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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   -----------
                                    FORM 10-Q
                                   -----------

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 1999


                         Commission File Number 0-21041

                               OBJECT DESIGN, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                            02-0424252
            --------                                            ----------
(State or other jurisdiction of                              (I.R.S.  Employer
incorporation or organization)                               Identification No.)


      25 Mall Road, Burlington, MA                                 01803
----------------------------------------                        ----------
(Address of principal executive offices)                        (Zip Code)


       Registrant's telephone number, including area code: (781) 674-5000

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
                               -----                 -----

The number of shares outstanding of the Registrant's  common stock as of October
31, 1999 was 28,495,430.

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<PAGE>



                               OBJECT DESIGN, INC.

                               INDEX TO FORM 10-Q

PART I - FINANCIAL INFORMATION                                              Page

Item 1.  Financial Statements

         Consolidated Balance Sheets as of September 30, 1999
         and December 31, 1998                                                3

         Consolidated Statements of Operations for the three and nine
         months ended September 30, 1999 and September 30, 1998               4

         Consolidated Statements of Cash Flows for the nine months
         ended September 30, 1999 and September 30, 1998                      5

         Notes to Consolidated Financial Statements                           6

Item 2.  Management's Discussion and Analysis of Financial                    8
              Condition and Results of Operations

Item 3.  Quantitative and Qualitative Disclosures About Market Risk          12

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                  12

Item 4.  Submission of Matters to a Vote of Security Holders                 12

Item 6. Exhibits and Reports on Form 8-K                                     13

Exhibit Index                                                                13

Signatures                                                                   14




                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                               Object Design, Inc.
                           Consolidated Balance Sheets
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                            September 30,       December 31,
                                                                                 1999               1998
                                                                           ----------------    --------------
                                                                             (Unaudited)
<S>                                                                            <C>                <C>
Assets
Current assets:
     Cash and cash equivalents                                                   $ 9,860           $ 14,846
     Marketable securities                                                         6,443              8,745
     Accounts receivable, net                                                     14,310             15,885
     Prepaid expenses and other current assets                                    1, 320                644
                                                                                --------           --------
Total current assets                                                              31,933             40,120

Property and equipment, net                                                        4,605              4,216
Marketable securities                                                              4,603              1,020
Capitalized software, net                                                          2,752              2,751
Other assets                                                                       1,153                885
                                                                                --------           --------
Total assets                                                                    $ 45,046           $ 48,992
                                                                                ========           ========

Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable                                                            $ 3,762            $ 2,913
     Accrued expenses                                                              3,775              2,281
     Accrued compensation                                                          2,639              3,596
     Deferred revenue                                                              6,533              5,433
                                                                                --------            -------
Total current liabilities                                                         16,709             14,223

Long-term capital lease obligations                                                    -                 18

Stockholders' equity:
  Preferred stock, $.01 par value; authorized 5,000,000
       shares; no shares issued or outstanding                                         -                  -
  Common stock, $.001 par value; authorized 200,000,000 shares;
     28,454,120 and 28,049,356 shares issued and outstanding
                                                                                      28                 28
  Additional paid-in capital                                                      65,157             64,977
  Treasury stock, at cost, 39,700 shares in 1998                                       -               (251)
  Accumulated deficit                                                            (34,746)           (27,910)
  Accumulated other comprehensive loss                                            (1,529)            (1,406)
  Advances to stockholders                                                          (573)              (687)
                                                                                ---------           --------
Total stockholders' equity                                                        28,337             34,751
                                                                                ---------           --------
Total liabilities and stockholders' equity                                       $45,046            $48,992
                                                                                =========           ========


                       The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
                                       3
<PAGE>


                               Object Design, Inc.
                      Consolidated Statements of Operations
               (Unaudited and in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                Three Months Ended                      Nine Months Ended
                                                                    September 30,                          September 30,
                                                                1999           1998                     1999          1998
                                                                ----           ----                     ----          ----
<S>                                                         <C>            <C>                      <C>           <C>
Revenues:
   Software                                                  $ 9,247        $11,415                  $25,858       $32,234
   Services                                                    6,396          5,213                   17,541        13,022
                                                             -------        -------                  -------       -------
      Total revenues                                          15,643         16,628                   43,399        45,256
Cost of revenues:
   Cost of software                                            1,012            457                    1,899         1,249
   Cost of services                                            3,129          2,600                    9,225         7,848
                                                             -------        -------                  -------       -------
      Total cost of revenues                                   4,141          3,057                   11,124         9,097

Gross profit                                                  11,502         13,571                   32,275        36,159
Operating expenses:
   Selling and marketing                                       9,733          8,073                   26,759        23,146
   Research and development                                    2,593          2,248                    7,588         6,256
   General and administrative                                  1,641          1,443                    4,621         4,204
   Restructuring charge                                          945              -                      945             -
                                                             -------        -------                  -------       -------
      Total operating expenses                                14,912         11,764                   39,913        33,606

   Operating income (loss)                                   (3,410)          1,807                  (7,638)         2,553

Other income, net                                                255            267                      845           697
                                                             -------        -------                  -------       -------

Income (loss) before income taxes                            (3,155)          2,074                   (6,793)        3,250
Provision for income taxes                                        -             207                       43           324
                                                             -------        -------                  -------       -------

Net income (loss)                                           $(3,155)         $1,867                 $(6,836)       $ 2,926
                                                            ========         ======                 ========       =======

Earnings (loss) per share:
Basic                                                       $ (0.11)         $ 0.07                 $ (0.24)        $ 0.11
Diluted                                                     $ (0.11)         $ 0.06                 $ (0.24)        $ 0.10

Weighted average shares outstanding:
Basic                                                         28,360         27,863                   28,228        27,724
Diluted                                                       28,360         29,059                   28,228        29,033


                       The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>


                                       4
<PAGE>


                               Object Design, Inc.
                      Consolidated Statements of Cash Flows
                         Nine Months Ended September 30
                          (Unaudited and in thousands)
<TABLE>
<CAPTION>

                                                                              1999               1998
                                                                              ----               ----
<S>                                                                        <C>                  <C>
Cash flows from operating activities:
   Net income(loss)                                                         $(6,836)             $2,926
   Adjustments to reconcile net income (loss) to net
     cash provided by (used for) operating activities:
     Depreciation and amortization                                             2,519              1,746
     Bad debt expense                                                            904                411
     Other                                                                       115                131
Changes in operating assets and liabilities:
     Accounts receivable                                                         483              (143)
     Prepaid expenses and other current assets                                 (554)              (314)
     Other assets                                                              (248)                 66
     Accounts payable and accrued expenses                                     1,302              1,938
     Deferred revenue                                                          1,146              1,239
                                                                             -------            -------
Net cash provided by (used for) operating activities                         (1,169)              8,000
                                                                             -------            -------

Cash flows from investing activities:
     Capital expenditures                                                    (1,718)            (1,902)
     Purchased software                                                      (1,151)            (2,000)
     Purchases of marketable securities                                     (13,048)            (5,837)
     Proceeds from maturities and sales of marketable securities              11,768              2,201
                                                                             -------            -------
Net cash used for investing activities                                       (4,149)            (7,538)
                                                                             -------            -------

Cash flows from financing activities:
     Proceeds from exercise of stock options                                     565                623
     Purchase of treasury stock                                                (251)                  -
     Payments received from shareholder advances                                   -                200
     Repayments of capital lease obligations                                       8               (61)
                                                                             -------            -------
Net cash provided by financing activities                                        322                762
                                                                             -------            -------

Effect of exchange rate changes on cash                                           10              (759)
                                                                             -------            -------

Net change in cash and cash equivalents                                      (4,986)                465

Cash and cash equivalents, beginning of period                                14,846             16,345
                                                                             -------            -------
Cash and cash equivalents, end of period                                     $ 9,860           $ 16,810
                                                                             =======           ========



                       The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>

                                       5
<PAGE>


OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.       Basis of Presentation

The  consolidated  financial  statements  include the accounts of Object Design,
Inc.  and  its  wholly  owned   subsidiaries.   All   significant   intercompany
transactions  and balances have been  eliminated.  In the opinion of management,
the  accompanying   unaudited  consolidated  financial  statements  contain  all
adjustments,  consisting only of those of a normal recurring  nature,  necessary
for a fair presentation of our financial  position,  results of operations,  and
cash flows at the dates and for the periods indicated. While we believe that the
disclosures presented are adequate to make the information not misleading, these
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial  statements  and related  notes  included in our Annual Report on Form
10-K for the year ended December 31, 1998 filed with the Securities and Exchange
Commission  on March 31, 1999.  Certain  information  and  footnote  disclosures
normally included in financial  statements prepared in accordance with generally
accepted  accounting  principles  have been  condensed  or omitted  pursuant  to
Securities   and   Exchange   Commission   rules   and   regulations.    Certain
reclassifications have been made for consistent presentation.

The  results  for the three and nine  months  ended  September  30, 1999 are not
necessarily  indicative of the results to be expected for the entire fiscal year
ending December 31, 1999.

B.       Reportable Segments

In the prior quarter we reported two segments.  As a result of re-positioning of
our business, we now report one business segment.

C.       Net Income (Loss) Per Share

Basic   earnings   per  share  is  computed  by  dividing   net  income  by  the
weighted-average  number of common shares  outstanding  for the period.  Diluted
earnings  per  share  is  computed  by  dividing  net  income  by the sum of the
weighted-average  number of common  shares  outstanding  for the period plus the
number of common  shares  issuable  upon the assumed  exercise  of all  dilutive
securities,  such as stock  options.  The following is a calculation of earnings
per share  ("EPS") for the three and nine months  ended  September  30, 1999 and
1998 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                       Three Months Ended                   Nine Months Ended
                                                          September 30,                      September 30,
                                                           1999              1998             1999              1998
                                                           ----              ----             ----              ----
<S>                                                  <C>                  <C>           <C>                  <C>
Net income (loss)                                     $ (3,155)            $1,867        $ (6,836)            $2,926
                                                      =========            ======        =========            ======

Weighted average shares outstanding:                     28,360            27,863           28,228            27,724
Stock options (dilutive)                                      -             1,196                -             1,309
                                                      ---------            ------        ---------            ------
Diluted shares                                           28,360            29,059           28,228            29,033
                                                         ======            ======           ======            ======

Basic EPS                                              $ (0.11)             $0.07         $ (0.24)             $0.11
Diluted EPS                                            $ (0.11)             $0.06         $ (0.24)             $0.10

</TABLE>

Options to purchase  5,623,697 and 3,983,132  shares of our common stock for the
three and nine months ended September 30, 1999,  respectively,  were outstanding
but were not included in the  computations of diluted  earnings per share as the
inclusion of these shares would have been anti-dilutive.


                                       6
<PAGE>

D.        Restructuring Charge

During the three months ended September 1999, we recorded a restructuring charge
in the amount of $945,000,  in connection  with  re-positioning  the company for
future growth. The charge is composed of the following (in thousands):

Severance                                                              $ 811
Office closure                                                            64
Marketing program cancellation                                            70
                                                                       ------

Total restructuring charge                                             $ 945
                                                                       ======

E.        Comprehensive Income

The table  below  sets forth  comprehensive  loss as  defined  by  Statement  of
Financial  Accounting Standards No. 130, "Reporting  Comprehensive  Income," for
the three and nine months ended September 30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                          Three Months Ended                 Nine Months Ended
                                                             September 30,                      September 30,
                                                         1999             1998            1999             1998
                                                         ----             ----            ----             ----
<S>                                                 <C>                <C>           <C>                <C>
Net income (loss)                                    $(3,155)           $1,867        $(6,836)           $2,926
Other comprehensive income, net of tax:
   Foreign currency translation adjustments               414              115            (56)            (551)
   Unrealized holding gain (loss) on securities          (15)               15            (68)               15
                                                     --------           ------        --------           ------
Total other comprehensive income (expense)                399              130           (124)            (536)
                                                     --------           ------        --------           ------
Comprehensive income (loss)                          $(2,756)           $1,997        $(6,960)           $2,390
                                                     ========           ======        ========           ======
</TABLE>


F.       New Accounting Standards

In June,  1998, the Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting  for  Derivatives  and  Hedging   Activities",   which   establishes
accounting  and  reporting  standards  for  derivative  instruments,   including
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities.  We will adopt SFAS No. 133 as required
by SFAS No. 137,  "Deferral of the effective date of the FASB Statement No. 133,
" in fiscal year 2001.  The  adoption of SFAS No. 133 is not expected to have an
impact on our financial condition or results of operations.

G.       Concurrent Transactions

We  occasionally  enter  into  concurrent  transactions  in which  our  software
licenses are exchanged for products or services. These transactions are recorded
at the  estimated  fair market value of the product or service  received  and/or
software  license  value.  During the nine months ended  September  30, 1998, we
purchased from one of our customers  $2.0 million of technology,  which was paid
in cash, is included in other assets and is being  amortized to cost of software
revenue over three years.  Concurrently,  that same customer  purchased products
from us that accounted for $1.5 million of software license revenues. Management
believes that these transactions were entered into under normal commercial terms
and reflect the fair value of the technology received and the software licensed.

                                       7
<PAGE>

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

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements, which reflect the current views
of  management  with  respect to future  events  that will have an effect on our
future  financial  performance.  These  statements  include the words  "expect,"
"believe," "estimate," and similar expressions.  Without limiting the generality
of the foregoing,  statements  concerning our expectations of growth in services
revenue,  our expectations of revenues from  international  operations,  cost of
services, increases in selling and marketing expenses, increases in research and
development  expenses,  adequacy of  our sources  of capital and the adoption of
SFAS No. 133 are forward looking statements.  Such statements are not guarantees
of future performance,  and involve certain risks, uncertainties and assumptions
that could cause our future results to differ materially from those expressed in
any forward-looking  statements.  We disclaim any intent or obligation to update
publicly any forward-looking  statements whether in response to new information,
future  events or  otherwise.  Important  information  about the basis for those
assumptions and factors that could cause our actual results to differ materially
from these forward-looking  statements is contained in "Certain Factors That May
Affect Future  Results"  included in  "Management's  Discussion  and Analysis of
Financial  Condition  and Results of  Operations"  contained  in our 1998 Annual
Report on Form 10-K filed with the Securities  and Exchange  Commission on March
31, 1999, which section is incorporated herein by reference.

RESULTS OF OPERATIONS

The following table shows certain consolidated financial data as a percentage of
our total revenues.
                                       Three Months Ended      Nine Months Ended
                                            September 30,        September 30,

                                        1999      1998         1999      1998
                                        ----      ----         ----      ----

Total revenues:                         100%      100%         100%      100%
Cost of revenues:
  Software                                 6         3            5         3
  Services                                20        15           21        17
                                        ----      ----         ----      ----
Total cost of revenues                    26        18           26        20

Gross profit                              74        82           74        80

Operating expenses:
  Selling and marketing                   62        49           62        51
  Research and development                17        13           17        14
  General and administrative              11         9           11         9
  Restructuring charge                     6         -            2         -
                                        ----      ----         ----      ----
Total operating expenses                  96        71           92        74

Operating income (loss)                 (22)        11         (18)         6

Other income, net                          2         1            2         1
                                        ----      ----         ----      ----
Income (loss) before income taxes       (20)        12         (16)         7
Provision for income taxes                 -         1            -         1
                                        ----      ----         ----      ----
Net income (loss)                      (20)%       11%        (16)%        6%
                                       =====      =====       =====      =====

                                       8
<PAGE>


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

RESULTS OF OPERATIONS:

TOTAL REVENUES. Our total revenues decreased 5.9% to $15.6 million for the three
months ended  September  30, 1999 from $16.6  million for the three months ended
September 30, 1998.  Total revenues for the nine months ended September 30, 1999
decreased 4.1% to $43.4 million down from $45.3 million for the same period last
year. This decline  resulted from lower software  revenues  partially  offset by
stronger services revenues.

SOFTWARE  REVENUES.  Software  revenues  decreased 19.0% to $9.2 million for the
three months ended  September  30, 1999 from $11.4  million for the three months
ended September 30, 1998. Software revenues decreased 19.8% to $25.9 million for
the nine months ended  September 30, 1999 from $32.2 million for the nine months
ended September 30, 1998. The decrease was due to lower sales of our ObjectStore
products, offset in part by growth in our new eXcelon and Javlin product lines.

SERVICE REVENUES. Service revenues increased 22.7% to $6.4 million for the three
months  ended  September  30, 1999 from $5.2  million for the three months ended
September 30, 1998.  Service  revenues  increased 34.7% to $17.5 million for the
nine months  ended  September  30,  1999 from $13.0  million for the nine months
ended  September  30, 1998.  The increase was  primarily the result of increased
consulting  revenues for customer  deployments and training as well as increased
maintenance revenues reflecting growth in the Company's installed base. While we
expect service  revenues to increase in future  quarters,  we do not expect year
over year growth rates as high as we experienced this quarter.

REVENUES  FROM  INTERNATIONAL  OPERATIONS.   Revenues  from  operations  of  our
international  subsidiaries  as a percentage of our total revenues was 41.0% for
the  three  months  ended  September  30,  1999  compared  with  39.7%  for  the
corresponding  period  in 1998.  Revenues  from  international  operations  as a
percentage of total revenues for the nine-month periods ended September 30, 1999
and 1998 were 40.6% and 38.2%, respectively. We expect international revenues as
a  percentage  of total  revenues to continue  to  fluctuate  slightly in future
periods.

COST OF  SOFTWARE.  Cost of software  increased  121.4% to $1.0  million for the
three months ended  September  30, 1999 from $457,000 for the three months ended
September 30, 1998 and increased as a percent of software revenues to 10.9% from
4.0% for September 30, 1999 and 1998,  respectively.  Cost of software increased
52.0% to $1.9  million for the nine months  ended  September  30, 1999 from $1.2
million for the nine months ended  September 30, 1998 and increased as a percent
of software revenues to 7.3% from 3.9% for the same periods,  respectively.  The
increase in cost of software as a percentage  of software  revenue  reflects the
write-off during the three months ended September 30, 1999 of certain previously
purchased  technologies,  and the amortization of purchased technologies related
to the eXcelon  product line. The  amortization of purchased  technologies  will
continue  to make the cost of  software as a  percentage  of  software  revenues
higher than in 1998 for the remainder of 1999.

COST OF SERVICES. Cost of services increased 20.3% to $3.1 million for the three
months  ended  September  30, 1999 from $2.6  million for the three months ended
September 30, 1998 and decreased as a percent of service  revenues to 48.9% from
49.9% for the same periods. Cost of services increased 17.5% to $9.2 million for
the nine months ended  September  30, 1999 from $7.8 million for the nine months
ended September 30, 1998 and decreased as a percent of service revenues to 52.6%
from 60.3% for the same periods.  The increase in cost of services  reflects the
growth in staffing necessary to generate and support increased worldwide service
revenue and provide ongoing quality  customer  support to our growing  installed
base.  The decrease in cost of services as a percentage  of service  revenues is
primarily due to higher  utilization  of  consulting  personnel  resulting  from
increased  demand  for our  services  in 1999.  We expect  cost of  services  to
continue to grow in absolute  dollars,  but to vary as a  percentage  of service
revenues.
                                       9
<PAGE>

SELLING AND MARKETING.  Selling and marketing  expenses  increased 20.6% to $9.7
million for the three months ended  September 30, 1999 from $8.1 million for the
three months ended  September 30, 1998 and increased as a percentage of revenues
to 62.2% from 48.6%.  Selling and marketing  expenses  increased  15.6% to $26.8
million for the nine months ended  September 30, 1999 from $23.1 million for the
nine months ended  September 30, 1998 and increased to 61.7% from 51.1% of total
revenues.  The increase resulted primarily from increased marketing expenditures
associated  with our new eXcelon and Javlin product lines. We intend to continue
to invest in marketing  for eXcelon and Javlin  through  direct mail,  seminars,
print and  banner  advertising,  and  trade  shows as well as other  direct  and
indirect  methods.  As a result we expect  selling  and  marketing  expenses  to
continue to increase in future periods, but to vary as a percentage of revenues.

RESEARCH AND DEVELOPMENT.  Research and development  expenses increased 15.3% to
$2.6 million for the three months ended September 30, 1999 from $2.2 million for
the three  months ended  September  30, 1998 and  increased  as a percentage  of
revenue to 16.6% from 13.5%.  Research and development  expenses increased 21.3%
to $7.6 million for the nine months ended  September  30, 1999 from $6.3 million
for the nine months ended  September  30, 1998 and increased to 17.5% from 13.9%
of total  revenues.  The increase was due to increased  staff and investments in
new   technologies   (primarily   eXcelon  and  Javlin)  as  well  as  continued
enhancements to existing products.  We expect research and development  expenses
to  continue  to  increase in future  periods,  but to vary as a  percentage  of
revenues.

GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased 13.7%
to $1.6 million for the three months ended  September 30, 1999 from $1.4 million
for the three months ended  September  30, 1998 and increased as a percentage of
revenue to 10.5% from 8.7%. General and  administrative  expenses increased 9.9%
to $4.6 million for the nine months ended  September  30, 1999 from $4.2 million
for the nine months ended September 30, 1998 and increased to 10.6% from 9.3% of
total  revenues.  The  increase  is  due  to  costs  associated  with  expanding
operations (primarily with respect to new products) and legal expenses.

RESTRUCTURING  CHARGE. During the three months ended September 1999, we recorded
a  restructuring   charge  in  the  amount  of  $945,000,   in  connection  with
re-positioning  the  company  for  future  growth.  The  charge is  composed  of
severance costs for eleven employees,  including two corporate officers, closure
costs of excess office  space,  and  cancellation  costs  of  certain  marketing
initiatives.

OTHER INCOME. Other income decreased 4.5% to $255,000 for the three months ended
September  30, 1999 from  $267,000  for the  corresponding  period in 1998.  The
decrease was the result of lower cash balances earning interest during the three
months ended  September 30, 1999.  Other income  increased 21.3% to $845,000 for
the nine months ended  September  30, 1999 from  $697,000 for the  corresponding
period in 1998.  The increase in 1999 over 1998 for the  comparative  nine-month
periods was largely the result of overall  higher cash  balances as well as some
movement to longer-term investments that yield a higher rate of return.

PROVISION FOR INCOME TAXES.  No income taxes,  other than corporate exise taxes,
were provided for during the three and nine months ended  September 30, 1999 due
to our net loss.  Our  effective  tax rate for the three and nine  months  ended
September  30,  1998  was  10%.  The  effective  tax  rate in 1998  reflects  an
alternative  minimum  tax  provision  for federal  taxes and  certain  state and
foreign  taxes.  The  effective  tax  rate is  lower  than  the  statutory  rate
principally due to the utilization of net operating loss carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1999, our principal sources of liquidity included $16.3 million
of cash, cash equivalents and short-term investments,  as well as a $2.0 million
revolving  line of credit with  Silicon  Valley Bank  entered  into in September
1999.  Availability under the line of credit,  expiring September 2000, is based

                                       10
<PAGE>

on a formula of eligible accounts receivable, subject to compliance with certain
covenants.   Borrowings  are  secured  by  our  assets,  excluding  intellectual
property,  and bear interest at the bank's prime rate. At September 30, 1999, no
borrowings  were  outstanding,  and  we  were  in  compliance  with  the  bank's
covenants.

Net cash used for  operating  activities  was $1.2  million  for the nine months
ended  September 30, 1999  compared to net cash of $8.0 million  provided in the
corresponding  period  in 1998.  The  decrease  in cash  provided  by  operating
activities  is  primarily  due to the net  loss  during  the nine  months  ended
September  30,  1999  offset in part by  improved  cash  management  and  higher
non-cash depreciation and amortization expense.

Our  investing  activities  used  $4.1million  of cash for the nine months ended
September 30, 1999  compared with cash used by our investing  activities of $7.5
million  in 1998.  The  decrease  was due  primarily  to less cash  invested  in
marketable securities and purchased software during the 1999 period.

Our  financing  activities  provided  $322,000  and $762,000 for the nine months
ended  September  30,  1999 and 1998,  respectively.  The  decrease  in 1999 was
primarily the result of the purchase of treasury stock as well as the absence of
repayments of shareholder advances.

We believe that our current cash, cash equivalents,  marketable securities, bank
facilities and funds generated from  operations,  if any, will provide  adequate
liquidity  to meet our capital and  operating  requirements  for the next twelve
months.

YEAR 2000 COMPLIANCE

Concerns have been widely expressed  regarding the inability of certain computer
programs to properly  process  certain  date  information  beyond the year 1999.
These  concerns  focus  on the  impact  of the Year  2000  problem  on  business
operations and the potential costs  associated  with  identifying and addressing
the problem.

STATE OF READINESS

We have  developed a Year 2000  readiness  plan  focusing on: (i)  assessing the
readiness of our product offerings, internal business systems, and major vendors
and suppliers; (ii) addressing known risks; and (iii) planning and budgeting for
reasonable likely contingencies.

We  have  completed   testing  our  current  product  offerings  for  Year  2000
compliance. Some limited testing of newly acquired products is ongoing. Based on
our review to date, we believe that our current product  offerings are Year 2000
compliant. We have conducted only limited testing of products that are no longer
offered,  and thus the Year 2000  compliance  of such  products is generally not
known.  Many of  these  untested  products  are  previous  releases  of  current
offerings. Our customers can upgrade many of these products to achieve Year 2000
compliance.

We have reviewed and begun  upgrading our internal  information  technology  and
business  systems,  both domestically and  internationally,  to ensure Year 2000
readiness.  This  process  is  complete  with  respect  to the  majority  of our
mission-critical systems. We expect to continue testing our internal systems and
to undertake necessary corrective measures during the remainder of 1999.

Finally,  we have  surveyed  the Year 2000  readiness  of our major  vendors and
suppliers.  This  process is complete  with  respect to the  majority of our key
vendors  and  suppliers.  We expect to  continue  this  process  throughout  the
remainder of 1999.  Where we believe that a particular  vendor or supplier poses
unacceptable Year 2000 risks, we will identify an alternative supply source.

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<PAGE>

COSTS OF YEAR 2000 COMPLIANCE

Costs incurred in the Year 2000 compliance  effort will be expensed as incurred.
During the first  nine  months of 1999 we  incurred  costs,  excluding  internal
personnel  time,  of less than  $50,000,  and we estimate that less than $50,000
will be required for our  compliance  effort  during the  remainder of 1999.  We
cannot,  of  course,  predict  the  nature or  materiality  of the impact on our
operations or operating  results of noncompliance by parties with whom we do not
have a direct relationship.  In particular, the purchasing patterns of customers
or  potential  customers  have been  affected by Year 2000  issues as  companies
expend  significant  resources to correct  their  current  systems for Year 2000
compliance.  These  expenditures  may result in reduced funds  available for the
purchase of our products and services.

RISK OF YEAR 2000 ISSUES AND CONTINGENCY PLANS

Our worst-case Year 2000 scenarios include: (i) undetected errors or uncorrected
defects in our current product  offerings;  (ii) corruption of data contained in
our  internal  information  systems;  and (iii) the  failure  of  infrastructure
services provided by third parties and government  agencies (e.g.,  electricity,
phone service, Internet services, etc.) any of which could significantly disrupt
our operations.  We are in the process of reviewing our contingency  planning in
all of these areas and expect the plans to  include,  among  other  things,  the
availability of support personnel to assist with customer support issues, manual
"work-arounds"  for internal software failure,  and substitution of systems,  if
needed.

EURO CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing  sovereign  currencies
and the Euro making the Euro their common legal currency.  The legacy currencies
are  scheduled  to  remain  legal  tender  in  the  participating  countries  as
denominations  of the Euro  between  January  1, 1999 and  January  1, 2002 (the
Transition  Period).  We are currently  evaluating the business  implications of
full conversion to the Euro. At this time, we do not believe that the conversion
to the Euro will have a material  impact on our business  during the  Transition
Period.

NEW ACCOUNTING STANDARDS

In June,  1998, the Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting  for  Derivatives  and  Hedging   Activities",   which   establishes
accounting  and  reporting  standards  for  derivative  instruments,   including
derivative instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities.  We will adopt SFAS No. 133 as required
by SFAS No. 137,  "Deferral of the effective date of the FASB Statement No. 133,
" in fiscal year 2001.  The  adoption of SFAS No. 133 is not expected to have an
impact on our financial condition or results of operations.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant  changes in our market risk exposure as described
in  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  included  in our 1998  Annual  Report  on Form 10-K  filed  with the
Securities  and Exchange  Commission  on March 31, 1999,  which  description  is
incorporated herein by reference.


Part II - OTHER INFORMATION

Item 1.    Legal Proceedings

There are no material legal  proceedings,  either  outstanding or pending,  with
respect to the Company.

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

No matters were submitted to a vote of security  holders during the three months
ended September 30, 1999.


                                       12
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

EXHIBIT NUMBER                              DESCRIPTION

*3.3     Amended and Restated Certificate of Incorporation
*3.5     Amended and Restated By-laws of the Company
10.42    Separation  Agreement  and  General  Release  dated  September  1, 1999
         between the Company and Justin J. Perreault
10.43    Separation  Agreement  and  General  Release  dated  September  1, 1999
         between the Company and Kirk Bowman
10.44    Amended and Restated Executive  Employment Agreement dated September 2,
         1999 between the Company and Robert N. Goldman
10.45    Executive  Employment  Agreement  dated  September  1, 1999 between the
         Company and Ross Hinchcliffe
10.46    Executive  Employment  Agreement  dated  September  1, 1999 between the
         Company and Satish Maripuri
10.47    Executive  Employment  Agreement dated May 19, 1999 between the Company
         and Daniel E. O'Connor
10.48    Asset Purchase  Agreement  dated September 30, 1999 between the Company
         and Transformis LLC
10.49    Loan and  Security  Agreement  dated  September  30,  1999  between the
         Company and Silicon Valley Bank
27.1     Financial Data Schedule

* This exhibit is  incorporated by reference to the similarly  numbered  exhibit
filed as part of the Company's  Registration  Statement on Form S-1,  Securities
and Exchange Commission File No. 333-05241.

b)   Reports on Form 8-K

No reports on Form 8-K were filed during the three months  ended  September  30,
1999.


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<PAGE>


                                   SIGNATURES



Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  Object
Design,  Inc. has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                           OBJECT DESIGN, INC.
                                           (Registrant)



November 12, 1999                   By: /s/ Robert N. Goldman
                                       -----------------------------------------
                                    Robert N. Goldman
                                    Chairman of the Board of Directors,
                                    President and Chief Executive Officer



November 12, 1999                   By: /s/ Lacey P. Brandt
                                       -----------------------------------------
                                    Lacey P. Brandt
                                    Chief Financial Officer


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