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, 1998

[ ]     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 0-27988


                      MICROWARE SYSTEMS CORPORATION
          (Exact name of registrant as specified in its charter)
 
         IOWA                                     42-1073916
  (State of incorporation)          (I.R.S. Employer Identification No.)

                 1500 N.W. 118TH ST. DES MOINES, IOWA  50325
                   (Address of principal executive office)

                            (515) 223-8000
             (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period 
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

            Yes   X        No
               ------         ------

Indicate the number of shares outstanding of each of the issuer's 
classes of common stock, as of the latest practicable date.

   COMMON STOCK:  14,584,692 SHARES OUTSTANDING AS OF JUNE 30, 1998

<PAGE>
                       MICROWARE SYSTEMS CORPORATION

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The accompanying financial information is unaudited but, in the opinion
of management, reflects all adjustments (which include only normally
recurring adjustments) necessary for a fair presentation of the results
for the periods shown.  The unaudited consolidated financial statements
and analyses should be read in conjuction with the audited consolidated
financial statements and notes thereto for the year ended March 31, 1998
included in the Annual Report on Form 10-K previously filed with the
Securities and Exchange Commission.

The results for the quarter ended June 30, 1998 are not necessarily
indicative of the results to be expected for the entire year.

<PAGE>
                     MICROWARE SYSTEMS CORPORATION
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (UNAUDITED)
               ($ in thousands, except per share amounts) 
<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED JUNE 30,
                                           ---------------------------- 
                                               1998           1997
                                             --------       -------- 
<S>                                          <C>            <C>
Revenues: 
   Product                                   $  3,600       $  2,711
   Services                                     1,611          1,368
                                             --------       --------
                                                5,211          4,079

Cost of revenues:	
   Product                                        622            578
   Services                                       705            703
                                             --------       --------
                                                1,327          1,281
                                             --------       --------
       Gross profit                             3,884          2,798
 
Operating expenses:
Research & development                          1,738          1,881
Sales & marketing                               2,765          2,463
General & administrative                          653            780
                                             --------       --------
       Total operating expenses                 5,156          5,124
                                             --------       --------
       Operating loss                          (1,272)        (2,326)
                                             --------       --------

Other income and (expense):
Foreign currency loss, net                        (29)           (13)
Interest income                                   158            221
Interest expense                                 (134)           (30)
                                             --------       --------
                                                   (5)           178
                                             --------       --------
       Loss before income tax expense          (1,277)        (2,148)
 Income tax expense                               111             34
                                             --------       --------
       Net loss                              $ (1,388)      $ (2,182)
                                             ========       ========
Loss per share                               $  (0.10)      $  (0.15)
                                             ========       ========
Shares used in per share 
   calculation-basic                           14,569         14,120
                                             ========       ========
Diluted loss per share                       $  (0.10)      $  (0.15)
                                             ========       ========
Shares used in per share 
   calculation-diluted                         14,569         14,120
                                             ========       ========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                   MICROWARE SYSTEMS CORPORATION
                    CONSOLIDATED BALANCE SHEETS
            ($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                             June 30,       March 31,
                                               1998           1998
                                            (unaudited)
                                             ---------      ---------
           Assets
<S>                                          <C>            <C>
Current assets:
   Cash and cash equivalents                 $   1,591      $   2,009
   Short-term investments                        9,659         11,611
   Trade receivables, net of allowance for
     doubtful accounts of $387 and $502          4,431          4,064
   Income taxes receivable                           3              6
   Inventories                                      68             66
   Prepaid royalties                               346            370
   Prepaid expenses and other current assets       838            780
   Deferred tax assets                             408            465
                                             ---------      ---------
       Total current assets                     17,344         19,371

Property and equipment:
   Land and improvements                         2,529          2,529
   Building                                      8,426          8,426
   Furniture, fixtures & equipment               3,438          3,264
   Research and development equipment            2,598          2,571
   Leasehold improvements                           50             50
                                             ---------      ---------
                                                17,041         16,840
   Accumulated depreciation and amortization     3,278          3,176
                                             ---------      ---------
       Net property and equipment               13,763         13,664

Other assets:
   Intangible assets, net of amortization        2,884          3,050
   Deposits and other                            1,399          1,414
                                             ---------      ---------
       Total other assets                        4,283          4,464
                                             ---------      ---------
                                             $  35,390      $  37,499
                                             =========      =========

<PAGE>

          Liabilities
Current liabilities:
   Notes payable to banks                    $     282      $     300
   Current portion of long-term debt                67             66
   Accounts payable                              1,370          1,386
   Accrued expenses                              1,577          2,317
   Deferred revenue                                797            833
   Income taxes payable                             64             56
                                             ---------      ---------
       Total current liabilities                 4,157          4,958

Long-term debt, less current installments        6,901          6,918
Deferred income taxes                              309            268
                                             ---------      ---------
       Total liabilties                         11,367         12,144
                                             ---------      ---------

       Shareholders' equity 
Series A preferred  stock, $14.71 par 
   value; 340,000 shares authorized;
   none issued or outstanding                        -              -
Series I preferred  stock, no par value; 
   500,000 shares authorized; none 
   issued or outstanding                             -              -
Common stock, voting, no par value; 
  50,000,000 shares authorized; 
  14,809,792 and 14,778,092                                          
  shares issued, 14,584,692 and 
  14,552,992 shares outstanding                 36,777         36,735
Retained earnings (deficit)                    (11,245)        (9,857)
Accumulated other comprehensive loss              (732)          (746)
                                             ---------      ---------
                                                24,800         26,132
Less cost of common shares acquired for the
  treasury, 225,100 and 225,100 shares             777            777
                                             ---------      ---------
       Total shareholders' equity               24,023         23,355
                                             ---------      ---------
                                             $  35,390      $  37,499
                                             =========      =========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                       MICROWARE SYSTEMS CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (UNAUDITED)
<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED JUNE 30,
                                            ---------------------------
                                                1998            1997
                                              --------        --------
                                                  ($ in thousands) 
<S>                                           <C>             <C>
Cash flows from operating activities:
  Net loss                                    $ (1,388)       $ (2,182)
    Adjustments to reconcile net loss
      to net cash used in operating 
      activities:
      Depreciation and amortization                697             491
      Deferred income taxes                         98              59
    Change in assets and liabilities:
      Trade receivables, net                      (378)          2,373
      Inventories                                   (2)              4
      Prepaid royalties                             24             (48)
      Other current assets                         (58)           (361)
      Income taxes receivable                        3             (19)
      Other assets                                (218)         (1,126)
      Accounts payable                               7            (651)
      Accrued expenses                            (550)             70
      Deferred revenue                            (216)            107
      Income taxes payable                           8             (24)
                                              --------        --------
  Net cash used in operating activities         (1,973)         (1,307)
                                              --------        --------
Cash flows from investing activities:
    Capital expenditures                          (440)         (2,595)
    Purchase of short-term investments               -          (5,794)
    Maturities of short-term investments         1,951           3,592
                                              --------        --------
  Net cash provided by (used in) investing 
    activities                                   1,511          (4,797)
                                              --------        --------
Cash flows from financing activities:
   Principal payments on notes payable
     to banks and long-term debt                   (16)           (567)
   Proceeds from issuance of notes
     payable to banks and long-term debt             -           2,129
   Proceeds from issuance of common stock           43             249
   Cost of issuance of common stock                 (1)            (34)
                                              --------        --------
  Net cash provided by financing activities         26           1,777
Effect of foreign currency exchange rate      --------        --------
  changes on cash                                   18              34
                                              --------        --------
  Net decrease in cash and cash equivalents       (418)         (4,293)
Cash and cash equivalents at beginning 
  of period                                      2,009           6,758
                                              --------        --------
Cash and cash equivalents at end of period    $  1,591        $  2,465
                                              ========        ========

Supplemental disclosure of cash flow information:
   Cash paid for interest                        $  87        $    141
                                            ==========        ========
   Cash paid for taxes                           $  13        $     27
                                            ==========        ========
</TABLE>

<PAGE>
                      MICROWARE SYSTEMS CORPORATION
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                               (UNAUDITED)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In accordance with the rules and regulations of the Securities and
Exchange Commission, the preceding unaudited financial statements omit
or condense certain information and footnote disclosure normally
required for complete financial statements prepared in accordance with
generally accepted accounting principles.  In the opinion of management,
all adjustments (which include reclassifications and normal recurring
adjustments) necessary to present fairly the financial position, results
of operations and cash flows at June 30, 1998 and for all periods
presented, have been made.

Certain amounts in the fiscal 1998 consolidated financial statements 
have been reclassified to conform to the fiscal 1999 presentation.

2.  REVENUE RECOGNITION

The Company has adopted the provisions of Statement of Position (SOP) 
97-2, "Software Revenue Recognition", as amended by SOP 98-4," Deferral 
of the Effective Date of Certain Provisions of SOP 97-2", effective 
April 1, 1998.  SOP 97-2 and SOP 98-4 provide guidance on recognizing 
revenue on software transactions and supercede SOP 91-1.  The adoption 
of SOP 97-2 and SOP 98-4 did not have a significant impact on the 
Company's current licensing or revenue recognition practices.  However, 
should the Company adopt new or change its existing licensing practices, 
the Company's revenue recognition practices may be subject to change to 
comply with the accounting guidance provided in SOP 97-2 and 98-4.

3.  COMPUTATION OF NET LOSS PER SHARE

Net loss per share is calculated in accordance with the provisions of 
Financial Accounting Standards Board ("FASB") Statement of Financial 
Accounting Standards ("SFAS") No. 128,  "Earnings per Share".  Basic EPS 
has been computed by dividing net loss by the weighted average number of 
common shares outstanding during the periods presented.  Diluted EPS is 
computed by dividing net loss by the weighted average common and, when 
dilutive, common equivalent shares outstanding during the periods 
presented.  Dilutive common equivalent shares are calculated using the 
treasury stock method and consist of common stock issuable upon the 
exercise of options and warrants.  Prior period EPS calculations have 
been restated.

4.  COMPREHENSIVE INCOME

On April 1, 1998, the Company adopted SFAS No. 130, "Reporting 
Comprehensive Income".  Comprehensive income is defined as the change in 
equity of a company during a period from transactions and other events 
and circumstances, excluding transactions resulting from investments by 
owners and distributions to owners.  For the Company, the primary 
difference between net income and comprehensive income results from 
foreign currency translation adjustments.

<PAGE>

Comprehensive loss for the three months ended June 30, 1997 and 1998 is 
as follows:
<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED JUNE 30,
                                            ---------------------------
                                                1998            1997
                                              --------        --------
                                                  ($ in thousands) 
<S>                                           <C>             <C>
Net loss                                      $ (1,388)       $ (2,182)
Foreign currency translation adjustment             14             138
                                              --------        --------
Total comprehensive loss                      $ (1,374)       $ (2,044)
                                              ========        ========
</TABLE>

5.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments 
of an Enterprise and Related Information".  This statement establishes 
standards for reporting information about operating segments in annual 
financial statements.  It also establishes standards for related 
disclosures about products and services, geographic areas and major 
customers.  The disclosures prescribed by SFAS No. 131 will be effective 
for the Company's consolidated financial statements for the year ending 
March 31, 1999.

In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software 
Developed or Obtained for Internal Use".  SOP 98-1 provides guidance for 
determining whether computer software is internal-use software and on 
accounting for the proceeds of computer software originally developed or 
obtained for internal use and then subsequently sold to the public.  It 
also provides guidance on capitalization of the losses incurred for 
computer software developed or obtained for internal use.  The Company 
has not yet determined the impact, if any, of adopting this statement.  
The disclosures prescribed by SOP 98-1 will be effective for the year 
ending March 31, 2000 consolidated financial statements.

<PAGE>

                        MICROWARE SYSTEMS CORPORATION

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

FORWARD-LOOKING INFORMATION IS SUBJECT TO UNCERTAINTY
This discussion and analysis of the Company's financial condition and 
results of operations includes forward-looking statements that involve 
risk and uncertainty, including management's expectations for fiscal 
1999 and known trends and uncertainties in the business.  Actual future 
results and trends may differ materially depending on a variety of 
factors, including the volume and timing of orders received during the 
quarter, the timing and acceptance of new products and product 
enhancements by the Company or its competitors, changes in pricing, 
product life cycles, seasonality of customer buying patterns, the 
existence of product errors, extraordinary events, such as litigation 
or acquisition, including related charges, and economic conditions 
generally or in various geographic areas.  All of the foregoing factors, 
and others not mentioned, make operating results difficult to forecast.  
The Company's operating results have varied significantly from quarter 
to quarter in the past, and the future operating results of the Company 
may fluctuate as a result of the above and other risk factors detailed 
in the Company's Annual Report on Form 10-K for the fiscal year ended 
March 31, 1998 and other documents filed by the Company with the 
Securities and Exchange Commission.  Due to all of the foregoing 
factors, the Company believes that period-to-period comparisons of its 
results of operations are not necessarily meaningful and should not be 
relied upon as an indication of future performance.  In prior years, the 
Company's actual financial performance has not always met market 
expectations.  It is likely that, in some future quarter, the Company's 
financial performance will again fall below market expectations.

OVERVIEW
Microware develops, markets and supports sophisticated real-time 
operating system software and development tools for the traditional 
embedded, communications and consumer products markets.  Microware's 
product line is built around the OS-9 family of real-time operating 
systems for advanced 16-bit and 32-bit microprocessors.  The Company's 
OS-9 product family includes options for programming languages, 
networking, graphical interfaces and productivity tools.

The Company has historically derived revenues from development licenses 
and run-time license royalty fees along with sales of related software 
productivity tools, maintenance support and custom contract engineering 
work.  Custom contract engineering revenues are typically derived from 
discrete software engineering projects porting the OS-9 operating system 
along with customized software products to a customer's product.  
Commonly, license royalty fees follow the completion of these contracts 
and the successful deployment of the customer's product.  For financial 
reporting purposes, product revenues primarily consist of software 
licenses and software development tool products, along with license run-
time royalty fees earned, including non-refundable prepaid royalties.  
Services revenues principally consist of revenues from custom contract 
engineering and maintenance support agreements, along with consulting 
and training activity. 

<PAGE>

A key element of the Company's long-term strategy is to develop product 
which can be embedded into successful, high volume customer products; 
thereby significantly increasing license run-time royalty fees.  Any 
increase in the percentage of revenues attributable to license run-time 
royalties will depend on the Company's successful negotiation of license 
run-time royalties and on the successful commercialization by the 
Company's customer of the underlying product. Recently, the Company has 
been negatively impacted by target markets, such as cellular phones, 
two-way paging, personal Internet devices and digital and interactive 
television emerging much slower than anticipated.  In addition, there 
can be no assurances that the Company will be successful when the 
markets, for which the Company products are targeted, emerge.  In an 
effort to lessen the variability of its quarterly operating results and 
attain profitability, the Company substantially increased its emphasis 
on the traditional embedded and communications markets in the past 
year.  While the Company believes all these markets present significant 
opportunities for growth, this change in market emphasis, along with the 
Company's continued involvement on emerging consumer products markets 
whose development is uncertain, exposes the Company's business to 
significant risks and uncertainties.

The Company has entered into software license and custom contract 
engineering agreements with Motorola to provide or develop various 
software solutions. Motorola has maintained a significant equity 
position in the Company since July 1995.  Product revenues of 
approximately $10,000 and $1,260,000 resulted from such agreements in 
the first quarter of fiscal 1998 and 1999, respectively.  Services 
revenues of approximately $315,000 and $540,000 resulted from custom 
contract engineering services for Motorola in the first quarters of 
fiscal 1998 and 1999, respectively. These revenues relate to products 
under development which Motorola has not yet begun to distribute. The 
Company believes that all transactions with Motorola have been, and the 
Company's Board of Directors has adopted a policy stating that any 
future transactions with significant equity owners will be, on terms 
which are considered to be no less favorable to the Company than those 
obtained in arm's length transactions with unaffiliated third parties.

<PAGE>

RESULTS OF OPERATIONS

First Quarter of Fiscal 1999 Compared to the First Quarter of Fiscal 1998

Revenues

Total revenues increased 28% or $1.1 million from $4.1 million in the 
first quarter of fiscal 1998 to $5.2 million in the first quarter of 
fiscal 1999.  Product revenues increased 33% or $889,000 from $2.7 
million in the first quarter of fiscal 1998 to $3.6 million in the first 
quarter of fiscal 1999.  The increase in product revenues between 
periods resulted from an increase in non-refundable prepaid royalties 
from Motorola for the Company's Digital Television and Java product 
offerings.  Services revenues increased 18% or $243,000 from $1.4 
million in the first quarter of fiscal 1998 to $1.6 million in the first 
quarter of fiscal 1999.  The increase in services revenues from the 
first quarter of fiscal 1998 to the same period in fiscal 1999 resulted 
from an increase in funded development, principally from Motorola, of 
advanced processor ports.

International revenues represented 53% or $2.2 million and 44% or $2.3 
of total revenues in the first quarter of fiscal 1998 and 1999, 
respectively.  The decrease in international revenues as a percentage of 
total revenues between periods was due to a decline of $343,000 from the 
Company's operations in Japan. The decline in revenues from Japan 
resulted primarily from a decrease in funded porting and custom services 
work compounded by the increased strength of the U.S. dollar against the 
Japanese yen.  The reduction in revenues from the Company's operations 
in Japan were offset by an increase of $454,000 in revenues from the 
Company's operations in Europe.  The increase in Europe resulted from an 
increase in OEM license sales. The Company expects international sales 
to continue to represent a significant portion of its revenues, although 
the percentage may fluctuate significantly from period to period.  In 
Europe and Japan, revenues and expenses are primarily denominated in 
local currencies.  The Company's operating and pricing strategies take 
into account changes in exchange rates over time, however, the Company's 
results of operations may be significantly affected in the short-term by 
fluctuations in foreign currency exchange rates. 

Cost of Revenues

Cost of revenues totaled $1.3 million for both the first quarters of 
fiscal 1998 and 1999.  As a percentage of product revenues, cost of 
product revenues decreased from 21% in the first quarter of fiscal 1998 
to 17% in the first quarter of fiscal 1999, primarily as a result of the 
increased product revenues between periods.  As a percentage of services 
revenues, cost of services revenues decreased from 51% in the first 
quarter of fiscal 1998 to 44% in the first quarter of fiscal 1999.  This 
decrease resulted from higher margin custom contract work being 
performed in the first quarter of fiscal 1999 as compared to the first 
quarter of fiscal 1998.   

<PAGE>

Research and Development

Research and development expense decreased 8% or $143,000 from $1.9 
million in the first quarter of fiscal 1998 to $1.7 million in the first 
quarter of fiscal 1999.  The decrease in overall dollars between periods 
resulted primarily from a decrease in personnel partially offset by 
increased salary and purchased software maintenance costs.

Sales and Marketing

Sales and marketing expense increased 12% or $302,000 from $2.5 million 
in the first quarter of fiscal 1998 to $2.8 million in the first quarter 
of fiscal 1999.  The increase in sales and marketing expense from the 
first quarter of fiscal 1998 to the first quarter of fiscal 1999 
resulted primarily from the overall increase in revenues between 
periods. As a percentage of revenues, sales and marketing expense 
decreased 7% from the first quarter of fiscal 1998 to the first quarter 
of fiscal 1999. Additionally the Company increased advertising and 
trade-show related costs in Japan by approximately $110,000 between 
periods.  The Company expects to continue investing in sales and 
marketing over the remainder of fiscal 1999 to expand its sales force 
and customer base and to introduce new products.

General and Administrative Expense

General and administrative expenses decreased 16% or $127,000 from 
$780,000 to $653,000 in the first quarters of fiscal 1997 and 1998, 
respectively.  The decrease in general and administrative expenses 
between periods primarily resulted from a reduction in relocation and 
recruiting fees which were partially offset by increased salary and 
personnel costs.

Other Income (Expense)

Other income (expense) decreased from $178,000 to ($5,000) in the first 
quarters of fiscal 1998 and 1999, respectively. Overall, the decrease is 
attributable to a reduction in interest income due to cash used in 
operations along with an increase in interest expense related to the 
Company's long-term debt on its new headquarters facility.

Liquidity and Capital Resources

At June 30, 1998, the Company had working capital of $13.2 million and 
approximately $11.2 million in cash, cash equivalents and short-term 
investments.

Net cash used in operating activities in the first three months of 
fiscal 1998 and 1999 totaled $1.3 million and $2.0 million, 
respectively. In the first three months of fiscal 1998, the net loss 
of $2.2 million and an increase in other assets of $1.1 million were 
partially offset by a decrease in trade receivables of $2.4 million. The 
increase in other assets was due primarily to additional purchases of 
third party software to be bundled with the Company's software 
products.  The net loss of $1.4 million along with the reduction in 
accrued expenses of $550,000 were the primary reason for the cash used 
in operations in the first three months of fiscal 1999.

<PAGE>

Net cash provided by (used in) investing activities in the first three 
months of fiscal 1998 and 1999 totaled ($4.8) million and $1.5 million, 
respectively.  Uses of cash in the first quarter of fiscal 1998 resulted 
from construction expenditures made on the Company's new headquarters 
facility along with net purchases of short-term investments.  Cash 
provided from investing activities during the first quarter of fiscal 
1999 resulted from maturaties of short-term investments of $2.0 million 
offset by capital expenditures of $440,000.

Net cash provided by financing activities in the first three months of 
fiscal 1998 and 1999 totaled $1.8 million and $26,000, respectively.  
The cash provided by financing activities in the first quarter of fiscal 
1998 resulted primarily from proceeds received on the Company's 
construction loan for it new headquarters facility.

The Company believes its existing cash and short-term investments along 
with other working capital will be sufficient to meet its operating and 
capital expenditure needs for at least the next 12 months. 

"Year 2000" Issues

The Company is aware of the numerous issues associated with the 
programming code in existing computer systems as the year 2000 
approaches.  The "Year 2000" problem is pervasive and complex, as many 
computer systems will be affected in some way by the rollover of the two 
digit year value to 00.  Systems that do not properly recognize such 
information may generate erroneous data or cause a system to fail.  The 
"Year 2000" issue creates risk for the Company from unforeseen problems 
in its own computer systems and from third parties with whom the Company 
deals worldwide.  Failures in the Company's and/or third party's 
computer systems could have a material adverse impact on the Company's 
operations.  To address this concern, the Company has evaluated its 
products to assess their Year 2000 compliance.  The Company believes 
that the most current release of all of its products will not cease to 
perform nor generate incorrect or ambiguous data or results solely due 
to a change in date to or after January 1, 2000.  The Company believes 
that the current versions of its products are in material compliance 
with the Year 2000 papers by the British Standards Institute.  While 
copies of old versions of the Company's software may be embedded in 
deployed products developed by OEM licensees, some of which may be used 
in mission critical functions, the Company has made commercially 
available Year 2000 fixes to all of its past licensees, and believes 
that the term of its license agreements preclude any liability for Year 
2000 related failures in such products.  The Company is also currently 
in the process of evaluating its infrastructure along with its external 
suppliers for "Year 2000" compliance. Management believes its internal 
infrastructure and external suppliers used will be compliant by the year 
2000.  Management does not believe the costs related to achieving "Year 
2000" compliance will be material.  There can be no assurance that the 
systems of other companies on which the Company relies have been or will 
be accurately converted to be "Year 2000" compliant and will not have an 
adverse effect on the Company's operations.

<PAGE>

"Euro" Issues

The Economic and Monetary Union ("EMU") and the introduction of a new 
currency (the "Euro"), will begin in Europe on January 1, 1999.  The new 
currency enables the European Union ("EU") to blend the economies of 
EU's member states into one large market with unrestricted and 
unencumbered trade and commerce across borders.  Eleven European 
countries are expected to participate in the first membership wave, 
including the Netherlands, Belgium, Luxembourg, Germany, France, 
Ireland, Finland, Austria, Italy, Spain and Portugal.  Other member 
states are expected to join in the years to come.  The Company has 
begun to evaluate the impact of the introduction of the new currency 
but has not determined the impact, if any, on the Company's financial 
position, results of operations or cash flows.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not Applicable

PART II - OTHER INFORMATION

ITEM 5.  OTHER INFORMATION.

         a)  Subsequent to the end of the fiscal quarter ended June 30,
             1998, the Company accepted the resignation of an executive 
             vice president, Kent R. Kelderman, who had been serving as 
             the Company's Chief Financial Officer.  Following Mr. 
             Kelderman's resignation, the Board of Directors appointed 
             M. Denis Connaghan, the Company's Chief Operating Officer, 
             to be acting Chief Financial Officer.

         b)  The Securities and Exchange Commission has recently amended
             Rules 14a-4 and 14a-5 promulgated under the Securities 
             Exchange Act of 1934, as amended (the "1934 Act"), in 
             respect of the Company's exercise of discretionary voting 
             authority in connection with annual shareholder meetings, 
             and in particular with respect to matters not submitted 
             under the Shareholder Proposal rule set forth in Rule 14a-8
             under the 1934 Act.

             Under the amended Rules, a company is permitted 
             discretionary voting authority in those instances in which 
             the company did not have notice of the matter by a date 
             more than 45 days before the month and day in the current 
             year corresponding to the date on which the company first 
             mailed its proxy materials for the prior year's annual 
             meeting of shareholders, or by a date established by an 
             overriding advance notice provision in a company's articles
             of incorporation or bylaws.  The Company has not 
             implemented such an advance notice provision.  Accordingly,
             in connection with the 1999 Annual Meeting of Stockholders 
             of the Company, the date after which notice of a 
             stockholder proposal submitted outside the processes of 
             Rule 14a-8 under the 1934 Act is considered untimely is 
             June 8, 1999.

<PAGE>

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

        (a.)  Exhibit 27 - Financial Data Schedule (EDGAR version 
                 only).

        (b.)  None.

        No other items.

SIGNATURE

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

                      MICROWARE SYSTEMS CORPORATION

    Date: August 14, 1998  /s/ M. Denis Connaghan
                           ----------------------- 
                           M. Denis Connaghan
                           Chief Operating Officer &
                           Executive Vice President
                           (Acting Chief Financial Officer)