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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 June 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
July 31, 1999 was 28,293,207.

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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 June 30, 1999                       3
         and December 31, 1998

         Consolidated Statements of Operations for the three and six
         months ended June 30, 1999 and June 30, 1998                          4

         Consolidated Statements of Cash Flows for the six months
         ended June 30, 1999 and June 30, 1998                                 5

         Notes to Consolidated Financial Statements                            6

Item 2.  Management's Discussion and Analysis of Financial                    10
              Condition and Results of Operations

Item 3.  Quantitative and Qualitative Disclosures About Market Risk           15

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                   15

Item 4.  Submission of Matters to a Vote of Security Holders                  16

Item 6. Exhibits and Reports on Form 8-K                                      16

Exhibit Index                                                                 16
Signatures                                                                    17



<PAGE>


ITEM 1.    FINANCIAL STATEMENTS




                               OBJECT DESIGN, INC.
                           Consolidated Balance Sheets
                        (in thousands, except share data)
<TABLE>
<CAPTION>

                                                                             June 30,        December 31,
                                                                                 1999               1998
                                                                          ---------------    ---------------
                                                                          (unaudited)
<S>                                                                      <C>               <C>
Assets
Current assets:
     Cash and cash equivalents                                            $   12,593         $   14,846
     Marketable securities                                                     6,667              8,745
     Accounts receivable, net                                                 12,157             15,885
     Prepaid expenses and other current assets                                 1,031                644
                                                                          -----------        -----------
Total current assets                                                          32,448             40,120

Property and equipment, net                                                    4,230              4,216
Marketable securities                                                          4,625              1,020
Capitalized software, net                                                      2,486              2,751
Other assets                                                                     933                885
                                                                          -----------        -----------
Total assets                                                              $   44,722         $   48,992
                                                                          ==========         ==========

Liabilities and Stockholders' Equity

Current liabilities:
     Accounts payable                                                    $     2,590        $     2,913
     Accrued expenses                                                          3,010              2,281
     Accrued compensation                                                      2,282              3,596
     Deferred revenue                                                          6,034              5,433
                                                                         -----------        -----------
Total current liabilities                                                     13,916             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;
     28,289,407 and 28,049,356 shares issued and outstanding
                                                                                  28                 28
  Additional paid-in capital                                                  64,985             64,977
  Treasury stock, at cost, 39,700 shares in 1998                                   -               (251)
  Accumulated deficit                                                        (31,591)           (27,910)
  Accumulated other comprehensive loss                                        (1,929)            (1,406)
  Advances to stockholders                                                      (687)              (687)
                                                                          -----------        -----------
Total stockholders' equity                                                    30,806             34,751
                                                                          -----------        -----------
Total liabilities and stockholders' equity                                $   44,722        $    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)
                      (in thousands, except per share data)

<TABLE>
<CAPTION>

                                                          THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                               JUNE 30,                            JUNE 30,
                                                         1999            1998                  1999           1998
                                                         ----            ----                  ----           ----
<S>                                                  <C>            <C>                    <C>            <C>
Revenues:
   Software                                           $ 8,407        $ 11,570               $16,611        $20,818
   Services                                             6,240           4,032                11,144          7,810
                                                        -----           -----                ------          -----
      Total revenues                                   14,647          15,602                27,755         28,628
Cost of revenues:
   Cost of software                                       468             429                   886            792
   Cost of services                                     3,112           2,642                 6,096          5,248
                                                        -----           -----                 -----          -----
      Total cost of revenues                            3,580           3,071                 6,982          6,040

Gross profit                                           11,067          12,531                20,773         22,588
Operating expenses:
   Selling and marketing                                9,046           8,101                17,026         15,073
   Research and development                             2,524           2,076                 4,995          4,008
   General and administrative                           1,451           1,435                 2,980          2,761
                                                        -----           -----                 -----          -----
      Total operating expenses                         13,021          11,612                25,001         21,842

   Operating (loss) income                             (1,954)            919                (4,228)           746

Other income, net                                         326             230                   591            430
                                                          ---             ---                   ---            ---

Income (loss) before income taxes                     (1,628)           1,149               (3,637)          1,176
Provision for income taxes                                 43             115                    43            117
                                                           --           -----                    --          -----

Net (loss) income                                    $(1,671)          $1,034              $(3,680)        $ 1,059
                                                     ========          ======              ========        =======

Earnings (loss) per share:
Basic                                                $ (0.06)          $ 0.04              $ (0.13)         $ 0.04
Diluted                                              $ (0.06)          $ 0.04              $ (0.13)         $ 0.04

Weighted average shares outstanding:
Basic                                                  28,232          27,780                28,160         27,655
Diluted                                                28,232          29,004                28,160         29,014


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

                                        4

<PAGE>

                               OBJECT DESIGN, INC.
                      Consolidated Statements of Cash Flows
                                   (unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>


                                                                              Six Months Ended June 30,
                                                                               1999               1998
                                                                              ------             ------
<S>                                                                         <C>                 <C>
Cash flows from operating activities:
   Net income(loss)                                                          $(3,680)            $1,059
   Adjustments to reconcile net income to net
     Cash provided by operating activities:
     Depreciation and amortization                                             1,348              1,117
     Bad debt expense                                                            462                308
     Other                                                                        (3)                66
Changes in operating assets and liabilities:
     Accounts receivable                                                       2,721                189
     Prepaid expenses and other current assets                                  (402)               (74)
     Other assets                                                                (70)                89
     Accounts payable and accrued expenses                                      (753)               486
     Deferred revenue                                                            740                757
                                                                                 ---                ---
Net cash provided by operating activities                                        363              3,997
                                                                                 ---              -----

Cash flows from investing activities:
     Capital expenditures                                                     (1,030)            (1,366)
     Purchased software                                                         (100)            (1,300)
     Purchases of marketable securities                                       (9,663)            (3,564)
     Proceeds from maturities and sales of marketable securities               8,136              2,162
                                                                               -----              -----
Net cash used for investing activities                                       ( 2,657)           ( 4,068)
                                                                             --------           --------

Cash flows from financing activities:
     Proceeds from exercise of stock options                                     426                539
     Purchase of treasury stock                                                 (251)                 -
     Payments received from shareholder advances                                   -                200
     Repayments of capital lease obligations                                      11                (44)
                                                                                  --                ----
Net cash provided by financing activities                                        186                695
                                                                                 ---                ---

Effect of exchange rate changes on cash                                         (145)              (596)
                                                                                -----              -----

Net change in cash and cash equivalents                                       (2,253)                28

Cash and cash equivalents, beginning of period                                14,846             16,345
                                                                              ------             ------
Cash and cash equivalents, end of period                                    $ 12,593           $ 16,373
                                                                            ========           ========


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



                                        5

<PAGE>


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 six months ended June 30, 1999 are not necessarily
indicative  of the  results to be  expected  for the entire  fiscal  year ending
December 31, 1999.

B.       Reportable Segments:

Since the beginning of the second quarter of fiscal 1999 we have implemented two
reportable  segments:  Enterprise Object Databases  ("ObjectStore") and XML Data
Servers ("eXcelon").  Our ObjectStore segment designs,  develops and markets the
enterprise object-oriented database,  ObjectStore. The product is sold primarily
through a direct sales force to companies that embed databases in their software
or  hardware  offerings,   high  volume  web-sites,   or  corporate  information
technology  architectures  that rely on the Java  programming  language  and/ or
component-based computing application design. There are C++ and Java programming
language versions of ObjectStore.  In addition, the ObjectStore segment delivers
professional serves including technical support, education, and consulting.

Our eXcelon  segment  designs,  develops and markets the e-business  information
server,  eXcelon.  This product is sold primarily  through a reseller channel to
companies  who  use  it  as a  high-performance  eBusiness  information  server,
supporting  extensible markup language (XML), that lets a customer store, manage
and distribute  eBusiness  information  through  applications on the internet or
intranets. XML is a standard published by the World Wide Web Consortium to allow
a common data exchange  language between  companies or within companies  between
disparate  software  packages.  The eXcelon  segment also delivers  professional
services including technical support, education, and consulting.

Since the  beginning of the second  quarter of fiscal 1999,  our two  reportable
segments have been managed separately;  have their own sales, marketing, and R&D
functions;  sell through different channels;  and market and distribute distinct
products and services.

Segment Information for the three months ended June 30, 1999 is as follows:
(in thousands)
                                   ObjectStore          eXcelon          Total
                                   -----------          -------          -----
Revenues:
  License revenues                   $ 8,236            $  171          $ 8,407
  Services revenues                    6,238                 2            6,240
                                       -----                 -            -----
Total revenues                        14,474               173           14,647

Cost of revenues                       3,274               306            3,580

Gross profit (loss)                   11,200              (133)          11,067

Operating expenses                    10,401             2,620           13,021

Operating income (loss)               $  799           $(2,753)         $(1,954)

Total assets                        $ 41,846           $ 2,876          $44,722




                                       6

<PAGE>


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 six months ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>


                                                     Three Months Ended June 30,             Six Months Ended June 30,
                                                     ---------------------------             -------------------------
(in thousands, except per share amounts)                   1999              1998             1999             1998
                                                           ----              ----             ----             ----
<S>                                                  <C>                  <C>           <C>                  <C>
Net income (loss)                                     $ (1,671)            $1,034        $ (3,680)            $1,059
                                                      =========            ======        =========            ======

Weighted average shares outstanding:                     28,232            27,780           28,160            27,655
Stock options (dilutive)                                      -             1,224                -             1,359
                                                         ------            ------           ------            ------
Diluted shares                                           28,232            29,004           28,160            29,014
                                                         ======            ======           ======            ======

Basic EPS                                              $ (0.06)             $0.04         $ (0.13)             $0.04
Diluted EPS                                            $ (0.06)             $0.04         $ (0.13)             $0.04

</TABLE>

Options to purchase  shares of our common stock of 5,313,846  and  3,657,284 for
the three and six months ended June 30, 1999, respectively, and of 1,990,549 and
1,694,540 for the three and six months ended June 30, 1998, 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.




                                       7
<PAGE>


D.        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-month and six-month periods ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>

                                                              Three Months Ended June 30,        Six Months Ended June 30,
                                                              ---------------------------        -------------------------
                                                                1999              1998             1999             1998
                                                                ----              ----             ----             ----
<S>                                                          <C>                <C>           <C>                <C>
Net (loss) income                                             $(1,671)           $1,034        $ (3,680)          $ 1,059

Other comprehensive income, net of tax:
   Foreign currency translation adjustments                      (129)            (119)            (470)            (666)
   Unrealized holding loss on securities                          (48)               -              (53)               -
                                                              --------           ------          -------           ------
Total comprehensive expense                                      (177)            (119)            (523)            (666)
                                                                ------            -----           ------            -----
Comprehensive income (loss)                                  $ (1,848)            $ 915        $ (4,203)            $ 393
                                                             =========            =====        =========            =====
</TABLE>

E.       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.

F.       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.  For the three months ended June 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 will be amortized to cost of software  revenue over
three years,  and 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.



                                       8
<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,  cost  of  services,  increases  in  selling  and  marketing  expenses,
replacement of our bank  facility,  adequacies 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.



                                       9

<PAGE>



RESULTS OF OPERATIONS

The following table shows certain consolidated financial data as a percentage of
our total revenue.

<TABLE>
<CAPTION>
                                           Three Months Ended        Six Months Ended
                                                June 30,                 June 30,

                                            1999      1998           1999       1998
                                            ----      ----           ----       ----
<S>                                        <C>       <C>            <C>        <C>
Total revenues:                             100%      100%           100%       100%

Cost of revenues:
  Software                                     3         3              3          3
  Services                                    21        17             22         18
                                           -----      -----          -----      -----
Total cost of revenues                        24        20             25         21

Gross profit                                  76        80             75         79

Operating expenses:
  Selling and marketing                       62        52             61         53
  Research and development                    17        13             18         14
  General and administrative                  10         9             11         10
                                           -----      -----          -----      -----
Total operating expenses                      89        74             90         77

Operating income (loss)                     (13)         6           (15)          2

Other income, net                              2         1              2          2

Income (loss) before income taxes           (11)         7           (13)          4
Provision for income taxes                     -         1              -          -
                                           -----      -----          -----      -----
Net income (loss)                          (11)%        6%          (13)%         4%
                                           =====      =====         =====      ======
</TABLE>


                                       10

<PAGE>



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

RESULTS OF OPERATIONS:

TOTAL REVENUES. Our total revenues decreased 6.1% to $14.6 million for the three
months  ended June 30, 1999 from $15.6  million for the three  months ended June
30, 1998.  Total  revenues for the six months ended June 30, 1999 decreased 3.0%
to $27.8  million  down from $28.6  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 27.3% to $8.4 million for the
three-month  period ended June 30, 1999 from $11.6  million for the  three-month
period ended June 30, 1998.  Software revenues  decreased 20.2% to $16.6 million
for the  six-month  period  ended  June 30,  1999  from  $20.8  million  for the
six-month  period  ended  June 30,  1998.  The  decrease  was due in part to the
failure to close  certain large  customer  purchases and in part to the negative
impact of decreased ObjectStore marketing and lead generation programs,  related
to the increased  management  attention and marketing  resources  devoted to the
launch of the eXcelon product-line.

SERVICE  REVENUES.  Service  revenues  increased  54.8% to $6.2  million for the
three-month  period  ended June 30, 1999 from $4.0  million for the  three-month
period ended June 30, 1998.  Service  revenues  increased 42.7% to $11.1 million
for the six-month period ended June 30, 1999 from $7.8 million for the six-month
period ended June 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 37.4% for
the three months ended June 30, 1999 compared  with 37.7% for the  corresponding
period in 1998. Revenues from international  operations as a percentage of total
revenues for the  six-month  periods ended June 30, 1999 and 1998 were 40.3% and
37.3%. The increase in  international  revenues as a percentage of total Company
revenues is due to weaker U.S. software revenues paired with increased  software
revenues in the Asia Pacific region.

COST  OF  SOFTWARE.  Cost  of  software  increased  9.1%  to  $468,000  for  the
three-month  period ended June 30, 1999 from $429,000 for the three-month period
ended June 30, 1998 and increased as a percent of software revenues to 5.6% from
3.7% for June 30, 1999 and 1998, respectively.  Cost of software increased 11.9%
to $886,000 for the  six-month  period ended June 30, 1999 from $792,000 for the
six-month  period  ended June 30,  1998 and  increased  as a percent of software
revenues to 5.3% from 3.8% for the same periods,  respectively.  The increase in
cost of software as a percentage of software  revenue  reflects the amortization
of purchased  technologies  in association  with the release of eXcelon in March
1999. 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 17.8% to $3.1 million for the three
months  ended June 30, 1999 from $2.6 million for the  three-month  period ended
June 30, 1998 and decreased as a percent of service revenues to 49.9% from 65.5%
for the same periods.  Cost of services  increased 16.2% to $6.1 million for the
six months ended June 30, 1999 from $5.2 million for the six-month  period ended
June 30, 1998 and decreased as a percent of service revenues to 54.7% from 67.2%
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 demand of consulting personnel in 1999. We expect cost of services
to continue to grow in absolute dollars,  but to vary as a percentage of service
revenues.

SELLING AND MARKETING.  Selling and marketing  expenses  increased 11.7% to $9.0
million for the three months ended June 30, 1999 from $8.1 million for the three
months ended June 30, 1998 and  increased  as a percentage  of revenues to 61.8%
from 51.9%.  Selling and marketing  expenses  increased 13% to $17.0 million for
the six months  ended June 30, 1999 from $15.1  million for the six months ended
June 30, 1998 and increased to 61.3% from 52.7% of total revenues.  The increase
resulted  primarily  from  increased  marketing  expenditures   associated  with
eXcelon. We



                                       11

<PAGE>

intend to  continue to invest in  marketing  for eXcelon  through  direct  mail,
seminars, print and banner advertising, and trade shows as well as other direct/
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 21.6% to
$2.5  million for the three months ended June 30, 1999 from $2.1 million for the
three  months ended June 30, 1998 and  increased  as a percentage  of revenue to
17.2% from 13.3%.  Research and  development  expenses  increased  24.6% to $5.0
million  for the six months  ended June 30,  1999 from $4.0  million for the six
months ended June 30, 1998 and increased to 18.0% from 14.0% of total  revenues.
The increase  was due to increased  staff and  investments  in new  technologies
(primarily eXcelon) as well as continued enhancements to existing products.

GENERAL AND ADMINISTRATIVE.  General and administrative  expenses increased 1.1%
to $1.5  million for the three  months ended June 30, 1999 from $1.4 million for
the three months ended June 30, 1998 and increased as a percentage of revenue to
10.0% from 9.2%.  General and  administrative  expenses  increased  7.9% to $3.0
million  for the six months  ended June 30,  1999 from $2.8  million for the six
months ended June 30, 1998 and  increased to 10.7% from 9.6% of total  revenues.
The  increase in  absolute  dollars for the six month  period is  reflective  of
increased staffing,  investments in information  technology,  legal expenses and
other costs associated with expanding operations (primarily with respect towards
eXcelon).

OTHER  INCOME.  Other income  increased  41.7% to $326,000  for the  three-month
period ended June 30, 1999 from $230,000 for the  corresponding  period in 1998.
Other income increased 37.4% to $591,000 for the six-month period ended June 30,
1999 from  $430,000  for the  corresponding  period in 1998.  The  increase  was
largely  the result of higher cash  balances as well as some  movement to longer
term investments which yield a higher rate of return.

PROVISION FOR INCOME TAXES. During the quarter we paid taxes in association with
doing  business.  No other  taxes  were  provided  for due to our net loss.  Our
effective  tax rate for the three and six month ended June 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 June 30, 1999, our principal  sources of liquidity  included $19.3 million
of cash and cash equivalents and short-term  investments and a revolving line of
credit. Our revolving line of credit for $2,000,000 expired on June 30, 1999 and
an amendment  was signed to grant  waivers on certain  covenants  and extend the
facility until December 31, 1999 at a reduced amount of $450,000  collateralized
by an escrow account. We are currently  negotiating with another bank to grant a
new revolving  credit line of $2,000,000.  While we expect to have this facility
in place in  September,  there can be no  guarantees  that we will  achieve this
timeframe.  No borrowings were  outstanding  under the line of credit during the
six-month  period  ended June 30,  1999,  but letters of credit in the amount of
$450,000 issued under the line of credit were outstanding at that date.



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<PAGE>

   Net cash provided by operating activities was $0.4 million for the six months
ended June 30, 1999  compared  to $4.0  million  provided  in the  corresponding
period in 1998. The decrease in cash provided by operating  activities is due to
the net loss during the six months  ended June 30, 1999 offset in part by better
receivable turnover in the period and higher depreciation and amortization.

   Our investing  activities  used $2.7 million of cash for the six months ended
June 30,  1999  compared  with cash  used by our  investing  activities  of $4.1
million in 1998. The decrease was attributable  primarily to the net purchase of
$1.3  million  purchase of  technology  in 1998  compared to $0.1 of  technology
purchased in 1999.

   Our financing  activities  provided $0.2 million and $0.7 million for the six
months ended June 30, 1999 and 1998, respectively.  The decrease in 1999 was 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 are also in the process of reviewing and  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 throughout 1999.

Finally,  we have  commenced a program to survey the Year 2000  readiness of our
major vendors and suppliers,  with a particular focus on the Year 2000 readiness
of our key 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.

COSTS OF YEAR 2000 COMPLIANCE

Costs incurred in the Year 2000 compliance  effort will be expensed as incurred.
During  the  first six  months of 1999 we  incurred  costs,  excluding  internal
personnel time, of less than $50,000 and we estimate that less than $25,000 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  may be 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.


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<PAGE>

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.) either 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, and which  description is
incorporated herein by reference.

Part II:     OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are  subject  to  various  legal  proceedings  and  claims  that arise in the
ordinary course of business.  We currently  believe that resolving these matters
will  not  have  a  material  adverse  impact  on  our  consolidated   financial
statements.



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<PAGE>



ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 26, 1999, the Annual Meeting of Stockholders  of Object Design,  Inc. was
held in  Burlington,  Massachusetts.  An election of directors was held with the
following  individuals being elected to the Board of Directors of Object Design,
Inc. as Class III directors for a three-year term of office:

                           TOTAL VOTE FOR            TOTAL VOTE WITHHELD
                           EACH DIRECTOR             FROM EACH DIRECTOR

Robert N. Goldman          20,025,059                    198,476
Kevin J. Burns             20,135,000                     88,535

Justin  J.  Perreault,  Gerald  B. Bay,  Arthur  J.  Marks and David A.  Litwack
continue as Directors.

The  following  matter was voted upon and  approved by the  stockholders  at the
meeting:

A proposal to approve an amendment to the Company's 1996 Employee Stock Purchase
Plan to  increase  the  number of shares of  Common  Stock  available  for grant
thereunder by 200,000.

FOR               AGAINST           ABSTAIN
---               -------           -------
19,933,432        244,234           45,869

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
10.40     Fourth  Amendment to Lease dated March 1, 1996 between the Company and
          25 Mall Road Trust
10.41     Sixth  Amendment  to  the  Loan  and  Security  Agreement  and  Fourth
          Amendment to the  Revolving  Note dated  December 17, 1996 between the
          Company and Bank Boston
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 quarter ended June 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)



August 12, 1999                 By: /s/ Justin J. Perreault
                                   ---------------------------------------------
                                Justin J. Perreault
                                President and Chief Executive Officer



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




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