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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 March 31, 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                                                       |                                                                                         
|(State or other jurisdiction of incorporation or organization) |                                                                                         
|                                                               |                                                                                         
|5500 Flatiron Parkway, Boulder, Colorado                       |                                                                                         
|(Address of principal executive offices)                       |                                                                                         
|                                                               |                                                                                         
|(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 April 30, 2003
|------------------------------ |  | -----------------------------
|                               |  |                              
|Common Stock, $0.001 par value |  | 9,963,181                    

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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 March 31, 2003 and September 30, 2002                                                                   | 3       
|                               |                                                                                                                                                  |         
|                               | Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the Three and Six Months Ended March 31, 2003 and 2002 | 4       
|                               |                                                                                                                                                  |         
|                               | Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 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                                                            | 14      
|                               |                                                                                                                                                  |         
|                               | Risk Factors                                                                                                                                     | 23      
|                               |                                                                                                                                                  |         
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                                                                       | 27      
|                               |                                                                                                                                                  |         
|Item 4.                        | Controls and Procedures                                                                                                                          | 28      
|                               |                                                                                                                                                  |         
|PART II  OTHER INFORMATION    |                                                                                                                                                 
|                               |                                                                                                                                                 
|Item 4.                        | Submission of Matters to a Vote of Security Holders                                                                                              | 29      
|                               |                                                                                                                                                  |         
|Item 6.                        | Exhibits and Reports on Form 8-K                                                                                                                 | 29      
|                               |                                                                                                                                                  |         
|Signatures                     | 30                                                                                                                                              
|                               |                                                                                                                                                 
|Certifications                 | 31                                                                                                                                              

2.



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##### Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.     Consolidated Financial Statements

ROGUE WAVE SOFTWARE, INC. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands) (unaudited)

|                                           |  | March 31, 2003 |         | September 30, 2002 |  
|------------------------------------------ |  | -------------- | ------- | ------------------ | -
|                                           |  |                |         |                    |  
|ASSETS                                     |  |                |         |                    |  
|Current assets:                            |  |                |         |                    |  
|Cash and cash equivalents                  |  | $              | 13,516  |                    | $
|Short-term investments                     |  |                | 12,039  |                    |  
|Accounts receivable, net                   |  |                | 8,641   |                    |  
|Prepaid expenses and other current assets  |  |                | 862     |                    |  
|Income tax receivable                      |  |                | 1,280   |                    |  
|                                           |  |                |         |                    |  
|Total current assets                       |  |                | 36,338  |                    |  
|Furniture, fixture, and equipment, net     |  |                | 1,745   |                    |  
|Intangibles, net                           |  |                | 225     |                    |  
|Other assets, net                          |  |                | 617     |                    |  
|                                           |  |                |         |                    |  
|Total assets                               |  | $              | 38,925  |                    | $
|                                           |  |                |         |                    |  
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                |         |                    |  
|Current liabilities:                       |  |                |         |                    |  
|Accounts payable                           |  | $              | 319     |                    | $
|Accrued expenses                           |  |                | 3,992   |                    |  
|Deferred revenue                           |  |                | 7,652   |                    |  
|                                           |  |                |         |                    |  
|Total current liabilities                  |  |                | 11,963  |                    |  
|Stockholders equity:                      |  |                |         |                    |  
|Common stock                               |  |                | 10      |                    |  
|Additional paid-in capital                 |  |                | 41,914  |                    |  
|Treasury stock                             |  |                | (2,611  | )                  |  
|Deferred compensation                      |  |                | (360    | )                  |  
|Accumulated deficit                        |  |                | (12,451 | )                  |  
|Accumulated other comprehensive income     |  |                | 460     |                    |  
|                                           |  |                |         |                    |  
|Total stockholders equity                 |  |                | 26,962  |                    |  
|                                           |  |                |         |                    |  
|Total liabilities and stockholders equity |  | $              | 38,925  |                    | $
|                                           |  |                |         |                    |  

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 March 31, |        | Six Months Ended March 31, |  
|-------------------------------------------------- |  | ---------------------------- | ------ | -------------------------- | -
|                                                   |  |                              |        |                            |  
|                                                   |  | 2003                         |        | 2002                       |  
|                                                   |  |                              |        |                            |  
|Revenue:                                           |  |                              |        |                            |  
|License revenue                                    |  | $                            | 4,945  |                            | $
|Service and maintenance revenue                    |  |                              | 3,483  |                            |  
|                                                   |  |                              |        |                            |  
|Total revenue                                      |  |                              | 8,428  |                            |  
|Cost of revenue:                                   |  |                              |        |                            |  
|Cost of license revenue                            |  |                              | 126    |                            |  
|Cost of service and maintenance revenue            |  |                              | 713    |                            |  
|                                                   |  |                              |        |                            |  
|Total cost of revenue                              |  |                              | 839    |                            |  
|                                                   |  |                              |        |                            |  
|Gross profit                                       |  |                              | 7,589  |                            |  
|Operating expenses:                                |  |                              |        |                            |  
|Product development                                |  |                              | 1,655  |                            |  
|Sales and marketing                                |  |                              | 3,950  |                            |  
|General and administrative                         |  |                              | 960    |                            |  
|Restructuring, severance and goodwill amortization |  |                              | 482    |                            |  
|                                                   |  |                              |        |                            |  
|Total operating expenses                           |  |                              | 7,047  |                            |  
|                                                   |  |                              |        |                            |  
|Income (loss) from operations                      |  |                              | 542    |                            |  
|Other income, net                                  |  |                              | 22     |                            |  
|                                                   |  |                              |        |                            |  
|Income (loss) before income taxes                  |  |                              | 564    |                            |  
|Income tax expense (benefit)                       |  |                              | 52     |                            |  
|                                                   |  |                              |        |                            |  
|Net income (loss)                                  |  | $                            | 512    |                            | $
|                                                   |  |                              |        |                            |  
|Basic and diluted income (loss) per share          |  | $                            | 0.05   |                            | $
|                                                   |  |                              |        |                            |  
|Shares used in basic per share calculation         |  |                              | 10,073 |                            |  
|Shares used in diluted per share calculation       |  |                              | 10,102 |                            |  
|                                                   |  |                              |        |                            |  
|Net income (loss)                                  |  | $                            | 512    |                            | $
|Other comprehensive income (loss):                 |  |                              |        |                            |  
|Foreign currency translation gain (loss)           |  |                              | 33     |                            |  
|                                                   |  |                              |        |                            |  
|Total comprehensive income (loss)                  |  | $                            | 545    |                            | $
|                                                   |  |                              |        |                            |  

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. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

|                                                                            |  | Six Months Ended March 31, |       
|--------------------------------------------------------------------------- |  | -------------------------- | ------
|                                                                            |  |                            |       
|                                                                            |  | 2003                       |       
|                                                                            |  |                            |       
|Cash flows provided by (used in) operating activities:                      |  |                            |       
|Net loss                                                                    |  | $                          | (1,126
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                            |       
|Depreciation and amortization                                               |  |                            | 1,197 
|Loss on disposal of assets                                                  |  |                            | 45    
|Deferred income taxes                                                       |  |                            |      
|Amortization of deferred compensation                                       |  |                            | 89    
|Changes in assets and liabilities:                                          |  |                            |       
|Accounts receivable                                                         |  |                            | (335  
|Prepaid expenses, income tax receivable and other current assets            |  |                            | (26   
|Other noncurrent assets                                                     |  |                            | 757   
|Accounts payable and accrued expenses                                       |  |                            | (969  
|Deferred revenue                                                            |  |                            | (1,615
|                                                                            |  |                            |       
|Net cash used in operating activities                                       |  |                            | (1,983
|                                                                            |  |                            |       
|Cash flows provided by (used in) investing activities:                      |  |                            |       
|Maturities of short-term investments                                        |  |                            | 11,826
|Purchase of short-term investments                                          |  |                            | (6,134
|Purchase of equipment                                                       |  |                            | (30   
|                                                                            |  |                            |       
|Net cash provided by (used in) investing activities                         |  |                            | 5,662 
|                                                                            |  |                            |       
|Cash flows provided by (used in) financing activities:                      |  |                            |       
|Net proceeds from exercise of stock options                                 |  |                            | 10    
|Net proceeds from Employee Stock Purchase Plan                              |  |                            | 71    
|Treasury stock purchases                                                    |  |                            | (1,173
|                                                                            |  |                            |       
|Net cash used in financing activities                                       |  |                            | (1,092
|                                                                            |  |                            |       
|Effect of exchange rate changes on cash and cash equivalents                |  |                            | 404   
|                                                                            |  |                            |       
|Net change in cash and cash equivalents                                     |  |                            | 2,991 
|Cash and cash equivalents at beginning of period                            |  |                            | 10,525
|                                                                            |  |                            |       
|Cash and cash equivalents at end of period                                  |  | $                          | 13,516
|                                                                            |  |                            |       

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

5.



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##### Table of Contents

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. | 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
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. 
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 thirty-day right of return policy for software sales. 
The allowance for returns was $1.7 million and $1.1 million at March 31, 2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3. | 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 March
31, 2003, the accounts receivable balance was $10.3 million, before allowance for doubtful                                                                                                                                                                                                                                                                                                                                                                                                            

6.



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|   | accounts and sales returns, which total $1.7 million.  Two customers accounted for 15% and 12% of the gross accounts receivable balance at March 31, 2003, or 27%
combined.  These two customers also accounted for 17% of the Companys total revenue for the three months ended March 31, 2003 and 14% for the six months ended March 31, 2003.  International revenue was approximately 25% and 20% of
the Companys total revenue for the quarters ended March 31, 2003 and 2002, respectively.  International revenue was approximately 30% and 26% of the Companys total revenue for the six months ended March 31, 2003 and 2002,
respectively.                                                                                                                                                                                                                                                                                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4. | 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 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 and earnings per share would have been reduced to the following amounts (in thousands, except per share data):



|                                                                                                                              |  | Three months ended March 31, |      | Six months ended March 31, |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | -------------------------- | -
|                                                                                                                              |  |                              |      |                            |  
|                                                                                                                              |  | 2003                         |      | 2002                       |  
|                                                                                                                              |  |                              |      |                            |  
|Reported net income (loss)                                                                                                    |  | $                            | 512  |                            | $
|Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                              | 227  |                            |  
|                                                                                                                              |  |                              |      |                            |  
|Pro forma net income (loss)                                                                                                   |  | $                            | 285  |                            | $
|                                                                                                                              |  |                              |      |                            |  
|Reported basic and diluted income (loss) per share                                                                            |  | $                            | 0.05 |                            | $
|                                                                                                                              |  |                              |      |                            |  
|Pro forma basic and diluted income (loss) per share                                                                           |  | $                            | 0.03 |                            | $
|                                                                                                                              |  |                              |      |                            |  



| | 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       |  |                         | 2.98 | %                                |  | 5.00                    |  |                           | 0.00
|FY 2002       |  |                         | 3.13 | %                                |  | 5.00                    |  |                           | 0.00

7.



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##### Table of Contents

| | 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  |                               | $
|                                          |  |        |        |                               |  



| | Options vested and exercisable were 2.3 million shares at March 31, 2003.  Price ranges and weighted average characteristics of outstanding stock options at March 31, 2003
were as follows (share data in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|               |  | Outstanding Options |       | Exercisable Options    | 
|-------------- |  | ------------------- | ----- | ---------------------- | 
|               |  |                     |       |                        | 
|Exercise Price |  | Shares              |       | Remaining life (years) | 
|               |  |                     |       |                        | 
|$0.15-$2.68    |  |                     | 1,289 |                        | 
|$2.70-$4.34    |  |                     | 948   |                        | 
|$4.38-$5.44    |  |                     | 1,000 |                        | 
|$5.50-$17.00   |  |                     | 381   |                        | 
|               |  |                     |       |                        | 
|               |  |                     | 3,618 |                        | 
|               |  |                     |       |                        | 

|5. | Basic and Diluted Income (Loss) Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Basic income (loss) per share for the three and six months ended March 31, 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
March 31, 2003, the dilutive effect of outstanding options was 29,000 shares.  As a result of the net loss incurred for the three months ended March 31, 2002 and the six months ended March 31, 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 March 31, 2002 and six months ended March 31, 2003 and 2002, options to acquire approximately 55,000, 30,000 and 75,000
shares, respectively, calculated using the treasury stock method, were excluded from the calculation because of their anti-dilutive effect.  The Company had approximately 3.6 million and 4.8 million options outstanding at March 31,
2003 and 2002, respectively, of which approximately 108,000 and 1,357,000, 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 March 31, |        | Six months ended March 31, |  
|-------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | -------------------------- | -
|                                                                                                               |  |                              |        |                            |  
|                                                                                                               |  | 2003                         |        | 2002                       |  
|                                                                                                               |  |                              |        |                            |  
|Numerator:                                                                                                     |  |                              |        |                            |  
|Net income (loss)                                                                                              |  | $                            | 512    |                            | $
|                                                                                                               |  |                              |        |                            |  
|Denominator:                                                                                                   |  |                              |        |                            |  
|Historical common shares outstanding for basic and diluted income (loss) per share at beginning of period      |  |                              | 10,152 |                            |  
|Weighted average number of common equivalent shares purchased during the period                                |  |                              | (119   | )                          |  
|Weighted average number of common equivalent shares issued during the period                                   |  |                              | 40     |                            |  
|                                                                                                               |  |                              |        |                            |  
|Denominator for basic net income (loss) per share -  weighted average shares                                   |  |                              | 10,073 |                            |  
|                                                                                                               |  |                              |        |                            |  
|Incremental common shares attributable to shares issuable under equity incentive plans (treasury stock
method) |  |                              | 29     |                            |  
|                                                                                                               |  |                              |        |                            |  
|Denominator for diluted net income (loss) per share  weighted average shares                                  |  |                              | 10,102 |                            |  
|                                                                                                               |  |                              |        |                            |  
|Basic and diluted income (loss) per share                                                                      |  | $                            | 0.05   |                            | $
|                                                                                                               |  |                              |        |                            |  



|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 six months ended March 31, 2003, the Company repurchased 574,000 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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|   | 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 $270,000 at March 31, 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 March 31, 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   |   | $     |   
|                                                                         |  |                              |       |                    |   |       |   |       |    



| | 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. These actions are expected to reduce fiscal 2003 operating expenses, as compared to fiscal 2002, by
approximately $2.4 million.  The remaining accrued balance of $25,000 at March 31, 2003, is expected to be paid in the third quarter of fiscal 2003.

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| | The following table summarizes restructuring costs and related reserve at March 31, 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  
|                                                                               |  |                              |     



| | 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 finalized these costs, which resulted
in a less than anticipated cost of $40,000.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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 facility and was related to software, furniture, and fixtures.                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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 six months ended March 31, 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 three months ended March 31, 2003, the employment of two Company executives
was terminated, which resulted in severance costs of approximately $333,000.                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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.                                                                                            

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|    | 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.                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The notional amount of foreign exchange contracts outstanding at March 31, 2003 was $1.1 million with a derivative
related fair value of $66,000.  The fair value of the forward contracts is estimated based on quoted exchange rates at March 31, 2003.  The effective or unrealized gain related to the outstanding contracts at March 31, 2003 and March 31,
2002 was $104,000 and $36,000, respectively.  Also during the six months ended March 31, 2003 and 2002, certain foreign currency contracts matured resulting in a net loss of $5,000 and a net gain of $4,000, respectively, of which a loss of
$1,000 and $0 was recognized in the second quarters of fiscal 2003 and 2002, respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10. | Worldwide Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | Revenue by geographic area for the three months ended March 31, 2003 and 2002 was 75% and 79% in the Americas, 23%
and 19% in EMEA, and 2% and 1% in Asia Pacific, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| | Information regarding worldwide operations is as follows (in thousands):
| | ------------------------------------------------------------------------



|                                                |  | Americas |        | EMEA |   | Asia1Pacific |  | Eliminations |      | Total |  
|----------------------------------------------- |  | -------- | ------ | ---- | - | ------------ |  | ------------ | ---- | ----- | -
|                                                |  |          |        |      |   |              |  |              |      |       |  
|March 31, 2003, and for the quarter then ended: |  |          |        |      |   |              |  |              |      |       |  
|Revenue to unaffiliated customers               |  | $        | 6,356  |      | $ | 1,893        |  | $            | 179  |       | $
|Intercompany transfers                          |  |          | 1,281  |      |   | 604          |  |              |     |       |  
|                                                |  |          |        |      |   |              |  |              |      |       |  
|Net revenue                                     |  |          | 7,637  |      |   | 2,497        |  |              | 179  |       |  
|Operating income (loss)                         |  |          | 861    |      |   | 43           |  |              | (362 | )     |  
|Longlived assets                               |  |          | 1,466  |      |   | 263          |  |              | 16   |       |  
|March 31, 2002, and for the quarter then ended: |  |          |        |      |   |              |  |              |      |       |  
|Revenue to unaffiliated customers               |  | $        | 9,529  |      | $ | 2,333        |  | $            | 170  |       | $
|Intercompany transfers                          |  |          | 845    |      |   |             |  |              |     |       |  
|                                                |  |          |        |      |   |              |  |              |      |       |  
|Net revenue                                     |  |          | 10,374 |      |   | 2,333        |  |              | 170  |       |  
|Operating income (loss)                         |  |          | (793   | )    |   | 50           |  |              | (54  | )     |  
|Longlived assets                               |  |          | 3,639  |      |   | 284          |  |              | 3    |       |  



| | Revenue by geographic area for the six months ended March 31, 2003 and 2002 was 70% and 74% in the Americas, 22% and
21% in EMEA, and 8% and 5% in Asia Pacific, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                               
| | Information regarding worldwide operations is as follows (in thousands):                                                                                                      



|                                                   |  | Americas |        | EMEA |   | Asia1Pacific |   | Eliminations |       | Total |  
|-------------------------------------------------- |  | -------- | ------ | ---- | - | ------------ | - | ------------ | ----- | ----- | -
|                                                   |  |          |        |      |   |              |   |              |       |       |  
|March 31, 2003, and for the six months then ended: |  |          |        |      |   |              |   |              |       |       |  
|Revenue to unaffiliated customers                  |  | $        | 12,602 |      | $ | 3,911        |   | $            | 1,505 |       | $
|Intercompany transfers                             |  |          | 3,194  |      |   | 604          |   |              |      |       |  
|                                                   |  |          |        |      |   |              |   |              |       |       |  
|Net revenue                                        |  |          | 15,796 |      |   | 4,515        |   |              | 1,505 |       |  
|Operating income (loss)                            |  |          | (418   | )    |   | (586         | ) |              | (131  | )     |  
|Longlived assets                                  |  |          | 1,466  |      |   | 263          |   |              | 16    |       |  
|March 31, 2002, and for the six months then ended: |  |          |        |      |   |              |   |              |       |       |  
|Revenue to unaffiliated customers                  |  | $        | 17,762 |      | $ | 4,932        |   | $            | 1,283 |       | $
|Intercompany transfers                             |  |          | 2,218  |      |   |             |   |              |      |       |  
|                                                   |  |          |        |      |   |              |   |              |       |       |  
|Net revenue                                        |  |          | 19,980 |      |   | 4,932        |   |              | 1,283 |       |  
|Operating income (loss)                            |  |          | (2,730 | )    |   | (21          | ) |              | 253   |       |  
|Longlived assets                                  |  |          | 3,639  |      |   | 284          |   |              | 3     |       |  

| | 1. | Japan was the only country reported in Asia Pacific for the three and six months ended March 31, 2002. Asia Pacific includes Japan, Hong Kong, China, Australia and India in the
three and six months ended March 31, 2003.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|11. | Accounting for Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | At March 31, 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 $6.5 million and $5.9 million as of March 31, 2003 and September 30, 2002,
respectively.

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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. 
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 optimize productivity when building software solutions to address their business requirements.  The
Company strives to create products that efficiently and effectively align underlying information technology with a customers application of that technology.

The Company markets its products primarily through its direct sales force and, to a lesser extent, through the Internet 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
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.

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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 elimination 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.   During the three months ended March 31, 2003, the Company 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

The Company is aggressively investigating new product development opportunities that are intended to optimize its current cross-platform expertise, engineering
expertise, sales channels and customer base.

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

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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 twelve months.  As
a result, in April 2003, the Company announced its intention to close its Sydney, Australia and Amsterdam, Netherlands offices during the third quarter of fiscal 2003.

The Company will continue to develop these regions through combining the remaining direct sales force with strategic partnerships with third party distributors, which
the Company continues to establish.  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,
particularly in the Americas region.  The technology sector, including telecommunications, computer/software and financial services, which represents approximately 75% of the Companys customer base, has 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 first half of fiscal 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, 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 and termination of LSOS development operations in Southboro,
Massachusetts.

These restructuring initiatives resulted in workforce reductions of approximately 100 employees and a charge for
restructuring, severance, lease termination, asset impairment, relocation and other related costs of approximately $2.6 million. In addition, during April 2003 the Company announced plans to close two international offices and additional
organizational realignments of certain operations in the US.  As a result, the Company anticipates recognizing an additional $1.2 million - $1.4 million in restructuring and severance costs, including certain lease related costs associated with
the closure of offices, during the three months ended June 30, 2003.

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

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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.

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

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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 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.  In the first half of fiscal 2003, the Company incurred a loss and, subsequently, established a valuation
allowance equal to the tax benefit estimated for the six months ended March 31, 2003.  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.

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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 March 31,    |    
|                                                   |  |                                 |    
|                                                   |  | 2003                            |    
|                                                   |  |                                 |    
|Revenue:                                           |  |                                 |    
|License revenue                                    |  |                                 | 59 
|Service and maintenance revenue                    |  |                                 | 41 
|                                                   |  |                                 |    
|Total revenue                                      |  |                                 | 100
|                                                   |  |                                 |    
|Cost of revenue:                                   |  |                                 |    
|Cost of license revenue                            |  |                                 | 2  
|Cost of service and maintenance revenue            |  |                                 | 8  
|                                                   |  |                                 |    
|Total cost of revenue                              |  |                                 | 10 
|                                                   |  |                                 |    
|Gross profit                                       |  |                                 | 90 
|                                                   |  |                                 |    
|Operating expenses:                                |  |                                 |    
|Product development                                |  |                                 | 20 
|Sales and marketing                                |  |                                 | 47 
|General and administrative                         |  |                                 | 11 
|Restructuring, severance and goodwill amortization |  |                                 | 6  
|                                                   |  |                                 |    
|Total operating expenses                           |  |                                 | 84 
|                                                   |  |                                 |    
|Income (loss) from operations                      |  |                                 | 6  
|Other income, net                                  |  |                                 | 1  
|                                                   |  |                                 |    
|Income (loss) before income taxes                  |  |                                 | 7  
|Income tax expense (benefit)                       |  |                                 | 1  
|                                                   |  |                                 |    
|Net income (loss)                                  |  |                                 | 6  
|                                                   |  |                                 |    

Revenue

Total revenue for the three and six months ended March 31, 2003 was $8.4 million and $18.0 million, respectively, versus $12.0 and $24.0 million for the three and six
months ended March 31, 2002, respectively, representing a decrease of 30% and 25%, respectively.  License revenue for the three and six months ended March 31, 2003 was $4.9 million and $10.7 million, respectively, versus $6.7 million and $12.8
million for the three and six months ended March 31, 2002, respectively, representing a decrease of 27% and 16%, respectively.  The decrease in license revenue is due to the softness in overall demand, resulting primarily from a weakened
economy and overall drop in U.S. sales volume for C++ based products.

Service and maintenance revenue for the three and six months ended
March 31, 2003 was $3.5 million and $7.4 million, respectively, versus $5.3 million and $11.2 million for the three and six months ended March 31, 2002, respectively, representing a decrease of 34% in each period.  Because 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 of the previous quarters, coupled with minimal new consulting
contracts.

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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 six months ended March 31, 2003 was $126,000 and $360,000, respectively, versus $123,000 and $292,000 for the
three and six months ended March 31, 2002, respectively, representing an increase of 2% and 23%, respectively.  The increase in costs was primarily the result of an increase in royalties associated with certain technology licensing rights
acquired in the latter half of fiscal 2002.

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 six months ended March
31, 2003 was $713,000 and $1.8 million, respectively, versus $1.9 million and $3.9 million for the three and six months ended March 31, 2002, respectively, representing a decrease of 62% and 54%, 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 decline as a
percentage of total revenue in fiscal 2003.

Operating Expenses

Product
development expenses for the three and six months ended March 31, 2003 was $1.7 million and $3.8 million, respectively, versus $3.4 million and $6.6 million for the three and six months ended March 31, 2002, respectively, representing a decrease of
50% and 42%, respectively.  As a percent of revenue, product development expense for the three and six months ended March 31, 2003 was 20% and 21%, respectively, versus 28% for both the three and six months ended March 31, 2002,
respectively.  The overall decrease in product development expense during the three and six months ended March 31, 2003 was primarily attributable to the consolidation of development and information technology functions in the first fiscal
quarter of 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 as well as streamlining certain processes.  Although the Company anticipates that it will continue to devote substantial resources to product development and that product development expenses will increase, the
Company believes such expenses will increase only slightly as a percentage of total revenue for 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 six months ended March 31, 2003 were $4.0 million and $8.5 million,
respectively, versus $5.4 million and $11.4 million for the three and six months ended March 31, 2002, respectively, representing a decrease of 26% and 25%, respectively.  As a percentage of total revenue, sales and marketing expenses were 47%
for both the three and six months ended March 31, 2003, respectively, versus 45% and 48% for the three and six months ended March 31, 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 fiscal 2003.

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General and administrative expenses for the three and six months ended March 31, 2003 were $960,000 and $2.1
million, respectively, versus $1.6 million and $3.2 million for the three and six months ended March 31, 2002, respectively, representing a decrease of 40% and 34%, 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 half 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 was no longer expected to be paid; therefore, such amount was reversed, which served to reduce general and administrative expense in the second quarter of 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 $482,000 and $2.6 million during the three and six months ended March 31, 2003, respectively.  During the six months ended March 31, 2003, the Company incurred employee severance of $1.6
million, executive severance of $333,000, site closure costs of $404,000, relocation costs of $177,000, an LSOS asset impairment and contract termination net benefit of $16,000 and other related costs of $74,000 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 50% as of
March 31, 2003 compared to March 31, 2002, and are expected to reduce fiscal 2003 expenses from fiscal 2002 by approximately $13.4 million.

The Company recognized severance and goodwill expenses totaling approximately $1.0 million during the six months ended March 31, 2002.  The Company incurred
severance of $617,000 for the termination of three senior managers, severance of $352,000 for a strategic realignment and approximately $76,000 related to goodwill amortization.

Other
Income, Net

Other income for the three and six months ended March 31, 2003 was $22,000 and $115,000, respectively, versus $214,000
and $474,000 for the three and six months ended March 31, 2002, respectively, representing a decrease of 90% and 76%, respectively.  Other income primarily consists of interest income on the Companys cash, cash equivalents and short-term
investments. The decrease in other income is primarily due to a decrease in investment yield, specifically corporate notes and commercial paper, during the current fiscal period as compared to the same fiscal period last year.

Income Tax Expense

Income taxes for the three and six months ended March 31, 2003 are provided
during interim periods based on the expected tax rate for the year.  The provision for income taxes for the three and six months ended March 31, 2003 was 9.2% and 10.4%, respectively.  Income tax expense recognized during 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 six months ended March 31, 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, as of March 31, 2003, a $6.5 million valuation allowance against certain deferred tax assets. The Company will continue to record very

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minimal tax benefit or expense until at least four consecutive quarters of profitability have been achieved.

Liquidity
and Capital Resources

As of March 31, 2003, the Company had cash, cash equivalents and short-term investments of $25.6
million.  Net cash used in operating activities was $2.0 million during the six months ended March 31, 2003 compared to $2.9 million used in operating activities during the six months ended March 31, 2002.  The overall decrease in the use
of cash in operating activities was primarily attributable to a decrease in deferred revenue when compared to the same period in fiscal 2002 and a decrease in the Companys net deferred tax asset, when compared to fiscal 2002.

During the six months ended March 31, 2003 and 2002, the Companys investing activities consisted primarily of purchases of equipment and
purchases and maturities of short-term investments.  In the six months ended March 31, 2003, the Company had maturities of $11.8 million in short-term investments and purchased $6.1 million in short-term investments and $30,000 in equipment,
resulting in net cash provided by investing activities of $5.7 million.  This compared to net cash used in investing activities of $1.2 million in the six months ended March 31, 2002.

Net cash used in financing activities during the six months ended March 31, 2003 was $1.1 million, primarily as a result of the Company purchasing its common stock,
offset, in part, by the proceeds 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 six months ended March 31, 2003, the Company repurchased 574,000 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 twelve months following March 31, 2003.  See Risk Factors.

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 leases certain equipment and office space through noncancelable 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        |  | $     | 3,613 |                  | $ | 1,715     |  | $         | 1,557 |               | $

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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 net 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.

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                 

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| | 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.

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.

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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 have expanded our international operations and plan to enter additional international markets.  This will require significant management attention and financial resources that could adversely affect our
operating margins and earnings.  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
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.

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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.

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, BEA and Borland, as well as a number of smaller public and privately held
companies.  IBM and BEA 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, 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.

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 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.

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We operate in an industry with rapidly changing technology and, if we do not successfully modify our products to incorporate new technologies, they may become obsolete
and 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.  To keep pace with technological developments, evolving industry standards and changing customer needs, Rogue Wave must support existing products
and develop new products.  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 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.

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.

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 its impact on short-term investments and foreign currency
exchange rate fluctuations.

As of March 31, 2003, the Company had short-term investments of $12.0 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

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liquid corporate notes and commercial paper.  A reduction in overall interest rates would not have a material affect on the fair value of the investments or the financial
position of the Company.

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 March 31, 2003, movements in
foreign currency rates would not materially affect the financial position of the Company.  At December 31, 2003, the Company had outstanding short-term forward exchange contracts to exchange Euros for U.S. dollars in the amount of $1.1
million.  See Note 9 of Notes to Unaudited Condensed Consolidated Financial Statements.

ITEM 4.  CONTROLS AND PROCEDURES

Based on their evaluation of
the Companys disclosure controls and procedures (as defined by Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) as of a date within 90 days of the filing date of this quarterly report, the Companys Chief Executive
Officer and Corporate Controller have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in its periodic reports is recorded, processed, summarized and reported
within the time periods specified by the rules and forms of the Securities and Exchange Commission.

There were no significant
changes in the Companys internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.  Because there were no significant deficiencies or material weaknesses in these
controls, no corrective actions were taken with respect to them.

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PART II  OTHER INFORMATION

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

|(a) | The Companys Annual Meeting of Stockholders was held on February 14, 2003 (the Annual Meeting.)
|--- | --------------------------------------------------------------------------------------------------
|    |                                                                                                   
|(b) | The following matters were voted upon at the Annual Meeting:                                      
|    |                                                                                                   
|    |                                                                                                   



|Names              |  | For |           | Withheld |  | Broker Non-Votes | 
|------------------ |  | --- | --------- | -------- |  | ---------------- | 
|                   |  |     |           |          |  |                  | 
|John Floisand      |  |     | 7,816,672 |          |  | 52,333           | 
|Thomas M. Atwood   |  |     | 7,817,875 |          |  | 51,130           | 
|Louis C. Cole      |  |     | 7,818,136 |          |  | 50,869           | 
|Margaret M. Norton |  |     | 7,818,625 |          |  | 50,380           | 
|Marc H. Sternfeld  |  |     | 7,817,436 |          |  | 51,569           | 



| |  | ii. | The second matter related to the ratification of the appointment of the selection of KPMG LLP as independent auditors of the Company for its fiscal year ending September 30,
2003.  7,815,757 votes were cast for ratification, 49,217 votes were cast against ratification, 4,031 were abstentions and there were 2,283,047 broker non-votes.
| |  | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Based on
these reporting results, each director nominated was elected and the appointment of KPMG LLP as the independent auditors of the Company for its fiscal year ending September 30, 2003 was ratified.

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 January 6, 2003, the Company filed a Form 8-K with the Securities and Exchange Commission, related to the
Companys stockholder rights plan.                               

29.



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##### Table of Contents

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:    May 12, 2003 | /s/ KATHLEEN E. BRUSH                                  
|                      |                                                        
|                      | KATHLEEN E. BRUSH PRESIDENT AND CHIEF EXECUTIVE OFFICER

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|I, Kathleen E. Brush, certify that: |   
|----------------------------------- | --
|                                    |   
|                                    | 1.
|                                    |   
|                                    | 2.
|                                    |   
|                                    | 3.
|                                    |   
|                                    | 4.
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|                                    |   
|                                    | 5.
|                                    |   
|                                    |   
|                                    |   
|                                    |   
|                                    |   
|                                    | 6.
|                                    |   



|May 12, 2003 | /s/ KATHLEEN E. BRUSH                                  
|------------ | -------------------------------------------------------
|             |                                                        
|             | Kathleen E. Brush President and Chief Executive Officer

31.



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##### Table of Contents

|I, Teresa S. Madden, certify that:
|----------------------------------
|                                  
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|May 12, 2003 | /s/ TERESA S. MADDEN                 
|------------ | -------------------------------------
|             |                                      
|             | Teresa S. Madden Corporate Controller

32.



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##### Table of Contents

EXHIBIT INDEX

|EXHIBIT NUMBER |  | DESCRIPTION OF DOCUMENT                                                                                                                                                                                                                                                                          
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                  
|2.1(1)         |  | Agreement and Plan of Reorganization between Registrant, Inmark Development Corporation and RW Acquisitions, Inc. dated as of September 19, 1995.                                                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                  
|2.2(1)         |  | Agreement and Plan of Merger between the Registrant and Rogue Wave Software, Inc., an Oregon corporation, dated November 21, 1996.                                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                  
|2.3(3)         |  | Agreement and Plan of Merger and Reorganization among Rogue Wave Software, Inc., a Delaware corporation, SR Acquisition Corp., a North Carolina corporation, Stingray Software,
Inc., a North Carolina corporation and the shareholders of Stingray Software, Inc., dated as of January 19, 1998.
|               |  |                                                                                                                                                                                                                                                                                                  
|2.4(4)         |  | Articles of Merger and Plan of Merger dated February 27, 1998 filed with the Secretary of State of North Carolina on February 27, 1998.                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                  
|2.5(6)         |  | Agreement and Plan of Merger and Reorganization among Rogue Wave Software, Inc., a Delaware corporation, NN Acquisition Corp., a Delaware corporation, NobleNet, Inc., a Delaware
corporation and Steve Lemmo, as agent for the stockholders of NobleNet, dated as of February 11, 1999.         
|               |  |                                                                                                                                                                                                                                                                                                  
|2.6(6)         |  | Certificate of Merger and Plan of Merger dated March 1,1998, filed with the Secretary of State of the State of Delaware on March 1, 1999.                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                  
|3.1(2)         |  | Amended and Restated Certificate of Incorporation of Rogue Wave Software, Inc., a Delaware corporation.                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                  
|3.2(1)         |  | Bylaws of Rogue Wave Software, Inc., a Delaware corporation.                                                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                  
|4.1(1)         |  | Reference is made to Exhibits 3.1 and 3.2.                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                  
|4.2(1)         |  | Specimen Stock Certificate.                                                                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                  
|4.3(1)         |  | Amended and Restated Investors Rights Agreement between the Registrant and certain investors, dated November 10, 1995, as amended June 27, 1996.                                                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                  
|4.4(5)         |  | Form of Registration Rights Agreement between Rogue Wave Software, Inc. and the former shareholders of Stingray Software, Inc. and the former shareholders of Stingray Software,
Inc., dated February 22, 2000.                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                  
|10.1(7)        |  | Registrants 1996 Equity Incentive Plan.                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                  
|10.2(8)        |  | Amended and Restated Employee Stock Purchase Plan, dated June 6, 1996, as amended January 25, 2000.                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                  
|10.3(1)        |  | Form of Indemnity Agreement to be entered into between the Registrant and its officers and directors.                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                  
|10.12(9)       |  | 1997 Equity Inventive Plan, as amended on January 18, 2001.                                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                  
|10.13(10)      |  | Separation & Release Agreement between Registrant and John D. Iacobucci, dated October 9, 2001.                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                  
|10.14(11)      |  | Separation & Release Agreement between Registrant and James M. Smith, dated January 7, 2002.                                                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                  
|10.15(12)      |  | Home Loan Agreement between Registrant and John Floisand, dated June 5, 2002.                                                                                                                                                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                  
|10.16(12)      |  | Separation & Release Agreement between Registrant and David A. Rice, dated April 25, 2002.                                                                                                                                                                                                       

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##### Table of Contents

|10.17(13) |  | Separation & Release Agreement between Registrant and Marc  Manley, dated October 7, 2002.       
|--------- |  | -------------------------------------------------------------------------------------------------
|          |  |                                                                                                  
|10.18(13) |  | Separation & Release Agreement between Registrant and Charles M. ONeill dated November 12, 2002.
|          |  |                                                                                                  
|10.19(14) |  | Separation & Release Agreement between Registrant and John Floisand dated March 24, 2003.        
|          |  |                                                                                                  
|10.20(14) |  | Separation & Release Agreement between Registrant and John A. Racioppi dated April 14, 2003.     
|          |  |                                                                                                  
|99.1(14)  |  | Certification of Kathleen E. Brush.                                                              
|          |  |                                                                                                  
|99.2(14)  |  | Certification of Teresa S. Madden.                                                               



---

| | (1)  | Filed as an Exhibit to the Registrants Registration Statement on Form SB- 2, as amended (No. 333 -13517)     
| | ---- | --------------------------------------------------------------------------------------------------------------
| |      |                                                                                                               
| | (2)  | Filed as an Exhibit to the Registrants Quarterly Report on Form 10-Q for the quarter ended December 31, 1996.
| |      |                                                                                                               
| | (3)  | Filed as Exhibit 2.1 to the Registrants Form 8-K dated February 27, 1998, and filed on March 9, 1998.        
| |      |                                                                                                               
| | (4)  | Filed as Exhibit 2.2 to the Registrants Form 8-K dated February 27, 1998, and filed on March 9, 1998.        
| |      |                                                                                                               
| | (5)  | Filed as Exhibit 4.1 to the Registrants Form 8-K dated February 27, 1998, and filed on March 9, 1998.        
| |      |                                                                                                               
| | (6)  | Filed as an Exhibit to the Registrants Form 8-K dated March 1, 1999 and filed on March 9, 1999.              
| |      |                                                                                                               
| | (7)  | Filed as an Exhibit to the Registrants Proxy Statement on Schedule 14A and filed on December 10, 1998.       
| |      |                                                                                                               
| | (8)  | Filed as an Exhibit to the Registrants quarterly report on Form 10-Q for the quarter ended December 31, 1999.
| |      |                                                                                                               
| | (9)  | Filed as an Exhibit to the Registrants quarterly report on Form 10-Q for the quarter ended December 31, 2000.
| |      |                                                                                                               
| | (10) | Filed as an Exhibit to the Registrants quarterly report on Form 10-Q for the quarter ended December 31, 2001.
| |      |                                                                                                               
| | (11) | Filed as an Exhibit to the Registrants quarterly report on Form 10-Q for the quarter ended March 31, 2002.   
| |      |                                                                                                               
| | (12) | Filed as an Exhibit to the Registrants quarterly report on Form 10-Q for the quarter ended June 30, 2002.    
| |      |                                                                                                               
| | (13) | Filed as an Exhibit to the Registrants annual report on Form 10-K for the year ended September 30, 2002.     
| |      |                                                                                                               
| | (14) | Filed herewith.                                                                                               

34.