        (1)        (1)       (56)        (3)        --          (2)      (5)
Foreign currency transactions                      46          2         (8)         4          4          2          90        5
Other income                                       --         --         --         --         --         67          32       10
Investment impairments                           (591)      (821)      (527)      (281)      (218)        --        (500)      --
                                             --------------------------------------------------------------------------------------
Income (loss) before income taxes              (4,085)    (3,726)    (5,980)    (3,522)       (57)     1,210
Provision (benefit) for income taxes           (1,242)    (1,202)    (1,875)    (1,098)       484        195        (734)     418
                                             --------------------------------------------------------------------------------------
Net income(loss)available to common stock     $(2,843    $(2,524)   $(4,105)   $(2,424)   $(1,079     $ (252)    $(1,451)    $792
                                             ======================================================================================

Basic earnings (loss) per share                $(0.16)    $(0.14)     (0.23)    $(0.13)    ($0.06)    $(0.01)     $(0.08)   $0.04
Diluted earnings per share                     $(0.16)    $(0.14)     (0.23)    $(0.13)    ($0.06)    $(0.01)     $(0.08)   $0.04

As a Percentage of Total Revenues
Revenues:
 Software license revenues                       48.0%      50.6%      46.6%      58.5%      56.2%      54.9%       46.4%    53.8%
 Maintenance and other revenues                  52.0       49.4       53.4       41.5       43.8       45.1        53.6     46.2
                                             --------------------------------------------------------------------------------------
  Total revenues                                100.0      100.0      100.0      100.0      100.0      100.0       100.0    100.0
Costs of revenues:
  Software license revenues                       1.4        2.1        0.8        1.8        2.3        1.7         0.7      1.8
  Maintenance and other revenues                 12.2        9.4       10.7        8.7        8.4        7.4         9.1      8.3
                                             --------------------------------------------------------------------------------------
    Total costs of revenues                      13.6       11.5       11.5       10.5       10.7        9.1         9.8     10.1
                                             --------------------------------------------------------------------------------------
Gross profit                                     86.4       88.5       88.5       89.5       89.3       90.9        90.2     89.9
Operating expenses (1):
  Sales and marketing                            73.7       70.4       81.3       70.0       63.0       61.6        63.8     54.3
  Research and development                       22.3       22.9       29.5       23.9       23.4       20.7        24.7     19.5
  General and administrative                     22.2       20.8       21.7       16.8       13.9       13.2        16.4     13.1
                                             --------------------------------------------------------------------------------------
Total operating expenses                        118.2      114.1      132.5      110.7      100.3       95.5       104.9     86.9
Income (loss) from operations                   (31.8)     (25.6)     (44.0)     (21.2)     (11.0)      (4.6)      (14.7)     3.0
License and other interest income                 5.4        5.3        5.1        3.9        3.8        3.9         3.9      3.0
Interest expense                                  0.0        0.0        0.0       (0.2)       0.0        0.0         0.5      0.0
Foreign currency transaction gains (losses)       0.3        0.0        0.0        0.0        0.0        0.0         0.2      0.0
Other income                                      0.0        0.0        0.0        0.0        0.0        0.4         0.0      0.1
Investment impairments                           (4.4)      (5.7)      (3.8)      (1.5)      (1.2)       0.0        (3.0)     0.0
Income (loss) before income taxes               (30.5)     (26.0)     (42.7)     (19.0)      (8.4)      (0.3)      (13.1)     6.1
Provision (benefit) for income taxes             (9.3)      (8.4)     (13.4)      (5.9)       2.6        1.0        (4.4)     2.1
Net income (loss) available to common stock     (21.2)%    (17.6)%    (29.3)%    (13.1)%     (5.8)%     (1.3)%      (8.7)%    4.0%
                                             ======================================================================================
</TABLE>

(1) Included  within sales and marketing,  research and  development and general
and  administrative  expense is stock  compensation  expense associated with the
granting of stock options to employees  immediately  prior to the Company's IPO.
Such  stock  compensation  expense  for the 8 quarters  ended June 30,  2001 was
$166,000,  $167,000,  $113,000,  $91,000, $91,000, $91,000, $56,000 and $39,000,
respectively.

<PAGE>


      The  Company's  quarterly  revenues  and  operating  results  have  varied
significantly in the past and are likely to vary  substantially  from quarter to
quarter in the future.  Quarterly revenues and operating results are expected to
fluctuate as a result of a variety of factors,  including  lengthy product sales
cycles,  changes in the level of operating  expenses,  demand for the  Company's
products,  introductions  of new products and product  enhancements by Mobius or
Mobius's competitors, changes in customer budgets, competitive conditions in the
industry and general domestic and  international  economic  conditions.  License
revenues  typically peak during the fourth fiscal quarter and to a lesser extent
in the  second  fiscal  quarter.  These  fluctuations  are caused  primarily  by
customer  purchasing  patterns and the Company's sales force incentive  programs
which recognize and reward sales personnel on the basis of achievement of annual
and other periodic performance quotas, as well as the factors described above.


Liquidity and Capital Resources

      Since its inception,  Mobius has funded its operations principally through
cash flows from operating  activities  and, to a lesser  extent,  equity or bank
financings.  As of June 30, 2001,  Mobius had cash and cash equivalents of $24.1
million,  a 12.7%  increase  from the $21.4  million held at June 30,  2000.  In
addition, Mobius had marketable securities of $10.3 million and $10.5 million as
of June 30, 2000 and June 30, 2001, respectively.

      In  fiscal  1999,   $6.8  million  net  cash  was  provided  by  operating
activities.  In  fiscal  2000,  $4.0  million  net cash  was  used by  operating
activities  and in fiscal 2001,  $8.3 million net cash was provided by operating
activities.  Mobius's  primary  sources of cash  during  fiscal 1999 was its net
income  supported by increases  in its  deferred  income taxes and  decreases in
items requiring  working  capital.  During fiscal 2000,  Mobius's use of cash in
operating  activities  was  primarily  caused by its net loss and an increase in
accounts  receivable offset by collections of software license  installments and
growth in deferred  revenues.  During  fiscal 2001,  Mobius's  depreciation  and
amortization  expense  adjustment  in  operating  activities  was $4.2  million.
Depreciation  and  amortization  expense  increased  during  fiscal  2001 due to
infrastructure  investments.  Mobius's  sources of cash  during  fiscal 2001 was
collections of software  installments and accounts receivable.  Software license
installments, which decreased 18.5% from $17.8 million at June 30, 2000 to $14.5
million at June 30, 2001, represent payments due from customers for license fees
that are paid over the term of the  installment  agreement.  Since  payments are
made  over  multiple  reporting  periods,   software  license  installments  can
fluctuate with the amount of license revenue sold on an installment  basis.  Net
accounts receivable decreased 13.5% from $14.9 million at June 30, 2000 to $12.9
million at June 30, 2001, largely as a result of better collections.

      Net cash used in investing activities was $15.4 million,  $8.6 million and
$5.2 million in fiscal 1999,  2000 and 2001,  respectively.  For the years ended
June 30,  1999,  2000 and 2001,  cash of $4.5  million,  $6.2  million  and $4.2
million, respectively was used for the purchase of computer equipment, furniture
and fixtures and leasehold improvements. The Company continues to invest capital
resources into its  infrastructure,  including the  installation of an automated
sales force  computer  system,  implementation  of a new  accounting  system and
expansion of the Rye headquarters building.

      Marketable securities of $9.4 million, $3.5 million and $23.4 million were
purchased  and $0, $2.3 million and $23.2  million  marketable  securities  were
sold, in fiscal 1999, 2000, 2001, respectively.  Mobius made investments of $1.5
million,  $1.3 million and $375,000 in Home Account Network and Flooz.com during
fiscal 1999,  2000 and 2001,  respectively.  These  investments are disclosed in
detail in a separate section of Management's Discussion and Analysis and in Note
5 of the Consolidated Financial Statements.

      Net cash  provided by  financing  activities  was $227,000 in fiscal 1999,
which was primarily due to cash received from the exercise of stock options.  In
fiscal 2000, cash provided by financing activities of $327,000 was primarily due
to cash received from the exercise of stock options and sales of Mobius's common
stock through the employee  stock  purchase plan. Net cash provided by financing
activities  was $147,000

<PAGE>


in fiscal 2001,  primarily due to the sale of Mobius's  common stock through the
employee  stock purchase  plan,  offset by the cash used to repurchase  Mobius's
common stock.


Bad Debt Reserves

      Accounts  receivable  reserves are  primarily  calculated  by  identifying
problem  accounts and in  recognition  that some  customers  decide to cancel or
reduce the number of products  covered by  maintenance  arrangements  upon their
anniversary  but do not always notify Mobius in sufficient  time to prevent some
portion of the annual  maintenance  billings from being recognized.  Mobius also
has a small reserve to absorb losses based upon  historical  experience that may
result from current receivables. Mobius specifically identifies problem accounts
by the age of the  receivable  and through  discussions  with the  customer  and
Mobius sales  representatives.  Based on that information,  Mobius exercises its
best judgment as to what portion of the accounts  receivable  balance requires a
reserve.  At June 30,  2000 and June 30, 2001  approximately  78% and 80% of the
total accounts receivable reserve balances were related to specific accounts. To
the  extent  that an  account  for which a  specific  reserve  was  provided  is
subsequently collected, Mobius reduces the reserves in the period of collection.

      Software license installment reserves have consistently been determined as
a  percentage  of  software  license   installments  to  provide  for  potential
bankruptcies and contractual  disputes.  At June 30, 2000 and June 30, 2001, net
software license installments were approximately $17.8 million and $14.5 million
of which 84% and 80% were customer balances greater than $100,000, respectively.
Customer balances for software license  installments tend to be large due to the
selling price of Mobius's  products.  Software license  installment and accounts
receivable  reserves  were $1.7  million  and $1.5  million at June 30, 2000 and
2001, respectively.


Other Matters

      In January 1999, the Company sold the INFOPAC-TapeSaver product to a third
party for approximately  $3.0 million payable over a five year period. The buyer
assumed  responsibility  for  maintenance  support  for all  existing  TapeSaver
licenses,   however,  the  Company  recognized  approximately  $1.1  million  of
TapeSaver   maintenance   revenue  through   December  31,  1999  for  TapeSaver
maintenance  billings  collected  prior  to the  sale,  $795,000  of  which  was
recognized  in fiscal 1999 and $302,000 of which was  recognized in fiscal 2000.
No TapeSaver  maintenance  revenue was  recognized in fiscal 2001. For the years
ended June 30, 1999, 2000 and 2001, the Company  recognized  $756,000,  $673,000
and  $450,000 of  TapeSaver  license  revenue,  respectively.  Future  TapeSaver
license revenue of $112,500 each quarter,  will be recognized as the buyer makes
scheduled  payments  through December 31, 2003. The buyer is delinquent on these
payments since June 2001.

      During fiscal 2001,  Mobius  integrated  Click-n-Done  with Mobius's other
products,  to  provide  an  integrated  architecture  that  supports  electronic
statement  presentment,  electronic bill  presentment and payment and electronic
invoice  presentment and payment.  Mobius's segregated expenses for Click-n-Done
were  approximately  $8.2  million  and $4.4  million  in fiscal  2000 and 2001,
respectively.  Through June 30, 2000,  Mobius had not generated any revenue from
the sale of its Click-n-Done products. In fiscal 2001 Mobius recognized $173,000
of license revenue from Click-n-Done products.

      In compliance  with the lease of the Company's  corporate  headquarters in
Rye,  NY, the  landlord  holds a letter of credit with  Silicon  Valley Bank for
$275,000. This letter of credit is secured by a certificate of deposit.

      The  Company  believes  that its  existing  cash  balances  and cash flows
expected from future operations will be sufficient to meet the Company's capital
requirements for at least 12 months.


<PAGE>


Recent Accounting Pronouncements

      In July 2001, the FASB issued SFAS No. 141, "Business  Combinations" which
addresses  financial  accounting  and  reporting for business  combinations  and
supersedes  APB  Opinion  No.  16,  "Business  Combinations"  and SFAS  No.  38,
"Accounting for  Pre-acquisition  Contingencies of Purchased  Enterprises".  All
business  combinations  in the scope of this  Statement  are to be accounted for
using one method,  the purchase method.  The Statement also provides guidance on
purchase  accounting  related  to  the  recognition  of  intangible  assets  and
accounting for negative goodwill.  The provisions of this Statement apply to all
business combinations initiated after June 30, 2001.

      Also in July 2001,  the FASB  issued  SFAS No.  142,  "Goodwill  and Other
Intangible  Assets",  which  addresses  financial  accounting  and reporting for
acquired  goodwill  and other  intangible  assets.  Statement  142  changes  the
accounting  for  goodwill  from an  amortization  method  to an  impairment-only
approach.  Goodwill will be tested for impairment annually or whenever events or
circumstances  occur  that  indicate  goodwill  could have been  impaired.  Upon
adoption of  Statement  141,  amortization  of goodwill  recorded  for  business
combinations consummated prior to July 1, 2001 will cease, and intangible assets
acquired  prior to July 1, 2001 that do not meet the  criteria  for  recognition
under Statement 141 will be reclassified to goodwill.  Companies are required to
adopt  Statement  142 for fiscal years  beginning  after  December 15, 2001.  In
connection  with the adoption of Statement  142,  companies  will be required to
perform a transitional goodwill impairment assessment.  The adoption of SFAS No.
142 is not  expected to have a  significant  impact on the  Company's  financial
position  or results of  operations  as the  Company  does not have  significant
amounts of recorded  goodwill or  intangible  assets  associated  with any prior
business combination.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Mobius's investment portfolio is subject to interest rate sensitivity. The
primary objective of Mobius's  investment  activities is to preserve  principal,
while at the same time  maximizing the interest  income,  without  significantly
increasing  risk. Some of the marketable  securities that Mobius has invested in
may be subject to market rate interest  risk.  This means a change in prevailing
interest  rates may cause the market  value of the  security to  fluctuate.  For
example,  if Mobius holds a security that was issued with a fixed  interest rate
at the  then-prevailing  rates and the prevailing interest rates later rise, the
market value of the security will  probably  decline.  At June 30, 2001,  Mobius
primarily held debt securities.

      Mobius may be subject to foreign  currency  fluctuations  in  relation  to
accounts  receivable  and accounts  payable that may be denominated in a foreign
currency other than the functional currency in certain foreign jurisdictions. To
the extent that such foreign currency  transactions are negatively or positively
effected by foreign currency  fluctuations,  foreign currency transaction losses
or gains would be recognized.  We do not use derivative financial investments to
limit our foreign exchange expense.


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Consolidated financial statements are included in Item 14 (a)(1). Selected
Quarterly  Financial  Data is included in Item 7 -  Management's  Discussion and
Analysis of Financial Condition and Results of Operations.


ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

      None.


<PAGE>


PART III.
ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      There are currently  six members of the Board of Directors.  During fiscal
year 2001,  Peter  Barris  resigned  from the Board of  Directors.  The Board is
divided into three classes with terms expiring,  respectively, at the 2001, 2002
and 2003 annual meeting of  stockholders.  All Mobius  directors are elected for
three-year terms,  except Robert H. Levitan who was elected for a two-year term.
Personal information on each of our directors is given below.

      The Board  oversees  the  management  of the Company on the  stockholder's
behalf.  It reviews  Mobius's  long-term  strategic  plans and exercises  direct
decision-making  authority in key areas.  The Board chooses the Chief  Executive
Officer, sets the scope of his authority to manage Mobius's business day to day,
and evaluates his performance.

      Five of Mobius's six directors are not Mobius employees. Only non-employee
directors  serve on Mobius's Audit and  Compensation  committees.  The Board met
five times during fiscal 2001. Each director attended all of the meetings of the
Board except  Edward  Glassmeyer  who attended  four of the five meetings of the
Board.


DIRECTORS

Set forth below are the names,  ages,  positions and certain other  information
concerning the current Directors of Mobius.

Mitchell Gross...........  Co-Founder of Mobius. President since 1981 and
Age 51                     Chairman of the Board and Chief Executive Officer
Director since 1981        since 1996.  Mr. Gross was an officer in the U.S.
                           Navy, serving on nuclear submarines, from
                           1971-1976. Holds a B.S. in mechanical engineering
                           from Columbia University School of Engineering and
                           Applied Science and a M.B.A. in finance from The
                           Wharton School at the  University of Pennsylvania.

Gary G. Greenfield.......  President and Chief Executive Officer of MERANT plc
Age 46                     (software development company) from 1998 to 2001.
Director since 1998        Holds a M.S. in information systems from George
                           Washington University and a M.B.A from Harvard
                           Business School.  Serves as a director of MERANT
                           plc, Hyperion Solutions, Inc. and Managed Object
                           Solutions.

Edward F. Glassmeyer.....  Co-Founder of Oak Investment Partners (venture
Age 60                     capital firm) and its General Partner since 1978.
Director Since 1997        Holds a B.A. from Princeton University and a M.B.A.
                           from the Tuck School at Dartmouth College. Serves
                           as a Director of TheStreet.com.

Kenneth P. Kopelman......  Partner of Kramer Levin Naftalis & Frankel LLP(1)
Age 49                     (law firm).  Attended Cornell University (A.B.) and
Director since 1997        the London School of Economics and received his
                           J.D. from Columbia University School of Law.
                           Serves as a Director of Liz Claiborne, Inc.

Joseph J. Albracht.......  Co-founder of Mobius. Executive Vice President and
Age 52                     Secretary from 1981 to 1999, Chief Operating
Director since 1981        Officer from 1996 to 1999 and Treasurer from 1981
                           to 1996.  Holds a B.S. in operations research and a
                           M.B.A. from Pennsylvania State University.

<PAGE>


Robert H. Levitan........  Co-founder and Chief Executive Officer of
Age 40                     Flooz.com.  Co-founder of iVillage.com.  Holds a
Director since 2000        B.A. in history and public policy studies from Duke
                           University.  Serves as a director of New York Cares.

(1)   Kramer  Levin has served as legal  counsel to Mobius since its founding in
      1981.


DIRECTOR COMPENSATION

      Mobius   employees   receive  no  extra  pay  for  serving  as  directors.
Non-employee  directors are each paid a $10,000 annual  retainer fee for serving
on the Board,  payable quarterly in advance, and are paid meeting fees of $1,250
for each Board  meeting  attended  and $500 for each  telephonic  Board  meeting
attended,  each payable promptly after each meeting. Mr. Kopelman's fees are net
of the amounts paid to Kramer Levin for time Mr. Kopelman devotes to preparation
for and attendance at Board meetings.

      The Mobius Non-Employee Directors' 1998 Stock Option Plan provides for the
grant to Mobius  directors of  non-qualified  stock  options to purchase  Mobius
shares.  These  include  an  initial  grant  of  10,000  options,  made  upon  a
non-employee  director's first election to the Board, as well as an annual grant
of 10,000  options,  made at each annual  meeting to those  directors  having at
least nine months of Board  service on the grant date.  All such options have an
exercise price equal to the fair market value of the underlying Mobius shares on
the date of grant.


INFORMATION CONCERNING EXECUTIVE OFFICERS

      Set forth below are the names,  positions  and certain  other  information
concerning the current  Executive  Officers of Mobius.  Personal  information on
Mitchell Gross is given above.  Executive  officers are elected by the Board and
serve  until the next  meeting  of the Board  following  the  annual  meeting of
stockholders and until their successors have been duly executed and qualified.

Name                    Position
----                    --------

Mitchell Gross          Chairman of the Board, Chief Executive Officer and
                        President.

Sandra A. Becker        Senior Vice President, Marketing since 1998.  Prior
                        to joining Mobius, Ms. Becker was employed by
                        Ceridian Employer Services as Vice President of
                        Marketing and held several marketing and strategy
                        leadership positions for U.S. West Communications.
                        Holds a B.S. from College of St. Catherine and a
                        M.B.A. from the University of Minnesota.

Michael J. Festa        Vice President, Sales (United States and Latin
                        America) since 2000.  Joined Mobius in 1991 and
                        served as Area Director from 1998-2000 and Regional
                        Manager from 1996-1997. Holds a B.B.A. in management
                        from Iona College.

David J. Gordon         Interim Chief Financial Officer since 2000.  Joined
                        Mobius in 1987 and served as Director of Finance from
                        1999-2000 and Controller from 1987-1999.  Holds a
                        B.A. in Accounting from Queens College N.Y.

Karry Kleeman           Vice President, World Sales since 1999.  Joined
                        Mobius in 1990 and served as Vice President, Sales
                        (North and South America) from 1997-1999, National
                        Sales Manager from 1995 to 1997 and Regional Manager
                        from 1992 to 1995. Holds a B.A. in marketing from
                        Elmhurst College.

<PAGE>


Robert Lawrence         Vice President, Product Engineering since 1992.
                        Joined Mobius in 1985.  Holds a B.S. in physics from
                        the University of Massachusetts.

Joseph                  Tinnerello Vice President, Business Development since
                        January, 1998. Joined Mobius in 1990 and served as Vice
                        President, Sales from 1995 to 1997. Following a personal
                        leave of absence, left Mobius from October 1997 through
                        January 1998. From 1988 to 1989, Mr. Tinnerello served
                        as a Regional Manager with Legent Software.

Hiromasa Yazaki         Vice President, Sales (North Asia) since 1999.  Prior
                        to joining Mobius, Mr. Yazaki was employed by Kodak
                        Japan Ltd. in 1997 and 1998 as a General
                        Manger/Consumer Imaging Marketing and employed by
                        Informix K.K. in 1996 as Director of Sales.  Holds a
                        B.A. from Dokkyo University.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's  directors and executive  officers,  and persons who own more than
10% of the Company's  common  stock,  to file reports of ownership on Form 3 and
changes in  ownership  on Form 4 or 5 with the SEC.  Such  directors,  executive
officers  and 10%  stockholders  are also  required  by SEC rules to furnish the
Company with copies of all Section 16(a) forms they file.  Based solely upon its
review of copies of such  forms  received,  or on written  representations  from
certain reporting persons for which no other filings were required,  the Company
believes that during the year ended June 30, 2001,  there was  compliance of all
Section  16(a)  filing  requirements  applicable  to  its  directors,  executive
officers and 10% stockholders.


ITEM 11.   EXECUTIVE COMPENSATION

      The following table sets forth the compensation  earned, by Mobius's Chief
Executive  Officer and the four other  highest-paid  executive  officers for the
past  three  fiscal  years.  The  individuals  included  in the  table  will  be
collectively referred to as the "Named Officers."

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

Name and Principal Position                        Annual Compensation(1)
---------------------------       -------------------------------------------------
                                                                          All
                                                                     Other Annual      All Other
                                  Year      Salary         Bonus    Compensation(2)  Compensation
                                  ----      ------         -----    ---------------  ------------
<S>                               <C>      <C>           <C>          <C>            <C>
Mitchell Gross                    2001     $200,000      $150,264           --       $73,904(3)
Chairman of the Board             2000      200,000        75,252           --        84,948(3)
  Chief Executive Officer         1999      200,000            --           --        61,632(3)
  and President

Karry Kleeman                     2001      125,000         4,140      311,818         4,069(5)
Vice President, World Sales       2000      125,000         6,126      310,501               --
                                  1999      125,000        60,267      325,972               --

Michael J. Festa (4)              2001      125,000         7,016      257,698         3,468(5)
Vice President, U.S. and          2000      115,500        46,767      176,796               --
  Latin America Sales             1999       95,000       130,267      646,737               --

Sandra A. Becker                  2001      190,000       142,665           --         3,889(5)
Senior Vice President,            2000      190,000       142,658           --        72,943(7)
  Marketing                       1999      107,301(6)     71,250           --        30,000(7)

Joseph Tinnerello                 2001      150,000           231      189,750               --
Vice President, Business          2000      150,000           252      214,500               --
  Business Development            1999      150,000            --      198,000               --

Robert Lawrence                   2001      201,432        48,438           --               --
Vice President, Project           2000      193,737        43,875           --               --
  Engineering                     1999      170,000        48,423           --       271,175(8)
</TABLE>

<PAGE>


(1)   In accordance with the rules of the SEC, other compensation in the form of
      perquisites  and  other  personal  benefits  has  been  omitted  in  those
      instances  where  the  aggregate  amount  of such  perquisites  and  other
      personal  benefits  constituted  less than the lesser of $50,000 or 10% of
      the total annual  salary and bonuses for the named  executive  officer for
      such year.

(2)   Consists of sales commissions and non-recoverable draws.

(3)   Includes  premiums on insurance,  car premiums,  tax preparation  fees and
      sales  incentive  trip  added to  compensation.  These  amounts  have been
      grossed up to include taxes.

(4)   Michael J. Festa was  elected by the Board of  Directors  as an  Executive
      Officer on September 13, 2001. If Mr. Festa had been an executive  officer
      as of June 30,  2001,  he would have been  required to be included in this
      disclosure.

(5)   Includes sales  incentive  trip. The value of the trip has been grossed up
      to include taxes.

(6)   Ms.  Becker was  employed by Mobius for  approximately  7 months of fiscal
      1999.

(7)   Includes relocation expenses.

(8)   Disqualifying  disposition  of shares  obtained  through  the  exercise of
      incentive stock options.


BOARD COMMITTEES

      The Board appoints committees to help carry out its duties. Each committee
reviews the results of its meetings with the full Board.  The Board  established
its  committees  in February 1998 in connection  with  Mobius's  initial  public
offering.

      The Audit  Committee is responsible  for  accounting and internal  control
matters.  Subject to stockholder and Board approval, the Audit Committee chooses
the independent public  accountants to audit Mobius's  financial  statements and
reviews  the scope,  results and costs of the audit with such  accountants.  The
Audit Committee also reviews the financial statements and accounting and control
practices  of  Mobius.  The Audit  Committee  consists  of  Messrs.  Glassmeyer,
Greenfield and Levitan. The Audit Committee met twice last year.

      The Compensation  Committee oversees compensation for Mobius's executives,
including salary, bonus and incentive awards. The Compensation Committee is also
responsible for administering  Mobius's 1996 Stock Incentive Plan, Mobius's 1998
Employee  Stock Purchase Plan and Mobius's 1998  Executive  Incentive  Plan. The
Compensation  Committee  consisted  of  Messrs.  Albracht  and  Glassmeyer.  The
Compensation Committee met one time last year.


COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

      Overview

      The Compensation Committee:

      (1)  reviews and approves the compensation of Mr. Gross;

      (2)  approves the general policies  applicable to salaries and bonuses for
the other executive officers and reviews and acts on bonuses for those officers;
and

      (3)  makes  recommendations  to the full Board and senior  management with
respect to the adoption and administration of Mobius's compensation programs.


      Mobius's executive  compensation  program is designed to attract,  retain,
motivate and reward the  management  talent Mobius needs to achieve its business
goals and maintain its leadership in the increasingly competitive environment of
enterprise software products.

<PAGE>

      The three major  components of Mobius's  compensation  program are salary,
annual bonus and stock options.

      The salary and bonus  components of Mobius's  executive  compensation  are
designed to facilitate the fulfillment of the following objectives:

      (1)  retaining competent management;

      (2)  rewarding  management  for the  achievement  of short  and long  term
accomplishments;

      (3)  aligning the interests of  management  with the interests of Mobius's
stockholders; and

      (4)  relating  executive  compensation to the achievement of our goals and
financial performance.


      Salary

      We  base  salary  on  an  executive's  knowledge,   skills  and  level  of
responsibility as well as the economic and business conditions affecting Mobius.
Other factors we consider are:

      (1)  competitive  positioning  (comparing  Mobius's salary  structure with
salaries paid by other companies);

      (2)  Mobius's own business performance; and

      (3)  general economic factors.


      Annual Bonus

      We give our  executives  annual bonuses to provide an incentive and reward
for short-term  financial success and long-term  Company growth.  Annual bonuses
link compensation in significant part to Mobius's  financial  performance and is
determined solely by the Compensation Committee.


      Stock Options

      We use stock options as a long-term,  non-cash  incentive and to align the
long-term interests of executives and stockholders. The stock options are priced
at the market price of Mobius's common stock on the date of grant, therefore the
options are linked to future performance of our stock because the options do not
become  valuable to the holder unless the price of our stock increases above the
price on the date of grant.  The number of stock options granted to an executive
as a form of non-cash compensation is determined by the following factors:

      (1)  number of stock options previously granted to an executive;

      (2)  the executive's remaining options exercisable; and


      (3)  the  value of those  remaining  stock  options,  as  compared  to the
anticipated value that an executive will add to Mobius in the future.


      Employee Stock Purchase Plan

      The Employee  Stock  Purchase  Plan  commenced in fiscal 1999 and provides
employees  who wish to acquire  Mobius's  common stock with the  opportunity  to
purchase  shares  with a  convenient  way of  doing  so by  accumulated  payroll
deductions.  We believe that  employee  participation  in ownership of Mobius on
this basis will be to the mutual benefit of the employees and Mobius.

<PAGE>


      Executive Incentive Plan

      The Executive  Incentive Plan ("Incentive Plan") was established in fiscal
1998 and  participation in the Incentive Plan is limited to those executives and
key  employees  who, in the  judgment of the  Compensation  Committee,  are in a
position to have a significant impact on the performance of Mobius. Awards under
the  Incentive  Plan are  based  upon the  extent  to  which  performance  goals
established by the Compensation  Committee for a designated  performance  period
are  satisfied.  The Incentive  Plan also  provides for grants of  discretionary
bonuses. As of September 17, 2001, there were no awards made under the Incentive
Plan.

      Compensation of the Chief Executive Officer

      Mr.  Gross  is  one  of the  founders  of  Mobius.  He  beneficially  owns
approximately 5,550,000 shares of common stock constituting  approximately 30.6%
of the total amount outstanding.  Accordingly, his interest is very much aligned
with the interest of all  stockholders and Mobius has not considered it sensible
to relate Mr. Gross's  compensation to Mobius's  performance  through  long-term
stock  incentives  such as  restricted  stock  or  stock  options.  Mr.  Gross's
compensation  package consists primarily of salary and bonus. The members of the
Compensation  Committee  agreed to continue to pay Mr. Gross's  $200,000  annual
salary after the  expiration of his  employment  agreement on April 27, 2001 and
granted Mr. Gross a bonus attributable to his success in achieving certain goals
during fiscal 2001.

                                                Joseph J. Albracht
                                                Edward F. Glassmeyer


STOCK OPTIONS

      The following  table  contains  information  concerning the grant of stock
options  under the Company's  1996 Stock  Incentive  Plan to the Named  Officers
during fiscal year 2001.

<TABLE>
<CAPTION>
                                 OPTION GRANTS IN LAST FISCAL YEAR
                                         Individual Grants

      ---------------------------------------------------------------------------------------
                                                                         Potential Realizable
                                      % of                                 Value at Assumed
                     Number of     Underlying                              Rates of Stock
                     Securities      Options                               Appreciation for
                     Underlying    Granted to    Exercise                     Option Term
                      Options     Employees in    Price    Expiration   ---------------------
          Name     Granted(#)(1)   Fiscal Year  ($/Share)     Date        5%($)      10%($)
      ---------------------------------------------------------------------------------------
<S>                    <C>            <C>         <C>       <C>   <C>    <C>       <C>
      Sandra A.
      Becker           5,000          0.6%        $3.00     10/20/10     $9,433    $23,906
      ---------------------------------------------------------------------------------------
      Michael J.
      Festa(2)         20,000         2.46%        $3.00    10/20/10    $37,734    $95,624
      ---------------------------------------------------------------------------------------
      Joseph
      Tinnerello       5,000          0.6%         $3.00    10/20/10     $9,433    $23,906
      ---------------------------------------------------------------------------------------
</TABLE>

----------
(1)   Options  were  granted on October 20,  2000 and have a maximum  term of 10
      years measured from the grant date, subject to earlier  termination in the
      event of the optionee's cessation of service with the Company. The vesting
      of these options is 20% on October 20, 2001 and 5% of the remaining  stock
      options  will become  exercisable  every  three  months  thereafter  until
      October 20, 2005.

(2)   Michael J. Festa was  elected by the Board of  Directors  as an  Executive
      Officer on September 13, 2001. If Mr. Festa had been an executive  officer
      as of June 30,  2001,  he would have been  required to be included in this
      disclosure.

<PAGE>


OPTION EXERCISES AND HOLDINGS

            The table  below sets forth  information  with  respect to the Named
Officers  concerning  their  exercise of options during fiscal year 2001 and the
unexercised options held by them as of the end of such year.

             AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                          Shares                   Number of Securities
                         Acquired      Value      Underlying Unexercised           Value of Unexercised
                            on       Realized       Options at Fiscal              in-the Money Options
        Name             Exercise     ($)(1)            Year-End                 at Fiscal Year-End ($)(1)
        ----             --------     ------   ----------------------------     --------------------------
                                               Exercisable    Unexercisable     Exercisable   Unexercisable
                                               -----------    -------------     -----------   -------------
<S>                      <C>         <C>       <C>            <C>               <C>           <C>
Mitchell Gross              --         $ --           --            --               $ --           $ --
Karry Kleeman               --           --      297,526          47,474          313,650         34,850
Michael J. Festa(2)         --           --       39,250          60,750           18,450          8,050
Sandra A. Becker            --           --       45,999          59,001               --          1,500
Joseph Tinnerello           --           --      280,000           5,000               --          1,500
Robert Lawrence             --           --      168,000          36,000          344,400         73,800
</TABLE>

----------
(1)   Based on the  closing  sale  price on the  Nasdaq  National  Market of the
      common stock on June 29, 2001 of $3.30.

(2)   Michael J. Festa was  elected by the Board of  Directors  as an  Executive
      Officer on September 13, 2001. If Mr. Festa had been an executive  officer
      as of June 30,  2001,  he would have been  required to be included in this
      disclosure.


STOCK PERFORMANCE GRAPH

      The following  graph depicts a comparison of the  cumulative  total return
(assuming the  reinvestment of dividends) for a $100 investment on June 30, 1998
in each of the common stock of Mobius,  the Goldman Sachs  Technology  Composite
Index (a published  industry  index),  and the Nasdaq  Composite (a broad market
index).  The Company paid no dividends during the periods shown. The graph lines
merely connect measurement dates and do not reflect  fluctuations  between those
dates.

<TABLE>
<CAPTION>
                             June 30,1998   June 30,1999   June 30,2000   June 29,2001
                             ------------   ------------   ------------   ------------
<S>                          <C>           <C>             <C>            <C>
Mobius                          $100.00       $ 55.00        $ 30.42       $ 22.00
Goldman Sachs
Technology Composite Index       100.00        168.31         265.36        129.51
Nasdaq Composite                 100.00        141.77         209.32        114.03
</TABLE>


<PAGE>


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table shows the number of shares of Mobius common stock each
Named Officer, each non-employee director, and certain stockholders known by the
Company to be the  beneficial  owner of more than 5% of the  outstanding  common
stock, owned as of September 17, 2001.

      Name and Address of  Named Executive
      Officers, Certain Stockholders and                  Shares     Percent of
      Directors / Nominees                                Owned(1)      Class
      ------------------------------------                --------      -----

      Mitchell Gross(2)
      c/o Mobius Management Systems, Inc.
      120 Old Post Road
      Rye, New York 10580 ...........................    5,550,000      30.6%

      Joseph J. Albracht (3)
      c/o Mobius Management Systems, Inc.
      120 Old Post Road
      Rye, New York 10580............................    3,943,500      21.7%

      Karry Kleeman(4)
      c/o Mobius Management Systems, Inc.
      120 Old Post Road
      Rye, NY 10580 .................................     315,526       1.7%

      Michael J. Festa (5)
      c/o Mobius Management Systems, Inc.
      120 Old Post Road
      Rye, New York 10580                                  56,590         *

      Robert Lawrence (6)
      c/o Mobius Management Systems, Inc.
      120 Old Post Road
      Rye, New York 10580............................     319,000       1.7%

      Joseph Tinnerello(7)
      c/o Mobius Management Systems, Inc.
      600 West Fulton Street
      Chicago, IL 60661..............................     291,600       1.6%

      Edward F. Glassmeyer(8)
      c/o Oak Investments
      1 Gorham Island
      Westport, CT 06880.............................     100,847         *

      Gary G. Greenfield (9)
      c/o MERANT plc
      9420 Key West Avenue
      Rockville, MD 20850............................      30,481         *

      Kenneth P. Kopelman(10)
      c/o Kramer, Levin, Naftalis & Frankel
      919 Third Avenue
      New York, NY 10022.............................      33,850         *

      Robert H. Levitan(11)
      c/o Flooz.com, Inc.
      160 East 88th Street
      New York, NY  10128............................      10,000         *

<PAGE>


      Name and Address of  Named Executive
      Officers, Certain Stockholders and                  Shares     Percent of
      Directors / Nominees                                Owned(1)      Class
      ------------------------------------                --------      -----

      Sandra A. Becker(12)
      c/o Mobius Management Systems, Inc.
      120 Old Post Road
      Rye, New York 10580............................      60,428         *

      All Executive Officers and Directors
      as a group (13 persons) .......................   10,777,981      56.2%

----------
* Less than 1%

(1)   Beneficial  ownership is determined  in  accordance  with the rules of the
      Securities and Exchange Commission ("SEC"),  and generally includes voting
      power and/or investment power with respect to securities. Shares of Common
      Stock subject to options  currently  exercisable or exercisable  within 60
      days  ("Currently   Exercisable   Options")  are  deemed  outstanding  for
      computing the  percentage  beneficially  owned by the person  holding such
      options  but are not  deemed  outstanding  for  computing  the  percentage
      beneficially owned by any other person.

(2)   Includes  3,732,259  shares of Common  Stock held by HARMIT,  LP, of which
      Mitchell Gross is the general partner

(3)   Includes 10,000 shares issuable pursuant to Currently Exercisable Options.

(4)   Includes  314,526  shares  issuable  pursuant  to  Currently   Exercisable
      Options.

(5)   Includes 49,600 shares issuable pursuant to Currently Exercisable Options.

(6)   Includes  204,000  shares  issuable  pursuant  to  Currently   Exercisable
      Options.

(7)   Includes  281,000  shares  issuable  pursuant  to  Currently   Exercisable
      Options.

(8)   Includes 30,000 shares issuable pursuant to Currently Exercisable Options.

(9)   Includes 30,000 shares issuable pursuant to Currently Exercisable Options.

(10)  Includes  1,500  shares of Common  Stock  held in trust by Mr.  Kopelman's
      wife, as trustee, for Mr. Kopelman's three minor children and 2,350 shares
      of Common Stock held jointly by Mr.  Kopelman and his wife.  Mr.  Kopelman
      disclaims beneficial ownership to such shares. Also includes 30,000 shares
      issuable pursuant to Currently Exercisable Options.

(11)  Includes 10,000 shares issuable pursuant to Currently Exercisable Options.

(12)  Includes 52,999 shares issuable pursuant to Currently Exercisable Options.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Relationship With Kramer Levin Naftalis & Frankel LLP

      Since 1981 the Company has engaged,  and plans to continue to engage,  the
Kramer Levin law firm to provide the Company with legal counsel. Mr. Kopelman, a
member of Mobius's  Board of Directors,  is a partner of Kramer Levin Naftalis &
Frankel LLP.  Mobius believes that fees charged by Kramer Levin are at rates and
on terms no less  favorable  to the Company than could have been  obtained  from
unaffiliated third parties.


      Relationship With Mr. Tinnerello

      Following a personal leave,  on September 30, 1997,  Mobius entered into a
severance  agreement  with  Mr.  Joseph  Tinnerello,   presently  Mobius's  Vice
President, Business Development,  pursuant to which Mr. Tinnerello left Mobius's
employment  on  October  1,  1997 and  agreed  to  certain  non-competition  and
non-solicitation  restrictions  in  consideration  for (1) the  acceleration  of
80,000 options to purchase shares of our common stock previously  granted to him
and (2) the grant of 100,000 new options to purchase  shares of our common stock
at an exercise price equal to the fair market value of the shares at the time of
the grant.  Due to his termination and the terms of Mobius's 1996 Employee Stock
Incentive Plan, Mr.  Tinnerello  forfeited 640,000 options to purchase shares of
common stock that were  previously  granted to him in November 1996. On December
26, 1997, Mr.  Tinnerello agreed to return to Mobius effective January 15, 1998.
On December  28,  1997,  Mobius  agreed to advance  $160,000  to Mr.  Tinnerello
against  future  commissions.  As of September 17, 2001, the full amount of such
advance remains outstanding.  Such monies (net of applicable taxes) were used by
Mr. Tinnerello to exercise options to purchase 80,000 shares of Common Stock. On
January 15, 1998,  Mobius  granted Mr.  Tinnerello  options to purchase  180,000
shares of Common Stock in accordance  with and on terms similar to, our standard
hiring practices.

<PAGE>


      Agreements With Employees

      In February,  1998, Mobius entered into employment agreements with each of
Messrs.  Gross and Albracht  providing  for the  employment  of Mr. Gross as our
Chairman of the Board, Chief Executive Officer and President and Mr. Albracht as
our  Executive  Vice  President and Chief  Operating  Officer.  Each  employment
agreement  provides  for a three-year  term ending on April 27, 2001,  the third
anniversary of our initial public offering.  In October 1999, Mr. Albracht ended
his employment  with the Company.  These  employment  agreements  expired during
fiscal 2001.


      Compensation Committee Interlocks And Insider Participation

      The current  members of our  Board's  Compensation  Committee  are Messrs.
Albracht and Glassmeyer.  There are no compensation  committee  interlocks which
are  required to be  disclosed by  applicable  SEC rules.  No member of Mobius's
Compensation  Committee  serves  as a  member  of  the  board  of  directors  or
compensation  committee  of any  other  entity  that  has one or more  executive
officers  serving as a member of Mobius's  Board of  Directors  or  Compensation
Committee.


<PAGE>


PART IV.
ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)     Financial Statements


                         MOBIUS MANAGEMENT SYSTEMS, INC.

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Independent Auditors' Report

Consolidated Balance Sheets as of June 30, 2000 and 2001 Consolidated Statements
of  Operations  for the Years Ended June 30,  1999,  2000 and 2001  Consolidated
Statements of Stockholders'  Equity for the Years Ended June 30, 1999, 2000, and
2001  Consolidated  Statements  of Cash Flows for the Years Ended June 30, 1999,
2000, and 2001 Notes to Consolidated Financial Statements


(a)(2)     Financial Statement Schedule

           Schedule II - Valuation and Qualifying Accounts and Reserves

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Mobius Management Systems, Inc.:

      We have  audited  the  consolidated  financial  statements  and  financial
statement schedule of Mobius Management Systems, Inc. and subsidiaries as listed
in the accompanying index. These consolidated financial statements and financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements and financial statement schedule based on our audits.

      We conducted our audits in accordance  with auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

      In our opinion,  the consolidated  financial  statements referred to above
present  fairly,  in all material  respects,  the  financial  position of Mobius
Management  Systems,  Inc. and subsidiaries as of June 30, 2000 and 2001 and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended June 30, 2001, in conformity with accounting  principles
generally  accepted in the United States of America.  Also, in our opinion,  the
related financial statement  schedule,  when considered in relation to the basic
consolidated  financial  statements taken as a whole,  presents  fairly,  in all
material respects the information set forth therein.


                                                   KPMG LLP


July 25, 2001
Stamford, CT

<PAGE>


                         MOBIUS MANAGEMENT SYSTEMS, INC.
                         CONSOLIDATED BALANCE SHEETS
             (in thousands, except share data and per share data)


<TABLE>
<CAPTION>
                                                                        June 30,
                                                                 --------------------
                                                                    2000       2001
                                                                 --------    --------
<S>                                                              <C>        <C>
ASSETS

Current assets:
   Cash and cash equivalents                                     $ 21,380   $ 24,099
   Marketable securities, at market value                          10,287     10,508
   Accounts receivable, net of allowance for doubtful
      accounts of $1,084 and $899, respectively                    14,857     12,852
   Software license installments, current portion                   9,836      9,317
   Other current assets                                             3,804       2,304
                                                                 --------    --------
         Total current assets                                      60,164     59,080

Software license installments, non-current portion,
   net of allowance for doubtful accounts of $643
   and $551, respectively                                           7,992      5,216
Investments                                                           531         --
Property and equipment, net                                         9,295      9,231
Deferred income taxes                                                  --      1,242
Other assets                                                           411       746
                                                                  --------   -------

         Total assets                                            $ 78,393   $ 75,515
                                                                 ========   ========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses                         $ 15,046   $ 15,498
   Deferred revenue                                                16,488     16,950
   Deferred income taxes                                            2,570      3,199
                                                                 --------   --------
         Total current liabilities                                 34,104     35,647

Deferred revenue                                                    2,374      1,398
Deferred income taxes                                               1,324         --
                                                                 --------   --------
         Total liabilities                                         37,802     37,045
                                                                 --------   --------
Stockholders' equity:
   Common stock $.0001 par value; authorized 40,000,000
      shares; issued 22,218,473 and 22,297,413 shares,
      respectively; outstanding 18,114,000 and 18,206,413
      shares, respectively                                              2          2
   Additional paid-in capital                                      48,831     49,624
   Retained earnings                                                4,601      2,611
   Deferred stock compensation                                       (445)      (168)
   Accumulated other comprehensive income                            (313)      (878)
Treasury stock, at cost, 4,104,473
   and 4,275,273 shares, respectively                             (12,085)   (12,721)
                                                                 --------   --------
         Total stockholders' equity                                40,591     38,470
                                                                 --------   --------

Total liabilities and stockholders' equity                       $ 78,393   $ 75,515
                                                                 ========   ========
</TABLE>


            See accompanying notes to consolidated financial statements.

<PAGE>


                         MOBIUS MANAGEMENT SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)


                                                         Years Ended June 30,
                                                      1999      2000     2001
                                                      ----      ----     ----

Revenues:
   Software license revenues                        $48,811   $31,018   $39,321
   Maintenance and other revenues                    25,025    29,187    34,891
                                                     ------    ------    ------
      Total revenues                                 73,836    60,205    74,212
                                                     ------    ------    ------
Costs of revenues:
   Software license revenues                          1,223       946     1,219
   Maintenance and other revenues                     5,011     6,070     6,148
                                                     ------     -----    ------
      Total costs of revenues                         6,234     7,016     7,367
                                                     ------   -------    ------

Gross profit                                         67,602    53,189    66,845
                                                     ------    ------    ------

Operating expenses:
   Sales and marketing                               41,877    44,289    44,886
   Research and development                          10,674    14,823    16,267
   General and administrative                         9,409    12,086    10,460
                                                     ------    ------    ------
      Total operating expenses                       61,960    71,198    71,613
                                                     ------    ------    ------

Income (loss) from operations                         5,642   (18,009)   (4,768)

License and other interest income                     2,920     2,930     2,689
Interest expense                                        (16)      (58)       (9)
Foreign currency transactions                          (191)       44       102
Other income                                             --        --       109
Investment impairments                                   --    (2,220)     (718)
                                                     ------    ------    ------
Income (loss) before income taxes                     8,355   (17,313)   (2,595)

Provision (benefit)for income taxes                   4,057    (5,417)     (605)
                                                     ------    ------    ------
Net income (loss)                                   $ 4,298  $(11,896)  $(1,990)
                                                    =======  ========-  =======

Basic earnings (loss) per share                      $ 0.24   $ (0.66)   $(0.11)
Basic weighted average shares
   outstanding                                       17,813    17,988    18,225

Diluted earnings (loss) per share                    $ 0.23   $ (0.66)   $(0.11)
Diluted weighted average
   shares outstanding                                18,964    17,988    18,225


            See accompanying notes to consolidated financial statements.


<PAGE>


                         MOBIUS MANAGEMENT SYSTEMS, INC.
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                            Accumulated                     Total
                                                                                               Other                        Stock-
                                       Common Stock       Additional                          Compre-                      holders'
                                     -----------------     Paid-in    Retained   Deferred     hensive   Treasury Stock     (Deficit)
                                     Shares     Amount     Capital    Earnings Compensation   Income    Shares  Amount      Equity
                                     ------     ------     -------    -------- ------------   ------    ------  ------      ------
<S>                                  <C>        <C>        <C>         <C>        <C>         <C>       <C>     <C>         <C>
Balance at June 30, 1998             17,695     $    2     $47,994     $12,199    $(2,076)    $   3     4,091   $(12,000)   $46,122
Net income                               --         --          --       4,298         --        --        --         --      4,298
Change in other comprehensive
income, net of tax                       --         --          --          --         --      (401)       --         --       (401)
                                                                                                                            -------
   Comprehensive income                  --         --          --          --         --        --        --         --      3,897
Stock options exercised                 210         --         463          --         --        --        --         --        463
Change in deferred compensation          --         --         (48)         --      1,094        --        --         --      1,046
                                     ------     ------     -------     -------    --------    ------    -----   ---------   -------
Balance at June 30, 1999             17,905          2      48,409      16,497       (982)     (398)    4,091    (12,000)    51,528
Net loss                                 --         --          --     (11,896)        --        --        --         --    (11,896)
Change in other comprehensive
income, net of tax                       --         --          --          --         --        85        --         --         85
                                                                                                                            -------
   Comprehensive loss                    --         --          --          --         --        --        --         --    (11,811)
Stock options exercised                 155         --         252          --         --        --        13        (85)       167
Stock purchase plan shares issued        54         --         170          --         --        --        --         --        170
Change in deferred compensation          --         --          --          --        537        --        --         --        537
                                     ------     ------     -------     -------    --------    ------    -----   ---------   -------
Balance at June 30, 2000             18,114          2      48,831       4,601       (445)     (313)    4,104    (12,085)    40,591
Net loss                                 --         --          --      (1,990)        --        --        --         --     (1,990)
Change in other comprehensive
income, net of tax                       --         --          --          --         --      (565)       --         --       (565)
                                                                                                                           --------
   Comprehensive loss                    --         --          --          --         --        --        --         --     (2,555)
Stock options exercised                  25         --          38          --         --        --        --         --         38
Stock purchase plan shares issued       238         --         755          --         --        --        --         --        755
Stock repurchase program               (171)        --          --          --         --        --       171       (636)      (636)
Change in deferred compensation          --         --          --          --        277        --        --         --        277
                                     ------     ------     -------     -------    --------    ------    -----   ---------   -------
Balance at June 30, 2001             18,206     $    2     $49,624     $ 2,611      $(168)    $(878)    4,275   $(12,721)  $ 38,470
                                     ======     ======     =======     =======    ========    ======    =====   =========   =======
</TABLE>


         See accompanying notes to consolidated financial statements.

<PAGE>




                         MOBIUS MANAGEMENT SYSTEMS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                   Years Ended June 30,
                                                                          1999             2000            2001
                                                                        --------        --------         --------
<S>                                                                     <C>             <C>              <C>
Cash flows provided by (used in) operating activities:
  Net income (loss)                                                     $  4,298        $(11,896)        $ (1,990)
                                                                        --------        --------         --------
Adjustments to reconcile net income (loss)
  to net cash provided by (used in) operating activities:
  Deferred income taxes                                                    1,916          (3,200)          (1,937)
  Depreciation and amortization                                            1,372           3,029            4,163
  Stock compensation expense                                               1,046             537              277
  Impairment of investment                                                    --           2,220              718
  Loss on disposal of fixed assets                                            --              22              114
  Other                                                                       --              --              (18)

Change in operating assets and liabilities:
    Accounts receivable, net                                              (1,898)         (2,226)           2,005
    Software license installments                                         (2,365)          5,553            3,295
    Other assets                                                            (644)         (1,430)           1,778
    Accounts payable and accrued expenses                                  3,749           1,921              452
    Other liabilities                                                       (969)             --               --
    Deferred revenue                                                         335           1,503             (514)
                                                                        --------        --------         --------
      Total adjustments                                                    2,542           7,929           10,333
                                                                        --------        --------         --------
      Net cash provided by (used in) operating activities                  6,840          (3,967)           8,343
                                                                        --------        --------         --------

Cash flows used in investing activities:
  Purchase of marketable securities                                       (9,403)         (3,535)         (23,430)
  Purchase of investments                                                 (1,501)         (1,250)            (375)
  Sale of marketable securities                                               --           2,330           23,270
  Sale of fixed assets                                                        --              --               62
  Capital expenditures                                                    (4,479)         (6,152)          (4,245)
  Other investment                                                            --              --             (445)
                                                                        --------        --------         --------
      Net cash used in investing activities                              (15,383)         (8,607)          (5,163)
                                                                        --------        --------         --------

Cash flows provided by financing activities:
  Cash received from exercise of stock options                               263             193               35
  Cash received from employee stock purchase                                  --             170              748
  Cash used for stock repurchase program                                      --              --             (636)
  Payments on capital lease obligations                                      (36)            (36)              --
                                                                        --------        --------         --------
      Net cash provided by financing activities                              227             327              147
Effect of exchange rate changes on
  cash and cash equivalents                                                 (360)             81             (608)
                                                                        --------        --------         --------
Net change in cash and cash equivalents                                   (8,676)          2,719
Cash and cash equivalents at beginning of year                            42,222          33,546           21,380
                                                                        --------        --------         --------
Cash and cash equivalents at end of year                                $ 33,546        $ 21,380         $ 24,099
                                                                        ========        ========         ========

Supplemental disclosure of cash flow information:
  Cash paid during the period for:
    Interest                                                            $     16        $     58         $      9
    Income taxes (refunds), net                                            3,304          (3,119)          (1,690)
</TABLE>

         See accompanying notes to consolidated financial statements.


<PAGE>


                         MOBIUS MANAGEMENT SYSTEMS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  Organization

      Mobius   Management   Systems,   Inc.,   together  with  its  wholly-owned
subsidiaries  (the  "Company"),  is a leading provider of software that supports
content-intensive  e-business  applications.  The  Company  is  incorporated  in
Delaware and operates  wholly-owned  subsidiaries  in the United States,  United
Kingdom, France, Germany, Italy, Sweden,  Switzerland,  Australia, Japan and the
Benelux.


(2)  Significant Accounting Policies

      Principles of consolidation

      The Company and its subsidiaries are consolidated for financial  statement
purposes after the elimination of all significant intercompany transactions.

      Revenue recognition

      License  and  maintenance   revenue  are  recognized  in  accordance  with
Statement of Position 97-2, "Software Revenue Recognition" ("SOP 97-2"). Revenue
from  software  license  contracts  includes  license  fees related to long-term
licenses,  typically 5 or 15 years, and fees for term license  contracts,  which
are generally 3 to 5 years.  Revenue from executed software license contracts is
recognized  upon  delivery  of the  software to the  customer if no  significant
vendor  obligations  remain  and  collection  of  the  resulting  receivable  is
probable. Software license revenue includes the present value of future payments
under   non-cancelable   license  arrangements  which  provide  for  payment  in
installments generally over periods from 3 to 5 years. A portion of the discount
is recognized as interest income over the term of the arrangement.

      SOP 97-2 generally  requires  revenue earned on multiple  element software
arrangements,  such as additional  software products,  upgrades or enhancements,
rights to  exchange  or return  software,  maintenance  or  services,  including
elements deliverable only on a  when-and-if-available  basis, to be allocated to
the various elements of such sale based on  "vendor-specific  objective evidence
of fair values"  allocable to each such element.  If sufficient  vendor-specific
objective  evidence of fair market values does not exist,  revenue from the sale
is deferred until such sufficient  evidence  exists,  or until all elements have
satisfied the requirements for revenue recognition.  Statement of Position (SOP)
98-9,  "Modification of SOP 97-2, Software Revenue Recognition,  With Respect to
Certain  Transactions",  which amended SOP 97-2 and clarified what is considered
vendor-specific  evidence of fair value for the  various  elements in a multiple
element arrangement was adopted by Mobius on July 1, 1999.

      According to these  guidelines,  when the Company sells a software license
contract that includes  maintenance,  the maintenance  revenue is unbundled from
the initial  license fee and  recognized  ratably over the  maintenance  period,
starting  from the  inception of the software  license  agreement.  The unearned
portion of such  maintenance  revenue is  classified  as deferred  revenue  with
amounts extending beyond one-year reported as non-current.

      Revenue on maintenance  contracts is recognized on a  straight-line  basis
over the term of the maintenance contract, generally twelve months. The unearned
portion of maintenance revenue is classified as deferred revenue.


<PAGE>


      Software Development Costs

      Statement of Financial  Accounting Standards No. 86 (SFAS No. 86) requires
the  capitalization  of certain software  development  costs once  technological
feasibility  is  established.  The  capitalized  costs are then  amortized  on a
straight-line  basis over the estimated product life, or on the ratio of current
revenues to total projected product revenues, whichever is greater.

      The  Company  determines  technological  feasibility  based on the working
model  method.  The  period  between  establishment  of a working  model and the
general   availability  of  its  software  has  historically   been  short  and,
accordingly,  software development costs qualifying for capitalization have been
insignificant.  As a result,  the Company has expensed all software  development
costs.

      Property and Equipment

      Property and equipment are carried at cost.  Depreciation is computed on a
straight-line  basis over the estimated life of the related asset,  ranging from
three to fifteen years.  Assets acquired under capital leases are depreciated on
a  straight-line  basis over the shorter of the asset's  life or the  respective
lease.

      Income Taxes

      The  Company  accounts  for income  taxes  under  Statement  of  Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS
No. 109 requires  using the asset and liability  method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for
the future tax  consequences  attributable to differences  between the financial
statement  carrying  amounts  of  existing  assets  and  liabilities,  and their
respective  tax  bases.  Deferred  tax  assets  are  recognized  for  deductible
temporary  differences,  net  operating  loss  carryforwards,   and  tax  credit
carryforwards  if it is more  likely  than  not that  the tax  benefits  will be
realized.  A valuation  allowance is  established  if it is more likely than not
that a deferred tax asset will not be realized.

      Foreign Currency Translation

      Balance  sheet  accounts  of  the  Company's   foreign   subsidiaries  are
translated  into U.S.  dollars at exchange  rates in effect at the balance sheet
date.  Revenues,  costs and expenses are translated into U.S. dollars at average
exchange rates for the year.  Gains or losses that result from  translation  are
shown as a separate  component  of  stockholders'  equity.  Net gains and losses
resulting from foreign exchange  transactions are included in the  determination
of net income or loss.

      Cash Equivalents

      The Company considers  investments with maturities at the date of purchase
of three months or less to be cash equivalents.  At June 30, 2000 and 2001, cash
equivalents  were comprised of overnight  deposits and money market  investments
with financial institutions.

      Marketable Securities

      Marketable securities are categorized as available-for-sale securities, as
defined by Statement of Financial  Accounting  Standards No. 115, Accounting for
Certain  Investments  in Debt and Equity  Securities,  and are carried at market
value.  Unrealized  holding  gains and losses are reflected as a net amount in a
separate  component of stockholders'  equity until realized.  For the purpose of
computing  realized  gains  and  losses,   cost  is  identified  on  a  specific
identification  basis.  Realized  gains and losses for the years  ended June 30,
1999,  2000 and 2001  are  insignificant.  As of June  30,  2000 and  2001,  the
unamortized investment premium and unrealized holding gains and losses were also
insignificant.


<PAGE>


      Concentration of Credit Risk

      Financial   instruments  that   potentially   subject  the  Company  to  a
concentration of credit risk consist of substantially  all of the trade accounts
receivables and software license installments. The Company sells its products to
a large number of customers in diversified  industries  across many domestic and
international geographies.

      Use of Estimates

      The  preparation  of financial  statements  in accordance  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements,  and the  reported  amounts  of  revenue  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

      Fair Value of Financial Instruments

      Statement of Financial  Accounting  Standards No. 107,  "Disclosures about
Fair Value of  Financial  Instruments"  (SFAS 107)  defines  the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction  between willing parties.  The fair value of the Company's
cash and cash equivalents,  marketable securities, accounts receivable, software
license  installments,  non  current  investments,   accounts  payable,  accrued
expenses and deferred maintenance amounts approximate their carrying value.

      Earnings Per Share

      The Company calculates  earnings per share in accordance with Statement of
Financial  Accounting  Standards (SFAS) No. 128, "Earnings Per Share".  SFAS No.
128 stipulates that the calculation of earnings per share (EPS) be shown for all
historical  periods  as Basic EPS and  Diluted  EPS.  Basic EPS is  computed  by
dividing income available to common  shareholders by the weighted average number
of common shares  outstanding  during the period. The computation of Diluted EPS
is similar to the  computation  of Basic EPS except that it gives  effect to all
potentially  dilutive instruments that were outstanding during the period. Stock
options were the only  dilutive  instruments  for the years ended June 30, 1999,
2000 and 2001.

      The following is a  reconciliation  of the numerators and denominators for
the Basic and Diluted EPS calculations (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                         Years Ended June 30,
                                                         --------------------
                                              2000                                       2001
                          ---------------------------------------   ----------------------------------------
                            Net Loss        Shares      Per Share    Net Loss         Shares       Per Share
                          (Numerator)   (Denominator)     Amount    (Numerator)    (Denominator)    Amount
                          -----------   -------------   ---------   -----------    -------------   ---------
<S>                       <C>           <C>             <C>         <C>            <C>             <C>
Basic EPS:
Net income (loss)          $(11,896)                                 $(1,990)
                           ========                                  =======
Weighted average shares
 Outstanding                                17,988                                    18,225
Basic EPS                                                $(0.66)                                   $(0.11)
                                                         ======                                    ======
Diluted EPS:
Net income (loss)          $(11,896)                                 $(1,990)
                           ========                                  =======
Dilutive effect of
 stock options                                  --                                        --
                                            ------                                    ------
Diluted EPS                                 17,988       $(0.66)                      18,225       $(0.11)
                                            ======       ======                       ======       ======
</TABLE>


<PAGE>


                                                    Year Ended
                                                  June 30, 1999
                                     --------------------------------------
                                     Net Income      Shares       Per Share
                                     (Numerator)  (Denominator)    (Amount)
                                     -----------  -------------   ---------
         Basic EPS:
         Net income                    $4,298
                                       ======
         Weighted average shares
          outstanding                                17,813
         Basic EPS                                                   $0.24
                                                                     =====
         Diluted EPS:
         Net income                    $4,298
                                       ======
         Dilutive effect of
          stock options                               1,151
                                                      -----
         Diluted EPS                                 18,964          $0.23
                                                     ======          =====

      Outstanding stock options, representing an aggregate of 113,000, 2,684,150
and 3,048,150 shares of Common Stock equivalents,  are antidilutive for the year
ended June 30, 1999, 2000 and 2001, respectively.

      Stock Based Compensation

      The  Company   adopted   SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation",  and elected to continue to apply the  provisions  of  Accounting
Principles Board (APB) Opinion No. 25 in determining measurement of compensation
expense and provide pro forma net  earnings and pro forma net earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair value-based  method,  as defined in SFAS No. 123, had been applied.  As
such,  compensation  expense is generally  recorded on the date of grant only if
the current  fair market  value of the  underlying  stock  exceeded the exercise
price.

      FASB Interpretation No. 44, "Accounting for Certain Transactions Involving
Stock  Compensation" (FIN 44) provides guidance for applying APB Opinion No. 25,
"Accounting  for Stock Issued to  Employees".  With certain  exceptions,  FIN 44
applies  prospectively  to  new  awards,  exchanges  of  awards  in  a  business
combination,  modifications to outstanding  awards and changes in grantee status
on or after July 1, 2000.

      Reclassifications

      Certain  reclassifications  have been made to the 2000 and 1999 amounts to
conform to the 2001 presentation.

      Recently Adopted Pronouncements

      In June 1998,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of  Financial  Accounting  Standard  (SFAS) No. 133,  "Accounting  for
Derivative  Instruments and Hedging Activities" which establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded  in other  contracts,  and for  hedging  activities.  SFAS No.  133, as
amended by SFAS No.  137 and No. 138 is  effective  for fiscal  years  beginning
after  June  15,  2000.  As of July 1,  2000,  the  Company  has  adopted  these
statements,  however the Company has not identified  any derivative  instruments
subject to the  provisions of SFAS No. 133. The adoption did not have a material
impact  on  the  Company's  consolidated  results  of  operations  or  financial
position.

 (3)  Software License Installments

      The Company offers  extended  payment terms to some of its customers.  For
software  license  contracts  of 15  years,  the  related  financing  period  is
generally 5 years.  For  software  installment  contracts  of 3 to 5 years,  the
payments  are  generally   spread  ratably  over  the  term.   Software  license
installments  are  discounted  at a  market  rate of  interest  at the  date the
software license  contract revenue is

<PAGE>


recognized.  At June 30, 2000 and 2001 the effective  weighted  average discount
rate used for software  license  installments was 7.4% in both fiscal years. The
discount is amortized to interest income using the interest method over the term
of the financing.

      The present values of software  license  installments to be received after
June 30, 2001 are as follows (in thousands):

      Year Ended:

      June 30, 2002                                                     $10,124
      June 30, 2003                                                       4,649
      June 30, 2004                                                       1,249
      June 30, 2005                                                         659
      June 30, 2006                                                          58
                                                                        -------
      Total minimum payments to be received                              16,739
      Less unearned interest income                                      (1,655)
      Less allowance for doubtful accounts                                 (551)
                                                                        -------
      Present value of software license installments, net                14,533
      Less current portion, net                                          (9,317)
                                                                        -------
      Non-current portion, net                                          $ 5,216
                                                                        =======

(4)   Property and Equipment

      Property and equipment consists of the following (in thousands):

                                                                   June 30,
                                                                2000     2001
                                                             -------    -------
      Computer equipment                                     $12,349    $12,689
      Furniture, fixtures and office equipment                 1,089      1,650
      Leasehold improvements                                   1,542      4,665
      Construction in progress                                 1,062         --
                                                             -------    -------
                                                              16,042     19,004
      Less accumulated depreciation and amortization          (6,747)    (9,773)
                                                             -------    -------
      Property and equipment, net                            $ 9,295    $ 9,231
                                                             =======    =======

     Depreciation and amortization expense on property and equipment,  including
capital leases,  was  $1,372,000,  $2,874,000 and $4,133,000 for the years ended
June 30, 1999, 2000 and 2001, respectively.

(5)   Non-Current Investments

      In June 1999, Mobius invested  $1,501,000 in Home Account Network ("HAN"),
a  privately-held,  information  technology  company  providing  processing  and
Internet outsourcing to financial services companies. During fiscal 2000, Mobius
provided an additional  $750,000 to HAN in short term loans that were  converted
to preferred  stock in May 2000. In fiscal 2001,  Mobius  provided an additional
$375,000 to HAN as short term loans.

      Mobius regularly assessed the recoverability of the HAN investment and had
concluded   that  an  other  than  temporary   impairment   loss  had  occurred.
Accordingly,  impairment losses were recorded in connection with this investment
aggregating  $2.2  million  and  $218,000  for the years ended June 30, 2000 and
2001, respectively.

      In  January   2001,   HAN  was   purchased  by   Intelidata   Technologies
("Intelidata").  The merger agreement established a fixed number of shares to be
allocated  between  debt holders and all  shareholders,  including  Mobius.  The
Intelidata shares will be released at specified time periods beginning after the
Intelidata  shares are  registered.  The number of shares to be received by debt
holders  will be  based  upon a  formula  that  utilizes  the  market  value  of
Intelidata  stock on each  release  date.  After the  debtors  are  repaid,  any
remaining shares will be distributed to HAN's

<PAGE>


management and shareholders  based on percentages in the merger agreement.  Once
the stock is  released  to the  debtors  and  shareholders,  it is  subject to a
variety of trading  restrictions.  As of June 30, 2001,  Mobius has not received
any Intelidata shares.

      As of June 30, 2001,  the carrying value of the HAN investment is $188,000
and is included within other current  assets.  Mobius believes that the carrying
value is recoverable  based on estimates of the amount and value of shares to be
received from the  transaction,  discounted for the  restrictions  and estimated
time until the Intelidata shares are expected to be received.

      In January 2000,  Mobius made an  investment  of $500,000 in Flooz.com,  a
startup Internet company. This was an investment in preferred stock, which would
convert into Common Stock if Flooz.com had completed an initial public offering.
Mobius  held a minority  ownership  position,  which,  if the  preferred  shares
converted to Common Stock, would be less than 5%. The Chief Executive Officer of
Flooz.com is  currently a member of the Board of Directors of Mobius.  Flooz.com
has ceased  operations  and has filed for  bankruptcy  protection.  Accordingly,
Mobius recorded an impairment loss of $500,000 in the year ended June 30, 2001.

(6)  Accounts Payable and Accrued Expenses

      Accounts  payable  and  accrued  expenses  consist  of the  following  (in
thousands):
                                                                  June 30,
                                                              2000       2001
                                                            -------    -------
      Accounts payable                                      $ 2,563    $ 2,101
      Compensation and related benefits                       6,569      6,728
      Royalties payable                                       1,168      1,143
      Other                                                   4,746      5,526
                                                            -------    -------
                                                            $15,046    $15,498

(7)   Income Taxes

      Income(loss)before  provision (benefit) for income taxes is as follows (in
thousands):

                                                    Years Ended June 30,
                                               ----------------------------
                                                 1999       2000      2001
                                               -------    --------   ------
      Domestic income (loss)                   $13,236    $(15,575)  $1,216
      Foreign losses                            (4,881)     (1,738)  (3,811)
                                               -------    --------   ------
                                               $ 8,355    $(17,313) $(2,595)
                                               ========   ========  =======

      The  components of the provision  (benefit) for income taxes for the years
ended June 30, 1999, 2000 and 2001 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                 Years Ended June 30,
            ----------------------------------------------------------------------------------------------
                          1999                          2000                               2001
            -----------------------------   -----------------------------     ----------------------------
            Current    Deferred     Total   Current   Deferred     Total      Current   Deferred     Total
            -------    --------    ------   -------   --------    -------     -------   --------    ------
<S>         <C>        <C>         <C>      <C>       <C>         <C>         <C>       <C>         <C>
Federal      $1,736     $1,569     $3,305   $(1,734)   $(2,768)   $(4,502)    $1,000    $(1,592)    $ (592)
State           350        347        697      (532)      (432)      (964)       219       (345)      (126)
Foreign          55         --         55        49          -         49        113          -        113
             ------     ------     ------   -------    -------    -------     ------    -------     ------
             $2,141     $1,916     $4,057   $(2,217)   $(3,200)   $(5,417)    $1,332    $(1,937)    $ (605)
             ======     ======     ======   ========   ========   ========    ======    ========    =======
</TABLE>

      The following table reconciles the actual  provision  (benefit) for income
taxes to the  provision  (benefit)  for income taxes  calculated  at the Federal
statutory corporate rate of 34% for the years ended June 30, 1999, 2000 and 2001
(in thousands):

<TABLE>
<CAPTION>
                                                              Years Ended June 30,
                                                              --------------------
                                                         1999        2000         2001
                                                        ------     -------       ------
<S>                                                     <C>        <C>            <C>
Expected federal statutory corporate rate               $2,840     $(5,887)       $(882)
State income taxes, net of Federal benefit                 501        (693)         (78)
Losses of foreign  subsidiaries for which no benefit
has been recognized                                      1,170         866          208
Research credit                                           (167)          -            -
Other                                                     (287)        297          147
                                                        ------     -------       ------
Total income tax provision (benefit)                    $4,057     $ 5,417       $ (605)
                                                        ======     =======       ======

Pre-Tax Income(Loss)                                    $8,355   $(17,313)      $(2,595)
                                                        ======   =========      =======

Effective Tax Rate                                        48.6%    (31.3)%      (23.3)%
                                                          =====    =======      =======
</TABLE>


<PAGE>


      The tax effects of  temporary  differences  that give rise to  significant
portions of the deferred tax assets and deferred tax  liabilities  are presented
below (in thousands):

                                                                  June 30,
                                                              2000      2001
                                                             ------    ------
Deferred tax assets:
  Accounts receivable, principally due
    to allowance for doubtful accounts                       $  483    $  551
  Net operating loss carryforwards                            2,811     4,124
  Depreciation and amortization                                  --       103
  AMT tax credit                                                222       309
  Research and development credit carryforwards                  --       541
Unrealized loss on investments                                   --     1,135
  Other                                                          --        71
                                                             ------    ------
                                                              3,516     6,834
Valuation allowance                                          (2,219)   (3,289)
                                                             ------    ------
  Net deferred tax assets                                     1,297     3,545
Deferred tax liabilities:
  Software license installments                               4,899     5,464
  Depreciation                                                  254        --
  Other                                                          38        38
                                                             ------    ------
  Net deferred tax liability                                 $3,894    $1,957
                                                             ======    ======

      The valuation  allowance increased by $1.1 million for the year ended June
30, 2001 primarily due to  uncertainty  of  realization of net operating  losses
incurred by certain foreign  subsidiaries.  The valuation allowance decreased by
$1.3 million  between  fiscal 1999 and 2000 primarily as a result of utilization
of some of the foreign losses in certain foreign jurisdictions. The Company will
reduce the valuation  allowance when it is concluded that it is more likely than
not that these deferred tax assets will be realized.

      The expiration of net operating loss carryforwards varies by jurisdiction;
some begin to expire in fiscal 2002 and others extend indefinitely.

(8)   Preferred Stock

      The Company has authorized  1,000,000 shares of Preferred Stock with a par
value of $.01.  Before any shares are issued,  the Board of Directors  shall fix
the specific  provisions  of the shares  including  the  designation  of series,
voting rights, dividend features, redemption and liquidation provision and other
features. No shares were outstanding as of June 30, 2000 and 2001.

(9)   Treasury Stock

      In December  2000,  the Board of Directors  authorized a stock  repurchase
program  under which Mobius may  repurchase  up to 1,000,000  shares of Mobius's
outstanding  common stock.  The number of shares to be repurchased and timing of
purchases  will be based on a  variety  of  factors,  including  general  market
conditions,  the market price and trading volume of Mobius shares.  Through June
30, 2001,  170,800  shares at an approximate  cost of $636,000 were  repurchased
under this program.


<PAGE>


(10)  Stock Option Plans

      1996 Stock Incentive Plan

      In November 1996, the Company  adopted the 1996 Stock  Incentive Plan (the
"Plan")  pursuant  to which the  Company's  Board of  Directors  may grant stock
options to officers,  employees,  directors and consultants. The Plan authorizes
grants of options to purchase up to 4,388,400  shares of authorized but unissued
common stock.  Stock options are generally  granted with an exercise price equal
to the  stock's  fair  market  value at the date of grant as  determined  by the
Company's  Board of  Directors.  Stock options  generally  vest as to 20% of the
shares  subject  thereto on the first  anniversary  of the date of grant and the
remainder vest ratably over the subsequent 16 quarters.

      1998 Non-Employee Directors' Stock Option Plan

      In February 1998, the Board of Directors and  stockholders  of the Company
approved  and  adopted the 1998  Non-Employee  Director  Stock  Option Plan (the
"Directors'  Plan").  The  purpose  of the  Directors'  Plan  is to  provide  an
incentive  to the  Company's  non-employee  directors  to serve on the  Board of
Directors and to maintain and enhance the Company's long-term  performance.  The
Directors'  Plan provides for the issuance of a total of 250,000  authorized and
unissued  shares of common stock,  treasury shares and/or shares acquired by the
Company for purposes of the Directors' Plan.

      The Directors' Plan provides for initial grants (i.e. upon adoption of the
Directors' Plan or upon a non-employee  director's initial election to the Board
of Directors) of non-qualified stock options to purchase 10,000 shares of common
stock.  At each annual  meeting  thereafter,  each  non-employee  director  will
receive an option to  purchase  10,000  shares.  Each option  granted  under the
Directors' Plan will have a term of ten years and will become  exercisable  upon
grant.  The exercise price of each option granted under the Directors' Plan will
equal the fair market value of a share of common stock on the date of grant.

      Total stock option activity during the periods indicated was as follows:

                                                                Weighted
                                                                 Average
                                                  Number of     Exercise
                                                   Shares         Price
                                                  ---------     --------
Balance at June 30, 1998                         2,397,500       $ 5.17
  Granted                                          374,000        10.10
  Exercised                                       (210,650)        1.25
  Forfeited                                        (79,000)        6.63
  Expired                                               --          --
                                                 ---------
Balance at June 30, 1999                         2,481,850         6.20
  Granted                                          609,750         4.67
  Exercised                                       (154,950)        1.25
  Forfeited                                       (252,500)        5.60
  Expired                                               --          --
                                                 ---------
Balance at June 30, 2000                          2,684,150         6.19
  Granted                                          813,750         3.04
  Exercised                                        (24,650)        1.29
  Forfeited                                       (425,100)        6.80
  Expired                                               --           --
                                                 ---------
Balance at June 30, 2001                         3,048,150        $5.31
                                                 =========

<PAGE>


      The following table summarizes information about the stock option plans:

<TABLE>
<CAPTION>
                    OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
---------------------------------------------------------   ------------------------
                      Number       Weighted      Weighted       Number      Weighted
                   Outstanding      Average      Average     Exercisable     Average
    Range of          as of       Contractual    Exercise       as of       Exercise
 Exercise Prices   June 30,2001      Life         Price     June 30, 2001     Price

<S>                  <C>             <C>          <C>          <C>            <C>
  $1.25 - $1.25      643,150         5.17         $1.25        553,600        $1.25

  $2.00 - $3.25      615,750         9.35         $2.88             --          --

  $3.50 - $6.94      925,850         7.64         $5.07        508,426        $5.47

 $7.00 - $10.25      468,000         7.05         $9.23        398,650        $9.43

 $11.00 - $15.00     395,400         6.94         $11.60       251,874       $11.50
                   ---------                                   -------

 $1.25 - $15.00    3,048,150         7.28         $5.31       1,712,550       $5.91
</TABLE>


      At June 30, 2001,  there were 895,500 shares available for grant under the
Plan and 110,000 shares  available for grant under the Directors'  Plan. At June
30, 1999 and 2000, there were 803,321 and 1,242,276 options exercisable.

      In January,  February and March 1998 the Company  granted  350,000 370,000
and 53,000 stock options,  respectively,  under the 1996 Stock Incentive Plan at
an exercise  price of $9.86,  $11.00 and $11.00 per share,  respectively,  which
were deemed by the Board of Directors to be fair market values for the shares on
these dates. The Company subsequently determined that these options were granted
at exercise prices below the fair market value of $14.00 per share,  the low end
of the range of per share  prices for the IPO in April  1998.  As a result,  the
Company recognized compensation expense of $1,046,000, $537,000 and $277,000 for
the years ended June 30, 1999, 2000 and 2001,  respectively.  Such  compensation
expense is  included  within  Sales and  marketing  of  $802,000,  $397,000  and
$193,000, Research and development of $195,000, $112,000 and $67,000 and General
and administrative expenses of $49,000,  $28,000 and $17,000 for the years ended
June 30, 1999, 2000 and 2001, respectively. There is approximately, $125,000 and
$43,000 of expense  relating to these 1998  option  grants to be  recognized  as
stock compensation  expense in fiscal years 2002 and 2003,  respectively,  to be
adjusted for option holders' terminations.

      If the Company had determined compensation cost based on the fair value of
the  option on the grant date for its stock  options  under  SFAS No.  123,  the
Company's  net income  (loss) and  earnings  (loss) per share would have been as
indicated below.

                                                        Year Ended June 30,
                                                   1999       2000        2001
                                                   ----       ----        ----
Proforma net income (loss) and earnings
(loss) per share as would be reported
under SFAS No. 123:
   Net income (loss)                             $2,629    $(14,449)   $(4,379)
   Basic earnings (loss) per share               $ 0.15      $(0.80)   $ (0.24)
   Diluted earnings (loss) per share             $ 0.14      $(0.80)   $ (0.24)

      The modified  Black Scholes option pricing model was used for grants prior
to June 30, 1998 and the Black  Scholes  option  pricing model has been used for
grants  subsequent to July 1, 1998. The per share weighted average fair value of
stock options  granted  during the years ended June 30, 1999,  2000 and 2001 was
$10.07,  $4.54 and $2.95 on the date of grant,  respectively.  Grants during the
year  ended  June  30,  1999,  2000  and  2001  assumed  568%,  412% and 343% of
volatility,  expected  dividend yield of 0.0% and an expected life of 3.2 years,
3.1 years and 3.2 years,  respectively.  The assumed risk free  interest rate on
the date of grants  was 5.25%,  6.2% and 5.0% in fiscal  1999,  fiscal  2000 and
fiscal 2001, respectively.


<PAGE>


(11)  1998 Employee Stock Purchase Plan ("ESPP")

      In February 1998, the Board of Directors and  stockholders  of the Company
approved and adopted the 1998 Employee  Stock  Purchase  Plan (the "ESPP").  The
purpose of the ESPP is to provide eligible  employees who wish to acquire common
stock of the Company the  opportunity  to purchase  shares from the Company with
accumulated payroll deductions.  The ESPP is intended to constitute an "employee
stock  purchase  plan" under section 423 of the Internal  Revenue Code. The ESPP
provides for the issuance of an  aggregate  of up to  1,150,000  shares.  During
fiscal 1999 there were no shares issued under this plan.  During fiscal 2000 and
fiscal 2001, 53,812 and 238,563 shares were issued under the ESPP, respectively.
As of June 30,  2001,  111,768  shares are  reserved for issuance and there were
745,857 remaining shares available to purchase under this plan.

(12)  Employee Savings Plan and Executive Incentive Plan

      In fiscal 1995,  the Company  established  a savings  plan that  qualifies
under Section 401(k) of the Internal Revenue Code. Under the plan, participating
U.S. employees may defer up to 20% of their pre-tax  compensation,  but not more
than Internal Revenue Code  limitations.  The Company,  at the discretion of the
Board  of  Directors,   may  match  the  employee  contributions.   No  matching
contributions were made in the years ended June 30, 1999, 2000 and 2001.

      In February 1998, the Board of Directors and  stockholders  of the Company
have  approved  and  adopted  the  Mobius  Management  Systems,  Inc.  Executive
Incentive Plan (the "Incentive Plan"). The Incentive Plan is administered by the
Compensation  Committee of the Board.  Participation  in the  Incentive  Plan is
limited to those  executives  and key  employees  who,  in the  judgment  of the
Compensation  Committee,  are in a position to have a significant  impact on the
performance of the Company.

      Awards  under  the  Incentive  Plan are  based  upon the  extent  to which
performance  goals  established by the  Compensation  Committee for a designated
performance period are satisfied. The Incentive Plan also provides for grants of
discretionary  bonuses.  For the years ended June 30,  1999,  2000 and 2001,  no
awards were made under the Incentive Plan.

(13)  Comprehensive Income

      Statement  of  Financial   Accounting   Standards   No.  130,   "Reporting
Comprehensive  Income"  requires the disclosure of comprehensive  income,  which
includes  net  income  (loss),  foreign  currency  translation  adjustments  and
unrealized   gains  and   losses  on   marketable   securities   classified   as
available-for-sale.  Comprehensive  income  (loss) for the years  ended June 30,
1999, 2000 and 2001 is as follows:

                                                       Year ended June 30,
                                                   1999       2000       2001
                                                   ----       ----       ----
Net income (loss)                                $4,298    $(11,896)   $(1,990)
Unrealized marketable securities gain (loss)        (41)          4         43
Unrealized translation gain (loss)                 (360)         81       (608)
                                                --------------------------------
Comprehensive income (loss)                      $3,897     $(11,811)  $(2,555)
                                                ================================

(14)  Lease Commitments

      The Company has operating leases for its office facilities which expire on
various  dates through  fiscal 2008 and provide for  escalation  and  additional
payments relating to operating expenses.

      The following is a schedule of future minimum lease payments for operating
leases as of June 30, 2001 (in thousands):

<PAGE>


                                                    Operating
                                                     Leases
Year Ended:

June 30, 2002                                       $ 3,154
June 30, 2003                                         2,876
June 30, 2004                                         2,591
June 30, 2005                                         2,404
June 30, 2006                                         1,112
Thereafter                                            5,159
                                                    -------

Total minimum lease payments                        $17,296
                                                    =======


      Rental  expense for all  operating  leases was  approximately  $2,419,000,
$3,319,000  and  $3,516,000  for the years ended June 30,  1999,  2000 and 2001,
respectively.

      In compliance with the lease of the corporate headquarters,  the Company's
landlord  holds a letter of credit with Silicon  Valley Bank for $275,000.  This
letter of credit is secured by a certificate of deposit.

(15)  Segment and Geographic Information

      SFAS No. 131,  "Disclosures  about  Segments of an Enterprise  and Related
Information",  establishes  standards for reporting  information about operating
segments in annual  financial  statements  and requires  that  certain  selected
information   about  operating   segments  be  reported  in  interim   financial
statements. It also establishes standards for related disclosures about products
or services,  and geographic areas. Operating segments are defined as components
of an  enterprise  about  which  separate  financial  information  is  evaluated
regularly by the chief operating  decision maker, or  decision-making  group, in
deciding how to allocate  resources  and in assessing  performance.  The Company
operates in one principal  business  segment across  domestic and  international
markets.  No foreign  country  accounted  for more than 10% of revenue or 10% of
identifiable assets in any of the periods presented.

<TABLE>
<CAPTION>
                                         United
                                         States    Foreign(a)   Eliminations   Total
                                         ------    ----------   ------------   -----
<S>                                      <C>       <C>          <C>            <C>
Year Ended June 30, 1999:
Revenue:
  From external customers(b)             $64,269       9,567           --     $73,836
  Between geographic areas(c)              2,594          --       (2,594)         --
                                         -------     -------      -------     -------
Total revenue                            $66,863       9,567       (2,594)    $73,836
                                         =======     =======      =======     =======

Long-lived assets                        $18,642       2,136           --     $20,778
                                         =======       =====      =======     =======

Year Ended June 30, 2000:
Revenue:
  From external customers(b)             $50,321       9,884           --     $60,205
  Between geographic areas(c)              1,233          --       (1,233)         --
                                         -------     -------      -------     -------
Total revenue                            $51,554       9,884       (1,233)    $60,205
                                         -------     -------      -------     -------

Long-lived assets                        $16,422       1,807           --     $18,229
                                         =======      ======      =======     =======

Year Ended June 30, 2001:
Revenue:
  From external customers(b)             $61,415      12,797           --     $74,212
  Between geographic areas(c)              3,133          --       (3,133)         --
                                         -------      ------       ------     -------
Total revenue                            $64,548      12,797       (3,133)    $74,212
                                         =======      ======       ======     =======

Long-lived assets                        $14,589       1,846           --     $16,435
                                         =======      ======       ======     =======
</TABLE>

<PAGE>


----------
(a)   The Company  operates  wholly-owned  subsidiaries  in the United  Kingdom,
      France,  Germany,  Italy, Sweden,  Switzerland,  Australia,  Japan and the
      Benelux. Includes international sales with agents.

(b)   Includes  royalties paid to the Company and to its subsidiaries by agents.
      Royalties from agents are a percentage of the license and maintenance fees
      paid by customers to such agents.

(c)   Represents  royalties  from foreign  subsidiaries.  Royalties from foreign
      subsidiaries are a percentage of the license land maintenance fees paid by
      customers to such foreign subsidiaries.


(16)  Sale of INFOPAC-Tapesaver

      In January 1999, the Company sold the INFOPAC-TapeSaver product to a third
party for approximately  $3.0 million payable over a five year period. The buyer
assumed  responsibility  for  maintenance  support  for all  existing  TapeSaver
licenses,   however,  the  Company  recognized  approximately  $1.1  million  of
TapeSaver   maintenance   revenue  through   December  31,  1999  for  TapeSaver
maintenance  billings  collected  prior  to the  sale,  $795,000  of  which  was
recognized  in fiscal 1999 and $302,000 of which was  recognized in fiscal 2000.
No TapeSaver  maintenance  revenue was  recognized in fiscal 2001. For the years
ended June 30, 1999, 2000 and 2001, the Company  recognized  $756,000,  $673,000
and  $450,000 of  TapeSaver  license  revenue,  respectively.  Future  TapeSaver
license revenue of $112,500 each quarter,  will be recognized as the buyer makes
scheduled  payments  through December 31, 2003. The buyer is delinquent on these
payments since June 2001.

<PAGE>

                                                                     SCHEDULE II


                         MOBIUS MANAGEMENT SYSTEMS, INC.

                        Valuation and Qualifying Accounts
                                 (In thousands)

<TABLE>
<CAPTION>
                                                   Additions
                                      Balance at   Charged to   Charges                 Balance
                                      beginning    costs and    to other                at end
Description                           of period     expenses    accounts  Deductions   of period
-----------                           ---------    ---------    --------  ----------   ---------
<S>                                   <C>           <C>         <C>       <C>          <C>
Year ended June 30, 1999:
Deductions from asset account:
  Allowance for doubtful accounts       $1,379        636         --        (343)        $1,672
Year ended June 30, 2000:
Deductions from asset account:
  Allowance for doubtful accounts       $1,672        470         --        (415)        $1,727
Year ended June 30, 2001:
Deductions from asset account:
  Allowance for doubtful accounts       $1,727        316         --        (593)        $1,450
</TABLE>

      All other  schedules  are omitted  because they are not  applicable or the
required  information is shown in the consolidated  financial  statements or the
notes thereto.


<PAGE>


(a)(3) Exhibits

Exhibit No.       Description
-----------       -----------

3.1*        --    Form  of  Second   Amended   and   Restated   Certificate   of
                  Incorporation of the Registrant.
3.2*        --    Form of Restated By-Laws of the Registrant.
4.1*        --    Specimen certificate representing the Common Stock.
10.1*       --    Mobius Management Systems, Inc. 1996 Stock Incentive Plan.
10.2*       --    Amendment No. 1 to Mobius Management Systems,  Inc. 1996 Stock
                  Incentive Plan.
10.3*       --    Mobius Management  Systems,  Inc. 1998 Employee Stock Purchase
                  Plan.
10.4*       --    Mobius Management  Systems,  Inc. 1998  Non-Employee  Director
                  Stock Option Plan.
10.5*       --    Mobius Management System, Inc. 1998 Executive Incentive Plan.
10.6*       --    Form of Grantee Option Agreement.
10.7*       --    Lease  dated  December 4,  1997 by and between Old Boston Post
                  Road Associates LLC and the Registrant.
10.8*       --    Lease dated February 14, 1983 by and between American
                  National Bank and Trust Company of Chicago and the Registrant.
10.9        --    Sublease  dated  January 5, 1999 by and between  Fluor Daniel,
                  Inc. and the Registrant
10.10*      --    Stock  Purchase  Agreement  dated  as of  May 12,  1997 by and
                  among  the  Registrant  and the  other  parties  listed on the
                  signature pages thereto.
10.11*      --    Stockholders'  Agreement dated as of May 12, 1997 by and among
                  the  Registrant  and the other parties listed on the signature
                  pages thereto.
10.12*      --    Registration  Rights Agreement dated May 12, 1997 by and among
                  the  Registrant  and the other parties listed on the signature
                  pages thereto.
10.13*      --    Employment  Agreement  between  the  Registrant  and  Mitchell
                  Gross, dated February 26, 1998.
10.14*      --    Employment   Agreement   between  the  Registrant  and  Joseph
                  Albracht, dated February 26, 1998.
10.15*      --    Severance  Agreement  dated as of  September 30,  1997 between
                  the Registrant and Joseph Tinnerello.
10.16*      --    Option  Agreement dated as of  September 30,  1997 between the
                  Registrant and Joseph Tinnerello.
10.17*      --    Letter  Agreement,  dated as of December 28,  1997 between the
                  Registrant and Joseph Tinnerello.
10.18*      --    Stockholder Agreement,  dated as of December 30,  1997 between
                  the Registrant and Joseph Tinnerello.
10.19*      --    Software  Assets  Purchase  Agreement dated as of December 10,
                  1990 among the  Registrant,  Compucept  of Nevada and Software
                  Assist Corporation.
10.20*      --    OEM Agreement  between the Registrant and CDP  Communications,
                  Inc. dated as of October 15, 1993.
10.21*      --    Source Code  License and  Amendment to OEM  Agreement  between
                  the  Registrant  and  CDP  Communications  Inc.  dated  as  of
                  August 12, 1997.
10.22*      --    Amendment  #1  to  License  and  Amendment  to  OEM  Agreement
                  between the  Registrant  and CDP  Communications,  Inc.  dated
                  November 21, 1997.
10.23**     --    Lease  Modification  Agreement  dated  July  12,  1999  by and
                  between   Old  Boston  Post  Road   Associates   LLC  and  the
                  Registrant.
10.24       --    Amendment #1 to Mobius Management Systems,  Inc. 1998 Employee
                  Stock Purchase Plan.



<PAGE>


Exhibit No.       Description
-----------       -----------

21.1*       --    Subsidiaries of the Registrant.
23.1        --    Consent of KPMG LLP.


*     Filed  as an  exhibit  to  Mobius's  Registration  Statement  on Form  S-1
      (Registration  Number  333-47117) or an amendment thereto and incorporated
      herein by reference to the same exhibit number.

**    Filed as Exhibit No. 10.1 to Mobius Management  Systems,  Inc.'s Form 10-Q
      for the  quarter  ended  December  31,  1999 and  incorporated  herein  by
      reference.


<PAGE>


                                   SIGNATURES


      Pursuant to the  requirements of Section 13 or 15(d) of the Securities Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

                                          MOBIUS MANAGEMENT SYSTEMS, INC.


                                          By:   /s/  MITCHELL GROSS
                                                --------------------------------
                                                Mitchell Gross
                                                Chairman of the Board, Chief
                                                Executive Officer and President
                                                (Principal Executive Officer)

                                          Date: September 26, 2001


      Pursuant to the  requirements of Section 13 or 15(d) of the Securities Act
of 1934,  this  report has been  signed  below by the  following  persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
          Signatures                      Title(s)                     Date
          ----------                      --------                     ----
<S>                           <C>                                <C>
     /s/ Mitchell Gross       Chairman of the Board, Chief       September 26, 2001
    -----------------------   Executive Officer, President
        Mitchell Gross        and Director
                              (Principal Executive Officer)


   /s/ Joseph J. Albracht     Director                           September 26, 2001
  -------------------------
      Joseph J. Albracht


      /s/ David J. Gordon     Interim Chief Financial            September 26, 2001
    -----------------------   Officer, Assistant Treasurer
        David J. Gordon       and Assistant Secretary
                              (Principal Financial
                              and Accounting Officer)


   /s/ Edward F. Glassmeyer   Director                           September 26, 2001
  --------------------------
     Edward F. Glassmeyer



    /s/ Kenneth P. Kopelman   Director                           September 26, 2001
  --------------------------
      Kenneth P. Kopelman



      /s/ Gary Greenfield     Director                           September 26, 2001
    ----------------------
      Gary G. Greenfield


     /s/ Robert Levitan       Director                           September 26, 2001
    ----------------------
        Robert Levitan
</TABLE>