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 FEBRUARY 28, 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               (I.R.S. Employer Identification No.)
of incorporation or organization)

  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 February 28, 1999
----------------------------------          ------------------------------------

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


<PAGE>
                       EFFECTIVE MANAGEMENT SYSTEMS, INC.
                                    Form 10-Q
                                February 28, 1999


                                      INDEX



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

Item 1   Financial Statements

         Consolidated Balance Sheets at
         February 28, 1999 and November 30, 1998                         2

         Consolidated Statements of Operations - Three
         Months Ended February 28, 1999 and February  28, 1998           5

         Consolidated Statements of Cash Flows - Three                   6
         Months Ended February  28, 1999 and February 28, 1998

         Notes to Consolidated Financial Statements                      8


Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations                            10

Item 3   Quantitative and Qualitative Disclosures About Market Risk     18



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

Item 2   Changes in Securities and Use of Proceeds                      19

Item 6   Exhibits and Reports on Form 8-K                               20



SIGNATURES


                                       1
<PAGE>

Part I Financial Information

Item 1 Financial Statements

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


ASSETS                                                   28-Feb        30-Nov
                                                           1999          1998
==============================================================================

CURRENT ASSETS
   Cash                                                      $6           $21
   Accounts Receivable:
     Trade, less allowance
     for doubtful accounts                                8,626        12,871
     Related Parties                                        437           426

   Inventories                                              480           275
   Prepaid Expenses and Other Current Assets                272           225
                                                     -------------------------

              TOTAL CURRENT ASSETS                        9,821        13,818

LONG TERM ASSETS
Computer Software, net                                    4,718         4,373
Investments in and Advances to
  Unconsolidated Joint Ventures                             291           291
Equipment and Leasehold Improvements, net                 3,001         3,202
Intangible Assets, net                                    2,074         2,129
Other Assets                                                386           347
                                                     -------------------------

              TOTAL LONG TERM  ASSETS                    10,470        10,342

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

TOTAL ASSETS                                            $20,291       $24,160

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

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


                                       2
<PAGE>

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

LIABILITIES AND STOCKHOLDERS' EQUITY                   28-Feb         30-Nov
                                                         1999           1998
=============================================================================
CURRENT LIABILITIES
   Accounts Payable                                    $4,607         $3,662
   Accrued Liabilities                                  1,499          2,937
   Deferred Revenues                                    6,319          6,522
   Customer Deposits                                      133            113
   Current portion of
       Long-term Obligations                            5,244          6,194
                                                      -----------------------

            TOTAL CURRENT LIABILITIES                  17,802         19,428

LONG TERM LIABILITIES
   Deferred Revenue and Other
   Long-term Liabilities                                  771            858
   Long-term Obligations                                  259            242

                                                      -----------------------
            TOTAL LONG TERM LIABILITIES                 1,030          1,100

   Commitments and Contingencies


                                       3
<PAGE>


STOCKHOLDERS'  EQUITY
   Preferred Stock; 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, issued and outstanding                    1,394          1,411
    (liquidation preference at $1000 per share)
   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                         11,444         11,426
   Retained Earnings (Deficit)                        (11,504)        (9,330)
   Cost of Common Stock in Treasury(12,625 shares)        (60)           (60)
                                                     ------------------------

            TOTAL STOCKHOLDERS' EQUITY                  1,459          3,632

                                                     ------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $20,291        $24,160

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

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


                                       4
<PAGE>

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

                                                           THREE MONTHS ENDED
                                                         28-Feb         28-Feb
                                                          1999           1998
===================================================   =============   ==========

NET REVENUES:
  Software license fees                                   $3,156       $5,335
  Services                                                 3,994        4,239
  Hardware                                                   326          672
                                                      -----------   ----------
        Total net revenues                                 7,476       10,246

COST OF PRODUCTS AND SERVICES
  Software license fees                                      916        1,723
  Services                                                 3,811        3,220
  Hardware                                                   281          527
                                                      -----------   ----------
        Total cost of products and services                5,008        5,470

Selling and marketing expenses                             2,821        3,625
General and administrative expenses                          784        1,194
Product development expenses                                 881          837
                                                      -----------   ----------
        Total costs and operating expenses                 9,494       11,126
                                                      -----------   ----------
LOSS  FROM OPERATIONS                                     (2,018)        (880)

Other (Income)/ Expense
  Interest (income)                                           (8)         (10)
  Interest expense                                           174          153
                                                      -----------   ----------
                                                             166          143
                                                      -----------   ----------
LOSS BEFORE INCOME TAXES                                  (2,184)      (1,023)
Income tax (benefit) expense                                  (9)          33

                                                      -----------   ----------
   NET LOSS                                              ($2,175)     ($1,056)
                                                      ===========   ==========

Loss per share - basic and diluted                        ($0.53)      ($0.26)
===================================================   ===========   ==========

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


                                       5
<PAGE>

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

                                                       THREE MONTHS ENDED
                                                     28-Feb           28-Feb
                                                      1999             1998
===============================================================================

OPERATING ACTIVITIES
    Net Loss                                          ($2,175)        ($1,056)
    Adjustments to reconcile net loss to
      Net cash provided by (used in)
      operating activities:

      Depreciation and amortization                       343             352

      Amortization of capitalized computer 
         software development costs                       475             954

      Equity in earnings of joint ventures                  -               -

      Goodwill Amortization                                55              58

      Deferred income taxes                                 -               -

      Restructuring and Other Charges                       -               -

      Changes in operating assets and
        liabilities:
          Accounts Receivable                           4,486           1,270

          Inventories and other current assets           (504)             (1)

          Accounts payable and other liabilities         (764)           (538)
                                                     ------------------------
    Total adjustments                                   4,091           2,095
                                                     ------------------------
    Net cash provided by operating activities           1,916           1,039

INVESTING ACTIVITIES
      Additions to equipment and leasehold
       improvements                                      (143)            (74)

      Proceeds from sale of securities                      -               -

      Software development costs capitalized             (819)         (1,008)

      Other                                               (38)              8
                                                     ------------------------
    Net cash (used in) investing activities            (1,000)         (1,074)


                                       6
<PAGE>


FINANCING ACTIVITIES
      Proceeds on long-term debt and other
         notes payable                                   (932)            272
      Additional paid-in capital                                     
                                                           18              33
      Preferred stock dividend                                       
                                                          (17)              -
                                                     ------------------------
    Net cash provided (used) by financing
      activities                                         (931)            305
                                                     ------------------------
    Net increase (decrease) in cash                      ($15)           $270
Cash-beginning of period                                  $21             $14
                                                     ========================
Cash-end of period                                         $6            $284
=============================================================================

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


                                       7
<PAGE>



                       EFFECTIVE MANAGEMENT SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                February 28, 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-month  periods ended  February 28, 1999 and February 28, 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 February
28,  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

Equipment and leasehold improvements consisted of the following:

                                           28-February-1999       30-Nov-1998
                                           ----------------       -----------

Gross                                          $10,055                  $9,913
Less:  Accumulated Depreciation               (  7,054 )              (  6,711 )
                                              ----------              ----------
Net                                             $3,001                  $3,202

Allowance for doubtful accounts
 consisted of the following:

                                           28-February-1999       30-Nov-1998
                                           ----------------       -----------
Balance                                         $  326                 $  506

Provision for doubtful accounts
 consisted of the following:

                                           28-February-1999       30-Nov-1998
                                           ----------------       -----------
                                                $   48                  $  17



                                       8
<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.


                                                      Three Months Ended
                                                         February 28,
                                                  1999                 1998
                                                  ----                 ----
Denominator
Denominator for basic earnings per share -
   weighted average common shares                 4,114                4,075
Effect of dilutive securities - 
   stock options and warrants                         0                    0
Effect of dilutive securities - 
   preferred stock                                    0                    0
                                               --------------------------------
Denominator for diluted earnings per share -
adjusted weighted average common shares           4,114                4,075
                                               ================================



                                       9
<PAGE>

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


Overview

The Company incurred a 27% decrease in net revenues and a net loss of $2,175,000
for the first quarter of fiscal 1999 compared with a net loss of $1,056,000  for
the first  quarter of fiscal 1998.  The first quarter of fiscal 1999 and 1998 do
not  reflect a tax  benefit  relating  to the loss since for book  purposes  the
Company is in a loss carryforward position. Software revenues were down 40.8% in
the first  quarter of fiscal 1999 compared to the same period in the prior year.
Management  believes this decrease in software revenues was mainly the result of
a general decline in the Enterprise  Resource Planning ("ERP") industry,  delays
in the sales of the Baan products  distributed by the Company,  an  insufficient
level of leads for Baan  prospects,  a decline in the Company's  proprietary TCM
product revenues and reduced revenues from restructured  operations (a reduction
of $249,000 from the first quarter of 1998).

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, that
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  covenant relief in fiscal 1999.
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
the Company's ability to continue as a going concern.

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  $7,476,000  for the three months ended  February 28,
1999,  which  represented a 27.0% decrease from the  $10,246,000 in revenues for
the same quarter in the previous year. The mix of revenues  comparing  software,
services,  and

                                       10

<PAGE>

hardware  revenues as a percentage of net revenues was 42.2%,  53.4%,  and 4.4%,
respectively,  in the first  quarter of fiscal  1999,  as  compared  with 52.1%,
41.4%, and 6.7%, respectively, in the first quarter 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 40.8% to $3,156,000 in the
first  quarter of fiscal  1999 from  $5,335,000  in the first  quarter of fiscal
1998.  Management  believes  this  decrease in software  revenues was mainly the
result of a general  decline  in the ERP  industry,  delays in the sales of Baan
products,  an insufficient  level of leads for Baan prospects,  a decline in the
Company's proprietary TCM product revenues (a trend that is likely to continue),
reduced revenues from restructured  operations (a reduction of $249,000 from the
first quarter of 1998) and subsequent attrition.


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 decreased to $3,994,000 for the three months
ended February 28, 1999, as compared with  $4,239,000 for the same period of the
prior year. The decrease in revenues was mainly the result of a reduced level of
personnel due to the restructuring the Company  implemented in the quarter ended
May 31, 1998 and subsequent attrition.


Hardware Revenues

Hardware  revenues  decreased  51.5% to $326,000 in the first  quarter of fiscal
1999 compared with $672,000 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 and a reduction in new TCM system  sales.  The Company
has decided to reduce its sales of commodity-priced  hardware products and those
which  require  specific  expertise  beyond the scope of the  Company's  product
focus.  In turn,  the Company has developed  relationships  with various  system
integrators  which sell the  hardware  and provide  these  value-added  hardware
services.

                                       11

<PAGE>

Management  expects the trend of  declining  hardware  sales to continue due to
both the  increasing  sales of  software  licenses  operating  on the  Microsoft
Windows NT platform and the reduced level of new TCM system sales. Hardware used
with the Microsoft  Windows NT platform is either generally  already in 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 29.0%
for  the  first   quarter  of  fiscal  1999,  a  decrease  from  32.3%  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  efforts in the quarter ended May 31, 1998. Software  amortization
decreased  $479,000 in the first  quarter of fiscal 1999 as compared to the same
period of 1998 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 95.4% for
the three months ended  February 28, 1999,  as compared  with 76.0% for the same
quarter  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
initiated a group of personnel to implement  the Baan software  solutions  which
has  raised  the  level  of  training  costs  and  other  initial   non-billable
activities. Last, 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.


Cost of Hardware

The cost of hardware as a percentage  of related  revenue  increased to 86.2% in
the first quarter of fiscal 1999 from 78.4% in the first quarter 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. The cost of hardware as a percentage
of related  revenue also varies with the amount of low margin  hardware sales to
affiliates. Hardware sales to affiliates declined in the first quarter of fiscal
1999 compared to the first quarter of fiscal 1998.

                                       12

<PAGE>

Selling and Marketing Expenses

Selling and marketing expenses decreased $804,000,  or 22.2%, from $3,625,000 in
the first  quarter of fiscal 1998 to  $2,821,000  in the first quarter 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. The Company has also restructured compensation
levels to more effectively match industry practice in the upper mid-market. As a
percentage of total  revenues,  selling and  marketing  expense was 37.7% in the
first  quarter of fiscal 1999 compared to 35.4% in the  corresponding  period of
1998.  This  increase was mainly  attributable  to a reduction in revenues  (see
Software Revenues above).


General and Administrative Expenses

General  and  administrative   expenses  decreased  $410,000,   or  34.3%,  from
$1,194,000  in the first quarter of fiscal 1998 to $786,000 in the first quarter
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.  As a
percentage of net revenues,  general and administrative  expenses were 10.5% and
11.7% in the first quarter of fiscal 1999 and 1998, respectively.


Product Development Expense

Product development expense increased 5.3% from $837,000 in the first quarter of
fiscal 1998 to  $881,000  in the first  quarter of fiscal  1999.  This  increase
primarily related to a $189,000 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  $819,000 of product
development  costs in the first quarter of fiscal 1999 compared to $1,008,000 in
the first quarter of fiscal 1998. As a percentage of software  license fees, the
total amount  invested in software  development was 53.6% and 34.7% in the first
quarter of fiscal  1999 and fiscal  1998,  respectively.  Management  expects to
reduce  the  level of  software  development  expense  in the  next  two  fiscal
quarters.


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 February 28, 1999.


                                       13

<PAGE>

Other Income\Expense-Net

Other income\expense-net was $143,000 of expense for the first quarter of fiscal
1998 compared to $166,000 of expense for the first  quarter 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 $33,000  (for state and local  taxes) and no income tax benefit
was recorded for the first  quarter of fiscal 1998  compared to a tax expense of
$9,000 for the first  quarter of fiscal 1999.  For some time,  the Company,  for
book purposes, has been in a tax loss carryforward position.  Generally accepted
accounting  principles  prohibit the Company from  recording a tax benefit under
the circumstances.


Liquidity and Capital Resources

At February 28, 1999, the Company had cash and marketable securities aggregating
$6,000.  During  the first  quarter  of fiscal  1999,  the  Company's  operating
activities provided $1,916,000 of cash compared to providing  $1,039,000 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.

Investing activities used cash of $1,000,000 in the first quarter of fiscal 1999
compared  to  $1,074,000  of cash in the  first  quarter  of  fiscal  1998.  The
principal  use of the cash in the first  quarter of fiscal 1999 was $819,000 for
capitalized product development. The principal uses of cash in the first quarter
of fiscal 1998 included $1,008,000 for capitalized product development.

Financing  activities  used $931,000 of cash in the first quarter of fiscal 1999
compared with  providing  $305,000 in the first quarter of fiscal 1998. The cash
used in fiscal 1999 mainly  reflected  payments  under the  Company's  borrowing
facilities.  As of February 28, 1999, the Company had $ 891,000 of  availability
under its  $5,000,000  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 April 13,  1999 the  Company  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 which could include the sale of assets.
The Company is continuing its review of alternative sources of financing 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 


                                    14

<PAGE>

terms.  In the event that the 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  collateral
to meet these obligations,  whereby a lack of success could substantially impact
the Company's ability to continue as a going concern.

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  the  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 $80,000.  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.

To address the Year 2000 problem,  the Company established a corporate readiness
program which began in fiscal 1994 with the 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. 

                                       15

<PAGE>

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  plans to complete  its  detailed  assessment  plan on or
around  May of  fiscal  1999.  A formal  review  and  approval  by the  Board of
Directors is expected to occur immediately thereafter.

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 the software product, 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, and subsequently,  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.  Even though  substantial work has already been
completed,  a complete  detailed plan to address any assessed Year 2000 problems
should be  available  on or around May,  1999.  The Company  expects to complete
deployment of Year 2000 corrections on or around September of 1999.

Third Party Reseller and Key Suppliers

The Company  plans to assess the Year 2000  readiness of its  resellers  and key
suppliers over the second quarter of fiscal 1999. 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.

Costs

The Company  estimates  the  historical  costs to remediate the Year 2000 issues
have  totaled  $968,000  and future  costs to  remediate  will be  approximately
$500,000.  The  Company  expects to fund the  future  costs of  remedation  from
operations.


                                       16
<PAGE>

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 issues,  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 on or around
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, THE BUSINESS  CONTINUING  TO BE  UNPROFITABLE  DESPITE  STEPS TO
IMPROVE  PERFORMANCE,  THE  INABILITY  TO  OBTAIN  COVENANT  RELIEF  LEADING  TO
LIQUIDITY  PROBLEMS  AND  AN  INABILITY  TO  FUND  CONTINUING  OPERATIONS,   THE
RESTRUCTURING  FAILING TO IMPROVE OUR  FINANCIAL  PERFORMANCE  AND PERHAPS  EVEN
HAVING A NEGATIVE  IMPACT ON OUR  PERFORMANCE,  OUR POOR  FINANCIAL  PERFORMANCE
MAKING IT  DIFFICULT  TO CONTINUE AS A GOING  CONCERN,  THE  INABILITY TO OBTAIN
PRINCIPAL PRODUCTS  NEGATIVELY  IMPACTING OUR OPERATIONS,  THE BAAN RELATIONSHIP
FAILING AND THE LOSS OF KEY EMPLOYEES NEGATIVELY IMPACTING OUR OPERATIONS.


                                       17
<PAGE>



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.




                                       18
<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
provide  cumulative  preferential  dividends  to the  holders of the Series B on
January 2, 1999 and April 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 and (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.




                                       19
<PAGE>


                                  Exhibit Index



Item 6.  Exhibits and Reports on Form 8-K

Exhibit
Number

   (a)    Exhibits

          4.1 Waiver and Second Amendment 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.

          10.1 Form of Nonstatutory Stock Option Agreement, dated February 1,
          1999.

          27 Financial Data Schedule [EDGAR version only]

   (b)    Reports on Form 8-K

          None



                                       20
<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.




April 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)




                                       21