================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                -----------------


                                    FORM 10-Q


(Mark One)
             [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1999

                                       or

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

             For the transition period from __________ to __________

                         Commission File Number 0-18708


                                MICROGRAFX, INC.
             (Exact name of registrant as specified in its charter)


           Texas                                                75-1952080
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                               Identification No.)


                  1303 E. Arapaho Road, Richardson, Texas 75081
               (Address of principal executive offices) (Zip Code)

                                 (972) 234-1769
              (Registrant's telephone number, including area code)


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


     As of May 11, 1999,  11,126,606 shares of the Company's common stock were
outstanding.
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<PAGE>
<TABLE>
<CAPTION>


                                MICROGRAFX, INC.

                                    FORM 10-Q

                      For the Quarter Ended March 31, 1999

                                Table of Contents

                                                                          PAGE
                                     PART I.
<S>       <C>                                                              <C> 

Item 1.  Financial Statements

         Consolidated Balance Sheets as of                                 3
         March 31, 1999, and June 30, 1998

         Consolidated Statements of Operations for the three and           5
         nine months ended March 31, 1999, and 1998

         Consolidated Statements of Cash Flows for the                     6
         nine months ended March 31, 1999, and 1998

         Notes to Consolidated Financial Statements                        7

Item 2.  Management's Discussion and Analysis of Financial                 9
         Condition and Results of Operations

                           PART II.

Item 1.  Legal Proceedings                                                18

Item 6.  Exhibits and Reports on Form 8-K                                 18

         SIGNATURES                                                       19
</TABLE>



<PAGE>


Item 1.  Financial Statements



                                Micrografx, Inc.
                           Consolidated Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                              March 31,     June 30,
                                                                                1999          1998
                                                                             -----------   -----------
<S>                                                                             <C>            <C>    
                                                                             (Unaudited)
Assets

Current assets:
      Cash and cash equivalents                                                 $ 9,879      $ 26,483
      Short-term investments                                                     10,429         1,584
      Accounts receivable, less allowances of $2,543 and $3,049                   8,645        12,712
      Inventories                                                                   508           980
      Deferred tax asset                                                            358         1,135
      Other current assets                                                        1,668         1,379

                                                                             -----------   -----------
          Total current assets                                                   31,487        44,273

Property and equipment, net                                                       1,750         1,946

Capitalized software development costs, net                                       4,638         3,191

Acquired product rights, net                                                      2,612         2,693

Other assets                                                                      2,617         3,038

                                                                             -----------   -----------
          Total assets                                                       $   43,104    $   55,141
                                                                             ===========   ===========
See accompanying notes.
</TABLE>




                                       3
<PAGE>






                                Micrografx, Inc.
                           Consolidated Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                              March 31,      June 30,
                                                                                 1999          1998
                                                                             -----------   -----------
     <S>                                                                         <C>            <C>
                                                                             (Unaudited)
Liabilities and Shareholders' Equity

Current liabilities:
      Accounts payable                                                         $  4,096      $  4,979
      Accrued compensation and benefits                                           2,366         2,578
      Other accrued liabilities                                                   2,872         4,230
      Deferred revenue                                                            1,800        11,933
      Notes payable to related parties                                            1,400         1,125
      Accrued royalties                                                             264           976
      Income taxes payable                                                            -           340

                                                                             -----------   -----------
          Total current liabilities                                              12,798        26,161

Notes payable to related parties - non-current                                        -           400
Other liabilities                                                                    20            10

Shareholders' equity:
      Common stock, $.01 par value, 20,000 shares authorized;
       12,018 and 11,474 shares issued                                              120           115
      Additional capital                                                         37,216        33,835
      Retained earnings (accumulated deficit)                                     1,184          (894)
      Cumulative translation adjustment                                          (1,217)       (1,537)
      Less - treasury stock (909 and 438 shares), at cost                        (6,950)       (2,884)
      Deferred compensation                                                         (67)          (65)

                                                                             -----------   -----------
       Total shareholders' equity                                                30,286        28,570

                                                                             -----------   -----------
       Total liabilities and shareholders' equity                            $   43,104    $   55,141
                                                                             ===========   ===========
See accompanying notes.
</TABLE>




                                       4
<PAGE>







                                         Micrografx, Inc.
                               Consolidated Statements of Operations
                                            (Unaudited)
                               (In thousands, except per share data)

<TABLE>
<CAPTION>


                                           Three months ended               Nine months ended
                                               March 31,                        March 31,
                                      -----------------------------    -----------------------------
                                          1999            1998             1999            1998
                                      -------------   -------------    -------------   -------------
<S>                                          <C>            <C>              <C>             <C>

Net revenues                            $   14,472      $   17,262       $   47,256      $   52,150
Cost of revenues                             1,592           4,754            8,027          14,968
                                      -------------   -------------    -------------   -------------
     Gross profit                           12,880          12,508           39,229          37,182

Operating expenses:
   Sales and marketing                       8,447           8,325           25,752          26,215
   General and administrative                1,455           1,528            4,769           4,598
   Net research and development              1,854           2,364            6,000           6,367
                                      -------------   -------------    -------------   -------------
     Total operating expenses               11,756          12,217           36,521          37,180

                                      -------------   -------------    -------------   -------------
Income from operations                       1,124             291            2,708               2

Interest income                                197             129              823             470
Other expense, net                            (115)            (75)            (333)           (110)
                                      -------------   -------------    -------------   -------------
     Total non operating income, net            82              54              490             360

                                      -------------   -------------    -------------   -------------
Income before income taxes                   1,206             345            3,198             362

Income tax provision                           422             121            1,119             127

                                      -------------   -------------    -------------   -------------
Net income                              $      784      $      224       $    2,079      $      235
                                      =============   =============    =============   =============

Basic income per share                  $     0.07      $     0.02       $     0.19      $     0.02
                                      =============   =============    =============   =============

Diluted income per share                $     0.07      $     0.02       $     0.18      $     0.02
                                      =============   =============    =============   =============
See accompanying notes.

</TABLE>




                                       5
<PAGE>









                                Micrografx, Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                 Nine months ended March 31,
                                                                            --------------------------------------
                                                                                  1999                1998
                                                                            -----------------   ------------------
     <S>                                                                          <C>                  <C>

Cash flows from operating activities:
Net income                                                                     $  2,079            $    235
Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                                               5,896               6,440
      Deferred income taxes and other                                             1,193                (852)
      Changes in operating assets and liabilities:
           (Increase) decrease in accounts receivable                             4,067              (2,557)
           (Increase) decrease in inventories                                       472                (184)
           (Increase) decrease in other current assets                             (289)                191
           Decrease in payables and accruals                                     (3,169)               (491)
           Decrease in deferred revenue                                         (10,133)               (229)
           Increase (decrease) in income taxes payable                             (340)                454
                                                                            -----------------   ------------------
                Total adjustments                                                (2,303)              2,772
                                                                            -----------------   ------------------
                Net cash (used in) provided by operating activities                (224)              3,007
                                                                            -----------------   ------------------

Cash flows from investing activities:
      Proceeds from maturities of short-term investments                          6,233               3,003
      Purchases of short-term investments                                       (15,078)             (2,533)
      Capitalization of software development costs and
           purchases of acquired product rights                                  (6,060)             (4,627)
      Purchases of property and equipment                                        (1,007)               (830)
      Other                                                                           -                (250)
                                                                            -----------------   ------------------
                Net cash used in investing activities                           (15,912)             (5,237)
                                                                            -----------------   ------------------

Cash flows from financing activities:
      Proceeds from employee stock programs                                       3,073               1,856
      Treasury stock acquired                                                    (4,066)                  -
      Payments of notes payable                                                    (125)                  -
      Tax benefits realized from stock transactions                                 329                   -
                                                                            -----------------   ------------------
                Net cash (used in) provided by financing activities                (789)              1,856
                                                                            -----------------   ------------------

Effect of exchange rates on cash and cash equivalents                               321                (224)

Net decrease in cash and cash equivalents                                       (16,604)               (598)
Cash and cash equivalents, beginning of period                                   26,483              11,150
                                                                            -----------------   ------------------
Cash and cash equivalents, end of period                                       $  9,879            $ 10,552
                                                                            =================   ==================
See accompanying notes.

</TABLE>






                                       6
<PAGE>



                                Micrografx, Inc.

                   Notes to Consolidated Financial Statements

Basis of Presentation
The  accompanying  condensed  consolidated  financial  statements of Micrografx,
Inc., and subsidiaries  (the "Company") at March 31, 1999, and for the three and
nine-month  periods ended March 31, 1999, and 1998 are unaudited but reflect all
adjustments,  which are of a normal  recurring  nature  and,  in the  opinion of
management,  necessary for a fair  presentation  of the  financial  position and
results of operations  for the periods  presented.  The  accompanying  financial
statements and notes thereto  should be read in  conjunction  with the Company's
audited  consolidated  financial  statements  for the year ended June 30,  1998,
included in the 1998 Annual  Report to  Shareholders.  The results of operations
for the three and nine month periods ended March 31, 1999,  are not  necessarily
indicative of results to be expected for the year ending June 30, 1999.

Revenue Recognition
Revenue from packaged  product sales to  distributors  and resellers is recorded
when related  products  are shipped.  Maintenance  and  subscription  revenue is
recognized  ratably over the contract period.  Revenue from products licensed to
original  equipment  manufacturers  ("OEMs") is recorded when OEMs ship licensed
products  while revenue from  multi-user  licenses is recorded when the software
has been delivered. In connection with the sale of certain products, the Company
provides free telephone support service to customers. The Company does not defer
the recognition of any revenue  associated  with sales of these products,  since
the cost of  providing  this free  support  is  insignificant,  the  support  is
provided  within one year after the associated  revenue is recognized  (the vast
majority of the support  actually  occurs within three months) and  enhancements
are minimal and infrequent. The estimated cost of providing this free support is
accrued upon product shipment. Provisions are recorded for returns and bad debts
based on historical experience.

Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>

                               March 31, 1999              June 30, 1998
                          -------------------------   -------------------------
     <S>                             <C>                         <C>    
    
  Raw materials                 $       378                  $     720
  Finished goods                        130                        260
                          -------------------------   -------------------------
                                $       508                  $     980
                          =========================   =========================
</TABLE>

Foreign Forward Currency Exchange Contracts
The Company periodically enters into forward foreign currency exchange contracts
to hedge existing or projected exposure to changing foreign exchange rates. This
exposure results from the Company's  foreign  operations in countries  including
Germany,  France,  the  United  Kingdom,  the  Netherlands,  and Japan  that are
denominated in currencies  other than the U.S. dollar.  These forward  contracts
are not held for trading purposes. At March 31, 1999, the Company had no forward
contracts outstanding.

Comprehensive  Income
The Company adopted  Statement of Financial  Accounting  Standards  ("SFAS") No.
130, "Reporting  Comprehensive  Income" during the first quarter of fiscal 1999.
SFAS No.  130  establishes  new  rules for the  reporting  and  presentation  of
comprehensive income and its components.  The Company's  comprehensive income is
comprised  of  net  income  and  foreign   currency   translation   adjustments.
Comprehensive  income is  $646,000  and  $127,000,  respectively,  for the three
months ended March 31, 1999,  and March 31, 1998.  Comprehensive  income is $2.4
million and $11,000, respectively, for the nine months ended March 31, 1999, and
March 31, 1998.




                                       7
<PAGE>



Income Per Share
Income per share for all  periods  presented  is based on the  weighted  average
basic and  dilutive  equivalent  shares  outstanding  using the  treasury  stock
method. Amounts are shown in thousands except for per share data.
<TABLE>
<CAPTION>

                                                   Three Months Ended       Nine months Ended
                                                        March 31,               March 31,
                                                -----------------------  -----------------------
                                                  1999         1998        1999         1998
                                                ----------  -----------  ----------  -----------
     <S>                                            <C>          <C>         <C>          <C>  
Numerator:
  Net income                                        $ 784        $ 224      $2,079       $  235
  
Denominator:
  Denominator for basic earnings per                                                            
       share - weighted average shares             11,076       10,636      11,102       10,547
  Effect of dilutive employee stock options           328          877         387          606
                                                ----------  -----------  ----------  -----------
  Denominator for diluted earnings per                                                          
       share - weighted average                                                                 
       shares adjusted for the dilutive effect                                                  
       of stock options                            11,404       11,513      11,489       11,153
                                                ==========  ===========  ==========  ===========
  
Basic income per share                             $ 0.07       $ 0.02      $ 0.19       $ 0.02
                                                ==========  ===========  ==========  ===========
Diluted income per share                           $ 0.07       $ 0.02      $ 0.18       $ 0.02
                                                ==========  ===========  ==========  ===========
</TABLE>

In accordance  with FAS 128,  options to purchase  356,105 and 322,419 shares of
Common Stock were excluded from the diluted income per share calculation because
they were  anti-dilutive  for the three and nine months  ended  March 31,  1999,
respectively. Options to purchase 21,490 and 524,126 shares of Common Stock were
excluded  from the  diluted  income  per  share  calculation  because  they were
anti-dilutive for the three and nine months ended March 31, 1998, respectively.

Subsequent Event
On April 16,  1999,  the  Company  purchased  InterCAP  Graphics  Systems,  Inc.
("InterCAP")  for $12.15 million.  The $12.15 million was funded by paying $3.85
million in cash at close, issuing a short-term  promissory note for $2.5 million
and issuing a convertible  debenture for $5.8 million. The convertible debenture
may be converted into  approximately  600,000 shares of Micrografx common stock.
The actual number of shares and the timing of the conversion are both subject to
terms and conditions as outlined in the convertible debenture agreement.

Prior to the  purchase,  InterCAP was a wholly owned  subsidiary  of  Intergraph
Corporation.   The  acquisition  will  be  accounted  for  as  a  purchase.  The
acquisition  accelerates  the Company's  strategy to enable  corporations to use
graphics and Internet technology to solve real-world business problems.



                                       8
<PAGE>



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

Forward-Looking Statements

This Form 10-Q contains certain "forward-looking  statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and  Section  21E of the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange  Act").   Specifically,   all  statements  other  than  statements  of
historical  facts  included in this report  regarding  the  Company's  financial
position,  business  strategy and plans,  and  objectives  of  management of the
Company   for  future   operations   are   forward-looking   statements.   These
forward-looking statements are based on the beliefs of the Company's management,
as well  as  assumptions  made by and  information  currently  available  to the
Company's  management.  When  used  in  this  report,  the  words  "anticipate,"
"believe,"  "estimate,"  "expect," and "intend," and words or phrases of similar
import,  as they relate to the Company or Company  management,  are  intended to
identify   forward-looking   statements.   Such  statements   (the   "cautionary
statements")  reflect the current  view of the  Company  with  respect to future
events  and are  subject to risks,  uncertainties,  and  assumptions  related to
various factors including,  without  limitation,  changes in the product release
schedule,  acceptance  or the lack thereof of the Company's  recently  announced
iGrafx(TM)  products,  growth or the lack  thereof in the  enterprise  solutions
business  of the  Company,  changes  in  distribution  channels,  changes in the
market,  new  products  and  announcements  from  other  companies,  changes  in
technology,  interrupted  purchasing  patterns  by  customers  due to Year  2000
spending and competition from larger, more established competitors. Although the
Company believes that expectations are reasonable, it can give no assurance that
such  expectations  will prove to be correct.  Based upon  changing  conditions,
should any one or more of these risks or  uncertainties  materialize,  or should
any underlying  assumptions prove incorrect,  actual results may vary materially
from those described herein as anticipated,  believed,  estimated,  expected, or
intended.   All   subsequent   written  and  oral   forward-looking   statements
attributable  to the  Company  or persons  acting on its  behalf  are  expressly
qualified in their entirety by the applicable cautionary statements.

General

Micrografx,  Inc.  ("Micrografx"  or the  "Company"),  was  founded  in 1982 and
incorporated  in 1984 in the State of Texas.  The Company  develops  and markets
graphics software that serves to make complex problems simple by making graphics
intelligent,  so people can gain insight and visualize solutions. The Company is
focusing on graphics  applications  software  products for business use in three
target categories:  process management,  corporate graphics,  and network design
applications,  which are  capable of managing  all the  graphic  imagery for the
world's largest  corporations.  Additionally,  the Company seeks to leverage its
technology base by partnering with  organizations  to maximize the  distribution
and value of its intellectual property.

Historically,  in  addition  to its  business  graphics  software,  the  Company
developed and marketed  products for the personal  creativity  consumer  market.
Micrografx has been one of the premier  companies  competing in this market with
such popular titles as Crayola(TM) Art Studio(TM), Hallmark Connections(TM) Card
Studio(TM),  American  Greetings(R)  CreataCard(R)  Plus(TM)  and  CreataCard(R)
Gold(TM),  and Windows Draw(R). In light of recent consolidation in the consumer
software market and extremely  aggressive retail programs from competitors,  the
Company has chosen to shift its resources to the more rapidly growing enterprise
graphics market.

                                       9
<PAGE>

As a result of, and in line with its objective to leverage its strong technology
base,  the  Company  formed  a  strategic  relationship  with  Cendant  Software
Corporation  ("Cendant")  effective June 30, 1998, whereby  Micrografx  licensed
Cendant a series of core personal creativity graphics technologies,  information
relating  to  the  customers   who  have   purchased   products   based  on  the
aforementioned  technologies,  marketing  information related to those products,
and certain associated  intellectual property rights.  Additionally,  Micrografx
entered into a combination of worldwide  publishing and distribution  agreements
with Cendant for two personal creativity software titles,  Windows  Draw(R)Print
Studio(R)  and  Micrografx  SnapShot(TM)  whereby the Company no longer  markets
these  products.   The  agreements  with  Cendant  allow  the  Company  to  make
significant progress in de-emphasizing the consumer software market.

Effective  August 31, 1998,  Micrografx  entered into an agreement that assigned
the Company's  distribution  rights for American  Greetings  CreataCard Gold and
CreataCard Plus to The Learning  Company  ("TLC").  This assignment of rights to
TLC  concludes  all  contractual  responsibilities  and settles all  contractual
issues  between  Micrografx  and  American  Greetings   Corporation   ("American
Greetings").  With this assignment, the Company no longer markets these products
and has completed its de-emphasis of the consumer  marketplace in order to focus
on its business graphics software.

In January  1999,  the Company  announced its  iGrafx(TM)  System(R) of business
graphics products. The iGrafx System is intended to meet the needs of all levels
of users, from the person who occasionally views pictures,  diagrams or drawings
to the high-end  professional who creates very detailed business  graphics.  The
base level of  functionality  consists of  iGrafx(TM)  Business  and  iGrafx(TM)
Share.  Both products are included  throughout the entire iGrafx System.  iGrafx
Share  allows  users to view and use  existing  business  graphics in  Microsoft
Office and other Windows based applications.  iGrafx Business allows the user to
create,  edit, or view business graphics,  and contains powerful drawing,  image
editing, and 3D graphics features. iGrafx Business and iGrafx Share are intended
for deployment on all computers  within an organization and English versions are
currently available. In March 1999 the Company also released two new products in
the process management category, iGrafx(TM) Professional and iGrafx(TM) Process.
English versions of these products are currently available.  iGrafx Professional
is an extension of the Micrografx  FlowCharter(R) product, and iGrafx Process is
an extension of the Optima(R)  simulation  tool. In the fourth quarter of fiscal
1999, the Company  expects to release English  versions of iGrafx(TM)  Designer,
iGrafx(TM) Development,  and NetworkCharter Pro as well as localized versions of
iGrafx Business, iGrafx Share, iGrafx Professional, and iGrafx Process.

On April 16,  1999,  the  Company  purchased  InterCAP  Graphics  Systems,  Inc.
("InterCAP")  for $12.15 million.  The $12.15 million was funded by paying $3.85
million in cash at close, issuing a short-term  promissory note for $2.5 million
and issuing a convertible  debenture for $5.8 million. The convertible debenture
may be converted into  approximately  600,000 shares of Micrografx common stock.
The actual number of shares and the timing of the conversion are both subject to
terms and conditions as outlined in the convertible debenture agreement.

Prior to the  purchase,  InterCAP was a wholly owned  subsidiary  of  Intergraph
Corporation.   The  acquisition  will  be  accounted  for  as  a  purchase.  The
acquisition  accelerates  the Company's  strategy to enable  corporations to use
graphics and Internet technology to solve real-world business problems.




                                       10
<PAGE>



Results of Operations
The  following  table sets forth,  for the  periods  indicated,  the  percentage
relationship  to net  revenues of certain  items in the  Company's  Consolidated
Statements of Operations.  Historical  results and percentage  relationships are
not necessarily indicative of operating results for any future period.
<TABLE>
<CAPTION>

                                 Three Months Ended    Nine Months Ended
                                      March 31,            March 31,
                                -------------------   -------------------
                                  1999      1998        1999      1998   
                                --------- ---------   --------- ---------
<S>                                <C>       <C>         <C>       <C>

Net revenues                       100%      100%        100%      100%
Cost of revenues                    11%       27%         17%       29%
                                    ---       ---         ---       ---
Gross profit                        89%       73%         83%       71%

Operating expenses:
   Sales and marketing              58%       48%         54%       50%
   General and administrative       10%        9%         10%        9%
   Research and development         13%       14%         13%       12%
                                    ---       ---         ---       ---
Total operating expenses            81%       71%         77%       71%

Income from operations               8%        2%          6%       --

Non operating income, net           --        --           1%        1%

Income before income taxes           8%        2%          7%        1%

Income taxes                         3%        1%          2%       --

Net income                           5%        1%          5%        1%
</TABLE>

The following  table sets forth net revenues by product  category (in thousands)
and the percentage  relationship to total net revenues.  The technology category
results from the Company's use of its library of graphics  software in selective
licensing.  For fiscal 1999,  the technology  category  consists of licensing of
certain personal creativity software source code to Cendant and TLC.
<TABLE>
<CAPTION>

                                Three Months Ended March 31,             Nine months Ended March 31,
                           ----------------------------------------  -------------------------------------
                              1999        %        1998        %        1999       %       1998       %
                           ------------ ------- -----------  ------  ----------- ------ ----------- ------
<S>                             <C>       <C>         <C>      <C>       <C>      <C>       <C>      <C>
       
Process management           $   4,299     30%    $  4,761     27%     $ 11,856    25%    $ 12,090    23%
Network design                     206      1%          --     --         1,049     2%          --    --
Corporate graphics               5,162     36%       7,729     45%       14,519    31%      23,351    45%
Personal creativity                994      7%       4,772     28%        3,027     6%      16,709    32%
Technology                       3,811     26%          --     --        16,805    36%          --    --
                           ------------ ------- -----------  ------  ----------- ------ ----------- ------
Total net revenues           $  14,472    100%    $ 17,262    100%     $ 47,256   100%    $ 52,150   100%
                           ============ ======= ===========  ======  =========== ====== =========== ======
</TABLE>




                                       11
<PAGE>



Process Management
Management  believes that process management revenues were lower during both the
three and nine month periods because the sales of historical  products  declined
faster than new products could achieve sales momentum. The Company announced the
new products,  iGrafx  Professional  and iGrafx  Process in January  1999,  thus
limiting  demand for its  two-year-old  FlowCharter  product.  However,  the new
product  releases  were delayed since they include a version of Visual Basic for
Applications,  which was delayed by Microsoft. Despite the late release, English
versions of the new  products  contributed  revenue of  approximately  $900,000.
Localized  versions of iGrafx  Professional and iGrafx Process are scheduled for
release in the fourth quarter of fiscal 1999.  Optima  revenues were  relatively
unchanged from the prior year.

Network Design
In late September 1998 the Company released its first version of network related
documentation and discovery products, NetworkCharter and NetworkCharter Pro. The
NetworkCharter  products are  developed  in  conjunction  with another  company,
ImageNet,  Inc.  ("ImageNet").  On November 4, 1998, the United States  District
Court, District of Massachusetts,  denied a preliminary injunction motion citing
copyright  infringement filed by NetSuite Development  Corporation  ("NetSuite")
against ImageNet. The District Courts ruling removed any current restrictions on
the  Company's  ability to continue  selling the products.  However,  the future
outcome and effect of any litigation  against  ImageNet is unknown at this time.
Micrografx was not named in any action against ImageNet. Ultimately, a judgement
in NetSuite's  favor could  negatively  impact the ability of Micrografx to sell
products developed with ImageNet.

Corporate Graphics
Corporate  Graphics  product  revenues  declined  for both the  three-month  and
nine-month  periods of fiscal 1999 versus the year ago periods.  Consistent with
the reasons for declining process management revenues, management of the Company
believes  that new  product  announcements  had a  negative  effect on  existing
product  sales.  The  English  version  of  iGrafx  Business  is  available  and
contributed more than $500,000 of revenue in the current quarter.

Compounding  the natural  decline of corporate  graphics sales is the decline of
the retail  sector of the  Japanese  economy,  resulting  in less  revenue  from
Graphics Suite, a traditional  strong seller in Japanese retail software stores.
Europe and Asia Windows Draw revenue,  which is classified as Corporate Graphics
revenue,  declined  $1.5  million and $4.1 million for the three and nine months
ended March 31, 1999,  respectively,  compared to the same periods in 1998. This
decline is a result of the Company's  assignment of its rights to the product to
Cendant as  previously  described.  Revenues are also  impacted by the Company's
diminished  retail  presence  with the  assignment of its rights to its personal
creativity products.

Personal Creativity
The decline in this  category  resulted  from the  Company's  assignment  of its
rights  to  these  products  to  Cendant  and  TLC.   Future  revenues  will  be
insignificant  and  consist of revenues  from  pre-existing  original  equipment
manufacturer  (OEM) agreements,  which expire by the end of the current calendar
year.

Technology
The  technology   category  contains  the  revenue  recognized  related  to  the
previously  discussed  Cendant and TLC  relationships.  The  Company  expects to
recognize total revenue of approximately  $21 million from the  relationships of
which $3.0 million was recognized in fiscal 1998, $6.7 million was recognized in
the first  quarter of fiscal  1999,  $6.3 million was  recognized  in the second
quarter of fiscal 1999,  $3.8  million was  recognized  in the third  quarter of
fiscal 1999,  and the  remainder is  anticipated  to be recognized in the fourth
quarter of fiscal 1999. Revenue recognition is based on contractual  obligations
and risks assumed and the impact on net income varies each quarter  depending on
the costs to the Company of those  obligations  and risks.  Although the Company
continues to seek other opportunities to license its intellectual  property, its
success in doing so, as well as the timing and  magnitude of revenues  resulting
from new licensing relationships, is uncertain.



                                       12
<PAGE>



Net revenues by geographical region (in thousands) for the three and nine months
ended March 31, 1999, and 1998 were as follows:
<TABLE>
<CAPTION>

                    Three Months Ended March 31,                   Nine months Ended March 31,
              -----------------------------------------     ------------------------------------------
                 1999         %         1998       %           1999        %         1998        %
              ------------  ------  ------------  ------    -----------  -------  -----------  -------
  <S>               <C>      <C>         <C>      <C>            <C>       <C>        <C>       <C>
Americas         $  9,024     62%    $    9,507     55%        $29,509      62%      $27,635      53%
Europe              4,628     32%         6,446     37%         15,383      33%       18,588      36%
Asia Pacific          820      6%         1,309      8%          2,364       5%        5,927      11%
              ------------  ------  ------------  ------    -----------  -------  -----------  -------
Total            $ 14,472    100%      $ 17,262    100%        $47,256     100%      $52,150     100%
              ============  ======  ============  ======    ===========  =======  ===========  =======
</TABLE>                            

A significant portion of the revenue  fluctuations for the three and nine months
ended March 31, 1999, are related to  significant  decreases in Windows Draw and
CreataCard  revenues due to the licensing of those  technologies  to Cendant and
TLC, respectively. Revenue for these geographical regions, excluding revenue for
the products that were assigned to TLC or Cendant, for the three and nine months
ended March 31, 1999, and 1998 were as follows:
<TABLE>
<CAPTION>

                    Three Months Ended March 31,                   Nine months Ended March 31,
              -----------------------------------------     ------------------------------------------
                 1999         %        1998        %           1999        %         1998        %
              ------------  ------  -----------  -------    -----------  -------  -----------  -------
  <S>              <C>        <C>       <C>        <C>          <C>        <C>        <C>        <C>
Americas         $  9,024     62%     $  4,745      44%        $29,509      62%      $11,993      39%
Europe              4,628     32%        5,110      47%         15,383      33%       14,943      49%
Asia Pacific          820      6%          947       9%          2,364       5%        3,689      12%
              ------------  ------  -----------  -------    -----------  -------  -----------  -------
Total            $ 14,472    100%     $ 10,802     100%        $47,256     100%      $30,625     100%
              ============  ======  ===========  =======    ===========  =======  ===========  =======
</TABLE>

Included in Americas is technology  revenue of $3.8 million for the three months
ended March 31,  1999,  and $16.8  million  for the nine months  ended March 31,
1999.  Excluding  technology  revenue,  the revenue in Americas  and Europe were
lower during both the three and nine month periods due to the age of the product
versions  (approximately  24  months)  that were  available  during  most of the
quarter and a reduced retail presence related to the Company's focus on sales to
corporate  users.  The age of the product  versions  impacts revenues as revenue
tends to decrease near the end of a version's life cycle. Additionally, the Asia
Pacific decline resulted from the continued weakness in the retail sector of the
Japanese economy.

Cost of revenues for the three months ended March 31, 1999,  were $1.6  million,
or 11 percent of net revenues,  compared to $4.8  million,  or 27 percent of net
revenues,  for the three months ended March 31, 1998. The lower cost of revenues
for the three months ended March 31, 1999,  was  primarily  attributable  to the
Company's  de-emphasis of the personal  creativity market.  This change in focus
has caused an increase in the average  selling price of the  Company's  products
thus higher margins are being recognized. With the focus on selling to corporate
customers,  a  higher  percentage  of the  Company's  revenue  is  derived  from
multi-user   licenses   versus  boxed  product  sales.   Boxed  product  carries
significant costs including box design and creation,  manuals, media guides, and
CDs, compared to only minor costs associated with multi-user licenses.  Personal
creativity  revenues  also carry a much higher third party royalty cost than the
Company's  corporate  products.  Finally,  amortization  related to  capitalized
software  development  costs declined as the majority of amounts relating to old
products previously capitalized became fully amortized.  Amortization of amounts
capitalized  for the new products was minimal  since the products  were released
late in the quarter.

The  Company's  operating  results are  affected by changes in foreign  currency
exchange  rates.  These  variations  result from the change in exchange rates of
European  currencies  and the  Japanese  yen  versus  the U.S.  dollar.  Because
European  manufacturing  costs and European and Japanese  operating expenses are
also  incurred in those local  currencies,  the impact of exchange  rates on net
income is mitigated.  The impact of year-over-year  changes in exchange rates on
revenue and net income was not significant.



                                       13
<PAGE>




Sales and  marketing  expenses for the three  months ended March 31, 1999,  were
$8.4  million,  or 58 percent of net revenues,  compared to $8.3 million,  or 48
percent of net revenues for the same period in the  previous  year.  Total sales
and marketing  expenses as a percent of revenue increased due to the significant
spending  in the third  quarter  related to the  launch of the iGrafx  family of
products.  The Company  expects  these  expenses to decline in absolute  dollars
through the end of the fiscal year.

General and  administrative  expenses for the three months ended March 31, 1999,
were $1.5 million, or 10 percent of net revenues, compared to $1.5 million, or 9
percent  of net  revenues,  for the  three  months  ended  March 31,  1998.  The
percentage  increase is a result of fixed expenses remaining flat versus a lower
revenue base. The Company expects general and administrative  costs to remain at
approximately the current level for the near term.

Net research and development expenses for the three months ended March 31, 1999,
were $1.9 million,  or 13 percent of net revenues,  compared to $2.4 million, or
14 percent of net revenues,  for the quarter ended March 31, 1998.  The decrease
is a result of capitalizing  more software  development costs resulting from the
increased  activity  associated  with new product  releases.  Gross research and
development expenses,  before  capitalization,  for the three months ended March
31, 1999,  were $3.5 million,  or 24 percent of net  revenues,  compared to $3.3
million, or 19 percent of net revenues for the quarter ended March 31, 1998. The
Company expects research and development expenses to remain at approximately the
current level for the near term.

During  the  three  months  ended  March  31,  1999,  the  Company   capitalized
approximately   $1.6  million  in  software   development  costs  and  amortized
approximately   $400,000  in  software   development  costs.  This  compares  to
capitalization  of $900,000 and amortization of $800,000 during the three months
ended March 31, 1998.

For the three months ended March 31, 1999, interest income increased to $197,000
compared to $130,000 for the three  months  ended March 31, 1998.  For the three
months ended March 31, 1999,  and March 31, 1998,  exchange rates resulted in no
material gain or loss.

The Company's effective tax rate was 35 percent for all periods presented.

Liquidity and Capital Resources
At March 31, 1999,  the Company's  principal  sources of liquidity  consisted of
cash and cash  equivalents of $9.9 million and  short-term  investments of $10.4
million.

For the nine months ended March 31, 1999, cash used in operating,  investing and
financing  activities  exceeded net income,  resulting in a decrease in cash and
cash  equivalents  of $16.6  million.  This  decrease  is  primarily a result of
purchases of short-term  investments and recognition of deferred  revenue.  Cash
flows from operating activities used $0.2 million in cash during the nine months
ended March 31, 1999.  Of the deferred  revenue  decrease,  $3.8 occurred in the
current  quarter and was due to the  recognition  of revenue  generated from the
Cendant and TLC agreements.

The decrease in accounts  receivable  reserves is  primarily  due to the reduced
need for  rebates and  cooperative  funds  typically  associated  with  personal
creativity products.

Additionally,  the Company carries a $5 million line of credit dated as of April
1, 1998,  which was  amended on March 30,  1999 in order to renew the  agreement
until March 29, 2000.  The Company  believes that  existing cash and  short-term
investments  will be  sufficient  to meet the  Company's  capital and  operating
requirements in the short term.

                                       14
<PAGE>

Euro Conversion
The Company is  addressing  issues  regarding  the  European  Economic  Monetary
Union's  ("EMU")  single  eurocurrency  (the  "Euro") and is  currently  able to
transact  business  using this  currency.  The  Company  intends to convert  the
appropriate  European ledgers to the Euro after fiscal year ended June 30, 2000,
and anticipates no material costs associated with this conversion.

Year 2000 Costs
The Company is aware of and is  addressing  a broad  range of issues  associated
with  the  programming  code in  existing  computer  systems  as the  Year  2000
approaches.  The Year 2000 issue is complex,  as many  computer  systems will be
affected in some way by the rollover of the two-digit  year value to 00. Systems
that do not properly recognize such information could generate erroneous data or
cause a system to fail.  The Year 2000 issue  creates  risk for the Company from
unforeseen problems in its own infrastructure and systems,  its own products and
from  third  parties  with  which  the  Company  deals on  financial  and  other
transactions worldwide. Failures of the Company's and/or third parties' computer
systems  could have a material  impact on the  Company's  ability to conduct its
business.

The Company began an  infrastructure  and systems  review of Year 2000 readiness
for the United States Operations in May of 1998, with the objectives of:

o    Inventorying  all  computer,  network and  telephony-related  hardware  and
     software;
o    Assessing,  through both research and testing, whether or not the equipment
     and software are Y2K compliant;
o    Developing plans for upgrading hardware and software to Year 2000 compliant
     status, decommissioning non-compliant hardware that cannot be upgraded to a
     compliant  state,  and  replacing  software that cannot be upgraded to Year
     2000 compliance.

As of February 1, 1999, all mission  critical  systems and  applications  in the
data  center  have  been  reviewed  and plans for  upgrade,  decommissioning  or
replacement have been developed for systems and  applications  that are not Year
2000 compliant.  Software upgrades and replacement are scheduled to be completed
by June 30, 1999.

Workstations,  desktop  and  laptop  computers  used in the  development  of the
Company's  products and in conducting  the Company's  business are largely newer
machines that are reported by their  manufacturers to be Year 2000 compliant.  A
small number of machines have been identified which, due to age or obsolescence,
cannot be brought into  compliance.  The Company  plans to  decommission  and/or
replace these machines during the year.

The  principal  software  running on the Company's  computers is licensed  under
corporate  maintenance  agreements  with major vendors that have reported either
that their software is currently Year 2000 compliant or that Year 2000 compliant
upgrades will be available during calendar year 1999. It is the Company's intent
to apply and verify such upgrades as they become available.

Non-compliant hardware is scheduled to be upgraded,  decommissioned, or replaced
before,  or concurrent  with,  the  Company's  move to its new  headquarters  in
September of 1999.

The inventory,  review, upgrade, replacement and decommissioning plans described
herein refer specifically to mission critical corporate standard  technology and
components.  Special purpose hardware and software, such as may be found in some
areas of Development and Quality Assurance, and personal productivity tools that
are not covered by  corporate  standards,  are not covered in this plan  because
this hardware is not directly used in the running of the business or development
of products.

The Company's  foreign  subsidiaries  and  contractors  access mission  critical
applications  through the  services of the  Company's  wide area  network.  With
regard  to  centrally  administered   applications  and  systems  software,  the
Company's  foreign  operations are at an equal state of Year 2000 readiness 

                                       15
<PAGE>

with the Company.  The state of the Company's foreign operations with respect to
hardware  Year  2000  readiness  has not yet  been  assessed.  These  operations
represent a small percentage of the Company's hardware assets, and formal review
of their Year 2000 readiness status began in March 1999.

The principal  costs  incurred in addressing  Year 2000 issues to date have been
managerial  and  administrative.   All  essential  third-party  software  is  on
maintenance agreements, and hardware expenses have already been accounted for in
either normal  retirement/replacement  plans or in the planned  expenses for the
infrastructure of the new headquarters building.

A small number of internally developed  applications are not currently Year 2000
compliant,  and the cost of  remediation  will not be material to the  Company's
operating results.

Each of the Company's  product divisions has completed a Year 2000 assessment of
its currently offered products.  While this assessment included internal testing
of the Year 2000  capabilities of these  products,  the Company has not had, and
has no plans to have,  its products  tested by an independent  third party.  The
Company  believes that the vast majority of its currently  offered  products are
Year 2000  compliant,  and  expects  virtually  all of its  remaining  currently
offered products to become compliant by early 1999 through new releases.  In any
event,  the Company expects that all of its currently  offered  products will be
Year 2000  compliant  before the end of 1999.  Because Year 2000  compliance  is
generally integrated into its normal product development activities, the Company
has not  incurred  and does not  expect  to incur  any  significant  incremental
expenses in addressing  this issue in its product  lines.  The Company  believes
that a small  number of its  customers  that  receive  product  support from the
Company are operating  product  versions that may not be Year 2000  compliant or
products  that the Company has replaced or intends to replace  with  comparable,
Year 2000 compliant  products.  The Company believes that the vast majorities of
such customers are migrating and will continue to migrate to compliant  versions
and products through new releases, which the Company is strongly encouraging. In
addition,  certain former customers may be operating  non-compliant  versions of
products  in respect of which the  Company's  agreed-upon  product  support  and
warranty  periods have expired.  The Company has not undertaken an assessment of
whether  these  former  customers  are taking  appropriate  steps to address any
related Year 2000 issues.  The Company does not expect customers who purchase or
migrate to current  versions of the Company's  products to  experience  any Year
2000 failures caused by such products.  In addition,  the Company  believes that
its licenses and other agreements contain customary and appropriate  limitations
on the Company's  obligations with respect to any Year 2000 failures that may be
caused by its current or former  products.  However,  there can be no  assurance
that the Company's expectations and beliefs as to these and related matters will
prove to be  accurate.  Moreover,  the  Company is aware of a growing  number of
lawsuits against software vendors and other IT firms involving Year 2000 issues.
In  addition,  regardless  of  whether  the  Company's  products  are Year  2000
compliant,  they operate on IT systems  consisting of  third-party  hardware and
software,  some of which may not be fully Year 2000  compliant.  In light of the
foregoing factors,  there can be no assurance that customers or former customers
will not bring claims or proceedings  against the Company  seeking  compensation
for losses associated with Year 2000-related failures.

The  Company  has begun a Year  2000  assessment  of its  material  third  party
supplier  relationships.  The  assessment  is  being  conducted  through  formal
communications with such suppliers,  testing of supplier  equipment,  systems or
interfaces, and a review of the Year 2000 information made publicly available by
such suppliers.  The Company plans to  substantially  complete the assessment of
these third  parties by mid-1999 and,  promptly upon  discovery of any readiness
issues  that are  material  to the  Company,  begin  efforts to obtain  adequate
readiness assurances from the relevant third parties.  There can be no assurance
that the Company will receive all  information  necessary to fully  evaluate the
Year 2000 readiness of all material suppliers.  In addition,  the Company relies
in  various  ways,  both  domestically  and  internationally,   on  governments,
utilities,  communications  service providers,  financial institutions and other
third parties to conduct normal business  operations.  There can be no assurance
that  suppliers  and other third  parties upon which the Company is reliant will
not suffer business interruptions caused by Year 2000 issues. Such interruptions
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

                                       16
<PAGE>

Other aspects of the Year 2000 issue may pose  additional  risks to the Company.
Some  commentators  predict  that normal  purchasing  patterns and trends in the
software   industry  may  be  affected  by  customers   replacing  or  upgrading
applications  or  systems to  address  Year 2000  issues.  The  Company  has not
experienced  any  discernable  trend  indicating a recent or impending  material
reduction  in  demand  for the  Company's  products.  However,  there  can be no
assurance  that Year 2000  issues  will not affect  future  customer  purchasing
patterns,  possibly  resulting  in  lower  demand  for the  Company's  products.
Furthermore, commentators have predicted that a significant amount of litigation
may  arise  out of Year  2000  compliance  issues.  Although  certain  potential
litigation scenarios have been described above, the probability of the Company's
actual  involvement  in any  lawsuits of this nature and the range of  potential
outcomes is not  estimable  at this time. A material  adverse  outcome in a Year
2000  lawsuit as is the case with any  lawsuit - could  have a material  adverse
effect  on  the  Company's  business,   financial  condition,   and  results  of
operations.

Although the Company believes that its Year 2000 readiness  efforts are designed
to appropriately identify and address those Year 2000 issues that are within the
Company's control,  there can be no assurance that the Company's efforts will be
fully effective or that Year 2000 issues will not have a material adverse effect
on the Company's business,  financial condition,  or results of operations.  The
novelty  and  complexity  of  the  issues  presented,   the  proposed  solutions
therefore,  and the Company's  dependence on the  preparedness of third parties,
are among the  factors  that could cause the  Company's  efforts to be less than
fully effective.  Moreover,  Year 2000 issues present many risks that are simply
beyond the Company's control,  for example,  the collateral effects of Year 2000
issues on the  economy in general and on the  Company's  business  partners  and
customers in particular. In light of the foregoing, the Company believes that it
is not possible to specifically describe its most reasonably likely "worst case"
Year 2000 scenario or to quantify the related potential  consequences.  However,
the risks and the potential  consequences described above represent management's
best judgment of these matters based on currently available information.  Except
as  described  above,  the Company has not  established  "contingency  plans" to
address potential  consequences of the Year 2000 issues.  The Company intends to
continue to evaluate both existing and newly  identified  Year 2000 risks and to
develop and implement such further responsive measures as it deems appropriate.



                                       17
<PAGE>




Part II.  Other Information

Item 1.  Legal Proceedings

The Company is subject to certain legal proceedings and claims that arise in the
ordinary  course of business.  In the opinion of  management,  the resolution of
these  legal  proceedings  and  claims  will not have a  material  effect on the
Company's consolidated financial position or results of operations.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

          10.1 Revolving  credit  agreement  dated  April 1,  1998  between  the
               Company  and  BankBoston,  N.A.  (incorporated  by  reference  to
               Exhibit 10.15 to the Registrant's Annual Report on Form 10-K, for
               the year ended June 30, 1998, filed with the SEC on September 23,
               1998)

          10.2 Amendment  to  revolving  credit  agreement  dated  April 1, 1998
               between the Company and BankBoston, N.A.

          27.  The  Financial  Data  Schedule  required  by Item  601(b)(27)  of
               Regulation  S-K has been included with the  electronic  filing of
               this Form 10-Q.

(b)      Reports on Form 8-K - None




                                       18
<PAGE>




                                   Signatures


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

                                             MICROGRAFX, INC.



Date:    May 14, 1999                        By  /s/John M. Carradine
                                                ---------------------
                                             John M. Carradine
                                             Chief Financial Officer
                                             and Treasurer


                                             By  /s/Darryl R. Halbert
                                                 -------------------- 
                                             Darryl R. Halbert
                                             Vice President, Controller and
                                             Chief Accounting Officer



                                       19
<PAGE>



                                INDEX TO EXHIBITS


Exhibit No.                        Description

     10.1 Revolving credit agreement dated April 1, 1998 between the Company and
          BankBoston,  N.A.  (incorporated  by reference to Exhibit 10.15 to the
          Registrant's  Annual Report on Form 10-K,  for the year ended June 30,
          1998, filed with the SEC on September 23, 1998)

     10.2 Amendment to revolving  credit  agreement  dated April 1, 1998 between
          the Company and BankBoston, N.A.

     27.  The Financial Data Schedule  required by Item 601(b)(27) of Regulation
          S-K has been included with the electronic filing of this Form 10-Q.




                                       20
<PAGE>