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 AUGUST 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                   (I.R.S. Employer
     of 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 August 31, 1999
-----------------------------------      ---------------------------------
   Common Stock, $.01 par value                     4,130,986


<PAGE>

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


                                      INDEX


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

Item 1    Financial Statements

          Consolidated Balance Sheets at
          August 31, 1999 and November 30, 1998                             1

          Consolidated Statements of Operations - Three and
          Nine Months Ended August 31, 1999 and August 31, 1998             3

          Consolidated Statements of Cash Flows -Nine                       4
          Months Ended August 31, 1999 and August 31, 1998

          Notes to Consolidated Financial Statements                        5


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

Item 3    Quantitative and Qualitative Disclosures About Market Risk       16


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

Item 2    Changes in Securities and Use of Proceeds                        17

Item 6    Exhibits and Reports on Form 8-K                                 18


SIGNATURES                                                                 21

<PAGE>

PART I - Financial Information
Item 1.  Financial Statements

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

<CAPTION>
ASSETS                                                                         31-Aug              30-Nov
                                                                                 1999                1998
==========================================================================================================

CURRENT ASSETS
<S>                                                                           <C>                 <C>
   Cash                                                                            $3                 $21
   Accounts Receivable:
     Trade, less allowance for
        doubtful accounts                                                       6,530              12,871
     Related Parties                                                              511                 426

   Inventories                                                                    265                 275
   Prepaid Expenses and Other Current Assets                                      194                 225
                                                                   ---------------------------------------

            TOTAL CURRENT ASSETS                                                7,503              13,818

LONG TERM ASSETS
Computer Software, net                                                          5,230               4,373
Investments in and Advances to
  Unconsolidated Joint Ventures                                                   291                 291
Equipment and Leasehold Improvements, net                                       2,507               3,202
Intangible Assets, net                                                          1,964               2,129
Other Assets                                                                      182                 347
                                                                   ---------------------------------------

            TOTAL LONG TERM ASSETS                                             10,174              10,342

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

TOTAL ASSETS                                                                  $17,677             $24,160

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

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       1
<PAGE>

<TABLE>
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
--------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY                                           31-Aug              30-Nov
                                                                                 1999                1998
==========================================================================================================

CURRENT LIABILITIES
<S>                                                                           <C>                 <C>
   Accounts Payable                                                            $4,067              $3,662
   Accrued Liabilities                                                          2,011               2,937
   Deferred Revenues                                                            6,431               6,522
   Customer Deposits                                                               13                 113
   Current portion of
     Long-term Obligations                                                      6,335               6,194
                                                                   ---------------------------------------

            TOTAL CURRENT LIABILITIES                                          18,857              19,428

LONG TERM LIABILITIES
   Deferred Revenue and Other
   Long-term Liabilities                                                          785                 858
   Long-term Obligations                                                          248                 242

                                                                   ---------------------------------------
            TOTAL LONG TERM LIABILITIES                                         1,033               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"); 1,936.63  shares of
   Series  B are  issued  and  outstanding (liquidation preference
   of $1000 per share)                                                          1,361                1411
   Common Stock,  $.01 par value; authorized 20,000,000
   shares; issued 4,130,986 and 4,106,377 shares;
   Outstanding 4,118,361 and 4,093,752 shares                                      42                  41
   Common Stock Warrants                                                          144                 144
   Additional  Paid- in Capital                                                11,502              11,426
   Retained Earnings (Deficit)                                                (15,202)             (9,330)
   Cost of Common Stock in Treasury(12,625 shares)                                (60)                (60)
                                                                   ---------------------------------------

            TOTAL STOCKHOLDERS' EQUITY                                         (2,213)              3,632

                                                                   ---------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $17,677             $24,160

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

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       2
<PAGE>

<TABLE>
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands, except per share data) (unaudited)
-----------------------------------------------------------------------------
<CAPTION>
                                                                        THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                      31-Aug        31-Aug            31-Aug          31-Aug
                                                                        1999          1998              1999            1998
============================================================================================================================
<S>                                                                  <C>           <C>               <C>            <C>
NET REVENUES:
  Software license fees                                               $3,036        $3,866            $9,646         $13,573
  Services                                                             4,860         3,977            13,788          12,748
  Hardware                                                               152           339               710           1,455
                                                                  ----------    ----------        ----------      ----------
        Total net revenues                                             8,048         8,182            24,144          27,776

COST OF PRODUCTS AND SERVICES
  Software license fees                                                  874         1,059             2,803           4,163
  Services                                                             3,805         3,581            11,816          10,175
  Hardware                                                               133           232               594           1,112
                                                                  ----------    ----------        ----------      ----------
        Total cost of products and services                            4,812         4,872            15,213          15,450

Selling and marketing expenses                                         2,380         3,017             8,181          10,043
General and administrative expenses                                    1,541           624             3,542           2,837
Product development expenses                                             812           597             2,531           2,118
Restructuring and other charges                                            0             0                 0           6,836
                                                                  ----------    ----------        ----------      ----------
        Total costs and operating expenses                             9,545         9,110            29,467          37,284

                                                                  ----------    ----------        ----------      ----------
LOSS  FROM OPERATIONS                                                 (1,497)         (928)           (5,323)         (9,508)

Other (Income)/Expense
  Equity in (earnings)/loss of unconsolidated joint ventures               0             0                 0             (1)
  Interest (income)                                                       (1)          (19)               (9)            (39)
  Interest expense                                                       188           184               540             521
                                                                  ----------    ----------        ----------      ----------
                                                                         187           165               531             481
                                                                  ----------    ----------        ----------      ----------
LOSS BEFORE INCOME TAXES                                              (1,684)       (1,093)           (5,854)         (9,989)
Income tax (benefit) expense                                              18             0                18              33

                                                                  ----------    ----------        ----------      ----------
   NET LOSS                                                          ($1,702)      ($1,093)          ($5,872)       ($10,022)
                                                                  ==========    ==========        ==========      ==========
Loss per share - basic                                                ($0.41)        ($.27)           ($1.42)         ($2.45)

Loss per share - diluted                                              ($0.41)        ($.27)           ($1.42)         ($2.45)
============================================================================================================================

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

                                       3
</TABLE>
<PAGE>

<TABLE>
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
------------------------------------------------------------------------------
<CAPTION>
                                                                                              NINE MONTHS ENDED
                                                                                        31-August          31-August
                                                                                           1999               1998
====================================================================================================================

OPERATING ACTIVITIES
<S>                                                                                      <C>               <C>
    Net Loss                                                                             ($5,872)          ($10,022)
    Adjustments to reconcile net loss to
      net cash provided by (used in) operating activities:
      Depreciation and amortization                                                        1,034              1,044
      Amortization of capitalized computer software development costs                      1,458              2,277
      Equity in earnings of joint ventures                                                     0                  0
      Goodwill Amortization                                                                  165                176
      Restructuring and Other Charges                                                          0               6836
      Changes in operating assets and liabilities:
                 Accounts Receivable                                                       6,388              3,054
                 Inventories and other current assets                                        (91)               (25)
                 Accounts payable and other liabilities                                     (784)            (1,684)
                                                                                    --------------------------------
    Total adjustments                                                                      8,171             11,678
                                                                                    --------------------------------
    Net cash provided by operating activities                                              2,298              1,656

INVESTING ACTIVITIES
      Additions to equipment and leasehold improvements                                     (339)              (439)
      Software development costs capitalized                                              (2,316)            (2,800)
      Other                                                                                  166                527
                                                                                    --------------------------------
    Net cash used in investing activities                                                 (2,489)            (2,712)

FINANCING ACTIVITIES
      Proceeds on long-term debt and other notes payable                                     147                 61
      Additional paid-in capital                                                              76                 90
      Preferred stock dividend                                                               (50)                 0
      Proceeds from sale of stock                                                              0                899
                                                                                    --------------------------------
    Net cash provided (used) by financing activities                                         173              1,050
                                                                                    --------------------------------
    Net increase (decrease) in cash                                                         ($18)               $(6)
Cash-beginning of period                                                                     $21                $14
                                                                                    ================================
Cash-end of period                                                                            $3                 $8
====================================================================================================================

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       4
<PAGE>

                       EFFECTIVE MANAGEMENT SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 August 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
nine month  periods  ended  August 31,  1999 and August 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 August 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

Equipment and leasehold improvements consisted of the following:

                                               31-August-1999       30-Nov-1998
                                               --------------       -----------
Gross                                               $10,252            $9,913
Less:  Accumulated Depreciation                     ( 7,745)           (6,711)
                                                  ---------          ---------
Net                                                 $ 2,507            $3,202

Allowance for doubtful accounts
  consisted of the following:
                                               31-August-1999       30-Nov-1998
                                               --------------       -----------
Balance                                             $   519            $  506

Provision for doubtful accounts
  consisted of the following:
                                               31-August-1999       30-Nov-1998
                                               --------------       -----------
                                                    $    40            $   17


                                       5
<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
                                                                August 31,
                                                            1999          1998
                                                            ----          ----
Denominator
Denominator for basic earnings per share -
   weighted average common shares                          4,131         4,098
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                    4,131         4,098
                                                       =======================

                                                            Nine Months Ended
                                                                August 31,
                                                            1999          1998
                                                            ----          ----
Denominator
Denominator for basic earnings per share -
    weighted average common shares                         4,121         4,084
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                    4,121         4,084
                                                       =======================


                                       6
<PAGE>

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

Overview

On September 1, 1999, the Company  entered into a definitive  agreement and plan
of merger with IFS  Americas,  Inc.  and IFS  Acquisition,  Inc.  (collectively,
"IFS").  Pursuant to the  agreement,  IFS  commenced  a cash  tender  offer (the
"Tender  Offer") for all of the shares of common stock,  $.01 par value,  of the
Company at a per share price of $4.50.  The Tender  Offer will expire on October
15, 1999,  subject to extension.  Assuming that the Tender Offer is successfully
completed,  shares of common  stock not tendered are expected to be "cashed out"
in a second-step merger (the "Merger") at $4.50 per share.

The Company had total  revenues in the third quarter of  $8,048,000  which was a
decrease of 2% from the $8,182,000  recognized in the third quarter of 1998. The
net  loss  for the  quarter  was  $1,702,000  as  compared  with the net loss of
$1,093,000  for the third  quarter  of 1998.  Neither  period  reflects  any tax
benefit  relating to the losses  because  the Company is in a loss  carryforward
position for financial reporting purposes.

The Company's  financial  difficulties  continue to be primarily in the division
selling  the Baan ERP  product,  where  losses on the  operating  level  (before
interest   expense  but  after  overhead   allocations)  for  the  quarter  were
approximately  $1,128,000.  The  Company's TCM product line realized a profit of
approximately  $255,000 and the Company's  Intercim  division incurred a loss of
approximately $230,000 in the third quarter of 1999.

For the nine months  ended August 31,  1999,  the Company had total  revenues of
$24,144,000  which  represents a 13.1% decrease from the $27,776,000 in revenues
for the same period in 1998.  The net loss for the recent nine month  period was
$5,872,000  compared to a net loss of  $10,022,000  for the same period in 1998.
However, the 1998 figure included a restructuring charge of $6,836,000.  Without
the restructuring charge the loss would have been $3,186,000.

As a result of the  Company's  recent  financial  performance,  its  ability  to
continue to fund current operations is subject to significant doubt.  Without an
infusion of new capital and  improved  financial  performance,  the Company will
continue  to require  covenant  relief  from its  primary  lender  for  covenant
violations.  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.


                                       7
<PAGE>

Results of Operations


Net Revenues

Net revenues for the quarter ended August 31, 1999, were $8,048,000  which was a
decrease of 2% from the  $8,182,000  for the same quarter in the previous  year.
For the nine  months  ended  August 31,  1999,  net  revenues  were  $24,144,000
compared to $27,776,000  for the same period in 1998. This represents a decrease
of 13.1% on a  year-to-date  basis.  The  primary  reason for the  decrease on a
year-to-date  basis  is the  decline  in  sales of new  licenses  caused  by the
Company's  switch in focus from  selling its own ERP product to selling the Baan
ERP product.

The mix of revenues  comparing  software,  services,  and hardware revenues as a
percentage  of net revenues was 37.7%,  60.4%,  and 1.9%,  respectively,  in the
third  quarter  of  fiscal  1999,  as  compared  with  47.3%,  48.6%,  and 4.1%,
respectively, in the third quarter of fiscal 1998. The mix of revenues comparing
software,  services  and hardware  revenues as a percentage  of net revenues was
40.0%, 57.1%, and 2.9%, respectively,  in the nine months ended August 31, 1999,
as compared with 48.9%, 45.9%, and 5.2%, respectively,  in the nine months ended
August 31, 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  software orders and market  acceptance
of new products.  The Company has  historically  operated  with little  software
backlog because software orders are generally shipped as orders are received. As
a result, product revenue in any quarter is substantially  dependent on software
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 21.5%, from $3,866,000 in the
third  quarter of 1998 to  $3,036,000 in the quarter ended August 31, 1999. On a
year-to-date  basis,  license fee  revenues for the nine months ended August 31,
1999,  was  $9,646,000  which is a decline of 28.9% from the  $13,573,000 in fee
revenues for the same nine month period in 1998.

The decrease is primarily attributable to the sharp drop in new purchases of ERP
systems in 1999, as companies focused on resolving  problems related to the Year
2000 date conversion.



                                       8
<PAGE>

Service Revenues

The Company  offers a number of optional  services to its  customers,  including
such  services  as  telephone  support,  systems  integration,  custom  software
development,   implementation  consulting,  and  formal  classroom  and  on-site
training.  Service  revenues  increased 22.4% in the third quarter to $4,860,000
compared to $3,977,000 in the same period of the prior year.  For the nine month
period ended August 31, 1999 service revenues were  $13,788,000,  an increase of
8.2% over the  $12,748,000 in service  revenues for the nine months ended August
31, 1998. The increase is primarily due to the higher daily rate the Company has
begun charging its customers for its services.


Hardware Revenues

Hardware  revenue  decreased  55.2% for the third quarter,  from $339,000 in the
third  quarter of 1998 to  $152,000 in the third  quarter of 1999.  For the nine
months ended August 31, 1999,  sales of hardware  totaled  $710,000  which was a
drop of 51.3% from the  $1,455,000  sold for the first nine months of 1998.  The
drop in hardware sales was mainly the result of having sold fewer new systems in
1999 due to issues related to the Year 2000 date conversion. The Company expects
that sales of hardware  will remain at lower  levels going  forward  because the
Company  is less  interested  in  selling  these  items due to the lower  profit
margins involved and due to the trend of increasing  sales of software  licenses
operating on platforms for which the Company does not supply hardware.


Cost of Software License Fees

The cost of software  license fees as a percentage of related  revenue was 28.8%
for the third quarter, compared to 27.4% for the third quarter of last year. For
the nine  month  period  ended  August 31,  1999,  the cost was 29.1% of revenue
compared to 30.7% for the same nine months in 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.


Cost of Services

The cost of services as a percentage  of related  revenue for the third  quarter
decreased to 78.3%,  compared to 90.0% for the same period of 1998. For the nine
month period  ended  August 31, 1999,  the cost of services was 85.7% of related
revenue  compared  to 79.8% for the same  period  in 1998.  The  reason  for the
decrease  in the  cost  percentage  experienced  in  the  third  quarter  is the
increased daily rates the Company is now charging its customers for services.


                                       9
<PAGE>

For the nine  months  ended  August 31,  1999,  the cost of sales on services is
higher in 1999 due to the inclusion of more ERP implementation  services,  which
are done by third parties and thus yield lower margins.


Cost of Hardware

For the third  quarter of 1999 the cost of hardware as a  percentage  of related
revenue increased to 87.5%, compared to a cost of 68.4% for the third quarter of
1998.  On a year to date basis,  the cost of hardware as a percentage of related
revenue  increased to 83.7% for the nine months ended August 31, 1999,  compared
to 76.4% for the nine months ended  August 31,  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.  In general the higher costs  reflected in 1999 are a product of
the competitive environment.


Selling and Marketing Expenses

Selling and marketing expense  decreased to $2,380,000 in the third quarter,  an
improvement  of 21.1%  over the  $3,017,000  of  expense  incurred  for the same
quarter in 1998. For the nine months ended August 31, 1999,  sales and marketing
expense  totaled  $8,181,000,  compared to  $10,043,000 at this point last year.
This  reduction of 18.5% resulted from the  restructuring  that was completed in
1998, coupled with higher than normal attrition the Company has experienced this
year.  In addition,  the  Company's  lower sales this year have also resulted in
lower commission expenses.


General and Administrative Expense

General  and  administrative  expense  was  $1,541,000  for the  third  quarter,
compared  to  $624,000  for the same  period  in  1998.  The  increase  resulted
partially from lower allocations of general and administrative  expense to other
areas of the business due to lower  headcounts,  but also from accruals made for
potential sales tax liabilities of $200,000 and accruals for possible additional
legal and accounting expenses of $240,000.

On a year to date basis,  general and  administrative  expenses  are  $3,542,000
compared to $2,837,000  for the same period of 1998.  The primary reason for the
increase  is  the  accruals   mentioned  above  of  $440,000  along  with  lower
allocations to other functional areas, which amounted to approximately $200,000.


Product Development Expense

Product  development  expense  for the third  quarter  was  $812,000 or 10.1% of
sales.  This is 36% higher than the  $597,000  expensed  for the same quarter in
1998.  For the


                                       10
<PAGE>

nine month period ended August 31, 1999,  this expense is $2,531,000  which is a
19%  increase  from the  $2,118,000  expensed  for the same nine month period in
1998. This increase is 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  has  capitalized
$2,316,000 of product development cost in the first nine months of 1999 compared
to $2,800,000 for the same period in 1998.


Other Income/Expense - Net

Other  income/expense  consists  primarily of interest  expense on the Company's
line of  credit.  The net  amount  was  $187,000  for the third  quarter,  which
compares to $165,000 for the same  quarter  last year.  For the nine months just
ended the net amount is $531,000  compared  to  $559,000  for the same period of
1998.  The  expense  varies with the amount of funds  borrowed on the  Company's
revolving line of credit,  such that as borrowings increase the interest expense
increases.


Income Tax

A tax  expense of  $18,000  was  recorded  in the third  quarter of 1999,  which
consisted of some state and local  minimum  taxes due when the Company filed its
extended  returns in August.  There was no tax recorded in the third  quarter of
1998 because these amounts were paid earlier. Because of this, on a year to date
basis the $18,000  for the current  year  compares to $33,000  expenses  for the
first nine months of 1998.

For  several  years the Company  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 August 31, 1999, the Company had cash and marketable  securities  aggregating
$3,000.  During the first nine months of fiscal 1999,  the  Company's  operating
activities provided $2,298,000 of cash compared to providing  $1,656,000 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 $2,489,000 in the first nine months of fiscal
1999  compared  to  $2,712,000  of cash used in the first nine  months of fiscal
1998. The principal use of the cash fiscal 1999 was  $2,316,000 for  capitalized
product  development.  The  principal  uses  of  cash in  fiscal  1998  included
$2,800,000 for capitalized product development.

Financing  activities  provided  $173,000  of cash in the first  nine  months of
fiscal 1999 compared  with  providing  $1,050,000  for the same period of fiscal
1998. The cash


                                       11
<PAGE>

provided in fiscal 1999 came mainly from the Company's borrowing facilities. The
cash  provided  in 1998 came mainly as  proceeds  from the sale of stock.  As of
August 31, 1999, the Company had no  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, Foothill amended the credit
agreement 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 September 16, 1999, the Company obtained an
extension of this agreement until October 15, 1999. In addition, in August 1999,
the Company and  Foothill  entered  into a consent  agreement  whereby  Foothill
consented to the IFS transaction.  Pursuant to the merger agreement,  IFS agreed
to put in place a line of  credit,  subordinate  to  Foothill,  to  provide  the
Company with up to $2,000,000 of  additional  financing.  As of August 31, 1999,
the Company had borrowed $350,000 on this new line.

Because of its  continued  losses,  the Company  continues to be in violation of
certain  tangible  net worth and EBITDA  covenants  in its loan  agreement  with
Foothill.  Foothill has waived these  covenant  violations  in the quarter ended
August 31, 1999, and in prior quarters, but in the event that the acquisition by
IFS is not  completed,  no  assurance  can  be  given  that  future  waivers  or
additional financing will be available to the Company.

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 many of its 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  efforts  to  complete  the IFS
transaction,   which  would  allow  for   increased   borrowing  to  meet  these
obligations.

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.


                                       12
<PAGE>

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.

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
which has now been approved by the Board of Directors.


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.


                                       13
<PAGE>

Internal Systems

The  Company has  completed  an  assessment  of 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 November 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 November, 1999.


Costs

The Company  estimates  the  historical  costs to remediate the Year 2000 issues
have totaled over $1,000,000 and future costs to remediate will be approximately
$200,000.  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 the near
future.


                                       14
<PAGE>

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 COMPLETION OF THE
IFS TRANSACTION  AND 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  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."



                                       15
<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.



                                       16
<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, July 1, 1999, and October 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 (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 and (iv) on October 1, 1999 in
accordance  with and  pursuant  to the terms of the Series B, 48.43  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.



                                       17
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits:

2.1       Agreement  and Plan of Merger,  dated as of September 1, 1999,  by and
          among  IFS  Americas,  Inc.,  IFS  Acquisition,   Inc.  and  Effective
          Management Systems, Inc.

4.1       Fifth  Amendment  to Loan  Agreement  by and  among  Foothill  Capital
          Corporation and Effective Management Systems,  Inc.,  EMS-East,  Inc.,
          and Effective  Management  Systems of Illinois,  Inc., dated August 1,
          1999.

4.2       Consent and Sixth  Amendment to Loan  Agreement by and among  Foothill
          Capital Corporation and Effective Management Systems,  Inc., EMS-East,
          Inc., and Effective Management Systems of Illinois, Inc., dated August
          31, 1999.

4.3       Seventh  Amendment  to Loan  Agreement by and among  Foothill  Capital
          Corporation and Effective Management Systems,  Inc.,  EMS-East,  Inc.,
          and Effective  Management  Systems of Illinois,  Inc., dated September
          16, 1999.

4.4       Waiver to Loan Agreement by and among Foothill Capital Corporation and
          Effective  Management  Systems,  Inc.,  EMS-East,  Inc., and Effective
          Management Systems of Illinois, Inc., dated October 12, 1999.

4.5       Stock Option Agreement,  dated as of September 1, 1999, by and between
          IFS Americas,  Inc., IFS  Acquisition,  Inc. and Effective  Management
          Systems,  Inc.

10.1      Fairness  opinion of Tucker  Anthony Cleary Gull,  dated  September 1,
          1999.


                                       18
<PAGE>


10.2      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,   Inc.,  IFS  Acquisition,   Inc.  and  Michael  D.  Dunham.

10.3      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,   Inc.,  IFS  Acquisition,   Inc.  and  Thomas  M.  Dykstra.

10.4      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,  Inc.,  IFS  Acquisition,   Inc.  and  Donald  W.  Vahlsing.

10.5      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,  Inc.,  IFS  Acquisition,  Inc.  and  Robert E.  Weisenberg.

10.6      Mutual Nondisclosure Agreement,  executed on or about May 24, 1999, by
          and between Effective Management Systems, Inc. and IFS Americas,  Inc.

10.7      Letter  of  Industrial  &  Financial  Systems,  IFS  AB  to  Effective
          Management Systems,  Inc., dated September 1, 1999,  regarding funding
          for the Offer and the Merger.

10.8      Letter of Michael  D.  Dunham to IFS,  Inc.,  dated  August 31,  1999,
          regarding the purchase of shares of stock of Industrial  and Financial
          Systems,  IFS AB.


                                       19
<PAGE>


10.9      Letter of Thomas M.  Dykstra to IFS,  Inc.,  dated  August  31,  1999,
          regarding the purchase of shares of stock of Industrial  and Financial
          Systems,  IFS AB.

10.10     Non-competition Agreement by and between Effective Management Systems,
          Inc. and Helmut M. Adam,  dated  September 1, 1999.

10.11     Non-competition Agreement by and between Effective Management Systems,
          Inc. and Scott J. Mermel,  dated September 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.


October 15, 1999
                                 By:/s/ Michael D. Dunham
                                        Michael D. Dunham
                                 President (principal executive officer)



                                 By:/s/ Thomas G. Hickinbotham
                                        Thomas G. Hickinbotham
                                 Chief Financial Officer and Assistant Treasurer
                                 (principal financial and accounting officer)



                                       21
<PAGE>

                                  Exhibit Index
                       Effective Management Systems, Inc.


Exhibit Number                     Exhibit
--------------                     -------

2.1       Agreement  and Plan of Merger,  dated as of September 1, 1999,  by and
          among  IFS  Americas,  Inc.,  IFS  Acquisition,   Inc.  and  Effective
          Management Systems, Inc.  [Incorporated by reference to Exhibit (c)(1)
          to Effective Management Systems,  Inc.'s Solicitation/  Recommendation
          Statement on Schedule 14D-9, dated September 8, 1999].

4.1       Fifth  Amendment  to Loan  Agreement  by and  among  Foothill  Capital
          Corporation and Effective Management Systems,  Inc.,  EMS-East,  Inc.,
          and Effective  Management  Systems of Illinois,  Inc., dated August 1,
          1999.

4.2       Consent and Sixth  Amendment to Loan  Agreement by and among  Foothill
          Capital Corporation and Effective Management Systems,  Inc., EMS-East,
          Inc., and Effective Management Systems of Illinois, Inc., dated August
          31, 1999.

4.3       Seventh  Amendment  to Loan  Agreement by and among  Foothill  Capital
          Corporation and Effective Management Systems,  Inc.,  EMS-East,  Inc.,
          and Effective  Management  Systems of Illinois,  Inc., dated September
          16, 1999.

4.4       Waiver to Loan Agreement by and among Foothill Capital Corporation and
          Effective  Management  Systems,  Inc.,  EMS-East,  Inc., and Effective
          Management Systems of Illinois, Inc., dated October 12, 1999.

4.5       Stock Option Agreement,  dated as of September 1, 1999, by and between
          IFS Americas,  Inc., IFS  Acquisition,  Inc. and Effective  Management
          Systems,  Inc.   [Incorporated  by  reference  to  Exhibit  (c)(2)  to
          Effective  Management  Systems,  Inc.'s  Solicitation/  Recommendation
          Statement on Schedule 14D-9, dated September 8, 1999].

10.1      Fairness  opinion of Tucker  Anthony Cleary Gull,  dated  September 1,
          1999  [Incorporated  by  reference  to  Exhibit  (a)(3)  to  Effective
          Management Systems, Inc.'s Solicitation/  Recommendation  Statement on
          Schedule 14D-9, dated September 8, 1999].


                                       22
<PAGE>

Exhibit Number                     Exhibit
--------------                     -------

10.2      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,   Inc.,  IFS   Acquisition,   Inc.  and  Michael  D.  Dunham
          [Incorporated  by reference to Exhibit (c)(3) to Effective  Management
          Systems,  Inc.'s  Solicitation/  Recommendation  Statement on Schedule
          14D-9, dated September 8, 1999].

10.3      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,   Inc.,  IFS   Acquisition,   Inc.  and  Thomas  M.  Dykstra
          [Incorporated  by reference to Exhibit (c)(4) to Effective  Management
          Systems,  Inc.'s  Solicitation/  Recommendation  Statement on Schedule
          14D-9, dated September 8, 1999].

10.4      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,   Inc.,  IFS  Acquisition,   Inc.  and  Donald  W.  Vahlsing
          [Incorporated  by reference to Exhibit (c)(5) to Effective  Management
          Systems,  Inc.'s  Solicitation/  Recommendation  Statement on Schedule
          14D-9, dated September 8, 1999].

10.5      Stockholder Agreement, dated as of September 1, 1999, by and among IFS
          Americas,  Inc.,  IFS  Acquisition,  Inc.  and  Robert  E.  Weisenberg
          [Incorporated  by reference to Exhibit (c)(6) to Effective  Management
          Systems,  Inc.'s  Solicitation/  Recommendation  Statement on Schedule
          14D-9, dated September 8, 1999].

10.6      Mutual Nondisclosure Agreement,  executed on or about May 24, 1999, by
          and between Effective Management Systems, Inc. and IFS Americas,  Inc.
          [Incorporated by reference to Exhibit (c)(15) to Effective  Management
          Systems,  Inc.'s  Solicitation/  Recommendation  Statement on Schedule
          14D-9, dated September 8, 1999].

10.7      Letter  of  Industrial  &  Financial  Systems,  IFS  AB  to  Effective
          Management Systems,  Inc., dated September 1, 1999,  regarding funding
          for the Offer and the Merger  [Incorporated  by  reference  to Exhibit
          (c)(16)  to  Effective   Management  Systems,   Inc.'s   Solicitation/
          Recommendation Statement on Schedule 14D-9, dated September 8, 1999].

10.8      Letter of Michael  D.  Dunham to IFS,  Inc.,  dated  August 31,  1999,
          regarding the purchase of shares of stock of Industrial  and Financial
          Systems,  IFS AB  [Incorporated  by  reference  to Exhibit  (c)(17) to
          Effective  Management  Systems,  Inc.'s  Solicitation/  Recommendation
          Statement on Schedule 14D-9, dated September 8, 1999].


                                       23
<PAGE>

Exhibit Number                     Exhibit
--------------                     -------

10.9      Letter of Thomas M.  Dykstra to IFS,  Inc.,  dated  August  31,  1999,
          regarding the purchase of shares of stock of Industrial  and Financial
          Systems,  IFS AB  [Incorporated  by  reference  to Exhibit  (c)(18) to
          Effective  Management  Systems,  Inc.'s  Solicitation/  Recommendation
          Statement on Schedule 14D-9, dated September 8, 1999].

10.10     Non-competition Agreement by and between Effective Management Systems,
          Inc.  and Helmut M. Adam,  dated  September 1, 1999  [Incorporated  by
          reference to Exhibit (c)(19) to Effective  Management Systems,  Inc.'s
          Solicitation/   Recommendation  Statement  on  Schedule  14D-9,  dated
          September 8, 1999].

10.11     Non-competition Agreement by and between Effective Management Systems,
          Inc. and Scott J. Mermel,  dated  September 1, 1999  [Incorporated  by
          reference to Exhibit (c)(20) to Effective  Management Systems,  Inc.'s
          Solicitation/   Recommendation  Statement  on  Schedule  14D-9,  dated
          September 8, 1999].

27        Financial Data Schedule [EDGAR version only].


                                       24