SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q
                (Mark one)
               [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF
                THE SECURITIES EXCHANGE ACT OF 1934

                     For the Quarter ended December 31, 1998

                                       OR

               [ ] TRANSITION REPORT PURSUANT TO SECION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from       to

                         Commission File Number: 0-24077
                         Mobius Management Systems, Inc.
             (Exact name of registrant as specified in its charter)

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



       120 Old Post Road, Rye, New York                       10580
     (Address of principal  executive offices)              (zip code)


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


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 ||


Number of shares outstanding of the issuer's common stock as of February 3, 1998

                 Class                          Number of Shares Outstanding

Common Stock, par value $0.0001 per share                 17,803,150



<PAGE>



                         MOBIUS MANAGEMENT SYSTEMS, INC.


                                      INDEX


PART I      FINANCIAL INFORMATION


            Item 1.  Financial Statements

              Consolidated Balance Sheets
                June 30, 1998 and December 31, 1998                
              Consolidated Statements of Operations
                Three and six months ended December 31, 1997 and 1998
              Consolidated Statement of Stockholders' Equity
                Six months ended December 31, 1998
              Consolidated Statements of Cash Flows
                Six months ended December 31, 1997 and 1998

              Notes to Consolidated Financial Statements

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

            Item 3.  Quantitative and Qualitative Disclosures
                     About Market Risk

PART II     OTHER INFORMATION

            Item 1.  Legal Proceedings

            Item 2.  Changes in Securities and Use of Proceeds

            Item 3.  Defaults Upon Senior Securities

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

            Item 5.  Other Information

            Item 6.  Exhibits and Reports on Form 8-K

SIGNATURES


<PAGE>



PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
<TABLE>


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

<CAPTION>

                                                                 December 31,
                                                        June 30,     1998
                                                          1998   (Unaudited)
ASSETS
<S>                                                    <C>         <C>

Current assets:
  Cash and cash equivalents                            $  42,222    $ 44,434
  Accounts receivable, net of allowance
    for doubtful accounts of $612 and
    $580, respectively                                    10,733       8,674
  Software license installments                            7,330      10,348
  Other current assets                                     1,682       2,185
                                                        --------     -------
      Total current assets                                61,967      65,641
Software license installments, non-current portion,
  net of allowance for doubtful accounts of $767
  and $859, respectively                                  13,686      13,491
Property and equipment, net                                2,932       3,345
Other assets                                                 215         216
                                                        --------     -------
Total assets                                            $ 78,800    $ 82,693
                                                        ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses                 $  9,471    $  8,643
  Deferred maintenance revenue                            11,408      13,273
  Deferred income taxes                                    2,054       3,139
  Other liabilities                                          969          61
                                                        --------    --------
  Total current liabilities                               23,902      25,116
                                                        --------    --------

Deferred maintenance revenue, non-current portion          5,616       4,525  
Deferred income taxes, non-current portion                 3,124       3,331
Capital lease obligations, less current portion               36           5
Stockholders' equity:
  Common stock $.0001 par value; authorized 40,000,000
    shares; issued and outstanding 17,694,500 and
    17,789,150 shares, respectively                            2           2
  Additional paid-in capital                              47,994      48,216
  Deferred compensation                                   (2,076)     (1,369)
  Retained earnings                                       12,199      14,819
  Cumulative foreign currency translation adjustment           3          48
  Treasury stock, at cost, 4,091,000
    and 4,091,000 shares, respectively                   (12,000)    (12,000)
                                                        --------    --------
  Total stockholders' equity                              46,122      49,716
                                                        --------    --------
Total liabilities and stockholders' equity              $ 78,800    $ 82,693
                                                        ========    ========
</TABLE>


         See accompanying notes to consolidated financial statements.


<PAGE>

<TABLE>


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

<CAPTION>


                                          Three Months Ended                 Six Months Ended 
                                              December 31,                      December 31,
                                           1997            1998            1997             1998
                                      (Unaudited)      (Unaudited)                     (Unaudited)
<S>                                      <C>           <C>              <C>             <C>
 Revenues:
   Software license revenues             $ 8,596       $ 13,253        $ 14,293         $ 23,422
   Maintenance and other revenues          4,595          5,852           8,778           11,439
                                         -------       --------        --------         --------  
     Total revenues                       13,191         19,105          23,071           34,861

Cost of revenues:
   Software license revenues                 312            232             678              543
   Maintenance and other revenues            862          1,174           1,554            2,478
                                         -------       --------        --------         --------       
     Total cost of revenues                1,174          1,406           2,232            3,021

Gross profit                              12,017         17,699          20,839           31,840

Operating expenses:
   Sales and marketing                     6,097          9,702          10,797           18,048
   Research and development                1,869          2,706           3,550            5,277
   General and administrative              1,542          2,326           3,004            3,980
   Stock compensation expense                  -            343               -              666
                                         -------       --------        --------         --------  
     Total operating expenses              9,508         15,077          17,351           27,971

Income from operations                     2,509          2,622           3,488            3,869
Miscellaneous income, net                    502            702             820            1,334
                                         -------       --------        --------         --------  
Income before income taxes                 3,011          3,324           4,308            5,203
Provision for income taxes                 1,605          1,595           2,355            2,583
Accretion on preferred stock                 102              -             102                -
                                         -------       --------        --------         --------       
Net income                                $1,304         $1,729         $ 1,851           $2,620
                                         =======       ========        ========         ========
     
Basic weighted average shares             10,911         17,788          10,909           17,767
Basic earnings per share                   $0.12          $0.10           $0.17            $0.15

Diluted weighted average shares           16,257         18,928          15,785           18,901
Diluted earnings per share                 $0.08          $0.09           $0.12            $0.14

</TABLE>

<PAGE>

<TABLE>


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



                                                                                       Cumulative
                                                                                        Foreign
                                                  Additional                            Currency                          Total
                                   Common Stock     Paid in    Retained    Deferred   Translation  Treasury Stock     Stockholders'
                                  Shares  Amount    Capital    Earnings  Compensation  Adjustment  Shares    Amount       Equity
                                  ------  ------    -------    --------  ------------  ----------  ------    ------   ------------
<S>                               <C>     <C>       <C>         <C>        <C>            <C>        <C>    <C>         <C>   

Balance at June 30, 1998          17,695  $  2      $47,994     $12,199    $(2,076)       $  3       4,091  $(12,000)   $46,122
Net income                             -     -           -        2,620          -           -          -         -       2,620
Unrealized translation gain            -     -           -            -          -          45          -         -          45
Stock options exercised               94     -          263           -          -           -          -         -         263
Change in deferred compensation        -     -          (41)          -        707           -          -         -         666
                                ------------------------------------------------------------------------------------------------
Balance at December 31, 1998      17,789  $  2      $48,216     $14,819    $(1,369)       $ 48       4,091  $(12,000)   $49,716
                                ================================================================================================

</TABLE>

       See accompanying notes to consolidated financial statements.



<PAGE>

<TABLE>



                         MOBIUS MANAGEMENT SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands)
<CAPTION>

                                                              Six Months Ended
                                                                  December 31,
                                                                1997      1998
                                                                     (Unaudited)
<S>                                                        <C>          <C>

Cash flows from operating activities:
Net income                                                 $   1,851    $ 2,620
Adjustments to reconcile net
  income to net cash provided by operating activities:
   Deferred income taxes                                       1,009      1,292
   Depreciation and amortization                                 305        530
   Accretion of Preferred Stock                                  102         --
   Stock compensation expense                                     --        666
     Change in operating assets and liabilities:
     Accounts receivable, net                                  1,555      2,059
     Software license installments                            (4,281)    (2,823)
     Other assets                                             (1,592)      (359)
     Accounts payable and accrued expenses                    (1,904)      (828)
     Other liabilities                                           (78)      (908)
     Deferred maintenance revenue                              4,961        774
                                                             -------     ------
         Total adjustments                                        77        403 
                                                             -------     -------
         Net cash provided by operating activities             1,928      3,023
                                                             -------     ------
Cash flows used in investing activities:
   Capital expenditures                                         (322)      (943)
                                                             -------     ------
Cash flows from financing activities:
   Cash received from exercise of stock options                   --        118
   Payments on capital lease obligations                         (26)       (31)
                                                             -------     ------
         Net cash (used in) provided by financing activities     (26)        87
                                                             -------     ------
Effect of exchange rate changes on
   cash and cash equivalents                                     (70)        45 
                                                             --------    -------
Net change in cash and cash equivalents                        1,510      2,212
Cash and cash equivalents at beginning
   of period                                                   5,672     42,222
                                                              ------    -------
Cash and cash equivalents at end of period                    $7,182    $44,434
                                                              ======    =======
Supplemental disclosure of cash flow
   information:
   Cash paid during the period for:
     Interest                                                $     6   $    12
     Income taxes                                              1,756     2,484

</TABLE>

         See accompanying notes to consolidated financial statements.


<PAGE>





(1)  Basis of Presentation

The  accompanying  consolidated  financial  statements  as of June 30,  1998 and
December  31, 1998 and for the three and six month  periods  ended  December 31,
1997 and 1998,  have been prepared in accordance  with the  requirements  of the
Securities  and Exchange  Commission  (SEC) for interim  reporting.  Under those
rules,  certain  footnotes  or other  financial  information  that are  normally
required by generally accepted accounting  principles (GAAP) can be condensed or
omitted.

Revenues,  expenses,  assets  and  liabilities  vary  during  the  year and GAAP
requires us to make estimates and assumptions in preparing our interim financial
statements.  We have made our best effort in  establishing  good faith estimates
and assumptions, however, actual results may differ.

We are  responsible  for the  financial  statements  included in this Form 10-Q.
These financial statements include all normal and recurring adjustments that are
necessary  for the fair  presentation  of our  financial  position,  results  of
operations  and  changes  in  cash  flow.  These  statements  should  be read in
conjunction with the consolidated  financial  statements and notes in our latest
Form 10-K.

(2) Significant Accounting Policies

Earnings Per Share

Basic EPS is computed by dividing income available to common stockholders by the
weighted average number of shares of common stock outstanding during the period.
The computation of Diluted EPS is similar to the computation of Basic EPS except
that  it  gives  effect  to  all  potentially  dilutive  instruments  that  were
outstanding  during the period.  Stock options were dilutive  instruments in all
four periods and our Series A Convertible  Preferred  Stock was dilutive for the
three and six months ended December 31, 1997.

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

                                                                  Three Months Ended December 31,
                                                      1997                                            1998
                                  ------------------------------------------      -----------------------------------------
                                   Net Income        Shares       Per Share         Net Income       Shares      Per Share
                                   (Numerator)   (Denominator)     Amount          (Numerator)   (Denominator)     Amount
<S>                                  <C>              <C>           <C>              <C>             <C>           <C>


Basic EPS:
  Net income                         $ 1,304                                         $ 1,729
                                     =======                                         =======
  Weighted average                     
  shares outstanding                                 10,911                                          17,788
Basic EPS                                                           $0.12                                          $0.10
                                                                    =====                                          =====

Diluted EPS:
  Net income                         $ 1,304                                         $ 1,729
                                     =======                                         =======
  Dilutive effect of
  convertible securities                              4,091                                               -
  Dilutive effect of
  stock options                                       1,255                                           1,140
                                                     ------                                          ------
Diluted EPS                                          16,257         $0.08                            18,928        $0.09
                                                     ======         =====                            ======        =====


</TABLE>








(2) Significant Accounting Policies (continued)
<TABLE>
<CAPTION>

                                                                     Six Months Ended December 31,
                                                     1997                                            1998
                                 -------------- --------------- ------------      ------------- --------------- ------------
                                  Net Income        Shares       Per Share         Net Income       Shares       Per Share
                                  (Numerator)   (Denominator)     Amount          (Numerator)   (Denominator)     Amount
<S>                                 <C>             <C>            <C>               <C>            <C>            <C>

Basic EPS:
  Net income                        $ 1,851                                          $2,620
                                    =======                                          ======
  Weighted average
  shares outstanding                                 10,909                                         17,767
Basic EPS                                                          $0.17                                           $0.15
                                                                   =====                                           =====

Diluted EPS:
  Net income                        $ 1,851                                           $2,620
                                    =======                                           ======
  Dilutive effect of
  convertible securities                             4,104                                               -
  Dilutive effect of
  stock options                                        772                                           1,134
                                                    ------                                          ------
Diluted EPS                                         15,785         $0.12                            18,901         $0.14
                                                    ======         =====                            ======         =====

</TABLE>

Recent Accounting Pronouncements

On December 15,  1998,  the AICPA  issued SOP 98-9,  "Modification  of SOP 97-2,
Software Revenue Recognition,  With Respect to Certain Transactions".  SOP 98-9,
which is effective for transactions entered into in fiscal years beginning after
March 15, 1999,  requires the  application of the "residual  method" for certain
components of a multiple element arrangement. Under this method, the arrangement
fee is  recognized  as  follows:  (1) the total  fair  value of the  undelivered
elements,  as indicated by vendor-specific  objective evidence,  is deferred and
subsequently recognized in accordance with the relevant sections of SOP 97-2 and
(2) the difference between the total arrangement fee and the amount deferred for
the  undelivered  elements to be recognized as revenue  related to the delivered
elements.  All other provisions of SOP 97-2 remain in effect.  We will adopt SOP
98-9 for software  transactions  in our next fiscal year which begins on July 1,
1999. We believe our current accounting policies  substantially  comply with SOP
98-9 and therefore do not expect it to have a material effect on our operations.

3)  Software License Installments

We offer extended  payment terms to some of our customers.  For software license
contracts of 15 years,  the related  financing  period is generally 5 years. For
software  installment  contracts of 3 to 5 years,  the  payments  are  generally
spread ratably over the term. Software license  installments are discounted at a
market rate of interest at the date the  software  license  contract  revenue is
recognized.  The  discount is  amortized  to interest  income using the interest
method over the term of the license contract.

(4)  Property and Equipment

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

                                                       June 30,  December 31, 
                                                         1998        1998
                                                       -------    ----------  

   Furniture, fixtures and office equipment                508     $  578
   Computer equipment and software                       4,410      5,292
   Leasehold improvements                                  544        572
                                                        ------      -----
                                                         5,462      6,442
   Less accumulated depreciation and amortization       (2,530)    (3,097)
                                                        ------     ------
   Property and equipment, net                          $2,932     $3,345
                                                        ======     ======



<PAGE>



(4)  Property and Equipment (continued)

Depreciation and amortization expense on property and equipment,  including
capital  leases,  was  $305,000  and  $530,000  for the six month  period  ended
December 31, 1997 and December 31, 1998, respectively.

(5)  Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):

                                                   June 30,    December 31, 
                                                     1998         1998
                                                  ---------    -----------

         Accounts payable                          $  801        $  515
         Compensation and related benefits          4,872         4,476
         Royalty payable                            1,318         1,162
         Other                                      2,480         2,490
                                                   ------        ------
                                                   $9,471        $8,643
                                                   ======        ======

(6)  Stock Incentive Plan

In January, February and March 1998 we granted 350,000, 370,000 and 53,000 stock
options, respectively,  under our 1996 Stock Incentive Plan at an exercise price
of $9.86,  $11.00 and $11.00 per share,  respectively,  which were deemed by the
Board of  Directors to be fair market  values for the shares on these dates.  We
subsequently determined that these options were granted at exercise prices below
the fair market value of $14.00 per share, the low end of our preliminary  range
of per share prices for our Initial Public Offering  ("IPO") in April 1998. As a
result,  for the three and six months ended  December 31,  1998,  we  recognized
$343,000 and $666,000 of  compensation  expense  related to these stock options,
respectively.   We  expect  to  recognize  additional  compensation  expense  of
approximately  $1,369,000 in future periods.  This compensation  expense will be
amortized over the respective  option  holders'  service  periods,  adjusted for
option holders' terminations.

(7) Commitments and Contingencies

Our revolving line of credit expired on October 20, 1998. We are in negotiations
to extend,  expand or replace our line of credit for working capital.  We expect
that the new line of credit  will be secured by certain  assets and may  contain
certain financial restrictions and covenants such as maintaining minimum amounts
of cash,  net  worth  and  profitability.  In  compliance  with the lease of our
corporate  headquarters,  our  landlord  holds a letter of credit  with  Silicon
Valley Bank for $275,000.  This letter of credit is secured by a certificate  of
deposit.

(8) Subsequent Event

After  the  close  of  the  quarter,  we  completed  negotiations  to  sell  our
INFOPAC-TapeSaver  product to Technologic  Software  Concepts,  Incorporated  of
Irvine,  California  for  approximately  $3.0 million.  TapeSaver  accounted for
approximately  3.7% of license  revenue and  approximately  7.2% of  maintenance
revenue during the most recent quarter. Under the terms of the sale, Technologic
will assume  responsibility  for maintenance  support for all current  TapeSaver
licenses.  We will recognize the $3.0 million as license  revenue as Technologic
makes payments to us over the next five years.



<PAGE>




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

In this section,  readers are given a more detailed  assessment of our operating
results  and  changes in  financial  position.  This  section  should be read in
conjunction with our Consolidated  Financial  Statements and Notes.  Please note
that  references  in this  section to "last year's  quarter" and "this  quarter"
refer to our fiscal quarters ended December 31, 1997 and 1998, respectively. Our
quarterly revenues and operating results have varied  substantially from quarter
to  quarter  in the past,  and are likely to  continue  to do so in the  future.
Certain  factors  underlying  such  fluctuations,  as well as a number  of other
factors relevant to a reader's  understanding of this Management  Discussion and
Analysis, are set forth under the heading "Factors Affecting Future Performance"
contained in our Form 10-K, the full text of which is  incorporated in this Form
10-Q by this reference and filed as an exhibit hereto.

Statements  contained in this quarterly report,  other than historical financial
results,  may  contain  forward-looking  statements  within  the  meaning of the
Private  Securities  Litigation Reform Act of 1995.  Forward-looking  statements
involve risks and uncertainties.  In particular, any statements contained herein
regarding  expectations with respect to future sales and profitability,  as well
as product  development and/or  introductions,  are subject to known and unknown
risks,  uncertainties and  contingencies,  many of which are beyond our control,
which may cause actual results, performance or achievements to differ materially
from those projected or implied in such forward-looking statements. Factors that
might affect actual results,  performance or achievements  include,  among other
things,  overall economic and business conditions,  the demand for our goods and
services,  and technological  advances and competitive factors in the markets in
which we compete.  These risks and  uncertainties  are  described in detail from
time to  time in our  filings  with  the  Securities  and  Exchange  Commission,
including  our Form 10-K filed on September 28, 1998. We accept no obligation to
update these forward-looking statements and do not intend to do so.

Overview

We are a leading provider of enterprise  software  products designed to optimize
the  storage,  retrieval  and  presentation  of large  volumes of  transactional
information.  Major financial services,  healthcare,  manufacturing,  retail and
telecommunications  companies  and  governmental  entities  use our  products to
facilitate customer service and other mission-critical functions.


<PAGE>




Results of Operations

The  following  table  presents  our  Consolidated  Statements  of  Income  as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>


                                             Three Months Ended      Six Months Ended
                                                December 31,            December 31,
                                              1997       1998         1997        1998
                                              ----       ----         ----        ----
                                                    (Unaudited)               (Unaudited)
<S>                                          <C>         <C>         <C>         <C>   

Revenues:
  Software license revenues                   65.2%       69.4%       62.0%       67.2%
  Maintenance and other revenues              34.8        30.6        38.0        32.8
                                             -----       -----       -----       -----
         Total revenues                      100.0       100.0       100.0       100.0
Costs of revenues:
  Software license revenues                    2.4         1.2         2.9         1.6
  Maintenance and other revenues               6.5         6.2         6.8         7.1
                                             -----       -----       -----       -----
         Total costs of revenues               8.9         7.4         9.7         8.7
                                             -----       -----       -----       -----
Gross profit                                  91.1        92.6        90.3        91.3
Operating expenses:
  Sales and marketing                         46.2        50.7        46.8        51.8
  Research and development                    14.2        14.2        15.4        15.1
  General and administrative                  11.8        12.2        12.9        11.4
  Stock compensation expense                     -         1.8           -         1.9
                                             -----       -----       -----       -----
         Total operating expenses             72.2        78.9        75.1        80.2
                                             -----       -----       -----       -----
Income from operations                        18.9        13.7        15.2        11.1
Miscellaneous income, net                      3.9         3.7         3.5         3.8
                                             -----       -----       -----       -----
Income before income taxes                    22.8        17.4        18.7        14.9
Provision for income taxes                    12.2         8.3        10.2         7.4
Accretion on Preferred Stock                   0.7           -         0.5           -
                                             -----       -----       -----       -----
Net income available to common stock           9.9%        9.1%        8.0%        7.5%
                                             =====       =====       =====       =====

</TABLE>


                Three Months Ended December 31, 1997 Compared to
                      Three Months Ended December 31, 1998

Revenues.

o    Software license revenues  increased 54.2% from $8.6 million in last year's
     quarter  to  $13.3  million  this  quarter.   The  increase  was  primarily
     attributable  to  increased  sales  of our  ViewDirect  and  DocumentDirect
     products.  These  increases  were offset by decreased  sales of the ABS and
     TapeSaver products.

o    Maintenance  and other revenues  increased  27.4% from $4.6 million in last
     year's  quarter to $5.9 million this  quarter.  The increase was  primarily
     attributable  to the  growth of the number  and size of  software  licenses
     covered by maintenance contracts.
     Other revenues for both periods were not significant.

o    Total revenues increased 44.8% from $13.2 million in last year's quarter to
     $19.1  million  this  quarter.  U.S.  revenues  increased  49.6% from $11.4
     million  in  last  year's  quarter  to  $17.1  million  this  quarter.  Our
     international  revenues  increased  13.8% from $1.7  million in last year's
     quarter to $2.0 million this quarter.  Our total  revenues  have  increased
     primarily  because we have sold more  licenses  for our products to new and
     existing customers.


<PAGE>



Costs of Revenues.

o    Costs of license  revenues  consist  primarily of royalties and  sublicense
     fees. The costs of license  revenues  decreased 25.6% from $312,000 in last
     year's  quarter  to  $232,000  this  quarter,  representing  3.6% and 1.8%,
     respectively,  of license  revenues in those  periods.  This decrease was a
     result of decreases in the sales of products subject to royalties.

o    Costs of  maintenance  and other  revenues  consist  primarily  of customer
     support staff costs. The costs of maintenance and other revenues  increased
     36.2% from  $862,000 in last year's  quarter to $1.2 million this  quarter,
     representing   18.8%  and  20.1%  of   maintenance   and  other   revenues,
     respectively.   This  increase  was  primarily  attributable  to  increased
     staffing and personnel-related costs.

Operating Expenses.

o    Sales and  marketing  expenses  consist  primarily of the cost of personnel
     associated  with the  selling  and  marketing  of our  products,  including
     salaries,  commissions, bonus and travel and entertainment costs. Sales and
     marketing   expenses  also  include  the  cost  of  branch  sales  offices,
     marketing,  promotional  materials  and  advertising.  Sales and  marketing
     expenses  increased  59.1% from $6.0 million in last year's quarter to $9.7
     million this quarter.  This increase was primarily  attributable  to hiring
     more sales staff, which increased personnel related costs.

o    Research and  development  expenses  consist  primarily of personnel  costs
     attributable  to  the   development  of  new  software   products  and  the
     enhancement  of  existing  products.   Research  and  development  expenses
     increased  44.8% from $1.9  million in last year's  quarter to $2.7 million
     this quarter. The increase is primarily  attributable to increased staffing
     and  personnel-related  costs.  We  believe  that a  significant  level  of
     research  and  development  expenses  will  be  required  to  maintain  our
     competitive position in the future.

o    General and  administrative  expenses consist of personnel costs related to
     management,  accounting, human resources, network services,  administration
     and associated  overhead costs, as well as fees for professional  services.
     General and  administrative  expenses  increased 50.8% from $1.5 million in
     last year's  quarter to $2.3 million this quarter.  This increase is due to
     hiring  additional  personnel,  using  more  subcontractors  to  assist  in
     enhancing  and  improving  our  infrastructure  for  future  growth  and an
     increase  in  professional  fees.  We  expect  general  and  administrative
     expenses to increase in fiscal 1999 as a result of adding  personnel needed
     to support our continued expansion of our operations.

Miscellaneous  Income  consists  of  license  and  other  interest  income,
interest expense and foreign currency  transaction  gains (losses).  License and
other  interest  income  consists of interest on cash  balances and a portion of
license payments under  installment  contracts  allocated to interest based on a
discount rate. License and other interest income increased from $502,000 in last
year's quarter to $702,000 this quarter primarily as a result of the earnings on
higher cash  balances  as a result of our IPO in April 1998 and higher  software
installments.
  
Interest  expense  consists  primarily of costs associated with our capital
lease  obligations.  Foreign  currency  losses  consist of realized  transaction
losses relating to foreign currency  exchange rate  fluctuations.  Both interest
expense and foreign currency transaction losses were not material in last year's
quarter and this quarter.

<PAGE>




Provision  for Income Taxes was $1.6 million in each of the  quarters.  The
effective  tax rates were 53.3% in last year's  quarter and 48.0% this  quarter.
The effective tax rate has decreased due to new tax  structures  for certain new
foreign subsidiaries which permit consolidation of losses for U.S. tax purposes,
tax free  investment  earnings on higher cash  balances in the U.S.  and smaller
losses of some of our foreign subsidiaries.

                 Six Months Ended December 31, 1997 Compared to
                       Six Months Ended December 31, 1998

Revenues.

o    Software license  revenues  increased 63.9% from $14.3 million in the first
     six months of fiscal  1998 to $23.4  million the first six months of fiscal
     1999.  The increase was primarily  attributable  to increased  sales of our
     ViewDirect  and  DocumentDirect  products.  These  increases were offset by
     decreased sales of the ABS and TapeSaver products.

o    Maintenance  and other revenues  increased 30.3% from $8.8 million in first
     six months of fiscal  1998 to $11.4  million the first six months of fiscal
     1999. The increase was primarily  attributable  to the growth of the number
     and size of  software  licenses  covered by  maintenance  contracts.  Other
     revenues for both periods were not significant.

o    Total revenues  increased  51.1% from $23.1 million in the first six months
     of fiscal 1998 to $34.9  million the first six months of fiscal 1999.  U.S.
     revenues  increased  45.0%  from  $20.4  million in the first six months of
     fiscal  1998 to $29.5  million  the first six  months of fiscal  1999.  Our
     international  revenues  increased 97.5% from $2.7 million in the first six
     months of fiscal 1998 to $5.3  million the first six months of fiscal 1999.
     Our total  revenues  have  increased  primarily  because  we have sold more
     licenses for our products to new and existing customers.

Costs of Revenues.

o    Costs of license  revenues  decreased  19.9% from $678,000 in the first six
     months of fiscal  1998 to  $543,000  the first six  months of fiscal  1999,
     representing  4.7% and 2.3%,  respectively,  of license  revenues  in those
     periods.  This  decrease was a result of decreases in the sales of products
     subject to royalties.

o    Costs of maintenance  and other revenues  increased 59.5% from $1.6 million
     in the first six months of fiscal 1998 to $2.5 million the first six months
     of fiscal  1999,  representing  17.7% and  21.7% of  maintenance  and other
     revenues,   respectively.  This  increase  was  primarily  attributable  to
     increased staffing and personnel-related costs.

Operating Expenses.

o    Sales and  marketing  expenses  increased  67.2% from $10.8  million in the
     first six months of fiscal  1998 to $18.0  million  the first six months of
     fiscal 1999. This increase was primarily  attributable to hiring more sales
     staff, which increased personnel related costs.


<PAGE>




o    Research and development  expenses increased 48.6% from $3.6 million in the
     first six  months of fiscal  1998 to $5.3  million  the first six months of
     fiscal 1999. The increase is primarily  attributable to increased  staffing
     and personnel-related costs.

o    General and  administrative  expenses  increased 32.5% from $3.0 million in
     the first six months of fiscal 1998 to $4.0 million the first six months of
     fiscal 1999. This increase is due to hiring additional  personnel and using
     more subcontractors to assist in enhancing and improving our infrastructure
     for future growth.

Miscellaneous Income.  License and other interest income increased from $820,000
in the first six months of fiscal  1998 to $1.3  million the first six months of
fiscal 1999  primarily  as a result of  earnings  on higher  cash  balances as a
result of our IPO in April 1998 and higher software license  installments.  Both
interest  expense and foreign currency  transaction  losses were not material in
the first six months of fiscal 1998 and the first six months of fiscal 1999.

Provision  for Income  Taxes was $2.4  million  for the first six months of
fiscal  1998 and $2.6  million  for the first six  months  of fiscal  1999.  The
effective  tax rates for these  respective  periods  were 54.7% and  49.6%.  The
effective  tax rate has  decreased  due to new tax  structures  for  certain new
foreign subsidiaries which permit consolidation of losses for U.S. tax purposes,
tax free  investment  earnings on higher cash  balances in the U.S.  and smaller
losses of some of our foreign subsidiaries.
Liquidity and Capital Resources

Since our  inception,  we have funded our  operations  principally  through cash
flows from operating  activities  and, to a lesser extent,  bank  financings and
capital  leases.  As of December 31, 1998, we had cash and cash  equivalents  of
$44.4  million,  an increase of $2.2 million from the $42.2 million held at June
30, 1998.

Net cash provided by operating  activities  was $1.9 million and $3.0 million in
the first six months of fiscal 1998 and 1999, respectively.  Our primary sources
of cash during the first six months of fiscal 1999 were increased net income and
decreased  accounts  receivable.  These  sources  were  offset by  increases  in
software license installments,  decreases in accounts payable,  accrued expenses
and liabilities and other assets.  Due to successful  collection efforts and the
seasonality  of our business,  accounts  receivable  decreased  19.2% from $10.7
million at June 30, 1998 to $8.7 million at December 31, 1998.  Software license
installments  increased  13.4%  from  $21.0  million  at June 30,  1998 to $23.8
million at December 31, 1998.

Cash used in investing  activities,  consisting of capital  expenditures for the
purchase of computer  equipment  and software  used in product  development  and
customer  support,  was  $322,000  in the  first six  months of fiscal  1998 and
$943,000 in the first six months of fiscal 1999.

Net cash used in  financing  activities  was  $26,000 in the first six months of
fiscal 1998 and related to the repayment of capital leases. Net cash provided by
financing  activities  was $87,000 in the first six months of fiscal 1999 due to
cash received from the exercise of stock options.

We believe that our existing cash  balances and cash flows  expected from future
operations will be sufficient to meet our capital  requirements  for at least 12
months. We continue negotiations to extend, expand or replace our line of credit
for  working  capital  and expect that the new line of credit will be secured by
certain assets and may contain certain financial restrictions and covenants such
as  maintaining  minimum  amounts  of cash,  net  worth  and  profitability.  In
compliance with the lease of our corporate headquarters in Rye, NY, our landlord
holds a letter of credit with Silicon  Valley Bank for $275,000.  This letter of
credit is secured by a certificate of deposit.

After  the  close  of  the  quarter,  we  completed  negotiations  to  sell  our
INFOPAC-TapeSaver  product to Technologic  Software  Concepts,  Incorporated  of
Irvine,  California  for  approximately  $3.0 million.  TapeSaver  accounted for
approximately  3.7% of license  revenue and  approximately  7.2% of  maintenance
revenue   during  the  most  recent   quarter.   We  believe  the  sale  of  our
INFOPAC-TapeSaver  product will not have a material  impact on future results of
operations.  Under the terms of the sale, Technologic will assume responsibility
for maintenance  support for all current TapeSaver  licenses.  We will recognize
the $3.0 million as license revenue as Technologic makes payments to us over the
next five years.

Year 2000 Compliance

Many currently  installed  operating  systems and software products are coded to
accept  only two digit  entries in the date code  field.  These date code fields
need  additional  digits to  distinguish  21st  century  dates from 20th century
dates. As a result,  computer systems and/or software used by many companies may
need to be upgraded to comply  with such "Year 2000"  requirements.  Significant
uncertainty  exists in the software  industry  concerning the potential  effects
associated with such  compliance.  Since our products are designed for long-term
storage  and  retrieval  of data with end of life dates  well  beyond  2000,  we
believe that our products are and have been Year 2000 compliant. There can be no
assurance   that  our  products  will  not  experience   Year  2000   compliance
difficulties,  or that third party products,  including operating systems,  that
are not Year 2000 compliant will not have a detrimental  effect on the operation
of our products.

We  believe  that Year 2000  issues  may  significantly  affect  the  purchasing
patterns of our customers and potential customers.  Many companies are expending
significant  resources to correct or modify their current  software  systems for
Year 2000 compliance.  These  expenditures may result in reduced funds available
to purchase  software  products  such as those we offer.  Conversely,  Year 2000
issues may cause other  companies to accelerate  purchases,  thereby  causing an
increase in short-term demand and a consequent  decrease in long-term demand for
software products.

Additionally,  Year 2000 compliance  issues could cause a significant  number of
companies, including our customers; to re-evaluate their current systems' needs,
and as a result,  consider  switching to other systems or suppliers.  This could
have a material adverse effect on our business,  operating results and financial
condition.

Management  has  implemented  a  Company-wide  program to prepare  our  internal
computer  systems and  applications  (such as our accounting and word processing
programs) for Year 2000  compliance.  We expect to incur internal staff costs as
well as other expenses necessary during the course of such efforts and we expect
to both replace some systems and upgrade  others.  Maintenance  or  modification
costs will be expensed as incurred. The total cost of this effort is still being
evaluated, but we do not expect the cost to be material.

In light of above, we do not anticipate any serious Year 2000 problems. We will,
however,  continue to assess this  situation  and develop  contingency  plans as
necessary.  Our expectations with respect to these Year 2000 issues are based on
the  assumption  that  there  will be no general  failure  of  external  systems
(including  power,   communications,   transportation,   or  financial  systems)
necessary for the ordinary conduct of business.


Recent Accounting Pronouncements

On December 15,  1998,  the AICPA  issued SOP 98-9,  "Modification  of SOP 97-2,
Software Revenue Recognition,  With Respect to Certain Transactions".  SOP 98-9,
which is effective for transactions entered into in fiscal years beginning after
March 15, 1999,  requires the  application of the "residual  method" for certain
components of a multiple element arrangement. Under this method, the arrangement
fee is  recognized  as  follows:  (1) the total  fair  value of the  undelivered
elements,  as indicated by vendor-specific  objective evidence,  is deferred and
subsequently recognized in accordance with the relevant sections of SOP 97-2 and
(2) the difference between the total arrangement fee and the amount deferred for
the  undelivered  elements to be recognized as revenue  related to the delivered
elements.  All other provisions of SOP 97-2 remain in effect.  We will adopt SOP
98-9 for software  transactions  in our next fiscal year which begins on July 1,
1999. We believe our current accounting policies  substantially  comply with SOP
98-9 and therefore do not expect it to have a material effect on our operations.


Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable



<PAGE>




PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

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

Item 2 - Changes in Securities and Use of Proceeds

(a)  Not applicable

(b)  Not applicable

(c)  Not applicable

(d) On April 27, 1998, the Securities and Exchange Commission declared effective
our Registration  Statement on Form S-1 (File No. 333-47117) with respect to our
initial public offering.  To date, we have not used any of the approximately $33
million of proceeds  from the offering.  The proceeds are currently  invested in
short term, investment grade, interest bearing securities.

Item 3 - Defaults Upon Senior Securities

None

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

We held our Annual  Meeting of  Stockholders  on November 23, 1998.  The matters
submitted to a vote of our stockholders was the election of two directors to the
class of  directors  whose  terms  expire  in 2001 and the  ratification  of the
appointment of our independent auditors.

Our  stockholders  elected  Edward F.  Glassmeyer and Kenneth P. Kopelman to our
Board of Directors, to hold office until the 2001 Annual Meeting of Stockholders
and until  their  respective  successors  are duly  elected and  qualified.  The
results of the voting were as follows:

                  Edward F. Glassmeyer

                  Voted for                          16,901,377
                  Authority withheld                      3,250


                  Kenneth P. Kopelman

                  Voted for                          16,901,377
                  Authority withheld                      3,250


Our  stockholders  ratified  the  appointment  of  KPMG  LLP as our  independent
auditors. The results of the voting were as follows:

                  Voted for                          16,901,927
                  Against                                 2,500
                  Abstain                                   200


Item 5 - Other Information

None


<PAGE>



Item 6 - Exhibits and Reports on Form 8-K

(a)      Exhibits


Exhibit
  No.             Description

3.1*              Form of Second Amended and Restated Certificate of 
                  Incorporation of the Registrant.
3.2*              Form of Amended and Restated By-Laws of the Registrant.
4.1*              Specimen certificate representing the Common Stock
27                Financial Data Schedule (EDGAR only)
99.1              Factors Affecting Future Performance

* Filed as an exhibit to Mobius'  Registration  Statement on Form S-1 
  (File No.  333-47117)  or an amendment  thereto and  incorporated
  herein by reference to the same exhibit number.

(b)      Reports on Form 8-K

         Not Applicable



<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.

Date:  February 16, 1998



                         MOBIUS MANAGEMENT SYSTEMS, INC.

                         By: /s/ E. Kevin Dahill
                                 E. Kevin Dahill
                             Vice President, Finance, Chief 
                             Financial Officer and Treasurer
                            (Principal Financial and Accounting Officer)



<PAGE>





                                  EXHIBIT INDEX

Exhibit                 Description                                          

3.1*              --    Form of Second Amended and Restated Certificate 
                        of Incorporation of the Registrant.
3.2*              --    Form of Amended and Restated By-Laws of the Registrant.
4.1*              --    Specimen certificate representing the Common Stock
27                --    Financial Data Schedule (EDGAR only)
99.1                    Factors Affecting Future Performance

* Filed as an exhibit to Mobius'  Registration  Statement on Form S-1 
  (File No.  333-47117)  or an amendment  thereto and  incorporated
  herein by reference to the same exhibit number.