<PAGE>

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

                                   FORM 10-Q

(Mark One)
     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
          THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended March 31, 2001

                                       OR

     [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
          THE SECURITIES EXCHANGE ACT OF 1934


                        Commission File Number: 0-28900


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

          Delaware                                         93-1064214
(State or other jurisdiction of                          (IRS Employer
incorporation or organization)                         Identification No.)

5500 Flatiron Parkway, Boulder, Colorado                     80301
(Address of principal executive offices)                   (Zip Code)


                                (303) 473-9118
             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months  (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  YES    X    NO
                                         -----    -----

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, 2001
       Common Stock, $0.001 par value                10,995,961
<PAGE>

                           ROGUE WAVE SOFTWARE, INC.
                                   FORM 10-Q

                                     INDEX




PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                             Page No.
                                                                             --------
<S>                                                                          <C>
Item 1.   Consolidated Financial Statements:

          Condensed Consolidated Balance Sheets at September 30, 2000
          and March 31, 2001...........................................      3

          Condensed Consolidated Statements of Operations for the Three
          and Six Months Ended March 31, 2000 and 2001.................      4

          Condensed Consolidated Statements of Cash Flows for the Six
          Months Ended March 31, 2000 and 2001.........................      5

          Notes to Condensed Consolidated Financial Statements.........      6

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations..........................     10

Item 3.   Quantitative and Qualitative Disclosures About Market Risk...     22

PART II - OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K.............................     23

SIGNATURES.............................................................     25
</TABLE>

                                       2.
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements


                           ROGUE WAVE SOFTWARE, INC.
                                AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (in thousands)
<TABLE>
<CAPTION>
                                                                       September 30,          March 31,
                                                                           2000                 2001
                                                                     ---------------       --------------
                                                                                             (unaudited)
<S>                                                                    <C>                   <C>
                                    ASSETS
Current assets:
   Cash and cash equivalents.........................................        $21,823              $14,273
   Short term investments............................................         11,703               17,068
   Accounts receivable, net..........................................         12,101               14,227
   Prepaid expenses and other current assets.........................          1,499                1,543
   Deferred income taxes.............................................          1,603                1,701
                                                                             -------              -------

     Total current assets............................................         48,729               48,812

Equipment, net.......................................................          5,208                5,267
Intangibles, net.....................................................            822                  721
Other assets, net....................................................            860                  557
                                                                             -------              -------

     Total assets....................................................        $55,619              $55,357
                                                                             =======              =======

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable..................................................        $   880              $   595
   Accrued expenses..................................................          5,746                5,899
   Deferred revenue..................................................         11,700               11,865
                                                                             -------              -------

     Total current liabilities.......................................         18,326               18,359

Stockholders' equity:
   Common stock......................................................             11                   11
   Additional paid-in capital........................................         40,801               41,208
   Accumulated deficit...............................................         (3,419)              (3,707)
   Accumulated other comprehensive loss..............................          ( 100)               ( 514)
                                                                             -------              -------

     Total stockholders' equity......................................         37,293               36,998
                                                                             -------              -------

     Total liabilities and stockholders' equity......................        $55,619              $55,357
                                                                             =======              =======
</TABLE>

                            See accompanying notes.

                                       3.
<PAGE>

                           ROGUE WAVE SOFTWARE, INC.
                                AND SUBSIDIARIES

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER
                              COMPREHENSIVE LOSS

                (in thousands, except per share data, unaudited)

<TABLE>
<CAPTION>

                                                                        Three months ended             Six months ended
                                                                             March 31,                     March 31,
                                                                       ---------------------         ----------------------
                                                                        2000          2001            2000           2001
                                                                        ----          ----            ----           ----
<S>                                                                    <C>           <C>             <C>            <C>
Revenue:
 License revenue..................................................      $ 7,013       $ 7,681        $13,825        $14,469
 Service and maintenance revenue..................................        6,029         7,338         11,833         14,845
                                                                        -------       -------        -------        -------
    Total revenue..................................................      13,042        15,019         25,658         29,314

Cost of revenue:
 Cost of license revenue..........................................          364           220            808            479
 Cost of service and maintenance revenue..........................        1,998         3,536          3,925          6,452
                                                                        -------       -------        -------        -------
   Total cost of revenue..........................................        2,362         3,756          4,733          6,931
                                                                        -------       -------        -------        -------
   Gross profit...................................................       10,680        11,263         20,925         22,383

Operating expenses:
 Product development..............................................        3,502         3,738          7,157          7,532
 Sales and marketing..............................................        5,781         6,510         11,353         12,610
 General and administrative.......................................        1,381         1,714          2,729          2,861
 Restructuring, severance and goodwill amortization...............          354           640            955            640
                                                                         -------       -------        -------        -------
   Total operating expenses.......................................       11,018        12,602         22,194         23,643
                                                                        -------       -------        -------        -------
   Loss from operations...........................................         (338)       (1,339)        (1,269)        (1,260)
Other income, net.................................................          356           333            691            815
                                                                        -------       -------        -------        -------
   Income (loss) before income taxes..............................           18        (1,006)          (578)          (445)
Income tax expense (benefit)......................................          130          (353)            41           (157)
                                                                        -------       -------        -------        -------

   Net loss.......................................................      $  (112)      $  (653)       $  (619)       $  (288)
                                                                        =======       =======        =======        =======


 Basic and diluted loss per share..................................     $ (0.01)      $ (0.06)       $ (0.06)       $ (0.03)
                                                                        =======       =======        =======        =======


Shares used in share calculations.................................       10,504        10,966         10,349         10,937

   Net loss.......................................................      $  (112)      $  (653)       $  (619)       $  (288)

Other comprehensive loss:
 Foreign currency translation losses..............................         (427)         (430)          (184)          (414)
                                                                        -------       -------        -------        -------
   Total comprehensive loss.......................................      $  (539)      $(1,083)       $  (803)       $  (702)
                                                                        =======       =======        =======        =======
</TABLE>

                             See accompanying notes.

                                       4.
<PAGE>

                           ROGUE WAVE SOFTWARE, INC.
                                AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (in thousands, unaudited)

<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                                           March  31,
                                                                                    -----------------------
                                                                                        2000          2001
                                                                                        ----          ----
<S>                                                                                 <C>            <C>
Cash flows from operating activities:
   Net loss....................................................................      $  (619)      $  (288)
   Adjustments to reconcile net loss to net cash from (used in) operating
       activities:
   Depreciation and amortization...............................................        2,354         1,733
   Changes in assets and liabilities:
    Accounts receivable........................................................        1,055        (2,126)
    Prepaid expenses and other current assets..................................          239           (44)
    Other noncurrent assets....................................................          206          (225)
    Accounts payable and accrued expenses......................................         (918)         (135)
    Deferred revenue...........................................................          417           165
                                                                                     -------       -------
       Net cash from (used in) operating activities............................        2,734          (920)
                                                                                     -------       -------
Cash flows from investing activities :
    Short term investments.....................................................       (1,966)       (5,365)
    Equipment acquisitions.....................................................         (902)       (1,261)
                                                                                     -------       -------
       Net cash used in investing activities...................................       (2,868)       (6,626)
                                                                                     -------       -------
Cash flows from financing activities:
    Proceeds from exercise of stock options....................................        4,994             2
    Proceeds from Employee Stock Purchase Plan.................................            -           408
                                                                                     -------       -------
       Net cash from financing activities......................................        4,994           410
                                                                                     -------       -------
Effect of exchange rate changes on cash and cash equivalents...................         (184)         (414)
                                                                                     -------       -------
       Net change in cash and cash equivalents.................................        4,676        (7,550)
Cash and cash equivalents at beginning of period...............................       13,875        21,823
                                                                                     -------       -------
Cash and cash equivalents at end of period.....................................      $18,551       $14,273
                                                                                     =======       =======
</TABLE>

                            See accompanying notes.

                                       5.
<PAGE>

                           ROGUE WAVE SOFTWARE, INC.
                                   NOTES TO
                  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


1. Basis of Presentation

       The accompanying financial statements have been prepared in conformity
   with generally accepted accounting principles. Certain information or
   footnote disclosures normally included in financial statements prepared in
   accordance with generally accepted accounting principles have been condensed,
   or omitted, pursuant to the rules and regulations of the Securities and
   Exchange Commission ("SEC"). In the opinion of management, the statements
   include all adjustments necessary (which are of a normal and recurring
   nature) for the fair presentation of the results of the interim periods
   presented. These financial statements should be read in conjunction with the
   Company's audited consolidated financial statements and notes thereto (the
   "Consolidated Financial Statements") for the year ended September 30, 2000,
   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 year ending September 30, 2001.

2. Revenue Recognition

       The Company's revenue is recognized according to the criteria of the
   American Institute of Certified Public Accountants Statements of Position 97-
   2, as amended, and 98-9, relating to software revenue recognition. License
   revenue is recognized upon the execution of a license agreement or signed
   written contract with fixed or determinable fees, shipment or electronic
   delivery of the product, and determination that collection of the resulting
   receivable is probable. Maintenance and service revenue includes maintenance
   revenue that is deferred and recognized over the maintenance period. Service
   revenue that includes training and consulting is recognized as services are
   performed. The percentage of completion revenue recognition method is used
   for customized software consulting contracts.

3. Basic and Diluted Earnings (Loss) Per Share

       Basic and diluted loss per share for the three and six months ended March
   31, 2001 and 2000 is computed on the basis of the weighted average number of
   common shares outstanding. As a result of the net loss incurred during such
   periods, all options outstanding are anti-dilutive and, accordingly, the
   shares used in computing the basic and diluted shares are the same. For the
   three and six months ended March 31, 2000 and 2001, the anti-dilutive effect
   of outstanding options would have been 467 and 322, and 66 and 65,
   respectively.

                                       6.
<PAGE>

   Calculation of basic and diluted loss per share is as follows (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
                                                                   Three months ended               Six months ended
                                                                       March 31,                       March 31,
                                                           ---------------------------------------------------------------
                                                                      2000            2001            2000            2001
                                                                      ----            ----            ----            ----
<S>                                                                <C>             <C>             <C>             <C>
Numerator:
 Net loss..................................................        $  (112)        $  (653)        $  (619)        $  (288)
                                                                   =======         =======         =======         =======

Denominator:
 Historical common shares outstanding for basic and
  diluted loss per share at beginning of period............
                                                                    10,358          10,909          10,117          10,909

 Weighted average number of common equivalent shares
  issued during the period.................................            146              57             232              28
                                                                   -------         -------         -------         -------
 Denominator for basic and diluted loss per share -
  weighted average shares..................................         10,504          10,966          10,349          10,937
                                                                   =======         =======         =======         =======

 Basic and diluted loss per share..........................        $ (0.01)        $ (0.06)        $ (0.06)        $ (0.03)
                                                                   =======         =======         =======         =======
</TABLE>

4. Restructuring and Severance

       During March 2001, following a decision to discontinue the Fornova
   project, the Company recognized a restructuring charge of approximately
   $447,100. Fornova, a venture focused on developing internet information
   exchange technology for the business to business market, had been pursuing
   obtaining third party expansion capital with an initial investment commitment
   of $2 million from the Company. As a result of the overall softening of the
   US economy, coupled with the slowing of third party investment in such
   ventures, the project was abandoned with the termination of 12 employees. The
   Company had recognized expenses of approximately $720,100 and $793,000 of
   product development costs associated with the Fornova project during the
   first and second quarters of fiscal 2001, respectively. Following are the
   primary components of the restructuring charge at March 31, 2001. All amounts
   are expected to be paid during the three months ended June 30, 2001.

       Contract termination fees    $304,900
       Employee severance            133,400
       Other miscellaneous costs       8,800
                                    --------
                                    $447,100
                                    ========

       Additionally, in conjunction with the Company's transition to its new
   business model, during the second fiscal quarter ended March 31, 2001,
   certain executive severance costs totaling approximately $192,500 were
   recognized.

5. Foreign Exchange Contracts

       Effective October 1, 2000, the Company adopted 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

                                       7.
<PAGE>

   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, 2001 was approximately $1,452,000 with a fair value of approximately
   $1,441,000. The fair value of the forward contracts is estimated based on
   quoted exchange rates at March 31, 2001. The effective or unrealized gain
   related to the outstanding contracts was $27,298 and the ineffective or
   realized loss was $38,220 at March 31, 2001. Also during the six months ended
   March 31, 2001, certain foreign currency contracts matured resulting in a
   total realized net gain of $98,458 of which $64,200 and $34,285 were
   recognized in the first and second quarters of fiscal 2001, respectively.

6. Worldwide Operations

       Revenue by geographic area for the three months ended March 31, 2001 and
   2000 was 74% and 79% in the United States, 25% and 21% in Europe and 1% and
   0% in Japan, respectively.

   Information regarding worldwide operations is as follows:

<TABLE>
<CAPTION>
                                                             United
                                                             States       Europe        Japan     Eliminations         Total
                                                             ------       ------        -----     ------------         -----
<S>                                                      <C>            <C>         <C>         <C>                <C>
March 31, 2001, and for the quarter then ended:
 Revenue to unaffiliated customers................        $11,189       $3,744         $  86          $    --        $15,019
 Intercompany transfers...........................          1,344           --            --           (1,344)            --
                                                          -------       ------         -----          -------        -------
  Net revenue.....................................         12,533        3,744            86           (1,344)        15,019
 Operating income (loss)..........................         (1,739)         577          (177)              --         (1,339)
 Long-lived assets................................          5,232          801            --             (209)         5,824

March 31, 2000, and for the quarter then ended:
 Revenue to unaffiliated customers................        $10,277       $2,765         $  --          $    --        $13,042
 Intercompany transfers...........................            956           --            --             (956)            --
                                                          -------       ------                        -------        -------
  Net revenue.....................................         11,233        2,765            --             (956)        13,042
 Operating income (loss)..........................           (613)         275            --               --           (338)
 Long-lived assets................................          4,183          421            --             (114)         4,490
</TABLE>

                                       8.
<PAGE>

  Revenue by geographic area for the six months ended March 31, 2001 and 2000
  was 72% and 79% in the United States, 27% and 21% in Europe and 1% and 0% in
  Japan, respectively.

Information regarding worldwide operations is as follows:

<TABLE>
<CAPTION>
                                                             United
                                                             States       Europe        Japan     Eliminations         Total
                                                             ------       ------        -----     ------------         -----
<S>                                                        <C>           <C>            <C>       <C>                <C>
March 31, 2001, and for the six months then ended:
 Revenue to unaffiliated customers..................       $21,160       $7,956         $ 198          $    --       $29,314
 Intercompany transfers.............................         3,024           --            --           (3,024)           --
                                                           -------       ------         -----          -------       -------
  Net revenue.......................................        24,184        7,956           198           (3,024)       29,314
 Operating income (loss)............................        (2,532)       1,491          (219)              --        (1,260)
 Long-lived assets..................................         5,232          801            --             (209)        5,824

March  31, 2000 and for the six months then ended:
 Revenue to unaffiliated customers..................       $20,253       $5,405         $  --          $    --       $25,658
 Intercompany transfers.............................         1,913           --            --           (1,913)           --
                                                           -------       ------                        -------       -------
  Net revenue.......................................        22,166        5,405            --           (1,913)       25,658
 Operating income (loss)............................        (1,777)         508            --               --        (1,269)
 Long-lived assets..................................         4,183          421            --             (114)        4,490
</TABLE>


7. New Accounting Pronouncements

       The SEC issued Staff Accounting Bulletin ("SAB") 101, Revenue Recognition
   in Financial Statements, in December 1999. The SAB summarizes certain of the
   SEC staff's view in applying generally accepted accounting principles to
   revenue recognition in financial statements. In June 2000, the SEC issued SAB
   101B, which delays the implementation date of SAB 101 until no later than the
   fourth fiscal quarter of fiscal years beginning after December 15, 1999.
   Based on the SEC's timeline, the Company will be required to comply with the
   guidelines in the fourth quarter of fiscal year 2001. The Company does not
   believe the adoption of this SAB will have a material impact on the Company's
   financial position, results of operations or cash flows.

       In March 2000, the Financial Accounting Standards Board ("FASB") issued
   FASB interpretation No. ("FIN") 44, Accounting for Certain Transactions
   involving Stock Compensation, which clarifies the application of APB 25 for
   certain issues. The interpretation is effective July 1, 2000, except for the
   provisions that related to modifications that directly or indirectly reduce
   the exercise price of an award and the definition of an employee, which are
   effective after December 15, 1998. There was no impact from the adoption of
   this interpretation.

                                       9.
<PAGE>

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, 2000.  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.

Overview

     Rogue Wave Software, Inc. ("Rogue Wave" or the "Company") was founded in
1989 to provide reusable software components for the development of object-
oriented software applications.  The Company operated as a Subchapter S
corporation until June 1994.  In October 1995, Rogue Wave merged with Inmark
Development Corporation, a privately held corporation specializing in the
development, distribution and support of an object-oriented graphical user
interface library written in the C++ programming language.  In February 1998,
the Company merged with Stingray Software, Inc., a privately held corporation
specializing in the development and distribution of object-oriented development
tools for Windows programmers and is a leading provider of Visual C++ class
libraries. Both transactions were accounted for using the pooling-of-interests
method of accounting.  In March 1999, the Company merged with NobleNet, Inc.
("NobleNet"), in a transaction utilizing the purchase method of accounting.
NobleNet specialized in building and marketing software products that allow
existing information technology systems to communicate and interoperate across
corporate networks and the Internet. The products were used to build
sophisticated, enterprise-wide, distributed applications that run on more than
40 platforms. Following the fourth quarter 2000 decision to discontinue
marketing of the Nouveau product line that was acquired as a part of the
NobleNet acquisition, the investment in NobleNet, which consisted primarily of
goodwill, was written off.

     To date, the Company's revenue has been derived from licenses of its
software products and related maintenance, training and consulting services.
License revenue is recognized according to the criteria of SOP 97-2, as amended.
License revenue is recognized upon execution of a license agreement or signed
written contract with fixed or determinable fees, shipment or electronic
delivery of the product, and when collection of the resulting receivable is
probable.  Allowances for credit risks and for estimated future returns are
provided upon shipment.  Returns to date have not been material.  Service and
maintenance revenue consists of fees that are charged separately from the
product licenses.  Maintenance revenue consists of fees for ongoing support and
product updates and is recognized ratably over the term of the contract, which
is typically 12 months.  Service revenue consists of training and consulting
services and, when appropriate, is recognized utilizing the percentage of
completion revenue recognition method.  The Company's revenue recognition
policies are in compliance with the American Institute of Certified Public
Accountants Statements of Position 97-2, as amended, and 98-9, relating to
Software Revenue Recognition.

     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's direct sales force consists of an inside telesales
group

                                      10.
<PAGE>

that focuses on smaller orders ($50,000 or less), and an outside sales force
that focuses on larger site licenses. The Company makes all 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.

     International revenue accounted for approximately 24%, 24% and 28% of total
revenue in fiscal 1999, 2000 and the six months ended March 31, 2001,
respectively.  Since 1996, the Company has expanded its European operations with
distribution channels in the United Kingdom, Germany, France, Italy and the
Benelux countries. In 2000, the Company established offices in Japan and Hong
Kong. The Company anticipates further expansion in foreign countries and expects
that international license and service and maintenance revenue will account for
an increasing portion of its total revenue in the future.  The Company has
committed and continues to commit significant management time and financial
resources to developing direct and indirect international sales and support
channels.  International revenue has increased during the current period as a
result of the management reorganization and the addition of sales personnel
during fiscal 2000, which allowed for the successful execution of Europe's
revenue growth strategy.  There can be no assurance, however, that the Company
will be able to maintain or increase international market demand for its
products.

     The majority of the Company's international revenue is generated by the
Company's European subsidiaries. To date, other than revenue generated by the
Company's European subsidiaries, the Company's international revenue has been
denominated in United States dollars.  The Company has entered into forward
foreign exchange contracts to reduce certain risks associated with currency
fluctuations.  Although exposure to currency fluctuations to date has been
insignificant, to the extent international revenue is denominated in local
currencies, foreign currency translations may contribute to significant
fluctuations in, and could have a material adverse effect upon, the Company's
business, financial condition and results of operations.  See "Risk Factors
Related To Our Business - Doing business outside the United States involves
numerous factors that could negatively affect our financial results."

The Rogue Wave Solution and Strategy

     During fiscal 2000, the Company determined that certain of its primary
products had reached a maturity phase due to rapid technological developments
coupled with the introduction of new products by competitors.  The Company
identified a need to reposition itself in the marketplace and, therefore,
developed a new comprehensive business strategy to aggressively address this
evolving environment.  The Company is focusing on furthering its traditional
core C++ component technology, while developing new products that provide
customers with an "end-to-end pervasive computing solution".

Rogue Wave(R) SourcePro(TM) C++ Product Launch

     Effective May 1, 2001, in conjunction with a continued transition to its
new business strategy, Rogue Wave announced the launch of the SourcePro C++
product line, reflecting a substantive alteration to the Company's core products
business model.  The SourcePro C++ products, which integrate the majority of
formerly offered Rogue Wave C++ component technology as well as adding features
not previously available, are designed to provide more comprehensive solutions
while optimizing the use of the Company's core C++ products.  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,
in contrast to the historically employed "license per developer" approach.
Overall, the new model allows customers greater flexibility in their utilization
of the Company's products.  Adoption of the new core

                                      11.
<PAGE>

business model, including the transition to the new SourcePro C++ product line,
is not expected to have an adverse impact on the Company's business, financial
condition or results of operations.

Large Scale Object Solutions ("LSOS")

     As a further step in the execution of its new corporate strategy, Rogue
Wave is pursuing the expansion of its "Solutions Business", primarily through
the development of LSOS. In general, LSOS is the underlying architecture, or
components, upon which large-scale software applications are built, allowing for
the integration of object technology with relational data stores, directly
solving the technical problems posed by complex business systems. Additionally,
LSOS provides a number of database services, including transaction history
tracking as well as ad hoc query and roll back capacities, often commonly
required to process significant volumes of transactions.

     While the technology is considered a natural extension of the Company's
object oriented core competencies that can be applied horizontally across many
industries, Rogue Wave is initially targeting the high-end financial
applications market and has secured a significant contract with a major
financial institution.  This contract is expected to be successfully completed
during the fourth quarter of fiscal 2001, providing the foundation for further
expansion of this business.

Stingray Restructuring

     In early May 2001, as part of an ongoing effort to optimize its corporate
organizational structure and in conjunction with continuing cost containment
programs, the Company reorganized its Stingray business unit.  The restructuring
is designed to integrate certain operations of the Stingray division with other
corporate functions, resulting in estimated annual cost savings of, at a
minimum, $2.3 million.  As part of this reorganization, during the three months
ended June 30, 2001, the Company expects to recognize a restructuring charge
ranging from $300,000 to $500,000, related primarily to severance costs
associated with the resulting termination of approximately 27 employees as well
as certain contract termination fees. The Stingray products, which primarily
consist of development tools for Windows Programmers, will continue to be sold
and supported by the Company.

                                      12.
<PAGE>

Results of Operations

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

<TABLE>
<CAPTION>
                                                                                   Percentage of Total Net Revenue
                                                                          ---------------------------------------------------
                                                                            Three months ended             Six months ended
                                                                                March 31,                      March 31,
                                                                          -----------------------      ---------------------
                                                                             2000         2001            2000        2001
<S>                                                                          <C>          <C>             <C>         <C>
Revenue:
 License revenue..................................................            54%          51%             54%         49%
 Service and maintenance revenue..................................            46           49              46          51
                                                                             ----         ----            ----        ----
   Total revenue..................................................           100          100             100         100
                                                                             ----         ----            ----        ----
Cost of revenue:
 Cost of license revenue..........................................             3            1               3           2
 Cost of service and maintenance revenue..........................            15           24              15          22
                                                                             ----         ----            ----        ----
   Total cost of revenue..........................................            18           25              18          24
                                                                             ----         ----            ----        ----
   Gross profit                                                               82           75              82          76
                                                                             ----         ----            ----        ----
Operating expenses:
 Product development..............................................            27           25              28          26
 Sales and marketing..............................................            44           44              44          43
 General and administrative.......................................            11           11              11          10
 Restructuring, severance and goodwill amortization...............             3            4               4           2
                                                                             ----         ----            ----        ----
    Total operating expenses.......................................           85           84              87          81
                                                                             ----         ----            ----        ----
    Loss from operations...........................................           (3)          (9)             (5)         (5)
Other income, net.................................................             3            2               3           3
                                                                             ----         ----            ----        ----
    Loss before income taxes.......................................            -           (7)             (2)         (2)
Income tax expense (benefit)......................................             1           (3)              -          (1)
                                                                             ----         ----            ----        ----
    Net loss.......................................................           (1)%         (4)%            (2)%        (1)%
                                                                             ====         ====            ====        ====
</TABLE>

Revenue

     Total revenue for the three and six months ended March 31, 2001 was $15.0
million and $29.3 million, respectively, versus $13.0 million and $25.7 million
for the three and six months ended March 31, 2000, representing an increase of
15% and 14%, respectively.  License revenue for the three and six months ended
March 31, 2001 was $7.7 million and $14.5 million, respectively, versus $7.0
million and $13.8 million for the three and six months ended March 31, 2000,
respectively, representing an increase of 10% and 5%, respectively.  Although
license revenue increased during the three and six months ended March 31, 2001,
the number of licenses sold to existing and new customers decreased by
approximately 39% and 36%, respectively, during such periods when compared to
the same periods in fiscal 2000. These decreases were offset by increases in
license revenue from cross platform deployment rights sales.

     Service and maintenance revenue for the three and six months ended March
31, 2001 was $7.3 million and $14.8 million, respectively, versus $6.0 million
and $11.8 million, respectively, for the three and six months ended March 31,
2000, respectively, representing an increase of 22% and 25%, respectively.  The
increases in service and maintenance revenue were primarily attributable to
increased sales volume of the Company's support and maintenance services related
to the Company's core products

                                      13.
<PAGE>

as well as two new customized software consulting contracts totaling $5.2
million of which $1.6 million and $3.7 million were recognized during the three
and six months ended March 31, 2001, respectively.

Cost of Revenue

     Cost of license revenue consists primarily of amortization of purchased
software, materials, packaging and freight expense.  Cost of license revenue for
the three months and six months ended March 31, 2001 was $220,000 and $479,000,
respectively, versus $364,000 and $808,000 for the three and six months ended
March 31, 2000, respectively, representing a decrease of 40% and 41%,
respectively.  The decrease in cost of license revenue during the three and six
months ended March 31, 2001 is primarily the result of a decrease in the number
of manuals produced due to a decline in new product offerings as well as a
decrease in purchased software amortization.  The Company expects that the cost
of license revenue as a percentage of total revenue will decrease in fiscal
2001.

     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, 2001 was $3.5 million and $6.5 million, respectively,
versus $2.0 million and $3.9 million, respectively, for the three and six months
ended March 31, 2000, respectively, representing an increase of 77% and 64%,
respectively.  The increases in the three and six months ended March 31, 2001
cost of service and maintenance revenue was due primarily to additional product
support personnel, an increase in the utilization of third-party consulting
services and the additional costs associated with two new customized software
consulting contracts.  The Company expects that the cost of such revenue will
increase as a percentage of total revenue in fiscal 2001.

Operating Expenses

     Product development expenses for the three and six months ended March 31,
2001 were $3.7 million and $7.5 million, respectively, versus $3.5 million and
$7.2 million for the three and six months ended March 31, 2000, representing an
increase of 7% and 5%, respectively. As a percent of revenue, product and
development expense for the three and six months ended March 31, 2001 was 25%
and 26%, respectively, as compared to 27% and 28%, respectively, for the three
and six months ended March 31, 2000, respectively. The decrease in product
development expenses as a percentage of revenue is due primarily to the slower
growth of development relative to the growth in revenue.  While the Company
anticipates that it will continue to devote substantial resources to product
development and that product development expenses will continue to increase, the
Company does not believe such expenses will increase as a percentage of total
revenue for fiscal 2001.

     Sales and marketing expenses for the three and six months ended March 31,
2001 were $6.5 million and $12.6 million, respectively, versus $5.8 million and
$11.4 million for the three and six months ended March 31, 2000, respectively,
representing an increase of 13% and 11%, respectively.  As a percentage of total
revenue, sales and marketing expenses were 44% and 43%, respectively, for the
three and six months ended March 31, 2001 and 44% for both the three and six
months ended March 31, 2000. The current fiscal year increases in sales and
marketing expense reflect the hiring of additional sales and marketing personnel
and related costs as well as increased costs associated with expanded
promotional activities.  While the Company expects that sales and marketing
expenses will continue to grow, the Company does not believe such expenses will
increase as a percentage of total revenue for fiscal 2001.

     General and administrative expenses for the three months and six months
ended March 31, 2001 were $1.7 million and $2.9 million, respectively, as
compared to $1.4 million and $2.7 million, for the

                                      14.
<PAGE>

prior year respective periods. Overall, general and administrative expenses
increased due to higher levels of staffing, investment in infrastructure and
associated expenses necessary to maintain and support the Company's growing
operations. However, the increase in general and administrative expenses during
the six months ended March 31, 2001, when compared to the same period in the
prior fiscal year, was mitigated, in part, as a result of a decrease of $575,000
in certain reserves following the resolution of various potential employment and
product distribution contract issues. Although the Company believes that its
general and administrative expenses will increase in absolute dollars, such
expenses are not expected to vary significantly as a percentage of total revenue
for fiscal 2001.

     Restructuring and severance expenses totaling approximately $640,000 were
recognized during the three months ended March 31, 2001. Following a March 2001
decision to discontinue the Fornova project, the Company recognized a
restructuring charge of approximately $447,100. Fornova, a venture focused on
developing internet information exchange technology for the business to business
market, had been pursuing obtaining third party expansion capital with an
initial investment commitment of $2 million from the Company. As a result of the
overall softening of the US economy, coupled with the slowing of third party
investment in such ventures, the project was abandoned with the termination of
12 employees. The Company had recognized expenses of approximately $720,100 and
$793,000 associated with the Fornova project during the first and second
quarters of fiscal 2001, respectively. Additionally, in conjunction with the
Company's transition to its new business model, during the second fiscal quarter
ended March 31, 2001, certain executive severance costs totaling approximately
$192,500 were recognized.

     As a result of the obsolescing of the Nouveau product line, which was
acquired through the acquisition of NobleNet in March 1999, the Company recorded
an impairment charge at September 30, 2000 to write off the remaining goodwill
related to the NobleNet accession. Therefore, no goodwill amortization expense
related to this investment was recognized during the three and six month periods
ended March 31, 2001.

Other Income, Net

     Other income for the three and six months ended March 31, 2001 and March
31, 2000 primarily consists of interest income on the Company's cash, cash
equivalents and short-term investments. The decrease in other income of 6% for
the three months ended March 31, 2001, compared to the three months ended March
31, 2000, is primarily due to a decrease in interest rates during the current
fiscal quarter as compared to the same fiscal quarter last year.  The increase
in interest income during the six months ended March 31, 2001, as compared to
the same period in the prior fiscal year, was primarily due to positive impact
of higher interest rates as well as the recognized gain of $73,895 on foreign
exchange forward contracts in the first quarter of fiscal 2001.  See Note 5 of
Notes to Condensed Consolidated Financial Statements.

Income Tax Expense (Benefit)

     Income taxes are provided on an interim basis at the expected tax rate for
the year.  The provision for income taxes for the three and six month periods
ended March 31, 2001, is based on an estimated annual effective tax rate of 35%,
which is applied to the income (loss) before income taxes and includes federal,
state and foreign income taxes.

Liquidity and Capital Resources

          The decrease in cash flows from operations during the six months ended
March 31, 2001 compared to the six months ended March 31, 2000, was primarily
due to an increase of $2.1 million in accounts

                                      15.
<PAGE>

receivable resulting primarily from the difference in the timing of the sale of
products completed during the comparable six month period.

     The Company's investing activities consist primarily of the purchase and
sale of short-term investments and purchases of equipment.  During the six
months ended March 31, 2001, net cash used in investing activities was $6.6
million, which included the purchase of short-term investments of $5.4 million.
Short-term investments primarily consist of commercial paper with original
maturities of 180 days or less, which are held as securities available for sale.

     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 foreseeable future.  See "Factors That May
Affect Future Results - Risks Related To Our Business."

Factors That May Affect Future Results - Risks Related To Our Business

     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:

 .    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;
 .    the timing of new product introductions and product enhancements;
 .    levels of international sales;
 .    changes in our pricing policy or that of our competitors;
 .    publication of opinions about us, our products and object-oriented,
     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 adopted in fiscal 2000.

     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 or the market price of our common stock.

Our operating results in one or more future periods may fluctuate significantly
and could cause our stock price to be volatile.

     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

                                      16.
<PAGE>

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;
 .    historically we have earned a substantial portion of our revenue in the
     last weeks, or even days, of each quarter;
 .    larger customer orders are subject to long sales cycles and are frequently
     delayed; and
 .    our service and maintenance revenue tends to fluctuate as consulting
     contracts are undertaken, renewed, completed or terminated.

     We base operating expenses on anticipated revenue trends and 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 in the future.

Our failure to manage planned growth could adversely affect our ability to
increase revenue.

     Our business has evolved significantly in recent years, placing a strain on
our management systems and resources.  To manage future growth, we must continue
to improve our financial and management controls, reporting systems and
procedures on a timely basis and expand, train and manage our employee work
force.  If we fail to manage our growth effectively, our business, financial
condition and results of operations could be materially and adversely affected.

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

     Our business is highly dependent on the ability of our management team to
work effectively to meet the demands of our anticipated growth. Several members
of our senior management, including our Chief Executive Officer, Chief Technical
Officer, Executive Vice President World Wide Sales, and Managing Director of
Europe have been employed by us for a relatively short period of time. These
individuals have not previously worked together as a management team. The
failure of our management team to work together effectively could prevent
efficient decision-making by our executive team, affecting product development
and sales and marketing efforts, which would negatively impact our operating
results.

     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.

                                      17.
<PAGE>

Variability of our sales cycles makes it difficult to forecast quarterly 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 two different direct sales
channels, a telesales force and a field sales force, each of which is subject to
a variable sales cycle.  Products sold by our telesales force may be sold after
a single phone call or may require several weeks of education and negotiation
before a sale is made.  As such, the sales cycle associated with telesales
typically ranges from a few days to two months.  On the other hand, the purchase
of products from our field sales force 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
through our field sales force 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 of complementary technologies,
products or businesses will 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 goodwill and other intangible assets.  Our failure to
successfully manage future acquisitions may have a material adverse effect on
our business and financial results.

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

     A significant portion of our revenue is derived from international sources.
To service the needs of these customers, we must provide worldwide product
support services.  We have expanded, and intend to continue expanding, 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 fluctuations, (2) economic or political instability, (3)
shipping delays and (4) various trade restrictions.  Any of these risks could
have a significant impact on our ability to deliver products on a competitive
and timely basis.  Significant increases in the level of customs duties, export
quotas or other trade restrictions could also have an adverse effect on our
business, financial condition and results of operations.  In situations where
direct sales are denominated in foreign currency, any fluctuation in foreign
currency or the exchange rate may adversely affect our business, financial
condition and results of operations.

                                      18.
<PAGE>

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.  As such, 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, former 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 former employers.  Any such
claims, with or without merit, could (1) be time consuming to defend, (2) result
in costly litigation, (3) divert management's attention and resources, (4) cause
product shipment delays or (5) require us to pay money damages or enter into
royalty or licensing agreements.  A successful claim of intellectual property
infringement against us and our failure or inability to license or create a
workaround for such infringed or similar technology may materially and adversely
affect our business, operating results and financial condition.

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

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

     Software products frequently contain errors or failures, especially when
first introduced or when new versions are released.  Also, new products or
enhancements may contain undetected errors, or "bugs," or performance problems
that, despite testing, are discovered only after a product has been installed
and used by customers.  Errors or performance problems could cause delays in
product introduction and shipments or require design modifications, either of
which could lead to a loss in revenue.  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

                                      19.
<PAGE>

service and warranty costs, any of which could have a material adverse effect on
our business and results of operations.

Factors That May Affect Future Results - Risk Related To Our Industry

We cannot predict whether the market acceptance for C++ and Visual C++/MFC will
continue to grow.

     Our product lines are designed for use in object-oriented software
application development, specifically the C++, Visual C++/MFC language.  To
date, a substantial majority of our revenue has been attributable to sales of
products and related maintenance and consulting services related to C++
programming and development.  We believe that, while the market for object-
oriented technology is maturing, optimization of the C++ solutions through
realignment of products and services coupled with the pursuit of unsaturated
markets in Asia, Europe and Latin America, will serve to enhance future revenue.
However, object-oriented programming languages are very complex and the number
of software developers using them is relatively small compared to the number of
developers using other software development technology.  Our financial
performance will depend in part upon continued growth in object-oriented
technology and markets and the development of standards that our products
address.  There can be no assurance that the market will continue to grow or
that we will be able to respond effectively to the evolving requirements of the
market.

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

     Our products target the markets for C++, Visual C++/MFC and Visual
Basic/ActiveX software parts and programming tools.  Direct competitors in the
C++ market include Microsoft (with its Microsoft Foundation Classes, "MFC"),
IBM, ILOG and several privately held companies. Microsoft is a particularly
strong competitor due to its large installed base and the fact that it bundles
its MFC library with its own and other C++ compilers.  Microsoft may decide in
the future to devote more resources to or broaden the functions of MFC in order
to address and more effectively compete with the functionality of our products.

     Software applications can also be developed using software parts and
programming tools in environments other than C++.  Indirect competitors with
such offerings include Microsoft (with its ActiveX technology), Borland, Oracle
and Powersoft (a subsidiary of Sybase).  Many of these competitors have
significantly greater resources, name recognition and larger installed bases of
customers than we do.  In addition, several database vendors, such as Informix,
Oracle and Sybase are increasingly developing robust software parts for
inclusion with their database products and may begin to compete with us in the
future.  These potential competitors have well-established relationships with
current and potential customers and have the resources to enable them to more
easily offer a single vendor solution.  Like our current competitors, many of
these companies have longer operating histories, significantly greater resources
and name recognition and larger installed bases of customers than we do.  As a
result, these potential competitors 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 sale of their products than
us.

     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

                                      20.
<PAGE>

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.

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, we 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.

                                      21.
<PAGE>

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 cash, cash equivalents and short-
term investments.

     As of March 31, 2001, short-term investments of $17.1 million were held
available for sale with maturities of less than 180 days.  Short-term
investments consist primarily of high credit and highly liquid corporate
commercial paper and money market funds.  A substantial change in overall
interest rates would not have a material affect on the financial position of the
Company.

     Exposure to variability in foreign currency exchange rates is managed
primarily through the use of cash flow hedges.  See Note 5 of Notes to Condensed
Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations.

                                      22.
<PAGE>

PART II  - OTHER INFORMATION

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

No reports on Form 8-K were filed during the three months ended March 31, 2001.

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 as of 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.

10.1(8)   Registrant's 1996 Equity Incentive Plan.

10.2(9)   Amended and Restated Employee Stock Purchase Plan, dated June 6, 1996,
          as amended January 25, 2000.

                                      23.
<PAGE>

10.3(1)   Form of Indemnity Agreement to be entered into between the Registrant
          and its officers and directors.

10.4(1)   Lease Agreement between Registrant and the State of Oregon, dated May
          1, 1996.

10.5(1)   Lease Agreement between the Registrant and the Landmark, dated April
          22, 1996.

10.6(7)   Home Loan Agreement between Registrant and Michael Scally, dated
          January 7,1998.

10.7(7)   Home Loan Agreement between Registrant and Robert Holburn, dated
          February 2,1998.

10.8      Separation & Release Agreement between Registrant and Michael Ernst,
          dated November 15, 1999.

10.9      Separation & Release Agreement between Registrant and Robert Holburn,
          dated January 3, 2000.

10.10     Separation & Release Agreement between Registrant and Michael Foreman,
          dated May 1, 2000.

10.11     Separation & Release Agreement between Registrant and Harold Julsen,
          dated December 6, 2000.

10.12     1997 Equity Incentive Plan, as amended on January 18, 2001.

_____________
  (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 annual report on Form 10-K for the
      year ended September 30, 1998.

  (8) Filed as an Exhibit to the Registrant's proxy statement on Schedule 14A &
      filed on December 10, 1998.

  (9) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
      the quarter ended December 31, 1999.

Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.

                                      24.
<PAGE>

                                  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 9, 2001                  /s/ Merle A.Waterman
                                   ----------------------------------------
                                   MERLE A. WATERMAN
                                   CHIEF FINANCIAL OFFICER

                                      25.