MOBIUS MANAGEMENT SYSTEMS INC, 424B1, 1998-04-28

MOBIUS MANAGEMENT SYSTEMS INC
424B1, 1998-04-28
PREPACKAGED SOFTWARE

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<PAGE> 1
As Filed Pursuant to Rule 424(b)(1)
Registration No. 333-47117

3,300,000 SHARES

[MOBIUS LOGO]
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
------------------------

Of the 3,300,000 shares of Common Stock offered hereby, 2,500,000 shares are
being sold by the Company and 800,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.

Shares of Common Stock are being reserved for sale at the initial public
offering price to employees and friends of the Company. Such employees and
friends will purchase, in the aggregate, not more than 5% of the Common Stock
offered hereby. See "Underwriting".

Prior to this offering, there has been no public market for the Common
Stock. For factors considered in determining the initial public offering price,
see "Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "MOBI".
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2) SELLING STOCKHOLDERS
-------------- ------------ ----------- --------------------
<S> <C> <C> <C> <C>
Per Share............... $14.50 $1.015 $13.485 $13.485
Total(3)................ $47,850,000 $3,349,500 $33,712,500 $10,788,000
</TABLE>

- ---------------

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".

(2) Before deducting estimated expenses of $900,000 payable by the Company.

(3) The Selling Stockholders have granted the Underwriters an option for 30 days
to purchase up to an additional 452,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to Selling
Stockholders will be $54,404,000, $3,808,280, and $16,883,220, respectively.
See "Underwriting".
------------------------

The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery in New York, New York, on or about May 1, 1998,
against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.

NATIONSBANC MONTGOMERY SECURITIES LLC
BANCAMERICA ROBERTSON STEPHENS
------------------------

The date of this Prospectus is April 27, 1998.

<PAGE> 2

[PHOTOS TO COME]

Graphic and Text appearing on inside front cover of the Prospectus:

This page contains a stylized rendering of a man sitting on a desk chair
looking at a computer monitor and typing on a computer keyboard. There is a
beam of light projecting from the man's eyes to the computer monitor which
contains an image of a document. The beam of light projects out of the back of
the computer monitor and onto a sphere. Under the computer monitor, there are
three vertically stacked disks. Above the man and the computer monitor, the
following textual heading is printed: "Electronic Document Warehouse." Below
the heading, the following text is printed: "Storage, retrieval and
presentation of diverse information in a heterogeneous computing environment."
Above the sphere, the following text is printed: "Software for the Electronic
Enterprise." In the upper right hand corner of the page, the Mobius Management
Systems, Inc. logo appears.

Graphic and Text Appearing on the gatefold of the inside front cover of the
Prospectus:

On the top center of the gatefold the following header text appears, "Electronic
Document Warehouse." On the right side of the gatefold, the following header
text appears, "Customer Service Representatives" which connects by a line
running down the right side of the page to a heading which contains the
following text "Internal Users." On the left side of the gatefold, the following
header text appears, "Customer Self-Service" which connects by a line running
down the left side of the page to a heading which contains the following text:
"Internal Users." The gatefold contains a stylized flow chart depicting the
Company's EDW products. The center of the gatefold contains a tri-level
building. On the first level of the building there are 7 images of documents
which are labelled: "correspondence," "checks," "policies," "statements,"
"photographs," "remittances," "reports" and "images." On the second level of the
building there is a sphere with the following text within it "VIEWDIRECT." To
the right of the gatefold, the "VIEWDIRECT" sphere connects by a dotted line to
a heading which contains the following text: "Network." The "Network" heading
connects by a dotted line to three other headings which contain the following
text, respectively, "DocumentDirect," "DocumentDirect Application Suite" and
"Docuanalyzer." Above the heading "DocumentDirect", there is a woman sitting in
front of a computer and computer monitor, which has an image of a document on
it. Above the heading "DocumentDirect Application Suite" there is a man holding
a document. An arrow extends from the man to a woman sitting in front of a
computer and a computer monitor which has an image of a document on it. To the
left of the gatefold, the "VIEWDIRECT" sphere connects by a dotted line to a
heading which contains the following text: "DocumentDirect for the Internet."
The "DocumentDirect for the Internet" heading connect by a dotted line to two
headings: "intranet" (toward the top of the page) and "internet" (toward the
bottom of the page). The "intranet" heading connects by a dotted line to a
heading which contains the following text: "Internet Browser." The Internet
heading connects by a dotted line to two headings which contain the following
text: "Internet Browser." Above each "Internet Browser" heading there is a man
looking into a computer monitor which has an image of a document on it. There is
a beam of light projecting from the man's eyes to the computer monitor. On the
left side of the bottom of the gatefold the following header text appears:
"Storage." Underneath the "Storage" header there are three bullet points which
contain the following text: (1) "Wide Range of Information Types," (2) "Scalable
from Desktop to Enterprise" and (3) "Device-Independent Storage." On the middle
of the bottom of the gatefold the following header text appears: "Retrieval."
Underneath the "Retrieval" header there are three bullet points which contain
the following text: (1) "Powerful Indexing For Easy Use," (2) "No Need to Know
Location or Format" and (3) "Direct Access to Disk, Tape, Optical." On the right
side of the bottom of the gatefold the following header text appears:
"Presentation." Underneath the "Presentation" header there are three bullet
points which contain the following text: (1) "Common Interface to Diverse
Documents," (2) "Flexible Viewing Options" and (3) "Self-Service Via Internet."
On the bottom left hand corner of the gatefold the following text appears:
"Mobius Management Systems, Inc." On the bottom right hand corner of the
gatefold the following text appears: "Electronic Document Warehouse."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
Except as otherwise indicated, all information contained in this Prospectus
assumes (i) no exercise of the Underwriters' over-allotment option, and (ii) the
conversion of the outstanding shares of the Company's Series A Convertible
Preferred Stock and Class A Non-Voting Common Stock into an aggregate of
4,171,000 shares of Common Stock effective on the closing of the offering. All
references to the "Company" and "Mobius" shall mean Mobius Management Systems,
Inc. and its subsidiaries unless the context otherwise requires. All references
in this Prospectus to a fiscal year are to the Company's fiscal year which ends
on June 30 of that year. For example, the 1997 fiscal year ended on June 30,
1997.

THE COMPANY

Organizations are faced with the need to store ever-increasing volumes of
information to meet operational, regulatory and legal requirements. These static
records of individual events and transactions rapidly accumulate and may result
in archives containing billions of individual records, which may increase by
millions of records each day. Furthermore, a single organization must often
manage static information in a wide variety of formats including text, images,
complex data streams and video or audio recordings.

Static information has traditionally been stored as paper or microfiche,
neither of which permits electronic archiving and rapid retrieval. Other
technologies, such as relational databases and data warehouses, do not
economically store and present large volumes of static information created in a
wide variety of formats. The multiple computing platforms and storage devices
used by enterprises further compound the difficulty of efficiently storing,
retrieving and presenting large volumes of information.

The Company's Electronic Document Warehouse ("EDW") products store and
integrate documents of different formats on a wide variety of computing
platforms and electronic storage devices and make these documents available to
the user through a common intuitive interface, including Internet browsers. The
Company's software is designed to utilize an organization's established
infrastructure, thus minimizing storage costs while meeting rapid retrieval
needs. Mobius software products store, retrieve and present computer and
non-computer generated documents, such as text, images, video or audio
recordings, customer statements, checks, external correspondence and remittance
forms. EDW products operate in heterogeneous environments, supporting a broad
range of hardware platforms and operating systems, including OS/390, Windows NT,
Windows 95, UNIX, OS/400, NetWare and others.

Mobius was founded in 1981 by current management to address a market need
for large-scale information storage and retrieval systems. The Company's
objective is to extend its market leadership by: continuing to develop
innovative storage, retrieval and presentation technologies; leveraging its blue
chip customer base; expanding direct and indirect sales channels; increasing its
focus on vertical markets; and further penetrating international markets.

The Company was incorporated in New York in 1981 and was reincorporated in
Delaware in 1997. Its executive offices are located at 120 Old Post Road, Rye,
New York 10580 and its telephone number is (914) 921-7200.

DocumentDirect, INFOPAC, TapeSaver, ViewDirect and WriteDirect are
registered trademarks of the Company in the United States. EnterpriseIndex,
Mobius, ServerTransparency, UniArc and Virtual Pocket are unregistered
trademarks of the Company. This Prospectus also contains other product names,
trade names and trademarks of the Company and other companies.

3
<PAGE> 4

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company......................... 2,500,000 shares
Common Stock offered by the Selling Stockholders............ 800,000 shares
Common Stock to be outstanding after the offering(1)........ 17,580,000 shares
Nasdaq National Market symbol............................... MOBI
Use of Proceeds............................................. General corporate purposes,
including working capital,
product development, capital
expenditures and possible
acquisitions. See "Use of
Proceeds".
</TABLE>

- ---------------

(1) Based upon the number of shares of Common Stock outstanding on February 28,
1998. Excludes 2,493,500 shares of Common Stock issuable pursuant to the
exercise of options outstanding at February 28, 1998, at a weighted average
exercise price of $4.89 per share, of which options to purchase 441,625
shares were then exercisable. Also excludes an additional 1,536,500 shares
reserved for issuance under the Company's 1996 Stock Incentive Plan (the
"1996 Plan"), 1998 Employee Stock Purchase Plan (the "ESPP") and 1998
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"). See
"Capitalization", "Management -- Benefit Plans" and Note 9 of Notes to
Consolidated Financial Statements.

4
<PAGE> 5

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
--------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues.................................... $13,104 $17,654 $22,405 $30,958 $41,327 $17,398 $23,071
Gross profit................................ 11,292 15,257 19,742 27,616 37,068 15,429 20,839
Income from operations...................... 537 990 1,678 5,048 4,843 1,528 3,488
License and other interest income........... 125 186 375 339 922 328 832
Income before income taxes and change in
accounting for income taxes............... 584 1,146 2,029 5,274 5,731 1,846 4,308
Accretion on Preferred Stock................ -- -- -- -- -- -- 102
Provision for income taxes.................. 244 507 880 2,657 3,348 1,043 2,355
Cumulative effect of change in accounting
for income taxes(1)....................... -- 194 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income available to common stock........ $ 340 $ 833 $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
======= ======= ======= ======= ======= ======= =======
Basic earnings per share(2)................. $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.17 $ 0.05 $ 0.17
Basic weighted average shares
outstanding(2)............................ 15,000 15,000 15,000 15,000 14,318 15,000 10,909
Diluted earnings per share(2)............... $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.15 $ 0.05 $ 0.12
Diluted weighted average shares
outstanding(2)............................ 15,000 15,000 15,000 15,000 15,882 15,355 15,785
Pro forma data (unaudited):
Pro forma basic earnings per share(3)....... $ 0.13 $ 0.12
Pro forma basic weighted average shares
outstanding(3)............................ 18,489 15,080
Pro forma diluted earnings per share(3)..... $ 0.12 $ 0.12
Pro forma diluted weighted average shares
outstanding (3)........................... 19,371 15,852
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------
CONVERSION PRO FORMA
ACTUAL PRO FORMA(6) ADJUSTED(6)(7)
------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,182 $ 7,182 $39,995
Total software license installments(4)...................... 16,767 16,767 16,767
Total assets................................................ 34,347 34,347 67,160
Total deferred maintenance revenue(5)....................... 16,116 16,116 16,116
Convertible preferred stock................................. 12,000 -- --
Stockholders' equity (deficit).............................. (2,563) 9,437 42,250
</TABLE>

- ---------------
(1) Represents cumulative effect of change in accounting for the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".

(2) For a description of the basic and diluted earnings per share ("EPS")
calculations and the basic and diluted weighted average shares outstanding,
see Note 2 of Notes to Consolidated Financial Statements.

(3) For a description of the pro forma basic and pro forma diluted EPS
calculations and the pro forma basic and pro forma diluted weighted average
shares outstanding, see Note 14 of Notes to Consolidated Financial
Statements. The pro forma basic and diluted earnings per share giving effect
to the 2,500,000 shares in the offering would be $0.11 and $0.11 for the
year ended June 30, 1997 and $0.11 and $0.10 for the six months ended
December 31, 1997 based on the pro forma basic and diluted weighted average
shares outstanding of 20,989,000 and 21,871,000 for the year ended June 30,
1997, respectively, and 17,580,000 and 18,352,000 for the six months ended
December 31, 1997, respectively.

(4) Total software license installments include amounts classified as current
and long term. See Consolidated Financial Statements and Note 3 of Notes to
Consolidated Financial Statements.

(5) Total deferred maintenance revenue includes amounts classified as current
and long term. See Consolidated Financial Statements and Note 2 of Notes to
Consolidated Financial Statements.

(6) Gives effect to the conversion of all outstanding shares of the Company's
Series A Convertible Preferred Stock and Class A Non-Voting Common Stock
into Common Stock. See "Capitalization".

(7) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock
offered by the Company hereby, at the initial public offering price of
$14.50 per share, after deducting the underwriting discount and estimated
offering expenses payable by the Company. See "Use of Proceeds" and
"Capitalization".

5
<PAGE> 6

RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus. In addition to the other information contained in this Prospectus,
the following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the Common Stock offered by this
Prospectus.

FLUCTUATIONS IN PERIOD TO PERIOD RESULTS; SEASONALITY; UNCERTAINTY OF FUTURE
OPERATING RESULTS

The timing, size and nature of individual license transactions are
important factors in the Company's quarterly operating results. Many such
license transactions involve large dollar commitments by customers, and the
sales cycles for these transactions are often lengthy and unpredictable. There
can be no assurance that the Company will be successful in closing large license
transactions within the fiscal quarter in which they are budgeted, if at all.

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

The Company's business has experienced and is expected to continue to
experience significant seasonality, with revenues typically peaking primarily in
its fourth fiscal quarter and to a lesser extent in its second fiscal quarter.
These fluctuations are caused primarily by customer purchasing patterns and the
Company's sales force incentive programs which recognize and reward sales
personnel on the basis of achievement of annual and other periodic performance
quotas, as well as by the factors described above.

The Company recognizes revenue in accordance with Statement of Position
("SOP") 91-1, "Software Revenue Recognition", issued by the American Institute
of Certified Public Accountants ("AICPA"). For transactions occurring on or
after July 1, 1998, the Company will be required to recognize revenue in
accordance with SOP 97-2, "Software Revenue Recognition", issued by the AICPA in
October 1997, which supersedes SOP 91-1. In general terms, SOP 97-2 recognizes
that sales of software products may consist of multiple elements, such as
additional software products, upgrades and enhancements, rights to exchange or
return software, post-contract customer support, or services, including elements
deliverable only on a when-and-if-available basis, and provides that a vendor's
fee must be allocated to the various elements of such sale based on
"vendor-specific objective evidence of fair values" allocable to each such
element. If sufficient vendor-specific objective evidence of fair values does
not exist, all revenue from the sale could be deferred until such sufficient
evidence exists, or until all elements have satisfied the requirements for
revenue recognition. SOP 97-2 is newly issued and has not yet been subject to
interpretation in practice or in applicable accounting guidelines. Although the
Company has reviewed, and is continuing to review, its license agreements in
light of its requirement to adopt SOP 97-2 and believes such adoption will not
have a material effect on its operations, there can be no assurance

6
<PAGE> 7

that the future application of, or subsequent interpretations of, SOP 97-2 will
not require the Company to defer the recognition of certain elements of revenue
or result in revenue patterns in periods subsequent to fiscal 1998 which are
materially different than historical periods. In addition, there can be no
assurance that any adjustments the Company makes to its license agreements or
other contractual arrangements to accommodate the requirements of SOP 97-2 would
not be negatively viewed by prospective customers and therefore have a material
adverse effect on the Company's sales efforts.

Due to all of the foregoing factors and other factors described below,
revenues for any period are subject to significant variation, and the Company
believes that period to period comparisons of its operating results are not
necessarily meaningful and such comparisons may not be reliable indicators of
future performance. Although the Company has been profitable in recent quarterly
periods, there can be no assurance that the Company will remain profitable on a
quarterly basis, if at all. It is also possible that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In either case, the price of the Company's Common Stock
would likely be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

TECHNOLOGICAL CHANGE

The market for the Company's software is characterized by a high degree of
technological change, frequent new product introductions, evolving industry
standards and changes in customer demands. The introduction of competitive
products embodying new technologies and the emergence of new industry standards
could render the Company's existing products obsolete and unmarketable. The
Company's future success will depend in part on its ability to enhance existing
products and to develop and introduce new products to meet diverse and evolving
customer requirements and keep pace with technological developments and emerging
industry standards such as new operating systems, hardware platforms, user
interfaces and storage media. The development of new products or enhanced
versions of existing products and services entails significant technical risks.
There can be no assurance that the Company will be successful in developing and
marketing product enhancements or new products that respond to technological
change or evolving industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction, implementation and marketing of these products and enhancements,
or that any new products and product enhancements it may introduce will achieve
market acceptance. See "-- Risk of Product Defects", "-- Year 2000 Compliance",
"Business -- Industry Background", "-- The Mobius Solution", "-- Research and
Development" and "-- Competition".

PRODUCT CONCENTRATION

To date, a substantial portion of the Company's revenues has been
attributable to the licensing of its ViewDirect and DocumentDirect software and
the provision of related maintenance services. The Company currently expects
that the licensing of the ViewDirect and DocumentDirect software, and the
provision of related maintenance services, will account for a substantial
portion of its revenues for the foreseeable future. As a result, factors
adversely affecting the pricing of, or demand for, such products and services,
such as competition or technological change, could have a material adverse
effect on the Company's business, operating results and financial condition.

COMPETITION

7
<PAGE> 8

and document formats, ease of use, product reputation, quality, performance,
price, sales and marketing effort and customer service. The Company currently
encounters direct competition from a number of public and private companies
including Computer Associates International ("Computer Associates"), Computron
Software, Inc. ("Computron"), FileNet Corporation ("FileNet"), International
Business Machines Corp. ("IBM"), Eastman Kodak Co. ("Kodak"), New Dimension
Software Ltd. ("New Dimension") and RSD S.A. ("RSD"). Due to the relatively low
barriers to entry in the software market, the Company expects additional
competition from other established and emerging companies as the market for
storage, retrieval and presentation software continues to develop and expand.
Some of the Company's current and potential competitors are substantially larger
than the Company and have significantly greater financial, technical and
marketing resources, and a larger installed base of customers, than the Company.
Some of such competitors also have extensive direct and indirect channels of
distribution. As a result, they may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products than the
Company. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves with prospective customers.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. Increased competition
may result in price reductions, reduced gross margins and loss of market share,
any of which would have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures will not have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business -- Competition".

INTERNATIONAL SALES AND OPERATIONS

Revenues from customers outside of the United States represented 10.8% and
7.7% of the Company's total revenues in fiscal 1996 and fiscal 1997,
respectively, and 11.7% in the first six months of fiscal 1998. The Company
believes that its revenues and future operating results will depend in part on
its ability to increase sales in international markets. An important part of the
Company's strategy is to expand its direct and indirect sales efforts in
international markets. The Company's international subsidiaries have not been
profitable to date, and management expects achieving profitability will require
significant management attention and financial resources. There can be no
assurance that the Company will be able to maintain or increase international
market demand for the Company's products or hire additional qualified personnel
that will successfully be able to market the Company's products internationally.
The Company's international sales are subject to the general risks inherent in
doing business abroad, including unexpected changes in regulatory requirements,
tariffs and other trade barriers, costs and difficulties of localizing products
for foreign countries, lack of acceptance of localized products in foreign
countries, longer accounts receivable payment cycles, difficulties in managing
international operations, potentially adverse tax consequences, restrictions on
the repatriation of earnings, the burdens of complying with a wide variety of
foreign laws and economic instability. There can be no assurance that such
factors will not have a material adverse effect on the Company's future
international revenues and, consequently, on the Company's business, operating
results and financial condition.

An increase in the value of the U.S. dollar relative to foreign currencies
could make the Company's products more expensive, and, therefore, potentially
less competitive in those markets. Although the Company does not currently
engage in international currency hedging transactions, it is exploring the
possibility of doing so in the future. To the extent that the U.S. dollar
strengthens against foreign currencies in international markets in which the
Company maintains operations, the net assets of the Company that are denominated
in such foreign currencies will be devalued, resulting in a foreign currency
translation loss to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Business -- Strategy",
"-- Sales and Marketing" and Notes 1, 2 and 12 of Notes to Consolidated
Financial Statements.
8
<PAGE> 9

EXPANSION OF INDIRECT CHANNELS

As part of its growth strategy, the Company intends to increase its sales
through indirect channels such as marketing partnerships, joint-selling
opportunities and original equipment manufacturers. To date, sales through
indirect sales channels have been immaterial. The Company intends to invest
resources to develop these channels, which could adversely affect the Company's
operating results if the Company's efforts do not generate sufficient license
revenues. The Company's ability to achieve revenue growth in the future will be
affected by its success in expanding existing and establishing additional
relationships with strategic partners. In addition, if the Company is successful
in selling products through indirect channels, the Company's gross margins as a
percentage of revenue will be negatively affected due to the lower unit prices
that the Company expects to receive when selling through indirect channels. See
"Business -- Strategy".

EXTENDED PAYMENT RISK

Terms of sale are a competitive factor in the Company's markets. The
Company offers extended payment terms to some of its customers, generally three
years for its server products and five years for its client products. The
license revenue for such agreements is recorded at the time of sale as the
present value of the contract payments expected over the life of the agreement,
net of bundled maintenance fees. Interest income from these agreements is
recognized over the term of the financing based on the discount rate used by the
Company to determine present value. To date, the Company has experienced one bad
debt as a result of a customer's bankruptcy and has established reserves against
possible future bad debts. The Company expects to continue its financing
activities to compete effectively in its markets. Although management believes
that its installment contracts are enforceable and that ultimate collection is
probable, there can be no assurances that customers will not default under such
financing arrangements, or that any such default would not have a material
adverse effect on the Company's business, operating results and financial
condition. See Notes 2 and 3 of Notes to Consolidated Financial Statements.

PROTECTION OF INTELLECTUAL PROPERTY

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

The Company's products are generally provided to customers in object code
format only. However, the Company generally enters into arrangements with its
customers pursuant to which the Company's source code will be released to the
customer upon the occurrence of certain events, such as the bankruptcy or
insolvency of the Company or certain material breaches by the Company of the
license agreement. In the event of any release of the source code pursuant to
these arrangements, the customer's license is generally limited to use of the
source code to maintain, support and configure the Company's software products.
Notwithstanding such provision, the delivery of source code to customers may
increase the likelihood of misappropriation or other misuse of the Company's
intellectual property.

The Company is not aware that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim infringement by the

9
<PAGE> 10

Company with respect to current or future products. The Company expects that
software product developers such as itself will increasingly be subject to
infringement claims as the number of products and competitors in the business
applications software market grows and the functionality of products in this
market overlap. Defense of any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all, which could have a material adverse effect on the
Company's business, operating results and financial condition. See "Business --
Intellectual Property, Proprietary Rights and Licenses".

DEPENDENCE ON LICENSED TECHNOLOGY

The Company relies on certain software and other information that it
licenses from third parties, including software that is used in the Company's
products to perform certain functions. Although the Company believes that there
are alternatives for these products, any significant interruption in the
availability of such third-party software could have a material adverse impact
on the Company's sales unless and until the Company can replace the
functionality provided by these products. In addition, the Company is to a
certain extent dependent upon such third parties' abilities to enhance their
current products, to develop new products on a timely and cost-effective basis
and to respond to emerging industry standards and other technological changes.
There can be no assurance that the Company would be able to replace the
functionality provided by the third party software currently offered in
conjunction with the Company's products in the event that such software becomes
obsolete or incompatible with future versions of the Company's products or is
otherwise not adequately maintained or updated. The absence of or any
significant delay in the replacement of that functionality could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Intellectual Property, Proprietary Rights and
Licenses".

PRODUCT LIABILITY

The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. However, it is possible that the limitation of liability
provisions contained in the Company's license agreements may not be effective
under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of
products by the Company may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future. The
Company does not maintain product liability insurance. A successful product
liability claim brought against the Company could have a material adverse effect
on the Company's business, operating results and financial condition.

RISK OF PRODUCT DEFECTS

Software products as complex as those offered by the Company frequently
contain defects, especially when first introduced or when new versions are
released. Although the Company conducts extensive product testing, the Company
has in the past discovered software defects in certain of its new products and
enhancements after their introduction. The Company could in the future lose, or
delay recognition of, revenues as a result of software errors or defects. The
Company believes that its customers and potential customers are highly sensitive
to defects in the Company's software. Although the Company's business has not
been materially adversely affected by any such errors to date, there can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in
market acceptance, diversion of development resources, damage to the Company's
reputation, or increased service and warranty costs, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Research and Development".

10
<PAGE> 11

YEAR 2000 COMPLIANCE

Many currently installed operating systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
need additional digits to distinguish 21st century dates from 20th century
dates. As a result, computer systems and/or software used by many companies may
need to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. Other than INFOPAC-RDS for VSE, for which the
Company expects to release a Year 2000 compliant version in the fourth quarter
of fiscal 1998 or the first quarter of fiscal 1999, the Company believes that
its products are Year 2000 compliant. There can be no assurance that the Company
will successfully release a Year 2000 compliant version of INFOPAC-RDS for VSE,
that its other products will not experience Year 2000 compliance difficulties,
or that third-party products that are not Year 2000 compliant will not have a
detrimental effect on the operation of the Company's products.

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

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

MANAGEMENT OF GROWTH; DEPENDENCE ON SENIOR MANAGEMENT AND OTHER KEY EMPLOYEES

The Company's ability to effectively manage its future growth, if any, will
require it to continue to improve its operational, financial and management
controls, accounting and reporting systems, and other internal processes. There
can be no assurance that the Company will be able to make such improvements in
an efficient or timely manner or that any such improvements will be sufficient
to manage its growth, if any. If the Company is unable to manage growth
effectively, the Company's business, operating results and financial condition
would likely be materially adversely affected.

The Company's success depends to a significant extent upon its senior
management, including Mitchell Gross, Chairman of the Board, Chief Executive
Officer and President, and Joseph J. Albracht, Executive Vice President, Chief
Operating Officer and Secretary, and certain other key employees of the Company,
many of whom have no experience in managing a public software company. The
Company has entered into employment agreements with, and is the beneficiary of,
$2 million key man life insurance policies on each of, Messrs. Gross and
Albracht. Notwithstanding such agreements and policies, the loss of the service
of either of these individuals, other members of senior management or other key
employees could have a material adverse effect on the Company. Furthermore, the
Company believes that its future success will also depend to a significant
extent upon its ability to attract, train and retain highly skilled technical,
management, sales and marketing personnel. Competition for such personnel is
intense, and the Company expects that such competition will continue for the
foreseeable future. The Company has from time to time experienced difficulty in
locating candidates with appropriate qualifications. There can be no assurance
that the Company will be successful in attracting or retaining such personnel;
the failure to attract or retain such personnel could have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business -- Sales and Marketing" and "Management".

11
<PAGE> 12

CONCENTRATION OF SHARE OWNERSHIP AND VOTING POWER

Based upon the number of shares of Common Stock that will be outstanding
upon the completion of this offering, Mitchell Gross, the Company's Chairman,
Chief Executive Officer and President, and Joseph J. Albracht, the Company's
Executive Vice President, Chief Operating Officer and Secretary, together will
beneficially own approximately 57.5% of the Company's outstanding Common Stock.
As a result, such individuals will be able to elect the Board of Directors and
will retain the voting power to approve all matters requiring approval by the
stockholders of the Company, regardless of the votes of other stockholders. In
addition, subject to certain limitations imposed by applicable law, Messrs.
Gross and Albracht will be able to, among other things, amend the Company's
Second Amended and Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") and the Amended and Restated By-Laws (the
"By-Laws") and effect or preclude fundamental corporate transactions involving
the Company, including the acceptance or rejection of any proposals relating to
a merger of the Company or an acquisition of the Company by another entity, in
each case without the approval of any of the Company's other stockholders. See
"Principal and Selling Stockholders" and "Description of Capital Stock".

ANTI-TAKEOVER PROVISIONS

The Company's Restated Certificate of Incorporation requires that any
action required or permitted to be taken by the stockholders of the Company must
be effected at a duly called annual or special meeting of stockholders and may
not be effected by any consent in writing, and the Company's By-Laws require
advance notice by a stockholder of a director nomination which such stockholder
desires to present at any annual or special meeting of stockholders. Pursuant to
the Restated Certificate of Incorporation, special meetings of stockholders may
be called only by the Chairman of the Board, the Chief Executive Officer, the
President, or the Executive Vice President, or the Secretary of the Company upon
the written request of two-thirds of the Board of Directors. The Restated
Certificate of Incorporation provides for a classified Board of Directors, and
members of the Board of Directors may be removed only for cause upon the
affirmative vote of holders of at least 67% of the shares of capital stock of
the Company entitled to vote. In addition, shares of the Company's Preferred
Stock may be issued in the future without further stockholder approval and upon
such terms and conditions, at a price and having such rights, privileges and
preferences, as the Board of Directors may determine. The rights of the holders
of Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. The
issuance of shares of Preferred Stock, while potentially providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. The Company
has no present intent to issue any shares of Preferred Stock. The Company is
also subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, which could have the effect of delaying or preventing a
change of control of the Company. The foregoing provisions, and other provisions
of the Restated Certificate of Incorporation, may have the effect of deterring
hostile takeovers or delaying or preventing changes in control or management of
the Company, including transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices. In addition,
these provisions may limit the ability of stockholders to approve transactions
that they may deem to be in their best interests. See "Description of Capital
Stock -- Delaware Law and Certain Provisions of the Company's Certificate of
Incorporation and By-Laws".

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POTENTIAL VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the offering or that the market price
of the Common Stock will not decline below the initial public offering price,
which was determined by negotiations among the Company and representatives of
the Underwriters. See "Underwriting" for a discussion of the factors considered
in determining

12
<PAGE> 13

the initial public offering price. Investors should be aware that market prices
for securities of software companies such as Mobius are highly volatile. The
market price of the Common Stock could be subject to wide fluctuations in
response to quarter-to-quarter variations in operating results, the gain or loss
of significant contracts, announcements of technological developments or new
products by the Company and its competitors, changes in earnings estimates by
analysts, market conditions in the industry and general domestic and
international economic conditions. In addition, the stock market has experienced
volatility that has particularly affected the market prices of many companies'
stock and that often has been unrelated to the operating performance of such
companies. These market fluctuations may adversely affect the market price of
the Common Stock. See "-- Fluctuations in Period to Period Results; Seasonality;
Uncertainty of Future Operating Results".

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of significant amounts of Common Stock in the public market or the
perception that such sales will occur could adversely affect the market price of
the Common Stock or the future ability of the Company to raise capital through
an offering of its equity securities. Of the 17,580,000 shares of Common Stock
to be outstanding upon completion of the offering, the 3,300,000 shares offered
hereby will be eligible for immediate sale in the public market without
restriction unless the shares are purchased by "affiliates" of the Company
within the meaning of Rule 144 of the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting".

The remaining 14,280,000 shares of Common Stock held by existing
stockholders upon completion of the offering will be "restricted" securities as
that term is defined in Rule 144 under the Securities Act. Restricted securities
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 promulgated under the
Securities Act. The Company's directors, officers and existing stockholders
(holding all of such 14,280,000 shares) have agreed that they will not sell,
directly or indirectly, any Common Stock without the prior consent of the
representatives of the Underwriters for a period of 180 days from the date of
this Prospectus. Subject to the provisions of Rules 144, 144(k) and 701, all of
such shares will be eligible for sale upon the expiration of these lock-up
agreements. In addition, certain stockholders, representing approximately
14,200,000 shares of Common Stock, have the right, subject to certain
conditions, to include their shares in future registration statements relating
to the Company's securities and to cause the Company to register certain shares
of Common Stock owned by them. See "Shares Eligible for Future Sale" and
"Underwriting".

After the date of this Prospectus, the Company intends to file a Form S-8
registration statement under the Securities Act to register all shares of Common
Stock issuable under the Company's stock-based benefit plans. See
"Management -- Director Compensation" and "-- Benefit Plans". Such registration
statement is expected to become effective immediately upon filing, and shares
covered by that registration statement will thereupon be eligible for sale in
the public markets, subject to Rule 144 limitations applicable to affiliates.
See "Shares Eligible for Future Sale".

NO DIVIDENDS

The Company has never paid or declared a dividend on its Common Stock and
does not anticipate doing so for the foreseeable future. The Company's current
bank line prohibits payment of dividends without the bank's consent. See
"Dividend Policy".

BENEFITS OF THE OFFERING TO CURRENT STOCKHOLDERS

The completion of this offering will provide significant benefits to the
current stockholders of the Company, including certain of its directors and
officers. The Company will not receive any of the net proceeds from the sale of
shares by the Selling Stockholders, which will be approximately $10.8 million in
the aggregate. The completion of this offering will also create a public market
for the

13
<PAGE> 14

Common Stock and thereby is likely to substantially increase the market value of
the Common Stock held by current stockholders in the Company. Upon the closing
of this offering, (i) the difference between the aggregate purchase price paid
by all of the Company's current stockholders for their shares and the aggregate
market value of such shares will be approximately $195 million; and (ii) the
difference between the aggregate purchase price paid by the Company's management
stockholders for their shares and the aggregate market value of such shares will
be approximately $148 million.

IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS

The initial public offering price of Common Stock is substantially higher
than the net tangible book value per outstanding share of Common Stock.
Investors purchasing Common Stock in this offering will, therefore, incur
immediate dilution of $12.10 in net tangible book value per share of Common
Stock (after deducting the underwriting discount and estimated offering expenses
payable by the Company) from the initial public offering price and will incur
additional dilution upon the exercise of outstanding stock options. See
"Dilution".

14
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company pursuant to this offering are $32,812,500,
after deducting the underwriting discount and estimated offering expenses
payable by the Company. The Company will not receive any proceeds from the sale
of Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders".

The principal purposes of this offering are to increase the Company's
working capital and equity base, to create a public market for the Company's
Common Stock and to facilitate future access by the Company to the public
capital markets. The Company expects to use the net proceeds for general
corporate purposes, including working capital, product development and capital
expenditures. A portion of the net proceeds may also be used for the acquisition
of businesses, products and technologies that are complementary to those of the
Company. The Company may from time to time consider potential acquisitions,
although there are no commitments or understandings for any material
acquisitions, and no portion of the net proceeds has been allocated for any
specific acquisition. Pending such uses, the Company intends to invest the net
proceeds from this offering in short-term, investment-grade, interest-bearing
securities.

DIVIDEND POLICY

The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The
Company's current loan agreement with a bank prohibits the payment of dividends
without the bank's consent. The Company currently intends to retain future
earnings to fund the development and growth of its business. Payment of future
dividends, if any, will be at the discretion of the Company's Board of Directors
after taking into account various factors, including the Company's financial
condition, operating results, current and anticipated cash needs and plans for
expansion.

15
<PAGE> 16

CAPITALIZATION

The following table sets forth, as of December 31, 1997, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
after giving effect to the conversion of the outstanding Series A Convertible
Preferred Stock and Class A Non-Voting Common Stock into shares of Common Stock
and (iii) the pro forma capitalization of the Company, as adjusted to reflect
the sale of 2,500,000 shares of Common Stock offered hereby by the Company after
deducting the underwriting discount and estimated offering expenses payable by
the Company. This table should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------
CONVERSION PRO FORMA
ACTUAL PRO FORMA ADJUSTED
------ ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital lease obligations, less current portion............. $ 66 $ 66 $ 66
-------- ------- --------

Series A Convertible Preferred Stock, $.01 par value(1);
40,910 shares authorized; 40,910 shares outstanding
(actual); none authorized or outstanding (conversion pro
forma and pro forma adjusted)............................. 12,000 -- --
-------- ------- --------
Stockholders' equity: (1)
Preferred Stock, $.01 par value; 159,090 shares authorized
(actual); 1,000,000 shares authorized (conversion pro
forma and pro forma adjusted); none outstanding (actual,
conversion pro forma and pro forma adjusted)(2)........... -- -- --
Common Stock, $.0001 par value; 40,000,000 shares
authorized; 10,909,000 shares outstanding (actual);
15,080,000 shares outstanding (conversion pro forma)
and 17,580,000 shares outstanding (pro forma
adjusted)(3)........................................... 1 2 2
Class A Non-Voting Common Stock, $.0001 par value;
5,000,000 shares authorized (actual); none authorized
(conversion pro forma and pro forma adjusted); 80,000
shares outstanding (actual); none outstanding
(conversion pro forma and pro forma adjusted).......... -- -- --
Additional paid-in capital................................ -- 11,999 44,812
Retained earnings......................................... 9,487 9,487 9,487
Translation adjustment.................................... (51) (51) (51)
Treasury stock, at cost (4,091,000 shares)................ (12,000) (12,000) (12,000)
-------- ------- --------
Total stockholders' equity (deficit)................... (2,563) 9,437 42,250
-------- ------- --------
Total capitalization.............................. $ 9,503 $ 9,503 $ 42,316
======== ======= ========
</TABLE>

- ---------------
(1) See Notes 7 and 8 of Notes to Consolidated Financial Statements.

(2) At December 31, 1997, the Company had 200,000 shares of Preferred Stock
authorized, of which 40,910 shares have been designated Series A
Convertible Preferred Stock and 159,090 were undesignated. Upon the
completion of the offering, 1,000,000 shares of Preferred Stock will be
authorized, none of which will be outstanding.

(3) Excludes 1,786,000 shares of Common Stock issuable pursuant to the
exercise of options outstanding at December 31, 1997, at a weighted
average exercise price of $2.64 per share of Common Stock, of which
options to purchase 411,625 shares were exercisable as of February 28,
1998. Also excludes 720,000 shares of Common Stock issuable pursuant to
the exercise of options granted between January 1, 1998 and February
28, 1998 at a weighted average exercise price of $10.45 per share of
Common Stock, of which options to purchase 30,000 shares were
exercisable as of February 28, 1998. Also excludes an additional
1,536,500 shares reserved for issuance under the 1996 Plan, the ESPP
and the Directors' Plan. See "Management -- Benefit Plans" and Note 9
of Notes to Consolidated Financial Statements.

16
<PAGE> 17

DILUTION

The pro forma net tangible book value of the Company as of December 31,
1997, after giving effect to the conversion of the outstanding Series A
Convertible Preferred Stock and Class A Non-Voting Common Stock into Common
Stock, was approximately $9,437,000, or $0.63 per share of Common Stock. Pro
forma net tangible book value per share is equal to the Company's total tangible
assets less total liabilities, divided by the number of shares of Common Stock
outstanding after giving effect to the aforementioned conversions. After giving
effect to the sale by the Company of 2,500,000 shares of Common Stock offered
hereby (after deducting the underwriting discount and estimated offering
expenses) the pro forma net tangible book value of the Company as of December
31, 1997 would have been approximately $42,250,000, or $2.40 per share. This
represents an immediate increase in pro forma net tangible book value of $1.77
per share to existing stockholders and an immediate dilution of $12.10 per share
to new investors purchasing shares in this offering. The following table
illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $14.50
Pro forma net tangible book value as of December 31,
1997................................................... $0.63
Pro forma increase per share attributable to new
investors.............................................. 1.77
-----
Pro forma net tangible book value after offering............ 2.40
------
Pro forma net tangible book value dilution per share to new
investors................................................. $12.10
======
</TABLE>

The following table summarizes, on a pro forma basis as of December 31,
1997, after giving effect to the conversion of the outstanding Series A
Convertible Preferred Stock and Class A Non-Voting Common Stock into Common
Stock, the differences between existing stockholders and new investors with
respect to the number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average consideration paid per
share by the existing stockholders and by the new investors:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1)....... 15,080,000 85.8% $12,101,221 25.0% $ 0.80
New investors(1)........ 2,500,000 14.2 36,250,000 75.0 14.50
---------- ----- ----------- -----
Total................. 17,580,000 100.0% $48,351,221 100.0% $ 2.75
========== ===== =========== =====
</TABLE>

- ---------------

(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 14,280,000 or approximately 81.2% of
the total number of shares of Common Stock outstanding after this offering
(or 13,828,000 shares and approximately 78.7% if the Underwriters'
over-allotment option is exercised in full), and will increase the number of
shares held by new investors to 3,300,000 or approximately 18.8% of the
total number of shares of Common Stock outstanding after this offering (or
3,752,000 shares and approximately 21.3% if the Underwriters' over-allotment
option is exercised in full). See "Principal and Selling Stockholders".

As of February 28, 1998, there were options outstanding to purchase
2,493,500 shares of Common Stock under the 1996 Plan and the Directors' Plan at
a weighted average exercise price of $4.89 per share, of which options to
purchase 441,625 shares were then exercisable. To the extent any such options
are exercised, there will be further dilution to the new investors. An
additional 1,536,500 shares in the aggregate have been reserved for issuance
under the 1996 Plan, the ESPP and the Directors' Plan. See
"Management -- Benefit Plans".

17
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below under the captions
"Consolidated Statement of Income Data" and "Consolidated Balance Sheet Data" as
of and for each of the years in the five-year period ended June 30, 1997 and as
of and for the six months ended December 31, 1997 are derived from the
consolidated financial statements of the Company, which statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements as of June 30, 1996 and 1997 and December 31,
1997, and for each of the years in the three-year period ended June 30, 1997 and
the six months ended December 31, 1997, and the report thereon, are included
elsewhere in this Prospectus. The interim consolidated financial data set forth
below for the six-month period ended December 31, 1996 has been derived from the
unaudited consolidated financial statements included elsewhere in this
Prospectus. The unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, that the Company
considers necessary for a fair presentation of the financial position and
results of operations for the period. Operating results for the six-month period
ended December 31, 1997 are not necessarily indicative of the results that may
be expected for the entire fiscal year ending June 30, 1998. The data set forth
below should be read in conjunction with, and are qualified by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto,
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
----------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA):
Revenues:
Software license revenues........................... $ 7,821 $10,604 $12,729 $18,769 $26,112 $10,239 $14,293
Maintenance and other revenues...................... 5,283 7,050 9,676 12,189 15,215 7,159 8,778
------- ------- ------- ------- ------- ------- -------
Total revenues.................................... 13,104 17,654 22,405 30,958 41,327 17,398 23,071
------- ------- ------- ------- ------- ------- -------
Costs of revenues:
Software license revenues........................... 534 841 614 626 1,336 528 678
Maintenance and other revenues...................... 1,278 1,556 2,049 2,716 2,923 1,441 1,554
------- ------- ------- ------- ------- ------- -------
Total costs of revenues........................... 1,812 2,397 2,663 3,342 4,259 1,969 2,232
------- ------- ------- ------- ------- ------- -------
Gross profit.......................................... 11,292 15,257 19,742 27,616 37,068 15,429 20,839
Operating expenses:
Sales and marketing................................. 8,030 9,687 12,523 15,136 21,971 9,180 10,797
Research and development............................ 1,665 2,669 3,478 4,600 5,904 2,810 3,550
General and administrative.......................... 1,060 1,911 2,063 2,832 4,350 1,911 3,004
------- ------- ------- ------- ------- ------- -------
Total operating expenses.......................... 10,755 14,267 18,064 22,568 32,225 13,901 17,351
------- ------- ------- ------- ------- ------- -------
Income from operations................................ 537 990 1,678 5,048 4,843 1,528 3,488
License and other interest income..................... 125 186 375 339 922 328 832
Interest expense...................................... (79) (61) (58) (41) (22) (11) (6)
Foreign currency transaction gains (losses)........... 1 31 34 (72) (12) 1 (6)
------- ------- ------- ------- ------- ------- -------
Income before income taxes and change in accounting
for income taxes.................................... 584 1,146 2,029 5,274 5,731 1,846 4,308
Provision for income taxes............................ 244 507 880 2,657 3,348 1,043 2,355
Accretion on Preferred Stock.......................... -- -- -- -- -- -- 102
------- ------- ------- ------- ------- ------- -------
Income before cumulative effect of change in
accounting for income taxes......................... 340 639 1,149 2,617 2,383 803 1,851
------- ------- ------- ------- ------- ------- -------
Cumulative effect of change in accounting for income
taxes(1)............................................ -- 194 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income available to common stock.................. $ 340 $ 833 $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
======= ======= ======= ======= ======= ======= =======
Basic earnings per share(2)........................... $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.17 $ 0.05 $ 0.17
Basic weighted average shares outstanding(2).......... 15,000 15,000 15,000 15,000 14,318 15,000 10,909
Diluted earnings per share(2)......................... $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.15 $ 0.05 $ 0.12
Diluted weighted average shares outstanding(2)........ 15,000 15,000 15,000 15,000 15,882 15,355 15,785
</TABLE>

18
<PAGE> 19

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
----------------------------------------------- ---------------------
1993 1994 1995 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA (UNAUDITED):
Pro forma basic earnings per share(3)................. $ 0.13 $ 0.12
Pro forma basic weighted average shares
outstanding(3)...................................... 18,489 15,080
Pro forma diluted earnings per share(3)............... $ 0.12 $ 0.12
Pro forma diluted weighted average shares
outstanding(3)...................................... 19,371 15,852
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
JUNE 30, ------------------------------------
--------------------------------------------- CONVERSION PRO FORMA
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(6) ADJUSTED(7)
---- ---- ---- ---- ---- ------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS):
Cash and cash equivalents........... $ 214 $3,166 $ 2,711 $ 4,447 $ 5,672 $ 7,182 $ 7,182 $39,995
Total software license installments(4).. 1,006 1,546 1,317 4,990 12,486 16,767 16,767 16,767
Total assets........................ 6,360 9,422 12,713 18,446 28,502 34,347 34,347 67,160
Total deferred maintenance revenue(5).. 3,039 3,845 5,317 7,154 11,155 16,116 16,116 16,116
Capital lease obligations, less current
portion........................... 73 23 104 151 95 66 66 66
Convertible preferred stock......... -- -- -- -- 11,898 12,000 -- --
Stockholders' equity (deficit)...... 655 1,465 2,586 5,226 (4,344) (2,563) 9,437 42,250
</TABLE>

- ---------------

(1) Represents cumulative effect of change in accounting for the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".

(4) Total software license installments include amounts classified as current
and long term. See Consolidated Financial Statements and Note 3 of Notes to
Consolidated Financial Statements.

(5) Total deferred maintenance revenue includes amounts classified as current
and long term. See Consolidated Financial Statements and Note 2 of Notes to
Consolidated Financial Statements.

(6) Gives effect to the conversion of all outstanding shares of the Company's
Series A Convertible Preferred Stock and Class A Non-Voting Common Stock
into Common Stock. See "Capitalization".

(7) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock
offered by the Company hereby, after deducting the underwriting discount and
estimated offering expenses payable by the Company. See "Use of Proceeds"
and "Capitalization".

20
<PAGE> 20

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

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, and the other financial
information included elsewhere in this Prospectus. The Company's revenues and
costs of operations are difficult to forecast and could differ materially from
those discussed in the forward-looking statements contained in this Prospectus
as a result of a number of factors, including, without limitation, those
discussed under "Risk Factors" above.

OVERVIEW

The Company is a leading provider of enterprise software products designed
to optimize the storage, retrieval and presentation of large volumes of
transactional information. Major financial services, healthcare, manufacturing,
retail and telecommunications companies and governmental entities use the
Company's products to facilitate customer service and other mission-critical
functions. Founded in 1981, the Company provided information storage, retrieval
and presentation products and support, as well as consulting services throughout
its first decade. In 1991, the Company decided to focus primarily on developing
and marketing software products and, as a result, sold its consulting services
business.

Mobius derives its revenues primarily from software license fees and
related annual maintenance fees. In fiscal 1997, 63.2% of the Company's total
revenues were generated by software license fees and 36.8% were generated by
maintenance and other fees. The Company's total revenues have increased over
each of the past five fiscal years, from $13.1 million in fiscal 1993 to $41.3
million in fiscal 1997.

Revenue from software license contracts is recognized upon shipment of the
software to the customer if no significant vendor obligations remain and
collection of the resulting receivable is probable. The Company offers
installment payment terms to some of its customers for the acquisition of
software licenses. The license revenue for such agreements is recorded as the
present value of contract payments, net of bundled maintenance fees. These
installment contracts give rise to the software license installments recorded on
the Company's balance sheet. License interest income represents the portion of
installment contracts allocated by the Company to interest, based on a discount
rate tied to relevant market indices.

Maintenance fees are calculated as a percentage of license fees and are
recognized ratably over the maintenance term, typically one year. Unearned
maintenance revenue from these transactions is reflected on the Company's
balance sheet as deferred maintenance revenue.

Licenses of the Company's ViewDirect and DocumentDirect products have
historically accounted for a majority of the Company's license revenues and for
a significant portion of the Company's total revenues, and the Company
anticipates that this trend will continue for the foreseeable future. In fiscal
1997, license fees for these products accounted for approximately 81.0% of
license revenues and approximately 51.0% of total revenues. The Company's
growing customer base has led to continued growth in maintenance fees. Aside
from the involvement of systems engineers during the sales cycle, Mobius does
not provide implementation services and has trained and certified a group of
independent professional services organizations to provide such services.

International revenues increased in absolute dollar terms in 1995 and 1996
representing 15.8% and 50.2% increases over the respective prior years while
1997 decreased 4.9% as compared to 1996. The Company intends to expand its
international sales activities as part of its business strategy. The majority of
Mobius' current international revenues are derived from the operations of five
wholly-owned subsidiaries. In addition, international revenues include sales
made directly by the Company or through agents located in the United States to
international customers. The Company

20
<PAGE> 21

receives a royalty that is a percent of agent and subsidiary sales of software
licenses and maintenance contracts to international customers. The Company's
subsidiaries conduct business in the currency of the country in which they
operate, exposing Mobius to currency fluctuations and currency transaction
losses or gains which are outside of Mobius' control. To date, all of these
subsidiaries have operated at a loss, which cannot be consolidated for United
States income tax purposes. Consequently, the Company's effective tax rate is
substantially higher than the statutory rate as no benefit has been provided for
the foreign losses. To the extent that Mobius is successful at bringing these
operations to profitability, the Company will have effective tax rates that are
below the statutory rates as a result of realizing the benefit of the tax loss
carryforwards currently being generated outside of the United States. See "Risk
Factors -- International Sales and Operations" and "Strategy -- Increase
Penetration of International Markets".

Capitalization of internally developed software costs is required once
technological feasibility is established. The period between achieving
technological feasibility, which the Company has defined as the establishment of
a working model, and the general availability of such software has been short
and, therefore, software development costs qualifying for capitalization have
been insignificant. Accordingly, the Company has not capitalized any software
development costs. The Company currently anticipates that such eligible amounts
will be insignificant for the foreseeable future. Software development costs are
included in research and development and are expensed as incurred. See Note 2 of
Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
----------------------- --------------------
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license revenues................. 56.8% 60.6% 63.2% 58.9% 62.0%
Maintenance and other revenues............ 43.2 39.4 36.8 41.1 38.0
----- ----- ----- ----- -----
Total revenues......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs of revenues:
Software license revenues................. 2.8 2.0 3.2 3.0 2.9
Maintenance and other revenues............ 9.1 8.8 7.1 8.3 6.8
----- ----- ----- ----- -----
Total costs of revenues................ 11.9 10.8 10.3 11.3 9.7
----- ----- ----- ----- -----
Gross profit................................ 88.1 89.2 89.7 88.7 90.3

Operating expenses:
Sales and marketing....................... 55.9 48.9 53.2 52.8 46.8
Research and development.................. 15.5 14.9 14.3 16.1 15.4
General and administrative................ 9.2 9.1 10.5 11.0 12.9
----- ----- ----- ----- -----
Total operating expenses............... 80.6 72.9 78.0 79.9 75.1
----- ----- ----- ----- -----
Income from operations...................... 7.5 16.3 11.7 8.8 15.2
License and other interest income........... 1.7 1.1 2.3 1.9 3.5
Interest expense............................ (0.3) (0.1) (0.1) (0.1) (0.0)
Foreign currency transaction gains
(losses).................................. 0.2 (0.2) 0.0 0.0 0.0
----- ----- ----- ----- -----
Income before income taxes.................. 9.1 17.1 13.9 10.6 18.7
Provision for income taxes.................. 3.9 8.6 8.1 6.0 10.2
Accretion on Preferred Stock................ -- -- -- -- 0.5
----- ----- ----- ----- -----
Net income available to common stock........ 5.2% 8.5% 5.8% 4.6% 8.0%
===== ===== ===== ===== =====
</TABLE>

21
<PAGE> 22

SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS ENDED DECEMBER
31, 1997

REVENUES. Total revenues, consisting principally of software license
revenues and maintenance and other revenues, increased 32.6% from $17.4 million
in the first six months of fiscal 1997 to $23.1 million in the first six months
of fiscal 1998. Domestic revenues increased 29.0% from $15.8 million in the
first six months of fiscal 1997 to $20.4 million in the same period in fiscal
1998. International revenues increased 68.6% from $1.6 million in the first six
months of fiscal 1997 to $2.7 million in the same period in fiscal 1998.

Software license revenues increased 39.6% from $10.2 million in the first
six months of fiscal 1997 to $14.3 million in the comparable period of fiscal
1998. The increase was primarily attributable to increased sales of the
ViewDirect and DocumentDirect products and, to a lesser extent, the
INFOPAC-TapeSaver product.

Maintenance and other revenues increased 22.6% from $7.2 million for the
first six months of fiscal 1997 to $8.8 million in the first six months of
fiscal 1998. The increase was primarily attributable to the growth of the
installed base of customers with maintenance contracts, and, to a lesser extent,
increases in the fees charged by the Company. Other revenues for both periods
were not significant.

COSTS OF REVENUES. Costs of license revenues consist primarily of
royalties, amortization of purchased software and sublicense fees. The costs of
license revenues increased 28.4% from $0.5 million in the first six months of
fiscal 1997 to $0.7 million in the comparable period of fiscal 1998,
representing 5.2% and 4.7%, respectively, of license revenues in those periods.
The increase in the costs of license revenues was primarily related to increased
sales of the INFOPAC-TapeSaver and DocuAnalyzer products, which require the
Company to pay third party royalty fees.

Costs of maintenance and other revenues consist primarily of customer
support staff costs. The costs of maintenance revenues increased 7.8% from $1.4
million in the first six months of fiscal 1997 to $1.6 million in the first six
months of fiscal 1998, representing 20.1% and 17.7% of maintenance revenues,
respectively. The increase in the costs of maintenance and other revenues is
primarily attributable to increased staffing and personnel-related costs.

OPERATING EXPENSES. Sales and marketing expenses consist primarily of the
cost of personnel associated with the selling and marketing of the Company's
products, including salaries, commissions and travel and entertainment. Sales
and marketing expenses also include the cost of branch sales offices,
advertising, trade shows, marketing and promotional materials. Sales and
marketing expenses increased 17.6% from $9.2 million in the first six months of
fiscal 1997 to $10.8 million in the comparable period of fiscal 1998. This
increase was primarily attributable to increased commissions associated with
increased revenues and expenses for additional sales staff and personnel-
related costs.

Research and development expenses consist primarily of personnel costs
attributable to the development of new software products and the enhancement of
existing products. Research and development expenses increased 26.3% from $2.8
million in the first six months of fiscal 1997 to $3.6 million in the comparable
period of fiscal 1998. The increase is primarily attributable to increased
staffing and personnel-related costs. The Company believes that a significant
level of research and development expenses will be required to maintain its
competitive position in the future.

General and administrative expenses primarily consist of personnel costs
related to management, accounting, human resources, administration and
associated overhead costs, as well as fees for professional services. General
and administrative expenses increased 57.2% from $1.9 million in the first six
months of fiscal 1997 to $3.0 million in the comparable period of fiscal 1998.
The increase primarily reflects additional personnel-related costs as a result
of the Company's expanded operations. The Company expects general and
administrative expenses to increase in fiscal

22
<PAGE> 23

1998 as a result of the costs associated with the regulatory and communication
requirements applicable to public companies.

LICENSE AND OTHER INTEREST INCOME; INTEREST EXPENSE; FOREIGN CURRENCY
TRANSACTION GAINS (LOSSES). License and other interest income consists
primarily of the portion of license payments under installment contracts
allocated by the Company to interest based on a discount rate. License and other
interest income increased from $0.3 million in the first six months of fiscal
1997 to $0.8 million in the comparable period of fiscal 1998.

Interest expense consists primarily of costs associated with the Company's
capital lease obligations. Foreign currency transaction gains (losses) consists
of income or expenses associated with the valuation of the Company's non-dollar
denominated assets held by its foreign subsidiaries. Both interest expense and
foreign currency transaction gains (losses) were not material in the first six
months of each of fiscal years 1997 and 1998.

PROVISION FOR INCOME TAXES. The provision for income taxes was $1.0
million for the first six months of fiscal 1997 and $2.4 million for the
comparable period of fiscal 1998. The effective tax rates for these respective
periods were 56.5% and 54.7%. The difference between these rates and the
applicable statutory rates is primarily attributable to the unrecognized tax
benefit related to operating losses of the Company's foreign subsidiaries.

YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1996 COMPARED TO
YEAR ENDED JUNE 30, 1997

REVENUES. Total revenues increased 38.2% from $22.4 million in fiscal 1995
to $31.0 million in fiscal 1996 and increased 33.5% to $41.3 million in fiscal
1997. Domestic revenues increased 36.8% from $20.2 million in fiscal 1995 to
$27.6 million in fiscal 1996 and increased 38.2% to $38.2 million in fiscal
1997. International revenues increased 50.3% from $2.2 million in fiscal 1995 to
$3.3 million in fiscal 1996 and decreased 4.9% to $3.2 million in fiscal 1997.
The increase in total revenues is primarily attributable to increased licensing
of the Company's software products by new and current customers.

Software license revenues increased 47.5% from $12.7 million in fiscal 1995
to $18.8 million in fiscal 1996 and increased 39.1% to $26.1 million in fiscal
1997. The increases in software license revenues were primarily attributable to
increased license revenues from the Company's ViewDirect and DocumentDirect
products, and, to a lesser extent, the INFOPAC-TapeSaver product.

Maintenance and other revenues increased 26.0% from $9.7 million in fiscal
1995 to $12.2 million in fiscal 1996 and increased 24.8% to $15.2 million in
fiscal 1997. The increases in maintenance and other revenues during these years
were primarily attributable to the growth of the installed base of customers
with maintenance contracts, and, to a lesser extent, increases in the
maintenance fees charged by the Company. Other revenues for all periods were not
significant.

COSTS OF REVENUES. The costs of software license revenues remained
relatively constant at $0.6 million in fiscal 1995 and fiscal 1996, and
increased 113.4% to $1.3 million in fiscal 1997, representing 4.8%, 3.3% and
5.1%, respectively, of software license revenues in those years. The increase in
costs of software license revenue in fiscal 1997 was primarily due to increased
sales of the INFOPAC-TapeSaver and DocuAnalyzer products.

The costs of maintenance and other revenues increased 32.6% from $2.0
million in fiscal 1995 to $2.7 million in fiscal 1996 and increased 7.6% to $2.9
million in fiscal 1997, representing 21.2%, 22.3% and 19.2%, respectively, of
maintenance and other revenues in those years. The increases in costs of
maintenance and other revenues were primarily attributable to increased staffing
and personnel-related costs.

OPERATING EXPENSES. Sales and marketing expenses increased 20.9% from
$12.5 million in fiscal 1995 to $15.1 million in fiscal 1996 and increased 45.1%
to $22.0 million in fiscal 1997. The

23
<PAGE> 24

increases in sales and marketing expenses were primarily attributable to
increased commissions associated with increased revenues, the hiring of
additional sales personnel and increased personnel-related costs.

Research and development expenses increased 32.3% from $3.5 million in
fiscal 1995 to $4.6 million in fiscal 1996 and increased 28.3% to $5.9 million
in fiscal 1997, representing 15.5%, 14.9% and 14.3%, respectively, of total
revenues in those years. The increases in research and development expenses were
primarily attributable to increased staffing and personnel-related costs for
technical staff.

General and administrative expenses increased 37.3% from $2.1 million in
fiscal 1995 to $2.8 million in fiscal 1996 and increased 53.6% to $4.4 million
in fiscal 1997. The increases were generally attributable to increased
professional services fees and additional personnel costs.

LICENSE AND OTHER INTEREST INCOME; INTEREST EXPENSE; FOREIGN CURRENCY
TRANSACTION GAINS (LOSSES). License and other interest income decreased from
$0.4 million in fiscal 1995 to $0.3 million in fiscal 1996 and increased to $0.9
million in fiscal 1997. The decrease in license and other interest income from
fiscal 1995 to fiscal 1996 was primarily due to the reduction in the discount
rate used by the Company on installment contracts in 1996 and the completion of
payment obligations on higher rate contracts within fiscal 1996. The increase in
license and other interest income from fiscal 1996 to fiscal 1997 was primarily
due to increases in the number of installment contracts entered into by the
Company, and, to a lesser extent, increased earnings on higher cash balances
held by the Company during that year.

Interest expense decreased from $58,000 in fiscal 1995 to $41,000 in fiscal
1996 and decreased to $22,000 in fiscal 1997. The decreases were primarily due
to reductions in the principal balances associated with the Company's capital
leases.

Foreign currency transaction gains (losses) declined from a gain of $34,000
in fiscal 1995 to a loss of $72,000 in fiscal 1996 primarily due to unfavorable
fluctuations in the Company's functional currencies. The loss diminished to
$12,000 in fiscal 1997 primarily due to declining fluctuations in fiscal 1997 as
compared to fiscal 1996.

PROVISION FOR INCOME TAXES. The provision for income taxes was $0.9
million in fiscal 1995, $2.7 million in fiscal 1996 and $3.3 million in fiscal
1997. The Company had effective tax rates of approximately 43.4%, 50.4% and
58.4% in fiscal years 1995, 1996 and 1997, respectively. The difference between
these rates and the applicable statutory rates is primarily attributable to the
unrecognized tax benefit related to operating losses of the Company's foreign
subsidiaries. The increase in the effective tax rate from fiscal 1995 to fiscal
1996 principally reflects the absence of federal research tax credits due to a
temporary change in the Internal Revenue Code in 1996 and an increase in the
provision for tax contingencies. The increase in the effective tax rate from
fiscal 1996 to fiscal 1997 principally reflects the impact of an increase in the
amount of operating losses of the Company's foreign subsidiaries. See Note 6 of
Notes to Consolidated Financial Statements.

24
<PAGE> 25

SELECTED QUARTERLY OPERATING RESULTS

The following tables present certain consolidated statement of income data
for the eight fiscal quarters in the period ended December 31, 1997. In
management's opinion, this unaudited information has been prepared on the same
basis as the audited Consolidated Financial Statements appearing elsewhere in
this Prospectus and includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information for
the quarters presented, when read in conjunction with the audited Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
The results of operations for any quarter are not necessarily indicative of
results for any future period.
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1996 1996 1997 1997
--------- -------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Software license
revenues............. $3,323 $ 7,662 $3,714 $ 6,525 $5,237 $10,636
Maintenance and other
revenues............. 3,203 3,168 3,522 3,637 4,087 3,969
------ ------- ------ ------- ------ -------
Total revenues....... 6,526 10,830 7,236 10,162 9,324 14,605
Costs of revenues:
Software license
revenues............. 102 303 308 220 276 532
Maintenance and other
revenues............. 690 797 639 802 751 731
------ ------- ------ ------- ------ -------
Total costs of
revenues........... 792 1,100 947 1,022 1,027 1,263
------ ------- ------ ------- ------ -------
Gross profit............. 5,734 9,730 6,289 9,140 8,297 13,342

Operating expenses:
Sales and marketing.... 3,697 4,849 3,616 5,564 5,255 7,536
Research and
development.......... 1,228 1,216 1,367 1,443 1,533 1,561
General and
administrative....... 649 983 722 1,189 1,136 1,303
------ ------- ------ ------- ------ -------
Total operating
expenses........... 5,574 7,048 5,705 8,196 7,924 10,400
------ ------- ------ ------- ------ -------
Income from operations... 160 2,682 584 944 373 2,942
License and other
interest income........ 64 164 140 188 223 371
Interest expense......... (6) (9) (7) (4) (4) (7)
Foreign currency
transaction gains
(losses)............... (54) 18 1 -- (8) (5)
------ ------- ------ ------- ------ -------
Income before income
taxes.................. 164 2,855 718 1,128 584 3,301
Provision for income
taxes.................. 86 1,434 351 692 354 1,951
Accretion on Preferred
Stock.................. -- -- -- -- -- --
------ ------- ------ ------- ------ -------
Net income available to
common stock........... $ 78 $ 1,421 $ 367 $ 436 $ 230 $ 1,350
====== ======= ====== ======= ====== =======

<CAPTION>
QUARTERS ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- ------------
<S> <C> <C>
Revenues:
Software license
revenues............. $5,697 $8,596
Maintenance and other
revenues............. 4,183 4,595
------ ------
Total revenues....... 9,880 13,191
Costs of revenues:
Software license
revenues............. 366 312
Maintenance and other
revenues............. 692 862
------ ------
Total costs of
revenues........... 1,058 1,174
------ ------
Gross profit............. 8,822 12,017
Operating expenses:
Sales and marketing.... 4,700 6,097
Research and
development.......... 1,681 1,869
General and
administrative....... 1,462 1,542
------ ------
Total operating
expenses........... 7,843 9,508
------ ------
Income from operations... 979 2,509
License and other
interest income........ 325 507
Interest expense......... (4) (2)
Foreign currency
transaction gains
(losses)............... (3) (3)
------ ------
Income before income
taxes.................. 1,297 3,011
Provision for income
taxes.................. 750 1,605
Accretion on Preferred
Stock.................. -- 102
------ ------
Net income available to
common stock........... $ 547 $1,304
====== ======
</TABLE>

25
<PAGE> 26
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1996 1996 1997 1997
--------- -------- ------------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL
REVENUES
Revenues:
Software license
revenues............. 50.9% 70.7% 51.3% 64.2% 56.2% 72.8%
Maintenance and other
revenues............. 49.1 29.3 48.7 35.8 43.8 27.2
----- ----- ----- ----- ----- -----
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0
Costs of revenues:
Software license
revenues............. 1.6 2.8 4.3 2.2 3.0 3.6
Maintenance and other
revenues............. 10.6 7.4 8.8 7.9 8.0 5.0
----- ----- ----- ----- ----- -----
Total costs of
revenues........... 12.2 10.2 13.1 10.1 11.0 8.6
----- ----- ----- ----- ----- -----
Gross profit............. 87.8 89.8 86.9 89.9 89.0 91.4
Operating expenses:
Sales and marketing.... 56.7 44.7 50.0 54.7 56.4 51.6
Research and
development.......... 18.8 11.2 18.8 14.2 16.4 10.7
General and
administrative....... 9.9 9.1 10.0 11.7 12.2 8.9
----- ----- ----- ----- ----- -----
Total operating
expenses........... 85.4 65.0 78.8 80.6 85.0 71.2
Income from operations... 2.4 24.8 8.1 9.3 4.0 20.2
License and other
interest income........ 1.0 1.5 1.9 1.8 2.4 2.5
Interest expense......... (0.1) (0.1) (0.1) 0.0 0.0 (0.1)
Foreign currency
transaction gains
(losses)............... (0.8) 0.2 0.0 0.0 (0.1) 0.0
----- ----- ----- ----- ----- -----
Income before income
taxes.................. 2.5 26.4 9.9 11.1 6.3 22.6
Provision for income
taxes.................. 1.3 13.3 4.8 6.8 3.8 13.4
----- ----- ----- ----- ----- -----
Accretion on Preferred
Stock.................. -- -- -- -- -- --
----- ----- ----- ----- ----- -----
Net income available to
common stock........... 1.2% 13.1% 5.1% 4.3% 2.5% 9.2%
===== ===== ===== ===== ===== =====

<CAPTION>
QUARTERS ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- ------------
<S> <C> <C>
AS A PERCENTAGE OF TOTAL
REVENUES
Revenues:
Software license
revenues............. 57.7% 65.2%
Maintenance and other
revenues............. 42.3 34.8
----- -----
Total revenues....... 100.0 100.0
Costs of revenues:
Software license
revenues............. 3.7 2.4
Maintenance and other
revenues............. 7.0 6.5
----- -----
Total costs of
revenues........... 10.7 8.9
----- -----
Gross profit............. 89.3 91.1
Operating expenses:
Sales and marketing.... 47.6 46.2
Research and
development.......... 17.0 14.2
General and
administrative....... 14.8 11.8
----- -----
Total operating
expenses........... 79.4 72.2
Income from operations... 9.9 18.9
License and other
interest income........ 3.2 3.8
Interest expense......... 0.0 0.0
Foreign currency
transaction gains
(losses)............... 0.0 0.1
----- -----
Income before income
taxes.................. 13.1 22.8
Provision for income
taxes.................. 7.6 12.2
----- -----
Accretion on Preferred
Stock.................. -- 0.7
----- -----
Net income available to
common stock........... 5.5% 9.9%
===== =====
</TABLE>

The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Quarterly revenues and operating results are expected to
fluctuate as a result of a variety of factors, including lengthy product sales
cycles, changes in the level of operating expenses, demand for the Company's
products, introductions of new products and product enhancements by the Company
or its competitors, changes in customer budgets, competitive conditions in the
industry and general domestic and international economic conditions. The
Company's business has experienced and is expected to continue to experience
significant seasonality, with revenues typically peaking primarily in its fourth
fiscal quarter and to a lesser extent in its second fiscal quarter. These
fluctuations are caused primarily by customer purchasing patterns and the
Company's sales force incentive programs which recognize and reward sales
personnel on the basis of achievement of annual and other periodic performance
quotas, as well as the factors described above. The Company expects its
operating results for the third quarter of fiscal 1998 to be consistent with its
historical seasonality patterns. See "Risk Factors -- Fluctuations in Period to
Period Results; Seasonality; Uncertainty of Future Operating Results".

26
<PAGE> 27

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has funded its operations principally
through cash flows from operating activities and, to a lesser extent, bank
financings and capital leases. As of December 31, 1997, the Company had cash and
cash equivalents of $7.2 million, an increase of $1.5 million from the $5.7
million held at June 30, 1997.

Net cash provided by operating activities was $0.3 million, $2.7 million
and $2.5 million in fiscal 1995, 1996 and 1997, and $1.9 million in the first
six months of each of fiscal 1997 and 1998. The Company's cash position was
improved by diligent collection efforts, resulting in lower accounts receivable
per dollar of revenue, offset by the increase in software license installments.
Software license installments, which, in total, increased 150% from $5.0 million
in at the end of fiscal 1996 to $12.5 million at the end of fiscal 1997 and 34%
to $16.8 million at the six months ended December 31, 1997 represent payments
due from customers for license fees that are paid over the term of the
installment agreement. These payments are typically made over 3-5 year terms.
Since payments are made over multiple reporting periods, software license
installments will increase with the increase in license revenue if the
percentage of licenses sold on this basis remains relatively stable, as it has
over the past 3 years.

The Company's cash position has also benefited from increases in deferred
maintenance revenue, which has increased 56% from $7.2 million in fiscal 1996 to
$11.2 million in fiscal 1997 and 44% to $16.1 million for the six months ended
December 31, 1997. Deferred maintenance revenue represents the unrecognized
portion of maintenance billings and the unrecognized portion of maintenance
revenue unbundled from customer license agreements which are recognized ratably
over the term of the agreement, or the first year of the license agreement.
These increases are primarily due to increases in license fees, the increase in
the number of customers covered by maintenance agreements and, to a lesser
extent, increases in the fees charged to customers for maintenance.

Cash used in investing activities, consisting of capital expenditures for
the purchase of computer equipment and software used in product development and
customer support, was $0.4 million, $0.6 million and $1.0 million in fiscal
1995, 1996 and 1997 and $0.3 million in the first six months of each of fiscal
1997 and 1998.

Cash used in financing activities remained relatively consistent at $0.3
million in fiscal 1995, 1996 and 1997 and $28,000 and $26,000 for the first six
months of fiscal 1997 and 1998, respectively. The cash was used primarily for
the repayment of capital lease obligations and the retirement of notes payable.
In addition, in 1997, the Company raised $12.0 million in a private placement of
its Series A Convertible Preferred stock and repurchased $12.0 million of Common
Stock.

The Company currently has a $5.0 million line of credit for working capital
purposes secured by certain assets of the Company. The line of credit requires
the Company to maintain certain financial ratios and provides for certain
negative covenants by the Company including, among others, restrictions, subject
to the qualifications and limitations contained therein, on the Company's
ability to (i) dispose of a substantial part of its business or property; (ii)
change its business; (iii) materially change the Company's ownership or
management; (iv) merge or consolidate with any other business organization, or
acquire all or substantially all of the capital stock or property of another
person; (v) incur any indebtedness or encumbrances, other than indebtedness or
encumbrances specifically permitted by the line of credit; and (vi) make any
other distribution with respect to any capital stock of the Company. The line of
credit expires on October 20, 1998.

The Company believes that the net proceeds from the offering, combined with
its existing cash balances, its line of credit and cash flows expected from
future operations, will be sufficient to meet the Company's capital requirements
for at least 12 months.

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<PAGE> 28

INFLATION

Inflation has not had a significant impact on the Company's operating
results to date, nor does the Company expect it to have a significant impact in
the future.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1997, the AICPA issued SOP 97-2, "Software Revenue Recognition",
which supersedes SOP 91-1. The Company will adopt SOP 97-2 for software
transactions entered into beginning July 1, 1998. SOP 97-2 generally requires
revenue earned on software arrangements involving multiple elements, such as
additional software products, upgrades or enhancements, rights to exchange or
return software, postcontract customer support, or services, including elements
deliverable only on a when-and-if-available basis, to be allocated to the
various elements of such sale based on "vendor-specific objective evidence of
fair values" allocable to each such element. If sufficient vendor-specific
objective evidence of fair market values does not exist, revenue from the sale
could be deferred until such sufficient evidence exists, or until all elements
have satisfied the requirements for revenue recognition.

SOP 97-2 is newly issued and has not yet been subject to interpretation in
practice or in applicable accounting guidelines. Although the Company has
reviewed, and is continuing to review, its license agreements in light of its
requirement to adopt SOP 97-2 and believes such adoption will have a material
effect on its operations, there can be no assurance that the future application
of or subsequent interpretations to SOP 97-2 will not require the Company to
defer the recognition of certain elements of revenue or result in revenue
patterns in periods subsequent to fiscal 1998 which are materially different
than historical periods. In addition, there can be no assurance that any
adjustments the Company makes to its license agreements or other contractual
arrangements in order to accommodate the requirements of SOP 97-2 would not be
negatively viewed by prospective customers and therefore have a material adverse
effect on the Company's sales efforts.

On February 11, 1998, the AICPA issued an Exposure Draft of a Proposed
Statement of Position "Deferral of the Effective Date of Certain Purchase of SOP
97-2, Software Revenue Recognition, for Certain Transactions". The proposed SOP
defers for one year the application of what constitutes vendor-specific
objective evidence of the fair value of the delivered software element in
certain multiple-element arrangements that include service elements and that are
entered into by entities that never sell the software element separately. The
Company believes that the provisions of the Exposure Draft do not apply to the
Company.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information". Commencing in 1998, SFAS No. 130 will
require companies to report comprehensive income and SFAS No. 131 will require
companies to report segment performance as it is used internally to evaluate
segment performance.

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<PAGE> 29

BUSINESS

Mobius is a leading provider of enterprise software products designed to
optimize the storage, retrieval and presentation of large volumes of
transactional information. Major financial services, healthcare, manufacturing,
retail and telecommunications companies and government entities use the
Company's software to facilitate customer service and other mission-critical
functions. Mobius' Electronic Document Warehouse ("EDW") products store and
integrate documents of different formats on a wide variety of computing
platforms and electronic storage devices, and make the documents available to
the user through a common intuitive interface, including Internet browsers.
These software products store, retrieve and present computer generated documents
and non-computer generated documents, such as text, images, video or audio
recordings, customer statements, checks, external correspondence and remittance
forms. These products can be used by a single department, multiple departments
or centrally by an entire enterprise. More than 1,200 customers, including 58 of
the Fortune 100, have licensed Mobius products.

INDUSTRY BACKGROUND

Organizations are faced with the need to store ever-increasing volumes of
information. For example, credit card companies store a record of each charge
transaction; brokerage firms store records of every trade; and telephone
companies store records of individual telephone calls. These static records are
transaction "snapshots" which organizations maintain to meet operational,
regulatory and legal requirements. Organizations may retain vast archives of
this static information for long periods of time and access these archives to
satisfy customer or other inquiries. Static information rapidly accumulates and
results in information archives containing billions of individual transaction
records, which often increase by millions of records each day.

The large volumes of static information that organizations maintain create
significant storage, retrieval and presentation challenges. Organizations need
to quickly and accurately retrieve such information to improve customer service,
meet legal requirements and reach more informed business decisions. For example,
customer service departments capable of routinely answering inquiries during a
single telephone call are more responsive and operate more efficiently and cost
effectively than those relying on manual access to information and follow-up
calls. Customers have become dependent upon organizations to accurately account
for transaction and other static information and increasingly demand rapid and
consistent access to their records, including self-service via the Internet.
Furthermore, organizations that quickly and inexpensively access customer data
can incorporate a broader universe of information into their operating decisions
to distinguish themselves from their competitors.

A single organization often creates static information in a wide variety of
formats, including text, images, complex data streams, video and audio
recordings. This proliferation of formats has increased the complexity of
information storage and retrieval. Organizations may maintain a number of
discrete, non-integrated systems, each of which provides access to a portion of
the organization's stored information. When the organization needs to access all
information about a particular customer or transaction, these disparate systems
make retrieval costly and time consuming. As a result, the Company believes
there is a need for an integrated system capable of storing, retrieving and
presenting all information relevant to a customer or transaction, regardless of
formats or storage sites. Moreover, organizations are seeking a comprehensive
solution that can accommodate rapidly evolving techology and is capable of
supporting multiple computing platforms and storage media.

Traditional approaches to the storage, retrieval and presentation of static
information inadequately address the challenges inherent in developing a fully
integrated, comprehensive information management system. Paper and microfiche
archives ensure the integrity of the information, but make retrieval and
presentation costly and slow. Relational databases, while effective for the
initial capture and short-term storage of operational data for business
applications, do not economically

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<PAGE> 30

store and present large amounts of static information created in a wide variety
of formats. Point storage technologies, such as imaging and computer output to
laser disk, while sufficient to address departmental needs, are limited in their
ability to support a wide array of data types, and typically require additional
investments in information technology infrastructure and significant
customization. Data warehousing technologies, such as on-line analytical
processing and query and reporting tools, enable organizations to analyze
certain historical financial and operational data but are not designed to cost
effectively support complex information formats or high volume storage.
Consequently, the Company believes that traditional approaches to static
information management are inadequate in today's competitive business
environment.

THE MOBIUS SOLUTION

Mobius develops, licenses and supports software solutions that are designed
to optimize the enterprise-wide storage, retrieval and presentation of
transactional information. The Company's Electronic Document Warehouse products
store and integrate documents of different formats on a wide variety of
computing platforms and electronic storage devices, making them available to the
user through a common intuitive interface, including Internet browsers. The
Mobius solution offers the following advantages:

- STORAGE OPTIMIZATION. The Company's software is designed to manage the
storage of information across an organization's established
infrastructure, minimizing storage costs while meeting rapid retrieval
needs. For example, the software keeps the most frequently used
information on a fast access medium, such as an on-line direct access
storage device. Infrequently accessed data is automatically migrated to
less expensive storage devices, such as tape or optical disk, for
long-term retention, but remains available for direct access.

- EFFICIENT INFORMATION RETRIEVAL. Mobius' indexing technology provides
quick and easy access to the large volumes of information in EDW
archives. The archiving technology retrieves information without the user
knowing where the information resides in the enterprise, how or when it
was created, or the information's type and format, thereby substantially
enhancing information retrieval productivity. Users can automatically
link disparate documents into virtual folders extending across servers,
applications and formats, providing an easy-to-use path to quickly find
required documents.

- OPEN ARCHITECTURE. The Company's software supports a wide range of
computing platforms and, through its UniversalArchive storage format, a
variety of storage media. As a result, customers can leverage existing
investments in technology and reduce the risks of storage media
obsolescence. The software stores, retrieves and presents a wide range of
information formats including document types such as reports, formatted
statements and images, as well as raw transaction records and audio and
video files. Further, the Company's software is designed to accommodate
evolving formats. Developers can use the Company's application
programming interfaces ("APIs") to incorporate Mobius' products into
their existing application infrastructure.

- ENTERPRISE SCALABILITY. The Mobius solution supports the enterprise-wide
information storage, retrieval and presentation requirements of large
organizations. The Company's solution is scalable in that it is capable
of meeting the information storage needs of organizations regardless of
information volume and the number and type of formats. The system can
operate on PC, mid-range, mainframe or Internet servers. Due to its
enterprise scalability, Mobius software can support many thousands of
concurrent users and store tens of millions of transactions per day.

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<PAGE> 31

- EASE OF INSTALLATION AND IMPLEMENTATION. The Company's software is a
packaged solution that is designed to be easily and quickly installed by
the customer. By using an organization's existing storage facilities and
computer capacity, Mobius' software minimizes the need for additional
capital expenditures and is easily implemented. In addition, the software
is easily adapted by both users and application developers to effectively
deploy applications tailored to their own business processes.

STRATEGY

The Company's objective is to be a leading provider of enterprise software
solutions that manage the storage, retrieval and presentation of large volumes
of transactional information created in a wide variety of formats. To achieve
this objective, the Company is pursuing the following strategies:

- MAINTAIN AND EXTEND TECHNOLOGICAL LEADERSHIP. Mobius has focused on
developing innovative storage, retrieval and presentation technologies.
As document formats proliferate, computing environments evolve,
Internet/intranet usage continues to grow and the storage and retrieval
demands of organizations escalate, the Company will strive to strengthen
its current market position by developing innovative technologies and new
products, features, functions and performance improvements.

- LEVERAGE INSTALLED BASE. More than 1,200 customers, including 58 of the
Fortune 100, have licensed the Company's products. Mobius plans to use
its blue chip customer base to expand existing relationships and further
extend its customer base. The Company's success in meeting the technology
challenges of sophisticated customers allows it to leverage its
experience into broader market penetration. The Company's sales
infrastructure is organized to expand penetration within existing
accounts at the divisional, departmental and enterprise-wide levels.

- EXPAND DISTRIBUTION CHANNELS. The Company's distribution strategy is to
develop multiple sales channels to reach a broad customer base. Mobius
expects to continue to expand both its field sales force and its
telesales force. In addition, the Company is focused on growing its
indirect sales channels by continuing to develop marketing partnerships
and joint-selling opportunities and by expanding distribution through
original equipment manufacturers ("OEMs").

- INCREASE FOCUS ON VERTICAL MARKETS. Mobius is pursuing a strategy
designed to increase its penetration of targeted vertical industries,
such as financial services and telecommunications. The Company is
developing application templates tailored toward specific industries, the
first two of which, for the banking and brokerage industries, were
recently introduced. In addition, to further enhance the effectiveness of
its selling efforts, the Company has built specialized sales teams
focused on selected vertical markets.

- INCREASE PENETRATION OF INTERNATIONAL MARKETS. Mobius began directly
selling its products in Europe in 1993. The Company has sales offices in
five European countries and one in Australia. In addition, the Company
has direct sales teams focusing on key areas of Canada, Mexico, South
America, Europe, Africa and Asia Pacific. The Company's global strategy
is to continue to expand its direct foreign operations as well as to
enter into joint ventures and other strategic alliances to provide a
sales and marketing presence for its products in key international
markets. Where appropriate, the Company has introduced national language
versions and double-byte character support in its products to meet the
needs of its international customers.

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<PAGE> 32

CUSTOMERS

More than 1,200 customers in a wide range of industries have licensed the
Company's products, including approximately 1,000 customers who have licensed
one or more of the Company's EDW products. No single customer accounted for 10%
or more of revenues in fiscal years 1995, 1996 or 1997. The following is a list
of selected customers of the Company, segmented by industry concentration.

<TABLE>
<S> <C> <C>
BANKING FINANCIAL INSURANCE
ABN AMRO North America, Inc. Chicago Board of Trade Clearing American Family Life Insurance
The Chase Manhattan Bank Corp. Company
Lloyds Bank PLC Securities Industry Automation The Equitable Life Assurance
Mellon Bank, N.A. Corporation Society of the United States
National Westminster Bank PLC Oppenheimer Funds, Inc. John Hancock Mutual Life
NationsBank Corporation VISA International Service Insurance Company
Wells Fargo Bank, N.A. Association Provident Mutual Life Insurance
TELECOMMUNICATIONS The Vanguard Group Company
Ameritech Services, Inc. Zurich Kemper Investments, Inc. MANUFACTURING
BellSouth Telecommunications, Inc. HEALTH CARE SERVICES American Honda Motor Co. Inc.
Century Telephone Enterprises, Inc. Abbott Laboratories Caterpillar Inc.
Cincinnati Bell Inc. Baxter Healthcare Corporation Ford Motor Company
RETAIL BlueCross BlueShield of Illinois Nabisco Brands Company
CVS Corporation Eli Lilly and Company TRANSPORTATION
Land's End, Inc. Johns Hopkins University Medical Alamo Rent-A-Car, Inc.
Nordstrom, Inc. Center Budget Rent A Car Corporation
Safeway Inc. GOVERNMENT The Hertz Corporation
Wal-Mart Stores, Inc. Commonwealth of Massachusetts US Airways Group, Inc.
UTILITIES Social Security Administration
British Gas plc The United Kingdom Ministry of
Consolidated Natural Gas Defence
Company United States Postal Service
Occidental Petroleum Corporation
Pacific Gas and Electric Company
</TABLE>

CUSTOMER APPLICATIONS

The following case studies illustrate applications of the Company's
products. These examples are based upon information provided to the Company by
the customer. The benefits achieved by the following customers may not be
achieved by other customers.

CREDIT CARDS: One of the world's largest credit card processors was
storing nearly 12 million transactions per day on microfiche, generating about
700 sheets of microfiche per day. Copies of these sheets of microfiche were then
distributed to locations throughout the world. Microfiche was often not
available for at least five days following a transaction, and delays of up to
fifteen days between transaction and record availability were common. Using
Mobius' EDW software and a tape storage system to index, store and retrieve
transactions, data currently representing 30 million transactions per day is
available to users the next day.

TELECOMMUNICATIONS: A major telecommunications company was storing the
current and previous month's billing information for its 14 million customers on
line, then moving it to microfiche. Manual retrieval of information from
microfiche to satisfy a customer query could take up to two weeks. Further,
neither the on-line data nor the microfiche presented the information to the
customer service representative in the same format as the customer's bill. Using
Mobius' EDW software and dedicated tape silos, the company has virtually
eliminated microfiche for billing data for its local land-line customers. Each
month, 270 million pages of customer bills -- about half a terabyte -- are
archived to the system. Six thousand customer service representatives retrieve
and view the bills in the same format the customer sees in an average retrieval
time of under 45 seconds.

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<PAGE> 33

New uses for the archived data, such as fraud research and litigation-related
inquiries, continue to provide added benefits.

INSURANCE: One of the largest insurers in the U.S. chose Mobius' EDW
software to enhance its remittance processing operations by implementing an
on-line check image archive. Up to one million items, from three different
processing centers, are imaged and stored each day. The system has reduced the
time to research and resolve errors and has reduced the number of people needed
to support check processing operations. Customer service representatives have
timely access to check images to respond to inquiries and overpayments. Back
office personnel use images to research items and handle bank reconciliation.
Lookups that had taken 15 minutes per item using microfilm are now done in
seconds.

FINANCIAL SERVICES: A major brokerage firm uses mobius EDW products to
store annual statements and confirmations for 4.6 million customers. The
documents, originally created with Xerox DJDE, are being converted from an
existing computer-output-to-laser-disk system. All documents since 1992 that
have to be retained to meet either regulatory or service requirements will be
available to customer service representatives for desktop viewing.
SecuritiesDirect, an option of DocumentDirect Application Suite, facilitates
fast, easy navigation of the archive, letting the user apply Boolean logic to
locate documents that meet specified criteria. Documents can be instantaneously
printed or faxed to customers.

FINANCIAL SERVICES: A major financial services organization uses Mobius
EDW products to support its 401(k) services, comprising the management of $16
billion in assets and more than 350 plans. DocumentDirect for the Internet
provides 401(k) plan sponsors who subscribe to the service direct access to
information about their accounts over a private network. The system, operational
since mid-1997, currently has 200 internal users and over 40 plan sponsors
subscribed. Previously, reports were mailed and were available to the customer
three days after they were generated. Now, using Internet browsers, plan
managers can view their reports immediately.

TECHNOLOGY

The Company's technology is designed to optimize the performance of
mission-critical information storage, retrieval and presentation processes on a
variety of computing platforms, information formats and storage media. Mobius'
Electronic Document Warehouse solutions have the following key technological
attributes:

- ENTERPRISEINDEX. Mobius' EnterpriseIndex technology provides a
multi-level, multi-key index for maximum information access flexibility.
EnterpriseIndex allows EDW users to create virtual folders of disparate
documents. Documents can be associated across time, servers and formats
and presented to the user in a consistent viewing format.

- UNIVERSALARCHIVE. The Company's UniversalArchive storage format
(trademarked as UniArc) supports a wide range of storage media from
traditional disk drives to optical disk to robotically-controlled
magnetic tape. As information ages and is accessed less frequently,
migration utilities move the archive from direct access storage devices
("DASD") to less expensive tape or optical storage. Users view documents,
and applications access information, directly from tape or optical disk
devices, eliminating expensive recalls, reducing DASD use and providing
low cost, direct access to long-term, infrequently-accessed data. The
UniversalArchive facilitates the integration of new hardware as
technology enhancements occur, and reduces the risk of media obsolescence
by ensuring that as equipment ages, information can be migrated without
reprocessing.

- SERVERTRANSPARENCY. The Company's ServerTransparency architecture enables
the user to retrieve documents without knowing where they are located in
the heterogeneous computing environment. ServerTransparency alleviates
the need for the end user to keep track of the location of documents
across the supported platforms, which include OS/390, Windows NT,

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<PAGE> 34

Windows 95, UNIX, OS/400, NetWare and others. In addition, the Company's
archive replication facilities enable Mobius customers to position
archives throughout the computing complex so as to optimize information
retrieval.

- ASSOCIATED DATATYPE. The Company's software provides a way to build EDW
archives that contain application-specific data streams such as HTML,
Java, Adobe PDF, word processor and spreadsheet formats. These archives
can be associated with external software products that render and display
the archived objects. This capability enables implementation of both
Internet and "thick client" information retrieval and object processing
applications.

- VISUAL PARSER. The visual parser feature of ViewDirect for Networks
provides a powerful and easy-to-use graphical interface through which
customers visually define document identifiers and indexing information,
prescribe access privileges and validate the proper extraction of these
parameters from the data stream. Using these visually-defined parameters,
the Mobius software parses defined fields within the data stream to
extract and populate the ViewDirect for Networks' databases. The visual
parser facility reduces the expertise level needed to set up Mobius
software.

- LPFD VIEWING. Many organizations create and store large volumes of static
documents using printer definition languages. This laser printer
formatted data ("LPFD") contains variable data as well as all the
resources (shading, grids, logos, signatures, etc.) needed to print or
view a stylized document. The Company's software, in addition to
supporting traditional data streams, supports IBM AFP and Xerox
DJDE/Metacode LPFD formats. A Total Resource Management facility manages
the retention and caching of these resource objects throughout the
network to minimize network traffic and maximize the speed of rendering
complex data streams.

- FUNCTIONAL ISOLATION. The multi-dataset architecture of the Mobius
software makes it possible to isolate specific functions, such as
retrieval, viewing and data migration, thereby eliminating unnecessary
contention for computing resources and preventing performance
degradation, even during peak usage periods.

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<PAGE> 35

PRODUCTS

The following chart describes the Company's primary products and highlights
the key features of each:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
YEAR OF SUPPORTED
FIRST CURRENT OPERATING
PRODUCT SALE RELEASE SYSTEMS DESCRIPTION
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDW SERVER PRODUCTS
ViewDirect for MVS 1983 6.1 OS/390 Information archiver and
ViewDirect for Networks 1995 3.1 Windows, OS/2, server
OS/400, UNIX, - Integrates information
Netware created in various formats
- Direct access to disk, tape
and optical disk
- Flexible indexing
- ---------------------------------------------------------------------------------------------------
EDW CLIENT PRODUCTS
DocumentDirect 1992 2.1 Windows, OS/2 Viewing client
- Common user interface to
diverse documents
- Easy navigation of the
archive
- Multiple viewing options
- Exports data to other
applications
DocumentDirect for the 1997 1.1 Windows Document viewing over
Internet Internet/intranets
- Access to archive via
Internet browsers
- Accommodates "thin client"
- Self-service access for
customers
DocumentDirect Application 1997 1.1 Windows, OS/2 Vertical industry application
Suite templates for document
viewing
- Options for banking and
brokerage
- Customizable user interface
- Integrates with external
applications
DocuAnalyzer(1) 1996 2.1 Windows, OS/2 Data mining client
- Loads text and character
data into tables for
analysis
- Drill down and graphical
analysis
- ---------------------------------------------------------------------------------------------------
OTHER PRODUCTS
INFOPAC-TapeSaver 1990 2.1 OS/390 Tape dataset consolidation
- Conserves tape resources
- Improves efficiency of
robotic tape devices
- Forecasts tape storage
requirements
INFOPAC-ABS 1990 1.4 OS/390 Automated balancing
- Ensures data integrity
across applications
- Confirms accuracy of Year
2000 conversions
- ---------------------------------------------------------------------------------------------------
</TABLE>

(1) This product is owned by Datawatch Corporation and licensed to Mobius
for resale to customers pursuant to a reseller agreement. The year of
first sale is the date Mobius first licensed the product to a customer.

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<PAGE> 36

ELECTRONIC DOCUMENT WAREHOUSE

The software components of the EDW are shown in the figure below. The EDW
products consist of ViewDirect, the archiving engine and server; DocumentDirect,
the document viewing client; DocumentDirect for the Internet, the viewing
application which makes information available over the Internet and corporate
intranets; and DocuAnalyzer, the data mining client. The Company recently
introduced DocumentDirect Application Suite, a framework for vertical industry
document-centric applications.

[DIAGRAM]

[The diagram portrays a network configuration of the Company's EDW
products. The diagram shows icons representing the Company's ViewDirect for MVS
and ViewDirect for Networks server products connecting through a network with
the Company's DocumentDirect, DocumentDirect Application Suite, DocuAnalyzer and
DocumentDirect for the Internet client products. The diagram shows icons
representing users' Internet browsers connecting to DocumentDirect for the
Internet through an Internet or corporate intranet link. Icons representing
tape, optical disk and DASD storage media are shown residing on the server
products.]

SERVER PRODUCTS

VIEWDIRECT. ViewDirect is the archiving engine and server of the EDW. It
supports both host-based and client/server implementations, scaling from the
desktop to the department to the largest enterprise OS/390 server. It stores and
presents virtually any record of business transactions, including
computer-generated reports; print-formatted documents, such as customer
statements; scanned images; transparent or undefined transactions created in
other environments; and associated documents, created for display devices such
as generic Internet browsers. ViewDirect provides direct on-line access to
information stored on disk, tape or optical devices. It supports multi-user,
simultaneous random access to information stored on tape or optical devices
without recall to on-line magnetic disk. Flexible indexing facilitates efficient
information retrieval and enables the grouping of disparate documents.

ViewDirect automatically indexes, stores and manages the migration and
archiving of long-term retention documents. It is designed to assure data
integrity and control, providing facilities for backup, off-site storage and
archive duplexing. As a result, ViewDirect maintains the integrity of documents
and transactions as originals while significantly reducing the costs and
enhancing the service levels previously associated with older technologies such
as microfiche.

ViewDirect supports a wide range of operating environments: ViewDirect for
MVS runs on the largest OS/390 servers and ViewDirect for Networks supports
client/server implementations in a variety of distributed environments.

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<PAGE> 37

CLIENT PRODUCTS

DOCUMENTDIRECT. DocumentDirect, a document viewing client of the EDW, is a
Windows-based full-function viewer. It provides a common dashboard through which
the user is able to access any type or number of documents stored in ViewDirect
archives on servers distributed across a heterogeneous computing complex.
DocumentDirect provides flexibility for the most demanding user in locating and
displaying documents. DocumentDirect has the ability to simultaneously display
documents of diverse formats and facilitates the annotation and reformatting of
document elements for viewing. DocumentDirect lets the user export documents in
whole or in part to other desktop applications such as spreadsheets, analytical
tools and word processors.

DOCUMENTDIRECT FOR THE INTERNET. DocumentDirect for the Internet is
designed for secure, self-service access to documents over the Internet and
corporate intranets. It is a common gateway interface ("CGI") application that
runs under Windows NT and manages all communications between the EDW and the
Internet/intranet server. DocumentDirect for the Internet makes all the
documents in EDW archives available for viewing via Internet browsers. It allows
users to leverage installed Internet infrastructure and reduce the costs and
administrative overhead associated with software distribution of "thick
clients".

DOCUMENTDIRECT APPLICATION SUITE. DocumentDirect Application Suite is a
document viewing client designed for users with well defined requirements for
document access. It comprises a framework for the development of application
templates tailored for vertical industry requirements. To date, the Company has
introduced versions of DocumentDirect Application Suite for the banking and
brokerage industries. The DocumentDirect Application Suite user can specify
Boolean logic operators to filter document selection lists, speeding access to
desired documents.

DOCUANALYZER. DocuAnalyzer is a Windows-based data-mining client that
makes the data in the EDW archive available for analysis without re-keying. It
simplifies the conversion of character data into a table format to facilitate
"drill-down", analysis, graphing and creation of new reports. Mobius licenses
DocuAnalyzer from a third party for resale.

OTHER PRODUCTS

Mobius also provides systems software products designed to optimize
resource utilization in the data center and to ensure the accuracy and integrity
of data across applications.

INFOPAC-TAPESAVER. INFOPAC-TapeSaver is an OS/390-based software product
that is designed to optimize the utilization of tape and tape devices. Following
user-defined rules, the product automatically consolidates datasets, eliminating
wasted space and freeing up tape cartridges. INFOPAC-TapeSaver improves the
efficiency of robotic tape devices by ensuring that every cartridge is filled to
its useful capacity and that high-activity datasets are available for automated
mounting.

INFOPAC-TapeSaver's forecasting facility allows data centers to proactively
manage their tape storage environment. For example, the data center can make
informed decisions on migrating datasets and acquiring new hardware.

INFOPAC-ABS. INFOPAC-ABS (Automated Balancing System) is an OS/390 data
integrity and quality control software tool. Data in computer systems,
databases, and end user applications originates from many sources. Due to the
large number of input sources, computer systems can and do become
unsynchronized. INFOPAC-ABS provides cross-application balancing of numerical
data resident in databases, files and reports to detect and assist in the
correction of out-of-balance situations. It eliminates slow and costly manual
balancing, speeding procedures such as item reconciliation and control-total
balancing. INFOPAC-ABS is used in Year 2000 conversions to audit applications,
verify the accuracy of output and load databases that include dates beyond 2000.

37
<PAGE> 38

PRODUCT AND MAINTENANCE PRICING

The Company's products are licensed under agreements requiring the payment
of fees. The amount of the license fee is based on various factors, including
the number of concurrent users, the functionality of the system, the number of
servers on which the product is installed, and the scope of the business usage.

Typically, the Company's server products are licensed for fifteen years and
client products are licensed for five years. The Company also provides financing
to some of its customers for the purchase of its software licenses; the term of
these financing agreements is typically three years for server products and five
years for client products.

The Company provides product updates and enhancements and customer support
services under annual maintenance agreements. Maintenance fees are calculated as
a percentage of license fees and are collected annually in advance. During
fiscal 1997, more than 95% of existing maintenance agreements for the Company's
primary EDW products were renewed.

During fiscal 1997 and the first six months of fiscal 1998, the average
amount of revenue recognized by the Company for domestic licenses to new
customers was approximately $168,000.

SALES AND MARKETING

The Company sells and markets its products primarily through a direct sales
force based in Chicago and additional sales offices in the Atlanta, Boston,
Dallas, Houston, Lawrenceville (New Jersey), Los Angeles, Madison, Minneapolis,
Rye (New York), St. Louis, Washington, D.C., London, Milan, Paris, Dusseldorf,
Melbourne and Stockholm metropolitan areas. The Company's sales and marketing
organization consisted of 156 employees as of December 31, 1997, of which 84
were direct sales representatives.

A portion of Mobius' direct sales force focuses on sales of products to
large organizations for enterprise-wide use. To support its direct sales
efforts, the Company conducts a number of marketing programs, which include
public relations, seminars, trade shows, product education and user group
conferences, speaking engagements and white papers. Mobius' telesales staff
markets the Company's products to smaller organizations and to departments of
large organizations. Mobius has undertaken a vertical marketing strategy
designed to target large customers in key vertical markets, such as financial
services and telecommunications companies, by emphasizing certain
industry-specific benefits afforded by the Company's products. In addition, the
Company has entered into distribution agreements with distributors in Canada,
Australia, Japan, Europe, South Africa and Latin America.

The Company's direct sales team includes both sales personnel and systems
engineers who conduct multiple presentations and demonstrations of the Company's
products at customer sites as part of the direct sales effort. Systems engineers
provide comprehensive on-site training and pre-sale customer support services.
The Company's sales cycles generally range from three to nine months, depending
on the product and the market segment.

The Company has strategic relationships with a number of organizations that
it believes enhance its worldwide sales, marketing and support activities. These
relationships provide marketing and sales opportunities for the Company's direct
sales team, expand the distribution of its products and broaden its product
offerings through product bundling. The Company is actively seeking strategic
partners with products that are complementary and provide additional
functionality to the Company's products in targeted industries to further
enhance the Company's vertical marketing program.

Mobius began directly selling its products in Europe in 1993, and has since
opened international sales offices in five European countries and one office in
Australia. In addition, the Company has direct sales teams focusing on key areas
of Canada, Mexico, South America, Europe, Africa and

38
<PAGE> 39

Asia Pacific. The Company believes that an important part of its overall growth
strategy is to expand its foreign operations and enter into joint ventures and
other strategic alliances to provide a worldwide sales and marketing presence
for its products.

At the annual Mobius users group conference, Mobius meets with customers to
determine their needs, ascertain their direction and mold the Company's products
to fit the marketplace. At the conference, customers have the opportunity to
work directly with Mobius personnel to explore new product capabilities.

CUSTOMER SATISFACTION

Mobius provides twenty-four hour, seven-day-a-week support services for all
of the Company's products through its United States and European support centers
(based in New York and the United Kingdom, respectively). Complex diagnostics
and product correction are provided exclusively through the United States
support center. First-line support services for customers outside North America
and the United Kingdom are typically provided by the Company's subsidiaries. In
addition, Mobius has trained and certified five professional service
organizations -- independent companies located across Europe and North
America -- to provide customers with post-sale assistance with Mobius' products
and on-site implementation services, if necessary. As of December 31, 1997, the
Company had 32 employees in its customer satisfaction department.

RESEARCH AND DEVELOPMENT

The Company intends to continue to make substantial investments in research
and development to maintain and enhance its product lines. The Company spent
$3.5 million, $4.6 million and $5.9 million on research and development in
fiscal years 1995, 1996 and 1997, respectively. The Company believes that its
future success will, in large part, depend on its ability to maintain and
improve current products and develop new products that meet the emerging needs
of the marketplace. Mobius research and development focuses on designing and
developing reliable and easy-to-use products. As of December 31, 1997, the
Company's research and development organization consisted of 58 full-time
employees.

To capitalize on market opportunities and to be responsive to customer
demands, the Mobius product development cycle targets shipment of new products
and enhancements to the marketplace within approximately six months from the
date resources are allocated to a project. Larger projects are typically
disaggregated to provide specific deliverables within a six-month maximum
period. The Company divides its development team into groups delineated by
product functionality and employs advanced Rapid Application Development ("RAD")
tools to facilitate short development cycles for functional enhancements while
maintaining product reliability.

COMPETITION

The market for the Company's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's products are targeted
at a broad range of hardware and software environments from PCs to mid-range to
mainframe servers. The Company currently encounters direct competition from a
number of public and private companies including Computer Associates, Computron,
FileNet, IBM, Kodak, New Dimension and RSD. Some of these competitors have
longer operating histories, significantly greater financial, technical,
marketing and other resources, significantly greater name recognition and a
larger installed base of customers than the Company. In the future, it is
possible that new competitors or alliances among competitors may emerge and
enter into the Company's market. See "Risk Factors -- Competition".

The Company believes that the principal competitive factors affecting its
market include product features such as scalability, breadth of supported
operating systems and document formats, ease of use, product reputation,
quality, performance, price, sales and marketing effort and customer
39
<PAGE> 40

service. Although the Company believes that it currently competes favorably with
respect to such factors, there can be no assurance that the Company can maintain
its competitive position against current and potential competitors, especially
those with greater financial, marketing, service, support, technical and other
resources than the Company.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of confidentiality agreements, contractual rights, copyright, trademark and
trade secret laws and other measures to protect its intellectual property. The
Company has no patents, and existing trade secret and copyright laws afford only
limited protection. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. The Company believes that, because of the rapid rate of
technological change in the computer software industry, trade secret and
copyright protection are less significant than factors such as the knowledge,
ability and experience of the Company's employees, frequent product enhancements
and the timeliness and quality of support services.

Typically, the Company's server products are licensed for fifteen years and
its client products are licensed for five years. The Company generally licenses
its products solely for the customer's internal operations and only on
designated computers. In certain circumstances, the Company makes available
enterprise-wide licenses.

In addition, the Company relies on certain software and other information
that it licenses from third parties, including software that is used in the
Company's products to perform certain functions. See Risk Factors -- "Dependence
on Licensed Technology".

The Company's products are generally provided to customers in object code
format only. However, the Company generally enters into arrangements with its
customers pursuant to which the Company's source code will be released to the
customer upon the occurrence of certain events, such as the bankruptcy or
insolvency of the Company, or certain material breaches by the Company of the
license agreement. In the event of any release of the source code pursuant to
these arrangements, the customer's license is generally limited to use of the
source code to maintain, support and configure the Company's software products.
The provision of source code may increase the likelihood of misappropriation or
other misuse of the Company's intellectual property. See "Risk
Factors -- Protection of Intellectual Property".

EMPLOYEES

As of December 31, 1997, Mobius employed 282 people. None of the Company's
employees is represented by a labor union or is subject to a collective
bargaining agreement. The Company has experienced no work stoppages and believes
its relationship with its employees is good. The Company believes that its
future success will depend to a significant extent upon its ability to attract,
train and retain highly skilled technical, management, sales and marketing
personnel. There can be no assurance that the Company will be successful in
attracting or retaining such personnel, and the failure to attract or retain
such personnel could have a material adverse effect on the Company's business,
operating results and financial condition.

FACILITIES

The Company is headquartered in Rye, New York, where it leases an aggregate
of approximately 43,700 square feet of space. Administrative, marketing, product
development and customer support and service operations are located in the Rye
space, and sales operations are based in Chicago. The Company leases an
aggregate of approximately 43,559 additional square feet of space in the
Atlanta, Boston, Chicago, Dallas, Houston, Lawrenceville (New Jersey), Los
Angeles, Madison, Minneapolis, New Rochelle (New York), St. Louis, Washington,
D.C., London, Paris,
40
<PAGE> 41

Milan, Dusseldorf and Stockholm metropolitan areas. The annualized lease
payments on the Rye Facility are currently $965,688 and the annualized lease
payments on the additional 43,559 square feet of space currently range from
$9.87 to $232.08 per square foot. The Company believes that these facilities are
adequate to meet its current needs and that suitable additional space will be
available as needed to accommodate physical expansions of corporate operations
and for additional sales and service field offices.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
business, operating results and financial condition.

41
<PAGE> 42

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The officers and directors of the Company are as follows. Messrs. Gross,
Albracht, Dahill, Kleeman, Lawrence, Pelleschi and Tinnerello are the Company's
executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Mitchell Gross............................ 48 Chairman of the Board of Directors, Chief Executive
Officer and President

Joseph J. Albracht........................ 48 Executive Vice President, Chief Operating Officer,
Secretary and Director

E. Kevin Dahill........................... 50 Vice President, Finance, Chief Financial Officer
and Treasurer

Anne Ashley............................... 55 Vice President, Customer Satisfaction

Scott Gellis.............................. 42 Vice President, Technical Services

Karry Kleeman............................. 35 Vice President, Sales

Robert Lawrence........................... 45 Vice President, Product Engineering

Mario Pelleschi........................... 40 Vice President, Sales (Europe, Middle East and
Africa)

Abby Pinard............................... 55 Vice President, Corporate Marketing

Joseph Tinnerello......................... 41 Vice President, Business Development

Peter J. Barris(1)(2)..................... 46 Director

Edward F. Glassmeyer(1)(2)................ 56 Director

Kenneth P. Kopelman(1).................... 47 Director
</TABLE>

- ---------------
(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

MITCHELL GROSS co-founded Mobius and has served as President and a Director
since 1981 and as Chairman of the Board and Chief Executive Officer since 1996.
Prior to co-founding the Company, Mr. Gross was a Senior Consultant at American
Management Systems, Inc. ("AMS"), a consulting and software products
organization, from 1978 to 1981. Mr. Gross was an officer in the U.S. Navy,
serving on nuclear submarines, from 1971 to 1976. He holds an M.B.A. in Finance
from The Wharton School, University of Pennsylvania and a B.S. in Mechanical
Engineering from Columbia University School of Engineering and Applied Science.

JOSEPH J. ALBRACHT co-founded Mobius and has served as Executive Vice
President, Secretary and a Director since 1981, Treasurer from 1981 to 1996 and
Chief Operating Officer since 1996. Prior to co-founding the Company, Mr.
Albracht was a principal at AMS from 1978 to 1981, and held various positions at
Warner-Lambert Co. and RCA Corporation from 1973 to 1977. He holds an M.B.A. and
a B.S. in Operations Research from Pennsylvania State University.

E. KEVIN DAHILL joined Mobius in December, 1996 as Vice President, Finance,
Chief Financial Officer and Treasurer. From 1991 to 1996, Mr. Dahill was
employed by Electronic Information Services, Inc. ("EIS"), a publicly-held
corporation engaged in the supply of systems and software

42
<PAGE> 43

in the outbound call center market where he served in various capacities
including as President from 1995 to 1996, Chief Operating Officer from 1994 to
1996 and Senior Vice President, Finance and Chief Financial Officer from 1991 to
1994. Mr. Dahill also served as a member of the EIS Board of Directors from 1992
to 1996. He holds an M.S. in Management from the Massachusetts Institute of
Technology, Sloan School of Management, an M.S. in Mechanical Engineering from
the Georgia Institute of Technology and a B.S. in Mechanical Engineering from
the University of Notre Dame.

ANNE ASHLEY joined Mobius in 1995 as Director of Customer Satisfaction and
has served as Vice President, Customer Satisfaction since August 1997. Prior to
joining the Company, Ms. Ashley worked from 1987 to 1995 for Syncsort, Inc.
where she was responsible for support and service and pre-sales technical
support for MVS products. Ms. Ashley holds a B.S. in Electrical Engineering from
the University of Michigan.

SCOTT GELLIS joined Mobius in 1994 as Director of Technical Services and
has served as Vice President, Technical Services since January, 1998. From 1992
to 1994, Mr. Gellis was Vice President of Data Switch Corporation. During 1992,
Mr. Gellis was employed by Microcom, Inc. as Director of Research and
Development. From 1988 to 1992, he was Vice President, Product Development for
Coordination Technology, Inc. Mr. Gellis holds a B.S. in Computer Sciences from
Union College.

KARRY KLEEMAN joined Mobius in 1990 and has served as Vice President, Sales
since 1997. From 1995 to 1997, he served as the Company's National Sales Manager
and from 1992 to 1995 as a Regional Manager. From 1988 to 1990, Mr. Kleeman was
a sales representative for MUST Software Inc., a subsidiary of French based
Thomson-CSF. Mr. Kleeman holds a B.A. in Marketing from Elmhurst College.

ROBERT LAWRENCE joined Mobius in 1985 and has served as Vice President,
Product Engineering since 1992. Prior to joining the Company, he was a senior
developer with Time Sharing Resources, Inc. developing custom decision support
applications for Fortune 500 clients from 1977 to 1983. In 1983 Mr. Lawrence
joined On-Line Software International, Inc. as a consultant and later as a
software developer. Mr. Lawrence graduated from the University of Massachusetts
in 1974 where he earned the Hasbrook award given each year to the outstanding
physics major.

MARIO PELLESCHI joined Mobius in 1998 as Vice President, Sales (Europe,
Middle East and Africa). Prior to joining the Company, Mr. Pelleschi was
employed by Computer Associates from 1981 to 1997, initially as a Branch
Manager, and as Managing Director of various subsidiaries as follows:
Switzerland, 1981-1985; Brazil, 1985-1987; Germany, 1987-1995; and France,
1995-1997. Mr. Pelleschi holds a Swiss Federal degree in Electronic Engineering.

ABBY PINARD joined Mobius in 1996 as Vice President, Corporate Marketing.
From 1987 to 1996, she served as Vice President of Marketing for Thomson
Software Products, a subsidiary of French-based Thomson-CSF where she was
responsible for corporate and product marketing of a multi-platform suite of
decision support, application development and data warehousing tools. Ms. Pinard
holds a B.S. degree, cum laude, in Mathematics from Brooklyn College.

JOSEPH TINNERELLO joined Mobius in 1990 and has served as Vice President,
Business Development since 1998 and as Vice President, Sales from 1995 to 1997.
Following a personal leave of absence, Mr. Tinnerello left the Company from
October 1, 1997 through January 14, 1998. From 1988 to 1989, he was a Regional
Manager with Legent Software, prior to its acquisition by Computer Associates.

43
<PAGE> 44

PETER J. BARRIS has served as a director of the Company since 1997. Since
1992, Mr. Barris has served as a partner of New Enterprise Associates, a venture
capital firm, and as a General Partner since 1993. Mr. Barris serves on the
boards of a number of privately-held information technology companies. He holds
a B.S degree in Electrical Engineering from Northwestern University and an
M.B.A. from the Tuck School at Dartmouth College.

EDWARD F. GLASSMEYER has served as a director of the Company since 1997.
Since 1978, Mr. Glassmeyer has served as a general partner of Oak Investment
Partners, a venture capital firm, that he co-founded in that year. Mr.
Glassmeyer is a director of Aavid Thermal Technologies, Inc., and is a director
of several privately-held companies in which one of the Oak investment
partnerships is an investor. Mr. Glassmeyer holds a B.A. from Princeton
University and an M.B.A. from the Tuck School at Dartmouth College.

KENNETH P. KOPELMAN, a member of the New York City law firm of Kramer,
Levin, Naftalis & Frankel ("Kramer Levin") since 1984, has served as a Director
of the Company since 1997. He also serves as a Director of Liz Claiborne, Inc.,
a publicly-held apparel company. He attended Cornell University, The London
School of Economics and received his J.D. from the Columbia University School of
Law, and has practiced corporate and securities law for over 20 years. Kramer
Levin has served as legal counsel to the Company since its founding in 1981.

The Company's Board of Directors is divided into three classes. Messrs.
Glassmeyer and Kopelman serve in the class whose term expires in 1999; Messrs.
Albracht and Barris serve in the class whose term expires in 2000; and Mr. Gross
serves in the class whose term expires in 2001. Upon the expiration of the term
of a class of directors, directors within such class will be elected for a
three-year term at the annual meeting of stockholders in the year in which such
term expires. Directors will hold office until the expiration of their term and
until that director's successor has been elected and qualified.

Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until the next annual meeting of the Board of
Directors and until their successors have been duly elected and qualified. There
are no family relationships among any of the executive officers or directors of
the Company.

BOARD COMMITTEES

The Company's Board of Directors has recently appointed an Audit Committee
and a Compensation Committee. The Audit Committee is responsible for nominating
the Company's independent accountants for approval by the Board of Directors;
reviewing the scope, results and costs of the audit with the Company's
independent accountants; and reviewing the financial statements and accounting
and control practices of the Company. The Compensation Committee is responsible
for recommending compensation and benefits for the executive officers of the
Company to the Board of Directors and for administering the Company's 1996 Plan
and the Company's 1998 Executive Compensation Plan. The entire Board of
Directors fulfilled the functions of these committees during fiscal 1997.

DIRECTOR COMPENSATION

The Company reimburses non-employee directors for expenses incurred in
attending Board meetings. Kramer Levin is paid Mr. Kopelman's standard rates for
all time Mr. Kopelman devotes to the preparation for and attendance at Board
Meetings. No additional compensation is paid to directors for attending Board or
committee meetings. In addition, pursuant to the Directors' Plan each of Messrs.
Barris, Glassmeyer and Kopelman have been granted immediately exercisable
options to purchase 10,000 shares of Common Stock at an exercise price of $11.00
per share. See "-- Benefit Plans".

44
<PAGE> 45

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the fiscal
year ended June 30, 1997 by (i) the Company's Chief Executive Officer and (ii)
the five most highly compensated other executive officers who received annual
compensation in fiscal 1997 in excess of $100,000 (collectively, the "Named
Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------------------
OTHER ANNUAL LONG TERM
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2) OTHER(3) UNDERLYING OPTIONS
--------------------------- ------ ----- --------------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Mitchell Gross............... $200,000 $150,151 -- $62,349 --
Chairman of the Board,
Chief Executive Officer &
President
Joseph J. Albracht........... 200,000 150,366 -- 46,134 --
Executive Vice President,
Chief Operating Officer &
Secretary
E. Kevin Dahill(4)........... 87,579 25,397 -- -- 270,000
Vice President, Finance,
Chief Financial Officer &
Treasurer
Karry Kleeman................ 288,046 10,324 232,782 -- 170,000
Vice President, Sales
Robert Lawrence.............. 156,910 32,509 -- -- 360,000
Vice President, Product
Engineering
Joseph Tinnerello............ 288,836 75,366 145,180 -- 80,000(5)
Vice President, Business
Development
</TABLE>

- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total of annual salary and bonuses for the Named
Executive Officer for such year.

(2) Consists of sales commissions.

(3) Includes premiums on insurance added to compensation. Also includes the
grossed up amount to cover taxes.

(4) Mr. Dahill joined Mobius in December, 1996 and the amounts presented are for
the seven month period ended June 30, 1997.

(5) Mr. Tinnerello was granted options to purchase 720,000 shares during fiscal
1997. Options to purchase 640,000 of these shares lapsed when Mr.
Tinnerello's employment with the Company terminated in October, 1997. Mr.
Tinnerello rejoined the Company in January, 1998. See "-- Agreements with
Employees".

45
<PAGE> 46

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information with respect to options granted
during the fiscal year ended June 30, 1997 by the Company to the following the
Named Executive Officers.

<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE
TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM(2)
OPTIONS IN FISCAL PRICE --------------------------
NAME GRANTED 1997(1) PER SHARE EXPIRATION DATE 5% 10%
---- ---------- ---------- --------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
E. Kevin Dahill........... 270,000 13.2% $1.25 December 2, 2006 $549,752 $ 875,388
Robert Lawrence........... 360,000 17.6 1.25 November 6, 2006 733,003 1,167,184
Karry Kleeman(3).......... 170,000 8.3 1.25 November 6, 2006 346,140 551,170
Joseph Tinnerello(3)(4)... 80,000 3.9 1.25 November 6, 2006 162,889 259,374
</TABLE>

- ---------------
(1) In fiscal 1997, the Company granted employees options to purchase an
aggregate of 2,045,500 shares of Common Stock.

(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by rules of the Commission and do not represent the Company's estimate or
projection of the Company's future Common Stock prices. These amounts
represent certain assumed rates of appreciation in the value of the
Company's Common Stock from the fair value on the date of the grant. Actual
gains, if any, will depend on stock market conditions. The amounts reflected
in the table may not necessarily be achieved.

(3) Subsequent to June 30, 1997, the Company granted options to purchase shares
of Common Stock to the following Named Executive Officers: Mr. Kleeman,
170,000 shares at an exercise price of $5.28 per share; and Mr. Tinnerello,
100,000 shares at an exercise price of $6.94 per share and 180,000 shares at
an exercise price of $9.86 per share.

(4) Mr. Tinnerello was granted options to purchase 720,000 shares during fiscal
1997 (35% of total options granted to employees in fiscal 1997). Options to
purchase 640,000 shares lapsed when Mr. Tinnerello's employment with the
Company terminated in October, 1997. Mr. Tinnerello rejoined the Company in
January, 1998. See "-- Agreements with Employees".

46
<PAGE> 47

YEAR-END OPTION TABLE

The following table sets forth certain information concerning the number
and value of unexercised stock options held by each of the Named Executive
Officers as of June 30, 1997. No stock options were exercisable during fiscal
1997.

<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISABLE IN-THE-MONEY OPTIONS
NAME OPTIONS AT JUNE 30, 1997(1) AT JUNE 30, 1997(2)
---- --------------------------- --------------------
<S> <C> <C>
E. Kevin Dahill.......................... 270,000 $ 861,300
Robert Lawrence.......................... 360,000 1,148,400
Karry Kleeman............................ 170,000 542,300
Joseph Tinnerello(3)(4).................. 80,000 255,500
</TABLE>

- ---------------
(1) Does not include options to purchase Common Stock granted to Named Executive
Officers after June 30, 1997.

(2) There was no public trading market for the Common Stock as of June 30, 1997.
Accordingly, as permitted by the rules of the Commission, these values have
been calculated on the basis of the fair market value of the Common Stock as
of June 30, 1997 ($4.44), as determined by the Company, less the applicable
exercise price.

(3) Mr. Tinnerello was granted options to purchase 720,000 shares during fiscal
1997. Options to purchase 640,000 shares lapsed when Mr. Tinnerello's
employment with the Company terminated in October, 1997. Mr. Tinnerello
rejoined the Company in January, 1998. See "-- Agreements with Employees".

(4) On December 30, 1997, Mr. Tinnerello exercised options to purchase 80,000
shares at an exercise price of $1.25 per share. The aggregate value realized
upon such exercise, calculated on the basis of the fair value of the Common
Stock on the date of exercise ($9.44), was $655,200.

AGREEMENTS WITH EMPLOYEES

In February, 1998, the Company entered into employment agreements with each
of Messrs. Gross and Albracht providing for the employment of Mr. Gross as
Chairman of the Board, Chief Executive Officer and President of the Company and
Mr. Albracht as Executive Vice President and Chief Operating Officer of the
Company. Each employment agreement provides for a three-year term ending on the
third anniversary of the consummation of the offering (the "Termination Date").
The agreements each provide for an annual base salary of not less than $200,000
as well as an annual bonus based upon the performance of the Company in an
amount determined by the Board of Directors of the Company or an appropriate
committee thereof in its respective sole discretion. Each agreement also
prohibits the executive from using the confidential information of the Company
for a period of three years following the termination of his employment (two
years if he is terminated other than for cause (as defined therein)) and
contains a non-competition covenant pursuant to which the executive is
prohibited from competing with the Company during his employment by the Company
and for two years thereafter (one year in the event the executive is terminated
other than for cause). The agreements further provide that in the event that
employment is terminated by the Company without cause (as defined therein) or by
the executive for good reason (as defined therein), the executive is entitled to
receive (i) his accrued but unpaid base salary and bonus through the Termination
Date; (ii) coverages substantially identical to those provided immediately prior
to the termination for twelve months following the Termination Date; and (iii)
an aggregate amount, payable in equal semi-monthly installments over a one-year
period following the Termination Date, equal to the aggregate of what his base
salary would have been for said period plus his maximum bonus for such period,
but not less than his highest annual bonus during the preceding five years. In
the event of the death or disability of the executive, the Company will continue
to make base salary payments to the executive or his estate for twelve months
following such death or disability.

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<PAGE> 48

Following a personal leave, on September 30, 1997, the Company and Mr.
Joseph Tinnerello, presently the Company's Vice President, Business Development,
entered into a severance agreement pursuant to which Mr. Tinnerello left the
employment of the Company on October 1, 1997 and agreed to certain
non-competition and non-solicitation restrictions in consideration for (i) the
acceleration of 80,000 options to purchase shares of Common Stock of the Company
previously granted to him and (ii) the grant of 100,000 new options to purchase
shares of Common Stock at an exercise price equal to the fair market value of
the shares at the time of the grant. As a result of such termination and
pursuant to the terms of the 1996 Plan, Mr. Tinnerello forfeited 640,000 options
to purchase shares of Common Stock that were previously granted to him in
November, 1996. On December 26, 1997, Mr. Tinnerello agreed to return to the
Company effective January 15, 1998. On December 28, 1997, the Company agreed to
advance $160,000 to Mr. Tinnerello against certain future commissions. Such
monies (net of applicable taxes) were used by Mr. Tinnerello to exercise options
to purchase 80,000 shares of Common Stock. On January 15, 1998 the Company
granted Mr. Tinnerello options to purchase 180,000 shares of Common Stock in
accordance with, and on terms similar to, its standard hiring practices.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee of the Company's Board of
Directors are Messrs. Barris and Glassmeyer. There are no compensation committee
interlocks which are required to be disclosed by the rules promulgated by the
Commission under the Securities Act. No member of the Compensation Committee of
the Company serves as a member of the board of directors or compensation
committee of any other entity that has one or more executive officers serving as
a member of the Company's Board of Directors or Compensation Committee.

BENEFIT PLANS

401(K) PLAN

In fiscal 1995, the Company established a 401(k) retirement savings plan
(the "401(k) Plan"). The 401(k) Plan provides that each participant may
contribute from 1% to 20% of his or her pre-tax salary (up to a statutorily
prescribed annual limit, $10,000 for 1998) to the 401(k) Plan, although the
percentage elected by certain highly compensated participants may be required to
be lower. All amounts contributed to the 401(k) Plan by employee participants
and earnings on these contributions are fully vested at all times. Employee
participants may elect to invest their contributions in various established
funds, which include fixed income, growth and equity funds. The Company, at the
discretion of the Board of Directors, may match employee contributions. No
matching contributions were made in 1995, 1996 or 1997.

1996 STOCK INCENTIVE PLAN

The Board of Directors and stockholders of the Company have approved and
adopted the 1996 Plan, the terms of which are summarized below.

General. The 1996 Plan provides for the issuance of a total of up to
3,480,000 authorized and unissued shares of Common Stock, treasury shares and/or
shares acquired by the Company for purposes of the 1996 Plan. In addition, as of
any January 1 beginning with January 1, 1999, the Board of Directors, in its
discretion, may increase such share limit by a number that is no more than 3% of
the total number of shares of Common Stock issued and outstanding as of the date
of such increase.

Awards under the 1996 Plan may be made in the form of (i) incentive stock
options, (ii) nonqualified stock options (incentive and nonqualified stock
options are collectively referred to as "options"), (iii) stock appreciation
rights, (iv) restricted stock, (v) restricted stock units, and (vi) other types
of stock-based awards. Awards may be made to such directors, officers and key
employees of the Company and its subsidiaries (including prospective employees
who become

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<PAGE> 49

employees), and to such consultants to the Company and its subsidiaries, as the
Compensation Committee shall in its discretion select (collectively, "key
persons").

Administration. The 1996 Plan is administered by the Compensation
Committee. The Compensation Committee is authorized to construe, interpret and
implement the provisions of the 1996 Plan, to select the persons to whom awards
will be granted, to determine the terms and provisions of such awards and to
amend outstanding awards. The determinations of the Compensation Committee are
made in its sole discretion and are binding and conclusive.

Grants under the 1996 Plan. Unless the Compensation Committee determines
otherwise, an option grant will become exercisable as to 20% of the shares
subject thereto on the first anniversary of the date of grant and the remainder
will vest ratably over the subsequent 16 quarters. The purchase price per share
payable upon the exercise of an option will be established by the Compensation
Committee.

As of February 28, 1998 the Company had granted 2,463,500 options under the
1996 Plan. These grants were made to 141 employees of the Company (representing
49% of its total employees) at exercise prices, except as described in the
following paragraph, equal to the fair market value of the Company's Common
Stock at the time of each such grant, including options to purchase 270,000,
340,000, 360,000, and 360,000 (net of 640,000 options which have lapsed) shares
to the following named Executive Officers, respectively: E. Kevin Dahill; Karry
Kleeman; Robert Lawrence; and Joseph Tinnerello.

In January, 1998, the Company granted 350,000 options under the 1996 Plan
at an exercise price of $9.86 per share, including 180,000 options to Mr.
Tinnerello. In February and March, 1998, the Company made additional grants
totaling 423,000 options under the 1996 Plan and the Directors' Plan at an
exercise price of $11.00 per share, including 10,000 options to each of Messrs.
Barris, Glassmeyer and Kopelman. Based on events occurring after the grant of
these options, the Company subsequently determined that these options were
granted at exercise prices below the fair market value of $14.00 per share. As a
result, and assuming that all such options vest in accordance with their terms,
the Company expects to incur total compensation expense of approximately
$2,718,000, which will be amortized over the respective option holders' service
periods. Such compensation expense is expected to be approximately $643,000,
$1,055,000, $558,000, $288,000, $130,000 and $44,000 for the six months ended
June 30, 1998 and years ended June 30, 1999, 2000, 2001, 2002 and 2003,
respectively.

Other features of the 1996 Plan. Awards granted under the 1996 Plan and
shares acquired pursuant thereto are subject to a number of rights and
restrictions, including provisions relating to the termination of employment or
service of the grantee.

The Board of Directors may, without stockholder approval, suspend,
discontinue, revise or amend the 1996 Plan at any time, or from time to time;
provided, however, that stockholder approval shall be obtained for any amendment
for which such approval is required by Section 422 of the Internal Revenue Code
of 1986, as amended, (the "Code") or by other provisions of applicable law.
Unless sooner terminated by the Board of Directors, the provisions of the 1996
Plan relating to the grant of incentive stock options shall terminate on the
tenth anniversary of the adoption of the 1996 Plan by the Board of Directors.
All awards made under the 1996 Plan prior to its termination shall remain in
effect until they are satisfied or terminated.

The vesting of awards granted under the 1996 Plan will accelerate in the
event of a change in control, as defined in the 1996 Plan unless otherwise
provided in the individual option agreements.

1998 EMPLOYEE STOCK PURCHASE PLAN

The Board of Directors and stockholders of the Company have approved and
adopted the ESPP. The purpose of the ESPP is to provide eligible employees who
wish to acquire Common Stock of the Company the opportunity to purchase shares
from the Company with accumulated
49
<PAGE> 50

payroll deductions. The ESPP is intended to constitute an "employee stock
purchase plan" under section 423 of the Code.

The ESPP provides for the issuance of an aggregate of up to 300,000
authorized and unissued shares of Common Stock, treasury shares and/or shares
acquired by the Company for the purposes of the ESPP.

The ESPP may be administered by the Board of Directors or by a committee of
the Board of Directors comprised of not less than two directors.

Any employee who has been employed at least six months by the Company, or
by any subsidiary which adopts the ESPP with the consent of the Company, and who
is employed more than twenty hours per week for more than five months per
calendar year is eligible to participate in the ESPP.

As of February 28, 1998, there were approximately 232 employees eligible to
participate in the ESPP.

In the event of a merger or consolidation of the Company with or into any
other corporation or entity, payroll deductions will cease and all amounts
previously deducted from participants' pay will be refunded immediately prior to
the consummation of the action.

The Board of Directors may suspend, discontinue, revise or amend the ESPP
at any time and in any respect; provided, however, that stockholder approval
will be obtained to the extent necessary to comply with section 423 of the Code
and other applicable law.

1998 EXECUTIVE INCENTIVE PLAN

The Board of Directors and stockholders of the Company have approved and
adopted the Mobius Management Systems, Inc. Executive Incentive Plan (the
"Incentive Plan"). The Incentive Plan is administered by the Compensation
Committee of the Board. Participation in the Incentive Plan is limited to those
executives and key employees who, in the judgment of the Compensation Committee,
are in a position to have a significant impact on the performance of the
Company.

Awards under the Incentive Plan are based upon the extent to which
performance goals established by the Compensation Committee for a designated
performance period are satisfied. Performance goals are related to criteria
which include net earnings, operating income, earnings per share, cash flow,
absolute and/or relative return on equity or assets, pre-tax profits, earning
growth, revenue growth, comparison to peer companies, any combination of the
foregoing or any other criteria as the Compensation Committee deems appropriate.
The Compensation Committee may provide that the bonuses payable to participants
will vary based upon different levels of achievement of the applicable goals.
The Incentive Plan also provides for grants of discretionary bonuses.

1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

The Board of Directors and stockholders of the Company have approved and
adopted the Directors' Plan. The purpose of the Directors' Plan is to provide an
incentive to the Company's non-employee directors to serve on the Board of
Directors and to maintain and enhance the Company's long-term performance.

The Directors' Plan provides for the issuance of a total of 250,000
authorized and unissued shares of Common Stock, treasury shares and/or shares
acquired by the Company for purposes of the Directors' Plan.

The Directors' Plan provides for initial grants (i.e. upon adoption of the
Directors' Plan or upon a non-employee director's initial election to the Board
of Directors) of non-qualified stock options to purchase 10,000 shares of Common
Stock. At each annual meeting thereafter, each non-employee

50
<PAGE> 51

director will receive an option to purchase 10,000 shares. Each option granted
under the Directors' Plan will have a term of ten years and will become
exercisable upon grant. The exercise price of each option granted under the
Directors' Plan will equal the fair market value of a share of Common Stock on
the date of grant.

The Board of Directors may amend the Directors' Plan at any time or from
time to time; provided, that no amendment may impair any material rights or
increase any material obligations under any outstanding option without the
non-employee directors' consent. Stockholder approval of any amendment shall be
obtained to the extent necessary to comply with any applicable law, rule or
regulation.

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<PAGE> 52

CERTAIN TRANSACTIONS

Since 1981 the Company has engaged, and plans to continue to engage, Kramer
Levin to provide legal counsel to the Company. Mr. Kopelman, a member of the
Company's Board of Directors, is also a member of Kramer Levin. The Company
believes that fees charged by Kramer Levin are at rates and on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties.

Since November, 1996, the Company has granted options to purchase shares of
Common Stock to certain of its employees, including its Executive Officers. The
Company believes that the exercise prices for all such grants (other than
certain grants made in January, 1998) have not been less than the fair market
values of the shares at the time of their respective grants. See
"Management -- Benefit Plans".

On May 12, 1997, the Company issued 40,910 shares of Series A Convertible
Preferred Stock for an aggregate consideration of $12,000,130 pursuant to a
Stock Purchase Agreement by and among the Company, Mitchell Gross, Joseph J.
Albracht, Oak Investment Partners VI, Limited Partnership, Oak VI Affiliates
Fund, Limited Partnership, NEA Ventures 1997, NEA President's Fund L.P., New
Enterprise Associates VII L.P., New Venture Partners III L.P. and Glynn Ventures
III, L.P. Mr. Peter Barris, a member of Mobius' Board of Directors, is
affiliated with NEA Ventures 1997, NEA President's Fund L.P. and New Enterprise
Associates VII L.P. and Mr. Edward Glassmeyer, a member of Mobius' Board of
Directors, is affiliated with the aforementioned Oak entities. Simultaneously
therewith and as a condition thereof, the Company repurchased 2,045,500 shares
of Common Stock from Mr. Gross, the Company's Chairman of the Board, Chief
Executive Officer and President and 2,045,500 shares of Common Stock from Mr.
Albracht, the Company's Executive Vice President, Chief Operating Officer,
Secretary and a member of the Board of Directors, for an aggregate purchase
price of $12,000,130.

From time to time the Company has advanced salaries and/or commissions to
its employees. In particular, in December, 1997 the Company advanced against
certain commissions $160,000 to Mr. Joseph Tinnerello, the Company's Vice
President, Business Development. See "Management -- Agreements with Employees".

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<PAGE> 53

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 28, 1998 and as adjusted
to reflect the sale of the shares offered hereby by (i) each person who is known
by the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each director and Named Executive Officer of the Company,
(iii) all directors and executive officers of the Company as a group, and (iv)
each Selling Stockholder. Unless otherwise indicated below, to the knowledge of
the Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED NUMBER OF SHARES BENEFICIALLY OWNED
5% STOCKHOLDERS, NAMED PRIOR TO OFFERING(1) SHARES AFTER OFFERING(1)(2)(3)
EXECUTIVE OFFICERS, DIRECTORS ------------------------- OFFERED -------------------------
AND SELLING STOCKHOLDERS NUMBER PERCENTAGE FOR SALE(2) NUMBER PERCENTAGE
- ----------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Mitchell Gross(4)....................... 6,204,500 41.1% 400,000 5,804,500 33.0%
Joseph J. Albracht(5)................... 4,704,500 31.2 400,000 4,304,500 24.5
Oak Investment Partners VI, Limited
Partnership(6)........................ 2,045,500 13.6 -- 2,045,500 11.6
New Enterprise Associates VII L.P.(7)... 1,943,200 12.9 -- 1,943,200 11.1
E. Kevin Dahill(8)...................... 67,500 * -- 67,500 *
Karry Kleeman(9)........................ 42,500 * -- 42,500 *
Robert Lawrence(10)..................... 90,000 * -- 90,000 *
Joseph Tinnerello(11)................... 180,000 1.2 -- 180,000 1.0
Peter J. Barris(12)..................... 1,953,200 12.9 -- 1,953,200 11.1
Edward F. Glassmeyer(13)................ 2,055,500 13.6 -- 2,055,500 11.7
Kenneth P. Kopelman(14)................. 10,000 * -- 10,000 *
All Executive Officers and Directors as
a group (10 persons)(4)(12)(13)(15)... 15,307,700 99.3% 800,000 14,507,700 81.0%
</TABLE>

- ---------------
* Less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Commission, and includes generally voting power and/or investment power
with respect to securities. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days of February 28, 1998
("Currently Exercisable Options") are deemed outstanding for computing the
percentage beneficially owned by the person holding such options but are
not deemed outstanding for computing the percentage beneficially owned by
any other person.

(2) Assumes no exercise of the Underwriters' over-allotment option.

(3) Does not include shares to be purchased in the offering, aggregating less
than 1.0% of the shares offered for all executive officers and directors as
a group.

(4) Includes 4,100,000 shares of Common Stock held by HARMIT, LP, of which
Mitchell Gross and Harriet Gross, the spouse of Mr. Gross, are general
partners. Mr. Gross's address is c/o the Company at 120 Old Post Road, Rye,
New York 10580.

(5) Mr. Albracht's address is c/o the Company at 120 Old Post Road, Rye, New
York 10580.

(6) Includes 46,600 shares of Common Stock held by Oak VI Affiliates Fund,
Limited Partnership. The address of such stockholders is 1 Gorham Island,
Westport, Connecticut 06880.

(7) Includes 1,700 shares of Common Stock held by NEA Ventures 1997, 27,300
shares held by NEA President's Fund L.P. and 102,300 shares held by New
Venture Partners III L.P. The address of such stockholders is 1911 Freedom
Drive, Reston, Virginia 20190.

(8) Represents 67,500 shares issuable pursuant to Currently Exercisable
Options.

(9) Represents 42,500 shares issuable pursuant to Currently Exercisable
Options.

(10) Represents 90,000 shares issuable pursuant to Currently Exercisable
Options.

(11) Includes 100,000 shares issuable pursuant to Currently Exercisable Options.

(12) Includes 1,811,900 shares of Common Stock held by New Enterprise Associates
VII L.P., 1,700 shares held by NEA Ventures 1997, 27,300 shares held by NEA
President's Fund L.P. and 102,300 shares held by New Venture Partners III
L.P. Mr. Barris disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest therein arising from his affiliation
with such entities. Also includes 10,000 shares issuable pursuant to
Currently Exercisable Options.

(13) Includes 1,998,900 shares of Common Stock held by Oak Investment Partners
VI, Limited Partnership and 46,600 shares held by Oak VI Affiliates Fund,
Limited Partnership. Mr. Glassmeyer disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein arising from
his affiliation with such entities. Also includes 10,000 shares issuable
pursuant to Currently Exercisable Options.

(14) Includes 10,000 shares issuable pursuant to Currently Exercisable Options.

(15) Includes 310,000 shares issuable pursuant to Currently Exercisable Options.

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<PAGE> 54

DESCRIPTION OF CAPITAL STOCK

Effective upon the filing of the Restated Certificate of Incorporation and
the conversion of the Series A Convertible Preferred Stock and Class A
Non-Voting Common Stock upon the closing of the offering, the authorized capital
stock of the Company will consist of 40,000,000 shares of Common Stock, $.0001
par value per share, and 1,000,000 shares of Preferred stock, $.01 par value per
share (the "Preferred Stock"), which may be issued in one or more series.

COMMON STOCK

As of February 28, 1998 there were 10,909,000 shares of Common Stock
outstanding and held of record by three stockholders. Based upon the number of
shares outstanding as of that date and giving effect to the issuance of the
shares of Common Stock offered by the Company hereby and the conversion of the
outstanding Series A Convertible Preferred Stock and Class A Non-Voting Common
Stock into shares of Common Stock upon consummation of the offering, there will
be 17,580,000 shares of Common Stock outstanding upon the closing of the
offering.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election (other than those directors, if any, who are to be elected
by the holders of any series of preferred stock, if any). Holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor, subject to
any preferential dividend rights of outstanding Preferred Stock. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities and subject to the prior
rights of any outstanding Preferred Stock. Holders of the Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Company in this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future. Upon the closing of this offering, there will be no shares of Preferred
Stock outstanding.

PREFERRED STOCK

The Board of Directors is authorized, without further stockholder approval,
subject to certain limitations prescribed by law, to issue from time to time up
to an aggregate of 1,000,000 shares of Preferred Stock in one or more series and
to fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof, including
the dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares of Preferred Stock constituting
any series or designations of such series of Preferred Stock.

The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock. See "Risk
Factors -- Anti-Takeover Provisions".

DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BY-LAWS

The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law (the "Delaware Law"), an anti-takeover law. In
general, Section 203 of the
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<PAGE> 55

Delaware Law prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. The existence of this provision would be
expected to have an anti-takeover effect, including attempts that might result
in a premium over the market price for the shares of Common Stock held by
stockholders.

The Restated Certificate of Incorporation provides for the division of the
Board of Directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management". In addition, the Restated
Certificate of Incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of 67% of the shares of capital
stock of the corporation entitled to vote. Under the Company's By-Laws, any
vacancy on the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board, may be filled by vote of a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director, and may be filled by the stockholders only if the Board has
not filled such vacancy. The classification of the Board of Directors and the
limitations on the removal of directors and filling of vacancies could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, control of the Company.

The Restated Certificate of Incorporation also provides that any action
required or permitted to be taken by the stockholders of the Company at an
annual meeting or special meeting of stockholders may only be taken if it is
properly brought before such meeting and may not be taken by written action in
lieu of a meeting. The Restated Certificate of Incorporation further provides
that special meeting of the stockholders may only be called by the Chairman of
the Board of Directors, the Chief Executive Officer, the President or the
Executive Vice President of the Company, or by the Secretary upon the written
request of two-thirds of the Board of Directors. Under the By-Laws, in order for
any matter to be considered "properly brought" before a meeting, a stockholder
must comply with certain requirements regarding advance notice to the Company.
The foregoing provisions could have the effect of delaying until the next
stockholders meeting stockholders' actions which are favored by the holders of a
majority of the outstanding voting securities of the Company. These provisions
may also discourage another person or entity from making a tender offer for the
Company's Common Stock, because such person or entity, even if it acquired a
majority of the outstanding voting securities of the Company, would be able to
take action as a stockholder (such as electing new directors or approving a
merger) only at a duly called stockholders' meeting, and not by written consent.

The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Restated Certificate of Incorporation contains provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is the American Stock
Transfer and Trust Company, New York, New York.

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<PAGE> 56

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, the Company will have an aggregate of
17,580,000 shares of Common Stock outstanding, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options to
purchase Common Stock. Of these Shares, the 3,300,000 shares sold in this
offering are freely tradeable without restriction or further registration under
the Securities Act of 1933, as amended (the "Securities Act"), except that any
shares held by "affiliates" of the Company, as that term is defined in Rule 144
("Rule 144") under the Securities Act ("Affiliates"), may generally only be sold
in compliance with the limitations of Rule 144 described below.

SALES OF RESTRICTED SHARES

The remaining 14,280,000 shares of Common Stock are deemed "Restricted
Shares" under Rule 144. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated), including an affiliate of the
Company, who has beneficially owned Restricted Shares for at least one year is
entitled to sell, within any three-month period, a number of such shares that
does not exceed the greater of (i) one percent of the then outstanding shares of
Common Stock (approximately 175,800 shares immediately after this offering) or
(ii) the average weekly trading volume in the Common Stock in the
over-the-counter market during the four calendar weeks preceding the date on
which notice of such sale is filed. In addition, under Rule 144(k), a person who
is not an affiliate of the Company and has not been an affiliate of the Company
for at least three months prior to the sale and who has beneficially owned
Restricted Shares for at least two years may resell such shares without
compliance with the foregoing requirements. In meeting the one-and two-year
holding periods described above, a holder of Restricted Shares can include the
holding periods of a prior owner who was not an affiliate. See "Risk
Factors -- Shares Eligible for Future Sale; Registration Rights".

Rule 701 under the Securities Act provides that the shares of Common Stock
acquired upon the exercise of currently outstanding options may be resold by
persons, other than affiliates of the Company, beginning 90 days after the date
of the Company's initial public offering, subject only to the manner of sale
provisions of Rule 144, and by affiliates of the Company under Rule 144 without
compliance with its one-year minimum holding period, subject to certain
limitations.

OPTIONS

Upon completion of this offering, it is anticipated that options to
purchase a total of 2,493,500 shares of Common Stock will be outstanding. As of
February 28, 1998, an additional approximately 1,536,500 shares of Common Stock
were available for future issuance under the Company's 1996 Plan, 1998 ESPP and
the 1998 Directors' Plan. See "Management -- Benefit Plans".

LOCK-UP AGREEMENTS

Certain stockholders, who upon the closing of this offering will hold in
the aggregate approximately 14,280,000 shares of Common Stock and options to
purchase additional 1,624,000 shares of Common Stock, have agreed, pursuant to
the Lock-Up Agreements, that they will not, without the prior written consent of
the representatives of the Underwriters, directly or indirectly offer to sell,
sell, or otherwise dispose of any shares of Common Stock beneficially owned by
them for a period
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<PAGE> 57

of 180 days after the date of this Prospectus, subject to certain exceptions.
Subject to the provisions of Rules 144, 144(k) and 701, all of such shares will
be eligible for sale upon the expiration of these lock-up agreements.

LEGAL MATTERS

The validity of the shares of Common Stock offered by this Prospectus will
be passed upon for the Company and the Selling Stockholders by Kramer, Levin,
Naftalis & Frankel, New York, New York. Mr. Kopelman, a partner at Kramer Levin,
is a director of the Company and owns options to purchase 10,000 shares of
Common Stock that were granted to him pursuant to the Directors' Plan. Certain
legal matters will be passed upon for the Underwriters by Hale and Dorr LLP,
Boston, Massachusetts.

EXPERTS

The consolidated financial statements and schedule of the Company as of
June 30, 1996, 1997 and as of December 31, 1997 and for each of the years in the
three-year period ended June 30, 1997, and the six months ended December 31,
1997 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (including all amendments and
exhibits thereto, the "Registration Statement") under the Securities Act with
respect to the offer and sale of shares of Common Stock pursuant to this
Prospectus. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained in the Registration Statement.
For further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
regarding the contents of any agreement or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such agreement filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.

The Registration Statement, including the exhibits and schedules thereto,
may also be inspected, without charge, and copied at prescribed rates at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549, and at the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois, and 7 World Trade Center, Suite 1300, New York, New York. This
material may also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. In
addition, the Company is required to file electronic versions of these documents
with the Commission through the Commission's Electronic Data Gathering, Analysis
and Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.

57
<PAGE> 58

MOBIUS MANAGEMENT SYSTEMS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of June 30, 1996 and 1997 and
December 31, 1997......................................... F-3
Consolidated Statements of Income for the Years Ended June
30, 1995, 1996 and 1997, and for the Six Month Periods
Ended December 31, 1996 (Unaudited) and 1997.............. F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1995, 1996, and 1997, and for the Six
Month Period Ended December 31, 1997...................... F-5
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1995, 1996, and 1997, and for the Six Month
Periods Ended December 31, 1996 (Unaudited) and 1997...... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 59

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Mobius Management Systems, Inc.:

We have audited the accompanying consolidated balance sheets of Mobius
Management Systems, Inc. and subsidiaries as of June 30, 1996 and 1997 and
December 31, 1997 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1997 and the six month period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mobius
Management Systems, Inc. and subsidiaries as of June 30, 1996 and 1997 and
December 31, 1997 and the results of their operations and their cash flows for
each of the years in the three-year period ended June 30, 1997 and the six month
period ended December 31, 1997, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

February 23, 1998,
except as to Note 15
which is as of April 27, 1998
Stamford, CT

F-2
<PAGE> 60

MOBIUS MANAGEMENT SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31,
JUNE 30, 1997
------------------ DECEMBER 31, (UNAUDITED-
1996 1997 1997 NOTE 2)
------- -------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 4,447 $ 5,672 $ 7,182 $ 7,182
Accounts receivable, net of allowance for
doubtful accounts of $423, $308, $611 and
$611 respectively............................ 7,328 7,793 6,238 6,238
Software license installments, current
portion...................................... 1,614 4,615 5,158 5,158
Other current assets........................... 251 474 1,655 1,655
------- -------- -------- -------
Total current assets.................... 13,640 18,554 20,233 20,233
Software license installments, non-current
portion, net of allowance for doubtful accounts
of $0, $413, $577 and $577 respectively........ 3,376 7,871 11,609 11,609
Property and equipment, net...................... 1,356 1,990 2,007 2,007
Other assets..................................... 74 87 498 498
------- -------- -------- -------
Total assets............................ $18,446 $ 28,502 $ 34,347 $34,347
======= ======== ======== =======
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.......... $ 4,479 $ 6,593 $ 4,689 $ 4,689
Deferred maintenance revenue................... 6,494 7,494 10,669 10,669
Deferred income taxes.......................... 286 1,551 1,593 1,593
Other liabilities.............................. 322 134 59 59
------- -------- -------- -------
Total current liabilities............... 11,581 15,772 17,010 17,010
------- -------- -------- -------
Deferred maintenance revenue, non-current
portion........................................ 660 3,661 5,447 5,447
Deferred income taxes............................ 828 1,420 2,387 2,387
Capital lease obligations, less current
portion........................................ 151 95 66 66
Convertible preferred stock, $.01 par value;
40,910 shares outstanding...................... -- 11,898 12,000 --
Stockholders' equity (deficit):
Common stock $.0001 par value; authorized
40,000,000 shares; issued 16,727,200,
15,000,000, 15,000,000 and 19,171,000 (Pro
Forma), shares, respectively; outstanding
15,000,000, 10,909,000, 10,909,000 and
15,080,000 (Pro Forma) shares,
respectively................................. 2 1 1 2
Additional paid-in capital..................... 77 -- -- 11,999
Retained earnings.............................. 5,306 7,636 9,487 9,487
Cumulative foreign currency translation
adjustment................................... (28) 19 (51) (51)
Treasury stock, at cost, 1,727,200, 4,091,000,
4,091,000 and 4,091,000 shares,
respectively................................. (131) (12,000) (12,000) (12,000)
------- -------- -------- -------
Total stockholders' equity (deficit).... 5,226 (4,344) (2,563) 9,437
------- -------- -------- -------
Total liabilities, preferred stock and
stockholders' equity........................... $18,446 $ 28,502 $ 34,347 $34,347
======= ======== ======== =======
</TABLE>

See accompanying notes to consolidated financial statements.
F-3
<PAGE> 61

MOBIUS MANAGEMENT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
--------------------------- ---------------------
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license revenues............. $12,729 $18,769 $26,112 $10,239 $14,293
Maintenance and other revenues........ 9,676 12,189 15,215 7,159 8,778
------- ------- ------- ------- -------
Total revenues..................... 22,405 30,958 41,327 17,398 23,071
------- ------- ------- ------- -------
Costs of revenues:
Software license revenues............. 614 626 1,336 528 678
Maintenance and other revenues........ 2,049 2,716 2,923 1,441 1,554
------- ------- ------- ------- -------
Total costs of revenues............ 2,663 3,342 4,259 1,969 2,232
------- ------- ------- ------- -------
Gross profit............................ 19,742 27,616 37,068 15,429 20,839
------- ------- ------- ------- -------
Operating expenses:
Sales and marketing................... 12,523 15,136 21,971 9,180 10,797
Research and development.............. 3,478 4,600 5,904 2,810 3,550
General and administrative............ 2,063 2,832 4,350 1,911 3,004
------- ------- ------- ------- -------
Total operating expenses........... 18,064 22,568 32,225 13,901 17,351
------- ------- ------- ------- -------
Income from operations.................. 1,678 5,048 4,843 1,528 3,488
License and other interest
income................................ 375 339 922 328 832
Interest expense........................ (58) (41) (22) (11) (6)
Foreign currency transaction gains
(losses).............................. 34 (72) (12) 1 (6)
------- ------- ------- ------- -------
Income before income taxes.............. 2,029 5,274 5,731 1,846 4,308
Provision for income taxes.............. 880 2,657 3,348 1,043 2,355
Accretion on Preferred Stock............ -- -- -- -- 102
------- ------- ------- ------- -------
Net income available to common stock.... $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
======= ======= ======= ======= =======
Basic earnings per share................ $ 0.08 $ 0.17 $ 0.17 $ 0.05 $ 0.17
Basic weighted average shares
outstanding........................... 15,000 15,000 14,318 15,000 10,909
Diluted earnings per share.............. $ 0.08 $ 0.17 $ 0.15 $ 0.05 $ 0.12
Diluted weighted average shares
outstanding........................... 15,000 15,000 15,882 15,355 15,785
Pro forma data (unaudited):
Pro forma basic earnings per share.... $ 0.13 $ 0.12
Pro forma basic weighted average
shares outstanding................. 18,489 15,080
Pro forma diluted earnings per
share.............................. $ 0.12 $ 0.12
Pro forma diluted weighted average
shares outstanding................. 19,371 15,852
</TABLE>

See accompanying notes to consolidated financial statements.
F-4
<PAGE> 62

MOBIUS MANAGEMENT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
-------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
----------- ------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1995................................ 16,727,200 $2 $ 77 $2,689 $(51)
Net income.............................................. -- -- -- 2,617 --
Unrealized translation gain............................. -- -- -- -- 23
----------- -- ---- ------ ----
Balance at June 30, 1996................................ 16,727,200 2 77 5,306 (28)
Net income.............................................. -- -- -- 2,383 --
Unrealized translation gain............................. -- -- -- -- 47
Retirement of treasury stock............................ (1,727,200) (1) (77) (53) --
Share repurchase in connection with issuance of
preferred stock....................................... (4,091,000) -- -- -- --
----------- -- ---- ------ ----
Balance at June 30, 1997................................ 10,909,000 1 -- 7,636 19
Net Income.............................................. -- -- -- 1,851 --
Unrealized translation loss............................. -- -- -- -- (70)
----------- -- ---- ------ ----
Balance at December 31, 1997............................ 10,909,000 $1 $ -- $9,487 $(51)
=========== == ==== ====== ====

TREASURY STOCK TOTAL
---------------------- STOCKHOLDERS'
SHARES AMOUNT EQUITY (DEFICIT)
----------- -------- ----------------
<S> <C> <C> <C>
Balance at June 30, 1995................................ 1,727,200 $ (131) $ 2,586
Net income.............................................. -- -- 2,617
Unrealized translation gain............................. -- -- 23
----------- -------- --------
Balance at June 30, 1996................................ 1,727,200 (131) 5,226
Net income.............................................. -- -- 2,383
Unrealized translation gain............................. -- -- 47
Retirement of treasury stock............................ (1,727,200) 131 --
Share repurchase in connection with issuance of
preferred stock....................................... 4,091,000 (12,000) (12,000)
----------- -------- --------
Balance at June 30, 1997................................ 4,091,000 (12,000) (4,344)
Net Income.............................................. -- -- 1,851
Unrealized translation loss............................. -- -- (70)
----------- -------- --------
Balance at December 31, 1997............................ 4,091,000 $(12,000) $ (2,563)
=========== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 63

MOBIUS MANAGEMENT SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
---------------------------- ---------------------
1995 1996 1997 1996 1997
------- ------- -------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
------- ------- -------- ------- -------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Deferred income taxes............... 139 700 1,857 372 1,009
Depreciation and amortization....... 416 381 406 220 305
Accretion of Preferred Stock........ -- -- -- -- 102
Change in operating assets and
liabilities:
Accounts receivable, net......... (3,434) (56) (465) (537) 1,555
Software license installments.... 229 (3,673) (7,497) (1,803) (4,281)
Other assets..................... (59) (21) (235) (635) (1,592)
Accounts payable and accrued
expenses....................... 333 1,059 2,112 (322) (1,904)
Other liabilities................ 37 (179) (94) 99 (78)
Deferred maintenance revenue..... 1,472 1,837 4,002 3,722 4,961
------- ------- -------- ------- -------
Total adjustments........... (867) 48 86 1,116 77
------- ------- -------- ------- -------
Net cash provided by
operating activities...... 282 2,665 2,469 1,919 1,928
------- ------- -------- ------- -------
Cash flows used in investing
activities:
Capital expenditures................ (434) (628) (1,039) (348) (322)
------- ------- -------- ------- -------
Cash flows from financing activities:
Cash received from sale of preferred
stock, net of issuance costs..... -- -- 11,898 -- --
Cash payment for repurchase of
common stock..................... -- -- (12,000) -- --
Payments on capital lease
obligations...................... (185) (55) (150) (28) (26)
Payments on notes payable........... (89) (269) -- -- --
------- ------- -------- ------- -------
Net cash used by financing
activities................ (274) (324) (252) (28) (26)
------- ------- -------- ------- -------
Effect of exchange rate changes on
cash and cash equivalents........... (29) 23 47 153 (70)
------- ------- -------- ------- -------
Net change in cash and cash
equivalents......................... (455) 1,736 1,225 1,696 1,510
Cash and cash equivalents at beginning
of period........................... 3,166 2,711 4,447 4,447 5,672
------- ------- -------- ------- -------
Cash and cash equivalents at end of
period.............................. $ 2,711 $ 4,447 $ 5,672 $ 6,143 $ 7,182
======= ======= ======== ======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest......................... $ 58 $ 41 $ 22 $ 11 $ 6
Income taxes..................... 612 1,779 1,544 948 1,756
Capital lease obligations
incurred......................... 464 219 -- -- --
</TABLE>

See accompanying notes to consolidated financial statements.
F-6
<PAGE> 64

MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997

(1) ORGANIZATION

Mobius Management Systems, Inc., together with its wholly-owned
subsidiaries (the "Company"), is a provider of enterprise software products
designed to optimize the storage, retrieval and presentation of large volumes of
transactional information.

The Company was incorporated in the State of New York in 1981 and in 1997
the Company was reincorporated in the State of Delaware. In March 1993, the
Company established its first wholly-owned subsidiary, Mobius U.K., in
Basingstoke, England and subsequently relocated to Shepperton, England. The
purpose of this subsidiary is to provide direct sales within the U.K. In fiscal
1995, the Company established wholly-owned subsidiaries in Nogent sur Marne,
France, Dusseldorf, Germany, and Assago, Italy, and in fiscal 1998, the Company
established an additional wholly-owned subsidiary in Upplands Vasby, Sweden, to
broaden the reach of its direct sales force in Europe.

(2) SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The Company and its subsidiaries are consolidated for financial statement
purposes after the elimination of all significant intercompany transactions.

PRO FORMA BALANCE SHEET

In connection with the proposed closing of an initial public offering of
the Company's Common Stock, all of the outstanding shares of the Convertible
Preferred Stock will convert into newly issued shares of Common Stock (see note
8). The Pro Forma Balance Sheet at December 31, 1997 reflects the conversion of
$12,000,000 of Convertible Preferred Stock into Common Stock ($1,000 credit to
Common Stock and $11,999,000 credit to Additional paid-in capital) and the
issuance of 80,000 shares of Common Stock upon conversion of 80,000 shares of
Class A Non-Voting Common Stock.

REVENUE RECOGNITION

Revenue from software license contracts includes license fees related to
long-term licenses, typically 5 or 15 years, and fees for term license
contracts, which are generally 3 to 5 years. Such license revenue and
maintenance and service revenue are recognized in accordance with Statement of
Position 91-1 Software Revenue Recognition.

Revenue from executed software license contracts is recognized upon
delivery of the software to the customer if no significant vendor obligations
remain and collection of the resulting receivable is probable. Software license
revenue includes the present value of future payments under non-cancelable
license arrangements which provide for payment in installments generally over
periods from 3 to 5 years. A portion of the discount is recognized as interest
income over the term of the arrangement.

Revenue on maintenance contracts is recognized on a straight-line basis
over the term of the maintenance contract, generally twelve months, except for
maintenance on term license contracts, which extends to the contract term. The
unearned portion of maintenance revenue is classified as deferred maintenance
revenue.

When the software license contract includes maintenance, the Company
unbundles maintenance revenue from the initial license fee and recognizes it
ratably over the maintenance period,

F-7
<PAGE> 65
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

starting from the inception of the software license agreement. The unearned
portion of such maintenance revenue is classified as deferred maintenance
revenue with amounts extending beyond one-year reported as non-current.

SOFTWARE DEVELOPMENT COSTS

Statement of Financial Accounting Standards No. 86 (SFAS No. 86) requires
the capitalization of certain software development costs once technological
feasibility is established. The capitalized costs are then amortized on a
straight-line basis over the estimated product life, or on the ratio of current
revenues to total projected product revenues, whichever is greater.

The Company determines technological feasibility based on the working model
method. The period between establishment of a working model and the general
availability of its software has historically been short and, accordingly,
software development costs qualifying for capitalization have been
insignificant. As a result, the Company has expensed all software development
costs.

PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation is computed on a
straight-line basis over the estimated life of the related asset, ranging from
five to seven years. Assets acquired under capital leases are depreciated on a
straight-line basis over the shorter of the asset's life or the respective
lease.

INCOME TAXES

The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS
No. 109 requires using the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred tax assets are recognized for deductible
temporary differences, net operating loss carryforwards, and tax credit
carryforwards if it is more likely than not that the tax benefits will be
realized. A valuation allowance is established if it is not more likely than not
that a deferred tax asset will be realized.

FOREIGN CURRENCY TRANSLATION

Balance sheet accounts of the Company's foreign subsidiaries are translated
into U.S. dollars at exchange rates in effect at the balance sheet date.
Revenues, costs and expenses are translated into U.S. dollars at average rates
for the year. Gains or losses that result from translation are shown as a
separate component of stockholders' equity. Net gains and losses resulting from
foreign exchange transactions are included in the determination of net income.

CASH EQUIVALENTS

The Company considers investments with maturities at the date of purchase
of three months or less to be cash equivalents.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to a
concentration of credit risk consist of substantially all of the trade accounts
receivables and software license installments. The

F-8
<PAGE> 66
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company sells its products to a large number of customers in diversified
industries across many domestic and international geographies.

USE OF ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (SFAS 107) defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties. The fair value of the Company's
cash and cash equivalents, accounts receivable, software license installments
and accounts payable and accrued expenses and deferred maintenance amounts
approximates their carrying value.

EARNINGS PER SHARE

Effective December 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128
stipulates that the calculation of earnings per share (EPS) be shown for all
historical periods as Basic EPS and Diluted EPS. Basic EPS is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding during the period. The computation of Diluted EPS
is similar to the computation of Basic EPS except that it gives effect to all
potentially dilutive instruments that were outstanding during the period. Such
dilutive instruments include stock options, the conversion of Series A
Convertible Preferred Stock, and the conversion of the Class A Non-Voting Common
Stock.

The following is a reconciliation of the numerators and denominators for
the basic and diluted EPS calculations (in thousands, except per share data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
---------------------------------------
YEAR ENDED JUNE 30, 1997 1996
--------------------------------------- ---------------------------------------
NET INCOME SHARES PER SHARE NET INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income.................... $2,383 $803
====== ====
Weighted average shares
outstanding.................. 14,318 15,000
Basic EPS..................... $0.17 $0.05
===== =====
Diluted EPS:
Net income.................... $2,383 $803
====== ====
Dilutive effect of convertible
securities................... 682
Dilutive effect of stock
options...................... 882 355
------ ------
Diluted EPS................... 15,882 $0.15 15,355 $0.05
====== ===== ====== =====

<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
---------------------------------------
1997
---------------------------------------
NET INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS:
Net income.................... $1,851
======
Weighted average shares
outstanding.................. 10,909
Basic EPS..................... $0.17
=====
Diluted EPS:
Net income.................... $1,851
======
Dilutive effect of convertible
securities................... 4,104
Dilutive effect of stock
options...................... 772
------
Diluted EPS................... 15,785 $0.12
====== =====
</TABLE>

F-9
<PAGE> 67
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK BASED COMPENSATION

The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", and elected to continue to apply the provisions of Accounting
Principles Board (APB) Opinion No. 25 in determining measurement of compensation
expense and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair value-based method, as defined in SFAS No. 123, had been applied. As
such, compensation expense is generally recorded on the date of grant only if
the current fair market value of the underlying stock exceeded the exercise
price.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

During the third quarter of 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The adoption of
SFAS 121 had no effect on the Company's financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

SOP 97-2 is newly issued and has not yet been subject to interpretation in
practice or in applicable accounting guidelines. Although the Company has
reviewed, and is continuing to review, its license agreements in light of its
requirement to adopt SOP 97-2 and believes such adoption will not have a
material effect on its operations, there can be no assurance that the future
application of or subsequent interpretations to SOP 97-2 will not require the
Company to defer the recognition of certain elements of revenue or result in
revenue patterns in periods subsequent to fiscal 1998 which are materially
different than historical periods. In addition, there can be no assurance that
any adjustments the Company makes to its license agreements or other contractual
arrangements in order to accommodate the requirements of SOP 97-2 would not be
negatively viewed by prospective customers and therefore have a material adverse
effect on the Company's sales efforts.

F-10
<PAGE> 68
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

income and SFAS No. 131 will require companies to report segment performance as
it is used internally to evaluate segment performance. These statements merely
provide for additional disclosure requirements.

INTERIM RESULTS

The financial statements for the six-month period ended December 31, 1996
are unaudited, but include all adjustments (consisting only of normal recurring
adjustments) that management considers necessary for a fair presentation of the
Company's operating results and cash flows for such period. Results for interim
periods are not necessarily indicative of results for the entire year or for
future periods.

(3) SOFTWARE LICENSE INSTALLMENTS

The Company offers extended payment terms to some of its customers. For
software license contracts of 15 years, the related financing period is
generally 5 years. For software installment contracts of 3 to 5 years, the
payments are generally spread ratably over the term. Software license
installments are discounted at a market rate of interest at the date the
software license contract revenue is recognized. At June 30, 1996 and 1997 and
at December 31, 1997 the effective weighted average discount rate used for
software license installments was 8.25%, 7.59% and 7.51%, respectively.
Associated interest income is earned using the interest method over the term of
the license contract.

The present values of software license installments to be received after
December 31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
Six months ended June 30, 1998.............................. $ 1,998
Year ended June 30, 1999.................................... 6,442
Year ended June 30, 2000.................................... 5,347
Year ended June 30, 2001.................................... 3,871
Year ended June 30, 2002.................................... 2,370
-------
Total minimum payments to be received....................... 20,028
Less unearned interest income............................... (2,684)
Less allowance for doubtful accounts........................ (577)
-------
Present value of software license installments, net......... 16,767
Less current portion, net................................... (5,158)
-------
Non-current portion, net.................................... $11,609
=======
</TABLE>

F-11
<PAGE> 69
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
JUNE 30,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Furniture, fixtures and office equipment......... $ 860 $ 700 $ 868
Computer equipment............................... 1,789 2,985 3,140
Leasehold improvements........................... 311 315 314
------- ------- -------
2,960 4,000 4,322
Less accumulated depreciation and amortization... (1,604) (2,010) (2,315)
------- ------- -------
Property and equipment, net...................... $ 1,356 $ 1,990 $ 2,007
======= ======= =======
</TABLE>

Depreciation and amortization expense on property and equipment, including
capital leases, was $416,000, $381,000 and $406,000 for the twelve months ended
June 30, 1995, 1996 and 1997, respectively, and $220,000 (unaudited) and
$305,000 for the six-month periods ended December 31, 1996 and December 31,
1997, respectively. The net book value of equipment under capital leases
included in property and equipment at June 30, 1996 and 1997 and December 31,
1997 was $278,000, $175,000 and $159,000, respectively.

(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

<TABLE>
<CAPTION>
JUNE 30,
---------------- DECEMBER 31,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
Accounts payable................................... $ 615 $1,002 $1,054
Compensation and related benefits.................. 2,924 4,196 1,334
Royalty payable.................................... 351 680 1,097
Other.............................................. 589 715 1,204
------ ------ ------
$4,479 $6,593 $4,689
====== ====== ======
</TABLE>

(6) INCOME TAXES

Income before provision for income taxes is as follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------- ---------------------
1995 1996 1997 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Domestic income....................... $2,612 $6,072 $ 7,923 $2,554 $ 5,569
Foreign losses........................ (583) (798) (2,192) (708) (1,261)
------ ------ ------- ------ -------
$2,029 $5,274 $ 5,731 $1,846 $ 4,308
====== ====== ======= ====== =======
</TABLE>

F-12
<PAGE> 70
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the provision for income taxes for the years ended June
30, 1995, 1996 and 1997 and the six-month periods ended December 31, 1996
(unaudited) and December 31, 1997, are as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------------------------------------------------------------
1995 1996 1997
-------------------------- --------------------------- ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ----- ------- -------- ----- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal.............. $450 $160 $610 $1,577 $573 $2,150 $1,200 $1,521 $2,721
State................ 195 (21) 174 336 127 463 276 336 612
Foreign.............. 96 -- 96 44 -- 44 15 -- 15
---- ---- ---- ------ ---- ------ ------ ------ ------
$741 $139 $880 $1,957 $700 $2,657 $1,491 $1,857 $3,348
==== ==== ==== ====== ==== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1997
----------------------------- ------------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ----- ------- -------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Federal......................... $534 $305 $ 839 $1,126 $ 827 $1,953
State........................... 129 67 196 208 182 390
Foreign......................... 8 -- 8 12 -- 12
---- ---- ------ ------ ------ ------
$671 $372 $1,043 $1,346 $1,009 $2,355
==== ==== ====== ====== ====== ======
</TABLE>

The following table reconciles the Federal statutory corporate rate to the
effective income tax rate for the years ended June 30, 1995, 1996 and 1997 and
the six-month periods ended December 31, 1996 (unaudited) and 1997:

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
-------------------- -------------------
1995 1996 1997 1996 1997
---- ---- ---- ----------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal statutory corporate rate.......... 34% 34% 34% 34% 34%
State income taxes, net of Federal
benefit................................. 6 6 6 6 6
Losses of foreign subsidiaries............ 10 6 14 14 13
Research credit........................... (5) -- (1) -- --
Other..................................... (2) 4 5 3 2
-- -- -- -- --
43% 50% 58% 57% 55%
== == == == ==
</TABLE>

F-13
<PAGE> 71
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
----------------- DECEMBER 31,
1996 1997 1997
------ ------- ------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts.............. $ 163 $ 216 $ 325
Foreign net operating loss carryforwards........ 708 1,677 2,172
------ ------- -------
871 1,893 2,497
Valuation allowance............................... (708) (1,677) (2,172)
------ ------- -------
Net deferred tax assets......................... 163 216 325
Deferred tax liabilities:
Software license installments................... 1,277 3,111 4,196
Depreciation.................................... -- 76 109
------ ------- -------
Net deferred tax liability...................... $1,114 $ 2,971 $ 3,980
====== ======= =======
</TABLE>

The valuation allowance increased by $380,000, $328,000 and $969,000 for
the years ended June 30, 1995, 1996 and 1997 and $495,000 for the six months
ended December 31, 1997 primarily due to uncertainty of realization of net
operating losses incurred by certain foreign subsidiaries. The Company will
reduce the valuation allowance when it is concluded that it is more likely than
not that these deferred tax assets will be realized.

The expiration of net operating loss carryforwards varies by foreign
jurisdiction; some begin to expire in fiscal 2000 and others extend
indefinitely.

(7) COMMON STOCK

COMMON STOCK

The Company has authorized 40,000,000 shares of Common Stock with a $.0001
par value. This includes 1,727,200 shares of Common Stock that were retired
during 1997, having previously been held in treasury stock.

On May 12, 1997, as part of the Preferred Stock Agreement (see note 8) the
Company repurchased 4,091,000 shares of Common Stock, $.0001 par value, from its
founders for $12,000,130. Such amount is being held in treasury stock at
December 31, 1997.

CLASS A NON-VOTING COMMON STOCK

The Company has authorized 5,000,000 shares of Class A Non-Voting Common
Stock with a $.0001 par value. As of December 31, 1997, 80,000 shares have been
issued and are outstanding and 1,786,000 shares have been reserved for issuance
to officers, employees or directors of, or consultants to the Company in
connection with the Company's stock incentive plan. Upon the completion of the
offering, all shares of the Class A Non-Voting Common Stock will be converted to
Common Stock.

STOCK SPLIT

The Board of Directors authorized a 100-to-one stock split of the Company's
common stock which was approved by the stockholders on February 19, 1998. All
common share and per share amounts have been retroactively adjusted in the
accompanying consolidated financial statements to reflect the stock split.

F-14
<PAGE> 72
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) PREFERRED STOCK

The Company has authorized 200,000 shares of Preferred Stock with a par
value of $.01. Before any shares are issued, the Board of Directors shall fix
the specific provisions of the shares including the designation of series,
voting rights, dividend features, redemption and liquidation provision and other
features.

On May 12, 1997, the Company entered into a Stock Purchase Agreement (the
"Agreement") whereby certain investors purchased 40,910 shares of the Preferred
Stock that the Board of Directors designated as Series A Convertible Preferred
Stock ("Convertible Preferred Stock") for $12,000,130.

On or after May 8, 2002, each holder of Convertible Preferred Stock can at
their option, request redemption of their Convertible Preferred Stock at a price
equal to the original issuance price per share plus any accrued dividends on
such Convertible Preferred Stock. In addition, Preferred Stockholders are
entitled to receive dividends and other distributions equivalent to those
declared or paid on Common Stock as if all Convertible Preferred Stock had been
converted into Common Stock. At December 31, 1997, no dividends have been
declared on the Convertible Preferred Stock.

Each share of Convertible Preferred Stock is convertible at the option of
the holder and is mandatorily converted into Common Stock upon the following:
(i) a sale of substantially all of the assets of the Company at an aggregate
purchase price of not less than $100,000,000 up until the first anniversary of
the Agreement, $125,000,000 from the first anniversary of the Agreement to the
second anniversary of the Agreement and $150,000,000 thereafter, (ii) a merger
of the Company with or into another Company in which the Stockholders receive
aggregate consideration having value of not less than $100,000,000 up until the
first anniversary of the Agreement, $125,000,000 from the first anniversary of
the Agreement to the second anniversary of the Agreement and $150,000,000
thereafter, (iii) a designated public offering which results in aggregate net
proceeds of not less than $20,000,000 to the Corporation at an offering price
per share of not less than $5.87, and (iv) a private sale of substantially all
of the Common Stock of the Company at a price per share of not less than $5.87
up until the first anniversary of the Agreement, $7.33 from the first
anniversary of the Agreement to the second anniversary of the Agreement and
$8.80 thereafter. Such Convertible Preferred Stock is convertible into 4,091,000
shares of the Company's Common Stock and will so convert upon consummation of
the offering.

(9) STOCK INCENTIVE PLAN

In November 1996, the Company adopted a stock incentive plan (the "Plan")
pursuant to which the Company's Board of Directors may grant stock options to
officers, employees, directors and consultants. The Plan authorizes grants of
options to purchase up to 3,480,000 shares of authorized but unissued Common
Stock. Stock options are granted with an exercise price equal to the stock's
fair market value at the date of grant as determined by the Company's Board of
Directors. Stock options generally vest as to 20% of the shares subject thereto
on the first anniversary of the date of grant and the remainder vest ratably
over the subsequent 16 quarters.

F-15
<PAGE> 73
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock option activity during the periods indicated was as follows:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at June 30, 1996............................... -- --
Granted.............................................. 2,045,500 $1.25
Exercised............................................ -- --
Forfeited............................................ -- --
Expired.............................................. -- --
--------- -----
Balance at June 30, 1997............................... 2,045,500 1.25
Granted.............................................. 485,500 6.36
Exercised............................................ (80,000) 1.25
Forfeited............................................ (665,000) 1.25
Expired.............................................. -- --
--------- -----
Balance at December 31, 1997........................... 1,786,000 $2.64
========= =====
</TABLE>

At June 30, 1997 and December 31, 1997, the range of exercise price was
$1.25 and $1.25 - $6.94, respectively. At June 30, 1997 and December 31, 1997,
the weighted average remaining contractual life of outstanding options was 8.92
and 9.13 years, respectively.

At June 30, 1997 and December 31, 1997, the number of options exercisable
was 0 and 360,100, respectively, and the weighted average exercise price of the
exercisable options was $0.00 and $2.83, respectively.

At December 31, 1997, there were 1,134,000 shares available for grant under
the plan.

The Company applies APB Opinion No. 25 in measuring compensation expense
for options issued under the Plan. Had the Company determined compensation cost
based on the fair value on the grant date for its stock options under SFAS No.
123, the Company's net income and earnings per share would have been reduced to
the amounts indicated below.

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
1997 1997
---------- ----------------
<S> <C> <C>
Net income and earnings per share as would be
reported under SFAS No. 123:
Net income................................... $2,317 $1,758
Basic earnings per share..................... $ 0.16 $ 0.16
Diluted earnings per share................... $ 0.15 $ 0.11
</TABLE>

The per share weighted average fair value of stock options granted during
the year ended June 30, 1997 and the six months ended December 31, 1997 was
$0.80 and $4.31 on the date of grant using the modified Black Scholes option
pricing model, excluding volatility assumption, with the following weighted
average assumptions: expected dividend yield of 0.0%, risk free interest rate of
6.5%, and an expected life of 7 years.

(10) EMPLOYEE SAVINGS PLAN

In fiscal 1995, the Company established a savings plan that qualifies under
Section 401(k) of the Internal Revenue Code. Under the plan, participating U.S.
employees may defer up to 20% of

F-16
<PAGE> 74
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

their pre-tax compensation, but not more than Internal Revenue Code limitations.
The Company, at the discretion of the Board of Directors, may match the employee
contributions. No matching contributions were made in the years ended June 30,
1995, 1996 and 1997 or for the six months ended December 31, 1997.

(11) LEASE COMMITMENTS

The Company has operating leases for its office facilities which expire on
various dates through fiscal 2008 and provide for escalation and additional
payments relating to operating expenses. The Company leases some of its computer
and office equipment under capital leases expiring on various dates through
fiscal 2000.

The following is a schedule of future minimum lease payments for capital
and operating leases as of December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
Six months Ended June 30, 1998....................... $ 33 $ 744
Year Ended June 30, 1999............................. 65 1,690
Year Ended June 30, 2000............................. 37 1,580
Year Ended June 30, 2001............................. -- 1,525
Year Ended June 30, 2002............................. -- 1,258
Year Ended June 30, 2003............................. -- 1,154
Thereafter........................................... -- 5,264
---- -------
Total minimum lease payments......................... 135 $13,215
=======
Less interest component.............................. (12)
----
Present value of minimum lease payments.............. 123
Less current portion................................. (57)
----
Non-current portion.................................. $ 66
====
</TABLE>

Rental expense for all operating leases was approximately $520,000,
$873,000 and $1,046,000 for the years ended June 30, 1995, 1996 and 1997,
respectively, and $498,000 (unaudited) and $697,000 for the six months ended
December 31, 1996 and 1997, respectively.

F-17
<PAGE> 75
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12) GEOGRAPHIC AREA INFORMATION AND FOREIGN OPERATIONS

<TABLE>
<CAPTION>
UNITED
STATES(a) FOREIGN(b) ELIMINATIONS TOTAL
------------- ---------- ------------ -------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995:
Revenue:
From unaffiliated customers(c)................ $21,209 1,196 -- $22,405
Between geographic areas(d)................... 455 579 (1,024) --
------- ------- ------- -------
Total Revenue................................... $21,664 1,775 (1,024) $22,405
======= ======= ======= =======
Net income...................................... $ 1,733 (584) -- $ 1,149
Identifiable assets............................. $13,850 1,080 (2,218) $12,712
YEAR ENDED JUNE 30, 1996:
Revenue:
From unaffiliated customers(c)................ $28,348 2,610 -- $30,958
Between geographic areas(d)................... 899 -- (899) --
------- ------- ------- -------
Total Revenue................................... $29,247 2,610 (899) $30,958
======= ======= ======= =======
Net income...................................... $ 3,417 (800) -- $ 2,617
Identifiable assets............................. $19,169 2,695 (3,418) $18,446
YEAR ENDED JUNE 30, 1997:
Revenue:
From unaffiliated customers(c)................ $38,716 2,611 -- $41,327
Between geographic areas(d)................... 942 -- (942) --
------- ------- ------- -------
Total Revenue................................... $39,658 2,611 (942) $41,327
======= ======= ======= =======
Net income...................................... $ 4,600 (2,217) -- $ 2,383
Identifiable assets............................. $31,434 3,628 (6,560) $28,502
SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED):
Revenue:
From unaffiliated customers(c)................ $16,086 1,312 -- $17,398
Between geographic areas(d)................... 449 -- (449) --
------- ------- ------- -------
Total Revenue................................... $16,535 1,312 (449) $17,398
======= ======= ======= =======
Net income...................................... $ 1,511 (708) -- $ 803
Identifiable assets............................. $24,227 3,913 (4,895) $23,245
SIX MONTHS ENDED DECEMBER 31, 1997:
Revenue:
From unaffiliated customers(c)................ $21,407 1,664 -- $23,071
Between geographic areas(d)................... 586 -- (586) --
------- ------- ------- -------
Total Revenue................................... $21,993 1,664 (586) $23,071
======= ======= ======= =======
Net income...................................... $ 3,133 (1,282) -- $ 1,851
Identifiable assets............................. $38,238 4,747 (8,638) $34,347
</TABLE>

- ---------------
(a) Includes international sales through agents located in the United States.

(b) The Company operates wholly owned subsidiaries in the United Kingdom, Italy,
Germany, France and Sweden.

(c) Includes royalties paid to the Company and to its subsidiaries by agents.
Royalties from agents are a percentage of the license and maintenance fees
paid by customers to such agents.
F-18
<PAGE> 76
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(d) Represents royalties from foreign subsidiaries. Royalties from foreign
subsidiaries are a percentage of the license and maintenance fees paid by
customers to such foreign subsidiaries.

(13) COMMITMENTS AND CONTINGENCIES

REVOLVING LINE OF CREDIT

The Company has available as of December 31, 1997 with Silicon Valley Bank
a revolving line of credit of $5,000,000 for working capital purposes, bearing
interest at the prime rate. At December 31, 1997 there were no borrowings on the
line and the agreement expires on October 20, 1998. The line of credit is
secured by certain assets of the Company.

The agreement contains certain financial restrictions and covenants which,
among other things, includes provisions for maintaining a minimum amount of
cash, net worth and profitability.

LETTER OF CREDIT

At December 31, 1997, the Company has established a letter of credit for
$500,000 under the above line of credit with Silicon Valley Bank in connection
with the lease on its corporate office.

F-19
<PAGE> 77
MOBIUS MANAGEMENT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) PRO FORMA EARNINGS PER SHARE (UNAUDITED)

Pro forma basic earnings per share is calculated by dividing income
available to common stockholders by the pro forma weighted average number of
common shares outstanding for the period. Pro forma diluted earnings per share
is calculated by dividing income available to common stockholders by the pro
forma weighted average number of common shares and potential common shares
outstanding for the period. Both the pro forma basic and diluted weighted
average shares include the conversion of the Series A Convertible Preferred
Stock and the Class A Non-Voting Common Stock into Common Stock. The following
is a reconciliation of the numerators and denominators for the pro forma basic
and pro forma diluted EPS calculation (in thousands, except per share data):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1997 DECEMBER 31, 1997
------------------------------------- -------------------------------------
NET PER NET PER
INCOME SHARES SHARE INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ------ ------------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Pro forma basic EPS: Net
income.................... $2,383 $1,851
====== ======
Weighted average shares
outstanding............... 14,318 10,909
Common shares expected to be
issued for conversion of
Preferred Stock........... 4,091 4,091
Common shares expected to be
issued for conversion of
Class A Non-Voting Common
Stock..................... 80 80
------ ------
Pro forma basic EPS......... 18,489 $0.13 15,080 $0.12
===== =====
Pro forma diluted EPS.......
Net income................ $2,383 $1,851
====== ======
Dilutive effect of stock
options................. 882 772
------ ------
Pro forma diluted EPS....... 19,371 $0.12 15,852 $0.12
====== ===== ====== =====
</TABLE>

If the assumed conversion of the Series A Convertible Preferred Stock and
the Class A Non-Voting Common Stock into Common Stock had occurred as of
December 31, 1997, total stockholder's equity would have increased to
$9,437,000.

(15) SUBSEQUENT EVENTS

In January, February and March 1998, the Company granted 350,000, 340,000
and 53,000 stock options, respectively, under the 1996 Incentive Plan at an
exercise price of $9.86, $11.00 and $11.00 per share, respectively. Subsequent
to December 31, 1997, the Company established the 1998 Non-Employee Directors
Stock Option Plan and in February 1998 issued 30,000 stock options to Non-
Employee Directors at $11.00 per share. The Company subsequently determined that
their options were granted at exercise prices below the fair market value of
$14.00 per share. As a result, and assuming that all such options vest in
accordance with their terms, the Company expects to incur total compensation
expense of approximately $2,718,000, which will be amortized over the respective
option holders' service periods. Such compensation expense is expected to be
approximately $643,000, $1,055,000, $558,000, $288,000, $130,000 and $44,000 for
the six months ended June 30, 1998 and the years ended June 30, 1999, 2000,
2001, 2002 and 2003, respectively.

F-20
<PAGE> 78

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., NationsBanc Montgomery Securities LLC and BancAmerica Robertson Stephens
are acting as representatives, has severally agreed to purchase from the Company
and the Selling Stockholders, the respective number of shares of Common Stock
set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co. ....................................... 1,261,600
NationsBanc Montgomery Securities LLC....................... 796,800
BancAmerica Robertson Stephens.............................. 597,600
CIBC Oppenheimer Corp....................................... 107,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 107,000
Morgan Stanley & Co. Incorporated........................... 107,000
Wasserstein Perella Securities, Inc......................... 107,000
Cowen & Company............................................. 54,000
First Albany Corporation.................................... 54,000
Kaufman Bros., L.P.......................................... 54,000
SoundView Financial Group, Inc.............................. 54,000
---------
Total............................................. 3,300,000
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $0.55 per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $0.10 per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the initial public offering price and other selling terms may from
time to time be varied by the representatives.

The Selling Stockholders have granted the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 452,000 additional shares of Common Stock to cover over-allotments,
if any. If the Underwriters exercise their over-allotment option, the
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
3,300,000 shares of Common Stock offered.

The Company, its directors and officers, and certain of its stockholders
have agreed that, subject to certain exceptions, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days after the date of the Prospectus, they will not offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or of any other
securities of the Company (other than, in the case of the Company, pursuant to
stock incentive plans existing on the date of this Prospectus) which are
substantially similar to the shares of Common Stock or which are convertible or
exchangeable into securities which are substantially similar to the shares of
Common Stock without the prior written consent of the representatives, except
for the shares of Common Stock offered in connection with the offering.

Prior to the offering, there has been no public market for the shares of
Common Stock. The initial public offering price was negotiated among the Company
and the representatives. Among

U-1
<PAGE> 79

the factors considered in determining the initial public offering price of the
Common Stock, in addition to prevailing market conditions, were the Company's
historical performance, estimates of the business potential and earnings
prospects for the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed 5% of the total number of shares of Common
Stock offered hereby.

At the request of the Company, the Underwriters have reserved shares of the
Common Stock offered hereby for sale at the initial public offering price, to
employees and friends of the Company. Such employees and friends will purchase,
in the aggregate, not more than 5% of the Common Stock offered hereby of which
approximately 3% are expected to be purchased by employees. The number of shares
available to the general public will be reduced to the extent that such person
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the Underwriters to the general public on the same terms as the other
shares offered by this Prospectus.

In connection with the offering, the Underwriters may purchase and sell
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the Underwriters in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock; and syndicate
short positions created by the Underwriters involve the sale by the Underwriters
of a greater number of shares of Common Stock than they are required to purchase
from the Company in the offering. The Underwriters also may impose a penalty
bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the securities sold in the offering for their
account may be reclaimed by the syndicate if such shares of Common Stock are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock, which may be higher than the price that might otherwise prevail in
the open market. These transactions may be effected on the Nasdaq National
Market, in the over-the-counter market or otherwise, and these activities, if
commenced, may be discontinued at any time.

The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "MOBI".

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.

U-2
<PAGE> 80
Graphic and Text Appearing on the inside back cover of the Prospectus:

This page contains a stylized rendering of a tri-level building. On the first
level of the building there is a man standing next to a computer monitor which
has images of documents on it and coming out of it, projecting upward within
the building. Next to the man projecting toward the right of the page is a
strip of film. On the second level of the building there is a sphere. From the
sphere there are two beams of light projecting to the right and the left sides
of the page. To the right of the sphere, the beam of light projects onto a
computer and a computer monitor. The computer monitor has an image of a
document on it. The beam of light projects from the computer monitor to a woman
sitting on a desk chair in front of the monitor and typing on the computer
keyboard. Above the woman are 5 cartridges stacked on top of each other. To the
left of the sphere, the beam of light projects onto a computer and a computer
monitor. The computer monitor has an image of a document on it. The beam of
light projects from the computer monitor to a man sitting on a desk chair in
front of the monitor and typing on the computer keyboard. On the left side of
the page below the man and the computer, there are three disks going toward the
bottom of the page. Above the man there is a sphere and an image of a document.
Above the building: on the left side of the page there is a magnifying glass
and an image of a document; on the middle of the page there is a scale with the
images of documents upon it; and on the right side of the page there is a pie
chart, a bar graph and a line graph. In the upper right hand corner of the
page, the Mobius Management Systems, Inc. logo appears.

<PAGE> 81

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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 6
Use of Proceeds.......................... 15
Dividend Policy.......................... 15
Capitalization........................... 16
Dilution................................. 17
Selected Consolidated Financial Data..... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 20
Business................................. 29
Management............................... 42
Certain Transactions..................... 52
Principal and Selling Stockholders....... 53
Description of Capital Stock............. 54
Shares Eligible For Future Sale.......... 56
Legal Matters............................ 57
Experts.................................. 57
Additional Information................... 57
Index to Consolidated Financial
Statements............................. F-1
Underwriting............................. U-1
</TABLE>

THROUGH AND INCLUDING MAY 22, 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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3,300,000 SHARES

MOBIUS MANAGEMENT
SYSTEMS, INC.

COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
----------------------

[MOBIUS LOGO]
----------------------

GOLDMAN, SACHS & CO.

NATIONSBANC MONTGOMERY
SECURITIES LLC

BANCAMERICA ROBERTSON
STEPHENS

REPRESENTATIVES OF THE UNDERWRITERS

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