The  following is an excerpt from our Form 10-K filed on September  28, 1998. We
accept no  obligation  to update  these  forward-looking  statements  and do not
intend to do so.


                   FACTORS AFFECTING FUTURE PERFORMANCE

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

         Our 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 our 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 the Company's  quarterly  operating  results.  Many of our
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  we will  be  successful  in  closing  large  license
transactions within the fiscal quarter in which they are budgeted, if at all.

         We have often  recognized a  substantial  portion of our revenue in the
last month of the quarter and often in the last week of that month. As a result,
license fees in any quarter are often  substantially  dependent on orders booked
and shipped in the last month or last week of that quarter. Accordingly,  delays
in the closing of sales near the end of a quarter could cause quarterly revenues
and, to a greater degree, net income, to fall substantially short of anticipated
levels.

         Our business has  experienced and is expected to continue to experience
significant seasonality, with revenues typically peaking primarily in our fourth
(June)  fiscal  quarter and to a lesser extent in our second  (December)  fiscal
quarter. These fluctuations are caused primarily by customer purchasing patterns
and the Company'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.

         We recognize  revenue in accordance with Statement of Position  ("SOP")
91-1,  "Software  Revenue  Recognition",  issued by the  American  Institute  of
Certified Public Accountants  ("AICPA").  For transactions occurring on or after
July 1, 1998, we will be required to recognize  revenue in  accordance  with SOP
97-2, "Software Revenue Recognition", issued by the AICPA in October 1997, which
supersedes SOP 91-1. For a discussion of the possible effect the adoption of SOP
97-2 may have on our  financial  results  in  general,  and the  recognition  of
revenues in specific  periods in particular,  see  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations".

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

Technological Change

         The  market  for our  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 our existing products obsolete and unmarketable. Our future success
will depend in part on our ability to enhance  existing  products and to develop
and  introduce new products to meet diverse and evolving  customer  requirements
and 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
we will be successful in developing and marketing  product  enhancements  or new
products that respond to technological  change or evolving  industry  standards,
that the Company 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 we
may introduce will achieve market acceptance.

Product Concentration

         To date, a substantial  portion of our revenues have been  attributable
to the licensing of our ViewDirect and DocumentDirect software and the provision
of related  maintenance  services.  We currently expect 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 our business,  operating results
and financial condition.

Competition

         The market for our products is intensely competitive,  subject to rapid
change and significantly  affected by new product introductions and other market
activities of industry  participants.  We think 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.  We currently  encounter direct  competition from a
number  of  public  and  private   companies   including   Computer   Associates
International,  Computron  Software,  Inc., FileNet  Corporation,  International
Business Machines Corp., Eastman Kodak Co., New Dimension Software Ltd., 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 our business,
operating results and financial condition.



<PAGE>




International Sales and Operations

         We believe that our revenues and future  operating  results will depend
in  part  on our  ability  to  increase  sales  in  international  markets.  Our
international  subsidiaries  have not been  profitable  to date,  and we  expect
achieving  profitability  will  require  significant  management  attention  and
financial resources.  There can be no assurance that we will be able to maintain
or increase  international  market  demand for our  products or hire  additional
qualified  personnel  who  will  successfully  be able to  market  our  products
internationally.  Our  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
our future international revenues and, consequently,  on our business, operating
results and financial condition.

         An  increase  in the  value  of the U.S.  dollar  relative  to  foreign
currencies could make our products more expensive,  and, therefore,  potentially
less  competitive  in those  markets.  Although  we do 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 we maintain operations, our
net assets that are  denominated  in such foreign  currencies  will be devalued,
resulting in a foreign  currency  translation  loss. For more information on our
international operations, see "Management's Discussion and Analysis of Financial
Condition  and Results of  Operations"  in Item 7 and Notes 2 and 12 of Notes to
Consolidated Financial Statements.

Expansion of Indirect Channels

         To date, sales through indirect sales channels have been immaterial. We
intend to invest resources to develop these channels; however, if our efforts do
not  generate   sufficient  license  revenues  our  operating  results  will  be
negatively impacted. Our ability to achieve revenue growth in the future will be
affected  by our  success in  expanding  existing  and  establishing  additional
relationships  with strategic  partners.  We expect to receive lower unit prices
when selling  through  indirect  channels,  therefore,  if we are  successful in
selling products through indirect channels; our gross margins as a percentage of
revenue will decrease.

Extended Payment Risk

         Terms  of sale  are a  competitive  factor  in our  markets.  We  offer
extended  payment  terms to some of our  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 we have established reserves against possible
future bad debts and we believe 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 the  Company's  business,
operating  results  and  financial  condition.  For  more  information  on these
extended payment agreements see Notes 2 and 3 of Notes to Consolidated Financial
Statements.


<PAGE>



Protection of Intellectual Property

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

         Our products are generally  provided to customers in object code format
only.  However,  we enter into arrangements with our 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  our  software   products.
Notwithstanding  such  provision,  the delivery of source code to customers  may
increase the likelihood of  misappropriation or other misuse of our intellectual
property.

         We are not aware  that any of our  products  infringe  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 our business,
operating results and financial condition.

Dependence on Licensed Technology

         We rely on certain software and other  information that we license from
third parties,  including  software that is used to perform certain functions in
our  products.  Although  we  believe  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 our sales unless and until we
can replace the functionality provided by these products. In addition, we are 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 we would be able to replace  the  functionality
provided by the third party software  currently  offered in conjunction with our
products in the event that such software becomes  obsolete or incompatible  with
future  versions of our 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 our 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 we conduct  extensive  product testing,  we have in the past
discovered  software  defects in certain of our new  products  and  enhancements
after their introduction.  We could in the future lose, or delay recognition of,
revenues  as a result  of  software  errors  or  defects.  We  believe  that our
customers  and  potential  customers  are  highly  sensitive  to  defects in our
software.  Although our 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 our reputation,  or increased  service and warranty costs,
any of which could have a material  adverse  effect on our  business,  operating
results and financial condition.

         Our license agreements with our customers  typically contain provisions
designed to limit our exposure to potential product  liability claims.  However,
it is possible  that the  limitation  of liability  provisions  contained in our
license agreements may not be effective under the laws of certain jurisdictions.
Although we have 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  Mobius  will not be  subject  to such  claims in the
future. We do not maintain product  liability  insurance.  A successful  product
liability claim brought  against Mobius could have a material  adverse effect on
our business, operating results and financial condition.

Year 2000 Compliance

         Many currently  installed  operating  systems and software products are
coded to accept only two digit  entries in the date code field.  These date code
fields  need  additional  digits to  distinguish  21st  century  dates from 20th
century  dates.  As a result,  computer  systems  and/or  software  used by many
companies may need to be upgraded to comply with such "Year 2000"  requirements.
Significant uncertainty exists in the software industry concerning the potential
effects  associated  with  such  compliance.  For  a  discussion  on  Year  2000
compliance  by  Mobius  and how Year  2000  compliance  may  effect  our  future
performance,  see "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" in Item 7.

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

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

         Our success depends to a significant  extent upon our 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,  we believe that our future  success will also depend to a
significant extent upon our ability to attract,  train and retain highly skilled
technical,  management,  sales and  marketing  personnel.  Competition  for such
personnel is intense,  and we expect that such competition will continue for the
foreseeable future. We have 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 our business,  operating
results and financial condition.