<PAGE>


                                  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 JUNE 30, 1997

                                       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  0-19377
                        -------

                                TCSI CORPORATION
             (Exact name of Registrant as specified in its charter)


               NEVADA                                  68-0140975
----------------------------------------  ------------------------------------
   (State or other jurisdiction of        (I.R.S. Employer identification no.)
   incorporation or organization)

1080 Marina Village Parkway, Alameda, CA                  94501
----------------------------------------  ------------------------------------
(Address of principal executive offices)               (Zip code)

                         Telephone number(510) 749-8500

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 August 1, 1997, there were 21,558,775 shares of common stock of the 
Registrant outstanding.


<PAGE>


                                    FORM 10-Q


                                      INDEX


                                                                      Page No.
PART I.  FINANCIAL INFORMATION

  ITEM 1.  CONSOLIDATED FINANCIAL INFORMATION
  
    Consolidated Statements of Income for the Three and Six 
      Months Ended June 30, 1997 and 1996 (Unaudited). . . . . . . . . . .  3

    Consolidated Balance Sheets at June 30, 1997 (Unaudited)
      and December 31, 1996. . . . . . . . . . . . . . . . . . . . . . . .  4

    Consolidated Statements of Cash Flows for the Six Months
      Ended June 30, 1997 and 1996 (Unaudited) . . . . . . . . . . . . . .  5

    Notes to Consolidated Financial Information(Unaudited) . . . . . . . .  6

  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . .  9


PART II. OTHER INFORMATION

  ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . 27

  ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS. . . . . . . . 29

  ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 30

                                      -2-

<PAGE>


                              TCSI CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Information

                  CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                  Three Months Ended             Three Months Ended
                                                       June 30,                       June 30,
                                               -----------------------        ----------------------
                                                  1997          1996             1997          1996
                                               ----------   ----------        ----------   ---------
<S>                                            <C>          <C>               <C>          <C>
Revenues:
 Services                                       $ 9,055       $ 12,962        $ 16,858     $ 25,545
 Software licensing fees                            449          4,438           2,480        7,554
                                               ----------   ----------        ----------   ---------
  Total services and licensing fees               9,504         17,400          19,338       33,099
 Equipment, non-telecom                            --            4,431            --          7,270
                                               ----------   ----------        ----------   ---------
  Total revenues                                  9,504         21,831          19,338       40,369
                                               ----------   ----------        ----------   ---------

Costs, expenses, and special items:
 Services                                         5,139          6,824          10,282       12,952
 Equipment, non-telecom                            --            4,156            --          6,810
 Product development                              1,361          1,487           2,813        2,491
 Selling, general, and administrative             4,306          5,899           8,874       11,182
 Non-recurring special items                        818           --             1,088          --
                                               ----------   ----------        ----------   ---------
  Total costs, expenses, and special items       11,624         18,366          23,057       33,435
                                               ----------   ----------        ----------   ---------

Income (loss) from operations                    (2,120)         3,465          (3,719)       6,934
 
Interest income                                     729            664           1,478          946
                                               ----------   ----------        ----------   ---------
Income (loss) before income taxes                (1,391)         4,129          (2,241)       7,880

Provision for (benefit from) income taxes          (472)         1,321            (761)       2,521
                                               ----------   ----------        ----------   ---------

Net income (loss)                               $  (919)      $  2,808        $ (1,480)    $  5,359
                                               ----------   ----------        ----------   ---------
                                               ----------   ----------        ----------   ---------

Earnings (loss) per share (EPS)                 $ (0.04)      $   0.13        $  (0.07)    $   0.25
                                               ----------   ----------        ----------   ---------
                                               ----------   ----------        ----------   ---------

Shares used in calculation of EPS                21,327         22,191          21,335       21,042
                                               ----------   ----------        ----------   ---------
                                               ----------   ----------        ----------   ---------

</TABLE>

The accompanying notes are an integral part of this financial information.

                                      -3-

<PAGE>

                                TCSI CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                                       June 30,          December 31,
                                                                         1997                1996
                                                                     -----------         ------------
                                                                     (Unaudited)
<S>                                                                  <C>                 <C>
ASSETS
Current assets:
  Cash and cash equivalents                                           $  31,465           $  30,880
  Investments in marketable securities                                   12,452              14,352
  Receivables                                                             8,815              12,522
  Other receivables                                                       2,314               2,042
  Deferred income taxes                                                   1,731               2,178
  Other current assets                                                    1,260               2,308
                                                                     -----------         ------------

    Total current assets                                                 58,037              64,282

Furniture, equipment, and leasehold improvements, net                    10,775               9,234
Non-current investments in marketable securities                          6,975               7,375
Non-current deferred income taxes                                         2,478               5,000
Other non-current assets                                                    689               1,284
                                                                     -----------         ------------

    Total assets                                                      $  78,954           $  87,175
                                                                     -----------         ------------
                                                                     -----------         ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and other accruals                                  $  2,098            $  7,263
  Accrued compensation and related costs                                  3,157               4,705
  Income taxes                                                              793               1,597
                                                                     -----------         ------------
    Total current liabilities                                             6,048              13,565
                                                                     -----------         ------------

Shareholders' equity:
  Preferred shares, $0.01 par value; 5,000 shares authorized;
    none outstanding                                                       --                  --
  Common shares, $0.10 par value; 75,000 shares authorized;
   21,516 shares issued and outstanding - 1997 (21,219 - 1996)            2,152               2,122
  Additional paid-in capital                                             46,661              45,939
  Retained earnings                                                      24,069              25,549
  Foreign currency translation adjustments                                  (86)               --
  Unrealized gain on investments                                            110                --
                                                                     -----------         ------------

    Total shareholders' equity                                           72,906              73,610
                                                                     -----------         ------------

    Total liabilities and shareholders' equity                        $  78,954           $  87,175
                                                                     -----------         ------------
                                                                     -----------         ------------

</TABLE>


The accompanying notes are an integral part of this financial information.

                                      -4-

<PAGE>

                               TCSI CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                Six Months Ended June 30,
                                                                -------------------------
                                                                    1997          1996
                                                                ----------     ----------
<S>                                                             <C>            <C>
OPERATING ACTIVITIES
Net income (loss)                                               $  (1,480)      $  5,359
Adjustments to reconcile net income (loss) to net cash 
 provided by (used in) operations:
  Depreciation and amortization                                     1,755          1,416
  Deferred income taxes                                            (1,816)            85
  Changes in:
    Receivables                                                     3,707         (5,623)
    Equipment receivables, non-telecom                               --           (7,270)
    Other receivables                                                (810)           --
    Other current assets                                            1,048          1,692
    Accounts payable and other accruals                            (2,594)           503
    Accrued compensation and related costs                         (1,548)          (388)
    Income taxes                                                    3,981          1,832
                                                                ----------     ----------
      Net cash provided by (used in) operating activities           2,243         (2,394)
                                                                ----------     ----------

INVESTMENT ACTIVITIES
Capital expenditures                                               (5,329)        (3,083)
Purchase of marketable securities                                  (9,090)       (11,911)
Maturity and sale of marketable securities                         11,500          4,250
Decrease (increase) in other non-current assets                       595           (141)
                                                                ----------     ----------
  Net cash provided by (used in) investing activities              (2,324)       (10,885)
                                                                ----------     ----------

FINANCING ACTIVITIES
Issuance of common shares                                             --          25,900
Proceeds from exercise of options                                     752          2,761
                                                                ----------     ----------
  Net cash provided by financing activities                           752         28,661
                                                                ----------     ----------

Effect of foreign currency exchange rate changes on cash 
 and cash equivalents                                                 (86)         --
                                                                ----------     ----------

Net increase in cash and cash equivalents                             585         15,382

Cash and cash equivalents at beginning of period                   30,880         16,946
                                                                ----------     ----------
Cash and cash equivalents at end of period                      $  31,465      $  32,328
                                                                ----------     ----------
                                                                ----------     ----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (refund received) for income taxes, net               $  (2,928)     $     604
                                                                ----------     ----------
                                                                ----------     ----------

</TABLE>

The accompanying notes are an integral part of this financial information.

                                      -5-

<PAGE>

                              TCSI CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL INFORMATION (Unaudited)

1.   BASIS OF PRESENTATION

          The accompanying unaudited consolidated financial information has been
     prepared by TCSI Corporation ("TCSI" or the "Company") in accordance with
     generally accepted accounting principles for interim financial statements
     and pursuant to the rules of the Securities and Exchange Commission for 
     Form 10-Q. Accordingly, certain information and footnotes required by   
     generally accepted accounting principles for complete financial statements 
     have been omitted. It is the opinion of management that all adjustments 
     considered necessary for a fair presentation have been included, and that
     all such adjustments are of a normal and recurring nature. Operating 
     results for the periods presented are not necessarily indicative of the   
     results that may be expected for any future periods. For further 
     information, refer to the audited financial statements and footnotes 
     included in the Company's 1996 Annual Report on Form 10-K. 

2.   CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

          The Company accounts for its marketable securities under Statement of 
     Financial Accounting Standards No. 115, "Accounting for Certain Investments
     in Debt and Equity Securities." Management determines the appropriate 
     classification of investments and debt securities at the time of purchase 
     and reevaluates such designation as of each balance sheet date. Investments
     are classified as held-to-maturity when the Company has the intent and 
     ability to hold the securities to maturity. Held-to-maturity securities 
     are stated at amortized cost. Investments not classified as such are 
     classified as available-for-sale. Available-for-sale securities are stated 
     at fair value, with the unrealized gains and losses, net of tax, reported 
     in a separate component of shareholder's equity. Realized and unrealized 
     gains and losses from investments have been insignificant to the results of
     operations and financial position of the Company. 

3.   RECEIVABLES AND CREDIT RISK

          Receivable balances are primarily from large, credit-worthy customers
     in the telecommunications industry and are unsecured. The Company performs
     ongoing credit evaluations of its customers and generally does not require
     collateral. The Company does not anticipate any significant default from a
     customer's inability to make a payment for products and/or services 
     received.  Reserves are maintained for potential credit losses.
     

          Receivables balances are as follows:

<TABLE>
<CAPTION>

                                                       June 30,   December 31, 
          (In thousands)                                 1997        1996
                                                       --------   ------------
          <S>                                          <C>        <C>
          Billed receivables                           $ 6,700     $ 10,433
          Unbilled receivables                           2,515        2,489
          Reserve for doubtful accounts                   (400)        (400)
                                                       --------   ------------
                                                       $ 8,815     $ 12,522
                                                       --------   ------------
                                                       --------   ------------

</TABLE>

                                      -6-

<PAGE>

                              TCSI CORPORATION


4.   FURNITURE, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS

          Furniture, equipment, and leasehold improvements are stated at 
     cost. Depreciation is provided for furniture and equipment in amounts 
     sufficient to relate the cost of depreciable assets to operations over 
     their estimated service lives of five years and three years, respectively,
     utilizing the straight-line method. Amortization is provided for leasehold
     improvements in amounts sufficient to relate the cost over the shorter of 
     the term of the related office lease or ten years utilizing the 
     straight-line method.

          Furniture, equipment, and leasehold improvements balances are as 
          follows: 

<TABLE>
<CAPTION>

                                                              June 30,       December 31,
          (In thousands)                                        1997             1996
                                                             ---------       ------------
          <S>                                                <C>             <C>
          Computer and lab equipment                         $  13,430        $  12,856
          Furniture and fixtures                                 3,531            3,307
          Leasehold improvements                                 6,692            4,194
                                                             ---------       ------------
                                                                23,653           20,357

          Less accumulated depreciation and amortization       (12,878)         (11,123)
                                                             ---------       ------------
                                                             $  10,775        $   9,234
                                                             ---------       ------------
                                                             ---------       ------------

</TABLE>


5.   INCOME TAXES

          The effective tax rate used in the calculation of the income tax 
     provision (benefit) for the three and six months ended June 30, 1997 and 
     1996 was 34 percent and 32 percent, respectively. In determining its 
     effective tax rate for the quarter, the Company used its estimated 
     effective tax rate for the year. To the extent there are differences 
     between planned and actual net income, the components thereof, or changes
     in the tax laws effecting the Company, the effective tax rate could change.

          At June 30, 1997, the Company had approximately $4.2 million of 
     deferred tax assets. Included in this balance is approximately $0.7 million
     associated with stock options.  In the event these stock option related 
     deferred assets are not entirely realized, the unrealized balance would be
     reversed to shareholders' equity. Realization of the remaining deferred tax
     assets is dependent upon the Company generating sufficient taxable income 
     in future years to obtain the benefit from the reversal of temporary 
     differences and from tax credit carry forwards. 

6.   STOCK BASED COMPENSATION

          The Company grants stock options for a fixed number of shares to 
     employees, consultants, and directors with an exercise price equal to the
     fair value of the shares at the date of grant. The Company accounts for 
     stock option grants in accordance with APB Opinion No. 25, "Accounting for
     Stock Issued to Employees," and, accordingly, recognizes no compensation 
     expense for the stock option grants.

                                      -7-

<PAGE>

                              TCSI CORPORATION

7.   PER SHARE INFORMATION

          Earnings per share is computed using the weighted average number of
     shares outstanding and dilutive common stock equivalents from the Company's
     stock option plans, calculated using the treasury stock method. Such common
     stock equivalents are excluded from the loss per share calculation as their
     effect is anti-dilutive for the three and six month periods ending 
     June 30, 1997.

          In February 1997, the Financial Accounting Standards Board issued
     Statement No. 128, "Earnings Per Share," which is required to be adopted 
     on December 31, 1997. At that time, the Company will be required to change
     the method currently used to compute earnings per share and to restate all
     prior periods. Under the new requirements for calculating primary earnings
     per share, the dilutive effect of stock options will be excluded. The 
     impact is expected to result in no change in primary earnings (loss) per 
     share for the three and six months ended June 30, 1997 and the three months
     ended June 30, 1996. For the six months ended June 30, 1996, the impact is
     expected to result in an increase in primary earnings per share of $0.02 to
     $0.27 per share.  The impact of Statement 128 is not expected to be 
     material.

8.   LITIGATION

          In late 1996, two class action lawsuits on behalf of certain 
     shareholders were filed against the Company and various of its officers and
     directors. The suits allege violations of state securities laws during 1995
     and 1996. Management believes that the claims contained in the suits are 
     without merit and is vigorously defending such suits. In the opinion of 
     management, resolution of this litigation is not expected to have a 
     material adverse effect on the financial position of the Company. However,
     depending on the amount and timing, an unfavorable resolution of this 
     matter could materially affect the Company's future results of operations 
     or cash flows in a particular period.

          On May 16, 1997, Atmel Corporation made a claim under the 
     TCSI/Atmel Corporation Purchase Agreement dated November 14, 1996, 
     asserting that TCSI breached certain representations and warranties in 
     connection with the sale of its Consumer Product Division to Atmel 
     Corporation. Pursuant to the Purchase Agreement, $1,000,000 of the sale 
     price was escrowed to be available for claims arising from the transaction.
     Recently, Atmel has asserted that its damages exceed $3,000,000. Management
     disputes this claim and intends to initiate an arbitration proceeding to 
     obtain the release of the $1,000,000 escrow fund.  In the opinion of  
     management, resolution of this matter is not expected to have a material 
     adverse effect on the financial position of the Company. However, depending
     on the amount and timing, an unfavorable resolution of this matter could 
     materially affect the Company's future results of operations or cash flows 
     in a particular period.   

                                      -8-

<PAGE>

                             TCSI CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and 
        Results of Operations
        
          IN ADDITION TO HISTORICAL INFORMATION CONTAINED HEREIN, THIS 
     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
     OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING 
     STATEMENTS CONTAINED HEREIN ARE SUBJECT TO CERTAIN FACTORS THAT COULD CAUSE
     ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE 
     FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO, 
     THOSE DISCUSSED BELOW AND IN THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR 
     ENDED DECEMBER 31, 1996. 

     OVERVIEW

        TCSI Corporation provides integrated software products and services 
     for the global telecommunications industry. Since its inception in 1983, a
     significant portion of the Company's revenues has been earned from 
     telecommunications service providers and equipment manufacturers. Since
     1993, the Company's revenues have resulted primarily from sales of 
     object-oriented software products and services. During the second half of
     1996, the Company divested its non-telecom product lines by licensing its
     embedded software product lines and terminating its final 
     transportation-related development agreement. As a result, the Company's
     primary focus has been on offering software solutions to the 
     telecommunications industry. 

          The Company provides services to customers under level-of-effort and
     fixed price contracts. Service revenues are recognized on the 
     percentage-of-completion method based on the percentage of contract costs
     incurred in relation to total estimated contract costs. Changes to total 
     estimated contract costs, if any, are recognized in the period such changes
     are determined. The scope and size of many of the Company's system 
     solutions are large and complex, typically requiring delivery over several
     quarters. From time to time, customers have established payment milestones
     which can be achieved only after completion of the related services. In 
     some cases, customers have disputed fees charged for services provided. 
     The Company may write off receivable amounts if such disputes cannot be 
     resolved. Additionally, a significant portion of the Company's revenues and
     operating income has been, and is expected to continue to be, derived from
     software licensing fees from a limited number of customers. The Company 
     recognizes revenues from software licensing fees only after delivery of 
     software products and if there are no remaining significant post-delivery
     obligations. The Company recognizes revenues from software licensing fees
     with significant post-delivery obligations associated with the related 
     services contract on a percentage of completion basis.  

                                      -9-

<PAGE>

                             TCSI CORPORATION

          The licensing and implementation of the Company's software products 
     generally involves a significant commitment of resources by prospective 
     customers. As a result, the Company's sales process is subject to delays
     associated with lengthy approval processes typically accompanying such 
     significant capital expenditures. Accordingly, the Company is substantially
     dependent on its customers' decisions as to the timing and level of 
     expenditures and resource commitments. The variability in the timing of 
     such expenditures could cause material fluctuations in the Company's 
     business, operating results, and financial condition. In this regard, the 
     consistency of the Company's 1996 and 1997 quarterly results have been 
     adversely affected by customer delays in the purchase of software licenses.

          A substantial portion of the Company's revenues are derived from 
     the sale of the Company's software products and services to major 
     telecommunications service providers and equipment manufacturers. Due to 
     the complex nature of the advanced element, network, and service management
     systems being developed, successful deployment of these systems often 
     contains significant technological risks. The Company has in the past 
     relied and will in the future rely on its development and implementation 
     expertise. Additionally, development and implementation of these systems 
     often occurs over several quarters. There exists the risk that a change in 
     the customer's technology or business strategy during such lengthy 
     development and implementation periods may cause early termination of the 
     project or discontinuance of future phases. In this regard, the Company has
     experienced and expects to continue to experience significant fluctuations 
     in revenues and operating results on a quarterly basis due to termination, 
     cancellation, or non-renewal of agreements.

          Management believes that revenue growth is highly dependent upon the
     development and enhancement of software products that meet market needs.
     Prior to 1996, the Company's product development was primarily funded by 
     customers as part of the development of software applications for such 
     customers. The Company typically retained certain rights to developed 
     software products. In certain circumstances, however, the Company agreed to
     restrict its use of such products to certain markets and during certain 
     time periods. During 1996, the Company began internally funding a larger 
     portion of its product development costs. Management intends to target 
     product development spending at levels consistent with other software 
     companies. Furthermore, management expects that from time to time it may 
     acquire businesses, products, or technologies to enhance the Company's 
     current product offerings. To date, the Company has not consummated any 
     such acquisitions and the Company has no current agreements to effect any 
     such acquisitions. The failure to successfully evaluate, negotiate, and 
     effect such an acquisition could have a material adverse effect on the 
     Company's business, operating results, and financial condition.

                                      -10-

<PAGE>

                             TCSI CORPORATION

     RESULTS OF OPERATIONS
        
          REVENUES.  The Company generates revenues from the sale of its 
     software products and related services to the telecommunications industry. 
     For the three and six months ended June 30, 1997 and 1996, revenues were as
     follows:

<TABLE>
<CAPTION>

                                Three Months Ended June 30,   Six Months Ended June 30,
                                ---------------------------   -------------------------
                                    1997          1996            1997           1996
                                -----------   -------------   -----------   -----------
<S>                             <C>           <C>             <C>           <C>
TOTAL COMPANY REVENUES:
Services                        $   9,055      $  12,962      $  16,858      $  25,545
Software licensing fees               449          4,438          2,480          7,554
Equipment, non-telecom                 --          4,431             --          7,270
                                -----------   -------------   -----------   -----------

  Totals                        $   9,504      $  21,831      $  19,338      $  40,369
                                -----------   -------------   -----------   -----------
                                -----------   -------------   -----------   -----------

</TABLE>


<TABLE>
<CAPTION>

                                Three Months Ended June 30,   Six Months Ended June 30,
                                ---------------------------   -------------------------
                                    1997           1996            1997        1996
                                -----------   -------------   -----------   -----------
<S>                             <C>           <C>             <C>           <C>
TELECOM REVENUES:
Services                        $  9,055      $  11,153        $  16,796     $  20,221
Software licensing fees              449          2,145            2,059         4,662
                                -----------   -------------   -----------   -----------
 Totals                         $  9,504      $  13,298        $  18,855     $  24,883
                                -----------   -------------   -----------   -----------
                                -----------   -------------   -----------   -----------

</TABLE>

          Total Company revenues for the three months ended June 30, 1997
     decreased 56 percent  to $9.5 million from $21.8 million for the same
     period in 1996.  For the six months ended June 30, 1997, the Company's
     total revenues decreased 52 percent to $19.3 million from $40.4 million for
     the comparable 1996 period.  The decline in revenues for both periods is,
     in part, due to $8.5 million and $15.5 million of revenues generated for
     the three and six months ended June 30, 1996, respectively, by non-telecom
     business units which were discontinued in late 1996.  For the three months
     ended June 30, 1997, total telecom related revenues declined to $9.5
     million from $13.3 million, or 29 percent, and for the six months ended
     June 30,  telecom revenues decreased 24 percent  to $18.9 million in 1997
     compared to $24.9 million in 1996.  The decline in telecom services
     revenues is due primarily to delayed or canceled customer deployments. 
     Such delays in deployments additionally resulted in decreased telecom
     software licensing fees for the three and six months ended June 30, 1997. 
     The Company expects software licensing fees to continue to decline in the
     near term and to vary from period to period.*

__________________
*    This statement is a forward-looking statement reflecting current 
     expectations. There can be no assurance that the Company's actual future
     performance will meet the Company's current expectations. The Company 
     strongly encourages review of the section entitled "Factors Affecting 
     Operating Results and Market Price of Stock" commencing on page 17 for a
     discussion of factors that could affect future performance.

                                      -11-

<PAGE>

                               TCSI CORPORATION

          The following summarizes revenues by geographic location:

<TABLE>
<CAPTION>

                                    Three Months Ended       Six Months Ended,
                                         June 30,                 June 30,
                                    ------------------       -----------------
                                     1997       1996           1997      1996
                                    -------   --------       --------  -------
     <S>                            <C>       <C>            <C>       <C>
     TOTAL COMPANY:
     North America                    28%         62%           29%       61%
     Asia and the Pacific Rim         50          28            45        28
     Europe                           22          10            26        11
                                    -------   --------       --------  -------
                                     100%        100%          100%      100%
                                    -------   --------       --------  -------
                                    -------   --------       --------  -------

</TABLE>


<TABLE>


                                    Three Months Ended       Six Months Ended, 
                                         June 30,                 June 30,
                                    ------------------       -----------------
                                      1997      1996           1997      1996
                                    -------   --------       --------  -------
     <S>                            <C>       <C>            <C>       <C>
     TELECOM:
     North America                     28%       55%            29%       53%
     Asia and the Pacific Rim          50        29             45        29
     Europe                            22        16             26        18
                                    -------   --------       --------  -------
                                      100%      100%           100%      100%
                                    -------   --------       --------  -------
                                    -------   --------       --------  -------

</TABLE>

          Telecom revenues from Asia and the Pacific Rim and Europe increased 
     approximately 15 percent for both the three and six months ended 
     June 30, 1997. Such revenues were $6.9 million for the three months ended 
     June 30, 1997 compared to $5.9 million for the same period in 1996 and 
     $13.4 million for the first six months of 1997 compared to $11.7 million 
     for the comparable 1996 period. The increase is attributable to continued 
     relationships with existing customers resulting in revenues from follow-on
     contracts signed in early 1997. Telecom revenues from North America for 
     the three months ended June 30 declined to $2.6 million in 1997 from 
     $7.3 million in 1996. For the six months ended June 30, 1997 and 1996 
     telecom revenues from North America decreased to $5.4 million from 
     $13.2 million, respectively. As a result of low North American based 
     telecom bookings during 1996, telecom revenues from North America declined 
     in 1997, as the Company generally realizes services revenues involving 
     design, development, testing, and deployment over a twelve to eighteen 
     month period. The Company anticipates that revenues from Asia and the 
     Pacific Rim and European customers will continue to account for a 
     significant portion of its total revenue in future periods.*

__________________
*    This statement is a forward-looking statement reflecting current 
     expectations. There can be no assurance that the Company's actual future
     performance will meet the Company's current expectations. The Company 
     strongly encourages review of the section entitled "Factors Affecting 
     Operating Results and Market Price of Stock" commencing on page 17 for a
     discussion of factors that could affect future performance.

                                      -12-

<PAGE>

                               TCSI CORPORATION

          To date, a significant portion of revenues has been concentrated 
     among a limited number of customers. For the six months ended June 30, the
     concentration of total revenue from the Company's five largest customers 
     remained relatively unchanged at just over 60 percent for both 1997 and 
     1996. The concentration of revenue from the Company's five largest telecom
     customers for the six months ended June 30, declined to 61 percent in 1997
     from 68 percent in 1996. The decline is primarily due to the associated 
     decline in telecom revenues for the six months ended June 30, 1997 compared
     to the same period in 1996. Two customers each represented 15 percent or
     more of total revenues for the six months ended June 30, 1997. There can be
     no assurance that such customers will continue to place orders with the
     Company which equal or exceed the comparable levels for prior periods. See
     "Factors Affecting Operating Results and Market Price of Stock -- Customer
     Concentration."

          DIRECT COSTS OF SERVICES.  The Company incurs direct costs in the 
     development and deployment of its customer's software solutions.  The major
     components of direct costs are employee compensation, subcontractor fees,
     training costs, and other billable direct costs, including travel expenses.
     Direct costs also include an allocation for benefits, facilities, and 
     depreciation. For the three months ended June 30, 1997, costs of services 
     declined 25 percent to $5.1 million from $6.8 million for the same period 
     in 1996. For the six months ended June 30, costs of services declined to 
     $10.3 million in 1997 from $13.0 million in 1996, a 21 percent decrease. 
     The decrease is primarily due to the divestiture of the Company's 
     non-telecom business units in late 1996. As a percentage of services 
     revenues, cost of services were 57 percent for the three months ended 
     June 30, 1997 compared to 53 percent for the same period in 1996.  For the 
     six months ended June 30, costs of services as a percentage of services 
     revenues were 61 percent in 1997 compared to 51 percent in 1996.  As in 
     1996, during the first three months of 1997 the Company continued to invest
     in the completion of telecom software solutions. Such customer-related 
     investments have been reduced in the second quarter of 1997 bringing 
     directs costs to 54 percent of revenue for the three months ended 
     June 30, 1997. Direct costs of services for the three months ended 
     June 30, 1996 were 31 percent of revenues. The Company anticipates that 
     such investments will continue to decrease as a percentage of revenue 
     throughout the remainder of 1997.*

__________________
*    This statement is a forward-looking statement reflecting current 
     expectations. There can be no assurance that the Company's actual future
     performance will meet the Company's current expectations. The Company 
     strongly encourages review of the section entitled "Factors Affecting 
     Operating Results and Market Price of Stock" commencing on page 17 for a
     discussion of factors that could affect future performance.

                                      -13-

<PAGE>

                               TCSI CORPORATION

          PRODUCT DEVELOPMENT.  Product development includes employee 
     compensation, subcontractor fees, training costs, and other product 
     development costs, including an allocation for benefits, depreciation, and
     facilities. In 1996, the Company began internally funding its product 
     development costs. Prior to 1996, such product development had been 
     primarily funded by customers as part of the development of software 
     applications for the customer. In the second quarter of 1997, the Company
     invested $1.4 million or 14 percent of revenues on internally funded 
     product development compared with $1.5 million or 7 percent of revenues for
     the second quarter of 1996. For the six months ended June 30, 1997 the 
     Company invested $2.8 million or 15 percent of revenues on such product 
     development compared to $2.5 million or 6 percent in 1996. In 1997, the 
     funds have been used primarily for the development of the Company's 
     SolutionCore-TM- product, which includes the fifth release of Object 
     Services Package (OSP) and new releases of related development tools.  
     The Company expects to continue to invest in SolutionCore, as well as 
     its new components-based applications, SolutionSuites-TM-, throughout 
     1997, in amounts generally consistent with the current period's spending 
     levels.*

          SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES.  Selling expenses 
     include sales and marketing employee compensation, promotional material,
     trade shows, travel, and facilities expenses. General and administrative 
     costs include compensation costs related to executive management, finance, 
     and administrative personnel along with the other administrative costs 
     including recruiting, legal and accounting fees, insurance, and bad debt 
     expense. Selling, general, and administrative expenses decreased 27 percent
     to $4.3 million for the three months ended June 30, 1997 from $5.9 million 
     in the comparable 1996 period. For the six months ended June 30, selling, 
     general, and administrative expenses decreased 21 percent to $8.9 million 
     in 1997 from $11.2 million in 1996. The decrease is due to the 
     discontinuance of non-telecom business units in late 1996, as well as the 
     Company's efforts to reduce general and administrative costs through 
     efficiencies and the consolidation of its facilities. The Company's 
     resources devoted to sales and marketing have declined slightly over 1996 
     levels.  The Company expects to continue its efforts to reduce general and
     administrative costs throughout 1997.* As a percent of revenue, selling, 
     general, and administration expense was 45 percent for the three months 
     ended June 30, 1997 compared to 27 percent for the same 1996 period.  For 
     the six months ended June 30, such costs as a percent of revenue were 
     46 percent for 1997 and 28 percent for 1996.  The increase is primarily 
     attributed to the decline in revenues for the three and six months ended 
     June 30, 1997, compared to the same periods in 1996.

          NON-RECURRING SPECIAL ITEMS. The Company incurred an expense of $0.8 
     million in the second quarter of 1997 resulting from an adjustment to the 
     market-value of equipment held for resale related to the termination of a 
     non-telecom contract in the third quarter of 1996. Such charges for the six
     months ended June 30, 1997 were $1.1 million.  The Company expects to 
     conclude the sale of the equipment in the next six months and does not 
     anticipate future expenses associated with this equipment.*

__________________
*    This statement is a forward-looking statement reflecting current 
     expectations. There can be no assurance that the Company's actual future
     performance will meet the Company's current expectations. The Company 
     strongly encourages review of the section entitled "Factors Affecting 
     Operating Results and Market Price of Stock" commencing on page 17 for a
     discussion of factors that could affect future performance.

                                      -14-

<PAGE>

                               TCSI CORPORATION

          INCOME TAXES.  The Company records income taxes in accordance with 
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes." The Company's effective tax rate was 34 percent and 32 percent for
     the three and six months ended June 30, 1997 and 1996, respectively.  The 
     Company realized a tax benefit of $0.5 million for the quarter ended 
     June 30, 1997 compared to income tax expense of $1.3 million in 1996. For 
     the six months ended June 30, the Company realized a tax benefit of 
     $0.8 million in 1997 compared to income tax expense of $2.5 million in 
     1996.

          EARNINGS PER SHARE.  Shares used in the calculation of earnings (loss)
     per share (EPS) decreased to 21.3 million in 1997 from 22.2 million in
     1996 for the quarters ended June 30, resulting in EPS of $(0.04) and $0.13,
     respectively. For the six months ended June 30, shares used in the EPS 
     calculation increased to 21.3 million in 1997 compared to 21.0 million in 
     1996, resulting in EPS of $(0.07) and $0.25, respectively. For the three 
     and six months ended June 30, 1997 the calculation of EPS excludes 
     unexercised option shares as such shares would be anti-dilutive as a result
     of the net loss for the periods. Such exclusion of unexercised option 
     shares attributed to the decline in shares used in the calculation of EPS 
     for the second quarter of 1997 compared to the same period in 1996.  For 
     the six months ended June 30, 1997, the exclusion of unexercised option 
     shares was offset by options exercised during the first six months of 1997
     resulting in a net increase in the shares used in the calculation of EPS 
     compared to the first six months of 1996.

__________________
*    This statement is a forward-looking statement reflecting current 
     expectations. There can be no assurance that the Company's actual future
     performance will meet the Company's current expectations. The Company 
     strongly encourages review of the section entitled "Factors Affecting 
     Operating Results and Market Price of Stock" commencing on page 17 for a
     discussion of factors that could affect future performance.

                                      -15-

<PAGE>

                               TCSI CORPORATION




          LIQUIDITY AND CAPITAL RESOURCES

          Net cash generated from operating activities was $2.2 million for the
     six months ended June 30, 1997 compared to net cash used in operations of 
     $2.4 million for the comparable period in 1996. The increase in cash 
     generated from operations is primarily due to a decline in the Company's 
     accounts receivable. In the first period of 1996, accounts receivable 
     balances included a significant amount related to transportation and 
     wireless product lines which were discontinued in late 1996. As in the 
     past, the Company's operating cash flows in the future may be affected by
     fluctuating receivable balances. The Company's receivables are primarily 
     from large, credit-worthy customers and, as a result, the Company does not
     anticipate any significant default from a customer's inability to make a 
     payment for products and/or services received.*  

          Cash provided by financing activities declined $27.9 million to 
     $0.8 million for the six months ended June 30, 1997 compared to 
     $28.7 million for the comparable 1996 period. In early 1996, the Company
     raised funds through a follow-on public offering, realizing net proceeds 
     of approximately $25.9 million. For the six months ended June 30, 1997, 
     $2.3 million cash was used in investment activities compared to 
     $10.9 million used in investment activities for the same period in 1996. 
     In 1997, the six month period included the purchase of $9.1 million of 
     marketable securities and $11.5 million of maturities of marketable 
     securities compared to the purchase of $11.9 million of marketable 
     securities and $4.3 million of maturities for the comparable period in 
     1996. The net decrease in cash used in such investment activities also 
     included $5.3 million of cash used for capital expenditures and 
     leasehold improvements during the first six months of 1997 compared to 
     $3.1 million of cash used for capital expenditures for the comparable 1996
     period.  The increase in capital expenditures is primarily related to the 
     consolidation of the Company's facilities in northern California and the 
     Company's new office in the United Kingdom.  The Company expects such 
     expenditures to be significantly lower in the near term.*  The Company 
     currently has no significant commitments for capital expenditures, although
     management intends to support operational needs as necessary.

__________________
*    This statement is a forward-looking statement reflecting current 
     expectations. There can be no assurance that the Company's actual future
     performance will meet the Company's current expectations. The Company 
     strongly encourages review of the section entitled "Factors Affecting 
     Operating Results and Market Price of Stock" commencing on page 17 for a
     discussion of factors that could affect future performance.

                                      -16-

<PAGE>

                               TCSI CORPORATION

     FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK

          The Company operates in a rapidly changing environment that 
     involves numerous risks, some of which are beyond the Company's control.
     The following discussion highlights some of the risks the Company faces.

     POTENTIAL FLUCTUATIONS IN FUTURE OPERATING RESULTS

          The Company has experienced and expects to continue to experience 
     significant fluctuations in revenues and operating results on an annual or
     quarterly basis as a result of a number of factors, many of which are 
     beyond the control of the Company. These factors include the cancellation,
     modification, or non-renewal of service, license, or maintenance 
     agreements; the size and timing of significant customer engagements and 
     license fees; the relative proportion of services and software licensing 
     fees; personnel changes; capital spending patterns of the Company's 
     customers; concentration of the Company's customers; the lengthy sales 
     cycles of the Company's products and services; industry acceptance of the 
     Company's products and services; changes in operating expenses; new product
     introductions and product enhancements by the Company or its competitors; 
     the ability of the Company to develop, introduce, and market new products 
     and product enhancements on a timely basis; changes in pricing policies by
     the Company or its competitors; regulatory changes, currency fluctuations, 
     and general economic factors. These factors are difficult to forecast, and 
     these or other factors could have a material adverse effect on the 
     Company's business, operating results, and financial condition.

          A significant portion of the Company's operating income has been 
     derived from software licensing fees from a limited number of customers. 
     Variability in the timing of such license fees has caused and may continue
     to cause material fluctuations in the Company's business, operating 
     results, and financial condition. The Company's products and services 
     generally require significant capital expenditures by customers as well as 
     the commitment of resources to implement, monitor, and test the Company's 
     enhancements to such customers systems. Accordingly, the Company is 
     substantially dependent on its customers' decisions as to the timing and 
     level of such expenditures and resource commitments. In addition, the 
     Company typically realizes a significant portion of license revenues in 
     the last weeks or even days of a quarter. As a result, the magnitude of 
     quarterly fluctuations may not become evident until late in, or after the
     close of, a particular quarter. The Company's expenses are based in part 
     on the Company's expectations as to future revenue levels and to a large 
     extent are fixed in the short-term. If revenues do not meet expectations, 
     the Company's business, operating results, and financial condition are 
     likely to be materially adversely affected. In particular, because only a 
     small portion of the Company's expenses varies with revenues, net income 
     may be disproportionately affected by a reduction in revenues. As a result,
     the Company believes that period-to-period comparisons of its operating 
     results are not necessarily meaningful and should not be relied upon as 
     indications of future performance. Due to the foregoing factors, it is 
     likely that in some future period, the Company's revenues or operating 
     results will be below the expectations of public market analysts and 
     investors. In such event the price of the Company's common stock could be 
     materially adversely affected.


                                      -17-

<PAGE>

                               TCSI CORPORATION

     LENGTHY SALES AND IMPLEMENTATION CYCLES

          The Company's products are typically intended for use in 
     applications that may be critical to a customer's business. The licensing 
     and implementation of the Company's software products generally involves a
     significant commitment of resources by prospective customers. As a result,
     the Company's sales process is often subject to delays associated with 
     lengthy approval processes that typically accompany significant capital 
     expenditures. For these and other reasons, the sales cycles associated with
     the license of the Company's products is often lengthy (averaging 
     approximately nine to twelve months) and subject to a number of significant
     delays over which the Company has little or no control. In addition, the 
     Company does not recognize services revenue until the services are 
     rendered. The time required to implement the Company's products can vary 
     significantly with the needs of its customers and is generally a process 
     that extends for several months. Because of their complexity, larger 
     implementations may take multiple quarters to complete. From time to time 
     the Company has provided services to implement certain large projects, and,
     although no contractual basis exists for the customer to do so, certain 
     customers have delayed payment of a portion of service fees and in some 
     cases have disputed the fees charged. There can be no assurance the Company
     will not experience additional delays or disputes regarding payment in the 
     future, particularly if the Company receives orders for large, complex 
     installations. Therefore, the Company believes that its quarterly and 
     annual operating results and financial condition are likely to vary 
     significantly in the future.

     ACCEPTANCE OF THE COMPANY'S PRODUCTS; PRODUCT DEVELOPMENT RISKS

          A substantial portion of the Company's revenues are derived from 
     the sale of the Company's products and services which provide software 
     solutions to major corporations in the worldwide telecom services and 
     equipment industries. Although many telecom companies currently seek to 
     integrate their business operation systems and network operation systems, 
     there can be no assurance that these or other service providers will 
     continue to seek the integration of such systems or that such companies 
     will use the Company's products. Due to the complex nature of the 
     advanced element, network, and service management systems developed by the 
     Company, the Company has in the past relied and will in the future rely on 
     its development and implementation expertise. The Company continues to 
     develop distributed object software products that reduce the customization
     necessary to fully integrate customers' systems. There can be no assurance,
     however, that the Company will continue to successfully develop and market
     such products or, if successful, that the revenue from such products will
     compensate for any concurrent loss of development and implementation 
     service revenues. The failure by the Company to successfully develop and 
     market such products and technologies would have a material adverse effect
     on its business, operating results, and financial condition.

                                      -18-

<PAGE>

                               TCSI CORPORATION

          Revenues attributable to the Company's distributed object software 
     products and services have in the past accounted for and are expected to 
     continue to account for a substantial majority of the Company's revenues.
     Accordingly, the Company's future business, operating results, and 
     financial condition are significantly dependent upon the continued market 
     acceptance of distributed object software products and services in general
     and the Company's portfolio of products and services in particular. There 
     can be no assurance that distributed object technology will continue to 
     achieve market acceptance or that the Company will be successful in 
     developing, introducing, or marketing improvements to its distributed 
     object products. Moreover, the life cycle of distributed object products 
     is difficult to estimate due in large part to the recent emergence of many
     of the Company's markets, the effect of future product enhancements, and 
     competition. A decline in the demand for distributed object technology as 
     a result of new or existing competing technologies, or other factors would
     have a material adverse effect on the Company's business, operating 
     results, and financial condition.

          Prior to 1996, the Company's product development was primarily 
     funded by customers as part of the development of software applications for
     such customers. The Company typically retained certain rights to developed
     software products. In certain circumstances, however, the Company agreed to
     restrict its use of such products to certain markets and during certain 
     time periods. Management believes that continued revenue growth is highly
     dependent upon the development and enhancement of software products that 
     meet market needs. Prior to 1996, internally funded product development 
     costs were nominal. Management intends to target product development 
     spending at amounts consistent with other software companies. There can be 
     no assurance, however, that such funding will result in the successful 
     introduction of new products.

     CUSTOMER CONCENTRATION

          To date, a significant portion of the Company's revenues have been 
     concentrated among a limited number of customers. In particular, the 
     Company anticipates that, in 1997, a large portion of revenues will be 
     derived from contracts negotiated through a large equipment manufacturer 
     in Asia.  The Company anticipates that it will continue to experience 
     significant customer concentration. There can be no assurance that such 
     customers or any other customers will in the future continue to place 
     orders with the Company which equal or exceed the comparable levels for 
     prior periods. In addition, the Company's customers typically designate 
     one individual to procure network management software. If any of such 
     individuals were terminated, transferred, or replaced, the Company would 
     be vulnerable to cancellation of an order if, for example, the Company's 
     competitors had pre-existing relationships with such individual's 
     replacement. As a result of these factors, the Company's business, 
     operating results, and financial condition could be materially adversely 
     affected.

                                      -19-

<PAGE>

                               TCSI CORPORATION

     PRODUCT DEFECTS

          The Company provides complex software products for major 
     corporations. The development and enhancement of such software entails 
     substantial risks of product defects. The Company has in the past 
     identified software defects in certain of its products. There can be no
     assurance that errors will not be found in existing or new products or 
     releases after commencement of commercial licensing, which may result in 
     delay or loss of revenue, loss of market share, failure to achieve market
     acceptance, or may otherwise adversely impact the Company's business, 
     operating results, and financial condition.

     IMPLEMENTATION RISKS

          As characteristic of companies providing software solutions to the 
     telecommunications industry, the complexities involved in implementing the
     Company's software solutions entail risks of performance failures. In some 
     cases the Company has agreed to accept some financial responsibility, in 
     the form of negotiated penalty amounts, should the Company's products not 
     meet specifications or cause customer system downtime. There can be no 
     assurance that the Company will not encounter delays or other difficulties
     due to such complexities. Because the Company's customer base consists of a
     relatively limited number of customers, the reputational harm resulting 
     from product defects or implementation errors would be damaging to the 
     Company. Any such occurrence could have a material adverse effect upon the 
     Company's business, operating results, and financial condition.

                                      -20-

<PAGE>

                               TCSI CORPORATION

     INTERNATIONAL SALES

          Revenues outside of North America accounted for just over 70 
     percent of the Company's total revenues for the three and six months ended
     June 30, 1997. The Company expects that international revenues will 
     continue to account for a significant portion of its total revenue in 
     future periods. The Company intends to penetrate additional international 
     markets and to further expand its existing international operations. The 
     Company's international business involves a number of inherent risks, 
     including longer receivables collection periods and greater difficulty in 
     accounts receivable collection, difficulty in staffing and managing foreign
     operations, a longer sales cycle than with domestic customers, potentially 
     unstable political and economic conditions, language barriers, cultural 
     differences in the conduct of business, seasonality due to the slowdown in
     European business activity during the Company's third fiscal quarter, 
     unexpected changes in regulatory requirements, including a slowdown in the 
     rate of privatization of telecom service providers, reduced protection for 
     intellectual property rights in some countries, potentially adverse tax 
     consequences, tariffs, and other trade barriers. In addition, access to 
     foreign markets is often difficult due to the established relationships 
     between government owned or controlled communications companies and local 
     suppliers of communications products. There can be no assurance the Company
     will be able to successfully penetrate such foreign markets. In addition, 
     there can be no assurance that the Company will be able to sustain or 
     increase revenue derived from international licensing and services or that 
     the foregoing factors will not have a material adverse effect on the 
     Company's future international business, and consequently, on the Company's
     business, operating results, and financial condition.

          International sales also entail risks associated with currency 
     fluctuations. The Company has attempted to reduce the risk of fluctuations
     in currency exchange rates associated with international revenue by pricing
     its products and services in United States dollars whenever possible. The 
     Company, however, generally pays the expenses of its international 
     operations in local currencies and generally does not engage in hedging 
     transactions with respect to such obligations. Upward fluctuations in 
     currency exchange rates could cause the Company's products to become 
     relatively more expensive to foreign customers, leading to a reduction in 
     sales or profitability. Furthermore, future international activity may 
     result in foreign currency denominated sales, and, in such event, gains 
     and losses on the conversion to U.S. dollars of accounts receivable and 
     accounts payable arising from international operations may contribute to 
     fluctuations in the Company's operating results. In order to reduce the 
     risk of exchange rate losses from foreign currency denominated sales, the 
     Company may engage in hedging transactions. There can be no assurance that
     such hedging transactions will not have a material adverse effect on the 
     Company's business, operating results, and financial condition.

                                      -21-

<PAGE>

                               TCSI CORPORATION

     DEPENDENCE ON TELECOMMUNICATIONS CARRIERS; GOVERNMENT REGULATION

          The Company's principal customers are concentrated among major 
     telecom carriers, including regional bell operating companies (RBOCs). Such
     companies operate within the telecom industry, which has recently been 
     characterized by intense competition in the development of new technology,
     equipment, and customer services. The Company believes that large telecom 
     carriers have become increasingly cautious in making significant capital 
     expenditures, due in part to increased competition from smaller, rapidly 
     developing alternative carriers, decreasing prices for telecom services and
     equipment, and regulatory rate structures that have become less dependent 
     on the level of carriers' capital expenditures. These and other factors 
     have in the past and may in the future cause such customers to experience 
     significant fluctuations in capital expenditures for network management 
     software solutions.

          The telecom industry is subject to extensive regulation in the 
     United States and other countries, and the Company's customers generally 
     must receive regulatory approvals in conducting their businesses. Although
     the telecom industry has recently been characterized by government 
     deregulation, there can be no assurance that deregulatory trends will 
     continue or that reregulation will not occur. Government regulatory 
     policies are likely to continue to have a major impact on the Company's 
     ability to attract and retain customers. For example, regulatory 
     authorities may continue to oversee the pricing of new and existing telecom
     services, which, in turn impact carriers' ability to make significant 
     capital expenditures. The enactment by federal, state, or foreign 
     governments of new laws or regulations or change in the interpretation of 
     existing regulations could adversely affect the Company's customers, and 
     thereby affect the Company's business, operating results, and financial 
     condition.

     COMPETITION

          The Company offers products and services in the evolving markets 
     for telecom network management software and distributed object technology.
     Competition in this market is intense and is characterized by rapidly 
     changing technologies, evolving industry standards, changing regulatory 
     requirements, frequent new product introductions, and rapid changes in 
     customer requirements. To maintain and improve its competitive position, 
     the Company must continue to develop and introduce, in a timely and 
     cost-effective manner, new services, products, and product features that 
     keep pace with competitive offerings by telecom companies and independent
     software vendors, technological developments, and emerging industry 
     standards in the development of software solutions. The principal 
     competitive factors in the Company's market are quality, performance, 
     price, customer support, corporate reputation, and product features such 
     as scalability, interoperability, functionality, customizability, and ease 
     of use.

                                       -22-

<PAGE>

                               TCSI CORPORATION

          The Company's current and prospective competitors offer a variety 
     of solutions to address telecom software needs. The Company faces 
     competition in each of the three functional areas the Company believes 
     are necessary for the delivery of complete network management software 
     solutions: development environments, object frameworks, and customized 
     applications. Because certain of the Company's competitors focus only on 
     one of these functional areas, such competitors may be in a position to 
     develop competitive products targeted solely at the segment they serve. 
     These competitors include major communications service providers, RBOCs, 
     systems integrators, and equipment manufacturers, each of which has 
     substantially greater financial, manufacturing, technical, marketing, 
     distribution, and other resources, greater name recognition, and 
     longer-standing relationships with customers than does the Company. 
     Furthermore, many of the Company's current and potential customers 
     continuously evaluate whether to design, develop, and support internally 
     the software solutions provided by the Company, thereby obviating the need
     for relying on an outside vendor, such as the Company. There can be no 
     assurance that the Company's current or potential competitors will not 
     develop products comparable or superior to those developed by the Company
     or adapt more quickly than the Company to new technologies, evolving 
     industry standards, new product introductions, or changing customer 
     requirements.

     RAPID TECHNOLOGICAL CHANGE; NEED TO MANAGE PRODUCT TRANSITIONS

          The market for the Company's products is characterized by rapidly 
     changing technologies, evolving industry standards, changing regulatory 
     environments, frequent new product introductions, and rapid changes in 
     customer requirements. The introduction of products embodying new 
     technologies and the emergence of new industry standards and practices can 
     render existing products obsolete and unmarketable. As a result, the life 
     cycles of the Company's products are difficult to estimate. This poses 
     substantial risks for the Company because the Company's products and 
     software solutions typically have lengthy development and sales cycles. The
     Company's future success will depend on its ability to enhance its existing
     products and to develop and introduce, on a timely and cost-effective 
     basis, new products and product features that keep pace with technological
     developments and emerging industry standards and address the evolving needs
     of its customers. There can be no assurance that the Company will be 
     successful in developing and marketing new products or product features 
     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, and marketing of these new 
     products and features, or that its new products or product features will 
     adequately meet the requirements of the marketplace and achieve market 
     acceptance. If the Company is unable, for technological or other reasons, 
     to develop and introduce enhancements of existing products or new products
     in a timely manner, the Company's business, operating results, and 
     financial condition will be materially adversely affected.

                                      -23-

<PAGE>

                               TCSI CORPORATION

          The Company's products are designed to operate on a variety of 
     hardware and software platforms and with a variety of databases employed by
     its customers in their networks. The Company must continually modify and 
     enhance its products to keep pace with changes in hardware and software 
     platforms and database technology. As a result, uncertainties related to 
     the timing and nature of new product announcements, introductions or 
     modifications by systems vendors, particularly Sun Microsystems, Inc. and 
     Hewlett Packard Company, and by vendors of relational database software, 
     particularly Oracle Corporation, Sybase, Inc., and Informix Corporation, 
     could have a material adverse impact on the Company's business, operating 
     results, and financial condition. In addition, the failure of the Company's
     products to operate across the various existing and evolving versions of 
     hardware and software platforms and database environments employed by 
     consumers would have a material adverse effect on the Company's business, 
     operating results, and financial condition.

          The introduction or announcement of products by the Company or one 
     or more of its competitors embodying new technologies, or changes in 
     industry standards or customer requirements, could render the Company's 
     software products and solutions obsolete or unmarketable. The introduction
     of new or enhanced versions of its products requires the Company to manage
     the transition from older products in order to minimize disruption in 
     customer ordering. There can be no assurance that the introduction or 
     announcement of new product offerings by the Company or one or more of its
     competitors will not cause customers to defer licensing of existing Company
     products or engaging the Company's services. Any deferral of license or 
     service revenues could have a material adverse effect on the Company's 
     business, operating results, and financial condition.

     PROTECTION OF INTELLECTUAL PROPERTY

          The Company's success and ability to compete is dependent in part 
     upon its proprietary software technology. The Company relies on a 
     combination of patent, trade secret, copyright and trademark laws, 
     nondisclosure and other contractual agreements, and technical measures 
     to protect its proprietary rights. To date, the Company has patents and 
     patents pending related to its telecom products. The Company expects to 
     continue to file patent applications where it believes it is appropriate 
     to protect its proprietary technologies. 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. There can be no assurance that the steps 
     taken by the Company to protect its proprietary technology will prevent 
     misappropriation of such technology, and such protections may not preclude 
     competitors from developing products with functionality or features similar
     to the Company's products. In addition, effective patent, copyright, 
     trademark, and trade secret protection may be unavailable or limited in 
     certain foreign countries. The failure of the Company to protect its 
     proprietary information could have a material adverse effect on the 
     Company's business, operating results, and financial condition.

                                      -24-

<PAGE>

                               TCSI CORPORATION

          While the Company believes that its products and trademarks and 
     their use by customers does not infringe upon the proprietary rights of 
     third parties, there can be no assurance that the Company will not receive
     future communications from third parties asserting that the Company's 
     products or their use by customers infringe, or may infringe, the 
     proprietary rights of such third parties. The Company expects that software
     product developers will be increasingly subject to infringement claims as 
     the numbers of products and competitors in the Company's industry segment 
     grows and the functionality of products in different industry segments 
     overlaps. Any such claims, including meritless claims, could result in 
     costly, time-consuming litigation, and diversion of technical and 
     management personnel. In the event any third party were to make a valid 
     claim and a license were not made available on commercially reasonable 
     terms, or if the Company were unable to develop non-infringing alternative 
     technology, the Company's business, operating results, and financial 
     condition could be materially adversely affected.

          In addition, certain of the Company's customers regard the 
     solutions provided by the Company to be proprietary to such customers and 
     may attempt to prohibit the Company from using or otherwise benefiting from
     certain of the advances made in developing such solutions. Although the 
     Company intends to increasingly standardize its integration solutions 
     through the use of object-oriented software products, there can be no 
     assurance that the prohibition or restrictions imposed by certain customers
     of the use of certain intellectual property will not adversely affect the 
     Company's business, operating results, and financial condition.

          The Company relies on certain software that it licenses from third 
     parties, including software that is integrated with internally developed 
     software and used in the Company's products to perform key functions. There
     can be no assurance that these third party software licenses will continue 
     to be available to the Company on commercially reasonable terms or that 
     such licenses will not be terminated. Although the Company believes that 
     alternative software is available from other third-party suppliers, the 
     loss of or inability to maintain any of these software licenses or the 
     inability of the third parties to enhance their products in a timely and 
     cost-effective manner could result in delays or reductions in product 
     shipments by the Company until equivalent software could be developed 
     internally or identified, licensed, and integrated, which would have a 
     material adverse effect on the Company's business, operating results, and 
     financial condition.

     DEPENDENCE ON KEY PERSONNEL

          The Company's future growth and success depends to a significant 
     extent on the ability to attract and retain qualified managerial, sales, 
     and software engineering personnel.  The Company has at times experienced 
     and continues to experience difficulty in attracting and retaining 
     qualified personnel.  The Company's future success will also depend on the
     ability of its current and future management personnel to operate 
     effectively, both independently and as a group. The Company has recently 
     experienced a change in and temporary loss of executive management 
     personnel. Competition for the hiring of such personnel in the software 
     industry is intense, and there can be no assurance that the Company will 
     be successful in locating candidates with appropriate qualifications.  
     Failure to attract and retain key personnel could have a material adverse 
     effect on the Company's business, operating results, and financial 
     condition.

                                      -25-

<PAGE>

                               TCSI CORPORATION

     RISKS ASSOCIATED WITH ACQUISITIONS

          The Company from time to time evaluates potential acquisitions of 
     complementary businesses, products, and technologies. To support its growth
     plans, the Company may acquire companies that have a significant installed 
     base of products not yet offered by the Company, have strategic 
     distribution channels or customer relationships, or otherwise present 
     opportunities which management believes enhance the Company's competitive 
     position. Such acquisitions would subject the Company to numerous risks, 
     including risks associated with the integration into the Company of new 
     employees and technology. Moreover, the negotiation and acquisition of such
     transactions involve the diversion of substantial management resources and
     the evaluation of such opportunities requires substantial diversion of 
     engineering and technological resources. In addition, transactions 
     involving the issuance by the Company of common stock or other securities 
     could result in immediate and substantial dilution to the Company's 
     existing shareholders, large one-time write-offs, or the creation of 
     goodwill or other intangible assets that could result in amortization 
     expenses. To date, the Company has not consummated an acquisition 
     transaction. The failure to successfully evaluate, negotiate, and effect 
     acquisition transactions could have a material adverse effect on the 
     Company's business, operating results, and financial condition.

     POTENTIAL VOLATILITY OF STOCK PRICE

          The market price of the shares of the Company's common stock has 
     been and is likely to continue to be highly volatile and may be 
     significantly affected by factors such as actual or anticipated 
     fluctuations in the Company's business, operating results, and financial 
     condition, announcements of technological innovations, new products, or new
     contracts by the Company or its competitors, developments with respect to 
     proprietary rights, adoption of new accounting standards affecting the 
     software industry, general market conditions, and other factors. In 
     addition, the stock market has from time to time experienced significant 
     price and volume fluctuations that have particularly affected the market 
     prices for the common stocks of technology companies. These types of broad
     market fluctuations may adversely affect the market price of the Company's
     common stock. In the past, following periods of volatility in the market 
     price of a company's securities, securities class action litigation has 
     often been initiated against such company. Such litigation could result in 
     substantial costs and a diversion of management's attention and resources, 
     which could have a material adverse effect upon the Company's business, 
     operating results, and financial condition. In this regard, in late 1996, 
     two class action lawsuits on behalf of certain of the Company's 
     shareholders were filed against the Company and various of its officers and
     directors. The suits allege violations of state securities laws during 1995
     and 1996. Management believes that the lawsuits are without merit and is 
     contesting them.

                                      -26-

<PAGE>

                               TCSI CORPORATION

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

          On November 4, 1996, a securities class action complaint, 
     Copperstone et al. v. TCSI Corporation, et al., No. 0775199-2, was filed in
     the Superior Court of California, County of Alameda, against the Company 
     and certain of its directors and current and former officers. The complaint
     alleged that, between October 11, 1995, and September 25, 1996, the 
     defendants violated California state law by making false or misleading 
     statements of material fact about the Company's prospects, and by failing 
     to follow certain generally accepted accounting principles. Specifically, 
     the complaint alleged causes of actions for violation of Sections 25400 
     and 25500 of the California Corporations Code, Sections 1709-1710 of the 
     California Civil Code, and Section 17200 of the California Business & 
     Professions Code. The complaint sought an unspecified amount of damages.  
     Defendants filed a motion to dismiss the claims; in April 1997 the court 
     dismissed with leave to amend as to the Corporations Code and Civil Code 
     claims and the Court dismissed the Business & Professions Code claim with 
     prejudice.  On June 2, 1997, the plaintiffs filed and amended complaint 
     alleging one cause of action alleging the defendants violated California 
     state law by making false and misleading statements of material fact about
     the Company's prospects, and by failing to follow certain generally 
     accepted accounting principles. In addition, the defendants filed a demur, 
     which is scheduled to be argued on September 4, 1997.  The Company believes
     there is no merit to the case and intends to defend the case vigorously.

          On November 20, 1996, a putative shareholder derivative complaint, 
     Tinkler v. Hasler et al. and TCSI Corporation, No. 776206-4, was filed in 
     the Superior Court of California, County of Alameda, against certain 
     officers and directors of the Company and, nominally, against the Company. 
     The derivative complaint is based on the allegations of the Copperstone 
     action, and alleges that, if the individual defendants engaged in the 
     wrongdoing alleged in Copperstone, they also violated their duties to the 
     Company. Specifically, the derivative complaint alleged causes of action 
     for breach of fiduciary duty, violations of Sections 25402 and 25502.5 of 
     the California Corporations Code, and unjust enrichment. The derivative 
     complaint sought an unspecified amount of damages, a declaration that the 
     individual defendants violated their duties to the Company, and other 
     remedies purportedly on behalf of the Company. On March 21, 1997, the 
     Company and the individual defendants demurred to the derivative complaint.
     On April 1, 1997, the Superior Court of California, the county of Alameda, 
     sustained nominal defendant TCSI's demur to the derivative complaint with 
     leave to amend. On July 21, 1997, the plaintiff filed an amended derivative
     complaint alleging that if the individual defendants engaged in the wrong 
     doing alleged in Copperstone, they also violated their duties to the 
     Company. The Company and the individual defendants intend to respond to 
     this amended derivative complaint by filing an amended demur.  The Company
     believes there is no merit to the case and intends to defend the case 
     vigorously.

          On May 16, 1997, Atmel Corporation made a claim under the 
     TCSI/Atmel Corporation Purchase Agreement dated November 14, 1996, 
     asserting that TCSI breached certain representations and warranties in 
     connection with the sale of its Consumer Product Division to Atmel 
     Corporation. Pursuant to the Purchase Agreement, $1,000,000 of the sale 
     price was escrowed to be available for claims arising from the transaction.
     Recently, Atmel 

                                      -27-

<PAGE>

                               TCSI CORPORATION

     has asserted that its damages exceed $3,000,000.  Management disputes this
     claim and intends to initiate an arbitration proceeding to obtain the 
     release of the $1,000,000 escrow fund.

          The Company believes the resolution of the matters cited above will 
     not have a material adverse effect on its financial position.  However, 
     depending on the amount and timing of any unfavorable resolution of these 
     lawsuits, it is possible that the Company's future results of operations or
     cash flows could be materially affected in a particular period.

                                      -28-

<PAGE>

                               TCSI CORPORATION

Item 4.   Submission of Matters to Vote of Security Holders

     An annual meeting of shareholders was held in Alameda, California on 
     May 7, 1997.  The following matters were voted upon by the shareholders:

     The following persons, who were the only nominees, were re-elected as 
     directors to hold office for one year and received the following number of 
     votes:

<TABLE>
<CAPTION>

                                                For         Against       Withheld
                                            ----------    -----------     --------
     <S>                                    <C>           <C>             <C>
     Roger A. Strauch(1)                    17,663,286         -           131,310
     John C. Bolger                         17,687,386         -           107,210
     William A. Hasler                      17,686,336         -           108,260
     David G. Messerschmitt, Ph.D.          17,687,036         -           107,560
     Daniel H. Miller(1)                    16,833,436         -           961,160
     Harvey E. Wagner                       17,684,486         -           110,110

</TABLE>

     A proposal to approve the TCSI Employee Stock Purchase Plan was approved by
     the shareholders.  The following votes were cast as to such proposal: 
     For: 11,354,452; Against: 850,341; Abstain: 66,340; No Vote: 5,523,463.

     A proposal to ratify the selection of Ernst & Young LLP as independent 
     auditors for the Company for the fiscal year ending December 31, 1997, was
     approved by the shareholders.  The following votes were cast as to such 
     proposal:  For: 17,700,596; Against: 54,310;  Abstain: 39,690.

__________________

(1)  Roger A. Strauch, chairman of the board  and chief executive officer, 
     resigned from the board of directors and the Company effective 
     June 30, 1997. Daniel H. Miller also resigned from the board of directors
     effective June 30, 1997. In addition, Ram A. Banin, president and chief 
     operating officer, was appointed chief executive officer and president by 
     the board of directors and was also elected to serve on the board of 
     directors effective July 1, 1997.

                                      -29-

<PAGE>

                               TCSI CORPORATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits Required by Item 601 of Regulation S-K.


<TABLE>
<CAPTION>

        Exhibit Number        Document Description                    Page Number
     ------------------------------------------------------------------------------
        <S>              <C>                                          <C>
           10.27         Arrangements with Executive Officer               32
                         Amendment to Employment Agreement
     
           10.28         Arrangements with Executive Officer               37
                         Employment Agreement
     
           10.29         Arrangements with Executive Officer               40
                         Termination Agreement
     
           11.1          Statement re: computation of per share earnings   48
     
           27            Financial Data Schedule                           49
     

</TABLE>


(b)  Reports on Form 8-K filed in the second quarter of 1997.

     (i)   Press release dated June 17, 1997, "TCSI Announces Management 
           Changes"
        
     (ii)  Press release dated June 4, 1997, "TCSI and DSI Partner To Provide 
           State-of-the-Art Telecommunications Solutions to Israeli Service 
           and Equipment Suppliers; TCSI Addresses International Telecom 
           Opportunities Through Strategic Alliances with Industry Leaders"
        
     (iii) Press release dated April 28, 1997, "TCSI Teams with SMARTS to 
           Provide Sophisticated, Automated Network Management Solutions;  
           Leading Telecom Software Provider Adds Advanced Event Correlation 
           to Next Generation of Products"
        
     (iv)  Press release dated April 22, 1997, "TCSI Corporation Expands 
           Operations to Alameda, California; Leading Telecom Software Provider 
           Hosts Grand Opening at New Silicon Island Facility April 24"
        
     (v)   Press release dated April 17, 1997, "TCSI Corporation Reports First 
           Quarter Results"

                                      -30-

<PAGE>

                               TCSI CORPORATION

                                  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 authorized.

                                   TCSI Corporation                
                                   -------------------------------------------
                                   (Registrant)                    

     August 13, 1997               /s/ Ram A. Banin                
-----------------------------      -------------------------------------------
          Date                     Ram A. Banin, President and Chief Executive
                                   Officer, and Acting Chief Financial Officer



                                      -31-