<PAGE>



                       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, 1999

[ ]      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 STREET. 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: 14,949,042 SHARES OUTSTANDING AS OF SEPTEMBER 30, 1999





                                     1 of 22

<PAGE>


                          MICROWARE SYSTEMS CORPORATION
                                    FORM 10-Q
                        QUARTER ENDED SEPTEMBER 30, 1999



INDEX

PART I - FINANCIAL INFORMATION

         ITEM 1.        Financial statements

                        Consolidated Statements of Operations for the six
                        month periods ended September 30, 1999 and 1998.

                        Consolidated Balance Sheets as of September 30, 1999
                        and March 31, 1999.

                        Consolidated Statements of Cash Flows for the six
                        month periods ended September 30, 1999 and 1998.

                        Notes to Consolidated Financial Statements

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

         ITEM 3.        Quantitative and Qualitative Disclosures About Market
                        Risks

PART II - OTHER INFORMATION

         ITEM 1.           Legal Procedings

         ITEM 2.           Submission of Matters to a Vote of Security Holders

         ITEM 6.           Exhibits and Reports of Form 8-K

SIGNATURES





                                    2 of 22

<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 conjunction with the audited consolidated financial statements and notes
thereto for the year ended March 31, 1999 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, 1999 are not necessarily
indicative of the results to be expected for the entire year.





                                    3 of 22

<PAGE>



                          MICROWARE SYSTEMS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                   ($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                SIX MONTHS ENDED
                                                                 SEPTEMBER 30,                    SEPTEMBER 30,
                                                           ---------------------------      ---------------------------
                                                               1999          1998               1999          1998
                                                           ------------- --------------     ------------- -------------
REVENUES:
<S>                                                         <C>           <C>                <C>           <C>
     Product                                                 $  2,595      $  3,330           $  4,975      $  6,930
     Services                                                   1,065           868              1,502         2,479
                                                            ----------   -----------         ----------    ---------
                                                                3,660         4,198              6,477         9,409
                                                            ----------   -----------         ----------    ---------
COST OF REVENUES:
     Product                                                      479           661              1,067         1,283
     Services                                                     406           602                698         1,307
                                                           -----------   -----------        -----------    ---------
                                                                  885         1,263              1,765         2,590
                                                           -----------   -----------         ----------    ---------

         GROSS PROFIT                                           2,775         2,935              4,712         6,819

OPERATING EXPENSES:
     Research and development                                   1,500         1,778              3,018         3,516
     Sales and marketing                                        2,621         2,807              4,904         5,572
     General and administrative                                   800         1,136              1,541         1,789
                                                            ----------    ----------         -----------   ---------
         TOTAL OPERATING EXPENSES                               4,921         5,721              9,463        10,877
                                                            ----------    ----------         ----------    ---------

         OPERATING LOSS                                        (2,146)       (2,786)            (4,751)       (4,058)
                                                            ----------    ----------         ----------    ----------

OTHER INCOME (EXPENSE):
     Foreign currency gain, net                                   338           102                253            73
     Interest income                                               54           134                122           292
     Interest expense                                            (129)         (134)              (259)         (268)
                                                           -----------   -----------        -----------   -----------
                                                                  263           102                116            97
                                                           -----------   -----------        -----------   -----------
           LOSS BEFORE INCOME TAX EXPENSE                      (1,883)       (2,684)            (4,635)       (3,961)
Income tax expense                                                 13            79                 90           190
                                                           ------------  ------------       -----------    ----------
           NET LOSS                                         $  (1,896)    $  (2,763)          $ (4,725)    $  (4,151)
                                                           ============  ============       ===========    ==========

Loss per share                                              $   (0.13)    $   (0.19)         $   (0.32)    $   (0.28)
                                                            ==========   ============        ===========   ==========

Shares used in per share calculation - basic                   14,948        14,617             14,943        14,593
                                                            ==========   ============        ===========   ==========

Diluted loss per share                                      $   (0.13)    $   (0.19)         $   (0.32)    $   (0.28)
                                                            ==========   ============        ===========   ==========

Shares used in per share calculation - diluted                 14,948        14,617             14,943        14,593
                                                            ==========    ==========        ===========    =========
</TABLE>
See accompanying notes to consolidated financial statements.



                                     4 of 22

<PAGE>


                          MICROWARE SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                   ($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                ASSETS
                                                                       September 30, 1999         March 31, 1999
                                                                      -------------------         --------------
CURRENT ASSETS:                                                           (unaudited)
<S>                                                                        <C>                    <C>
        Cash and cash equivalents                                           $   2,180              $   2,840
        Short-term investments                                                  2,713                  4,687
        Trade receivables, net of allowance for doubtful
            accounts of $398 and $485, respectively                             2,502                  3,593
        Income taxes receivable                                                   120                    122
        Inventories                                                                50                     71
        Prepaid expenses and other current assets                                 472                    438
        Deferred tax assets                                                       403                    473
                                                                        ----------------       -------------
             TOTAL CURRENT ASSETS                                               8,440                 12,224

PROPERTY AND EQUIPMENT:
        Land and improvements                                                   2,004                  2,004
        Building                                                                8,426                  8,426
        Furniture, fixtures & equipment                                         3,632                  3,647
        Research and development equipment                                      2,642                  2,806
        Leasehold improvements                                                    135                     49
                                                                        ----------------       -------------
                                                                               16,839                 16,932
        Accumulated depreciation and amortization                               4,878                  4,416
                                                                        ----------------       ------------
             NET PROPERTY AND EQUIPMENT                                        11,961                 12,516

OTHER ASSETS:
        Intangible assets, net of amortization                                  1,450                  2,007
        Deposits and other                                                        923                    787
                                                                        ----------------       -------------
             TOTAL OTHER ASSETS                                                 2,373                  2,794
                                                                        ----------------       -------------
                                                                            $  22,774              $  27,534
                                                                        ================       =============
</TABLE>



                                     5 of 22

<PAGE>


                          MICROWARE SYSTEMS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)
<TABLE>
<CAPTION>
                             LIABILITIES
                                                                        September 30, 1999      March 31, 1999
                                                                        ------------------     ----------------
CURRENT LIABILITIES:                                                       (Unaudited)
<S>                                                                     <C>                      <C>
        Notes payable to banks                                           $          -             $     253
        Current portion of long-term debt                                          74                    71
        Accounts payable                                                        1,142                   927
        Accrued expenses                                                        2,231                 2,140
        Deferred revenues                                                         881                   812
        Income taxes payable                                                      195                   113
                                                                        ----------------       ---------------
             TOTAL CURRENT LIABILITIES                                          4,523                 4,316
Long-term debt, less current installments                                       6,809                 6,847
Deferred income taxes                                                             403                   428
                                                                        ----------------       ---------------
             TOTAL LIABILITIES                                                 11,735                11,591
                                                                        ----------------       ---------------


                         SHAREHOLDERS' EQUITY
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; 15,174,142 and
     15,154,992 shares issued; 14,949,042 and 14,929,892
     shares outstanding                                                        37,086                37,065
Accumulated deficit                                                           (24,520)              (19,795)
Accumulated other comprehensive loss                                             (750)                 (550)
                                                                        ----------------      ----------------
                                                                               11,816                16,720
Less cost of common shares acquired for the treasury,
     225,100 and 225,100 shares                                                   777                   777
                                                                        ----------------      ----------------
              TOTAL SHAREHOLDERS' EQUITY                                       11,039                15,943
                                                                        ----------------      ----------------
                                                                            $  22,774             $  27,534
                                                                        ================      ================
</TABLE>
See accompanying notes to consolidated financial statements.




                                    6 of 22

<PAGE>


                          MICROWARE SYSTEMS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                            SIX MONTHS ENDED SEPTEMBER 30,
                                                                        --------------------------------------
                                                                             1999                  1998
                                                                        ----------------      ----------------
                                                                                  ($ in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                        <C>                   <C>
     Net loss                                                               $ (4,725)             $ (4,151)
         Adjustments to reconcile net loss to net cash used in
           operating activities:
           Depreciation and amortization                                       1,444                 1,415
           Gain on sale of assets                                                 11                     -
           Deferred income taxes                                                  45                   163
         Change in assets and liabilities:
           Trade receivables, net                                                949                  (204)
           Inventories                                                            21                    (1)
           Prepaid royalties                                                       -                   127
           Other current assets                                                  (29)                   82
           Income taxes receivable                                                 3                     3
           Other assets                                                         (245)                 (381)
           Accounts payable                                                      179                  (537)
           Accrued expenses                                                       79                   118
           Deferred revenues                                                      44                  (204)
           Income taxes payable                                                   80                    66
                                                                        ----------------      ----------------
     NET CASH USED IN OPERATING ACTIVITIES                                    (2,144)               (3,504)
                                                                        ----------------      ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Capital expenditures                                                   (146)                 (646)
         Purchase of short-term investments                                   (5,025)               (1,008)
         Maturities of short-term investments                                  7,000                 6,935
                                                                        ----------------      ----------------
     NET CASH PROVIDED BY INVESTING ACTIVITIES                                 1,829                 5,281
                                                                        ----------------      ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments on notes payable to banks and long-term debt            (295)                  (33)

     Proceeds from issuance of common stock                                       21                   100
     Cost of issuance of common stock                                              -                    (5)
                                                                        ----------------      ----------------
      NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                       (274)                   62
                                                                        ----------------      ----------------

Effect of foreign currency exchange rate changes on cash                         (71)                  (43)
                                                                        ----------------      ----------------
   Net (decrease) increase in cash and cash equivalents                         (660)                1,796

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                               2,840                 2,009
                                                                        ----------------      ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $  2,180              $  3,805
                                                                        ================      ================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid for interest                                                 $    258              $    260
                                                                        ================      ================
     Cash paid for taxes                                                    $      9              $     26
                                                                        ================      ================
</TABLE>
See accompanying notes to consolidated financial statements.




                                    7 of 22
<PAGE>


                          MICROWARE SYSTEMS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1999
                                    AND 1998
                                   (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,
1999 and for all periods presented, have been made. The consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the fiscal year ended March 31, 1999 included
in Microware's annual report on Form 10-K.

2.   REVENUE RECOGNITION

Microware 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 material impact on Microware's current licensing or revenue
recognition practices. Product revenues primarily consist of software
licenses and development tool products sold and royalties earned from
equipment distributors. Software license fees are recognized as revenues upon
contract signing and shipment of the software mastercopy. Sales of
development tool products are recognized as revenues upon shipment. Royalties
earned from equipment distributors are recognized as revenues when reported
by the equipment distributors or upon written agreement for non-refundable
prepaid royalties.

Service revenues are derived primarily from custom contract engineering work,
customer support (maintenance) agreements, and training and consulting
services. Revenues from custom contract engineering work are recognized using
the percentage of completion method. Maintenance revenues, including
maintenance bundled with software license fees, are recognized ratably over
the term of the related agreements. Revenues from training and consulting
services are recognized as the services are rendered.

In December 1998, the AICPA released SOP 98-9, "Modification of SOP 97-2,
`Software Revenue Recognition with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 to require that an entity recognize revenue for multiple
element arrangements by means of the "residual method" when (1) there is
vendor-specific objective evidence of the fair values of all the undelivered
elements that are not accounted for by means of long-term contract accounting
(2) vendor-specific objective evidence of fair value does not exist for one
or more of the delivered elements, and (3) all revenue recognition criteria
of SOP 97-2 (other than the requirement for vendor-specific objective
evidence of the fair value of each delivered element) are satisfied. The
provisions of SOP 98-9 extend the deferral of certain paragraphs of SOP 97-2
and became effective December 15, 1998. These deferred paragraphs of SOP 97-2
and SOP 98-9 will be effective for transactions that are entered into in
fiscal years beginning after March 15, 1999. Retroactive application is
prohibited. The effects of these statements are not expected to have a
material impact on Microware's operating results, financial position or cash
flows.

3.   COMPUTATION OF NET LOSS PER SHARE

Basic earnings (loss) per share (EPS) has been computed by dividing net
earnings (loss) by the weighted average number of common shares outstanding
during the periods presented. Diluted EPS has been computed by dividing net
earnings (loss) by the weighted average 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.




                                     8 of 22

<PAGE>


4.   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 Microware, the primary difference between net income and comprehensive
income results from foreign currency translation adjustments.

Comprehensive loss for the three and six months ended September 30, 1999 and
1998 is as follows:
<TABLE>
<CAPTION>
                                                  Three Months Ended           Six Months Ended
                                                    September 30,                September 30,
                                               ----------------------         ------------------
<S>                                             <C>          <C>            <C>          <C>
                                                  1999         1998            1999         1998
                                                  ----         ----            ----         ----

Net loss                                         $(1,896)     $(2,763)       $(4,725)     $(4,151)
Foreign currency translation adjustment             (196)          21           (200)          34
                                               ----------   ----------      ---------    ---------
Total comprehensive loss                         $(2,092)     $(2,742)       $(4,925)     $(4,117)
                                               ==========   ==========      =========    =========
</TABLE>




                                      9 of 22

<PAGE>


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 Microware's financial condition and results of operations
includes forward-looking statements that involve risk and uncertainty,
including management's expectations for fiscal 2000 and known trends and
uncertainties in the business. Words such as "expects", "anticipates",
"intends", "believes", "plans", "seeks", "estimates" and similar expressions
or variations of these words are intended to identify forward-looking
statements, but are not the only means of identifying forward-looking
statements. Additionally, statements that refer to Microware's estimated or
anticipated future results, sales or marketing strategies, new product
development or performance or other non-historical facts are forward-looking
and reflect Microware's current perspective of existing information.
Forward-looking statements are inherently subject to risks and uncertainties
that cannot be predicted or quantified, and actual results and outcomes may
differ materially from the results and outcomes discussed in the
forward-looking statements depending on a variety of factors, including the
volume and timing of orders received during the quarter, the Company's
ability to successfully market its products, the Company's ability to keep
pace with its competition and with rapid technological change, and the
Company's ability to manage turnover in its sales and marketing and other
personnel and to attract and maintain personnel generally, as well as other
risk factors mentioned throughout this Form 10-Q and in Microware's other
filings with the Securities and Exchange Commission. Readers are urged not to
place undue reliance on forward-looking statements and Microware disclaims
any obligation to update any of the forward-looking statements contained in
this Form 10-Q to reflect any future events or developments. Microware's
operating results have varied significantly from quarter to quarter in the
past, and the future operating results of Microware may fluctuate as a result
of the above and other risk factors detailed in this Form 10-Q and other
documents filed by Microware with the Securities and Exchange Commission. Due
to all of the foregoing factors, Microware 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, Microware's actual financial performance has not always met market
expectations and Microware has experienced significant quarterly losses. It
is likely that, in some future quarter, Microware's financial performance
will again fall below market expectations.

OVERVIEW Microware develops, markets and supports real-time operating system
software and high-level language compilers used in consumer electronics,
communications, process control and factory automation, scientific research,
and government/defense applications. Microware's product line is built around
the OS-9 family of real-time operating systems for advanced microprocessors.
The OS-9 product family includes options for programming languages,
networking, graphical interfaces and productivity tools. Substantially all of
Microware's revenues in the last and current fiscal years have been derived
from licenses and related services from the OS-9 product family.

Microware 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.

                                     10 of 22

<PAGE>


A key element of Microware's long-term strategy is to develop products that
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 Microware's successful negotiation of license run-time royalties and on
the successful commercialization by Microware's customer of the underlying
product. To date, Microware has been negatively impacted by target markets,
such as certain types of digital 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 Microware will
be successful when the markets, for which its products are targeted, emerge.

RESULTS OF OPERATIONS

SECOND QUARTER OF FISCAL 2000 COMPARED TO THE SECOND QUARTER OF FISCAL 1999

REVENUES

Total revenues decreased 13% or $538,000 from $4.2 million in the second
quarter of fiscal 1999 to $3.7 million in the second quarter of fiscal 2000.
Product revenues decreased 22% or $735,000 from $3.3 million in the second
quarter of fiscal 1999 to $2.6 million in the second quarter of fiscal 2000.
The decrease in product revenues between periods resulted primarily from a
reduction in distribution royalties for the Company's OS-9 for Digital TV
(DAVID). Services revenues increased 23% or $197,000 from $868,000 in the
second quarter of fiscal 1999 to $1.1 million in the second quarter of fiscal
2000. The increase in services revenues between periods resulted primarily
from an increase in support fees received under a software license and custom
contract engineering agreement with Motorola to develop various modular
software solutions for a number of Motorola personnel wireless communications
devices.

International revenues represented 57% or $2.4 million and 61% or $2.2
million of total revenues in the second quarter of fiscal 1999 and 2000,
respectively. The reduction in international revenues, in real dollars,
resulted primarily from an overall decrease in European revenues in the
second quarter of fiscal 2000. 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 product revenues includes direct and indirect costs for production
quality, as well as those costs related to the packaging, shipping and
delivery of the product to the customer. Cost of product revenues also
includes direct third party royalty expense and amortization expense of
purchased and capitalized software. Cost of services revenues includes direct
and indirect costs for technical phone support, training and education, and
custom engineering.

Cost of revenues decreased 30% or $378,000 from $1.3 million in the second
quarter of fiscal 1999 to $885,000 in the second quarter of fiscal 2000. As a
percentage of product revenues, the cost of product revenues was 20% and 19%
for the second quarters of fiscal 1999 and 2000, respectively. The slight
decrease as a percentage of product revenues was principally due to a
reduction in the amortization of prepaid royalties between periods. Cost of
services revenues decreased 33% or $196,000 from the second quarter of fiscal
1999 to the second quarter of fiscal 2000, and decreased as a percentage of
services revenues from 69% in the second quarter of fiscal 1999 to 38% in the
second quarter of fiscal 2000. The reduction in costs and increase in gross
margins on services work primarily resulted from fewer engineers providing
support and custom engineering for higher margin customers in the second
quarter of fiscal 2000 as compared to the second quarter of fiscal 1999.





                                     11 of 22

<PAGE>

RESEARCH AND DEVELOPMENT

Research and development expense includes expenses associated with the
development of new products and the enhancements of existing products, and
consists primarily of employee salaries and related expenses. Research and
development expense decreased 16% or $278,000 from $1.8 million in the second
quarter of fiscal 1999 to $1.5 million in the second quarter of fiscal 2000.
Research and development expense decreased primarily as a result of
reductions in engineering staff and software maintenance expense, however
these reductions were partially offset by increases in salaries and
consulting services utilized by the Company between periods. Microware has
made substantial investments in product development and believes its future
success will depend in large part on its ability to enhance its existing
products, to develop new products and to maintain technological
competitiveness. Consequently, Microware anticipates that it will continue to
commit substantial resources to product development in the future.

SALES AND MARKETING

Sales and Marketing expense consists primarily of sales and marketing
personnel related costs, including sales commissions. Sales and marketing
expense also includes costs of advertising, public relations and attendance
at industry trade shows. Sales and marketing expense decreased 7% or $186,000
from $2.8 million in the second quarter of fiscal 1999 to $2.6 million in the
second quarter of fiscal 2000. The reduction in sales and marketing expense
between periods primarily resulted from a reduction in personnel. Microware
continues to work towards developing a small, focused and efficient sales and
marketing team. Microware expects to continue investing strategically in
sales and marketing over the remainder of fiscal 2000 to expand its customer
base and to market its products.

GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expenses consist primarily of personnel related
costs for administration, finance, human resources and facilities management,
as well as legal, auditing and certain recruiting and relocation expenses.
General and administrative expenses decreased 30% or $336,000 from $1.1
million to $800,000 in the second quarters of fiscal 1999 and 2000,
respectively. The decrease in the second quarter of fiscal 2000 resulted from
the absence of costs incurred from organizational changes made in the
Company's operations during the second quarter of fiscal 1999.

OTHER INCOME (EXPENSE)

Other income (expense) increased from $102,000 to $263,000 in the second
quarters of fiscal 1999 and 2000, respectively. Overall, the increase is
attributable to an increase in foreign exchange gains resulting primarily
from the strengthening of the Japanese Yen and German Mark against the U.S.
Dollar. Offsetting the increase in foreign exchange gains was a reduction in
interest income due to cash used in operations.

SIX MONTHS YEAR-TO-DATE OF FISCAL 2000 COMPARED TO SIX MONTHS YEAR-TO-DATE OF
FISCAL 1999

REVENUES

Total revenues decreased 31% or $2.9 million from $9.4 million for the
six-month period ended September 30, 1998 to $6.5 million for the six-month
period ended September 30, 1999. Product revenues decreased 28% or $1.9
million from $6.9 million for the six-month period ended September 30, 1998
to $5.0 for the six-month period ended September 30, 1999. The decrease in
product revenues stemmed primarily from a reduction in DAVID and Java
distribution license and non-refundable prepaid royalty fees. Services
revenues decreased 39% or $1.0 million from $2.5 million for the six-month
period ended September 30, 1998 to $1.5 million for the six-month period
ended September 30, 1999. The decrease in services revenues in the first six
months of fiscal 2000 as compared to the first six months of fiscal 1999
resulted from a significant reduction in custom contract work.



                                     12 of 22


<PAGE>


COST OF REVENUES

Total cost of revenues decreased 32% or $825,000 from $2.6 million for the
six-month period ended September 30, 1998 to $1.8 million for the six-month
period ended September 30, 1999. As a percentage of product revenues, cost of
product revenues increased from 19% for the six-month period ended September
30, 1998 to 21% for the six-month period ended September 30, 1999, primarily
as a result of the reduction in product revenues between periods combined
with a certain level of fixed costs. As a percentage of services revenues,
cost of services revenues decreased from 53% for the six-month period ended
September 30, 1998 to 46% for the six-month period ended September 30, 1999.
The reduction in costs and increase in gross margins on services work
primarily resulted from fewer engineers providing support and custom
engineering for higher margin customers in the first six months of fiscal
2000 as compared to the first six months of fiscal 1999.

RESEARCH AND DEVELOPMENT

Research and development expense decreased 14% or $498,000 from $3.5 million
for the six-month period ended September 30, 1998 to $3.0 million for the
six-month period ended September 30, 1999. Research and development expense
fell due to reductions in engineering staff and in software support, however,
these reductions were partially offset by increases in salaries and
consulting services utilized by the Company between periods.

SALES AND MARKETING

Selling and marketing expense decreased 12% or $668,000 from $5.6 million to
$4.9 million in the six months ended September 30, 1998 and 1999,
respectively. The reduction in sales and marketing expense between periods
primarily resulted from a reduction in personnel. Microware continues to work
towards developing a small, focused and efficient sales and marketing team.
During the first six months of fiscal 2000 Microware continued to experience
turnover in its sales and marketing personnel, which has had, and may
continue to have, an interim adverse affect on our operations. While
Microware continues to invest substantial time, expense and resources in
recruiting and training certain sales personnel, many sales and marketing
positions that have been vacated will remain unfilled as the Company works
toward a smaller, more efficient organization.

GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expenses decreased 14% or $248,000 from $1.8
million for the six-month period ended September 30, 1998 to $1.5 million for
the six-month period ended September 30, 1999. The decrease between periods
resulted primarily from the absence of costs incurred from organizational
changes made in the Company's operations during the second quarter of fiscal
1999.

OTHER INCOME (EXPENSE)

Other income increased $19,000 from $97,000 for the six-month period ended
September 30, 1998 to $116,000 for the six-month period ended September 30,
1999. Overall, the increase is attributable to an increase in foreign
exchange gains resulting primarily from the strengthening of the Japanese Yen
and German Mark against the U.S. Dollar. Offsetting the increase in foreign
exchange gains was a reduction in interest income due to cash used in
operations.

                                     13 of 22

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Microware has historically funded its operations primarily through cash flows
from operations, the sale of common stock and, to a lesser extent, long term
debt. At September 30, 1999, Microware had approximately $3.9 million in
working capital and $4.9 million in cash and short-term investments as
compared to $7.9 million in working capital and $7.5 million in cash and
short term investments at March 31, 1999. The reduction in working capital
and cash and short term investments resulted principally from the use of cash
during the first and second quarters of fiscal 2000 for operating activities.

Net cash used in operating activities in the first six months of fiscal 1999
and 2000 totaled $3.5 million and $2.1 million, respectively. The net loss of
$4.2 million along with the reduction in accounts payable of $537,000 were
the primary reason for the cash used in operations in the first six months of
fiscal 1999. The net loss of $4.7 million, partially offset by a decrease in
trade receivables of $949,000, was the primary reason for the cash used in
operations in the first six months of fiscal 2000.

Net cash provided by investing activities in the first six months of fiscal
1999 and 2000 totaled $5.3 million and $1.8 million, respectively. Cash
provided by investing activities during the first two quarters of fiscal 1999
and 2000 resulted from net maturaties of short-term investments and were
partially offset by capital expenditures.

Net cash (used in) provided by financing activities in the first six months
of fiscal 1999 and 2000 totaled ($274,000) and $62,000, respectively. Cash
used for financing activities during the first six months of fiscal 2000
stemmed primarily from the retirement of a note payable to a bank associated
with Microware's Japanese subsidiary amounting to approximately $250,000.

As of September 30, 1999, Microware had approximately $6.9 million of long
term debt, including current portion, outstanding relating to its
headquarters building. Monthly payments are $49,000, including interest at
7.46%, with the unpaid balance due January 1, 2008. In accordance with the
loan agreement, Microware has provided the lender an irrevocable standby
letter of credit in the amount of $724,000. In order to obtain the
irrevocable standby letter of credit, Microware has pledged a $724,000 U.S.
Treasury note, included in short-term investments, as collateral.

Management believes current working capital and its $1.0 million bank line of
credit will be adequate to meet Microware's future working capital, new
product development and capital expenditure needs at least through the end of
fiscal 2000.

Management does not believe that inflation has historically had a material
effect on Microware's results of operations.

Many of Microware's international contracts are denominated in local
currencies, and an increase in the relative value of the dollar against such
currencies would lead to a reduction in Microware revenues. Microware
attempts to minimize its foreign currency exposure by attempting to keep
intercompany balances current and minimizing assets in any one currency
denomination. However, due to recent losses, intercompany balances have
increased and are not specifically hedged and while the gains reflected in
the second quarter of fiscal 2000 have benefited the Company, there can be no
assurance that Microware's future results of operations will not be adversely
affected by currency fluctuations.

Microware anticipates that international sales will continue to account for a
significant portion of net sales in the foreseeable future. This dependence
on international operations subjects Microware to certain risks, including
tariffs and other barriers, difficulty in staffing and managing foreign
subsidiary operations, difficulty in managing distributors and resellers,
difficulty in accounts receivable collection, foreign currency exposure and
adverse tax consequences. Microware is also subject to the risks associated
with the imposition of protective import or export legislation and
regulations by the United States or other countries. Microware cannot predict
whether quotas, duties, taxes or other charges or restrictions will be
implemented on its products in the future. There can be no assurance that
these factors or the adoption of restrictive policies will not have a
material adverse effect on Microware's business, financial condition and
results of operations.

                                     14 of 22

<PAGE>


"YEAR 2000" ISSUES

Many currently installed computer systems and software products include
coding to accept only two-digit entries in the date code field instead of
four digit entries and therefore cannot distinguish dates prior to January 1,
2000 from dates on or after January 1, 2000. Systems and software that do not
properly recognize such information may generate erroneous data or fail. Such
systems need to be upgraded or replaced in order to function properly or, in
other words, be Year 2000 compliant. Significant uncertainty exists in the
computer systems and software industry concerning the potential effects
associated with non-compliance.

Microware has conducted Year 2000 compliance reviews of current versions of
its products. The reviews include assessment, implementation, validation,
testing and contingency planning. Microware believes that all of its most
current product releases are Year 2000 compliant. However, there can be no
assurance that all of Microware's customers will implement these compliant
releases in a timely manner. This could lead to failure of customer systems
and product liability claims against Microware. While copies of old versions
of Microware's software may be embedded in deployed products, some of which
may be used in mission critical functions, Microware has made Year 2000
compliant upgrades commercially available to all of its past licensees, and
believes that the terms of its license agreements preclude any liability for
Year 2000 compliance-related failures in such products. However, even if
Microware products are Year 2000 compliant, Microware may be subject to
claims based on Year 2000 compliance issues in the products of other
companies or issues arising from the integration of multiple products within
a system. The costs of defending and resolving Year 2000 compliance-related
disputes, including consequential damages, could have a material adverse
effect on Microware's business, financial condition and results of operations.

As part of its compliance program, Microware has tested software obtained
from third parties which has been integrated with Microware products and in
addition has sought assurances from respective third parties that their
software is Year 2000 compliant. However, despite this testing by Microware
and assurances provided by third party suppliers, third party software may
not be Year 2000 compliant. Errors or defects in Microware or third party
products may result in loss of revenue, diversion of product development
resources or other damage to Microware which could have a material adverse
effect on Microware's business, financial condition and results of operations.

Microware has initiated an assessment of its worldwide business systems,
which include, product development, sales and marketing, finance, human
resources and order fulfillment systems. Microware is working with and
monitoring critical suppliers to determine that their products and/or
services are year 2000 compliant. Microware believes the software and
hardware it uses internally is presently Year 2000 compliant and is not aware
of any material operational issues or costs that will be incurred in the
future. However, Microware provides no assurance that it will not incur
materially adverse consequences caused by undetected Year 2000 compliant
errors or defects in its business systems.

All costs associated with Microware's Year 2000 compliance are expensed as
incurred and have not been accounted for separately. These costs to date have
not been material. Additional costs related to Year 2000 compliance are not
expected to be material. Microware is currently developing contingency plans
to be implemented as part of its Year 2000 compliance efforts. Depending on
the system in question, these plans could include accelerated replacement of
affected equipment, increased work hours for Company personnel or use of
contract personnel or possible manual workarounds, in addition to other
similar approaches. If Microware is required to implement contingency plans,
it could have a materially adverse effect on Microware's business, financial
condition and results of operations.

Microware's ability to achieve Year 2000 compliance, in all areas of its
business, could be adversely effected by, among other things, the
availability and cost of programming and testing resources, vendors' or
suppliers' ability to modify proprietary software and other unanticipated
problems identified in Year 2000 compliance reviews and assessments. Such
difficulties could have a material adverse effect on Microware's business,
financial condition and results of operations.

The foregoing is a Year 2000 readiness disclosure entitled to protection as
provided in the Year 2000 Information and Readiness Disclosure Act.

                                     15 of 22

<PAGE>


"EURO" ISSUES

On January 1, 1999, the European Union ("EU") introduced a new currency (the
"Euro"). The Euro is intended to enable the EU to blend the economies of the
EU's member states into one large market with unrestricted and unencumbered
trade and commerce across borders. Eleven European countries are
participating in the first membership wave, namely 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.
Legacy currencies will remain legal tender in the participating countries for
a transition period between January 1999 and January 2002. During the
transition period, non-cash payments can be made in the Euro, and parties can
elect to pay for goods and services and transact business using either the
Euro or a legacy currency. The Company does not presently expect that the
introduction and use of the Euro will have a material adverse effect on the
Company's financial position, results of operations or cash flows during the
transition period. The significant requirement of companies during the
transitionary period is the ability to invoice and accept payment in Euro
denominated transactions if a customer makes this request. The Company will
continue to evaluate issues involving the introduction of the Euro.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

In addition to the other risk factors contained herein and within other
filings with the Securities and Exchange Commission, Microware believes the
following additional risk factors should be taken into consideration in
evaluating its business:

VARIATION OF QUARTERLY OPERATING RESULTS

Microware's revenues and operating results have varied substantially from
quarter to quarter and should not be relied upon as an indication of future
performance. Microware believes its revenues may fluctuate from quarter to
quarter depending upon such factors as new product introductions by itself or
others, seasonality of customer buying patterns, Microware's sales commission
plan, renewals of product licenses by customers, product development and
marketing expenses, changes in Microware's and competitors' pricing policies,
the timing of significant orders, the mix of products sold, the mix of
international versus domestic revenues, currency fluctuations, the existence
of product errors and the hiring and training of additional staff.
Furthermore, delays in closing product licensing transactions or in
completion of custom contract engineering work during any quarter could cause
quarterly revenues and net earnings for that quarter to fall below
anticipated levels. Microware derives a significant portion of its revenues
from a relatively small number of large account customers, therefore any
delay in the consummation of business with this small number of customers
could significantly impact the Company's quarterly performance. The majority
of Microware's revenues in a quarter has been historically derived from
orders received in the last month of that quarter, which makes Microware's
financial performance more susceptible to an unexpected downturn in business
and makes quarterly results difficult to forecast. In addition, Microware's
expense levels are based on present expectations of future revenue levels,
and a shortfall in revenues could result in a disproportionate decrease in
net earnings. As the markets in which Microware competes mature and as new
and existing companies compete for customers, price competition is likely to
intensify and such competition could adversely affect quarterly operating
results. Variations in product mix may also affect gross profit margin
percentages. Therefore, although Microware's revenues and gross profit in any
period may increase in absolute terms, such an increase may result in lower
gross profit margin percentages.

HISTORY OF OPERATING LOSSES

Microware has experienced significant operating losses for the past three
fiscal years. While Microware has taken a number of measures to increase its
revenues, decrease its operating expenses, and attain profitability, there
can be no assurance that these measures will succeed or that Microware will
become profitable.

                                     16 of 22

<PAGE>


MARKET RISKS

Microware has invested substantial resources in the development of emerging
markets, in particular the digital television and wireless and Internet
communications devices markets. While Microware has achieved a substantial
number of OEM licenses in these markets and a number of the devices are
currently in commercial deployment, these markets remain at an early stage
and are increasingly competitive, and there can be no assurance that
Microware will receive substantial revenues or earnings from products or
services in these markets.

ABILITY TO KEEP PACE WITH COMPETITION AND RAPID TECHNOLOGY CHANGE

The embedded systems markets are highly diverse and devoid of established
technology standards. A majority of embedded operating systems and
applications are developed in-house by OEMs, and no single processor platform
accounts for a majority or even a substantial minority of the embedded
systems under development. Moreover, the market is increasingly competitive,
with a number of industry-leading companies with substantially greater
financial and technical resources than Microware devoting substantial
resources to the development of significant market share in the embedded
systems business. While Micrwoare tries to support the industry-leading
32-bit microprocessors which it believes represent the best market
opportunities, and to offer the best possible array of incremental software
functionalities, there can be no assurance that Microware's current products
will meet the demands of the market in an environment of increasing
competition and rapid technology change.

RISKS ASSOCIATED WITH PRODUCT DEVELOPMENT AND TRANSITIONS

Microware has in the past experienced delays in software development, and
there can be no assurance that Microware will not experience such delays in
the future. Such delays, which can occur because of resource constraints,
unforeseen technological obstacles within or outside Microware's control, and
changes in market requirements, can have a material adverse effect on
Microware's business.

COMPETITION

Microware has attracted substantial competition in its targeted markets. Many
of Microware's traditional competitors have grown substantially as a result
of successful exploitation of growth in the embedded systems market, and in
some cases have expanded their businesses in a manner which competes more
directly with Microware. Microsoft has devoted substantial resources to the
development of the embedded operating system business with its Windows CE
product, which is attempting to capture a significant market share in the
handheld computer market and digital TV market. Sun Microsystems, Inc. has
developed an embedded operating system product called JavaOS which it markets
together with its Java technology, and has made a number of business and
technology acquisitions in the past fiscal years related to the development
of its embedded systems business. There can be no assurance Microware will be
able to successfully attain new market share or even maintain its existing
market share in this increasingly competitive market.

ATTRACTION AND RETENTION OF QUALIFIED PERSONNEL

Microware's future performance depends to a significant degree upon the
continued contributions of its key management, product development, marketing
and sales personnel, many of whom have joined us recently. Microware has
experienced significant turnover in personnel during the past fiscal year
including its Executive Vice President and Chief Operating Officer, Vice
President of Sales, Vice President of Marketing and Vice President of
Engineering. Microware's ability to execute its market strategy will depend
to a large degree upon its ability to integrate new personnel into the
Company. Competition for qualified personnel throughout the software industry
is intense and there can be no assurance that Microware will be successful in
attracting and retaining such personnel.

                                     17 of 22

<PAGE>


INTERNATIONAL OPERATIONS

In the past three fiscal years, Microware derived at least 50% of its total
revenue from sales outside North America, and this trend is anticipated to
continue in the future. This dependence on international operations subjects
Microware to certain risks, including tariffs and other barriers, difficulty
in staffing and managing foreign subsidiary operations, difficulty in
managing distributors and resellers, difficulty in accounts receivable
collection, foreign currency exposure and adverse tax consequences. Microware
is also subject to the risks associated with the imposition of protective
import or export legislation and regulations by the United States or other
countries. We cannot predict whether quotas, duties, taxes or other charges
or restrictions will be implemented on our products in the future. There can
be no assurance that these factors or the adoption of restrictive policies
will not have a material adverse effect on Microware's business, financial
condition and results of operations.

YEAR 2000 ISSUES

Many currently installed computer systems and software products include
coding to accept only two-digit entries in the date code field instead of
four digit entries and therefore cannot distinguish dates prior to January 1,
2000 from dates on or after January 1, 2000. Systems and software that do not
properly recognize such information may generate erroneous data or fail. Such
systems need to be upgraded or replaced in order to function properly or, in
other words, be Year 2000 compliant. Significant uncertainty exists in the
computer systems and software industry concerning the potential effects
associated with non-compliance.

Microware believes its most current releases of its products, including third
party software integrated into certain products, are Year 2000 compliant and
will neither cease to perform nor generate incorrect or ambiguous data or
results when processing dates on or after January 1, 2000. Microware believes
that its products will calculate any information dependent on such dates in
the same manner and with the same functionality, data integrity and
performance. However, Microware provides no assurance that its software
products contain all the necessary software routines and programs for the
accurate calculation, display, storage and manipulation of data involving
dates on or after January 1, 2000. Any non-compliance of Microware's software
products could have a material adverse effect on its business, financial
condition and results of operations.

Additionally, the majority of Microware's software products are combined by
its customers with non-Microware software programs or hardware devices. Such
non-Microware products could be non-compliant, causing Year 2000 compliance
issues for Microware's customers. Any such Year 2000 issues could affect
customers' demand for Microware products, which could have a material adverse
effect on Microware's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations, Year 2000 Issues".

LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT

Microware depends on its proprietary technology. Despite Microware's efforts
to protect its proprietary rights, it may be possible for unauthorized third
parties to copy Microware's products or to reverse engineer or obtain and use
information that Microware regards as proprietary. Policing and enforcing
unauthorized use of Microware's products is difficult and can be expected to
be a persistent problem, particularly as many countries have only limited or
evolving protection of intellectual property rights. Because substantially
all of Microware's revenues are derived from OS-9 and related products, any
impairment of OS-9 could have a material adverse impact on Microware's
business. See Part II - Other Information, Item 1. Legal Proceedings.
Microware's business is therefore dependent on the adequacy of its
intellectual property protection through patents, trademarks, copyrights,
trade secrets, and license agreements; the adequacy and continued
availability of its licenses of integrated technology from third parties; and
the absence of any material technology litigation related to its products.

                                     18 of 22
<PAGE>


VOLATILITY OF STOCK PRICE

The market price of Microware's common stock has fluctuated considerably in
the past, and is likely to fluctuate considerably in the future. Microware
believes that various factors, including quarterly fluctuations in results of
operations, announcements of new products or partners by Microware or by its
competitors, changes in the software industry in general, or general
economic, political and market conditions may significantly affect the market
price of its common stock. Following periods of significant volatility,
securities class action litigation may be initiated against Microware. Such
litigation, if initiated, could result in substantial costs and diversion of
management attention and resources, which could have a material adverse
effect on Microware's business.

FINANCIAL STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the recorded amounts of assets and liabilities at the date of the
financial statements and the recorded amounts of revenues and expenses during
the reporting period. A change in the facts and circumstances surrounding
these estimates could result in a change to the estimates and impact future
operating results.

                                     19 of 22

<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE SENSITIVITY

Microware's exposure to market risk associated with changes in interest rates
relates primarily to debt obligations as all financial assets are short term
in nature. Microware is exposed to changes in fair value of its long-term
debt, which carries a fixed interest rate. At September 30, 1999, Microware
had total long-term debt of $6,883,000.

FOREIGN CURRENCY RISK

Microware transacts business in various foreign currencies, primarily
Japanese yen and certain European currencies, as discussed within this Form
10-Q as well as the Annual Report on Form 10-K, and accordingly is exposed to
fluctuations in foreign currency markets. The Company does not enter into
foreign currency hedging transactions.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEDINGS.

On September 1, 1999, Microware filed suit in the United States District
Court for the Southern District of Iowa against Apple Computer, Inc.
("Apple"). The suit charges Apple with trademark infringement, false
designation of origin, unfair competition, and trademark dilution. Microware
believes that Apple's use of the trademark "MAC OS 9" to identify its
operating system software has, and will continue to, cause confusion in the
marketplace, and dilute the value and goodwill associated with Microware's
trademark and incontestably registration for the mark "OS-9". On October 6,
1999, Apple filed its answer and counterclaimed for the cancellation of
Microware's registration of the mark "OS-9", alleging that the mark is
generic and that Microware filed fraudulent affidavits with the Trademark
Office. On October 14, 1999, Microware filed a motion for preliminary
injunction, asking the court to order Apple to stop all use of the mark "MAC
OS 9". The parties have agreed to a schedule whereby the preliminary
injunction motion will be heard by the court in mid-December, 1999. While
Apple has yet to substantively respond to the charges, Microware and its
counsel believe the charges brought against Apple are well founded and
strongly supported by the facts and law as presently known and understood.

                                    20 of 22

<PAGE>


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

The Annual Meeting of Shareholders of the Company was held on September 14,
1999. More than 91 percent of the holders of the Company's Common Stock were
represented at the meeting. Three issues were presented for consideration at
the meeting and were approved by the shareholders; 1) the election of three
Class I Directors to hold office until the 2002 Annual Meeting; 2) the
approval of the Microware Systems Corporation 1999 Stock Purchase Plan; and
3) the ratification of the selection of KPMG Peat Marwick LLP as independent
public accountants of the Company for the fiscal year ending March 31, 2000.
The results were as follows:

<TABLE>
<CAPTION>
1.       Election of Class I Directors
      Shares Entitled to Vote                    Votes at Meeting
      --------------------------------           ----------------
     <S>                                    <C>
            14,944,942                                    13,679,221

         Name                                 For          Withhold Authority
         ----                             ----------       ------------------
         Kenneth B. Kaplan                13,519,783             159,438
         Martin Allen                     13,529,671             149,550
         Daniel P. Howell                 13,534,144             145,077
</TABLE>
2. Proposal to adopt the Company's 1999 Stock Purchase Plan.
<TABLE>
<CAPTION>
            For                     Against        Abstain     Broker Non-vote
        ------------              ----------      ---------    ---------------
        <S>                        <C>             <C>              <C>
         13,388,182                 272,226         18,813           -0-
</TABLE>
3.       Ratification of Selection of KPMG Peat Marwick LLP as Independent
   Public Accountants
<TABLE>
<CAPTION>
          For              Against        Abstain      Broker Non-vote
      ------------        --------        -------      ---------------
      <S>                 <C>             <C>               <C>
       13,618,059          51,536          9,626             -0-
</TABLE>





                                    21 of 22

<PAGE>


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

(a.)     Exhibits

              10.10 Employment Agreement by and between George E. Leonard and
              Microware

              10.11 Severance Agreement and General Release by and between
              M. Denis Connaghan and Microware

              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, 1999           /S/ George E. Leonard
                                            ---------------------
                                            George E. Leonard
                                            Executive Vice President,
                                            Chief Financial Officer,
                                            Treasurer and Secretary


          Date: November 12, 1999           /S/ Kent E. Thompson
                                            ---------------------
                                            Kent E. Thompson
                                            Chief Accounting Officer,
                                            Controller and Assistant
                                            Treasurer and Assistant Secretary





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