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 
        September 30, 1997

[ ]     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: 14,490,842 SHARES OUTSTANDING AS OF September 30, 1997

<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 audited financial statements and notes 
thereto for the year ended March 31, 1997 are included in the Annual Report
on Form 10-K previously filed with the Securities and Exchange Commission.

The results for the quarter ended September 30, 1997, are not 
necessarily indicative of the results to be expected for the entire year

<PAGE>

                             Microware Systems Corporation
                           Consolidated Statements of Income
                                    (unaudited)
                        ($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
         
                                              Three Months Ended       Six Months Ended
                                                 September 30,           September 30,
                                              -------------------    ------------------
                                                1997       1996        1997       1996
                                              -------    -------     -------    -------

<S>                                           <C>        <C>         <C>       <C>
Revenues: 
   Product                                    $ 2,841    $ 3,957     $ 5,552   $ 7,921
   Services                                     1,437      3,340       2,805     6,186
                                              -------    -------     -------   -------
                                                4,278      7,297       8,357    14,107
                                              -------    -------     -------   -------
Cost of revenues:	
   Product                                        577        679       1,155     1,247
   Services                                       925        950       1,628     1,720
                                              -------    -------     -------   -------
                                                1,502      1,629       2,783     2,967
                                              -------    -------     -------   -------
     Gross profit                               2,776      5,668       5,574    11,140
 
Operating expenses:
   Research & development                       1,775      1,728       3,656     3,422
   Sales & marketing                            2,225      2,418       4,656     4,698
   General & administrative                     1,388        849       2,200     1,617
   Special charges                                940          -         940        75
                                              -------    -------     -------   -------
     Total operating expenses                   6,328      4,995      11,452     9,812
                                              -------    -------     -------   -------

     Operating (loss) profit                   (3,552)       673      (5,878)    1,328
                                              -------    -------     -------   -------

Other income (expense):
   Foreign currency (loss) gain, net              (78)        10         (91)       22
   Interest income                                200        358         421       682
   Interest expense                              (130)       (32)       (160)      (36)
                                              -------    -------     -------   -------
                                                   (8)       336         170       668
                                              -------    -------     -------   -------
     (Loss)earnings before income tax expense  (3,560)     1,009      (5,708)    1,996
Income tax expense                                 26        242          60       482
                                              -------    -------     -------   -------
     Net (loss) earnings                      $(3,586)   $   767     $(5,768)  $ 1,514
                                              =======    =======     =======   =======
(Loss) earnings per share                     $ (0.25)   $  0.05     $ (0.40)  $  0.10
                                              =======    =======     =======   =======
Weighted average common and common
  equivalent shares outstanding (in thousands) 14,422     16,287      14,250    15,900
                                              =======    =======     =======   =======

</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

                   Microware Systems Corporation
                    Consolidated Balance Sheets
            ($ in thousands, except per share amounts)

<TABLE>
<CAPTION>
 
                                         September 30,
                                             1997          March 31,
                                          (unaudited)         1997
                                         ------------     ----------
 
           Assets
<S>                                      <C>              <C>
Current assets:
   Cash and cash equivalents                  $ 5,129        $ 6,758
   Short-term investments                      10,394         13,204
   Trade receivables, net of allowance
      for doubtful accounts of 
      $517 and $635, respectively               4,249          7,014
   Income taxes receivable                        121            207
   Inventories                                     80             96
   Prepaid royalties                              589          1,005
   Prepaid expenses and other current assets      589            316
   Deferred tax assets                            488            507
                                            ---------      ---------
       Total current assets                    21,639         29,107

Investment, at cost                             5,004          5,004

Property and equipment:
   Land and improvements                        2,649            144
   Buildings                                   10,446          2,017
   Furniture, fixtures & equipment              4,484          4,115
   Research & development equipment             3,656          3,612
   Leasehold improvements                         121            123
   Construction in progress                         -          7,369
                                            ---------      ---------
                                               21,356         17,380
       Accumulated depreciation and 
         amortization                           5,963          5,463
                                            ---------       --------
       Net property and equipment              15,393         11,917

 Other assets:
   Intangible assets, net of amortization       2,696          1,675
   Deposits and other                           1,403          1,380
                                            ---------      ---------
       Total other assets                       4,099          3,055
                                            ---------      ---------
                                              $46,135        $49,083
                                            =========      =========

          Liabilities
Current liabilities:
   Notes payable to banks                        $331           $323
   Current portion of long-term debt               39             38
   Accounts payable                             1,508          2,559
   Accrued expenses                             2,221          2,194
   Deferred revenues                              954            867
   Income taxes payable                           122            102
                                            ---------      ---------
       Total current liabilities                5,175          6,083

Long-term debt, less current installments      11,130          8,038
Deferred income taxes                             269            236
                                            ---------      ---------

       Total liabilities                       16,574         14,357
                                            ---------      ---------

       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; 
  14,715,942 and 14,190,561 shares
  issued, 14,490,842 and 13,965,461 
  shares outstanding                           36,674         36,152
(Accumulated deficit) retained earnings        (5,679)            89
Cumulative adjustment for foreign
  currency translation                           (657)          (738)
                                            ---------      ---------
                                               30,338         35,503
Less cost of common shares acquired 
  for the treasury, 225,100 and 
  225,100 shares                                  777            777
                                            ---------      ---------
       Total shareholders' equity              29,561         34,726
                                            ---------      ---------
                                              $46,135        $49,083
                                           ==========      =========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                       Microware Systems Corporation
                   Consolidated Statements of Cash Flows
                                 (unaudited)
                               ($ in thousands)
<TABLE>
<CAPTION>
                                                       Six Months Ended September 30,
									 ------------------------------
                                                           1997             1996
                                                        ---------        ---------
<S>                                                     <C>              <C>
Cash flows from operating activities:
  Net (loss) earnings                                   $  (5,768)       $   1,514
    Adjustments to reconcile net (loss)earnings to net 
     cash used in operating activities:
      Depreciation and amortization                           825              739
      Write-off of intangible assets                          940                -
      Deferred income taxes                                    52             (421)
   Change in assets and liabilities:
      Trade receivables, net                                2,754           (2,169)
      Inventories                                              77              (20)
      Prepaid royalties                                      (211)            (848)
      Other current assets                                   (275)            (168)
      Income taxes receivable                                  87              242
      Other assets                                         (1,566)            (557)
      Accounts payable                                     (1,058)            (744)
      Accrued expenses                                         52              418
      Deferred revenues                                        89               29
      Income taxes payable                                     21              189
                                                        ---------        ---------
  Net cash used in operating activities                    (3,981)          (1,796)
                                                        ---------        ---------
Cash flows from investing activities:
   Capital expenditures                                    (4,148)          (1,308)
   Purchases of short-term investments                    (11,283)         (25,699)
   Maturities of short-term investments                    14,093            5,500
   Purchase of land                                           -             (2,163)
                                                        ---------        ---------
  Net cash used in investing activities                    (1,338)         (23,670)
                                                        ---------        ---------
Cash flows from financing activities:
   Principal payments on notes payable to banks and 
     long-term debt                                          (617)            (950)
   Proceeds from issuance of notes payable to banks         3,710            3,125
   Proceeds from issuance of common stock                     570           19,238
   Cost of issuance of common stock                           (47)            (394)
                                                        ---------        ---------
  Net cash provided by financing activities                 3,616           21,019
Effect of foreign currency exchange rate changes on cash       74              (43)
                                                        ---------        ---------
  Net decrease in cash and cash equivalents                (1,629)          (4,490)
Cash and cash equivalents at beginning of period            6,758           12,337
                                                        ---------        ---------
Cash and cash equivalents at end of period              $   5,129        $   7,847
                                                        =========        =========
Supplemental disclosure of cash flow information:
   Cash paid for interest                               $     359         $     85
                                                        =========        =========
   Cash paid for taxes                                  $      23         $     92
                                                        =========        =========
</TABLE>
Supplemental disclosure of non-cash financing activities:
   In connection with the Company's initial public offering effective 
   April 2, 1996, the 340,000 shares of Series A Preferred Stock were 
   each converted into 4 shares of Common Stock.

See accompanying notes to consolidated financial statements.

<PAGE>
                     MICROWARE SYSTEMS CORPORATION
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                               (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 September 30, 1997 and for all periods
presented, have been made.

2.  NET (LOSS) EARNINGS PER SHARE

Net (loss) earnings per share is computed dividing net (loss) earnings
by the weighted average number of common and, when dilutive, common
equivalent shares outstanding during the period.  Dilutive common
equivalent shares are calculated using the treasury stock method and
consist of common stock issuable upon the exercise of options and
warrants.

3.  STOCK OPTIONS

In May, 1997 the Company offered all recipients of stock option grants
made in October 1996 (totaling 353,100 shares) the right to cancel
those outstanding (and non-vested) options at the original exercise
price of $15.50 per share and receive new options dated May 1997 with a
new exercise price and revised vesting.  The new exercise prices are
$10.00 per share for employees who were serving as executive officers at
the time of the original grant and $6.25 for all other employees.  Both
exercise prices are equal to or in excess of the fair value of the
Company's common stock at the date of grant.  While the original grants
had a vesting schedule of 25% on each anniversary of October 14, 1996,
the new grants have vesting of 10%, 20%, 30%, and 40% on each
anniversary of May 2, 1997.  Vesting of grants accelerates in the event
of a change in control of the Company.  The new grants all have an
expiration date of May 2, 2007.

4. RECENT ACCOUNTING PRONOUNCEMENTS

In June, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income", and Statement of Financial Accounting Standards
No. 131 (SFAS 131), "Disclosure about Segments of an Enterprise and
Related Information".  The adoption of both statements is required for
fiscal years beginning after December 15, 1997.

SFAS 130 establishes standards for reporting and displaying comprehensive
income and its components in the financial statements.  It requires that
a company classify items of their comprehensive income, as defined by
accounting standards, by their nature (i.e. unrealized gains or losses on
securities) in a financial statement, but does not require a specific
format for that statement.  

SFAS 131 changes current practice under SFAS 14, "Financial Reporting of
Segments of a Business Enterprise", by establishing a new framework on
which to base segment reporting (referred to as the management approach)
and also requires interim reporting of segment information.

The Company is studying the implications of these new statements and the
impact of their implementation on its 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

Except for the historical information contained herein, the following
discussion and analysis of the Company's financial condition and results
of operations includes forward-looking statements that involve risks and
uncertainties, including management's expectations for fiscal 1998 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.  Additionally, the Company has recently experienced significant 
turnover in its North American sales personnel, which has had, and may 
continue to have, an interim adverse affect on the Company's North 
American operations.  While the Company has made significant progress in 
filling its vacated sales positions, the future effect of the turnover 
cannot be presently determined.  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, 1997, 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.  For the fiscal year ended March 31, 1997 and the six 
month period ended September 30, 1997, the Company's actual performance did 
not meet market expectations.  It is likely that, in some future period, the 
Company's operating results will again be below the expectations of stock 
market analysts and investors.

OVERVIEW

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.  Typically, license royalty fees
follow the completion of these contracts.  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. 

A key element of the Company's long-term strategy is to focus on markets
the Company anticipates will significantly increase run-time license
royalty fees.  The Company has made significant investments targeting
various emerging markets including wireless personal communications,
interactive and digital television, and Internet access devices, through
the development of specialized software modules that utilize the OS-9
operating system. As a result, the Company's product revenues have
demonstrated a proportionate increase in large account, vertical market
activities and related services, and a corresponding decrease in
traditional run-rate embedded systems business as a percentage of total
revenues. Deriving a large portion of revenues from a small number of
key customers increases the quarterly variability of the Company's
financial results.  Recently the Company has begun working towards
strengthening its traditional embedded systems business to better 
capitalize on the more stable growth in that market and thereby gain 
greater quarterly stability. 

RESULTS OF OPERATIONS

Second Quarter of Fiscal 1998 Compared to the Second Quarter of Fiscal
1997

Revenues

Total revenues decreased 41% or $3.0 million from $7.3 million in the
second quarter of fiscal 1997 to $4.3 million in the second quarter of
fiscal 1998.  During the second quarter of fiscal 1998, the Company 
experienced significant turnover in its North American sales force
which has had, and may continue to have, an adverse effect on revenues.  
Product revenues decreased 28% or $1.1 million from $4.0 million in the 
second quarter of fiscal 1997 to $2.9 million in the second quarter of 
fiscal 1998.  The decrease in product revenues from the second quarter 
of fiscal 1997 to the same period in fiscal 1998 was primarily due to a 
reduction in nonrefundable prepaid royalties recognized from customers. 
In addition, the initial license fees from new accounts in the Internet 
and wireless vertical markets did not meet management expectations in 
the current quarter. Future growth in the Company's product revenues 
will continue to be substantially dependent on its customers' timely and 
successful development and distribution of new products using the Company's 
products, making product revenues difficult to accurately forecast on a 
quarterly or annual basis.  Services revenues decreased 57% or $1.9 
million from $3.3 million in the second quarter of fiscal 1997 to $1.4 
million in the second quarter of fiscal 1998.  The decrease from the
second quarter of fiscal 1997 to the same period in fiscal 1998 primarily
resulted from a decrease in funded development of advanced processor ports.

Cost of Revenues

Total cost of revenues decreased 8% or $127,000 from $1.6 million in the
second quarter of fiscal 1997 to $1.5 million in the second quarter of
fiscal 1998.  As a percentage of product revenues, cost of product revenues
increased from 17% in the second quarter of fiscal 1997 to 20% in the second
quarter of fiscal 1998.  The percentage increase resulted from increased
amortization of purchased software, product warranty reserves and third
party royalty expense compounded by the overall decrease in product revenues
from the second quarter of fiscal 1997 to the second quarter of fiscal 1998.
As a percentage of services revenues, cost of services revenues increased
from 28% in the second quarter of fiscal 1997 to 64% in the second quarter
of fiscal 1998.  The percentage increase between periods resulted from small, 
lower margin custom work being performed during the second quarter of fiscal 
1998 compared to large, higher margin custom work being performed during the 
second quarter of fiscal 1997.  During the second quarter of fiscal 1997 the 
Company was engaged in three large advanced processor ports which allowed the 
Company to achieve economies of scale and leverage between contracts which 
resulted in higher margins. 

Research and Development

Research and development expense increased 3% or $47,000 from $1.7
million in the second quarter of fiscal 1997 to $1.8 million in the second
quarter of fiscal 1998.  The increase in overall dollars resulted primarily
from an increase in support costs related to certain acquired technology from 
the second quarter of fiscal 1997 to the second quarter of fiscal 1998.

Sales and Marketing

Sales and marketing expense decreased 8% or $193,000 from $2.4 million
in the second quarter of fiscal 1997 to $2.2 million in the second quarter
of fiscal 1998.  Sales and marketing expenses decreased during the second
quarter of fiscal 1998 as compared to the second quarter of fiscal 1997 as
a result of the elimination or resignation of certain U.S. sales
representatives.  Offsetting the decrease in the second quarter of fiscal
1998 was an increase resulting from the addition of a new Vice President
of Sales and a new Vice President of Marketing.  The Company will incur 
additional spending related to new hiring of North American sales personnel 
in the third quarter of fiscal 1998.

General and Administrative Expense

General and administrative expenses increased 63% or $539,000 from $849,000
to $1.4 million in the second quarters of fiscal 1997 and 1998, respectively.
The increase in general and administrative expenses resulted from costs 
incurred due to organizational changes in the Company's U.S. operation
during the second quarter of fiscal 1998.  These costs included severance
and related benefits associated with the elimination and resignation of
employees of approximately $170,000, moving costs to the Company's new
headquarters facility of approximately $80,000 and recruiting and relocation
costs associated with the hiring of new executive management personnel of
approximately $260,000.

Special Charges

During the three-month period ended September 30, 1997, the Company determined
that due to revised estimates of the marketability of certain products under
development, a special charge of $940,000 was appropriate to more adequately 
reflect the residual value of certain intangible assets.  Included in this 
charge was approximately $566,000 of deferred development costs in the form 
of pre-paid royalties, approximately $202,000 relating to goodwill associated 
with Micromall, a wholly owned subsidiary of the Company, and approximately 
$172,000 relating to the write-off of previously capitalized purchased 
technology.

Other Income (Expense)

Other income decreased $344,000 from $336,000 in the second quarter of fiscal
1997 to ($8,000) in the second quarter of fiscal 1998.  This decrease is
attributable to a reduction of interest income due to cash used in operations,
an increase in interest expense related to the Company's construction note on
its new headquarters facility and an unfavorable change in foreign currency
exchange rates. 

Six Months Year-to-Date of Fiscal 1998 Compared to the Six Months Year-to-Date
of Fiscal 1997

Revenues

Total revenues decreased 41% or $5.7 million from $14.1 million for the six
month period ended September 30, 1996 to $8.4 million for the six month
period ended September 30, 1997. During the second quarter of fiscal 1998, 
the Company experienced significant turnover in its North American sales force
which has had, and may continue to have, an adverse effect on revenues.  
Product revenues decreased 30% or $2.3 million from $7.9 million for the six 
month period ended September 30, 1996 to $5.6 million for the six month period 
ended September 30, 1997.  The decrease in product revenues from the six month 
period ended September 30, 1996 to the six month period ended September 30, 
1997 was primarily due to a reduction in nonrefundable prepaid royalties 
recognized from customers. In addition, initial license fees from new accounts 
in the Internet and wireless vertical markets have not met management 
expectations in fiscal 1998. Future growth in the Company's product revenues 
will continue to be substantially dependent on its customers' timely and 
successful development and distribution of new products using the Company's 
products, making product revenues difficult to accurately forecast on a 
quarterly or annual basis.  Services revenues decreased 55% or $3.4 million 
from $6.2 million for the six month period ended September 30, 1996 to $2.8 
million for the six month period ended September 30, 1997.  The decrease in 
services revenues between periods primarily resulted from a decrease in 
funded development of advanced processor ports. 

Cost of Revenues

Total cost of revenues decreased 6% or $184,000 from $3.0 million for the six
month period ended September 30, 1996 to $2.8 million for the six month period
ended September 30, 1997.  As a percentage of product revenues, cost of
product revenues increased from 16% for the six month period ended September 
30,1996 to 21% for the six month period ended September 30, 1997.  The 
percentage increase resulted from increased amortization of purchased 
software, productwarranty reserves and third party royalty expense compounded 
by the overall decrease in product revenues between periods.  As a percentage 
of services revenues, cost of services revenues increased from 28% for the six 
month period ended September 30, 1996 to 58% for the six month period ended 
September 30, 1997.  The percentage increase between periods resulted from 
small, lower margin custom work being performed during the six month period 
ended September 30, 1997 compared to large, higher margin custom work being 
performed during the six month period ended September 30, 1996.

Research and Development

Research and development expense increased 7% or $234,000 from $3.4 million
for the six month period ended September 30, 1996 to $3.7 million for the six
month period ended September 30, 1997. The increase in overall dollars
resulted from an increase in costs associated with additional technical staff
and higher support costs as a result of certain acquired technology.

Sales and Marketing

Sales and marketing expense decreased slightly from $4.7 million to $4.6 
million for the six month periods ended September 30, 1996 and 1997, 
respectively. Sales and marketing expenses decreased for the six month 
period ended September 30, 1996 to the six month period ended September 30, 
1997 as a result of the elimination or resignation of certain U.S. sales 
representatives.  Offsetting the decrease for the six month period ended 
September 30, 1997 was an increase resulting from the addition of a new 
Vice President of Sales and a new Vice President of Marketing.

General and Administrative Expense

General and administrative expenses increased 36% or $583,000 from $1.6
million for the six month period ended September 30, 1996 to $2.2 million
for the six month period ended September 30, 1997. The increase in general
and administrative expenses resulted from costs incurred due to 
organizational changes in the Company's U.S. operations during the second 
quarter of fiscal 1998.  These costs included severance and related benefits 
associated with the elimination and resignation of employees of approximately
$175,000, moving costs to the Company's new headquarters facility of 
approximately $80,000 and recruiting and relocation costs associated with the 
hiring of new executive management personnel of approximately $330,000.

Special Charges

For the six month period ended September 30, 1997, the Company determined
that due to revised estimates of the marketability of certain products under
development, a special charge of $940,000 was appropriate to more adequately 
reflect the residual value of certain intangible assets.  Included in this 
charge was approximately $566,000 of deferred development costs in the form 
of pre-paid royalties, approximately $202,000 relating to goodwill associated 
with Micromall, a wholly owned subsidiary of the Company, and approximately 
$172,000 relating to the write-off of previously capitalized purchased 
technology.  Special charges incurred for the six month period ended September 
30, 1996 related to severance and related benefits associated with the 
restructuring of operations in France.

Other Income (Expense)

Other income decreased $498,000 from $668,000 for the six month period ended
September 30, 1996 to $170,000 for the six month period ended September 30,
1997.  This decrease is attributable to a reduction of interest income due to
cash used in operations, an increase in interest expense related to the
Company's construction note on its new headquarters facility and an
unfavorable change in foreign currency exchange rates. 

Liquidity and Capital Resources

At September 30, 1997, the Company had working capital of $16.5 million, and
approximately $15.5 million in cash, cash equivalents and short-term
investments.  Of the $15.5 million, approximately $10.0 million of the
Company's short-term investments are required to be pledged as security for
the construction note (due April 1999)on the Company's new headquarters
facility.  The Company is currently in the process of securing long-term
financing for its new headquarters facility.  The Company anticipates
completing the financing by December 31, 1997.

Net cash used in operating activities increased from $1.8 million for the
six month period ended September 30, 1996 to $4.0 million for the six month
period ended September 30, 1997. The net loss of $5.8 million, offset by a
decrease in trade receivables of $2.8 million, were the primary reasons for
the cash used in operating activities for the six month period ended
September 30, 1997. The net earnings of $1.5 million, offset by the increase
in trade receivables of $2.2 million, were the primary reasons for the cash
used in operations for the six month period ended September 30, 1996.

Net cash used in investing activities totaled $23.7 million and $1.3
million for the six month periods ended September 30, 1996 and 1997,
respectively.  Uses of cash for the six month period ended September 30,
1997 resulted primarily from construction expenditures made on the Company's
new headquarters facility offset by net maturities of short-term investments.
Uses of cash for the six month period ended September 30, 1996 resulted
primarily from net purchases of short-term investments, the purchase of land
to construct the Company's new headquarters facility, and purchases of
computer and research equipment.  

Net cash provided by financing activities totaled $21.0 million and $3.6
million for the six month periods ended September 30, 1996 and 1997,
respectively. The cash provided to the Company for the six month period ended
September 30, 1997 resulted primarily from proceeds received on the Company's
construction note on its new headquarters facility.  The cash provided to the
Company for the six month period ended September 30, 1996 resulted primarily
from the issuance of approximately $17.6 million in common stock in 
connection with the Company's initial public offering along with approximately
$3.1 million in proceeds received on the Company's construction note on its 
new headquarters facility.
 
The Company expects to incur additional operating losses, at least through its
fiscal year end March 31, 1998.  However, assuming the Company secures 
long-term financing for its new headquarters facility, its existing cash and 
short-term investments along with other working capital is expected to be 
sufficient to meet its operating and capital expenditure needs for at least 
the next 12 months.

PART II - OTHER INFORMATION


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

         The Annual Meeting of Shareholders of the Company was held on
September 9, 1997.  More than 93 percent of the holders of the Company's 
Common Stock were represented at the meeting.  Three issues were presented
for consideration at the meeting; 1) the election of three Class II 
Directors to hold office until the 2000 Annual Meeting; 2) the amendment of 
the Company's 1995 Stock Option Plan i)to authorize the issuance of an 
additional 600,000 shares under the plan and ii) to limit the total grants 
to any executive officer to 200,000 options in any fiscal year; and 3) the 
ratification of the selection of KPMG Peat Marwick LLP as independent public
accountants of theCompany for the fiscal year ending March 31, 1998.  The 
results were as follows:

1.  Election of Class II Directors
      Shares Entitled to Vote	            Votes at Meeting
      -----------------------	            ----------------
            14,313,852                       13,423,192

      Name                          For         Withhold Authority
      ----                       ----------     ------------------
      M. Denis Connaghan         13,382,561          40,631
      James A. Gordon            13,359,841          63,351
      Robert L. Growney          13,387,721          35,471

2.  Proposal to Amend the Company's 1995 Stock Option Plan

            For         Against       Abstain    Broker Non-vote
        -----------     -------       -------    ---------------
         13,166,381     112,364       25,548	      118,899

3.  Ratification of Selection of KPMG Peat Marwick LLP as Independent
   Public Accountants

            For         Against       Abstain    Broker Non-vote
        -----------     -------       -------    ---------------
         13,396,572      13,565        13,055	      -0-




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

        (a.)  Exhibit 11 - Computation of Net Earnings (Loss) per
               Share. 
              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: November 12, 1997   /s/ KENT R. KELDERMAN
                           ----------------------- 
                           Kent R. Kelderman
                           Chief Financial Officer,
                           Executive Vice President
                             & Treasurer (Principal
                             Financial & Accounting
                             Officer)