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 September 30, 1998

                                       OR

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

                  For the transition period from        to

                         Commission File Number: 0-24077

                         Mobius Management Systems, Inc.
             (Exact name of registrant as specified in its charter)

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



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


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


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO ||

Number of shares outstanding of the issuer's common stock 
          as of November 11, 1998

                 Class                          Number of Shares Outstanding

 Common Stock, par value $0.0001 per share                17,787,650


<PAGE>



                         MOBIUS MANAGEMENT SYSTEMS, INC.


                                      INDEX

                                                                        
PART I      FINANCIAL INFORMATION                                       


Item 1. Financial Statements

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

Notes to Consolidated Financial Statements                                 

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

Item 3. Quantitative and Qualitative Disclosures
  About Market Risk                                                       

PART II     OTHER INFORMATION

Item 1. Legal Proceedings                                                 

Item 2. Changes in Securities and Use of Proceeds                         

Item 3. Defaults Upon Senior Securities                                   

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

Item 5. Other Information                                                 

Item 6. Exhibits and Reports on Form 8-K                                  

SIGNATURES


<PAGE>



PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements



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


                                                                   September 30,
                                                          June 30,      1998
                                                            1998    (Unaudited)
ASSETS 
Current assets:
     Cash and cash equivalents                           $  42,222   $  45,573
     Accounts receivable, net of allowance
         for doubtful accounts of $612, and
         $788 respectively                                  10,733       7,104
     Software license installments, current portion          7,330       8,837
     Other current assets                                    1,682       1,806
                                                          --------     --------
              Total current assets                          61,967      63,320
Software license installments,
     non-current portion, net of allowance for
     doubtful accounts of $767 and $904 respectively        13,686      13,112
Property and equipment, net                                  2,932       3,080
Other assets                                                   215         220
                                                          --------    --------
Total assets                                              $ 78,800    $ 79,732
                                                          ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued expenses                $  9,471     $ 6,891
     Deferred maintenance revenue                           11,408      13,317
     Deferred income taxes                                   2,054       1,864
     Other liabilities                                         969       1,748
                                                          --------     -------
              Total current liabilities                     23,902      23,820
                                                          --------     -------
Deferred maintenance revenue,
     non-current portion                                     5,616       4,997
Deferred income taxes                                        3,124       3,272
Capital lease obligations, less current portion                 36          21
Stockholders' equity:
     Common stock $.0001 par value; authorized 40,000,000
         shares; issued and outstanding 17,694,500 and
         17,787,150, shares, respectively                        2           2
     Additional paid-in capital                             47,994      48,102
     Deferred compensation                                  (2,076)     (1,714)
     Retained earnings                                      12,199      13,090
     Cumulative foreign currency translation adjustment          3         142
     Treasury stock, at cost, 4,091,000
         and 4,091,000 shares, respectively                (12,000)    (12,000)
                                                          --------    --------
              Total stockholders' equity                    46,122      47,622
                                                          --------    --------
Total liabilities and stockholders' equity                $ 78,800    $ 79,732
                                                          ========    ========


                See accompanying notes to consolidated financial
                                  statements.


<PAGE>



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


                                                   Three Months Ended
                                                       September 30,
                                                    1997          1998

Revenues:
     Software license revenues                    $ 5,697       $10,169
     Maintenance and other revenues                 4,183         5,587
                                                  -------       -------
         Total revenues                             9,880       $15,756
                                                  -------       -------

Costs of revenues:
     Software license revenues                        366           311
     Maintenance and other revenues                   692         1,304
                                                  -------       -------
         Total costs of revenues                    1,058         1,615
                                                  -------       -------

Gross profit                                        8,822        14,141
                                                  -------       -------

Operating expenses:
     Sales and marketing                            4,700         8,346
     Research and development                       1,681         2,571
     General and administrative                     1,462         1,654
     Stock compensation expense                         -           323
                                                  -------       -------
         Total operating expenses                   7,843        12,894
                                                  -------       -------

Income from operations                                979         1,247

License and other interest income                     325           672
Interest expense                                       (4)           (7)
Foreign currency transaction losses                    (3)          (33)
                                                  -------       -------

Income before income taxes                          1,297         1,879
Provision for income taxes                            750           988
                                                  -------       -------

Net income available to common stock              $   547       $   891
                                                  =======       =======

Basic earnings per share                          $  0.05       $  0.05
Basic weighted average shares
     outstanding                                   10,909        17,747

Diluted earnings per share                        $  0.03       $  0.05
Diluted weighted average
     shares outstanding                            16,510        18,724



                See accompanying notes to consolidated financial
                                  statements.



<PAGE>



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



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

Balance at June 30, 1998              17,695  $  2      $47,994   $12,199    $(2,076)       $  3         4,091 $(12,000)   $46,122
Net income                                 -     -           -        891          -           -            -         -       891
Unrealized translation gain                -     -           -          -          -         139            -         -       139
Stock options exercised                   92     -         147          -          -           -            -         -       147
Change in deferred compensation            -     -         (39)         -        362           -            -         -       323
                                      -------------------------------------------------------------------------------------------
Balance at September 30, 1998         17,787  $  2      $48,102   $13,090    $(1,714)       $142        4,091 $(12,000)   $47,622
                                      ===========================================================================================

</TABLE>

                     See accompanying notes to consolidated
                             financial statements.



<PAGE>




                         MOBIUS MANAGEMENT SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Unaudited, in thousands)

                                                            Three Months Ended
                                                               September 30,
                                                             1997         1998

Cash flows from operating activities:
  Net income                                              $   547       $   891
Adjustments to reconcile net
  income to net cash provided
  by operating  activities:
   Deferred income taxes                                      613           (42)
   Depreciation and amortization                              155           264
   Stock compensation expense                                  --           323
     Change in operating assets and liabilities:
     Accounts receivable, net                               1,866         3,629
     Software license installments                         (1,694)         (933)
     Other assets                                            (471)         (129)
     Accounts payable and accrued expenses                 (2,850)       (2,580)
     Other liabilities                                        (91)          810
     Deferred maintenance revenue                           3,068         1,290
                                                          -------       -------
         Total adjustments                                    596         2,632
                                                          -------       -------
Net cash provided by operating activities                   1,143         3,523
                                                          -------       -------
Cash flows used in investing activities:
   Capital expenditures                                      (134)         (412)
                                                          -------       -------
Cash flows from financing activities:
   Cash Received from exercise of stock options                --           116
   Payments on capital lease obligations                      (14)          (15)
                                                          -------       -------
Net cash (used in) provided by financing activities           (14)          101
                                                          -------       -------
Effect of exchange rate changes on
   cash and cash equivalents                                  (80)          139
                                                          -------       -------
Net change in cash and cash equivalents                       915         3,351
Cash and cash equivalents at beginning
   of period                                                5,672        42,222
                                                          -------       -------
Cash and cash equivalents at end of period                $ 6,587       $45,573
                                                          =======       =======
Supplemental disclosure of cash flow
   information:
   Cash paid during the period for:
     Interest                                             $     4      $     7
     Income taxes                                             223          200

                     See accompanying notes to consolidated
                             financial statements.


<PAGE>



                         MOBIUS MANAGEMENT SYSTEMS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1)  Basis of Presentation

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

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

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

(2) Earnings Per Share

Basic EPS is computed by dividing income available to common stockholders by the
weighted average number of shares of common stock outstanding during the period.
The computation of Diluted EPS is similar to the computation of Basic EPS except
that  it  gives  effect  to  all  potentially  dilutive  instruments  that  were
outstanding during the period.  Stock options were dilutive  instruments in both
periods and our Series A Convertible  Preferred Stock was dilutive for the three
months ended September 30, 1997.

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

<TABLE>
<CAPTION>

                                                                Three Months Ended September 30,
                                                    1997                                            1998
                                -------------- --------------- ------------      ------------- --------------- -----------
                                 Net Income        Shares       Per Share         Net Income       Shares      Per Share
                                 (Numerator)   (Denominator)     Amount          (Numerator)   (Denominator)     Amount
<S>                                 <C>            <C>            <C>                <C>           <C>           <C>

Basic EPS:
Net income                          $547                                             $891
                                    ====                                             ====
Weighted average shares
 outstanding                                      10,909                                          17,747
Basic EPS                                                         $0.05                                          $0.05
                                                                  =====                                          =====
Diluted EPS:
Net income                          $547                                             $891
                                    ====                                             ====
Dilutive      effect     of
convertible securities                             4,091                                               -
Dilutive effect of
 stock options                                     1,510                                             977
                                                  ------                                          ------
Diluted EPS                                       16,510          $0.03                           18,724        $0.05
                                                  ======          =====                           ======        =====

</TABLE>

<PAGE>

                         MOBIUS MANAGEMENT SYSTEMS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



(3)  Software License Installments

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

(4)  Property and Equipment

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

                                                      June 30, September 30,
                                                        1998       1998
                                                       -----      ------

  Furniture, fixtures and office equipment         $     508      $  564
  Computer equipment                                   4,410       4,745
  Leasehold improvements                                 544         574
                                                      ------      ------
                                                       5,462       5,883
  Less accumulated depreciation and amortization      (2,530)     (2,803)
                                                      ------      ------
  Property and equipment, net                         $2,932      $3,080
                                                      ======      ======

Depreciation and amortization expense on property and equipment,  including
capital  leases,  was  $156,000  and  $264,000  for the three month period ended
September 30, 1997 and September 30, 1998, respectively.

(5)  Accounts Payable and Accrued Expenses

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


                                                     June 30,  September 30,
                                                       1998         1998
                                                     ------       ------
         Accounts payable                            $  801       $  647
         Compensation and related benefits            4,872        2,180
         Royalty payable                              1,318        1,418
         Other                                        2,480        2,646
                                                     ------       ------
                                                     $9,471       $6,891
                                                     ======       ======


<PAGE>

                         MOBIUS MANAGEMENT SYSTEMS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



(6)  Stock Incentive Plan

In January, February and March 1998 we granted 350,000, 370,000 and 53,000 stock
options, respectively,  under our 1996 Stock Incentive Plan at an exercise price
of $9.86,  $11.00 and $11.00 per share,  respectively,  which were deemed by the
Board of  Directors to be fair market  values for the shares on these dates.  We
subsequently determined that these options were granted at exercise prices below
the fair market value of $14.00 per share, the low end of our preliminary  range
of per share prices for our Initial Public Offering.  As a result, for the three
months ended September 30, 1998, we recognized $323,000 of compensation  expense
related  to  these  stock   options.   We  expect  to  recognize  an  additional
compensation  expense  of  approximately  $1,714,000  in  future  periods.  This
compensation  expense  will be amortized  over the  respective  option  holders'
service periods, adjusted for option holders' terminations.

(7) Subsequent Events

Our revolving line of credit expired on October 20, 1998. We are in negotiations
to extend,  expand or replace our line of credit for working capital.  We expect
that the new line of credit  will be secured by certain  assets and may  contain
certain financial restrictions and covenants such as maintaining minimum amounts
of cash,  net  worth  and  profitability.  In  connection  with the lease of our
corporate headquarters,  we have a $500,000 letter of credit with Silicon Valley
Bank. We are in the process of  decreasing  this letter of credit to $275,000 in
compliance with the terms of our lease.


<PAGE>




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

In this section,  readers are given a more detailed  assessment of our operating
results  and  changes in  financial  position.  This  section  should be read in
conjunction with our Consolidated  Financial  Statements and Notes.  Please note
that  references  in this  section to "last year's  quarter" and "this  quarter"
refer to our fiscal  quarter ended  September  30, 1997 and 1998,  respectively.
our quarterly  revenues  and  operating results  have varied substantially from
quarter  to  quarter in the past,  and are  likely to  continue  to do so in the
future.  Certain factors  underlying such  fluctuations,  as well as a number of
other factors relevant to a reader's understanding of this Management Discussion
and  Analysis,  are set  forth  under  the  heading  "Factors  Affecting  Future
Performance"  contained in our Form 10-K, the full text of which is incorporated
in this Form 10-Q by this  reference.  Statements  contained  in this  quarterly
report,  other than historical  financial results,  may contain  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve risks and uncertainties. In particular,
any statements  contained herein regarding  expectations  with respect to future
sales and profitability,  as well as product  development and/or  introductions,
are subject to known and unknown risks, uncertainties and contingencies, many of
which are beyond our control,  which may cause actual  results,  performance  or
achievements  to differ  materially  from  those  projected  or  implied in such
forward-looking   statements.   Factors  that  might  affect   actual   results,
performance or achievements  include,  among other things,  overall economic and
business  conditions,  the demand for our goods and services,  and technological
advances and competitive factors in the markets in which we compete. These risks
and  uncertainties are described in detail from time to time in our filings with
the  Securities  and  Exchange  Commission,  including  our Form  10-K  filed on
September  28, 1998.  We accept no  obligation  to update these  forward-looking
statements and do not intend to do so.

Overview

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


<PAGE>




Results of Operations

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

                                              Three Months Ended
                                                 September 30,
                                              1997        1998
                                             -------------------
                                                (Unaudited)


Revenues:
  Software license revenues                   57.7%        64.5%
  Maintenance and other revenues              42.3         35.5
                                             -----        -----
         Total revenues                      100.0        100.0
Costs of revenues:
  Software license revenues                    3.7          2.0
  Maintenance and other revenues               7.0          8.3
                                             -----        -----
         Total costs of revenues              10.7         10.3
                                             -----        -----
Gross profit                                  89.3         89.7
Operating expenses:
  Sales and marketing                         47.6         53.0
  Research and development                    17.0         16.3
  General and administrative                  14.8         10.5
  Stock compensation expense                   -            2.0
                                             -----        -----
         Total operating expenses             79.4         81.8
                                             -----        -----
Income from operations                         9.9          7.9
Miscellaneous income, net                      3.2          4.0
                                             -----        -----
Income before income taxes                    13.1         11.9
Provision for income taxes                     7.6          6.2
                                             -----        -----
Net income available to common stock           5.5%         5.7%
                                             =====        =====



Three Months Ended September 30, 1997 Compared to Three Months Ended 
   September 30, 1998

Revenues.  

o    Software  license  revenues  increased 78.5% from $5.7 million in last
     year's  quarter  to $10.2  million  this  quarter.  The  increase  was
     primarily  attributable  to  increased  sales  of the  ViewDirect  and
     DocumentDirect products.

o    Maintenance  and other revenues  increased  33.6% from $4.2 million in
     last year's  quarter to $5.6  million this  quarter.  The increase was
     primarily  attributable  to the  growth  of the  number  and  size  of
     software licenses covered by maintenance contracts. Other revenues for
     both periods were not significant.

o    Total  revenues  increased  59.5% from $9.9  million  in  last  year's
     quarter to $15.8 million this quarter.  U.S. revenues  increased 42.2% 
     from $8.9 million in last year's quarter to $12.7 million this quarter. 
     Our  international  revenues   increased  224.0% from $941,000 in last
     year's quarter  to  $3.0  million  this  quarter.  Our  total revenues  
     have increased  primarily  because  we  have  sold  more  licenses for 
     our products to new and existing customers.


<PAGE>



Costs of Revenues.

o    Costs of license  revenues  consist  primarily of royalties and  sublicense
     fees. The costs of license  revenues  decreased 15.0% from $366,000 in last
     year's  quarter  to  $311,000  this  quarter,  representing  6.4% and 3.1%,
     respectively,  of license  revenues in those  periods.  This decrease was a
     result  of  changes  in the mix of  products  subject  to  royalties  and a
     decrease in the number of software components subject to royalties.

o    Costs of  maintenance  and other  revenues  consist  primarily  of customer
     support staff costs. The costs of maintenance and other revenues increased 
     88.4%  from  $692,000  in  last  year's  quarter  to  $1.3  million  this 
     quarter,  representing   16.5%  and  23.3%  of   maintenance   and  other  
     revenues, respectively.   This  increase  was  primarily  attributable  to
     increased staffing and related personnel costs.

Operating Expenses.

o    Sales  and  marketing.  These  expenses  consist  primarily  of the cost of
     personnel  associated  with the  selling  and  marketing  of our  products,
     including salaries,  commissions, bonus and travel and entertainment costs.
     Sales and marketing expenses also include the cost of branch sales offices,
     marketing,  promotional  materials  and  advertising.  Sales and  marketing
     expenses  increased  77.6% from $4.7 million in last year's quarter to $8.3
     million this quarter.  This increase was primarily  attributable  to hiring
     more sales staff, which increased personnel related costs.

o    Research and  development.  These 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  52.9% from $1.7  million in last year's  quarter to $2.6 million
     this quarter. The increase is primarily  attributable to increased staffing
     and  personnel-related  costs.  We  believe  that a  significant  level  of
     research  and  development  expenses  will  be  required  to  maintain  our
     competitive position in the future.

o    General and  administrative.  These  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 13.1%
     from $1.5 million in last year's quarter to $1.7 million this quarter. This
     increase is primarily due to hiring additional  personnel and was offset by
     a decrease in  professional  fees this quarter,  as compared to last year's
     quarter.  We expect  general  and  administrative  expenses  to increase in
     fiscal 1999 as a result of adding personnel needed to support our continued
     expansion of our operations.

License  and  other  interest  income;   interest   expense;   foreign  currency
transaction  gains  (losses).  License  and other  interest  income  consists of
interest on cash balances and a portion of license  payments  under  installment
contracts  allocated  to interest  based on a discount  rate.  License and other
interest income  increased from $325,000 in last year's quarter to $672,000 this
quarter primarily as a result of the earnings on higher cash balances.

Interest expense  consists  primarily of costs associated with our capital lease
obligations.  Foreign  currency  losses consist of realized  transaction  losses
relating to foreign currency exchange rate  fluctuations.  Both interest expense
and foreign currency transaction losses were not material in last year's quarter
and this quarter.


<PAGE>




Provision for Income Taxes.  The provision for income taxes was $750,000 in last
year's  quarter and $988,000  this  quarter.  The  effective tax rates for these
respective  periods were 57.8% and 52.6%. The difference between these rates and
the U.S. Federal  statutory rate is primarily  attributable to not being able to
consolidate foreign subsidiary losses for income tax purposes. The effective tax
rate has  decreased  as a result of a decrease in the amount of certain  foreign
subsidiary operating losses that can be consolidated for income tax purposes and
some foreign  subsidiary tax operating  profits being offset by prior period tax
operating losses.

Liquidity and Capital Resources

Since our  inception,  we have funded our  operations  principally  through cash
flows from operating  activities  and, to a lesser extent,  bank  financings and
capital  leases.  As of September 30, 1998, we had cash and cash  equivalents of
$45.6  million,  an increase of $3.4 million from the $42.2 million held at June
30, 1998.

Net cash provided by operating  activities  was $1.1 million and $3.5 million in
the first three months of fiscal 1998 and 1999, respectively.  Our cash position
was improved by collection  efforts,  resulting in lower days sales outstanding.
Software  license  installments,  which,  in total,  increased  4.4% from  $21.0
million at June 30, 1998 to $21.9  million this quarter  represent  payments due
from customers for license fees that are paid over 3-5 year terms.

Our cash  position has also  benefited  from  increases in deferred  maintenance
revenue,  which in total, has increased 7.6% from $17.0 million at June 30, 1998
to $18.3 million this  quarter.  Deferred  maintenance  revenue  represents  the
unrecognized  portion of maintenance  billings and the  unrecognized  portion of
maintenance  revenue  unbundled  from  customer  license  agreements  which  are
recognized  ratably  over the term of the  agreement,  or the first  year of the
license  agreement.  These  increases  are primarily due to increases in license
fees, the increase in the number of customers covered by maintenance  agreements
and,  to a  lesser  extent,  increases  in the fees  charged  to  customers  for
maintenance.

Cash used in investing  activities,  consisting of capital  expenditures for the
purchase of computer  equipment  and software  used in product  development  and
customer support, was $134,000 in last year's quarter and $412,000 this quarter.

Net cash used in  financing  activities  was $14,000 in last year's  quarter and
related to the  repayment  of capital  leases.  Net cash  provided by  financing
activities  was $101,000  this quarter due to cash received from the exercise of
stock options.

Our revolving line of credit expired on October 20, 1998. We are in negotiations
to extend,  expand or replace our line of credit for working capital.  We expect
that the new line of credit  will be secured by certain  assets and may  contain
certain financial restrictions and covenants such as maintaining minimum amounts
of cash,  net  worth  and  profitability.  In  connection  with the lease of our
corporate headquarters,  we have a $500,000 letter of credit with Silicon Valley
Bank. We are in the process of  decreasing  this letter of credit to $275,000 in
compliance with the terms of our lease.

We believe that our existing cash  balances and cash flows  expected from future
operations will be sufficient to meet our capital  requirements  for at least 12
months.

Year 2000 Compliance

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

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

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

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

Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable



PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

None

Item 2 - Changes in Securities and Use of Proceeds

(a)  Not applicable

(b)  Not applicable

(c)  Not applicable

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

Item 3 - Defaults Upon Senior Securities

None

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

None

Item 5 - Other Information

None

Item 6 - Exhibits and Reports on Form 8-K

(a)      Exhibits


Exhibit
  No.                            Description


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

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

(b)      Reports on Form 8-K

         Not Applicable



<PAGE>




                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date:  November 13, 1998



                                        MOBIUS MANAGEMENT SYSTEMS, INC.

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


<PAGE>





                                  EXHIBIT INDEX

Exhibit                                                                         
  No.                                Description                      

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

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