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, 2001

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

Number of shares outstanding of the issuer's common stock as of February 6, 2002

                 Class                          Number of Shares Outstanding

Common Stock, par value $0.0001 per share                17,227,286



<PAGE>



                         MOBIUS MANAGEMENT SYSTEMS, INC.


                                      INDEX


PART I      FINANCIAL INFORMATION


         Item 1.  Financial Statements

            Consolidated Balance Sheets
                June 30, 2001 and December 31, 2001

            Consolidated Statements of Operations
                Three and six months ended December 31, 2000 and 2001

            Consolidated Statements of Stockholders' Equity
                Six months ended December 31, 2001

            Consolidated Statements of Cash Flows
                Six months ended December 31, 2000 and 2001

               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)


                                                                    Unaudited
                                                        June 30,   December 31,
                                                          2001        2001
                                                      -----------  -----------
ASSETS
Current assets:
  Cash and cash equivalents                              $24,099      $28,761
  Marketable securities, at market value                  10,508        6,638
  Accounts receivable, net of allowance for
    doubtful accounts of $899 and $891, respectively      12,852       10,763
  Software license installments, current portion           9,317        7,484
  Other current assets                                     2,304        2,095
                                                         -------      -------
        Total current assets                              59,080       55,741

Software license installments, non-current portion,
  net of allowance for doubtful accounts of $551
  and $545, respectively                                   5,216        5,065
Property and equipment, net                                9,231        7,996
Deferred income taxes, non-current                         1,242        1,831
Other non-current assets                                     746          660
                                                         -------      -------
        Total assets                                     $75,515      $71,293
                                                         =======      =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses                  $15,498      $15,144
  Deferred revenues, current                              16,950       19,536
  Deferred income taxes, current                           3,199        2,466
                                                         -------      -------
        Total current liabilities                         35,647       37,146

Deferred revenues, non-current                             1,398        1,249
                                                         -------      -------
        Total liabilities                                 37,045       38,395

Stockholders' equity:
  Common stock, $.0001 par value; authorized
    40,000,000 shares; issued 22,481,436 and
    22,581,759 shares; outstanding 18,206,413
    and 17,227,286 shares, respectively                        2            2
  Additional paid-in capital                              49,624       49,827
  Retained earnings (Accumulated deficit)                  2,611         (156)
  Deferred stock compensation                               (168)         (88)
  Accumulated other comprehensive income                    (878)        (705)
  Treasury stock, at cost, 4,275,023 and 5,354,473
    shares, respectively                                 (12,721)     (15,982)
                                                         -------      -------
        Total stockholders' equity                        38,470       32,898
                                                         -------      -------

Total liabilities and stockholder's equity               $75,515      $71,293
                                                         =======      =======

See accompanying notes to consolidated financial statements.




<PAGE>









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

<TABLE>
<CAPTION>
                                                 Three months ended              Six months ended
                                                    December 31,                    December 31,
                                               2000             2001             2000           2001
                                               ----             ----             ----           ----
<S>                                           <C>             <C>              <C>            <C>

Revenues:
  Software licenses                           $10,479         $ 7,165          $20,885        $12,572
  Maintenance                                   8,308           8,679           16,043         17,267
  Professional service and other                  317           1,761              706          2,344
                                              -------         -------          -------        -------
    Total revenues                             19,104          17,605           37,634         32,183

Cost of revenues:
  Software licenses                               326             205              743            439
  Maintenance                                   1,239           1,565            2,523          2,857
  Professional service and other                  165           1,569              442          2,252
                                              -------         -------          -------        -------
    Total costs of revenues                     1,730           3,339            3,708          5,548

Gross profit                                   17,374          14,266           33,926         26,635

Operating expenses:
  Sales and marketing                          11,764           9,783           23,446         19,071
  Research and development                      3,953           3,745            8,283          7,489
  General and administrative                    2,531           2,567            5,113          5,156
                                              -------         -------          -------        -------
    Total operating expenses                   18,248          16,095           36,842         31,716

Loss from operations                             (874)         (1,829)          (2,916)        (5,081)

License and other interest income                 748             487            1,444          1,028
Interest expense                                   --               1               (3)            (4)
Foreign currency transaction gains                  2               6                6              8
Other income (expense)                             67              --               67             (2)
Investment impairment                              --              --             (218)            --
                                              -------         -------          -------        -------
Loss before income taxes                          (57)         (1,335)          (1,620)        (4,051)

Provision (benefit) from income taxes             195            (424)            (289)        (1,284)
                                              -------          ------          -------        -------
Net Loss                                       $ (252)         $ (911)         $(1,331)       $(2,767)
                                               ======          ======          =======        =======

Basic and diluted loss per share               $(0.01)         $(0.05)         $ (0.07)        $(0.16)
Basic and diluted weighted average
  shares outstanding
                                               18,272          17,236           18,195         17,690

</TABLE>
<PAGE>



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

                                                                                        Accumulated                       Total
                                                     Additional                            Other                       Stockholders'
                                       Common Stock   Paid-in   Retained   Deferred    Comprehensive   Treasury Stock    (Deficit)
                                      Shares  Amount  Capital   Earnings Compensation      Loss        Shares  Amount     Equity
                                      ------  ------  -------   -------- ------------  -------------   ------  ------   -----------
<S>                                   <C>        <C>  <C>         <C>         <C>         <C>          <C>   <C>          <C>
Balance at June 30, 2001              18,206     $ 2  $49,624     $2,611      $(168)       $(878)      4,275 $(12,721)    $38,470
Net loss                                   -       -        -     (2,767)         -            -           -        -      (2,767)
Change in other comprehensive
  loss, net of tax                         -       -        -          -          -          173           -        -         173
                                                                                                                           ------
   Comprehensive loss                      -       -        -          -          -            -           -        -      (2,594)
Stock options exercised                   15       -       25          -          -            -           -        -          25
Stock purchase plan shares issued         85       -      178          -          -            -           -        -         178
Stock repurchase program              (1,079)      -        -          -          -            -       1,079   (3,261)     (3,261)
Change in deferred compensation            -       -        -          -         80            -           -        -          80
                                  -----------------------------------------------------------------------------------------------
Balance at December 31, 2001          17,227     $ 2  $49,827     $ (156)      $(88)       $(705)      5,354 $(15,982)    $32,898
                                  ===============================================================================================
</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,
                                                                      2000              2001
                                                                  -----------       -----------

<S>                                                                 <C>               <C>

Cash flows provided by operating activities:
Net loss                                                            $(1,331)          $(2,767)
                                                                    -------           -------
Adjustments to reconcile net loss to net cash
  provided by operating activities:
  Deferred income taxes                                                (727)           (1,322)
  Depreciation and amortization                                       1,994             2,125
  Stock compensation expense                                            181                80
  Impairment of investment                                              218                --
  Loss on disposal of fixed assets                                       20                --
  Other                                                                 (67)                6
Change in operating assets and liabilities:
  Accounts receivable, net                                              334             2,089
  Software license installments                                       3,143             1,984
  Other assets                                                          554               212
  Accounts payable and accrued expenses                                (200)             (157)
  Deferred revenue                                                      449             2,437
                                                                     ------            ------
  Total adjustments                                                   5,899             7,454
                                                                     ------            ------
Net cash provided by operating activities                             4,568             4,687
                                                                     ------            ------

Cash flows (used in) provided by investing activities:
  Purchase of marketable securities                                  (9,787)           (6,925)
  Purchase of investment                                               (375)               --
  Sale of marketable securities                                      11,444            10,790
  Sale of fixed assets                                                   51                --
  Capital expenditures                                               (3,110)             (797)
  Other investment                                                       --               (11)
                                                                     ------            ------
Net cash (used in) provided by investing activities                  (1,777)            3,057
                                                                     ------            ------

Cash flows provided by (used in) financing activities:
  Cash received from exercise of stock options                           12                19
  Cash received from employee stock purchase                            619               178
  Cash used for stock repurchase program                                (37)           (3,261)
                                                                     ------            ------
Net cash provided by (used in) financing activities                     594            (3,064)
                                                                     ------            ------

Effect of exchange rate changes on cash and cash equivalents
                                                                       (175)              (18)
                                                                     ------            ------

Net change in cash and cash equivalents                               3,210             4,662
Cash and cash equivalents at beginning of period                     21,380            24,099
                                                                    -------           -------
Cash and cash equivalents at end of period                          $24,590           $28,761
                                                                    =======           =======

Supplemental disclosure of cash flow information:
Cash paid during the period for:
  Interest                                                              $ 3               $ 4
  Income taxes                                                          $ -               $ 7

</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, 2001 and
December 31, 2001 and for the three and six month periods ended December 31,
2000 and 2001, 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 Mobius to make estimates and assumptions in preparing the interim
financial statements. Mobius has made its 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

         Earnings per share are presented in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" and Staff
Accounting Bulletin No. 98. 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,
                                                    2000                                          2001
                                -------------- --------------- -----------    -------------- --------------- -----------
                                  Net Loss         Shares      Per Share        Net Loss         Shares      Per Share
                                 (Numerator)   (Denominator)     Amount        (Numerator)   (Denominator)     Amount
<S>                                <C>             <C>           <C>             <C>             <C>          <C>

Basic and diluted loss per share:
Net loss                           $(252)                                        $(911)
                                   ======                                        ======
Weighted average shares
 outstanding                                       18,272                                        17,236
Basic and diluted  loss per
share                                                           $(0.01)                                       $(0.05)
                                                                =======                                       =======


</TABLE>
<PAGE>



(2)  Earnings Per Share (continued)

<TABLE>
<CAPTION>

                                                               Six Months Ended December 31,
                                                    2000                                          2001
                                -------------- --------------- -----------    -------------- --------------- -----------
                                  Net Loss         Shares      Per Share        Net Loss         Shares      Per Share
                                 (Numerator)   (Denominator)     Amount        (Numerator)   (Denominator)     Amount
<S>                               <C>              <C>           <C>            <C>              <C>          <C>
Basic and diluted loss per share:
Net loss                          $(1,331)                                      $(2,767)
                                  ========                                      ========
Weighted average shares
 outstanding                                       18,195                                        17,690
Basic and diluted  loss per
share                                                           $(0.07)                                       $(0.16)
                                                                =======                                       =======
</TABLE>

         Outstanding stock options, representing an aggregate of 3,225,200 and
3,580,450 shares of common stock equivalents, are antidilutive for the three and
six months ended December 31, 2000 and 2001, respectively.

(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
insignificant realized gains and losses for the three and six months ended
December 31, 2000 and 2001. As of June 30, 2001 and December 31, 2001, 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 3 to 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 financing.



<PAGE>



(5)  Property and Equipment

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

                                                      June 30,     December 31,
                                                        2001           2001
                                                      --------     ------------

 Computer equipment and software                      $12,689        $13,499
 Furniture, fixtures and office equipment               1,650          1,648
 Leasehold improvements                                 4,665          4,625
                                                       ------         ------
                                                       19,004         19,772
 Less accumulated depreciation and amortization        (9,773)       (11,776)
                                                       ------        -------
 Property and equipment, net                          $ 9,231        $ 7,996
                                                      =======        =======

     Depreciation and amortization expense on property and equipment,  including
capital leases, was $1.0 million for each of the three months ended December 31,
2000 and 2001  and $2.0  million  and  $2.1  million  for the six  months  ended
December 31, 2000 and 2001, respectively.

(6)      Non-Current Investments

         In June 1999, the Company invested $1,501,000 in Home Account Network
("HAN") a privately-held, information technology company providing processing
and Internet outsourcing to financial services companies. During fiscal 2000,
Mobius provided an additional $750,000 to HAN in short term loans that were
converted to preferred stock in May 2000. In the first six months of fiscal
2001, Mobius provided an additional $375,000 as a short term loan to HAN.
Mobius's investment in HAN was a minority ownership position, which was less
than 5%. Mobius did not sit on the Board of Directors, nor influence day to day
operations of HAN.

         Mobius regularly assessed the recoverability of the HAN investment and
concluded that other than temporary impairment losses occurred. Impairment
losses of $2.2 million were recorded through June 30, 2000 and for the three
months ended September 30, 2000 an impairment loss of $218,000 was recorded. As
of December 31, 2001, the remaining carrying value of the HAN investment is
$188,000 and is included within other current assets.

         In January 2001, HAN was purchased by Intelidata Technologies
("Intelidata"). The merger agreement established a fixed number of shares to be
allocated between debt holders and all shareholders, including Mobius. The
Intelidata shares will be released at specified time periods beginning after the
Intelidata shares are registered. The number of shares to be received by debt
holders will be based upon a formula that utilizes the market value of
Intelidata stock on each release date. After the debtors are repaid, any
remaining shares will be distributed to HAN's management and shareholders based
on percentages in the merger agreement. Once the stock is released to the
debtors and shareholders, it is subject to a variety of trading restrictions. As
of December 31, 2001, Mobius has not received any Intelidata shares.

         Mobius believes that the $188,000 carrying value of the HAN investment
at December 31, 2001 is recoverable based on estimates of the amount and value
of the Intelidata shares to be received from the transaction, discounted for the
restrictions and estimated time until the Intelidata shares are expected to be
received.



<PAGE>




(7)  Accounts Payable and Accrued Expenses

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

                                                     June 30,   December 31,
                                                       2001         2001
                                                     --------   -----------

         Accounts payable                             $ 2,101      $ 2,020
         Compensation and related benefits              6,728        6,550
         Royalties payable                              1,143        1,016
         Other                                          5,526        5,558
                                                      -------      -------
                                                      $15,498      $15,144
                                                      =======      =======

(8)  Common Stock

         In September 2001, the Board of Directors expanded the Company's stock
repurchase program to allow repurchases of up to 1,250,000 shares of Mobius's
outstanding common stock. Since the inception of the program in December 31,
2000, the entire 1,250,000 shares were repurchased at a cost of approximately
$3.9 million. The number of shares repurchased and timing of purchases were
based on a variety of factors, including general market conditions, the market
price and trading volume of Mobius shares.


(9)  Stock Incentive Plan

         In January, February and March 1998, Mobius 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. Mobius 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 Mobius's initial public offering ("IPO") in
April 1998. As a result, Mobius recognized compensation expense as follows (in
thousands):

                                     Three Months ended   Six Months ended
                                        December 31,        December 31,
                                        2000     2001      2000     2001
                                        ----     ----      ----     ----

Sales and marketing                      $66     $26       $131     $52
Research and development                  20      11         40      23
General and administrative                 5       3         10       5
                                    ---------------------------------------
Total                                    $91     $40       $181     $80
                                    =======================================


         There is approximately $45,000 and $43,000 of stock compensation
expense relating to these 1998 option grants to be recognized as stock
compensation expense in fiscal years 2002 and 2003, respectively, to be adjusted
for option holders' terminations.


<PAGE>



(10)  Comprehensive Loss

         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 loss for the quarters ended December 31, 2000 and 2001 is as
follows (in thousands):

                                            Three Months ended  Six Months ended
                                               December 31,       December 31,
                                               2000    2001      2000     2001
                                               ----    ----      ----     ----

Net loss                                      $ (252) $(911)   $(1,331) $(2,767)
Unrealized marketable securities gain (loss)      56     (4)        75        1
Unrealized translation gain(loss)                 78      7       (175)     172
                                             -----------------------------------
Comprehensive loss                            $ (118) $(908)   $(1,431) $(2,594)
                                             ===================================


(11)  Commitments and Contingencies

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

(12) Sale of INFOPAC-Tapesaver

         In January 1999, the Company sold the INFOPAC-TapeSaver product to a
third party for approximately $3.0 million payable over a five year period. For
the three and six months ended December 31, 2000, the Company recognized
$112,500 and $262,500 of TapeSaver license revenue, respectively. As the buyer
is delinquent on these payments since June 2001, no TapeSaver license revenue
was recognized in the three and six months ended December 31, 2001. Mobius has
commenced arbitration proceedings with the buyer to enforce the payment terms in
the sales agreement. The outstanding balance of payments due to Mobius from the
buyer is approximately $1.2 million, which will be recognized when the buyer
makes the remaining payments.


<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 Mobius's Consolidated Financial Statements
and Notes. Please note that references in this section to "last year's quarter"
and "this quarter" refer to Mobius's fiscal quarters ended December 31, 2000 and
2001, 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.

         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. They are not historical facts or guarantees of
future performance or events. They are based on current expectations, estimates,
beliefs, assumptions, goals and objectives, and are subject to uncertainties
that are difficult to predict. 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 Mobius's
control, which may cause actual results, performance or achievements to differ
materially from those projected or implied in such forward-looking statements.
Important 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, including budget allocations for new
software products especially within larger corporate environments which have
traditionally licensed Mobius's products, technological advances and competitive
factors in the markets in which Mobius competes, including price competition
from products providing similar functionality to Mobius's products as well as
competition for experienced, seasoned employees (including retention) to support
Mobius's key business operations, ongoing product development and growth, and
acceptance and or adoption of Mobius's new internet products or services.
Certain of these risks and uncertainties are described in detail from time to
time in Mobius's filings with the Securities and Exchange Commission, including
without limitation, as set forth under the heading "Factors Affecting Future
Performance" below. Forward looking statements included in this quarterly report
are based on information known to Mobius as of the date of this quarterly report
and Mobius accepts no obligation (and expressly disclaims any obligations) to
update these forward-looking statements and does not intend to do so.

Overview

         Mobius is a leading provider of software that supports content
intensive e-business applications. For over two decades, Mobius has delivered
innovative technology that provides access through a common portal to
mission-critical documents, reports and images. Mobius solutions have achieved
industry-wide recognition for their ability to support high-volume,
high-performance, simultaneous-access requirements in distributed environments
that range from the desktop to the mainframe. Today, our ViewDirect(R)
technology stores and integrates information in virtually any format, presenting
and distributing it over the Internet and corporate networks. Personalized views
and automated distribution options deliver information in the format needed by
each employee, customer and partner. This versatile technology supports a broad
range of e-business requirements, including corporate portals, customer service,
customer relationship management, electronic statement presentment, Internet
bill presentment and payment, and archiving and output management for enterprise
resource planning systems.



<PAGE>



Results of Operations

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

                                       Three months ended    Six months ended
                                           December 31,        December 31,
                                          2000     2001       2000      2001
                                          ----     ----       ----      ----

Revenues:
  Software licenses                       54.9%   40.7%       55.5%    39.1%
  Maintenance                             43.5    49.3        42.6     53.6
  Professional service and other           1.6    10.0         1.9      7.3
                                         -----   -----       -----    -----
    Total revenues                       100.0   100.0       100.0    100.0

Cost of revenues:
  Software licenses                        1.7     1.2         2.0      1.3
  Maintenance                              6.5     8.9         6.7      8.9
  Professional service and other           0.9     8.9         1.2      7.0
                                         -----   -----       -----    -----
    Total costs of revenues                9.1    19.0         9.9     17.2

Gross profit                              90.9    81.0        90.1     82.8

Operating expenses:
  Sales and marketing                     61.6    55.5        62.2     59.3
  Research and development                20.7    21.3        22.0     23.3
  General and administrative              13.2    14.6        13.6     16.0
                                         -----   -----       -----    -----
    Total operating expenses              95.5    91.4        97.8     98.6

Loss from operations                      (4.6)  (10.4)       (7.7)   (15.8)

License and other interest income          3.9     2.8         3.8      3.2
Other income                               0.4      --         0.2       --
Investment impairment                       --      --        (0.6)      --
                                         -----   -----      ------    -----
Loss before income taxes                  (0.3)   (7.6)       (4.3)   (12.6)

Provision (benefit) from income taxes      1.0    (2.4)       (0.8)    (4.0)
                                         -----   -----       -----    -----

Net Loss                                  (1.3)%  (5.2)%      (3.5)%   (8.6)%
                                         =====   =====       =====    =====

      Three Months Ended December 31, 2000 Compared to Three Months Ended
                               December 31, 2001

Revenues.

o     Total revenues  decreased  7.8% from $19.1 million in last year's  quarter
      to $17.6 million this quarter.  U.S. total revenues decreased 1.3% from
      $15.3 million in last year's quarter to $15.1 million this quarter. Total
      U.S. revenues decreased due to less U.S. license revenues,  offset by an
      increase in U.S. professional service revenues.  International total
      revenues decreased 34.2% from $3.8 million in last year's quarter to $2.5
      million this quarter.  Total  international  revenues decreased  primarily
      due to less international license revenues.

o    Software license revenues decreased 31.6% from $10.5 million in last year's
     quarter to $7.2 million this quarter. Mobius believes this decrease was
     primarily attributable to the current economic environment which resulted
     in Mobius selling fewer licenses of its products to new and existing
     customers.


<PAGE>




o    Maintenance revenues increased 4.5% from $8.3 million in last year's
     quarter to $8.7 million this quarter. This increase in maintenance revenue
     was primarily attributable to the growth in the amount of licensed software
     covered by maintenance agreements and increases in the maintenance fees
     charged by Mobius.

o    Professional service and other revenues increased 455.5% from $317,000 in
     last year's quarter to $1.8 million this quarter. Professional service
     revenues have significantly increased as a result of Mobius dedicating more
     resources to the development of the Company's professional service business
     and Mobius entering into more professional service arrangements. Other
     revenues for both quarters were not significant.

Costs of Revenues.

o    Costs of license revenues consist primarily of the cost of royalties and
     sublicense fees. The costs of software license revenues decreased 37.1%
     from $326,000 in last year's quarter to $205,000 this quarter, representing
     3.1% and 2.9% respectively, of software license revenues in those quarters.
     The costs of software license revenues are a variable expense related to
     license revenues that were subject to royalties and the decrease in cost of
     license revenues is consistent with the decrease in license revenues.

o    Costs of maintenance revenues consist primarily of customer support staff
     costs. The costs of maintenance revenues increased 26.3% from $1.2 million
     in last year's quarter to $1.6 million this quarter, representing 14.9% and
     18.0% respectively, of maintenance revenues in those quarters. This
     increase was primarily attributable to an increase in the number of support
     staff needed to support more maintenance agreements.

o    Costs of professional service and other revenues consist primarily of
     personnel and subcontractor costs associated with providing professional
     services. The costs of professional service and other revenues increased
     850.9% from $165,000 in last year's quarter to $1.6 million this quarter,
     representing 52.1% and 89.1% respectively, of professional service and
     other revenues in those quarters. The costs of professional service and
     other revenues increased significantly as the result of Mobius entering
     into more professional service arrangements. The costs of professional
     service revenue as a percentage of professional service and other revenues
     has increased due to Mobius developing this business and dedicating more
     internal resources to providing professional services.

 Operating Expenses.

o    Sales and marketing expenses consist primarily of the cost of personnel
     associated with selling and marketing Mobius's products, including
     salaries, commissions, performance based bonuses and travel expenses. Sales
     and marketing costs also include the cost of branch sales offices,
     marketing, and advertising. These expenses decreased 16.8% from $11.8
     million in last year's quarter to $9.8 million this quarter, representing
     61.6% and 55.6%, respectively, of total revenues in those quarters. Sales
     and marketing expenses decreased primarily due to decreased commissions and
     consolidation of the Click-n-Done sales and marketing departments into
     Mobius's existing sales and marketing structures. Commissions are a
     variable expense related to license revenues and the decrease in
     commissions is consistent with the decrease in license revenues.

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
     decreased 5.3% from $4.0 million in last year's quarter to $3.7 million
     this quarter, representing 20.7% and 21.3%, respectively, of total revenues
     in those quarters. The decrease in research and development expenses was
     primarily attributable to the consolidation of a dedicated Click-n-Done
     research and development department into Mobius's existing research and
     development departments and utilizing fewer outside research contractors.

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 1.4% from $2.5 million in
     last year's quarter to $2.6 million this quarter, representing 13.2% and
     14.6%, respectively, of total revenues in those quarters.

         License and other interest income; interest expense; foreign currency
transaction gains. License and other interest income decreased 34.9% from
$748,000 in last year's quarter to $487,000 this quarter due to a significant
decrease in investment returns and, to a lesser extent, less interest income
being generated from a decreasing amount of installment sales. During both
quarters interest expense and foreign currency transaction gains were
insignificant.

      Provision (Benefit) for Income Taxes. The tax provision for income taxes
was $195,000 in last year's quarter compared to a tax benefit of $(424,000) this
quarter. The provision (benefit) for taxes as a percentage of loss before taxes
was 342.1% and (31.8%) for last year's quarter and this quarter, respectively.
The effective tax rate for these quarters reflect a statutory tax benefit for
the losses in the United States offset by limitations on the tax benefit which
can be taken from certain foreign subsidiary losses.

           Six Months Ended December 31, 2000 Compared to Six Months
                            Ended December 31, 2001

Revenues.

o    Total revenues decreased 14.5% from $37.6 million in the first six months
     of fiscal 2001 to $32.2 million in the first six months of fiscal 2002.
     Domestic revenues decreased 11.9% from $30.2 million in the first six
     months of fiscal 2001 to $26.6 million in the first six months of fiscal
     2002. International revenues decreased 25.7% from $7.4 million in the first
     six months of fiscal 2001 to $5.5 million in the first six months of fiscal
     2002. Mobius believes the geopolitical events in Mobius's first quarter and
     the current economic environment resulted in Mobius being able to sell
     fewer licenses of its products to new and existing customers. The decrease
     in license revenues has been partially offset by an increase in revenue
     from professional service and other revenues.

o    Software license revenues decreased 39.8% from $20.9 million in the first
     six months of fiscal 2001 to $12.6 million in the first six months of
     fiscal 2002. Mobius believes this decrease was primarily attributable to
     the current economic environment which resulted in Mobius selling fewer
     licenses of its products to new and existing customers.

o    Maintenance revenues increased 7.6% from $16.0 million in the first six
     months of fiscal 2001 to $17.3 million in the first six months of fiscal
     2002. This increase in maintenance revenue was primarily attributable to
     the growth in the amount of licensed software covered by maintenance
     agreements and increases in the maintenance fees charged by Mobius.

o    Professional fee and other revenues increased 232.0% from $706,000 in the
     first six months of fiscal 2001 to $2.3 million in the first six months of
     fiscal 2002. Professional service revenues have significantly increased as
     a result of Mobius dedicating more resources to the development of the
     Company's professional service business and Mobius entering into more
     professional service arrangements. Other revenues for both six month
     periods were not significant.

Costs of Revenues.

o    Costs of license revenues consist primarily of the cost of royalties and
     sublicense fees. The costs of software license revenues decreased 40.9%
     from $743,000 in the first six months of fiscal 2001 to $439,000 in the
     first six months of fiscal 2002, representing 3.6% and 3.5% of software
     license revenues in fiscal 2001 and 2002, respectively. The costs of
     software license revenues are a variable expense related to license
     revenues that were subject to royalties and the decrease in cost of license
     revenues is consistent with the decrease in license revenues.

o    Costs of maintenance revenues consist primarily of customer support staff
     costs. The costs of maintenance and other revenues increased 13.2% from
     $2.5 million to $2.9 million in the first six months of fiscal 2001 and
     2002, respectively. This represents 15.7% and 16.5% of maintenance revenues
     in fiscal 2001 and 2002, respectively. The increase in costs for the six
     months ended December 31, 2001 was primarily attributable to an increase in
     the number of support staff needed to support more maintenance agreements.

o    Costs of professional service and other revenues consist primarily of
     personnel and subcontractor costs associated with providing professional
     services. The cost of professional service and other revenues increased
     409.5% from $442,000 in the first six months of fiscal 2001 to $2.3 million
     in the first six months of fiscal 2002, representing 62.6% and 96.1%
     respectively, of professional service and other revenues in those six month
     periods. The costs of professional service and other revenues increased
     significantly as the result of Mobius entering into more professional
     service arrangements. The costs of professional service revenue as a
     percentage of professional service and other revenues has increased due to
     Mobius developing this business and dedicating of more internal resources
     to providing professional services.

Operating Expenses.

o    Sales and  marketing  expenses  consist  primarily of the cost of personnel
     associated  with selling and  marketing  Mobius's products, including
     salaries,  commissions,  performance based bonuses and travel expenses.
     Sales and marketing costs also include the cost of branch  sales  offices,
     marketing,  promotional  materials  and  advertising.  These  expenses
     decreased  18.7% from $23.4 million in the first six months of fiscal 2001
     to $19.1 million in the first six months of fiscal 2002,  representing
     62.2% and 59.3%,  respectively,  of total revenues in those six month
     periods.  Sales and marketing expenses decreased  primarily due to
     decreased  commissions and  consolidation of the  Click-n-Done  sales and
     marketing  departments into Mobius's  existing sales and marketing
     structures.  Commissions  are a variable  expense  related to license
     revenues  and the  decrease  in  commissions  is consistent with the
     decrease in license revenues.

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
     decreased 9.6% from $8.3 million in the first six months of fiscal 2001 to
     $7.5 million in the first six months of fiscal 2002, representing 22.0% and
     23.3%, respectively, of total revenues in those six month periods. The
     decrease in research and development expenses was primarily attributable to
     the consolidation of a dedicated Click-n-Done research and development
     department into Mobius's existing research and development departments and
     utilizing fewer outside research contractors. These decreases were offset
     by an increase in personnel costs.

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 1.0% from $5.1 million in the
     first six months of fiscal 2001 to $5.2 million in the first six months of
     fiscal 2002, representing 13.6% and 16.0%, respectively, of total revenues
     in those six month periods.

         License and other interest income; interest expense; foreign currency
transaction gains. License and other interest income decreased 28.8% from $1.4
million in the first six months of fiscal 2001 to $1.0 million in the first six
months of fiscal 2002, due to a significant decrease in investment returns and
to a lesser extent less interest income being generated from a decreasing amount
of installment sales. During both six month periods interest expense and foreign
currency transaction gains were insignificant.

     Benefit for Income Taxes. The tax benefit for income taxes was $289,000 and
$1.3 million in the first six months of fiscal 2001 and 2002, respectively. The
effective benefit for taxes as a percentage of loss before taxes was 17.8% and
31.7% for the first six months of fiscal 2001 and 2002, respectively. The
effective tax rate for fiscal 2001 and 2002 reflects the statutory tax benefit
for the losses in the United States offset by limitations on the tax benefit
which can be taken from certain foreign subsidiary losses.

Liquidity and Capital Resources

         Since its inception, Mobius has funded its operations principally
through cash flows from operating activities and, to a lesser extent, equity or
bank financings. As of December 31, 2001, Mobius had cash and cash equivalents
of $28.8 million, a 19.3% increase from $24.1 million held at June 30, 2001. In
addition, Mobius had marketable securities of $6.6 million and $10.5 million as
of December 31, 2001 and June 30, 2001, respectively.

         Net cash provided by operating activities was $4.6 million in the first
six months of fiscal 2001 and $4.7 million in the first six months of fiscal
2002. Mobius's primary sources of cash during this quarter were increased
deferred revenue, decreased accounts receivable and software installments. These
sources were offset by a net loss and the change in deferred taxes. Mobius's
depreciation and amortization expense adjustment in operating activities was
$2.0 million and $2.1 million in the first six months of fiscal 2001 and 2002,
respectively. Deferred revenue increased 13.3% from $18.3 million at June 30,
2001 to $20.8 million at December 31, 2001. Net software license installments
decreased 13.7% from $14.5 million at June 30, 2001 to $12.5 million at December
31, 2001. Net accounts receivable decreased 16.3% from $12.9 million at June 30,
2001 to $10.8 million at December 31, 2001.

         Cash used in investing activities was $1.8 million in the first six
months of fiscal 2001 and cash provided by investing activities was $3.1 million
in the first six months of fiscal 2002. During the first six months of fiscal
2002, Mobius sold $10.8 million of marketable securities and purchased $6.9
million of marketable securities.

         Cash provided by financing activities was $594,000 in the first six
months of fiscal 2001 and cash used by financing activities was $3.1 million in
first six months of fiscal 2002. In the first six months of fiscal 2002, the
cash was used to repurchase Mobius's common stock pursuant to Mobius's stock
repurchase program, offset by cash received for employee stock purchases and
stock option exercises.

Bad Debt Reserves

         Accounts receivable reserves are primarily calculated by identifying
problem accounts and potential changes to maintenance agreements. 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. As of June 30, 2001 and December 31, 2001 approximately 80% and 90%,
respectively, of the total accounts receivable reserve balances were related to
specific accounts. 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. Customer balances greater than $100,000
comprised 80% and 77% of net software license installments of $14.5 million at
June 30, 2001 and $12.5 million at December 31, 2001, respectively. Customer
balances for software license installments tend to be large due to the selling
price of Mobius's products. Software license installment and accounts receivable
reserves were $1.5 million and $1.4 million at June 30, 2001 and December 31,
2001, respectively.

Other Matters

         In September 2001, the Board of Directors expanded the Company's stock
repurchase program to allow repurchases of up to 1,250,000 shares of Mobius's
outstanding common stock. Since the inception of the program in December 31,
2000, the entire 1,250,000 shares were repurchased at a cost of approximately
$3.9 million. The number of shares repurchased and timing of purchases were
based on a variety of factors, including general market conditions, the market
price and trading volume of Mobius shares.

         In June 1999, the Company invested $1,501,000 in Home Account Network
("HAN") a privately-held, information technology company providing processing
and Internet outsourcing to financial services companies. During fiscal 2000,
Mobius provided an additional $750,000 to HAN in short term loans that were
converted to preferred stock in May 2000. In the first six months of fiscal
2001, Mobius provided an additional $375,000 as a short term loan to HAN.
Mobius's investment in HAN was a minority ownership position, which was less
than 5%. Mobius did not sit on the Board of Directors, nor influence day to day
operations of HAN.

         Mobius regularly assessed the recoverability of the HAN investment and
concluded that other than temporary impairment losses occurred. Impairment
losses of $2.2 million were recorded through June 30, 2000 and for the three
months ended September 30, 2000 an impairment loss of $218,000 was recorded. As
of December 31, 2001, the remaining carrying value of the HAN investment is
$188,000 and is included within other current assets.

         In January 2001, HAN was purchased by Intelidata Technologies
("Intelidata"). The merger agreement established a fixed number of shares to be
allocated between debt holders and all shareholders, including Mobius. The
Intelidata shares will be released at specified time periods beginning after the
Intelidata shares are registered. The number of shares to be received by debt
holders will be based upon a formula that utilizes the market value of
Intelidata stock on each release date. After the debtors are repaid, any
remaining shares will be distributed to HAN's management and shareholders based
on percentages in the merger agreement. Once the stock is released to the
debtors and shareholders, it is subject to a variety of trading restrictions. As
of December 31, 2001, Mobius has not received any Intelidata shares.

         Mobius believes that the $188,000 carrying value of the HAN investment
at December 31, 2001 is recoverable based on estimates of the amount and value
of the Intelidata shares to be received from the transaction, discounted for the
restrictions and estimated time until the Intelidata shares are expected to be
received.

         In January 1999, the Company sold the INFOPAC-TapeSaver product to a
third party for approximately $3.0 million payable over a five year period. For
the three and six months ended December 31, 2000, the Company recognized
$112,500 and $262,500 of TapeSaver license revenue, respectively. As the buyer
is delinquent on these payments since June 2001, no TapeSaver license revenue
was recognized in the three and six months ended December 31, 2001. Mobius has
commenced arbitration proceedings with the buyer to enforce the payment terms in
the sales agreement. The outstanding balance of payments due to Mobius from the
buyer is approximately $1.2 million, which will be recognized when the buyer
makes the remaining payments.

         During fiscal 2001, Mobius integrated Click-n-Done with Mobius's other
products, to provide an integrated architecture that supports electronic
statement presentment, electronic bill presentment and payment and electronic
invoice presentment and payment. Mobius's segregated expenses for Click-n-Done
were approximately $1.4 million and $3.0 million for the quarter and six months
ended December 31, 2000. For the quarter and six months ended December 31, 2001,
Click-n-Done's expenses are included with Mobius's core product expenses.

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

         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.

Recent Accounting Pronouncements

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations" which addresses financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16, "Business
Combinations" and SFAS No. 38, "Accounting for Pre-acquisition Contingencies of
Purchased Enterprises". All business combinations in the scope of this Statement
are to be accounted for using one method, the purchase method. The Statement
also provides guidance on purchase accounting related to the recognition of
intangible assets and accounting for negative goodwill. The provisions of this
Statement apply to all business combinations initiated after June 30, 2001. As
of July 1, 2001, the Company adopted this statement.

         Also in July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets", which addresses financial accounting and reporting for
acquired goodwill and other intangible assets. Statement 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. Goodwill will be tested for impairment annually or whenever events or
circumstances occur that indicate goodwill could have been impaired. Upon
adoption of Statement 141, amortization of goodwill recorded for business
combinations consummated prior to July 1, 2001 will cease, and intangible assets
acquired prior to July 1, 2001 that do not meet the criteria for recognition
under Statement 141 will be reclassified to goodwill. Companies are required to
adopt Statement 142 for fiscal years beginning after December 15, 2001. In
connection with the adoption of Statement 142, companies will be required to
perform a transitional goodwill impairment assessment. The Company plans to
adopt this statement on July 1, 2002. The adoption of SFAS No. 142 is not
expected to have a significant impact on the Company's financial position or
results of operations as the Company does not have significant amounts of
recorded goodwill or intangible assets associated with any prior business
combination.

         In August 2001, the FASB issued FASB Statement No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
Statement 144 requires an entity to test an asset for recoverability whenever
events or changes in circumstances indicate that the entity may not be able to
recover the asset's carrying amount. Companies are required to adopt Statement
144 for fiscal years beginning after December 15, 2001, therefore Mobius plans
to adopt this statement on July 1, 2002. The adoption of SFAS No. 144 is not
expected to have a significant impact on the Company's financial position or
results of operations as the Company does not have significant amounts of
long-lived assets.





<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.

         Mobius expects that the worsening global economy and recent
geopolitical events will continue to impact future quarterly operating results.
The state of the global economy has caused certain Mobius customers to defer
additional information technology spending. The current economic environment may
have an adverse effect on Mobius.

         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 and 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 web-based functionality, 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 and related maintenance service of its ViewDirect
and DocumentDirect suite of products. 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 or 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. Mobius 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, BMC Software, Inc., FileNet
Corporation, International Business Machines Corp., and Quest Software, Inc. 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 Mobius's business, operating results or
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 or financial condition.

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, Mobius's international subsidiaries have not achieved budgeted sales and
have been unprofitable to date, and Mobius expects achieving profitability will
continue to 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 or 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
Mobius 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 report.

Expansion of Indirect Channels

         To date, sales through indirect sales channels have not been
significant although Mobius continues 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.

Extended Payment Risk

         The Company offers extended payment terms to some of its customers. For
software license contracts of 15 years, the related financing period is
generally 3 to 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 financing.
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 or
financial condition.

Protection of Intellectual Property

         Mobius's success is heavily dependent upon its confidential and
proprietary intellectual property. Mobius has no issued patents covering any
aspect of its software products and it has two patent applications pending in
the U.S. with corresponding international filings. 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. From time to time, however, third parties
may 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 or 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 Mobius 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 or 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 Mobius'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 or 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 Mobius 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 or financial condition.

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 Mobius'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 or 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, Mobius 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 or financial condition.

If Widespread Internet Adoption Does Not Continue, or if the Internet Cannot
Accommodate Continued Growth, Mobius's Business Will Be Harmed.

         Acceptance of Mobius's Internet-based 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 is
subject to a high level of uncertainty. To the extent that businesses or
consumers do not consider the Internet a viable commercial medium, Mobius's
customer base for its Internet-based products 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 may be 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, Mobius's business may be 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 or efficiently
support any growth in Internet usage that may occur, our business may be harmed.

    Concerns about Transaction Security on the Internet May Hinder Mobius's
                            Internet Product Sales.

         A significant barrier to electronic commerce and communications is the
secure transmission of private information over public networks. Mobius's
products for the Internet rely 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 Mobius's Internet products use to protect customer
transaction data. Any breaches in security could cause a significant decrease in
Mobius's Internet products, which could undermine future Internet product sales.

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. Mobius's future success will depend on its ability to continually
improve its Internet 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,
2001, 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, Mobius is involved in litigation relating to claims arising
out of their operations in the normal course of business. Mobius is not a party
to any legal proceedings, the adverse outcome of which, individually or in the
aggregate, would have a material adverse effect on Mobius's 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
Mobius's Registration Statement on Form S-1 (File No. 333-47117) with respect to
Mobius's initial public offering. To date, of the $33.0 million of proceeds from
the offering Mobius has used approximately $3.0 million for working capital and
capital expenditures. The remaining proceeds are currently invested in cash and
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
10.25    Amendment #2 to Mobius Management Systems, Inc. 1998 Employee Stock
          Purchase Plan




* Filed as an exhibit to Mobius's 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 13, 2002

                                 MOBIUS MANAGEMENT SYSTEMS, INC.


                                 By:     /s/ Peter Takiff
                                     -------------------------
                                            Peter Takiff
                                            Chief Financial Officer
                                            and Senior Vice President,
                                            Finance (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
10.25    Amendment #2 to Mobius Management Systems, Inc. 1998 Employee Stock
           Purchase Plan




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