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, 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: 0-24077

                         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  reportsrequired  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
10, 2000

                 Class                          Number of Shares Outstanding

  Common Stock, par value $0.0001 per share                18,006,462

<PAGE>

                         MOBIUS MANAGEMENT SYSTEMS, INC.


                                      INDEX


PART I      FINANCIAL INFORMATION


         Item 1.  Financial Statements

                  Consolidated Balance Sheets
                    June 30, 1999 and December 31, 1999

                  Consolidated Statements of Operations
                    Three and six months ended December 31, 1998 and 1999

                  Consolidated Statement of Stockholders' Equity
                    Six months ended December 31, 1999

                  Consolidated Statements of Cash Flows
                    Six months ended December 31, 1998 and 1999

                  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

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



<TABLE>
<CAPTION>

                                                                               December 31,
                                                                  June 30,         1999
                                                                    1999       (Unaudited)
                                                                -----------    ------------
<S>                                                               <C>             <C>

ASSETS

Current assets:
     Cash and cash equivalents                                   $ 33,546        $ 32,518
     Marketable securities, at market                               9,362           9,772
     Accounts receivable, net of allowance for doubtful
         accounts of $860 and $764, respectively                   12,631           7,213
     Software license installments, current portion                10,603           9,571
     Other current assets                                           2,281           1,868
                                                                 --------       ---------
              Total current assets                                 68,423          60,942

Software license installments, non-current portion,
     net of allowance for doubtful accounts of $812
     and $804, respectively                                        12,778          11,120
Investment, at cost                                                 1,501              89
Property and equipment, net                                         6,039           8,431
Other assets                                                          460             461
                                                                 --------        --------
              Total assets                                       $ 89,201        $ 81,043
                                                                 ========        ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable and accrued expenses                       $ 13,892        $ 11,138
     Deferred maintenance revenue                                  12,840          13,594
     Deferred income taxes                                          3,293           2,837
     Other liabilities                                                 36               5
                                                                 --------        --------
              Total current liabilities                            30,061          27,574

Deferred maintenance revenue                                        3,811           3,135
Deferred income taxes                                               3,801           3,331

Stockholders' equity:
     Common stock $.0001 par value; authorized 40,000,000
     shares;  issued 21,996,150 and 22,091,962 shares,
     respectively;  outstanding 17,905,150 and 18,000,962
     shares, respectively                                               2               2
     Additional paid-in capital                                    48,409          48,667
     Retained earnings                                             16,497          11,130
     Deferred stock compensation                                     (982)           (649)
     Accumulated other comprehensive income (loss)                   (398)           (147)
     Treasury stock, at cost, 4,091,000
         and 4,091,000 shares, respectively                       (12,000)        (12,000)
                                                                 --------        --------
              Total stockholders' equity                           51,528          47,003
                                                                 --------        --------
Total liabilities and stockholders' equity                       $ 89,201        $ 81,043
                                                                 ========        ========

</TABLE>

              See accompanying notes to consolidated financial statements.
<PAGE>


                         MOBIUS MANAGEMENT SYSTEMS, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                (Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>

                                                    Three Months Ended           Six Months Ended
                                                        December 31,                 December 31,
                                                     1998          1999          1998           1999
                                                  -------        -------       -------        -------
<S>                                               <C>            <C>           <C>            <C>
Revenues:
     Software license revenues                    $13,253        $ 7,256       $23,422        $13,686
     Maintenance and other revenues                 5,852          7,089        11,439         14,042
                                                  -------        -------       -------        -------
         Total revenues                            19,105         14,345        34,861         27,728
Costs of revenues:
     Software license revenues                        232            305           543            490
     Maintenance and other revenues                 1,174          1,340         2,478          2,974
                                                  -------        -------       -------        -------
         Total costs of revenues                    1,406          1,645         3,021          3,464
                                                  -------        -------       -------        -------
Gross profit                                       17,699         12,700        31,840         24,264
                                                  -------        -------       -------        -------
Operating expenses:
     Sales and marketing                            9,702          9,977        18,048         19,719
     Research and development                       2,706          3,248         5,277          6,207
     General and administrative                     2,326          2,973         3,980          5,935
     Stock compensation expense                       343            167           666            333
                                                  -------        -------       -------        -------
         Total operating expenses                  15,077         16,365        27,971         32,194

Income (loss) from operations                       2,622         (3,665)        3,869         (7,930)

License and other interest income                     766            759         1,439          1,485
Interest expense                                       (4)            (1)          (12)            (2)
Foreign currency transaction (losses) gains           (60)             2           (93)            48
Investment impairment                                   -           (821)            -         (1,412)
                                                  -------        -------       -------        -------
Income (loss) before income taxes                   3,324         (3,726)        5,203         (7,811)

Provision (benefit) for income taxes                1,595         (1,202)        2,583         (2,444)
                                                  -------        -------       -------        -------
Net income (loss)                                 $ 1,729        $(2,524)      $ 2,620        $(5,367)
                                                  =======        =======       =======        =======

Basic earnings (loss) per share                   $  0.10        $ (0.14)        $0.15        $ (0.30)
Basic weighted average shares
     outstanding                                   17,788         17,963        17,767         17,940

Diluted earnings (loss) per share                 $  0.09        $ (0.14)        $0.14        $ (0.30)
Diluted weighted average
     shares outstanding                            18,928         17,963        18,901         17,940

</TABLE>

                                See accompanying notes to consolidated financial
statements.
<PAGE>



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

<TABLE>
<CAPTION>

                                                                                     Accumulated
                                                                                        Other                             Total
                                                 Additional                         Comprehensive                     Stockholders'
                                  Common  Stock    Paid-in  Retained    Deferred    Income, net of   Treasury Stock     (Deficit)
                                  Shares  Amount   Capital  Earnings  Compensation        tax       Shares    Amount      Equity
                                  ------------------------------------------------------------------------------------------------
<S>                               <C>        <C>   <C>       <C>         <C>            <C>          <C>    <C>         <C>

Balance at June 30, 1999          17,905     2     $48,409   $16,497     $(982)         $(398)       4,091  $(12,000)   $51,528
Net loss                               -     -           -    (5,367)        -              -            -         -     (5,367)
Change in other comprehensive
  income, net of tax                   -     -           -         -         -            251            -         -        251
                                                                                                                         ------
Comprehensive loss                     -     -           -         -         -              -            -         -     (5,116)
Stock options exercised               42     -          90         -         -              -            -         -         90
Stock purchase plan shares issued     54     -         168         -         -              -            -         -        168
Change in deferred compensation        -     -           -         -       333              -            -         -        333
                                  -----------------------------------------------------------------------------------------------
Balance at December 31, 1999      18,001  $  2     $48,667   $11,130    $ (649)        $ (147)      4,091   $(12,000)   $47,003
                                  ===============================================================================================

</TABLE>

                           See  accompanying  notes  to  consolidated  financial
statements.

<PAGE>


                                          MOBIUS MANAGEMENT SYSTEMS, INC.

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (Unaudited, in thousands)

<TABLE>
<CAPTION>

                                                            Six Months Ended
                                                              December 31,
                                                           1998         1999
                                                        --------      --------
<S>                                                     <C>            <C>
Cash flows provided by operating activities:
  Net income (loss)                                     $  2,620      $ (5,367)
Adjustments to reconcile net
  income (loss) to net cash provided
  by operating  activities:
   Deferred income taxes                                   1,292          (926)
   Depreciation and amortization                             530         1,197
   Stock compensation expense                                666           333
   Impairment of investment                                   --         1,412
   Change in operating assets and liabilities:
     Accounts receivable, net                              2,059         5,418
     Software license installments                        (2,823)        2,690
     Other assets                                           (359)          486
     Accounts payable and accrued expenses                  (828)       (2,693)
     Other liabilities                                      (908)           --
     Deferred maintenance revenue                            774            78
                                                        --------      --------
         Total adjustments                                   403         7,995
                                                        --------      --------
         Net cash provided by operating activities         3,023         2,628
                                                        --------      --------
Cash flows used in investing activities:
   Purchase of marketable securities                          --          (500)
   Capital expenditures                                     (943)       (3,589)
                                                        --------      --------
         Net cash used in investing activities              (943)       (4,089)
                                                        --------      --------
Cash flows (used) provided by financing activities:
   Cash received from employee stock purchase                 --           168
   Cash received from exercise of stock options              118            52
   Payments on capital lease obligations                     (31)          (31)
                                                        --------      --------
         Net cash provided by financing activities            87           189
                                                        --------      --------
Effect of exchange rate changes on
   cash and cash equivalents                                  45           244
                                                        --------      --------
Net change in cash and cash equivalents                    2,212        (1,028)

Cash and cash equivalents at beginning of period          42,222        33,546
                                                        --------      --------
Cash and cash equivalents at end of period              $ 44,434      $ 32,518
                                                        ========      ========
Supplemental disclosure of cash flow
   information:
   Cash paid during the period for:
     Interest                                            $    12     $     2
     Income taxes                                        $ 2,484     $     -
</TABLE>

                           See  accompanying  notes  to  consolidated  financial
statements.

<PAGE>

                         MOBIUS MANAGEMENT SYSTEMS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  Basis of Presentation

         The accompanying consolidated financial statements at June 30, 1999 and
December  31, 1999 and for the three and six month  periods  ended  December 31,
1998 and 1999,  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 the Company to make  estimates and  assumptions  in preparing the
interim  financial  statements.  The  Company  has made  their  best  effort  in
establishing good faith estimates and assumptions,  however,  actual results may
differ.

         Mobius is  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 Mobius's  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 Mobius's latest Form 10-K.

(2)  Earnings Per Share

         Effective  December  1997, the Company  adopted  Statement of Financial
Accounting  Standards  (SFAS)  No.  128,  "Earnings  Per  Share".  SFAS No.  128
stipulates  that the  calculation  of earnings  per share (EPS) be shown for all
historical  periods  as Basic EPS and  Diluted  EPS.  Basic EPS is  computed  by
dividing income available to common  shareholders by the weighted average number
of common shares  outstanding  during the period. The computation of Diluted EPS
is similar to the  computation  of Basic EPS except that it gives  effect to all
potentially  dilutive  instruments that were outstanding during the period. Such
dilutive instruments include stock options.

         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,
                                                    1998                                          1999
                                 ----------------------------------------       --------------------------------------
                                 Net Income        Shares      Per Share        Net Loss         Shares      Per Share
                                 (Numerator)   (Denominator)     Amount        (Numerator)   (Denominator)     Amount
                                 ----------------------------------------       --------------------------------------
<S>                                <C>             <C>           <C>            <C>               <C>         <C>
Basic EPS:
Net income (loss)                  $1,729                                       $(2,524)
                                   ======                                       =======
Weighted average shares
 outstanding                                       17,788                                         17,963
Basic earnings (loss)
per share                                                        $0.10                                        $(0.14)
                                                                 =====                                        ======
Diluted earnings (loss)
per share:
Net income (loss)                  $1,729                                       $(2,524)
                                   ======                                       =======
Dilutive effect of
 stock options                                      1,140                                             -
                                                   ------                                        ------
Diluted earnings (loss)
per share                                          18,928        $0.09                           17,963       $(0.14)
                                                   ======        =====                           ======       ======

</TABLE>
<PAGE>



(2)  Earnings Per Share (continued)
<TABLE>
<CAPTION>

                                                                  Six Months Ended December 31,
                                                    1998                                          1999
                                 ---------------------------------------        --------------------------------------
                                 Net Income        Shares      Per Share        Net Loss         Shares      Per Share
                                 (Numerator)   (Denominator)     Amount        (Numerator)   (Denominator)     Amount
                                 ---------------------------------------        --------------------------------------
<S>                                <C>             <C>           <C>            <C>               <C>          <C>
Basic EPS:
Net income (loss)                  $2,620                                       $(5,367)
                                   ======                                       =======
Weighted average shares
 outstanding                                       17,767                                         17,940
Basic earnings (loss)
per share                                                        $0.15                                        $(0.30)
                                                                 =====                                        ======
Diluted earnings (loss)
per share:
Net income (loss)                  $2,620                                       $(5,367)
                                   ======                                       =======
Dilutive effect of
 stock options                                      1,134                                             -
                                                   ------                                        ------
Diluted earnings (loss)
per share                                          18,901        $0.14                           17,940       $(0.30)
                                                   ======        =====                           ======       ======
</TABLE>


         For the three and six months ended December 31, 1999 stock options were
not  included  in  the  Diluted  EPS  calculation  because  their  effects  were
anti-dilutive.  There were  approximately  757,000 and 770,000  weighted average
shares of options that were not included in the EPS  calculation  because  their
effects were  anti-dilutive in the three and six months ended December 31, 1998,
respectively.


<PAGE>



(3)  Marketable Securities

         Marketable securities are categorized as available-for-sale securities,
as defined by Statement of Financial  Accounting  Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". Unrealized holding gains
and  losses  are  reflected  as  a  net  amount  in  a  separate   component  of
stockholders' equity until realized. For the purpose of computing realized gains
and losses, cost is identified on a specific identification basis. There were no
realized  gains and losses for the three and six months ended December 31, 1999.
As of June 30, 1999 and December 31, 1999, the  unamortized  investment  premium
and unrealized holding gains and losses were insignificant.

(4)  Software License Installments

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

(5)  Property and Equipment

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

                                                     June 30,     December 31,
                                                       1999          1999
                                                    -------       ----------

 Furniture, fixtures and office equipment           $   939        $ 1,022
 Computer equipment                                   7,803         10,843
 Leasehold improvements                               1,153          1,691
                                                     ------         ------
                                                      9,895         13,556
 Less accumulated depreciation and amortization      (3,856)        (5,125)
                                                     ------         ------
 Property and equipment, net                        $ 6,039        $ 8,431
                                                    =======        =======

         Depreciation  and  amortization  expense  on  property  and  equipment,
including capital leases, was $266,000,  $530,000, $637,000 and $1.2 million for
the three and six months ended December 31, 1998 and 1999, respectively. At June
30, 1999 and December 31, 1999 there was  $214,000 of  equipment  under  capital
leases  included in property and  equipment  with  accumulated  depreciation  of
$104,000 and $120,000 respectively.

(6)      Non-Current Investments

         In June 1999, the Company  invested  $1,501,000 in Home Account Network
("HAN"),  a  privately-held,  Web-based  information  technology  company  whose
products are being designed to enable  financial  services  companies to deliver
financial  products and  services via the  Internet.  This is an  investment  in
preferred stock, which automatically  converts into common stock if and when HAN
completes  an initial  public  offering.  The Company  has and will  continue to
regularly review the assumptions  underlying the operating  performance and cash
flow forecasts of HAN to assess the  investment's  recoverability.  Although HAN
has revenues,  it has operated at a loss.  There are no assurances that HAN will
complete  its  development   efforts  or  ultimately  offer  products  that  are
commercially  acceptable,  achieve  profitability  or  that  its  existing  cash
balances and cash flows from future  operations  will be  sufficient to meet its
working  capital  requirements.  HAN continues to consume cash as it executes it
business plan. As of December 31, 1999, these  circumstances have indicated that
this investment is permanently  impaired,  therefore a $821,000 and $1.4 million
impairment  loss have been recorded for the three and six months ended  December
31, 1999.  The current value of the  investment  was  calculated  based upon the
Company's pro-rata portion of HAN's cash balance at December 31, 1999.



<PAGE>



(7)  Accounts Payable and Accrued Expenses

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

                                                     June 30,    December 31,
                                                       1999          1999
                                                     -------       -------

         Accounts payable                            $ 2,179       $ 1,039
         Compensation and related benefits             5,897         5,097
         Royalties payable                             1,358         1,268
         Other                                         4,458         3,734
                                                     -------       -------
                                                     $13,892       $11,138
                                                     =======       =======

(8)  Stock Incentive Plan

         In January, February and March 1998 the Company granted 350,000 370,000
and 53,000 stock options,  respectively,  under the 1996 Stock Incentive Plan at
an exercise  price of $9.86,  $11.00 and $11.00 per share,  respectively,  which
were deemed by the Board of Directors to be fair market values for the shares on
these dates. The Company subsequently determined that these options were granted
at exercise prices below the fair market value of $14.00 per share,  the low end
of the range of per share  prices  for the  Company's  initial  public  offering
("IPO") in April 1998. As a result, the Company recognized  compensation expense
of $343,000,  $666,000, $167,000 and $333,000 for the three and six months ended
December  31,  1998 and 1999,  respectively.  There is  approximately  $214,000,
$264,000,  $134,000 and $37,000 of expense  relating to these 1998 option grants
to be  recognized  in fiscal  years  2000,  2001,  2002 and 2003,  respectively,
subject to adjustments for option holder terminations.

(9)  Comprehensive Income

         Statement  of  Financial   Accounting  Standards  No.  130,  "Reporting
Comprehensive  Income"  requires the disclosure of comprehensive  income,  which
includes net income,  foreign  currency  translation  adjustments and unrealized
gains and losses on  marketable  securities  classified  as  available-for-sale.
Comprehensive  income for the three and six months  ended  December 31, 1998 and
1999 is as follows:

                             Three months ended         Six months ended
                                December 31,               December 31,
                              1998      1999              1998      1999
                             ------------------         ----------------

Net Income (loss)            $1,729   $(2,524)          $2,620   $(5,367)
Unrealized marketable
securities gain (loss)            -       (18)               -       (11)
Unrealized translation
gain (loss)                    (184)      (54)             (45)      262
                            -------------------         ----------------
Comprehensive Income         $1,545   $(2,596)          $2,575   $(5,116)
                            ===================         ================



<PAGE>



(10)  Commitments and Contingencies

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

(11) Sale of INFOPAC-Tapesaver

         In January 1999,  the Company sold the  INFOPAC-TapeSaver  product to a
third party for  approximately  $3.0 million.  Under the terms of the sale,  the
buyer assumed  responsibility for maintenance support for all existing TapeSaver
licenses.  As a result of this  arrangement,  the Company  will  recognize  $3.0
million of license revenue as the buyer makes payments over the next five years,
and has recognized  approximately  $1.0 million of maintenance  revenue  through
December 31, 1999.  For the three and six months  ended  December 31, 1999,  the
Company  recognized  $322,000 and  $479,000 of license  revenue and $122,000 and
$302,000  of  maintenance  revenue  related to this  arrangement,  respectively.
Future  license  revenue is expected to be $112,500 each quarter  thereafter for
the remaining four year term of the contract.  All maintenance  revenue has been
recognized.

(12)     Subsequent Events

         In January 2000, the Company  provided  approximately a $150,000 bridge
loan to HAN.  The  Company  invested  in HAN in June  1999.  See  footnote 6 for
further information.  The Company anticipates it may provide up to an additional
$350,000 in financing in the third  quarter of fiscal 2000 to support HAN's cash
requirements.

         In January 2000, the Company invested $500,000 in Flooz.com,  a startup
Internet company.  Flooz is online gift currency that can be sent to a recipient
over the  Internet.  The flooz gift currency can be redeemed by the recipient at
Flooz.com  participating  merchants.  This is an investment in preferred  stock,
which  converts  into common  stock if and when  Flooz.com  completes an initial
public offering.


<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
Mobius's  operating  results and changes in  financial  position.  This  section
should  be  read  in  conjunction  with  the  Company's  Consolidated  Financial
Statements  and Notes.  Please  note that  references  in this  section to "last
year's quarter" and "this quarter" refer to the Company's  fiscal quarters ended
December  31,  1998 and 1999,  respectively.  Mobius's  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 at the end of the
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations in this Form 10-Q.

         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 the Company's
control,  which may cause actual results,  performance or achievements to differ
materially from those projected or implied in such  forward-looking  statements.
Factors that might affect actual results,  performance or achievements  include,
among other things,  overall  economic and business  conditions,  the demand for
Mobius's goods and services,  and technological advances and competitive factors
in the  markets in which  Mobius  competes.  These risks and  uncertainties  are
described  in  detail  from  time to  time in the  Company's  filings  with  the
Securities  and Exchange  Commission,  including the "Factors  Affecting  Future
Performance" included in the Company's  Management's  Discussion and Analysis of
Financial  Condition and Results of Operations in this Form 10-Q. Mobius accepts
no obligation to update these forward-looking  statements and does not intend to
do so.

Overview

         Mobius is a leading provider of software  products  designed to provide
network- and Web-based access to present and distribute large volumes of diverse
enterprise  information.  Major financial services,  healthcare,  manufacturing,
retail  and  telecommunications  companies  and  governmental  entities  use the
Company's products to record transactions,  facilitate customer service, billing
and other mission-critical functions.



<PAGE>



Results of Operations

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

<TABLE>
<CAPTION>


                                                Three Months Ended                Six Months Ended
                                                    December 31,                    December 31,
                                                  1998         1999              1998          1999
                                                 -----         -----             ----          ----
                                                  (Unaudited)                      (Unaudited)
<S>                                              <C>          <C>              <C>            <C>

Revenues:
  Software license revenues                      69.4%         50.6%            67.2%         49.4%
  Maintenance and other revenues                 30.6          49.4             32.8          50.6
                                                -----         -----            -----         -----
         Total revenues                         100.0         100.0            100.0         100.0
                                                -----         -----            -----         -----
Costs of revenues:
  Software license revenues                       1.2           2.1              1.6           1.8
  Maintenance and other revenues                  6.2           9.4              7.1          10.7
                                                -----         -----            -----         -----
         Total costs of revenues                  7.4          11.5              8.7          12.5
                                                -----         -----            -----         -----
 Gross profit                                    92.6          88.5             91.3          87.5

Operating expenses:
  Sales and marketing                            50.7          69.6             51.8          71.1
  Research and development                       14.2          22.6             15.1          22.4
  General and administrative                     12.2          20.7             11.4          21.4
  Stock compensation expense                      1.8           1.2              1.9           1.2
                                                -----         -----            -----         -----
         Total operating expenses                78.9         114.1             80.2         116.1
                                                -----         -----            -----         -----
Income (loss) from operations                    13.7         (25.6)            11.1         (28.6)
License and other interest income                 4.0           5.3              4.1           5.4
Interest expense                                   --            --               --            --
Foreign currency transaction(losses)gains        (0.3)           --             (0.3)          0.1
Investment impairment                              --          (5.7)              --          (5.1)
                                                -----         -----             -----        -----
Income (loss) before income taxes                17.4         (26.0)            14.9         (28.2)
Provision (benefit) for income taxes              8.3          (8.4)             7.4          (8.8)
                                                -----         -----            -----         -----
Net income (loss)                                 9.1%        (17.6)%            7.5%        (19.4)%
                                                =====         =====            =====         =====
</TABLE>


                Three Months Ended December 31, 1998 Compared to
                      Three Months Ended December 31, 1999

Revenues.

o    Total revenues decreased 24.9% from $19.1 million in last year's quarter to
     $14.3 million this quarter.  Domestic  revenues  decreased 28.4% from $17.1
     million in last year's quarter to $12.2 million this quarter. International
     revenues  increased  4.9% from $2.0 million in last year's  quarter to $2.1
     million  this  quarter.  The  Company  believes  total  revenues  decreased
     primarily  due to Year  2000  issues  which  resulted  in the  deferral  of
     purchase  decisions by the  Company's  customers.  The Company  anticipates
     continued  softness in license revenues for the next two to three quarters.
     Mobius  believes that the overall market demand for the Company's  products
     remains strong.

o    Software license revenues decreased 45.3% from $13.2 million in last year's
     quarter  to  $7.3  million  this  quarter.   This  decrease  was  primarily
     attributable to decreased sales of licenses. Mobius believes that Year 2000
     issues significantly  affected the purchasing patterns of its customers and
     potential  customers.  Many  companies  expended  significant  resources to
     correct or modify their current  software systems for Year 2000 compliance.
     These  expenditures  have resulted in reduced  funds  available to purchase
     software products such as those that Mobius offers.

o    Maintenance  and other revenues  increased  21.1% from $5.9 million in last
     year's  quarter to $7.0 million this quarter.  This increase in maintenance
     and other revenue was primarily attributable to the growth in the amount of
     licensed software covered by maintenance agreements and to a lesser extent,
     increases in the  maintenance  fees charged by the Company.  Other revenues
     for both quarters were not significant.


Costs of Revenues.

o    Cost of license  revenues  consist  primarily of the cost of royalties  and
     sublicense  fees. The costs of software  license  revenues  increased 31.5%
     from $232,000 in last year's quarter to $305,000 this quarter, representing
     1.8% and 4.2% respectively, of software license revenues in those quarters.
     The costs of software license revenue increased from last year's quarter to
     this quarter primarily due to increased license revenues from products that
     require royalty payments.

o    Costs of  maintenance  and other  revenues  consist  primarily  of customer
     support staff costs. The costs of maintenance and other revenues  increased
     14.1%  from $1.2  million  in last  year's  quarter  to $1.3  million  this
     quarter,  representing  20.1% and 18.9%  respectively,  of maintenance  and
     other revenues in those quarters. The increases in costs of maintenance and
     other  revenues  were  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 Mobius's  products,  including
     salaries,   commissions,   performance   based   bonuses   and  travel  and
     entertainment  costs.  Sales and  marketing  costs also include the cost of
     branch sales offices,  marketing,  promotional  materials and  advertising.
     These  expenses  increased 2.8% from $9.7 million in last year's quarter to
     $10.0 million this quarter,  representing 50.7% and 69.6%, respectively, of
     total  revenues  in those  quarters.  Sales  and  marketing  expenses  have
     increased  primarily  because of spending for the Company's new subsidiary,
     Click-n-Done.com,  and increased  personnel  related  costs for  marketing,
     partially offset by a decrease in sales  commissions due to decreased sales
     of software licenses.

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  20.0% from $2.7  million in last year's  quarter to $3.2 million
     this quarter, representing 14.2% and 22.6%, respectively, of total revenues
     in those quarters.  The increases in research and development expenses were
     primarily  attributable to increased staffing and  personnel-related  costs
     for  technical   staff  to  develop  new  products,   including  those  for
     Click-n-Done.com.

o    General and  administrative  expenses consist of personnel costs related to
     general  management,   accounting,   human  resources,   network  services,
     administration  and  associated   overhead  costs,  as  well  as  fees  for
     professional services.  General and administrative expenses increased 27.8%
     from $2.3  million in last year's  quarter to $3.0  million  this  quarter,
     representing  12.2% and 20.7%,  respectively,  of total  revenues  in those
     quarters.  The increase was primarily  attributable to additional personnel
     costs,  depreciation of improvements  made to the Company's  infrastructure
     and the costs to administer the Company's new subsidiary, Click-n-Done.com.



<PAGE>




o    Stock  compensation  expense was the result of issuing options in 1998 that
     were deemed to be below market value. Stock compensation  expense decreased
     51.3% from $343,000 in last year's  quarter to $167,000 this quarter.  This
     expense  will  continue  to  decrease  as it is  amortized  over the option
     holder's  vesting  periods,   subject  to  adjustments  for  option  holder
     terminations.  See footnote 8 in the consolidated  financial statements for
     further information.

         License and other interest income;  interest expense;  foreign currency
transaction  gains (losses).  License and other interest income was $766,000 and
$759,000 in last  year's  quarter and this  quarter,  respectively.  During both
quarters interest expense was insignificant. Foreign currency transaction losses
were $60,000 in last year's quarter and foreign currency  transaction gains were
$2,000 this quarter.  These losses and gains are the result of foreign  currency
fluctuations in the foreign jurisdictions where the Company does business.

         Investment Impairment. In June 1999, the Company invested $1,501,000 in
Home Account Network ("HAN"), a privately-held, Web-based information technology
company whose products are being designed to enable financial services companies
to  deliver  financial  products  and  services  via  the  Internet.  This is an
investment in preferred stock, which automatically converts into common stock if
and when HAN  completes  an initial  public  offering.  The Company has and will
continue  to  regularly   review  the   assumptions   underlying  the  operating
performance  and  cash  flow  forecasts  of  HAN  to  assess  the   investment's
recoverability.  Although HAN has revenues, it has operated at a loss. There are
no assurances that HAN will complete its development efforts or ultimately offer
products that are  commercially  acceptable,  achieve  profitability or that its
existing cash balances and cash flows from future  operations will be sufficient
to meet its working  capital  requirements.  HAN continues to consume cash as it
executes it business  plan. As of December 31, 1999,  these  circumstances  have
indicated  that this  investment is permanently  impaired,  therefore a $821,000
impairment  loss has been recorded for the three months ended December 31, 1999.
The current  value of the  investment  was  calculated  based upon the Company's
pro-rata  portion of HAN's cash balance at December 31, 1999.  In January  2000,
the Company  provided  approximately  a $150,000 bridge loan to HAN. The Company
anticipates  it may provide up to an  additional  $350,000 in  financing  in the
third quarter of fiscal 2000 to support HAN's cash requirements.

         Provision  for Income  Taxes.  The  provision for income taxes was $1.6
million in last year's quarter compared to a tax benefit of $1.2 million in this
quarter.  The  provision  (benefit)  for taxes as a percentage  of income (loss)
before  taxes was 48.0% and (32.3)% for last  year's  quarter and this  quarter,
respectively.  The change in the effective tax rate from last year's  quarter to
this  quarter  primarily  reflects a  statutory  tax benefit for the loss in the
United  States  offset by  limitations  on the tax benefit which can be taken in
this quarter from losses in the Company's foreign subsidiaries.

                 Six Months Ended December 31, 1998 Compared to
                       Six Months Ended December 31, 1999
Revenues.

o    Total revenues  decreased  20.5% from $34.9 million in the first six months
     of fiscal  1999 to $27.7  million in the first six  months of fiscal  2000.
     Domestic  revenues  decreased  23.3%  from  $29.6  million in the first six
     months of fiscal  1999 to $22.7  million  in the first six months of fiscal
     2000.  International revenues decreased 4.9% from $5.3 million in the first
     six months of fiscal 1999 to $5.0 million in the first six months of fiscal
     2000. The Company believes total revenues  decreased  primarily due to Year
     2000 issues  that  resulted in the  deferral of purchase  decisions  by the
     Company's customers.  The Company anticipates continued softness in license
     revenues  for the next  two to three  quarters.  Mobius  believes  that the
     overall market demand for the Company's products remains strong.

<PAGE>

o    Software license revenues decreased 41.6% from $23.4 million in the first
     six months of fiscal 1999 to $13.7 million in the first six months of
     fiscal 2000. This decrease was primarily attributable to decreased sales of
     licenses.  Mobius believes that Year 2000 issues significantly affected the
     purchasing  patterns  of  its  customers  and  potential  customers.   Many
     companies  have expended  significant  resources to correct or modify their
     current software systems for Year 2000 compliance.  These expenditures have
     resulted in reduced funds available to purchase  software  products such as
     those that Mobius offers.

o    Maintenance  and other revenues  increased  22.8% from $11.5 million in the
     first six months of fiscal 1999 to $14.0 million in the first six months of
     fiscal 2000.  This increase in maintenance  and other revenue was primarily
     attributable  to the growth in the amount of licensed  software  covered by
     maintenance agreements and to a lesser extent, increases in the maintenance
     fees charged by the Company. Other revenues for both six month periods were
     not significant.

Costs of Revenues.

o    Cost of license  revenues  consist  primarily of the cost of royalties  and
     sublicense fees. The costs of software license revenues decreased 9.8% from
     $543,000  in the first six months of fiscal  1999 to  $490,000 in the first
     six months of fiscal  2000,  representing  2.3% and 3.6%  respectively,  of
     software license revenues in those six month periods. The costs of software
     license  revenue  decreased from the first six months of fiscal 1999 to the
     first six months of fiscal 2000 primarily due to increased license revenues
     from products that were developed  exclusively by the Company and therefore
     do not require royalty payments.

o    Costs of  maintenance  and other  revenues  consist  primarily  of customer
     support staff costs. The costs of maintenance and other revenues  increased
     20.0%  from $2.5  million  in the first six  months of fiscal  1999 to $3.0
     million  in the first six  months of fiscal  2000,  representing  21.7% and
     21.2%  respectively,  of maintenance  and other revenues in those six month
     periods.  The  increases in costs of  maintenance  and other  revenues were
     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 Mobius's  products,  including
     salaries,   commissions,   performance   based   bonuses   and  travel  and
     entertainment  costs.  Sales and  marketing  costs also include the cost of
     branch sales offices,  marketing,  promotional  materials and  advertising.
     These expenses increased 9.3% from $18.0 million in the first six months of
     fiscal  1999 to $19.7  million  in the  first six  months  of fiscal  2000,
     representing 51.8% and 71.1%, respectively,  of total revenues in those six
     month  periods.  Sales and  marketing  expenses  have  increased  primarily
     because of spending for the Company's new subsidiary, Click-n-Done.com, and
     increased  personnel  related costs for  marketing,  partially  offset by a
     decrease in sales commissions due to decreased sales of software licenses.

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 17.6% from $5.3 million in the first six months of fiscal 1999 to
     $6.2 million in the first six months of fiscal 2000, representing 15.1% and
     22.4%,  respectively,  of total  revenues in those six month  periods.  The
     increases in research and development expenses were primarily  attributable
     to increased  staffing and  personnel-related  costs for technical staff to
     develop new products, including Click-n-Done.com.


<PAGE>



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 49.1% from $4.0 million in
     the first six months of fiscal 1999 to $5.9 million in the first six months
     of fiscal  2000,  representing  11.4%  and  21.4%,  respectively,  of total
     revenues  in  those  six  month   periods.   The  increase  was   primarily
     attributable to additional  personnel  costs,  depreciation of improvements
     made to the  Company's  infrastructure  and the  costs  to  administer  the
     Company's new subsidiary, Click-n-Done.com.

o    Stock  compensation  expense was the result of issuing options in 1998 that
     were deemed to be below market value. Stock compensation  expense decreased
     50.0% from  $666,000  in the first six months of fiscal 1999 to $333,000 in
     the first six months of fiscal 2000. This expense will continue to decrease
     as this  expense is amortized  over the option  holder's  vesting  periods,
     subject to adjustments  for option holder  terminations.  See footnote 8 in
     the consolidated financial statements for further information.

         License and other interest income;  interest expense;  foreign currency
transaction  gains (losses).  License and other interest income was $1.4 million
and $1.5  million  in the first six  months of fiscal  1999 and in the first six
months of fiscal  2000,  respectively.  During both six month  periods  interest
expense was insignificant.  Foreign currency  transaction losses were $93,000 in
the first six months of fiscal 1999 and foreign currency  transaction gains were
$48,000 in the first six months of fiscal  2000.  These losses and gains are the
result of foreign currency  fluctuations in the foreign  jurisdictions where the
Company does business.

         Investment Impairment. In June 1999, the Company invested $1,501,000 in
HAN, a privately-held,  Web-based information  technology company whose products
are being designed to enable financial  services  companies to deliver financial
products  and services via the  Internet.  The Company has and will  continue to
regularly review the assumptions  underlying the operating  performance and cash
flow forecasts of HAN to assess the investment's recoverability.  As of December
31, 1999, these circumstances have indicated that this investment is permanently
impaired, therefore a $1.4 million impairment loss has been recorded for the six
months  ended  December  31,  1999.  See  footnote 6 and 12 to the  consolidated
financial statements for further information.

         Provision  for Income  Taxes.  The  provision for income taxes was $2.6
million in the first six months of fiscal 1999 compared to a tax benefit of $2.4
million in the first six months of fiscal  2000.  The  provision  (benefit)  for
taxes as a percentage  of income  (loss)  before taxes was 49.6% and (31.3)% for
the first six months of fiscal 1999 and in the first six months of fiscal  2000,
respectively.  The change in the effective tax rate from the first six months of
fiscal  1999 to the  first  six  months  of fiscal  2000  primarily  reflects  a
statutory tax benefit for the loss in the United States offset by limitations on
the tax  benefit  which can be taken in the first six months of fiscal 2000 from
losses in the Company's foreign subsidiaries.


<PAGE>



Liquidity and Capital Resources

         Since its  inception,  Mobius  has funded  its  operations  principally
through  cash flows from  operating  activities  and, to a lesser  extent,  bank
financings.  In April 1998, the Company  completed its initial public  offering,
which generated net proceeds of $33.0 million.  As of December 31, 1999,  Mobius
had cash and cash equivalents of $32.5 million,  a decrease of $1.0 million from
the $33.5  million held at June 30, 1999.  In  addition,  Mobius had  marketable
securities of $9.4 million and $9.8 million as of June 30, 1999 and December 31,
1999, respectively.

         Net cash provided by operating activities was $3.0 million in the first
six  months of fiscal  1999 and $2.6  million  in the first six months of fiscal
2000.  Mobius's  primary  sources of cash  during the first six months of fiscal
2000  were  decreased   accounts   receivable  and  decreased  software  license
installments.  These sources were offset by a net loss and decreases in accounts
payable and accrued expenses.  Net software license installments decreased 11.5%
from $23.4 million at June 30, 1999 to $20.7  million at December 31, 1999.  Net
accounts receivable  decreased 42.9% from $12.6 million at June 30, 1999 to $7.2
million at December 31, 1999.  Deferred  maintenance  revenue remained stable at
$16.7 million at June 30, 1999 and December 31, 1999.

         Accounts  receivable  reserves are primarily  calculated by identifying
problem  accounts  and in  recognition  that  some  customers  decide  to cancel
maintenance  arrangements upon their anniversary but do not always notify Mobius
in sufficient time to prevent some portion of the annual maintenance billings to
be  recognized.  Mobius  also has a small  reserve to absorb  losses  based upon
historical   experience  that  may  result  from  current  receivables.   Mobius
specifically  identifies  problem  accounts  by the  age of the  receivable  and
through discussions with the customer and Mobius sales representatives. Based on
that  information,  Mobius exercises its best judgment as to what portion of the
accounts  receivable  balance requires a reserve.  At June 30, 1999 and December
31, 1999  approximately  83% and 74% of the total  accounts  receivable  reserve
balances  related to  specific  accounts,  respectively.  To the extent  that an
account for which a specific  reserve was  provided is  subsequently  collected,
Mobius reduces the reserves in the period of collection.

         Software license installment reserves have consistently been determined
as a  percentage  of software  license  installments  to provide  for  potential
bankruptcies and contractual  disputes.  At June 30, 1999 and December  31,1999,
software license installments were approximately  $24,200,000 and $21,495,000 of
which 85% and 82% were customer  balances  greater than $100,000,  respectively.
Customer balances for software license  installments tend to be large due to the
selling price of Mobius' products.

         Software  license  installment  and accounts  receivable  reserves have
decreased  6.2% from $1.7  million at June 30, 1999 to $1.6  million at December
31, 1999. The decrease in these reserves is attributable to favorable collection
experience  during the first six months of fiscal 2000 and management's  overall
assessment of specific accounts.

     Cash used in investing  activities,  consisting of capital  expenditures to
purchase computer  equipment and complete leasehold  improvements,  was $943,000
and $3.6  million  in the first six  months of fiscal  1999 and in the first six
months of fiscal 2000,  respectively.  In  addition,  in the first six months of
fiscal 2000, $500,000 of marketable  securities were purchased.  The Company has
undertaken significant projects in fiscal 2000, including the installation of an
automated sales force computer system, implementation of a new accounting system
and  expansion  of the  Rye  headquarters  therefore  capital  expenditures  are
expected to increase in future quarters.

         Cash  provided  by  financing  activities  was $87,000 in the first six
months of fiscal  1999 and  $189,000  in the  first six  months of fiscal  2000,
primarily  due to cash  received  from the  exercise  of stock  options  and the
employee stock purchase plan.

     In December 1999, Mobius announced its new suite of Internet-based bill and
presentment products, from it's subsidiary Click-n-Done.com.  Click-n-Done.com's
products are designed to  seamlessly  and securely  retrieve,  consolidate,  and
archive  bills  and  statements  on  a  consumer  or  business'  desktop,  while
preserving  the bill or  statement  issuers  total  control of their  one-to-one
relationship with their customer.  Mobius's expenses for  Click-n-Done.com  were
approximately $1.5 million and $2.2 million in this quarter and in the first six
months of fiscal 2000, respectively. Mobius anticipates that it will continue to
incur additional costs related to the this consumer focused Internet opportunity
for at least the next year.

         The Company  believes  that its existing  cash  balances and cash flows
expected from future operations will be sufficient to meet the Company's capital
requirements  for at least  12  months.  In  compliance  with  the  lease of the
Company's  corporate  headquarters  in Rye, NY, the  landlord  holds a letter of
credit with Silicon  Valley Bank for $275,000.  This letter of credit is secured
by a certificate of deposit.

         In January 1999,  the Company sold the  INFOPAC-TapeSaver  product to a
third party for  approximately  $3.0 million.  Under the terms of the sale,  the
buyer assumed  responsibility for maintenance support for all existing TapeSaver
licenses.  As a result of this  arrangement,  the Company  will  recognize  $3.0
million of license revenue as the buyer makes payments over the next five years,
and has recognized  approximately  $1.0 million of maintenance  revenue  through
December 31, 1999.  For the three and six months  ended  December 31, 1999,  the
Company  recognized  $322,000 and  $479,000 of license  revenue and $122,000 and
$302,000  of  maintenance  revenue  related to this  arrangement,  respectively.
Future  license  revenue is expected to be $112,500 each quarter  thereafter for
the remaining four year term of the contract.  All maintenance  revenue has been
recognized.

         In January 2000, the Company invested $500,000 in Flooz.com,  a startup
Internet company.  Flooz is online gift currency that can be sent to a recipient
over the  Internet.  The flooz gift currency can be redeemed by the recipient at
Flooz.com  participating  merchants.  This is an investment in preferred  stock,
which  converts  into common  stock if and when  Flooz.com  completes an initial
public offering.


<PAGE>



                      FACTORS AFFECTING FUTURE PERFORMANCE

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

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

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

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

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

Technological Change

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


<PAGE>



Product Concentration

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

Competition

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


<PAGE>



International Sales and Operations

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

         An  increase  in the  value  of the U.S.  dollar  relative  to  foreign
currencies  could  make  Mobius's  products  more  expensive,   and,  therefore,
potentially  less  competitive  in  those  markets.  Although  Mobius  does  not
currently  engage  in  international  currency  hedging  transactions,   we  are
exploring the possibility of doing so in the future. To the extent that the U.S.
dollar strengthens against foreign currencies in international  markets in which
the Company  maintains  operations,  its net assets that are denominated in such
foreign currencies will be devalued, resulting in a foreign currency translation
loss. For more information on its  international  operations,  see "Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations"  in
Item 2 of this Form 10-Q.

Expansion of Indirect Channels

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

Extended Payment Risk

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


<PAGE>



Protection of Intellectual Property

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

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

         Mobius  is  not  aware  that  any  of  its  products  infringe  on  the
proprietary rights of third parties.  There can be no assurance,  however,  that
third parties will not claim  infringement  by Mobius with respect to current or
future  products.  Defense of any such claims,  with or without merit,  could be
time-consuming,  result in costly  litigation,  cause product shipment delays or
require  Mobius to enter into royalty or licensing  agreements.  Such royalty or
licensing agreements,  if required,  may not be available on terms acceptable to
Mobius or at all,  which could have a material  adverse  effect on its business,
operating results and financial condition.

Dependence on Licensed Technology

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

Risk of Product Defects; Product Liability

         Software  products  as  complex as those  offered by Mobius  frequently
contain  defects,  especially  when first  introduced  or when new  versions are
released.  Although Mobius conducts extensive product testing, Mobius has in the
past discovered software defects in certain of its new products and enhancements
after their introduction.  Mobius could in the future lose, or delay recognition
of, revenues as a result of software errors or defects. Mobius believes that its
customers  and  potential  customers  are  highly  sensitive  to  defects in the
Company's software. Although Mobius's business has not been materially adversely
affected by any such errors to date,  there can be no  assurance  that,  despite
testing by Mobius and by current  and  potential  customers,  errors will not be
found in new products or releases after  commencement  of commercial  shipments,
resulting  in loss of  revenue  or  delay in  market  acceptance,  diversion  of
development resources,  damage to Mobius's reputation,  or increased service and
warranty  costs,  any of which  could  have a  material  adverse  effect  on its
business, operating results and financial condition.

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

<PAGE>

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

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

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

                        Click-n-Done.com Related Factors

     On December 9, 1999,  Mobius  announced the  formation of a new  subsidiary
called  Click-n-Done.com  and  its  intended  release  of  a  new  consumer  and
business-focused  suite of  Internet-based  bill presentment and payment system.
Click-n-Done.com's  products are designed to seamlessly  and securely  retrieve,
consolidate, and archive bills and statements on a consumer or business desktop,
while  preserving  the bill or statement  issuer's  control of their  one-to-one
relationship with their customer.  Mobius's expenses for  Click-n-Done.com  were
approximately $1.5 million and $2.2 million in this quarter and in the first six
months of fiscal 2000, respectively. Mobius anticipates that it will continue to
incur  additional costs related to this business for at least the next year. The
following factors may affect  Click-n-Done.com's  future  performance,  and as a
result, the future performance of Mobius on a consolidated basis.

<PAGE>



Mobius May Not Successfully Implement The Click-n-Done.com Business Plan.

         The Click-n-Done.com business model is still in development.  Mobius is
subject  to  expenses  and   difficulties   associated  with   implementing  the
Click-n-Done.com business plan that are not typically encountered by more mature
companies  since the  Click-n-Done.com  products are  Internet-based.  The risks
associated with implementing the Click-n-Done.com business plan relate to:

o        establishing and building out the operations infrastructure;
o        implementing and expanding the sales structure and marketing programs;
o        increasing and developing brand awareness;
o        providing  services to  customers  that are  reliable  and
         cost-effective;
o        responding to technological development or service offerings by
         competitors; and
o        attracting and retaining qualified personnel.

         If  Mobius  is not  successful  in  implementing  the  Click-n-Done.com
business plan, Mobius' future financial or operating results could suffer.

Mobius Has Incurred Significant Expenses for Click-n-Done.com and Mobius Expects
These Expenses to Increase in the Foreseeable Future.

         Mobius has incurred  significant  expenses relating to Click-n-Done.com
in the six months since  Click-n-Done.com's  inception and  anticipates  that it
will continue to incur  significant  expenses for  Click-n-Done.com's  sales and
marketing,  technology,  customer  support and personnel.  As a result of Mobius
Click-n-Done.com expansion plans, Mobius expects Click-n-Done.com's  expenses on
a  quarterly  and annual  basis to increase in the  foreseeable  future.  Mobius
cannot  assure you that  Click-n-Done.com  will  achieve  or sustain  revenue or
profitability on either a quarterly or an annual basis.

Click-n-Done.com May Need Additional Funds Which, If Available,  Could Result in
Dilution  of Mobius's  Equity  Interest  in  Click-n-Done.com  or an Increase in
Click-n-Done.com's   Interest  Expense.   If  These  Funds  Are  Not  Available,
Click-n-Done.com's Business Could Be Hurt.

         To date, Mobius has provided the working capital for Click-n-Done.com's
operations.  Click-n-Done.com  may need to raise additional funds through public
or private debt or equity financings in order to:

o        fully implement its business model;
o        take advantage of unanticipated opportunities or acquisitions of
         complementary assets, technologies or businesses;
o        develop new products; or
o        respond to competitive pressures.

         If additional funds become necessary,  additional  financing may not be
available  on terms  favorable  to  Click-n-Done.com,  or  available  at all. If
adequate  funds are not available or are not available on acceptable  terms when
needed,  Click-n-Done.com's  business  could be hurt.  If  additional  funds are
raised through the issuance of equity securities,  Mobius's percentage ownership
in  Click-n-Done.com  may be  reduced,  and the new equity  securities  may have
rights, preferences or privileges senior to those of Mobius. If additional funds
are raised through the issuance of debt securities,  these securities would have
some rights, preferences and privileges senior to those of Mobius, and the terms
of this debt could impose  restrictions  on  Click-n-Done.com's  operations  and
result in significant interest expense.


<PAGE>



If Widespread  Internet  Adoption Does Not Continue,  or If the Internet  Cannot
Accommodate Continued Growth, Click-n-Done.com's Business Will Be Harmed.

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

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

The Expected Continued Growth in the Market for Click-n-Done.com's  Products and
Services  May Not  Materialize  or May  Materialize  in a Manner  Mobius Has Not
Anticipated.

         Click-n-Done.com's market is new and rapidly evolving. Whether, and the
manner in which,  the market for  Click-n-Done.com's  products and services will
continue to grow is  uncertain.  The market for its products and services may be
inhibited for a number of reasons, including:

o  the  reluctance of businesses to adopt the  Click-n-Done.com  business model
o  alternative,  competitive  models for  services  similar  to
   Click-n-Done.com's services
o  Click-n-Done.com's  failure to successfully  market its products and
   services to new  customers;  and
o  Click-n-Done.com  inability  to maintain and strengthen its brand awareness.


<PAGE>



     Concerns   about   Transaction   Security  on  the   Internet   May  Hinder
Click-n-Done.com's Business.

         A significant  barrier to electronic commerce and communications is the
secure    transmission   of   private    information   over   public   networks.
Click-n-Done.com  relies on encryption  and  authentication  technology  some of
which it has  developed  and some of which may be licensed from third parties to
provide  the  required  security  and  authentication  to ensure the  privacy of
Internet transactions. Advances in computer capabilities, new discoveries in the
field of cryptography or other events or developments may result in a compromise
or  breach  of  the  algorithms   Click-n-Done.com   uses  to  protect  customer
transaction data. Any breaches in security could cause a significant decrease in
the use of Click-n-Done.com's  software or Web site, which would materially harm
its business.

         Anyone who can circumvent  Click-n-Done.com's  security  measures could
misappropriate    proprietary    information   or   cause    interruptions    in
Click-n-Done.com's  or its  operations.  Click-n-Done.com  could be  required to
expend significant  capital and other resources to protect against the threat of
security  breaches or to alleviate  problems caused by these breaches.  Consumer
concerns  about the  security of  electronic  commerce and user privacy may also
inhibit  the  growth  of  the  Internet  as a  means  of  conducting  commercial
transactions. To the extent that Click-n-Done.com's activities or the activities
of  third  party  contractors  involve  storing  and  transmitting   proprietary
information, such as credit card numbers, security breaches could expose us to a
risk of loss or litigation and possible liability.  Click-n-Done.com's  security
measures  may not  effectively  prevent  security  breaches,  and its failure to
prevent security breaches could significantly disrupt its operations.

The Internet Industry Is Characterized by Rapid Technological Change.

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



<PAGE>



Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Mobius investment  portfolio is subject to interest rate  sensitivity.  The
primary objective of Mobius's  investment  activities is to preserve  principal,
while at the same time  maximizing the interest  income,  without  significantly
increasing  risk. Some of the marketable  securities that Mobius has invested in
may be subject to market rate interest  risk.  This means a change in prevailing
interest  rates may cause the market  value of the  security to  fluctuate.  For
example,  if Mobius holds a security that was issued with a fixed  interest rate
at the  then-prevailing  rates and the prevailing interest rates later rise, the
market value of the marketable  security will probably decline.  At December 31,
1999, Mobius primarily held debt securities.

     Mobius may be  subject to foreign  currency  fluctuations  in  relation  to
accounts  receivable  and accounts  payable that may be denominated in a foreign
currency other than the functional currency in certain foreign jurisdictions. To
the extent that such foreign currency  transactions are negatively or positively
effected by foreign currency  fluctuations,  foreign currency transaction losses
or gains would be recognized.


<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
$33.0 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

None


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
10.1      Lease  Modification  Agreement  dated  July 12,  1999 by and  between
          Old  Boston  Post  Road Associates LLC and the Registrant
27        Financial Data Schedule (EDGAR only)

* 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 14, 2000

                                     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
 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
10.1        Lease  Modification  Agreement  dated  July  12,  1999  by and
            between Old Boston Post Road Associates LLC and the Registrant
27          Financial Data Schedule (EDGAR only)



* 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.