U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q



[X]    QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
       EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 1999
                                       OR
[ ]    TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
       EXCHANGE  ACT OF 1934 FOR THE  TRANSITION  PERIOD  FROM  ______________TO
       ____________


Commission file number 0-23438


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

             Wisconsin                                     39-1292200
  (State or other jurisdiction of                      (I.R.S. Employer
   incorporation or organization)                      Identification No.)

   12000 West Park Place, Milwaukee, WI                      53224
 (Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (414) 359-9800


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 the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.


              Class                       Outstanding as of May 31, 1999
------------------------------------  ----------------------------------------

   Common Stock, $.01 par value                     4,118,486



<PAGE>



                       EFFECTIVE MANAGEMENT SYSTEMS, INC.
                                    Form 10-Q
                                  May 31, 1999


                                      INDEX



PART 1 - FINANCIAL INFORMATION                                              PAGE
------------------------------                                              ----

Item 1      Financial Statements

            Consolidated Balance Sheets at
            May 31, 1999 and November 30, 1998                                 3

            Consolidated Statements of Operations - Three and
            Six Months Ended May 31, 1999 and May 31, 1998                     5

            Consolidated Statements of Cash Flows - Six                        6
            Months Ended May 31, 1999 and May 31, 1998

            Notes to Consolidated Financial Statements                         7


Item 2      Management's Discussion and Analysis of Financial
            Condition and Results of Operations                                9

Item 3      Quantitative and Qualitative Disclosures About Market Risk        19



PART II - OTHER INFORMATION

Item 2      Changes in Securities and Use of Proceeds                         20

Item 4      Submission of Matters to a Vote of Security Holders               21

Item 6      Exhibits and Reports on Form 8-K                                  22




SIGNATURES                                                                    23




                                       2
<PAGE>




PART I Financial Information
Item 1 Financial Statements


EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited)
--------------------------------------------------------------------------------


ASSETS                                                   31-May           30-Nov
                                                           1999             1998
================================================================================

CURRENT ASSETS
   Cash                                                 $     1          $    21
   Accounts Receivable:
     Trade, less allowance for
        doubtful accounts                                 6,694           12,871
     Related Parties                                        443              426

   Inventories                                              278              275
   Prepaid Expenses and Other Current Assets                309              225
                                                   -----------------------------

            TOTAL CURRENT ASSETS                          7,725           13,818

LONG TERM ASSETS
Computer Software, net                                    5,009            4,373
Investments in and Advances to
  Unconsolidated Joint Ventures                             291              291
Equipment and Leasehold Improvements, net                 2,764            3,202
Intangible Assets, net                                    2,019            2,129
Other Assets                                                376              347
                                                   -----------------------------

            TOTAL LONG TERM  ASSETS                      10,459           10,342

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

TOTAL ASSETS                                            $18,184          $24,160

================================================================================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                       3
<PAGE>







EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

LIABILITIES AND STOCKHOLDERS' EQUITY                                            31-May              30-Nov
                                                                                  1999                1998
===========================================================================================================
<S>                                                                           <C>                  <C>
CURRENT LIABILITIES
   Accounts Payable                                                           $  4,447             $ 3,662
   Accrued Liabilities                                                           1,755               2,937
   Deferred Revenues                                                             6,159               6,522
   Customer Deposits                                                               100                 113
   Current portion of
     Long-term Obligations                                                       5,323               6,194
                                                                            -------------------------------

            TOTAL CURRENT LIABILITIES                                           17,784              19,428

LONG TERM LIABILITIES
   Deferred Revenue and Other
   Long-term Liabilities                                                           642                 858
   Long-term Obligations                                                           274                 242

                                                                            -------------------------------
            TOTAL LONG TERM LIABILITIES                                            916               1,100

   Commitments and Contingencies

STOCKHOLDERS'  EQUITY
   Preferred Stock, $.01 par value;  authorized  3,000,000 shares
   of which 5,000 shares are designated as Series B 8% Convertible
   Redeemable Preferred Stock ("Series B"); 1,875.37 shares of
   Series B are issued and outstanding,(liquidation preference of
   $1000 per share)                                                              1,370                1411
   Common Stock,  $.01 par value; authorized 20,000,000
   shares; issued 4,118,486 and 4,106,377 shares;
   outstanding 4,105,861 and 4,093,752 shares                                       41                  41
   Common Stock Warrants                                                           144                 144
   Additional  Paid- in Capital                                                 11,489              11,426
   Retained Earnings (Deficit)                                                (13,500)             (9,330)
   Cost of Common Stock in Treasury(12,625 shares)                                (60)                (60)
                                                                            -------------------------------

            TOTAL STOCKHOLDERS' EQUITY                                           (516)               3,632

                                                                            -------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $ 18,184             $24,160

===========================================================================================================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

</TABLE>


                                       4
<PAGE>



<TABLE>
<CAPTION>


EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data) (unaudited)

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


                                                                      THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                      31-May         31-May        31-May        31-May
                                                                        1999           1998          1999          1998

========================================================================================================================

NET REVENUES:
<S>                                                                 <C>            <C>            <C>           <C>
  Software license fees                                             $  3,454       $  4,372       $ 6,610       $ 9,707
  Services                                                             4,934          4,532         8,928         8,771
  Hardware                                                               232            444           558         1,116
                                                                    --------       --------       -------       -------
        Total net revenues                                             8,620          9,348        16,096        19,594

COST OF PRODUCTS AND SERVICES
  Software license fees                                                1,013          1,381         1,929         3,104
  Services                                                             4,200          3,374         8,011         6,594
  Hardware                                                               180            353           461           880
                                                                    --------       --------       -------       -------
        Total cost of products and services                            5,393          5,108        10,401        10,578

Selling and marketing expenses                                         2,980          3,401         5,801         7,026
General and administrative expenses                                    1,217          1,019         2,001         2,213
Product development expenses                                             838            684         1,719         1,521
Restructuring and other charges                                            0          6,836             0         6,836
                                                                    --------       --------       -------       -------
        Total costs and operating expenses                            10,428         17,048        19,922        28,174

                                                                    --------       --------       -------       -------
LOSS  FROM OPERATIONS                                                 (1,808)        (7,700)       (3,826)       (8,580)

Other (Income)/ Expense
  Equity in (earnings)/loss of unconsolidated joint ventures               0             (1)            0           (1)
  Interest (income)                                                        0            (10)           (8)          (20)
  Interest expense                                                       178            184           352           337
                                                                    --------       --------       -------       -------
                                                                         178            173           344           316
                                                                    --------       --------       -------       -------
LOSS BEFORE INCOME TAXES                                              (1,986)        (7,873)       (4,170)       (8,896)
Income tax (benefit) expense                                               9              0             0            33

                                                                    --------       --------       -------       -------
   NET LOSS                                                         ($1,995)       ($ 7,873)      ($4,170)      ($8,929)
                                                                    ========       ========       =======       =======

Loss per share - basic                                              ($  0.48)      ($  1.93)       ($1.01)      ($ 2.19)

Loss per share - diluted                                            ($  0.48)      ($  1.93)       ($1.01)      ($ 2.19)

========================================================================================================================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

</TABLE>


                                       5

<PAGE>

<TABLE>
<CAPTION>



EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
--------------------------------------------------------------------------------

                                                                                         SIX MONTHS ENDED
                                                                                    31-May             31-May
                                                                                     1999               1998
==============================================================================================================
<S>                                                                                  <C>               <C>
OPERATING ACTIVITIES
    Net Loss                                                                         ($4,170)          ($8,929)
    Adjustments to reconcile net loss to
      net cash provided by (used in) operating activities:
      Depreciation and amortization                                                      689               693
      Amortization of capitalized computer software development costs                    972              1891
      Equity in earnings of joint ventures                                                 0                 0
      Goodwill Amortization                                                              109               117
      Restructuring and Other Charges                                                      0              6836
      Changes in operating assets and liabilities:
           Accounts Receivable                                                          6271              2251
           Inventories and other current assets                                         (198)             (560)
           Accounts payable and other liabilities                                       (991)            (1106)
                                                                                     -------------------------
    Total adjustments                                                                   6852             10122
                                                                                     -------------------------
    Net cash provided by operating activities                                           2682              1193

INVESTING ACTIVITIES
      Additions to equipment and leasehold improvements                                 (251)             (254)
      Software development costs capitalized                                           (1608)            (2063)
      Other                                                                              (28)               17
                                                                                     -------------------------
    Net cash used in investing activities                                              (1887)            (2300)

FINANCING ACTIVITIES
      Proceeds on long-term debt and other notes payable                                (837)             1283
      Additional paid-in capital                                                          22                41
      Preferred stock dividend                                                             0                 0
                                                                                     -------------------------
    Net cash provided (used) by financing activities                                    (815)             1324
                                                                                     -------------------------
    Net increase (decrease) in cash                                                  ($   20)          $   217
Cash-beginning of period                                                              $   21           $    14
                                                                                     =========================
Cash-end of period                                                                    $    1           $   231
==============================================================================================================

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

</TABLE>



                                       6
<PAGE>



                       EFFECTIVE MANAGEMENT SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  May 31, 1999
                           (Unaudited) (In Thousands)

Note 1 - Basis of Presentation

       The  accompanying  consolidated  interim  financial  statements  included
herein have been prepared by Effective Management Systems, Inc. (the "Company"),
without an audit, in accordance with generally  accepted  accounting  principles
for interim  financial  information and pursuant to the rules and regulations of
the  Securities  and  Exchange  Commission.  Certain  information  and  footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant to such rules and  regulations,  although the Company believes that the
disclosures made are adequate to make the information presented not misleading.

       In the opinion of management, the information furnished for the three and
six month periods ended May 31, 1999 and May 31, 1998 includes all  adjustments,
consisting   solely  of  normal  recurring   accruals,   necessary  for  a  fair
presentation of the financial position and results of operations for the interim
periods.  The results of operations  for the three months ended May 31, 1999 are
not  necessarily  indicative of the results of operations to be expected for the
entire fiscal year ending  November 30, 1999.  It is suggested  that the interim
financial  statements  be read in  conjunction  with  the  audited  consolidated
financial  statements  for the year ended  November  30,  1998  included  in the
Company's  Annual  Report on Form 10-K filed with the  Securities  and  Exchange
Commission.

Note 2 - Additional Financial Disclosure
<TABLE>
<CAPTION>

Equipment and leasehold improvements consisted of the following:

                                                                  31-May-1999      30-Nov-1998
                                                                  -----------      -----------

<S>                                                               <C>              <C>
Gross                                                             $    10,163      $     9,913
Less:  Accumulated Depreciation                                   (     7,400)     (    6,711)
                                                                  -----------      -----------
Net                                                               $     2,763      $     3,202

Allowance for doubtful accounts consisted of the following:

                                                                  31-May-1999      30-Nov-1998
                                                                  -----------      -----------
Balance                                                           $       147      $       506

Provision for doubtful accounts consisted of the following:

                                                                  31-May-1999      30-Nov-1998
                                                                  -----------      -----------

                                                                  $       244      $        17
</TABLE>


                                       7
<PAGE>



Note 3 - Net Loss Per Share

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards (SFAS) No. 128,  "Earnings Per Share." SFAS No.
128 replaced the  calculation  of primary and fully  diluted  earnings per share
with basic and diluted  earnings per share.  Unlike primary  earnings per share,
basic earnings per share excludes any dilutive  effects of options and warrants.
Earnings  per share  amounts  for all periods  have been  presented  and,  where
appropriate, restated to conform to SFAS No. 128 requirements.

The following table sets forth the computation of basic and diluted earnings per
share.
<TABLE>
<CAPTION>


                                                                   Three Months Ended
                                                                        May 31,
                                                                1999                 1998
                                                                ----                 ----
<S>                                                            <C>                  <C>
Denominator
Denominator for basic earnings per share -
               weighted average common shares                  4,118                4,080
Effect of dilutive securities - stock options
         and warrants                                              5                    0
Effect of dilutive securities - preferred stock                    0                    0
                                                        --------------------- -------------------
Denominator for diluted earnings per share -
adjusted weighted average common shares                        4,123                4,080
                                                        ===================== ===================


<CAPTION>

                                                                    Six Months Ended
                                                                        May 31,
                                                                1999                 1998
                                                                ----                 ----
<S>                                                            <C>                  <C>
Denominator
Denominator for basic earnings per share -
               weighted average common shares                  4,116                4,077
Effect of dilutive securities - stock options
         and warrants                                              6                    0
Effect of dilutive securities - preferred stock                    0                    0
                                                        --------------------- -------------------
Denominator for diluted earnings per share -
adjusted weighted average common shares                        4,122                4,077
                                                        ===================== ===================
</TABLE>


                                       8


<PAGE>



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


Overview

The  Company  incurred  a  7.8%  decrease  in net  revenues  and a net  loss  of
$1,995,000  for the second  quarter of fiscal 1999  compared  with a net loss of
$7,873,000 for the second  quarter of fiscal 1998. The Company  incurred a 17.9%
decrease  in net  revenues  and a net loss of  $4,170,000  for the first half of
fiscal 1999 compared with a net loss of $8,929,000  for the first half of fiscal
1998.  All periods  presented do not reflect a tax benefit  relating to the loss
since  for  book  purposes  the  Company  is in a loss  carry-forward  position.
Software  revenues were down 21.0% in the second quarter of fiscal 1999 compared
to the same  period in the prior  year and were down  31.9% in the first half of
1999  compared to the same period in the prior year.  Management  believes  this
decrease  in  software  revenues  was mainly  the  result of a general  industry
decline in demand for Enterprise  Resource Planning ("ERP") software,  a decline
in the Company's  proprietary TCM product  revenues due to recent prospect focus
on the Company's poor financial results,  and reduced revenues from restructured
operations  for the  first  half of 1999.  Revenues  in  fiscal  1999  were also
negatively  impacted  by lower  than  expected  revenues  for the Baan  products
distributed  by the Company.  The Company did experience an increase in revenues
from its Intercim  division both in the second  quarter of 1999 and in the first
half of fiscal 1999 as compared  with the similar  periods of 1998.  The Company
also reduced its level of personnel  through  attrition and several April,  1999
terminations  (mostly  administrative  related)  in order to reduce its  expense
levels to more  appropriate  levels.  The Company  expects its expense levels to
decrease by $87,000 per month from previous levels.


Although the Company has taken  various  actions with the objective of returning
the Company to profitability, no assurance can be given that these measures will
actually result in the achievement of this objective.  In addition,  as a result
of the recent  losses,  the Company has been required to obtain waivers from its
primary lender for covenant violations. In the event that, in the near term, the
Company's  financial  performance  does not improve or if it is unable to secure
additional  investment capital or sell assets to bolster its financial position,
the Company will continue to require  additional  covenant relief.  In the event
that such covenant  relief  cannot be obtained,  it would likely have a material
adverse effect on the Company's liquidity, including its ability to fund current
operations.  The Company's ability to borrow additional funds under its existing
credit facility remains limited. As a result of its financial situation,  all of
the Company's  debt has been  classified as short-term and its fiscal 1998 audit
report contains an explanatory paragraph for going concern uncertainty, pursuant
to which the auditors expressed  substantial doubt as to our ability to continue
as a going concern.

                                       9

<PAGE>



The Company's  on-going  operations are also dependent on its ability to attract
and retain a highly qualified sales,  development and service staff. The Company
has recently  experienced  attrition at rates higher than historical levels. The
Company has taken steps to curtail the attrition,  but no assurance can be given
that  these  steps  will  be  successful  or that  further  attrition  will  not
materially impact the Company's financial performance.

Results of Operations

Total Revenues

Net revenues  decreased to  $8,620,000  for the three months ended May 31, 1999,
which  represented a 7.8% decrease from the  $9,348,000 in revenues for the same
quarter in the previous year. Net revenues  decreased to $16,096,000 for the six
months  ended  May 31,  1999,  which  represented  a  17.9%  decrease  from  the
$19,594,000  in revenues  for the same period in the previous  year.  The mix of
revenues comparing software,  services, and hardware revenues as a percentage of
net revenues was 40.1%, 57.2%, and 2.7%, respectively,  in the second quarter of
fiscal 1999,  as compared  with 46.8%,  48.5%,  and 4.7%,  respectively,  in the
second quarter of fiscal 1998. The mix of revenues comparing software,  services
and hardware  revenues as a percentage  of net  revenues was 41.1%,  55.5%,  and
3.4%,  respectively,  in the first half of fiscal 1999,  as compared with 49.5%,
44.8%, and 5.7%, respectively, in the first half of fiscal 1998.

International revenues represented less than 10% of net revenues for all periods
presented.

The Company's  operating revenues can vary substantially from quarter to quarter
based on the size and timing of  customer  orders and market  acceptance  of new
products.  The Company has  historically  operated with little  backlog  because
software  orders are  generally  shipped as orders  are  received.  As a result,
product revenue in any quarter is  substantially  dependent on orders booked and
shipped during that quarter.


Software License Fees

Software  license fees are customer  charges for the right to use the  Company's
software  products.  Software  license fees decreased 21.0% to $3,454,000 in the
second  quarter of fiscal 1999 from  $4,372,000 in the second  quarter of fiscal
1998.  Software  license fees decreased 31.9% to $6,610,000 in the first half of
fiscal  1999 from  $9,707,000  in the  first  half of  fiscal  1998.  Management
believes this  decrease in software  revenues was mainly the result of a general
industry  decline  in  demand  for ERP  software,  a  decline  in the  Company's
proprietary  TCM product  revenues due to recent prospect

                                       11
<PAGE>


focus on the Company's  poor financial  results (a trend the Company  expects to
continue),  and reduced  revenues from  restructured  operations (a reduction of
$275,000  from the second  quarter of 1998 and  $524,000  from the first half of
1998).  Revenues  in fiscal  1999 were also  negatively  impacted  by lower than
expected  revenues for the Baan products  distributed  by the Company.  Software
revenues for the Companys'  Intercim division increased $381,000 to $1,174,00 in
the second quarter of 1999 as compared to $793,000 the  corresponding  period of
1998 and increased  $447,000 to $2,439,000 in the first half of 1999 as compared
to $1,992,000 the corresponding period of 1998.



Service Revenues

The Company  offers a number of optional  services to its  customers,  including
such  services as a  telephone  support  program,  systems  integration,  custom
software  development,  implementation  consulting,  and  formal  classroom  and
on-site training.  Service revenues increased to $4,934,000 for the three months
ended May 31, 1999, as compared with $4,532,000 for the same period of the prior
year.  Service revenues increased to $8,928,000 for the six months ended May 31,
1999, as compared  with  $8,771,000  for the same period of the prior year.  The
increase  in  revenues  was  mainly the result of an  increase  in Baan  service
revenues  on new  accounts ( an  increase  of  $727,000  compared  to the second
quarter of 1998 and an  increase  of  $1,142,000  compared  to the first half of
1998) , and an increase in revenues  related to rising Intercim  product sales (
an increase of $411,000  compared to the second  quarter of 1998 and an increase
of $562,000 compared to the first half of 1998).


Hardware Revenues

Hardware  revenues  decreased  47.8% to $232,000 in the second quarter of fiscal
1999  compared  with  $444,000 for the  corresponding  period of 1998.  Hardware
revenues  decreased  50.0% to $558,000 in the first half of fiscal 1999 compared
with $1,116,000 for the  corresponding  period of 1998. This decrease was mainly
due to increased  sales of software on platforms  for which the Company does not
supply  hardware.  Several years ago, the Company decided to reduce,  over time,
its sales of commodity-priced hardware products and those which require specific
expertise  beyond the scope of the Company's  product focus.  As an alternative,
the Company has developed  relationships  with various system  integrators which
sell the hardware and provide these value-added hardware services.

Management  expects the trend of declining hardware sales to continue due to the
increasing  sales of software  licenses  operating on the  Microsoft  Windows NT
platform.  Hardware  used  with the  Microsoft  Windows  NT  platform  is either
generally  already in


                                       11
<PAGE>


place at the customer  site or readily  available  from local  suppliers who can
also provide local support.


Cost of Software License Fees

The cost of software  license fees as a percentage of related  revenue was 29.3%
for  the  second  quarter  of  fiscal  1999,  a  decrease  from  31.6%  for  the
corresponding  period of 1998. The cost of software license fees as a percentage
of related  revenue was 29.2% for the first half of fiscal 1999, a decrease from
32.0% for the  corresponding  period of 1998.  Cost of software  license fees is
composed of both amortization of past investment in software development and the
third party costs associated with the software revenues.  Software  amortization
is  related  to past  investment  in  software  development  and  does  not vary
consistently  with  variations  in software  revenues.  The Company  wrote off a
substantial   portion  of  its  past  investment  in  software   development  in
conjunction with its  restructuring in the quarter ended May 31, 1998.  Software
amortization  decreased  $ 277,000  in the  second  quarter  of fiscal  1999 and
decreased  $756,000 in the first half of 1999 as compared to the same periods of
1998 mainly as a result of the amounts  written  off of  previously  capitalized
development  costs in the  restructuring.  The cost of software  license fees is
also  dependent  on the  level of third  party  costs  associated  with  certain
software  revenues  and  includes  such items as  purchased  licenses  and other
components.


Cost of Services

The cost of services as a percentage of related  revenue  increased to 85.1% for
the three months ended May 31, 1999, as compared with 74.5% for the same quarter
in the previous  year.  The cost of services as a percentage of related  revenue
increased to 89.7% for the six months ended May 31, 1999, as compared with 75.2%
for the same  period in the  previous  year.  The  increase  was  mainly  due to
additional compensation for current personnel,  lower levels of productivity for
new personnel,  higher costs of outside-sourced  labor, and additional  warranty
work  associated  with new versions of the Company's  software.  The Company has
also  organized a group  dedicated to the  implementation  of the Baan software,
which  activity  has  raised  the level of  training  costs  and  other  initial
non-billable matters. In addition,  the Company has been implementing a new call
management  system  for the hot  line  telephone  support  area  which  has also
temporarily  raised  costs.  The Company  has raised the  billing  rates for its
services  in line with  industry  practice,  but the  effects  will not be fully
realized until the third quarter of the 1999 fiscal year.



                                       12
<PAGE>



Cost of Hardware

The cost of hardware as a percentage  of related  revenue  decreased to 77.6% in
the  second  quarter of fiscal  1999 from 79.5% in the second  quarter of fiscal
1998. The cost of hardware as a percentage of related revenue increased to 82.6%
in the first half of fiscal  1999 from  78.8% in the first half of fiscal  1998.
The cost of hardware as a percentage of related  revenue varies with the size of
the system,  the margin mix of items  comprising  the system being sold, and the
competitive pressure of the customer sale.


Selling and Marketing Expenses

Selling and marketing expenses decreased $421,000,  or 12.4%, from $3,401,000 in
the second  quarter of fiscal 1998 to $2,980,000 in the second quarter of fiscal
1999.  Selling and  marketing  expenses  decreased  $1,225,000,  or 17.4%,  from
$7,026,000  in the first half of fiscal 1998, to $5,801,000 in the first half of
fiscal 1999.  This decrease in selling and  marketing  expense was mainly due to
reduced  levels of personnel  through  attrition,  and reduced levels of expense
resulting from the Company's  restructuring.  As a percentage of total revenues,
selling and  marketing  expense  was 34.6% in the second  quarter of fiscal 1999
compared to 36.4% in the corresponding  period of 1998. As a percentage of total
revenues,  selling and  marketing  expense was 36.0% in the first half of fiscal
1999 compared to 35.9% in the corresponding period of 1998.


General and Administrative Expenses

General and administrative expense increased $198,000, or 19.4%, from $1,019,000
in the second  quarter of fiscal  1998 to  $1,217,000  in the second  quarter of
fiscal  1999.  The  increase  in general and  administrative  expense was mainly
related to higher levels of expense  supporting the Company's  efforts to secure
alternative  sources of capital and an  increase  in the  reserve  for  doubtful
accounts.  General and administrative  expense decreased $212,000, or 9.6%, from
$2,213,000  in the first half of fiscal 1998 to  $2,001,000 in the first half of
fiscal 1999. The decrease in general and administrative  expenses was mainly due
to  reduced  expense  levels  as a result  of the  Company's  restructuring  and
attrition.  As a percentage of net revenues,  general and administrative expense
was 14.1% and 10.9% in the second  quarter and 12.4% and 11.3% in the first half
of fiscal  1999 and 1998,  respectively.  The  increases  were due to  decreased
levels of revenues.



                                       13
<PAGE>



Product Development Expense

Product  development expense increased 22.5% from $684,000 in the second quarter
of fiscal  1998 to  $838,000  in the  second  quarter  of fiscal  1999.  Product
development  expense increased 13.0% from $1,521,000 in the first half of fiscal
1998 to  $1,719,000 in the first half of fiscal 1999.  This  increase  primarily
related  to a  decrease  in the  amount of  software  capitalized.  The  Company
capitalizes costs in accordance with Statement of Financial  Accounting Standard
(SFAS) No. 86. The Company capitalized  $789,000 of product development costs in
the second  quarter of fiscal 1999 compared to $979,000 in the second quarter of
fiscal 1998. The Company capitalized  $1,608,000 of product development costs in
the first half of fiscal 1999 compared to $1,987,000 in the first half of fiscal
1998. As a percentage of software  license  fees,  the total amount  invested in
software  development  was 47.0% and 39.3% in the second  quarter of fiscal 1999
and  fiscal  1998,  respectively,  and was 49.5% and 36.4% in the first  half of
fiscal 1999 and 1998, respectively.  These increases as a percentage of software
license fees were mainly due to a reduced level of software revenues.


Restructuring Charges


In the second  quarter of fiscal  1998,  the  Company  recorded a  restructuring
charge of $6,836,000 related to entering into a new distributor  arrangement for
the Baan manufacturing  software,  and a reduction of costs focused on improving
the Company's financial performance. The full amount of the restructuring charge
has been paid or expensed as of May 31, 1999.



Other Income\Expense-Net

Other  income\expense-net  was  $173,000  of expense  for the second  quarter of
fiscal 1998  compared  to  $178,000 of expense for the second  quarter of fiscal
1999.  Other  income\expense-net  was  $316,000 of expense for the first half of
fiscal 1998  compared to $344,000 of expense for the first half of fiscal  1999.
The  increase  in the level of expense  was mainly the result of an  increase in
interest  expense  as a result  of  increased  borrowings  under  the  Company's
borrowing facilities.


Income Tax

A tax  expense of $9,000  (for state and local  taxes) and no income tax benefit
was  recorded for the second  quarter of fiscal 1999  compared to no tax expense
for the second  quarter of fiscal  1998.  The tax  expense for the first half of
1999  netted to $0 (for state and local  taxes) and no income  tax  benefit  was
recorded  for the first half of fiscal  1999  compared to $33,000 of tax expense
for the first half of fiscal 1998. For some time, the Company,


                                       14
<PAGE>


for  book  purposes,  has been in a tax loss  carryforward  position.  Generally
accepted accounting principles prohibit the Company from recording a tax benefit
under these circumstances.



Liquidity and Capital Resources

At May 31,  1999,  the Company had cash and  marketable  securities  aggregating
$1,000. During the first half of fiscal 1999, the Company's operating activities
provided  $2,682,000  of cash  compared to providing  $1,193,000 of cash for the
same period of the prior year.  This  increase in the cash  provided  was mainly
attributable to the Company's improved  collection of accounts  receivable and a
reduction of operating losses due to the  restructuring in the second quarter of
1998.

Investing  activities  used cash of  $1,887,000 in the first half of fiscal 1999
compared to $2,300,000  of cash in the first half of fiscal 1998.  The principal
use of the cash in the first half of fiscal 1999 was $1,608,000 for  capitalized
product development. The principal uses of cash in the first half of fiscal 1998
included $2,063,000 for capitalized product development.

Financing  activities  used  $815,000  of cash in the first half of fiscal  1999
compared with  providing  $1,324,000 in the first half of fiscal 1998.  The cash
used in  fiscal  1999  mainly  reflected  payments  on the  Company's  borrowing
facilities.  As of May 31, 1999, the Company had $ 590,000 of availability under
its $7,000,000 line of credit,  which is based on the level of eligible accounts
receivable.

The Company's  credit  agreement  with  Foothill  Capital  Corporation  contains
certain restrictive  covenants relating to income (EBITDA),  tangible net worth,
and level of capital  expenditures.  On May 25,  1999 the  Company  obtained  an
amendment  from the lender  raising the maximum  revolving  available  amount to
$7,000,000 subject to collateral  availability and, also, granted an "Additional
Availability  Amount" of $750,000 in addition to the standard  amount  available
under the existing  collateral  calculation.  On July 14, 1999, the Company also
obtained  a  waiver  from the  lender  as a result  of its  failure  to meet the
tangible net worth and EBITDA covenants. In order to meet financial covenants in
the future  and to meet short term  operational  needs,  the  Company  will need
positive  operational results in the short term. In the event that the Company's
performance  does not improve in the short term, the Company will need to secure
additional  waivers  and/or  alternative  sources of financing or capital  which
could  include  the sale of  assets,  restructuring  of the  business,  or other
business  transactions  beneficial  to the  capital  structure.  The  Company is
continuing  its review of alternative  sources of financing and other  strategic
alternatives  to deal with its current  financial  status.  Although  management
believes that waivers and/or additional financing can be obtained, if needed, no
assurance  can be  given  that  waivers  or such  additional  financing  will be
available to the Company on acceptable  terms.  In the event that the


                                       15
<PAGE>



Company is unable to secure necessary waivers or additional financing,  it would
likely have a material adverse effect on the Company's liquidity,  including its
ability to fund continuing operations at current levels.

The Company currently has past due amounts with certain vendors. The Company has
secured extended payment  arrangements  with some of these vendors and is in the
process of securing  similar  arrangements  with other vendors.  There can be no
assurance that the Company will be successful in extending these amounts owed to
other vendors or that funds will be available to pay  obligations as they arise.
The Company is dependent on success in its selling  efforts to build  additional
collateral that would allow for increased borrowing to meet these obligations. A
lack of success  in this  endeavor  could  substantially  impact  the  Company's
ability to operate.

As a result of its current financial situation,  the Company, in accordance with
generally  accepted   accounting   principles,   has  reclassified  all  of  its
outstanding  debt  under  its  credit  facility  as  short-term  debt.  All debt
pertaining to the credit  facility having  cross-default  provisions has been so
reclassified  regardless of whether or not covenant  violations have occurred or
are anticipated.  The Company's report from its independent  accountants for the
year ended November 30, 1998,  contains a going concern  explanatory  paragraph,
pursuant to which the auditors  expressed  substantial doubt as to the Company's
ability to continue as a going concern.


Market Risk

Due to the variable  rate paid on the revolver  portion of its credit  facility,
the Company is exposed to market risk from changes in interest rates. Generally,
if the base rate on the revolver  averaged 2% more in fiscal 1999 than in fiscal
1998, the Company's  interest expense would increase by $45,000.  This amount is
determined by considering  the impact of the  hypothetical  interest rate on the
Company's borrowing cost, but does not consider the effects of the reduced level
of economic  activity that could exist in such an  environment.  The Company has
not historically used financial  instruments to hedge interest rate exposure and
does not use financial  instruments  for trading  purposes and is not a party to
any leveraged derivatives.


Year 2000 Compliance

The Company faces "Year 2000"  compliance  issues similar to other  companies in
the manufacturing software industry. The problem relates to software systems and
programs that use only two digits, rather than four digits, to represent a year.
This does not allow  processing  of dates beyond the year 1999 and may result in
incorrect  calculations,  reports or other information.  Additionally,  this may
cause  system  failures  from  processors  that are  embedded in a multitude  of
devices.

                                       16
<PAGE>




To address the Year 2000 problem,  the Company established a corporate readiness
program  which  began in fiscal 1994 with a detailed  analysis of the  Company's
software  products sold to its  customers.  The Company had  originally  started
addressing  the changes to the program  code of its  software  products for Year
2000 issues in 1985. The Company later, in 1998,  added the analysis of internal
systems and third party  suppliers of both software and any other goods that may
have Year 2000 problems.  The Company has completed its detailed assessment plan
and will submit it to the Board of Directors at the next session.

State of Readiness

Company's Products

The  Company's  current  products  have been  designed  and tested for Year 2000
compliance. However, due to the complexity of software products, there can be no
absolute  assurance  that  the  Company's  software  products  contain  all  the
necessary  date code changes.  The Company's  versions of the software  prior to
version 5.1.2 in 1994 are known to contain code that is not Year 2000 compliant.
In 1996, the Company notified customers of prior versions of this non-compliance
and customers were offered upgrades and implementation  assistance to migrate to
a Year 2000 compliant version. The Company's agreements with the customers since
1992 do not expressly  obligate the Company to furnish an updated version of the
software that is Year 2000 compliant.  The Company's analysis of contracts prior
to 1992 indicate an immaterial  level of Company  obligation to furnish  updated
software.


Internal Systems

The  Company  is in the  process of  assessing  the Year 2000  readiness  of its
internal  computer  information  system  and  non-computer  systems  ,  such  as
telecommunications equipment, network equipment, etc., to determine whether such
systems are Year 2000 compliant.  A list of all mission  critical items has been
identified,  and the  Company  expects  to  complete  deployment  of  Year  2000
corrections on or around September of 1999.

Third Party Reseller and Key Suppliers

The  Company  has  completed  a  comprehensive  list  of its  resellers  and key
suppliers.  With  respect  to  certain  of its most  significant  resellers  and
suppliers,  the Company has already made inquiries to assess their readiness and
has obtained published information  indicating that they are in compliance.  The
Company expects to totally  complete its assessment of all its resellers and key
suppliers on or about September, 1999.


                                       17
<PAGE>



Costs

The Company  estimates  the  historical  costs to remediate the Year 2000 issues
have  totaled  $977,000  and future  costs to  remediate  will be  approximately
$250,000.  The  Company  expects to fund the future  costs of  remediation  from
operations.




Risk

Failure to correct critical Year 2000 issues could cause a serious  interruption
in business operations of the Company's customers and/or internal systems.  Such
interruptions  could  have  a  material  impact  on  the  Company's  results  of
operations, liquidity, and financial condition. The Company is taking actions to
minimize  these risks,  but no assurance can be given that all potential  issues
can be eliminated.  Additionally, the effects of potential litigation can not be
estimated  and could also have a material  effect on the results of  operations.
Finally,  factors outside the Company's  control could also cause  disruption of
business activities which could materially affect the results of operations.

Contingency Plans

The  Company is in the  process of  evaluating  contingency  plans to handle the
controllable risks regarding Year 2000 compliance.  Certain of the risks such as
lengthy  power  outages or  communication  failures may not be  circumvented.  A
detailed  plan of  controllable  risks is expected to be available in September,
1999.


Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

IN  ADDITION  TO  HISTORICAL  INFORMATION,  THIS  QUARTERLY  REPORT ON FORM 10-Q
CONTAINS  "FORWARD-LOOKING  STATEMENTS",  INCLUDING INFORMATION REGARDING FUTURE
ECONOMIC PERFORMANCE AND PLANS AND OBJECTIVES OF MANAGEMENT. STATEMENTS INCLUDED
IN THIS  QUARTERLY  REPORT ON FORM 10-Q THAT ARE NOT OF A HISTORICAL  NATURE ARE
FORWARD-LOOKING  STATEMENTS.  SUCH  FORWARD  LOOKING  STATEMENTS  ARE SUBJECT TO
CERTAIN  RISKS AND  UNCERTAINTIES  THAT  COULD  CAUSE  ACTUAL  RESULTS TO DIFFER
MATERIALLY  FROM  THOSE  REFLECTED  IN  THE  FORWARD-LOOKING   STATEMENTS.  SUCH
UNCERTAINTIES  AND RISKS INCLUDE,  BUT ARE NOT LIMITED TO, THE FACTORS DESCRIBED
IN THE SECTION CAPTIONED  "BUSINESS RISK FACTORS" IN ITEM 1 OF THE ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998, WHICH INCLUDE, BUT ARE
NOT  LIMITED  TO,  "FINANCIAL  RESULTS  FOR THE LAST  THREE  YEARS,"  "FINANCIAL


                                       18
<PAGE>



COVENANTS  AND  LIMITATIONS;  LIQUIDITY,"  "SUCCESS  OF  RECENT  RESTRUCTURING,"
"DEPENDENCE  ON PRINCIPAL  PRODUCTS,"  "BAAN  RELATIONSHIP;  DEPENDENCE ON THIRD
PARTY SOFTWARE," "DEPENDENCE ON KEY EMPLOYEES" AND "CONTROL BY MANAGEMENT."



Item  3.  Quantitative and  Qualitative Disclosure About Market Risk

       Reference  is  made  to the  information  in  Item 2  under  the  caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operation - Market Risk," which information is incorporated herein by reference.



                                       19
<PAGE>




Part II - Other Information

Item 2.  Changes in Securities and Use of Proceeds


Pursuant  to the  terms  of the  Company's  Series B 8%  Convertible  Redeemable
Preferred  Stock (the "Series B"), the Company was  obligated to pay  cumulative
preferential  dividends to the holders of the Series B on January 2, 1999, April
1, 1999 and July 1, 1999.

With respect to each of the  above-referenced  dividend payment dates, the Board
of  Directors  of the  Company,  in  accordance  with the terms of the Series B,
having  reviewed the cash situation of the Company,  determined that the Company
would pay the  dividends in shares of Series B. Thus, on (i) January 2, 1999, in
accordance  with and  pursuant to the terms of the Series B, 34.74 shares of the
Series B were issued in payment of the  dividends  due the holders of the Series
B, (ii) on April 1, 1999,  in  accordance  with and pursuant to the terms of the
Series B, 55.63  shares of the Series B were issued in payment of the  dividends
due the holders of the Series B and (iii) on July 1, 1999 in accordance with and
pursuant  to the terms of the Series B, 61.23  shares  were issued in payment of
the  dividends  due the  holders of the  Series B. Such  shares of Series B were
issued in transactions exempt from registration  pursuant to Section 4(2) of the
Securities Act of 1933, as amended.



                                       20
<PAGE>




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


At the Company's  annual meeting of shareholders  held on May 4, 1999,  Scott J.
Mermel and Robert E.  Weisenberg  were  elected as  directors of the Company for
terms  expiring at the annual  meeting in 2002.  The following  table sets forth
certain  information  with  respect  to  the  election  of  Messrs.  Mermel  and
Weisenberg as directors at the annual meeting:


      Name of Nominee        Shares Voted For       Shares Withholding Authority
      ---------------        ----------------       ----------------------------
      Scott J. Mermel            3,183,454                     74,142
   Robert E. Weisenberg          3,181,540                     76,056

The  following  table sets forth the other  directors of the Company whose terms
continued after the 1999 annual meeting:


                  Name of Nominee                            Term Expires
                  ---------------                            ------------
                 Thomas M. Dykstra                               2000
                 Elliot Wassarman                                2000
                  Helmut M. Adam                                 2001
                 Michael D. Dunham                               2001




                                       21
<PAGE>







Item 6.  Exhibits and Reports on Form 8-K


(a)      Exhibits
         Exhibit Number

              4.1 Waiver to Loan Agreement between Foothill Capital  Corporation
              and  Effective  Management  Systems,  Inc.,  EMS-East,  Inc.,  and
              Effective  Management  Systems of Illinois,  Inc., dated April 13,
              1999.

              4.2 Fourth  Amendment to Loan Agreement  between  Foothill Capital
              Corporation  and Effective  Management  Systems,  Inc.,  EMS-East,
              Inc., and Effective  Management  Systems of Illinois,  Inc., dated
              May 25, 1999

              4.3 Waiver to Loan Agreement between Foothill Capital  Corporation
              and  Effective  Management  Systems,  Inc.,  EMS-East,  Inc.,  and
              Effective  Management  Systems of Illinois,  Inc.,  dated July 14,
              1999

              10.1 Employment,  Confidentiality,  Non-competition, and Severance
              Agreement  by  and  between   Michael  D.  Dunham  and   Effective
              Management Systems, Inc. effective March 19, 1999

              10.2 Employment,  Confidentiality,  Non-competition, and Severance
              Agreement  by  and  between   Thomas  M.  Dykstra  and   Effective
              Management Systems, Inc. effective March 19, 1999

              10.3 Employment,  Confidentiality,  Non-competition, and Severance
              Agreement  by  and  between   Richard  W.  Grelck  and   Effective
              Management Systems, Inc. effective March 19, 1999

              10.4 Letter Agreement relating to employment of Jeffrey J. Fossum,
              dated May 4, 1999

              27  Financial Data Schedule [EDGAR version only]

(b)      Reports on Form 8-K
                  None



                                       22
<PAGE>








                                   SIGNATURES


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


                        EFFECTIVE MANAGEMENT SYSTEMS, INC.




July 14, 1999           By:     /s/ MICHAEL D. DUNHAM
                                Michael D. Dunham
                                President (principal executive officer)



                        By:     /s/JEFFREY J. FOSSUM
                                Jeffrey J. Fossum
                                Chief Financial Officer and Assistant Treasurer
                                (principal financial and accounting officer)




                                       23

<PAGE>

                                 EXHIBIT INDEX

                       EFFECTIVE MANAGEMENT SYSTEMS, INC.


Exhibit Number    Exhibits
--------------    -------

4.1               Waiver to Loan Agreement between Foothill Capital  Corporation
                  and Effective Management Systems,  Inc.,  EMS-East,  Inc., and
                  Effective  Management  Systems of Illinois,  Inc., dated April
                  13, 1999.

4.2               Fourth  Amendment to Loan Agreement  between  Foothill Capital
                  Corporation and Effective Management Systems,  Inc., EMS-East,
                  Inc.,  and  Effective  Management  Systems of Illinois,  Inc.,
                  dated May 25, 1999

4.3               Waiver to Loan Agreement between Foothill Capital  Corporation
                  and Effective Management Systems,  Inc.,  EMS-East,  Inc., and
                  Effective Management Systems of Illinois, Inc., dated July 14,
                  1999

10.1              Employment,  Confidentiality,  Non-competition,  and Severance
                  Agreement  by and  between  Michael D.  Dunham  and  Effective
                  Management Systems, Inc. effective March 19, 1999

10.2              Employment,  Confidentiality,  Non-competition,  and Severance
                  Agreement  by and  between  Thomas M.  Dykstra  and  Effective
                  Management Systems, Inc. effective March 19, 1999

10.3              Employment,  Confidentiality,  Non-competition,  and Severance
                  Agreement  by and  between  Richard W.  Grelck  and  Effective
                  Management Systems, Inc. effective March 19, 1999

10.4              Letter Agreement  relating to employment of Jeffrey J. Fossum,
                  dated May 4, 1999

27                Financial Data Schedule [EDGAR version only]





                                       24