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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549

FORM 10-Q

|x                                        | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|---------------------------------------- | ----------------------------------------------------------------------------------------
|                                         |                                                                                         
|For Quarterly Period Ended June 30, 2003
|                                        
|OR                                      
|                                         |                                                                                         
|o                                        | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                         |                                                                                         
|Commission File Number: 0-28900         

ROGUE WAVE SOFTWARE,
INC.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 93-1064214                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               |  |                                  
|5500 Flatiron Parkway, Boulder, Colorado                       |  | 80301                            
|(Address of principal executive offices)                       |  | (Zip Code)                       
|                                                               |  |                                  
|(303) 473-9118                                                
|(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 o
|----- | ----

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

|YES o | NO x
|----- | ----

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

|Class                          |  | Outstanding at July 31, 2003
|------------------------------ |  | ----------------------------
|                               |  |                             
|Common Stock, $0.001 par value |  | 10,217,192                  

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##### Table of Contents

ROGUE WAVE SOFTWARE, INC. FORM 10-Q

INDEX

|                               |                                                                                                                                                  | Page No.
|------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------ | --------
|                               |                                                                                                                                                  |         
|PART I - FINANCIAL INFORMATION
|                               |                                                                                                                                                  |         
|Item 1.                        | Condensed Consolidated Financial Statements:                                                                                                     |         
|                               |                                                                                                                                                  |         
|                               | Condensed Consolidated Balance Sheets at June 30, 2003 and September 30, 2002                                                                    | 3       
|                               |                                                                                                                                                  |         
|                               | Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the Three and Nine Months Ended June 30, 2003 and 2002 | 4       
|                               |                                                                                                                                                  |         
|                               | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2003 and 2002                                                 | 5       
|                               |                                                                                                                                                  |         
|                               | Notes to Condensed Consolidated Financial Statements                                                                                             | 6       
|                               |                                                                                                                                                  |         
|Item 2.                        | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                            | 16      
|                               |                                                                                                                                                  |         
|                               | Risk Factors                                                                                                                                     | 25      
|                               |                                                                                                                                                  |         
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                                                                       | 30      
|                               |                                                                                                                                                  |         
|Item 4.                        | Controls and Procedures                                                                                                                          | 31      
|                               |                                                                                                                                                  |         
|PART II  OTHER INFORMATION   
|                               |                                                                                                                                                  |         
|Item 6.                        | Exhibits and Reports on Form 8-K                                                                                                                 | 32      
|                               |                                                                                                                                                  |         
|Signatures                     | 33                                                                                                                                              
|                               |                                                                                                                                                  |         

2.



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PART I - FINANCIAL INFORMATION

Item 1.   Condensed Consolidated Financial Statements

ROGUE WAVE SOFTWARE, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) (unaudited)

|                                           |  | June 30, 2003 |         | September 30, 2002 |  
|------------------------------------------ |  | ------------- | ------- | ------------------ | -
|                                           |  |               |         |                    |  
|ASSETS                                     |  |               |         |                    |  
|Current assets:                            |  |               |         |                    |  
|Cash and cash equivalents                  |  | $             | 16,704  |                    | $
|Short-term investments                     |  |               | 12,094  |                    |  
|Accounts receivable, net                   |  |               | 6,266   |                    |  
|Prepaid expenses and other current assets  |  |               | 582     |                    |  
|Income tax receivable                      |  |               | 8       |                    |  
|                                           |  |               |         |                    |  
|Total current assets                       |  |               | 35,654  |                    |  
|Furniture, fixture, and equipment, net     |  |               | 1,274   |                    |  
|Intangibles, net                           |  |               | 169     |                    |  
|Other assets, net                          |  |               | 644     |                    |  
|                                           |  |               |         |                    |  
|Total assets                               |  | $             | 37,741  |                    | $
|                                           |  |               |         |                    |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |               |         |                    |  
|Current liabilities:                       |  |               |         |                    |  
|Accounts payable                           |  | $             | 331     |                    | $
|Accrued expenses                           |  |               | 3,527   |                    |  
|Deferred revenue                           |  |               | 6,918   |                    |  
|                                           |  |               |         |                    |  
|Total current liabilities                  |  |               | 10,776  |                    |  
|Stockholders equity:                      |  |               |         |                    |  
|Common stock                               |  |               | 10      |                    |  
|Additional paid-in capital                 |  |               | 41,538  |                    |  
|Treasury stock                             |  |               | (2,588  | )                  |  
|Deferred compensation                      |  |               |        |                    |  
|Accumulated deficit                        |  |               | (12,429 | )                  |  
|Accumulated other comprehensive income     |  |               | 434     |                    |  
|                                           |  |               |         |                    |  
|Total stockholders equity                 |  |               | 26,965  |                    |  
|                                           |  |               |         |                    |  
|Total liabilities and stockholders equity |  | $             | 37,741  |                    | $
|                                           |  |               |         |                    |  

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part
of these statements.

3.



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ROGUE WAVE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

(in thousands,
except per share data) (unaudited)

|                                                   |  | Three Months Ended June 30, |        | Nine Months Ended June 30, |  
|-------------------------------------------------- |  | --------------------------- | ------ | -------------------------- | -
|                                                   |  |                             |        |                            |  
|                                                   |  | 2003                        |        | 2002                       |  
|                                                   |  |                             |        |                            |  
|Revenue:                                           |  |                             |        |                            |  
|License revenue                                    |  | $                           | 3,880  |                            | $
|Service and maintenance revenue                    |  |                             | 3,405  |                            |  
|                                                   |  |                             |        |                            |  
|Total revenue                                      |  |                             | 7,285  |                            |  
|Cost of revenue:                                   |  |                             |        |                            |  
|Cost of license revenue                            |  |                             | 80     |                            |  
|Cost of service and maintenance revenue            |  |                             | 487    |                            |  
|                                                   |  |                             |        |                            |  
|Total cost of revenue                              |  |                             | 567    |                            |  
|                                                   |  |                             |        |                            |  
|Gross profit                                       |  |                             | 6,718  |                            |  
|Operating expenses:                                |  |                             |        |                            |  
|Product development                                |  |                             | 1,307  |                            |  
|Sales and marketing                                |  |                             | 2,913  |                            |  
|General and administrative                         |  |                             | 917    |                            |  
|Restructuring, severance and goodwill amortization |  |                             | 1,546  |                            |  
|                                                   |  |                             |        |                            |  
|Total operating expenses                           |  |                             | 6,683  |                            |  
|                                                   |  |                             |        |                            |  
|Income (loss) from operations                      |  |                             | 35     |                            |  
|Other income (loss), net                           |  |                             | 2      |                            |  
|                                                   |  |                             |        |                            |  
|Income (loss) before income taxes                  |  |                             | 37     |                            |  
|Income tax expense (benefit)                       |  |                             | 15     |                            |  
|                                                   |  |                             |        |                            |  
|Net income (loss)                                  |  | $                           | 22     |                            | $
|                                                   |  |                             |        |                            |  
|Basic and diluted income (loss) per share          |  | $                           | 0.00   |                            | $
|                                                   |  |                             |        |                            |  
|Shares used in basic per share calculation         |  |                             | 9,966  |                            |  
|Shares used in diluted per share calculation       |  |                             | 10,006 |                            |  
|Net income (loss)                                  |  | $                           | 22     |                            | $
|Other comprehensive loss:                          |  |                             |        |                            |  
|Foreign currency translation gain (loss)           |  |                             | (26    | )                          |  
|                                                   |  |                             |        |                            |  
|Total comprehensive loss                           |  | $                           | (4     | )                          | $
|                                                   |  |                             |        |                            |  

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part
of these statements.

4.



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ROGUE WAVE SOFTWARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)  (unaudited)

|                                                                                          |  | Nine Months Ended June  30, |        
|----------------------------------------------------------------------------------------- |  | --------------------------- | -------
|                                                                                          |  |                             |        
|                                                                                          |  | 2003                        |        
|                                                                                          |  |                             |        
|Cash flows provided by (used in) operating activities:                                    |  |                             |        
|Net loss                                                                                  |  | $                           | (1,104 
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                             |        
|Depreciation and amortization                                                             |  |                             | 1,685  
|Loss on disposal of assets                                                                |  |                             | 96     
|Deferred income taxes                                                                     |  |                             |       
|Amortization of deferred compensation                                                     |  |                             | 89     
|Changes in assets and liabilities:                                                        |  |                             |        
|Accounts receivable                                                                       |  |                             | 2,287  
|Prepaid expenses, income tax receivable and other current assets                          |  |                             | 1,424  
|Other noncurrent assets                                                                   |  |                             | 808    
|Accounts payable and accrued expenses                                                     |  |                             | (1,639 
|Deferred revenue                                                                          |  |                             | (2,469 
|                                                                                          |  |                             |        
|Net cash provided by (used in) operating activities                                       |  |                             | 1,177  
|                                                                                          |  |                             |        
|Cash flows provided by (used in) investing activities:                                    |  |                             |        
|Maturities of short-term investments                                                      |  |                             | 18,097 
|Purchase of short-term investments                                                        |  |                             | (12,460
|Purchase of equipment                                                                     |  |                             | (82    
|                                                                                          |  |                             |        
|Net cash provided by (used in) investing activities                                       |  |                             | 5,555  
|                                                                                          |  |                             |        
|Cash flows used in financing activities:                                                  |  |                             |        
|Net proceeds from exercise of stock options                                               |  |                             | 41     
|Net proceeds from Employee Stock Purchase Plan                                            |  |                             | 73     
|Treasury stock purchases                                                                  |  |                             | (1,196 
|                                                                                          |  |                             |        
|Net cash used in financing activities                                                     |  |                             | (1,082 
|                                                                                          |  |                             |        
|Effect of exchange rate changes on cash and cash equivalents                              |  |                             | 529    
|                                                                                          |  |                             |        
|Net change in cash and cash equivalents                                                   |  |                             | 6,179  
|Cash and cash equivalents at beginning of period                                          |  |                             | 10,525 
|                                                                                          |  |                             |        
|Cash and cash equivalents at end of period                                                |  | $                           | 16,704 
|                                                                                          |  |                             |        

The accompanying notes to the unaudited condensed consolidated financial statements are an integral part
of these statements.

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ROGUE WAVE SOFTWARE, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

|1. | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.  In the opinion of management, all adjustments (which are of a normal and recurring nature) considered necessary for a fair presentation have been included.  These financial statements
should be read in conjunction with Rogue Wave Software, Inc.s (Rogue Wave or the Company) consolidated financial statements and notes thereto (the Consolidated Financial Statements) for the year ended
September 30, 2002, included in the Companys annual report on Form 10-K.  The interim results presented are not necessarily indicative of results for any subsequent quarter or for the fiscal year ending September 30, 2003.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2. | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | The Company has stock option plans for employees and directors that provide for the granting of incentive and nonqualified stock options.  Under the
plans, options are granted at an exercise price equal to the fair market value of the underlying common stock at the date of grant, and may be exercisable for up to 10 years.  The Company applies Accounting Principles Board (APB)
Opinion No. 25 and related interpretations in accounting for its stock option plans, as permitted under Statement of Financial Accounting Standards (SFAS) No. 123 and SFAS No. 148.  Accordingly, no compensation cost has been
recognized for its stock option plans.  Assuming the compensation cost for the Companys stock option plans had been determined based on the fair value at the grant dates for awards under those plans consistent with the fair-value
methodology of SFAS No. 123, the Companys net income (loss) and earnings (loss) per share would have been reduced to the following amounts (in thousands, except per share data):                                                        

|                                                                                                                              |  | Three months ended June  30, |       | Nine months ended June 30, |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----- | -------------------------- | -
|                                                                                                                              |  |                              |       |                            |  
|                                                                                                                              |  | 2003                         |       | 2002                       |  
|                                                                                                                              |  |                              |       |                            |  
|Reported net income (loss)                                                                                                    |  | $                            | 22    |                            | $
|Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |  |                              | 152   |                            |  
|                                                                                                                              |  |                              |       |                            |  
|Pro forma net loss                                                                                                            |  | $                            | (130  | )                          | $
|                                                                                                                              |  |                              |       |                            |  
|Reported basic and diluted income (loss) per share                                                                            |  | $                            | 0.00  |                            | $
|                                                                                                                              |  |                              |       |                            |  
|Pro forma basic and diluted loss per share                                                                                    |  | $                            | (0.01 | )                          | $
|                                                                                                                              |  |                              |       |                            |  

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| | The fair value of each stock option is estimated as of the grant date using the Black-Scholes option-pricing model.  The assumptions used and
the estimated fair values are as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Year of Grant |  |  | Risk Free Interest Rate |   |  | Expected Life of Option in Years |  |  | Expected Dividend Yield |   |  | Expected Stock Volatility |  
|------------- |  |  | ----------------------- | - |  | -------------------------------- |  |  | ----------------------- | - |  | ------------------------- | -
|              |  |  |                         |   |  |                                  |  |  |                         |   |  |                           |  
|FY 2003       |  |  | 2.53                    | % |  | 5.00                             |  |  | 0.00                    | % |  | 67.96                     | %
|FY 2002       |  |  | 3.13                    | % |  | 5.00                             |  |  | 0.00                    | % |  | 55.38                     | %

| | The following table summarizes stock option activity (in thousands, except per share data):
| | -------------------------------------------------------------------------------------------

|                                          |  | Shares |        | Weighted avg. price per share |  
|----------------------------------------- |  | ------ | ------ | ----------------------------- | -
|                                          |  |        |        |                               |  
|Outstanding options at September 30, 2001 |  |        | 3,914  |                               | $
|Granted                                   |  |        | 2,487  |                               |  
|Exercised                                 |  |        | (8     | )                             |  
|Canceled                                  |  |        | (1,160 | )                             |  
|                                          |  |        |        |                               |  
|Outstanding options at September 30, 2002 |  |        | 5,233  |                               |  
|Granted                                   |  |        | 28     |                               |  
|Exercised                                 |  |        | (9     | )                             |  
|Canceled                                  |  |        | (762   | )                             |  
|                                          |  |        |        |                               |  
|Outstanding options at December 31, 2002  |  |        | 4,490  |                               |  
|Granted                                   |  |        | 536    |                               |  
|Exercised                                 |  |        | (15    | )                             |  
|Canceled                                  |  |        | (1,393 | )                             |  
|                                          |  |        |        |                               |  
|Outstanding options at March 31, 2003     |  |        | 3,618  |                               |  
|Granted                                   |  |        | 22     |                               |  
|Exercised                                 |  |        | (15    | )                             |  
|Canceled                                  |  |        | (865   | )                             |  
|                                          |  |        |        |                               |  
|Outstanding options at June 30, 2003      |  |        | 2,760  |                               | $

| | Options vested and exercisable were 1.9 million shares at June 30, 2003.  Price ranges and weighted average characteristics of outstanding
stock options at June 30, 2003 were as follows (share data in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               |  | Outstanding Options |       | Exercisable Options    | 
|-------------- |  | ------------------- | ----- | ---------------------- | 
|               |  |                     |       |                        | 
|Exercise Price |  | Shares              |       | Remaining life (years) | 
|               |  |                     |       |                        | 
|$0.15-$2.68    |  |                     | 1,137 |                        | 
|$2.80-$5.13    |  |                     | 696   |                        | 
|$5.31-$7.88    |  |                     | 702   |                        | 
|$8.00-$17.00   |  |                     | 225   |                        | 
|               |  |                     |       |                        | 
|               |  |                     | 2,760 |                        | 
|               |  |                     |       |                        | 

|3. | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | The Company derives revenue from licensing its software products and providing related maintenance and support, and training and consulting services. 
License revenue is recognized in accordance with Statement of Position (SOP) 97-2, Software Revenue Recognition, amended by SOP No. 98-9.  Revenue is recognized upon execution of a license agreement or signed written
contract with fixed or determinable fees, upon shipment or electronic delivery of the product and managements determination that collection of the resulting receivable is probable.  The Company

7.



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##### Table of Contents

|   | considers fees relating to arrangements with payment terms extending beyond 12 months not to be fixed or determinable.  If the fee is not fixed or determinable, revenue is
recognized as payments become due from the customer.  Maintenance and service revenue includes maintenance revenue that is deferred and recognized ratably over the maintenance period.  Service revenue, including training and consulting
services, is recognized as services are performed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | Revenue from reseller arrangements is recognized on a sell through basis, that is, when persuasive evidence is obtained by the Company that the reseller has
sold the products to an end-use customer.  In instances where the Company enters into customized software consulting contracts, the fees are recognized using the percentage of completion method of contract accounting in accordance with SOP No.
81-1, Accounting for Performance of Construction-Type and Certain Product-Type Contracts.  The Company generally provides a 30 day right of return policy for software sales.  The allowance for returns was $363,000 and $393,000
at June 30, 2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4. | Concentration of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, short-term investments and
accounts receivable.  The counter parties to the agreements relating to the Companys cash equivalents and short-term investments consist of various major corporations and financial institutions of high credit standing.  The
Companys receivables are derived primarily from the sales of software products and services to customers in diversified industries as well as distributors in the U.S. and foreign markets.  As of June 30, 2003, the accounts receivable
balance was $7.5 million, before allowance for doubtful accounts and sales returns, which total $1.2 million.  One customer accounted for 20% of the gross accounts receivable balance at June 30, 2003.  This customer accounted for 1% of the
Companys total revenue for the three months ended June 30, 2003 and 6% of total revenue for the nine months ended June 30, 2003.  There were no customers that accounted for 10% or more of revenue for the three and nine months ended June
30, 2002.  International revenue was approximately 30% and 32% of the Companys total revenue for the quarters ended June 30, 2003 and 2002, respectively.  International revenue was approximately 30% and 28% of the Companys
total revenue for the nine months ended June 30, 2003 and 2002, respectively.                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|5. | Basic and Diluted Income (Loss) Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Basic income (loss) per share for the three and nine months ended June 30, 2003 and 2002 is computed on the basis of the weighted average number of common
shares outstanding.  Diluted income (loss) per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of outstanding stock options using the treasury stock method unless the impact
is anti-dilutive.  The difference between basic income (loss) per share and diluted income (loss) per share is due to the effect of outstanding stock options.  For the three months ended June 30, 2003, the dilutive effect of outstanding
options was 40,000 shares.  As a result of the net loss incurred for the three months ended June 30, 2002 and the nine months ended June 30, 2003 and 2002, all options are anti-dilutive and, accordingly, the number of shares used in computing
the basic and diluted shares is the same.  During the three months ended June 30, 2002 and nine months ended June 30, 2003 and 2002, options to acquire approximately 70,000, 30,000 and 56,000 shares, respectively, calculated using the
treasury stock method, were excluded from the calculation because of their anti-dilutive effect.  The Company had approximately 2.8 million and 4.8 million options outstanding at June 30, 2003 and 2002, respectively, of which
approximately 1.1 million and 93,000, respectively, were considered in the money.

8.



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##### Table of Contents

| | Calculation of basic and diluted income (loss) per share is as follows (in thousands, except per share data):
| | -------------------------------------------------------------------------------------------------------------

|                                                                                                               |  | Three months ended June 30, |        | Nine months ended June 30, |  
|-------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | -------------------------- | -
|                                                                                                               |  |                             |        |                            |  
|                                                                                                               |  |                             | 2003   |                            |  
|                                                                                                               |  |                             |        |                            |  
|Numerator:                                                                                                     |  |                             |        |                            |  
|Net income (loss)                                                                                              |  | $                           | 22     |                            | $
|                                                                                                               |  |                             |        |                            |  
|Denominator:                                                                                                   |  |                             |        |                            |  
|Historical common shares outstanding for basic and diluted income (loss) per share at beginning of period      |  |                             | 9,973  |                            |  
|Weighted average number of common equivalent shares purchased during the period                                |  |                             | (11    | )                          |  
|Weighted average number of common equivalent shares issued during the period                                   |  |                             | 4      |                            |  
|                                                                                                               |  |                             |        |                            |  
|Denominator for basic net income (loss) per share - weighted average shares                                    |  |                             | 9,966  |                            |  
|                                                                                                               |  |                             |        |                            |  
|Incremental common shares attributable to shares issuable under equity incentive plans (treasury stock method) |  |                             | 40     |                            |  
|                                                                                                               |  |                             |        |                            |  
|Denominator for diluted net income (loss) per share  weighted average shares                                  |  |                             | 10,006 |                            |  
|                                                                                                               |  |                             |        |                            |  
|Basic and diluted income (loss) per share                                                                      |  | $                           | 0.00   |                            | $
|                                                                                                               |  |                             |        |                            |  

|6. | Common Stock Repurchases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | In September 2001, the Board of Directors authorized the Company to repurchase up to an aggregate of the lesser of $5.0 million or 2.5 million shares of its
common stock.  During the nine months ended June 30, 2003, the Company repurchased 585,000 shares for $1.2 million at prices ranging from $1.72 - $2.67 per share.  Since September 2001, the Company has purchased approximately 1.4 million
shares for approximately $3.4 million at prices ranging from $1.72 - $3.65 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|7. | Stockholder Rights Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On January 3, 2003, the Board of Directors declared a dividend of one right for each share of common stock outstanding on January 16, 2003.  Each right
represents the right to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock, $0.01 par value, at a price of $14.16 per one one-hundredth share, subject to adjustment.  In the event any person or group acquires
15% or more of the Companys common stock or announces a tender offer or exchange offer for 15% or more of the Companys common stock, subject to certain exceptions, the holders of the rights generally will be entitled to receive, upon
exercise, common stock of the Company having a value equal to two times the exercise price of the right.  The Board of Directors may, at its option after a person or group acquires 15% or more of the Companys common stock or announces a
tender offer or exchange offer for 15% or more of the Companys common stock, exchange all or part of the rights for shares of the Companys common stock.  In the event that the Company is acquired in a merger or other business
combination or 50% or more of the Companys assets or earning power is sold or transferred, the holders of the rights have the right to receive, upon exercise, common stock

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##### Table of Contents

|   | of the acquiring company having a value equal to two times the exercise price of the right.  The Company may redeem the rights at a price of $0.001 per right at any time
prior to an event triggering the exercisability of the rights.  The rights expire January 6, 2013, unless earlier redeemed or exchanged by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|8. | Restructuring, Severance, Relocation, Asset Impairment and Goodwill Amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | First Quarter 2003 Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | During the first quarter of fiscal 2003, Rogue Wave initiated several actions designed to mitigate the adverse financial impact attributable to the overall
weakness in the world economy.  The Company implemented several cost reduction initiatives to achieve operating efficiencies, including consolidation of facilities in the U.S. and international operations.  Consolidation activities
included termination of employees at the Companys Corvallis, Oregon facility and discontinuance of Large Scale Object Solutions (LSOS) development operations in Southboro, Massachusetts as a result of anticipated reduced market
demand for LSOS products.  As a part of the consolidation of facilities, during the three months ended December 31, 2002, the Company recognized a restructuring charge of $1.7 million, related primarily to severance costs associated with the
termination of approximately 75 employees as well as certain site closure costs, including those related to facility lease costs. The Company revised its estimate of the initial restructuring costs by $4,000 in the second quarter of fiscal 2003, as
actual severance costs were slightly less than originally anticipated.  These actions are expected to reduce fiscal 2003 operating expenses, as compared to fiscal 2002, by approximately $11.0 million.  The remaining liability associated
with these actions of $111,000 at June 30, 2003 is expected to be paid by the end of fiscal year 2003.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The following table summarizes restructuring costs by primary component and related reserve at  June 30, 2003 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                                         |  | Employee Severance & Related |       | Site Closure Costs |   | Other |   | Total |    
|------------------------------------------------------------------------ |  | ---------------------------- | ----- | ------------------ | - | ----- | - | ----- | ---
|                                                                         |  |                              |       |                    |   |       |   |       |    
|Consolidation costs incurred in the three months ended December 31, 2002 |  | $                            | 1,239 |                    | $ | 404   |   | $     | 70 
|Cash paid                                                                |  |                              | (986  | )                  |   |      |   |       |   
|                                                                         |  |                              |       |                    |   |       |   |       |    
|Balance at December 31, 2002                                             |  |                              | 253   |                    |   | 404   |   |       | 70 
|Cash paid                                                                |  |                              | (233  | )                  |   | (146  | ) |       | (74
|Adjustments for revised estimates                                        |  |                              | (8    | )                  |   |      |   |       | 4  
|                                                                         |  |                              |       |                    |   |       |   |       |    
|Balance at March 31, 2003                                                |  |                              | 12    |                    |   | 258   |   |       |   
|Cash paid                                                                |  |                              | (12   | )                  |   | (147  | ) |       |   
|                                                                         |  |                              |       |                    |   |       |   |       |    
|Balance at June 30, 2003                                                 |  | $                            |      |                    | $ | 111   |   | $     |   
|                                                                         |  |                              |       |                    |   |       |   |       |    

| | Second Quarter 2003 Cost Reduction Initiatives                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In the second quarter of fiscal 2003, the Company implemented additional cost reduction measures that resulted in workforce reductions of 24 employees. 
As a result of these actions, the Company recognized a severance charge of approximately $374,000.  The Company revised its original estimate of the severance costs by $3,000 in the third quarter of fiscal 2003, as actual severance costs were
less than anticipated. These actions are expected to reduce fiscal 2003 operating expenses, as compared to fiscal 2002, by approximately $2.4 million.

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##### Table of Contents

| | The following table summarizes restructuring costs at June 30, 2003 (in thousands):
| | -----------------------------------------------------------------------------------

|                                                                               |  | Employee Severance & Related |     
|------------------------------------------------------------------------------ |  | ---------------------------- | ----
|                                                                               |  |                              |     
|Employee reduction costs incurred during the three months ended March 31, 2003 |  | $                            | 374 
|Cash paid                                                                      |  |                              | (349
|                                                                               |  |                              |     
|Balance at March 31, 2003                                                      |  |                              | 25  
|Cash paid                                                                      |  |                              | (22 
|Adjustments for revised estimates                                              |  |                              | (3  
|                                                                               |  |                              |     
|Balance at June 30, 2003                                                       |  | $                            |    
|                                                                               |  |                              |     

| | Third Quarter 2003 Strategic Realignment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In response to the continuing sluggish economy and change in product strategy, the Company realigned certain U.S. operations and closed its Sydney, Australia
and Amsterdam, Netherlands offices in the third quarter of fiscal 2003.  As a result of these cost reduction actions, the Company recognized a restructuring charge of approximately $1.4 million, related primarily to severance costs associated
with the termination of approximately 39 employees as well as certain site closure costs, including those related to facility lease costs. These actions are expected to reduce fiscal 2003 operating expenses, as compared to fiscal 2002, by
approximately $3.9 million.  The remaining accrued balance of $689,000 at June 30, 2003, is expected to be paid by December 31, 2003.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The following table summarizes restructuring costs by primary component and related reserve at June 30, 2003 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                                          |  | Employee Severance & Related |      | Site Closure Costs |   | Other |   | Total |    
|----------------------------------------- |  | ---------------------------- | ---- | ------------------ | - | ----- | - | ----- | ---
|                                          |  |                              |      |                    |   |       |   |       |    
|Consolidation costs incurred in the three |  |                              |      |                    |   |       |   |       |    
|months ended June 30, 2003                |  | $                            | 786  |                    | $ | 572   |   | $     | 37 
|Cash paid                                 |  |                              | (660 | )                  |   | (9    | ) |       | (37
|                                          |  |                              |      |                    |   |       |   |       |    
|Balance at June 30, 2003                  |  | $                            | 126  |                    | $ | 563   |   | $     |   
|                                          |  |                              |      |                    |   |       |   |       |    

| | Relocation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As described above, the Company consolidated certain operations in the U.S. and international facilities in the first quarter of fiscal 2003 to achieve cost
reductions and streamline operations.  The Company relocated certain development and information technology functions from the Companys Corvallis, Oregon facility to its headquarters in Boulder, Colorado.  As a result of the
consolidation, the Company recognized a relocation expense of $217,000 during the three months ended December 31, 2002.  In the second quarter of fiscal 2003, the Company adjusted these costs, which resulted in a less than anticipated cost of
$40,000.  In the third fiscal quarter of fiscal 2003, the Company finalized these costs and recognized an additional $10,000 of expense.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Asset Impairment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The Company incurred an asset impairment charge of $165,000 during the three months ended December 31, 2002.  The asset impairment charge resulted
primarily from the closure of its Southboro, Massachusettss facility and was related to software, furniture and fixtures.  During the three months ended June 30, 2003, the Company incurred an additional asset impairment charge of $44,000
for other software, furniture and fixtures as a result of the closure of its Amsterdam, Netherlands office.                                                                                                                                                                                                                                                                             

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|   | LSOS Contract Termination                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | During the three months ended March 31, 2003, in conjunction with the discontinuance of the LSOS product line, the Company terminated a software license
agreement related to these products.  The software contract included provisions for minimum royalty payments that had been accrued in previous periods, which were expected to be paid subsequent to the first year anniversary of the
contract.  Upon termination of the contract, the Company determined that an estimated $181,000 obligation for minimum royalties was no longer required and reversed the accrual during the second quarter of fiscal 2003, which reduced operating
expense.   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Other Severance Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | During the nine months ended June 30, 2002, the Company terminated the employment of certain senior managers.  As a result, the Company recognized
approximately $505,000 and $112,000 in severance costs in the first and second quarters of fiscal 2002, respectively.  During the second and third quarters of fiscal 2003, the employment of three Company executives was terminated, which
resulted in severance costs of approximately $333,000 and $100,000, respectively.                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Strategic Realignment - 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | During the second quarter of fiscal year 2002, the Company announced a realignment of its corporate strategy to include a focused expansion in Europe, Middle
East, Eastern Europe and Africa (EMEA), Asia Pacific and Latin America.  In conjunction with this action and to better align its cost structure with its then new international business focus, on March 29, 2002, the Company announced
plans to restructure certain areas of its global operations, which resulted in severance related charges of approximately $352,000 during that period.  All severance expenses were paid in the third quarter of fiscal 2002.                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Goodwill Amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | During the three and six months ended March 31, 2002, the Company recognized approximately $58,000 and $18,000 of goodwill amortization, respectively. 
Goodwill was fully amortized at March 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|9. | Foreign Exchange Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | The Company accounts for foreign exchange contracts under SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, as amended by
SFAS No. 137 and SFAS No. 138, which establishes accounting and reporting standards for derivative instruments, including foreign exchange forward contracts.                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Company enters into foreign exchange forward contracts to hedge certain operational and balance sheet exposures, primarily intercompany royalty fees, from
changes in foreign currency exchange rates.  At inception, such contracts are designated as cash flow hedges.  To achieve hedge accounting, contracts must reduce the foreign currency exchange rate risk otherwise inherent in the amount and
duration of the hedged exposure and comply with established Company risk management policies.  The Company does not enter into any derivative transactions for speculative purposes.  Hedging contracts generally mature within 60 to 425
days.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | When hedging the intercompany receivable exposure, the effective portion of the derivatives gain or loss is initially reported as a component of other
comprehensive income and subsequently reclassified into earnings in the period in which earnings are impacted by the variability of the cash flow of the hedged item.  The ineffective portion of the gain or loss is reported in current period
earnings immediately.  The realized gains and losses are recorded in Other income-net in the statement of operations.                                                                                                                             

12.



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##### Table of Contents

|    | The notional amount of foreign exchange contracts outstanding at June 30, 2003 was $2.1 million with a derivative related fair value of
$73,000.  The fair value of the forward contracts is estimated based on quoted exchange rates at June 30, 2003.  The effective or unrealized gain related to the outstanding contracts at June 30, 2003 was $121,000 and the unrealized loss
related to the outstanding contracts at June 30, 2002 was $73,000.  Also during the nine months ended June 30, 2003 and 2002, certain foreign currency contracts matured resulting in a net loss of $3,000 and a net gain of $4,000, respectively,
of which a gain of $2,000 and $0 was recognized in the third quarters of fiscal 2003 and 2002, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10. | Worldwide Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Revenue by geographic area for the three months ended June 30, 2003 and 2002 was 70% and 68% in the Americas, 28% and 29% in EMEA, and 2% and 3% in Asia
Pacific, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Information regarding worldwide operations is as follows (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                               |  | Americas |        | EMEA |   | Asia1Pacific |   | Eliminations |      | Total |  
|---------------------------------------------- |  | -------- | ------ | ---- | - | ------------ | - | ------------ | ---- | ----- | -
|                                               |  |          |        |      |   |              |   |              |      |       |  
|June 30, 2003, and for the quarter then ended: |  |          |        |      |   |              |   |              |      |       |  
|Revenue to unaffiliated customers              |  | $        | 5,093  |      | $ | 2,023        |   | $            | 169  |       | $
|Intercompany transfers                         |  |          | 1,307  |      |   |             |   |              |     |       |  
|                                               |  |          |        |      |   |              |   |              |      |       |  
|Net revenue                                    |  |          | 6,400  |      |   | 2,023        |   |              | 169  |       |  
|Operating income (loss)                        |  |          | 1,458  |      |   | (1,143       | ) |              | (280 | )     |  
|Longlived assets                              |  |          | 1,058  |      |   | 201          |   |              | 15   |       |  
|June 30, 2002, and for the quarter then ended: |  |          |        |      |   |              |   |              |      |       |  
|Revenue to unaffiliated customers              |  | $        | 6,837  |      | $ | 2,940        |   | $            | 277  |       | $
|Intercompany transfers                         |  |          | 1,193  |      |   |             |   |              |     |       |  
|                                               |  |          |        |      |   |              |   |              |      |       |  
|Net revenue                                    |  |          | 8,030  |      |   | 2,940        |   |              | 277  |       |  
|Operating income (loss)                        |  |          | (1,362 | )    |   | 359          |   |              | (432 | )     |  
|Longlived assets                              |  |          | 3,133  |      |   | 326          |   |              | 13   |       |  
|                                               |  |          |        |      |   |              |   |              |      |       |  

| | 1. | Japan was the only country reported in Asia Pacific for the three months ended June 30, 2002. Asia Pacific includes Japan, Hong Kong, China, Australia and India in the three
months ended June 30, 2003.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | Revenue by geographic area for the nine months ended June 30, 2003 and 2002 was 70% and 72% in the Americas, 23% and 23% in EMEA, and 7% and 5% in
Asia Pacific, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                               
| | Information regarding worldwide operations is as follows (in thousands):                                                                                                      

|                                                   |  | Americas |        | EMEA |   | Asia1Pacific |   | Eliminations |       | Total |  
|-------------------------------------------------- |  | -------- | ------ | ---- | - | ------------ | - | ------------ | ----- | ----- | -
|                                                   |  |          |        |      |   |              |   |              |       |       |  
|June 30, 2003, and for the nine months then ended: |  |          |        |      |   |              |   |              |       |       |  
|Revenue to unaffiliated customers                  |  | $        | 17,696 |      | $ | 5,933        |   | $            | 1,674 |       | $
|Intercompany transfers                             |  |          | 4,501  |      |   | 604          |   |              |      |       |  
|                                                   |  |          |        |      |   |              |   |              |       |       |  
|Net revenue                                        |  |          | 22,197 |      |   | 6,537        |   |              | 1,674 |       |  
|Operating income (loss)                            |  |          | 1,041  |      |   | (1,729       | ) |              | (412  | )     |  
|Longlived assets                                  |  |          | 1,058  |      |   | 201          |   |              | 15    |       |  
|June 30, 2002, and for the nine months then ended: |  |          |        |      |   |              |   |              |       |       |  
|Revenue to unaffiliated customers                  |  | $        | 24,599 |      | $ | 7,872        |   | $            | 1,560 |       | $
|Intercompany transfers                             |  |          | 3,410  |      |   |             |   |              |      |       |  
|                                                   |  |          |        |      |   |              |   |              |       |       |  
|Net revenue                                        |  |          | 28,009 |      |   | 7,872        |   |              | 1,560 |       |  
|Operating income (loss)                            |  |          | (4,163 | )    |   | 339          |   |              | (108  | )     |  
|Longlived assets                                  |  |          | 3,133  |      |   | 326          |   |              | 13    |       |  

| | 1. | Japan was the only country reported in Asia Pacific for the nine months ended June 30, 2002. Asia Pacific includes Japan, Hong Kong, China, Australia and India in the nine
months ended June 30, 2003.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | At June 30, 2003, the Company had net operating loss carryforwards for federal and foreign income tax purposes and various tax credits and temporary
differences, which expire in varying amounts between 2003 and 2022.  Under SFAS No. 109, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  SFAS No. 109 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. 
Based upon the requirements of SFAS No. 109, the Company has established a valuation allowance related to deferred tax assets of approximately $6.9 million and $5.9 million as of June 30, 2003 and September 30, 2002, respectively.                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|12. | New Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities.  SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133.  In particular, this
statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative and when a derivative contains a financing component that warrants special reporting in the statement of cash
flows.  SFAS No. 149 is generally effective for contracts entered into or modified after June 30, 2003.  Management does not believe adoption of this statement will have a material impact on the Companys financial position, results
of operations or cash flows.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. 
SFAS No. 150 changes the accounting for certain                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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| | financial instruments that, under previous guidance, could be classified as equity or mezzanine equity, by now requiring those instruments to be classified as
liabilities (or assets in some circumstances) in the statement of financial position.  Further, SFAS No. 150 requires disclosure regarding the terms of those instruments effective for all financial instruments entered into or modified after May
31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003.  Management does not believe adoption of this statement will have a material impact on the Companys financial position,
results of operations or cash flows.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. 
These forward-looking statements may relate to, but are not limited to, revenues, cash flows, earnings, costs, strategy, demand for our products, market and technological trends in the software industry, effective tax rates, interest rates, foreign
currency exchange rates and various economic and business trends.  Generally, you can identify forward-looking statements by the use of words such as expect, estimate, project, budget,
forecast, anticipate, goal, intend, plan, may, will, could, should, believes, predicts, potential,
continue and similar expressions or the negative or other variations thereof.  The Companys actual results could differ materially from those discussed herein.  Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in the section Risk Factors and Business in the Companys Annual Report on Form 10-K for the year ended September 30, 2002.  Readers are
cautioned not to place undue reliance on these forward-looking statements, which reflect managements analysis only as of the date hereof.  The Company undertakes no obligation to publicly release the results of any revision to these
forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.  The following discussions should be read in conjunction with our condensed
consolidated financial statements and the notes thereto.

The Rogue Wave Strategy and Business Model

Rogue Wave Software develops, markets and supports object-oriented software technology.  Rogue Waves strategic objective is to provide technology and
services that allow customers to maximize productivity when building software solutions to address their business requirements.

The Company markets its products primarily through its direct sales force and an indirect channel consisting of original-equipment-manufacturers, value added
resellers, dealers and distributors.  The Company makes certain of its products available for sale and distribution over the Internet.  Revenue through this channel has not been significant to date, and there can be no assurance that the
Company will be successful in marketing its products through this channel.

Products

Core Technology - SourcePro C++

The Companys principal product is SourcePro C++.  SourcePro C++ is comprised of four products: SourcePro Core, SourcePro
DB, SourcePro Net and SourcePro Analysis.  Pricing of the SourcePro C++ products is based on a customer value model, which considers scope of deployment, including operating systems.

Light Weight Enterprise Integration Framework (LEIF)

In December 2002, the Company launched
its LEIF product.  This product is designed to integrate C++ applications with XML data and Web Services, enabling C++ applications to communicate with .NET and J2EE based applications, both within an enterprise and with external partners or
customers.  LEIF employs industry-standard networking, XML and Web Services technologies to expose the functionality of business-critical C++ applications to other disparate application and business

16.



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processes.  By easing the integration of XML with C++ applications, LEIF allows business-critical systems to work seamlessly with XML documents and communicate using an
XML-based data format that spans platforms and languages.  Pricing of the LEIF product considers scope of deployment, including operating systems.

Application Tuning System
(ATS)

Rogue Wave ATS provides increased application stability and performance by reducing heap contention and optimizing
memory allocation in multithreaded applications.  ATS offers development teams an opportunity to leverage their current hardware and use a solution to increase high-end processing efficiency, workflow efficiency and positive end-user
experience.

Stingray Studio

Stingray Studio offers higher-level graphical
user interface (GUI) components for Microsoft Windows platforms providing ease of use, shortening development time and making it easier to maintain GUI applications.  Stingray Studio lets developers rapidly build scalable,
distributed GUI applications that can be easily integrated with current enterprise systems and applications.

Large Scale Object Solutions

LSOS was a set of technologies the Company developed to target customers with specific needs related to running very high throughput systems deployed against a
relational database.  The Companys first implementation of this technology was an application that the Company developed, in partnership with JPMorgan Chase, known as Global Market Reference Data.  The Company planned to market this
product to worldwide financial institutions that were facing T+1 compliance requirements.

Because of global economic
uncertainties, which have resulted in significant spending constraints for information technology organizations, and the postponement of the T+1 compliance requirements by the Securities Industry Association, the Company reexamined the marketplace
opportunities for the LSOS product.  During the three months ended December 31, 2002, the Company suspended all future investment related to this product line.  Additionally, in connection with overall cost containment initiatives and the
uncertainty of the marketplace for these products, the Company terminated its LSOS operations in Southboro, Massachusetts in November 2002 and incurred a related restructuring charge during the quarter ended December 31, 2002.   The
Company has also discontinued all marketing and other related activities associated with this product line. See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements.

New
Product Initiatives

Since the first quarter of fiscal 2003, the Company has been aggressively investigating new product development
opportunities that are intended to leverage its current cross-platform expertise, application development expertise, sales channels and customer base.  Based on the extensive research conducted through the third quarter of fiscal 2003, the
Company announced its plans to create products that facilitate application development in a service-based architecture.  In a service-based architecture, the goal is to create the functionality of a full-scale application, traditionally
provided in a monolithic architecture, from an amalgam of smaller applications.  These smaller applications are individually wrapped in a network layer and are invoked as services.  In this respect they function like reusable components.
 When these services are connected or orchestrated, they function like a full-scale application but they are much more flexible and they can be easily modified and enhanced.  Another

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benefit of a service-based architecture is the ability to connect new and old applications written in different languages and built on different platforms.  Currently,
the Company sells LEIF, a product that facilitates the development of service-based architectures by creating Web services that can connect C++ applications to Java/J2EE and .NET applications.  The Company plans to deliver significant
enhancements to LEIF and also to introduce an additional new product in calendar year 2004.  Both of these initiatives target facilitating the creation of applications for a service-based architecture.

Strategic Realignment

Globalization

During
fiscal 2002, Rogue Wave aggressively focused on expansion in EMEA, Asia Pacific and Latin America.  In conjunction with this action and to better align its cost structure with its international business focus, the Company restructured certain
areas of its global operations, which resulted in severance related charges of approximately $479,000 in fiscal 2002.

As part of this
2002 restructuring plan and to better meet the needs of its customers, the Company established three separate regional operations, the Americas, EMEA and Asia Pacific, in an effort to drive autonomy and greater accountability.  During the
second fiscal quarter of 2002, the Company opened an office in Sydney, Australia and increased its resources in other areas of the Asia Pacific and EMEA regions.  Despite the Companys efforts and investment in expanding its international
operations, the Company achieved only minimal success during the subsequent 12 months.  As a result, the Company closed its Sydney, Australia and Amsterdam, Netherlands offices during the third quarter of fiscal 2003.  Currently, Rogue
Wave has not announced plans to close additional international offices.  However, the Company continually evaluates its international presence, which could result in future office closures.

The Company will continue to develop these regions through strategic partnerships with third party distributors and through development of internet based
channels.  Additionally, as part of the strategy to penetrate international markets, the Company has created a streamlined license and packaging process to be utilized by new distributor channels.  There can be no assurance, however, that
the Company will be able to maintain or increase international market demand for its products.  See Risk Factors for additional risk factors associated with the Companys international operations.

Outlook

The world economy has experienced a significant slowdown.  The financial services and
technology sectors, including telecommunications and computer/software, which represent approximately 75% of the Companys customer base, have been severely impacted.  Significant information technology spending constraints have resulted,
with fewer new project initiations expected in the near term and spending limited to mission critical functions.  Additionally, the continued maturation of the Companys core products coupled with greater focus by our customers
on competitive technologies, including Java as well as others, have resulted in further uncertainties.  Finally, while interest in our new products, such as LEIF, has been encouraging, sales have been less than originally anticipated.  As
a result of these factors, the Company currently anticipates a 26% - 32% decline in fiscal 2003 revenue compared to fiscal 2002 revenue.

In response, the Company initiated several actions during the nine months ending June 30, 2003 that were designed to mitigate the adverse financial impact
attributable to the factors discussed above.  The Company implemented several cost management initiatives to achieve operating efficiencies,

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including consolidation of facilities in the U.S. and international operations and through an overall reduction in headcount.  Consolidation activities included
termination or relocation of employees at the Companys Corvallis, Oregon facility to its headquarters in Boulder, Colorado, termination of LSOS development operations in Southboro, Massachusetts and closure of its Sydney, Australia and
Amsterdam, Netherlands offices.  These restructuring initiatives resulted in workforce reductions of approximately 140 employees and a charge for restructuring, severance, lease termination, asset impairment, relocation and other related costs
of approximately $4.1 million.

Critical Accounting Policies

The preparation
of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and
related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes.  The Securities and Exchange Commission has defined a companys most critical accounting policies as those that are
most important to the portrayal of the companys financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that
are inherently uncertain.  Based on this definition, the Company has identified the following critical accounting policies and judgments and assumptions.  Actual results may differ significantly from these estimates under different
assumptions or conditions.  For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies.

Revenue
Recognition

The Companys revenue is derived from licenses of its software products and related maintenance, training
and consulting services.  License, maintenance and most services are recognized in accordance with SOP No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-9, which permits revenue recognition when (1) persuasive
evidence of an arrangement exists, (2) delivery of the product has occurred, (3) the fee is fixed or determinable and (4) collectibility is probable.  The Company defines each of the four criteria as follows:

Persuasive evidence of an arrangement exists.Related to all sales transactions, Rogue Waves customary practice is to execute a written contract,
signed by both the customer and the Company, or obtain a purchase order issued by the customer, depending on the type of sale.

Delivery.The Companys software may be either physically or electronically delivered to the customer.  Delivery is deemed to have occurred
upon the shipment of the product or delivery of the authorization code.  If undelivered products or services exist in an arrangement that are essential to the functionality of the delivered product, delivery is not considered to have occurred
until these products or services are delivered.

The fee is fixed or determinable.The Company negotiates the fee for its
products at the outset of an arrangement.  In these arrangements, the majority of the development licenses are perpetual and nonrefundable.  The fees are generally due within one to twelve months depending on the length of the
contract.  The Company considers fees relating to arrangements with payment terms extending beyond twelve months not to be fixed or determinable.  If the fee is not fixed or determinable, revenue is recognized as payments become due from
the customer.  The Company has no history of concessions and there has been no indicator that fees are not fixed or determinable.

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Collectibility is probable.Collectibility is evaluated on a customer-by-customer basis.  New and
existing customers are subject to a credit review process, which evaluates the customers financial position (e.g. cash position and credit rating) and their ability to pay.  If collectibility is not considered probable at the outset of an
arrangement in accordance with the Companys credit review process, revenue is recognized when the fee is collected.

Assuming these
revenue recognition criteria are met, revenue from licenses is recognized upon delivery.  Maintenance and support revenue is deferred and recognized on a straight-line basis over the contractual service periods, which are typically one to three
years.  Consulting services, which include training, are not considered essential to the functionality of the other elements of the arrangement.  The revenue allocable to the consulting services is generally recognized as the services are
performed.  Revenue from reseller arrangements is recognized on a sell through basis, that is, when persuasive evidence is obtained by the Company that the reseller has sold the products to an end-use customer.  In instances where the
Company enters into customized software consulting contracts, the fees are recognized using the percentage of completion method of contract accounting in accordance with SOP No. 81-1, Accounting for Performance of Construction-Type and Certain
Product-Type Contracts.

Sales Returns and Allowance for Doubtful Accounts

The Companys management must make estimates of potential future product returns related to current period product revenue.  Management analyzes
historical returns, current economic trends, and changes in customer demand and acceptance of the products when evaluating the adequacy of the sales returns.  Based on this analysis, management must make subjective judgments in connection with
establishing the estimated sales returns in any accounting period.

The Companys allowance for doubtful accounts is intended to
reduce the value of customer accounts receivable to amounts expected to be collected.  In determining the required allowance, the Company considers factors such as customer credit history, overall and industry economic conditions and the
customers current financial position and recent performance.  The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customers current credit worthiness, as
determined by the review of their current credit information.  The Company continuously monitors collections and payments from customers.  While credit losses have historically been within expectations and the provisions established, we
cannot guarantee that we will continue to experience the same credit loss rates that we have in the past.

Accounting for Income Taxes

In preparing its consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. 
This process involves preparing estimates of the actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.  These differences result in deferred tax
assets and liabilities, which are included within the Companys consolidated balance sheet.  The Company then records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be
realized.  In assessing the need for a valuation allowance, the Company estimates future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax changes to tax laws, changes to statutory tax
rates and future anticipated taxable income levels.

The Company has reported net operating losses for the past several years, in
part due to cost restructuring efforts coupled with an overall continued decline in revenue.  As a result, the Company determined that it did not meet the applicable accounting requirements for recognition of deferred tax

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assets and, during the fourth quarter of fiscal 2002, increased its income tax valuation allowance by approximately $4.3 million through a charge to income.  For the nine
months ended June 30, 2003, the Company incurred a loss and, subsequently, established a valuation allowance equal to the estimated tax benefit.  If, in the future, the Company were to determine that accounting requirements for the recognition
of tax assets are met, the Company would decrease the recorded valuation allowance in the period that such determination is made.  See Note 11 of Notes to Unaudited Condensed Consolidated Financial Statements.

Results of Operations

The following table sets forth for the periods indicated the percentage of total
revenue represented by certain line items in the Companys Condensed Consolidated Statements of Operations.

|                                                   |  | Percentage of Total Net Revenue |    
|-------------------------------------------------- |  | ------------------------------- | ---
|                                                   |  |                                 |    
|                                                   |  | Three months ended June 30,     |    
|                                                   |  |                                 |    
|                                                   |  | 2003                            |    
|                                                   |  |                                 |    
|Revenue:                                           |  |                                 |    
|License revenue                                    |  |                                 | 53 
|Service and maintenance revenue                    |  |                                 | 47 
|                                                   |  |                                 |    
|Total revenue                                      |  |                                 | 100
|                                                   |  |                                 |    
|Cost of revenue:                                   |  |                                 |    
|Cost of license revenue                            |  |                                 | 1  
|Cost of service and maintenance revenue            |  |                                 | 7  
|                                                   |  |                                 |    
|Total cost of revenue                              |  |                                 | 8  
|                                                   |  |                                 |    
|Gross profit                                       |  |                                 | 92 
|                                                   |  |                                 |    
|Operating expenses:                                |  |                                 |    
|Product development                                |  |                                 | 18 
|Sales and marketing                                |  |                                 | 40 
|General and administrative                         |  |                                 | 13 
|Restructuring, severance and goodwill amortization |  |                                 | 21 
|                                                   |  |                                 |    
|Total operating expenses                           |  |                                 | 92 
|                                                   |  |                                 |    
|Income (loss) from operations                      |  |                                 |   
|Other income (loss), net                           |  |                                 |   
|                                                   |  |                                 |    
|Income (loss) before income taxes                  |  |                                 |   
|Income tax expense (benefit)                       |  |                                 |   
|                                                   |  |                                 |    
|Net income (loss)                                  |  |                                 |   
|                                                   |  |                                 |    

Revenue

Total revenue for the three and nine months ended June 30, 2003 was $7.3 million and $25.3 million, versus $10.1 million and $34.0 million for the three and nine
months ended June 30, 2002, representing a decrease of 28% and 26%, respectively.  License revenue for the three and nine months ended June 30, 2003 was $3.9 million and $14.5 million, versus $5.4 million and $18.2 million for the three and
nine months ended June 30, 2002, representing a decrease of 28% and 20%, respectively.  The decrease in license revenue is due to the softness in overall demand, resulting primarily from the weakened economy and overall decrease in sales volume
for C++ based products.

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Service and maintenance revenue for the three and nine months ended June 30, 2003 was $3.4 million and $10.8
million, versus $4.7 million and $15.8 million for the three and nine months ended June 30, 2002, representing a decrease of 28% and 32%, respectively.  As most of our support revenue is recognized over a term of one year, the decrease in
service and maintenance revenue was primarily attributable to the overall decline in gross sales during several previous quarters, coupled with minimal new consulting contracts.

See Strategic Realignment above for further discussion on the Companys revenue outlook.

Cost
of Revenue

Cost of license revenue consists primarily of amortization of purchased software, materials, packaging, royalties and
freight expense.  Cost of license revenue for the three and nine months ended June 30, 2003 was $80,000 and $439,000, versus $231,000 and $523,000 for the three and nine months ended June 30, 2002, representing a decrease of 65% and 16%,
respectively.  The decrease in costs was primarily the result of the cancellation of a contract due to the discontinuance of the LSOS product in the second quarter of fiscal 2003 that required the Company to pay royalties for technology
licensing rights.  See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements.

Cost of service and
maintenance revenue consists primarily of personnel related and facilities costs incurred in providing customer support and training services as well as third party costs incurred in providing training and consulting services.  Cost of service
and maintenance revenue for the three and nine months ended June 30, 2003 was $487,000 and $2.3 million, versus $1.3 million and $5.2 million for the three and nine months ended June 30, 2002, representing a decrease of 63% and 56%, respectively.
This decrease was due primarily to staff reductions resulting from cost management actions instituted during the last several quarters and a decline in the utilization of third-party consulting services.  The Company expects that the cost of
such revenue will continue to decline as a percentage of total revenue in fiscal 2003.

Operating Expenses

Product development expenses for the three and nine months ended June 30, 2003 were $1.3 million and $5.1 million, versus $2.9 million and $9.5 million for the three
and nine months ended June 30, 2002, representing a decrease of 55% and 46%, respectively.  As a percent of revenue, product development expenses for the three and nine months ended June 30, 2003 were 18% and 20%, versus 29% and 28% for the
three and nine months ended June 30, 2002, respectively.  The overall decrease in product development expenses during the three and nine months ended June 30, 2003 was primarily attributable to the consolidation of development and information
technology functions in the first quarter of fiscal 2003 as well as staff reduction measures taken over the second and third quarters of fiscal 2003.  These actions included the closure of the LSOS operations in Southboro, Massachusetts in
November 2002 and the reduction of the staff in Corvallis, Oregon by approximately 75%, in part as a result of the relocation of certain functions to Boulder, Colorado.  Although the Company anticipates that it will continue to devote
substantial resources to product development and that product development expenses will increase as a percent of revenue for fiscal 2004, the Company believes such expenses will increase only slightly as a percentage of total revenue for the
remainder of fiscal 2003.  All costs incurred in the research and development of software products and enhancements to existing products have been expensed as incurred.

Sales and marketing expenses for the three and nine months ended June 30, 2003 were $2.9 million and $11.4 million, versus $5.6 million and $17.0 million for the
three and nine months ended June 30, 2002, representing a decrease of 48% and 33%, respectively.  As a percentage of total revenue,

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sales and marketing expenses were 40% and 45% for the three and nine months ended June 30, 2003, versus 55% and 50% for the three and nine months ended June 30, 2002,
respectively.  The decrease in sales and marketing expense is due to the decrease in sales and marketing personnel and related costs associated with the implementation of cost containment programs coupled with the overall decrease in
sales.  The Company expects that sales and marketing expenses will remain stable as a percentage of total revenue for the remainder of fiscal 2003.

General and administrative expenses for the three and nine months ended June 30, 2003 were $917,000 and $3.0 million versus $1.2 million and $4.4 million for the
three and nine months ended June 30, 2002 representing a decrease of 24% and 32%, respectively.  The decreases are due primarily to a reduction in personnel as a result of the cost containment programs instituted in fiscal 2002 and in the first
nine months of fiscal 2003.  Additionally, during the three months ended March 31, 2003, the Company determined that a previously established reserve of approximately $153,000 related to certain employee bonuses were no longer expected to be
paid.  This amount was reversed, which reduced general and administrative expenses in fiscal 2003.  General and administrative expenses are not expected to vary significantly as a percentage of total revenue for fiscal 2003.

The Company recognized restructuring, relocation and asset impairment expenses totaling $1.5 million and $4.1 million during the three and nine months
ended June 30, 2003, respectively.  During the nine months ended June 30, 2003, the Company incurred employee severance of $2.4 million, executive severance of $433,000, site closure costs of $976,000, relocation costs of $187,000, an LSOS and
office closure asset impairment charge net of a contract termination benefit of $28,000 and other related costs of $111,000 associated with the consolidation of facilities in the Americas, EMEA and Asia Pacific and the streamlining of operating
functions.  See Note 8 of Notes to Unaudited Condensed Consolidated Financial Statements. These actions resulted in an overall personnel reduction of 55% as of June 30, 2003 compared to June 30, 2002, and are expected to reduce fiscal 2003
expenses from fiscal 2002 by approximately $17.3 million.

The Company recognized severance and goodwill expenses totaling
approximately $1.3 million during the nine months ended June 30, 2002.  The Company incurred severance of $617,000 for the termination of three senior managers, Stingray asset impairment and lease termination penalty of $148,000, severance of
$479,000 for a strategic realignment and approximately $76,000 related to goodwill amortization.

Other Income, Net

Other income for the three and nine months ended June 30, 2003 was $2,000 and $117,000, respectively, versus a net other loss of $104,000 for the three months ended
June 30, 2002 and other income of $370,000 for the nine months ended June 30, 2002, representing an increase of 102% and a decrease of 68%, respectively.  The increase attributed to the quarter to quarter comparison is primarily due to a loss
incurred in the third quarter of fiscal 2002 for the settlement of certain foreign currency transactions.  Other income primarily consists of interest income on the Companys cash, cash equivalents and short-term investments. The decrease
in other income for the comparative nine month periods is primarily due to a decrease in investment yield, specifically corporate notes and commercial paper.

Income Tax Expense

Income taxes for the three and nine months ended June 30, 2003 are provided during interim periods based on the expected tax rate for the
year.  The provision for income taxes for the three and nine months ended June 30, 2003 was 41% and 12%, respectively.  Income tax expense recognized during

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these periods relates primarily to state and foreign income taxes that the Company expects to pay.  The Company increased its valuation allowance on the deferred tax
assets generated during the three and nine months ended June 30, 2003 as a result of uncertainties associated with future realization.  Under SFAS No. 109, deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.  SFAS No. 109 provides for the recognition of deferred tax
assets if realization of such assets is more likely than not.  Based upon the requirements of SFAS No. 109, the Company has recorded a $6.9 million and $5.9 million valuation allowance against certain deferred tax assets as of June 30, 2003 and
September 30, 2002, respectively. The Company expects to continue to record very minimal tax benefit or expense until at least four consecutive quarters of profitability have been achieved.

Liquidity and Capital Resources

As of June 30, 2003, the Company had cash, cash equivalents and short-term
investments of $28.8 million.  Net cash provided by operating activities was $1.2 million during the nine months ended June 30, 2003 compared to $4.0 million used in operating activities during the nine months ended June 30, 2002.  The
overall increase in cash provided by operating activities was primarily attributable to the implementation of cost containment actions, strong accounts receivable collections and receipt of state and federal tax refunds.

During the nine months ended June 30, 2003 and 2002, the Companys investing activities consisted primarily of purchases of equipment and purchases and
maturities of short-term investments.  In the nine months ended June 30, 2003, the Company had maturities of $18.1 million in short-term investments and purchased $12.5 million in short-term investments and $82,000 in equipment purchases,
resulting in net cash provided by investing activities of $5.6 million.  This compared to net cash used in investing activities of $1.3 million in the nine months ended June 30, 2002.

Net cash used in financing activities during the nine months ended June 30, 2003 was $1.1 million, primarily as a result of the Company purchasing its common stock,
offset, in part, by the proceeds of $114,000 from the employee stock purchase plan and exercise of stock options.  In September 2001, the Board of Directors authorized the Company to repurchase up to an aggregate of $5.0 million or 2.5 million
shares of its common stock.  For the nine months ended June 30, 2003, the Company repurchased 585,000 shares for $1.2 million, at prices ranging from $1.72 - $2.67 per share.  Since September 2001, the Company has purchased approximately
1.4 million shares, for approximately $3.4 million at prices ranging from $1.72 - $3.65 per share.

The Company believes that
expected cash flows from operations combined with existing cash and cash equivalents and short-term investments will be sufficient to meet its cash requirements for the 12 months following June 30, 2003.  See Risk Factors
below.

In the future, the Companys capital purchases will relate primarily to replacement of computer equipment and are not
expected to be significant.  The Company frequently evaluates strategic opportunities available to it and may in the future pursue acquisitions of complementary technologies, products or businesses.  Any such acquisitions would use cash,
common stock or other securities, or a combination of cash and securities.  The Company does not currently have any agreements for any such acquisitions.

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The Company leases certain equipment and office space through non-cancelable operating lease arrangements that
require future cash payments.  The table below summarizes these future obligations (in thousands):

|Contractual Obligations |  |   | Total |  |   | Less than 1 year |  |   | 1-3 years |  |   | 4-5 years |  |   | After 5 years | 
|----------------------- |  | - | ----- |  | - | ---------------- |  | - | --------- |  | - | --------- |  | - | ------------- | 
|                        |  |   |       |  |   |                  |  |   |           |  |   |           |  |   |               | 
|Operating Leases        |  | $ | 3,161 |  | $ | 1,506            |  | $ | 1,352     |  | $ | 303       |  | $ |              | 

Risk Factors

In evaluating the Companys business,
investors should carefully consider the following factors in addition to the other information presented in this report.

Our future operating results are difficult to predict and actual
financial results may vary from our expectations, which could have an adverse effect on our stock price.

Our future operating
results are difficult to predict due to a variety of factors, many of which are outside of our control.  These factors include:

| | overall economic conditions of the U.S. and the rest of the world;                                                                 
|- | -----------------------------------------------------------------------------------------------------------------------------------
| | overall economic conditions in the software and information systems, telecommunications, financial services and defense industries;
| | the demand for our products and services;                                                                                          
| | the level of product and price competition;                                                                                        
| | the size, type and timing of individual license transactions;                                                                      
| | the delay or deferral of customer implementations;                                                                                 
| | our success in expanding our direct sales force and indirect distribution channels;                                                
| | timing of new product introductions and product enhancements;                                                                      
| | levels of international sales;                                                                                                     
| | obsolescence of our products or the programming languages that our products are designed to enhance;                               
| | changes in our pricing policy or that of our competitors;                                                                          
| | publication of opinions about us, our products and object-oriented and infrastructure component technology by industry analysts;   
| | our ability to retain key employees and hire new employees;                                                                        
| | our ability to develop and market new products and control costs; and                                                              
| | our ability to effectively deploy our new strategy, including our current business model.                                          

One or more of the foregoing factors may cause our operating expenses to be disproportionately high during any given period or may cause our revenue and operating
results to fluctuate significantly.  Based on the preceding factors, we may experience a shortfall in revenue or earnings or otherwise fail to meet public market expectations, which could materially adversely affect our business, financial
condition and the market price of our common stock.

We operate in an industry with rapidly changing technology and, if we do not successfully modify our products to incorporate new
technologies or introduce new products, our sales will suffer.

The software market in which we compete is characterized by (1)
rapid technological change, (2) frequent introductions of new products, (3) changing customer needs and (4) evolving industry standards.

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To keep pace with technological developments, evolving industry standards and changing customer needs, Rogue Wave must support existing products and develop new
products.  We have been aggressively investigating new product development opportunities, and we recently announced plans to create new products and enhancements to existing products that facilitate application development in a service-based
architecture.  We may not be successful in developing, marketing and releasing new products or new versions of our products that respond to technological developments, evolving industry standards or changing customer requirements.  We may
also experience difficulties that could delay or prevent the successful development, introduction and sale of these enhancements.  In addition, these new products or enhancements may not adequately meet the requirements of the marketplace and
may not achieve any significant degree of market acceptance.  If release dates of any future products or enhancements are delayed, or if these products or enhancements fail to achieve market acceptance when released, our business, operating
results and financial condition could be materially adversely affected.  In addition, new products or enhancements by our competitors may cause customers to defer or forgo purchases of our products, which could have a material adverse effect on
our business, financial condition and results of operations.

Our market is highly competitive, and if we are unable to compete successfully, our ability to grow our business or even maintain
revenue and operating results at current levels will be diminished.

Our products target the markets for C++ components and
development focused integration products.  Direct competitors in the C++ components market include ILOG, several privately held companies and Open Source offerings.  Direct competitors in the development focused integration products market
include large vendors like IBM and Borland, as well as a number of smaller public and privately held companies.  IBM and Borland are particularly strong competitors as they occupy leadership positions in this market and have significantly
greater resources, name recognition and larger installed bases of customers than Rogue Wave.

Software applications can also be developed
using components and programming tools in languages other than C++, including Java and Microsoft .NET languages such as Visual Basic .NET and C#.  Companies that provide components and tools for these languages include Microsoft, BEA, Borland
and Oracle.  These companies have significantly greater resources, name recognition and larger installed bases of customers than Rogue Wave and have established relationships with current and potential customers.  They may be able to
respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sales of their products than Rogue Wave can.

It is expected that new application development will be higher for Java and .NET than C++ in the foreseeable future.  As a result, the widespread acceptance of
Java and Microsofts .NET could curtail the use of C++ and therefore adversely impact the sales of our products.  In addition, failure to develop and market new products that will move us into new technologies, could materially and
adversely affect our business, results of operations and financial condition.

We also face competition from systems integrators
and our customers internal information technology departments.  Many systems integrators possess industry specific expertise that may enable them to offer a single vendor solution more easily, and already have a reputation among potential
customers for offering enterprise-wide solutions to software programming needs.  Systems integrators may market competitive software products in the future.

There are many factors that may increase competition in the market for object-oriented software parts and programming tools, including (1) entry of new competitors,
(2) alliances among existing

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competitors and (3) consolidation in the software industry.  Increased competition may result in price reductions, reduced gross margins or loss of market share, any of
which could materially adversely affect our business, operating results and financial condition.  If we cannot compete successfully against current and future competitors or overcome competitive pressures, our business, operating results and
financial condition may be adversely affected.

Our historical financial information relates to the sale of products primarily based on C++ and as such may not be indicative of our future
performance in developing and marketing software that targets other current or emerging technologies related to application development.

Our historical financial information is based on sales of software designed to develop applications for C++.  While we continue to enhance the functionality of
these products and expect sales of these technologies to continue to generate a significant percentage of our revenues, we expect to derive an increasing percentage of our revenues from sales of products that target the service-oriented architecture
opportunity.  Relative to our traditional business, we do not have a lengthy operating history in these markets upon which to evaluate our prospects, which may make it difficult to predict our actual results in future periods. 
Accordingly, actual results of our future operations may not meet our anticipated results.

Our sales volume is subject to fluctuations and unpredictable timing and may cause our operating
results to fluctuate significantly.

We generally ship orders as received, which means that quarterly revenue and operating
results depend substantially on the volume and timing of orders we receive during the quarter.  Sales volume is difficult to forecast due to a number of reasons, many of which are outside our control.  Such reasons include:

| | lack of a reliable means to assess overall customer demand;                                                                     
|- | --------------------------------------------------------------------------------------------------------------------------------
| | we typically earn a substantial portion of our revenue in the last weeks, or even days, of each quarter;                        
| | larger customer orders are subject to long sales cycles and are frequently delayed; and                                         
| | our service and maintenance revenue tends to fluctuate as consulting contracts are undertaken, renewed, completed or terminated.

We base operating expenses on anticipated revenue trends.  A high percentage of these expenses are relatively fixed.  As a result, a delay in the
recognition of revenue from a limited number of transactions could cause significant variations in operating results from quarter to quarter and could lead to significant losses.  Accordingly, operating results and growth rates for any
particular quarter or other fiscal period may not be indicative of future operating results.  Furthermore, fluctuations in our quarterly operating results may result in volatility in the price of our common stock.

Failure to attract and retain key employees will adversely affect our business.

Our future
performance depends significantly upon the continued service of our key technical, sales and senior management personnel, none of whom is bound by an employment agreement.  We believe that the technological and creative skills of our personnel
are essential to establishing and maintaining a leadership position, particularly in light of the fact that our intellectual property, once sold to the public market, is easily replicated.  The loss of the services of one or more of our
executive officers or key technical personnel may have a material adverse effect on our business.

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Our future success also depends on our continuing ability to attract and retain highly qualified technical, sales
and managerial personnel.  In the past, we have experienced some difficulty in attracting key personnel.  Competition for such personnel is intense and there can be no assurance that we can retain key employees or that we can attract,
assimilate or retain other highly qualified personnel in the future.

Variability of our sales cycles make it difficult to forecast quarterly and annual revenue and operating results, making
it likely that period-to-period comparisons are not necessarily meaningful as an indicator of future results.

We
distribute our products primarily through direct sales channels, which are subject to a variable sales cycle.  The purchase of products is often an enterprise-wide decision and may require the sales person to provide a significant level of
education to prospective customers regarding the use and benefits of our products.  For these and other reasons, the sales cycle associated with the sale of our products typically ranges from two to six months and is subject to a number of
significant delays over which we have little or no control.  As a result, quarterly revenue and operating results are variable and are difficult to forecast, and we believe that period-to-period comparisons of quarterly revenue are not
necessarily meaningful and should not be relied upon as an indicator of future revenue.

We face risks involving future business acquisitions.

We frequently evaluate strategic opportunities available to us and may in the future pursue additional acquisitions of complementary technologies, products or
businesses.  Future acquisitions may result in the diversion of managements attention from the day-to-day operations of our business and may include numerous other risks, including difficulties in the integration of the operations,
products and personnel of the acquired companies.  Future acquisitions may also result in a dilutive issuance of equity securities, the incurrence of debt and amortization expenses related to intangible assets.  Our failure to successfully
manage future acquisitions may have a material adverse effect on our business and financial results.

Doing business outside the United States involves numerous factors that could negatively
affect our financial results.

A significant portion of our revenue is derived from international sources.  To service the
needs of our international customers, we must provide worldwide product support services.  We may not be able to maintain or increase international market demand for our products.  If we do not, our international sales will be limited, and
our business, operating results and financial condition could be materially and adversely affected.

Our international operations are
subject to a variety of risks, including (1) foreign currency and exchange rate fluctuations, (2) economic or political instability, (3) shipping delays and (4) increases in the level of customs duties, export quotas or other trade
restrictions.  Any of these risks could have a significant impact on our ability to deliver products on a competitive and timely basis.

We may not be able to adequately protect our
intellectual property or operate our business without infringing on the intellectual property rights of others.

We
rely primarily on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary rights.  We also believe that factors such as the technological and creative skills
of our personnel, new product developments, frequent product

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enhancements, name recognition and reliable product maintenance are essential to establishing and maintaining a technological leadership position.  We seek to protect our
software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection.  Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary.  The nature of many of our products requires the release of the source code to customers.  Policing unauthorized use of our products is difficult, and while we are
unable to determine the extent to which piracy of our products exists, software piracy can be expected to be a persistent problem.  In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of
the United States.  There can be no assurance that our means of protecting our proprietary rights in the United States or abroad will be adequate or that competition will not independently develop similar technology.

Although we do not believe that we are infringing any proprietary rights of others, third parties may claim that we have infringed their intellectual
property rights.  Furthermore, employers of our former, current or future employees may assert claims that such employees have improperly disclosed to us the confidential or proprietary information of such employers.  Any such claims, with
or without merit, could (1) be time consuming to defend, (2) result in costly litigation, (3) divert managements attention and resources, (4) cause product shipment delays or (5) require us to pay money damages or enter into royalty or
licensing agreements.  A successful claim of intellectual property infringement against us and our failure or inability to license or create a workaround for such infringed or similar technology may materially and adversely affect our business,
operating results and financial condition.

Our license agreements with our customers typically contain provisions designed to
limit our exposure to potential product liability claims.  It is possible, however, that the limitation of liability provisions contained in our license agreements may not be effective under the laws of certain jurisdictions.  A successful
product liability claim brought against us could have a material adverse effect upon our business, operating results and financial condition.

Our business will suffer if our products contain
defects or do not function as intended, which would cause our revenue to decline.

Software products frequently
contain errors or failures, especially when first introduced or when new versions are released.  Also, new products or enhancements may contain undetected errors, or bugs, or performance problems that, despite testing, are
discovered only after a product has been installed and used by customers.  Errors or performance problems could cause delays in product introduction and shipments or require design modifications, either of which could lead to a loss in revenue
or increase in costs.  Our products are typically intended for use in applications that may be critical to a customers business.  As a result, we expect that our customers and potential customers have a greater sensitivity to product
defects than the market for software products generally.  Despite extensive testing by us and by current and potential customers, errors may be found in new products or releases after commencement of commercial shipments, resulting in loss of
revenue or delay in market acceptance, diversion of development resources, the payment of monetary damages, damage to our reputation, or increased service and warranty costs, any of which could have a material adverse effect on our business and
results of operations.

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Provisions in our charter documents, our rights agreement and Delaware law could prevent or delay a change in control of the Company and may reduce the market price of
our common stock.

Provisions of our certificate of incorporation, by-laws and rights agreement may discourage, delay or prevent a
merger, acquisition or other business combination that a stockholder may consider favorable.  These provisions include:

| | authorizing the issuance of preferred stock without stockholder approval;                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | limiting the persons who may call special meetings of stockholders;                                                                                                                          
| | prohibiting stockholder action by written consent;                                                                                                                                           
| | establishing advance notice requirements for nominations for election to the board of directors and for proposing other matters that can be acted on by stockholders at stockholder
meetings;
| | requiring super-majority voting to effect certain amendments to our certificate of incorporation or to amend our by-laws; and                                                                
| | requiring parties to request board approval prior to acquiring 15% or more of the voting power of our common stock to avoid economic and voting dilution of their stock holdings.            

We are incorporated in Delaware and certain provisions of Delaware law may also discourage, delay or prevent someone from
acquiring or merging with us, which may cause the market price of our common stock to decline.

Potential new accounting pronouncements may cause our net income to
decrease.

We currently account for the issuance of stock options under APB No. 25, Accounting for Stock Issued to
Employees.  If proposals currently under consideration by accounting standards organizations and governmental authorities are adopted, we may be required to change our practice and treat the value of stock options granted to employees as
a compensation expense.  If we change our method of accounting for employee stock options, whether voluntarily or as a result of changes in accounting rules, our net income could materially decrease.

Legislative and regulatory actions may cause our operating expenses to increase.

The Sarbanes-Oxley
Act of 2002 and newly proposed or enacted rules and regulations of the SEC or NASDAQ, impose new duties on the Company and its executives, directors, attorneys and auditors.  In order to comply with the Sarbanes-Oxley Act and any new rules
promulgated by the SEC or NASDAQ, we may be required to hire additional personnel and use additional outside legal, accounting and advisory services.  Any of these developments could materially increase our operating expenses and, accordingly,
reduce our net income.

ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Companys market risk exposure is the potential loss arising from changes in interest rates and their impact on short-term investments, and from foreign
currency exchange rate fluctuations.

As of June 30, 2003, the Company had short-term investments of $12.1 million, which are classified
as held to maturity and are carried at their amortized cost.  All investments have acquired maturities of less than 360 days.  Short-term investments consist primarily of high credit and highly liquid corporate notes and commercial
paper.  A reduction in overall interest rates would not have a material effect on the fair value of the investments or the financial position of the Company.

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Exposure to variability in foreign currency exchange rates is managed primarily through the use of natural hedges,
whereby funding obligations and assets are both managed in the local currency.  In addition, the Company will from time to time enter into foreign currency exchange agreements to manage its exposure arising from fluctuating exchange rates,
primarily in the Euro.  The Company does not enter into any derivative transactions for speculative purposes.  The sensitivity of earnings and cash flows to variability in exchange rates is assessed by applying an appropriate range of
potential rate fluctuations to the Companys assets, obligations and projected results of operations denominated in foreign currencies.  Based on the Companys overall foreign currency rate exposure at June 30, 2003, movements in
foreign currency rates would not materially affect the financial position of the Company.  At June 30, 2003, the Company had outstanding short-term forward exchange contracts to exchange Euros for U.S. dollars in the amount of $2.1
million.  See Note 9 of Notes to Unaudited Condensed Consolidated Financial Statements.

ITEM 4.  CONTROLS AND PROCEDURES

The Company carried out an
evaluation, under the supervision and with the participation of management, including our Chief Executive Officer, who is currently serving as interim Chief Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15.  Based on that evaluation, our Chief Executive Officer concluded that our controls and procedures were effective as of the end of the period covered by this report.  There were
no changes in the Companys internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to materially affect, the Companys internal control
over financial reporting.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that
information required to be disclosed in the Companys reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and
forms.  Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the
Companys Chief Executive Officer or Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

The
Company has confidence in its internal controls and procedures.  Nevertheless, the Companys management, including the Chief Executive Officer, does not expect that our internal controls will prevent all errors or intentional fraud. 
An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of such internal controls are met.  Further, the design of an internal control system must reflect
the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all internal control system, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud within the Company, if any, have been detected.

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PART II  OTHER INFORMATION

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

|(a) | Exhibits:                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                               
|    | The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report and the
Exhibit Index is incorporated herein by reference.
|    |                                                                                                                                                                               
|(b) | Reports on Form 8-K:                                                                                                                                                          
|    |                                                                                                                                                                               
|    | On April 11, 2003, the Company filed a report on Form 8-K furnishing its press release dated April 10, 2003 under Item
12.                                                    
|    |                                                                                                                                                                               
|    | On May 2, 2003, the Company filed a report on Form 8-K furnishing its press release dated April 29, 2003 under Item
12.                                                       

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SIGNATURES

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

|                      | ROGUE WAVE SOFTWARE, INC.             
|--------------------- | --------------------------------------
|                      | (Registrant)                          
|                      |                                       
|Date: August 13, 2003 | /s/ KATHLEEN E. BRUSH                 
|                      |                                       
|                      | KATHLEEN E. BRUSH                     
|                      | PRESIDENT, CHIEF EXECUTIVE OFFICER AND
|                      | INTERIM CHIEF FINANCIAL OFFICER       

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EXHIBIT INDEX

|EXHIBIT NUMBER |  | DESCRIPTION OF DOCUMENT                                                                                                                                                                          
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                  
|10.21(1)       |  | Separation & Release Agreement between Registrant and Merle A. Waterman dated May 8, 2003.                                                                                                       
|31.1(1)        |  | Certification of Chief Executive Officer and interim Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|               |  |                                                                                                                                                                                                  
|32.1(1)        |  | Certification of Chief Executive Officer and interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.           

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