<PAGE>

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

                                   FORM 10-Q


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

                    For Quarterly Period Ended June 30, 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  July 31, 2001
Common Stock, $0.001 par value                             11,088,933
<PAGE>

                           ROGUE WAVE SOFTWARE, INC.
                                   FORM 10-Q

                                     INDEX


<TABLE>
<CAPTION>
                                                                               Page No.
                                                                               --------
<S>                                                                            <C>
PART I - FINANCIAL INFORMATION

Item 1.   Condensed Consolidated Financial Statements:

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

          Condensed Consolidated Statements of Operations and Other Comprehensive
          Income (Loss) for the Three and Nine Months Ended June 30, 2000 and
          2001....................................................................   4

          Condensed Consolidated Statements of Cash Flows for the Nine
          Months Ended June 30, 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.....................................  12

          Factors That May Affect Future Results..................................  18

Item 3.   Quantitative and Qualitative Disclosures About Market Risk..............  23

SIGNATURES........................................................................  24
</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,           June 30,
                                                                           2000                 2001
                                                                     ---------------       --------------
                                                                                            (unaudited)
<S>                                                                  <C>                   <C>
                         ASSETS

Current assets:
   Cash and cash equivalents.........................................        $21,823              $11,792
   Short-term investments............................................         11,703               17,206
   Accounts receivable, net..........................................         12,101               16,617
   Prepaid expenses and other current assets.........................          1,499                1,443
   Deferred income taxes.............................................          1,603                1,776
                                                                             -------              -------
   Total current assets..............................................         48,729               48,834

Equipment, net.......................................................          5,208                5,159
Intangibles, net.....................................................            822                  373
Other assets, net....................................................            860                  544
                                                                             -------              -------
   Total assets......................................................        $55,619              $54,910
                                                                             =======              =======

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable..................................................        $   880              $   201
   Accrued expenses..................................................          5,746                5,882
   Deferred revenue..................................................         11,700               12,147
                                                                             -------              -------
   Total current liabilities.........................................         18,326               18,230

Stockholders' equity:
   Common stock......................................................             11                   11
   Additional paid-in capital........................................         40,801               41,212
   Accumulated deficit...............................................         (3,419)              (3,902)
   Accumulated other comprehensive loss..............................           (100)                (641)
                                                                             -------              -------
   Total stockholders' equity........................................         37,293               36,680
                                                                             -------              -------
   Total liabilities and stockholders' equity........................        $55,619              $54,910
                                                                             =======              =======
</TABLE>


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

                                       3.
<PAGE>

                           ROGUE WAVE SOFTWARE, INC.
                                AND SUBSIDIARIES

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

                (in thousands, except per share data, unaudited)

<TABLE>
<CAPTION>
                                                                        Three months ended              Nine months ended
                                                                             June 30,                       June 30,
                                                                      ---------------------------  --------------------------
                                                                           2000          2001           2000           2001
                                                                         -------       -------        -------        -------
<S>                                                                   <C>             <C>            <C>            <C>
Revenue:
 License revenue..................................................      $ 8,023       $ 8,020        $21,848        $22,489
 Service and maintenance revenue..................................        6,038         6,625         17,871         21,470
                                                                        -------       -------        -------        -------
   Total revenue..................................................       14,061        14,645         39,719         43,959
                                                                        -------       -------        -------        -------
Cost of revenue:
 Cost of license revenue..........................................          541           234          1,349            713
 Cost of service and maintenance revenue..........................        2,083         3,048          6,008          9,500
                                                                        -------       -------        -------        -------
   Total cost of revenue..........................................        2,624         3,282          7,357         10,213
                                                                        -------       -------        -------        -------
   Gross profit...................................................       11,437        11,363         32,362         33,746
                                                                        -------       -------        -------        -------
Operating expenses:
 Product development..............................................        3,598         3,258         10,755         10,790
 Sales and marketing..............................................        6,072         6,410         17,425         19,020
 General and administrative.......................................        1,336         1,667          4,065          4,528
 Restructuring, severance and goodwill amortization...............          354           596          1,309          1,236
                                                                        -------       -------        -------        -------
   Total operating expenses.......................................       11,360        11,931         33,554         35,574
                                                                        -------       -------        -------        -------
   Income (loss) from operations..................................           77          (568)        (1,192)        (1,828)
Other income, net.................................................          551           364          1,242          1,179
                                                                        -------       -------        -------        -------
   Income (loss) before income taxes..............................          628          (204)            50           (649)
Income tax expense (benefit)......................................          362           (12)           403           (169)
                                                                        -------       -------        -------        -------
   Net income (loss)..............................................      $   266       $  (192)       $  (353)       $  (480)
                                                                        =======       =======        =======        =======

Basic and diluted income (loss) per share.........................        $0.02        $(0.02)        $(0.03)        $(0.04)
                                                                        =======       =======        =======        =======

Shares used in basic per share calculation........................       10,686        10,996         10,465         10,958
Shares used in diluted per share calculation......................       10,827        10,996         10,465         10,958
                                                                        =======       =======        =======        =======
   Net income (loss)..............................................      $   266       $  (192)       $  (353)       $  (480)

Other comprehensive income (loss):
 Foreign currency translation losses..............................          (77)         (127)          (261)          (541)
                                                                        -------       -------        -------        -------
   Total other comprehensive income (loss)........................      $   189       $  (319)       $  (614)       $(1,021)
                                                                        =======       =======        =======        =======
</TABLE>

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

                                       4.
<PAGE>

                           ROGUE WAVE SOFTWARE, INC.
                                AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (in thousands, unaudited)


<TABLE>
<CAPTION>
                                                                                         Nine Months
                                                                                            Ended
                                                                                           June  30,
                                                                                    ----------------------
                                                                                       2000          2001
                                                                                     -------      --------
<S>                                                                                  <C>          <C>
Cash flows from operating activities:
   Net loss....................................................................      $  (353)     $   (480)
   Adjustments to reconcile net loss to net cash from (used in) operating
    activities:
      Depreciation and amortization............................................        3,569         2,709
      Loss on disposal of assets...............................................           --            77
      Changes in assets and liabilities:
        Accounts receivable....................................................         (270)       (4,516)
        Prepaid expenses and other current assets..............................          338            56
        Deferred income taxes..................................................          (16)         (173)
        Other noncurrent assets................................................          321           276
        Accounts payable and accrued expenses..................................          811          (543)
        Deferred revenue.......................................................          290           447
                                                                                     -------      --------
          Net cash from (used in) operating activities.........................        4,690        (2,147)
                                                                                     -------      --------
Cash flows from investing activities:
   Short-term investments......................................................       (2,499)       (5,503)
   Equipment acquisitions......................................................       (1,861)       (2,251)
                                                                                     -------      --------
          Net cash used in investing activities................................       (4,360)       (7,754)
                                                                                     -------      --------
Cash flows from financing activities:
   Payments on debt and capital lease obligations..............................           (4)           --
   Proceeds from exercise of stock options.....................................        4,772             3
   Proceeds from Employee Stock Purchase Plan..................................          260           408
                                                                                     -------      --------
          Net cash from financing activities...................................        5,028           411
                                                                                     -------      --------
Effect of exchange rate changes on cash and cash equivalents...................         (261)         (541)
                                                                                     -------      --------
          Net change in cash and cash equivalents..............................        5,097       (10,031)
Cash and cash equivalents at beginning of period...............................       13,875        21,823
                                                                                     -------      --------
Cash and cash equivalents at end of period.....................................      $18,972      $ 11,792
                                                                                     =======      ========
</TABLE>

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

                                       5.
<PAGE>

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


1.   Basis of Presentation

          The accompanying unaudited 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 earnings (loss) per share for the three and nine months ended
     June 30, 2001 and 2000 is computed on the basis of the weighted average
     number of common shares outstanding. Diluted earnings (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 earnings per share and diluted earnings per share is due to
     the effect of outstanding stock options. For the three months ended June
     30, 2000, the dilutive effect of outstanding options was 140,471. As a
     result of the net loss incurred for the three months ended June 30, 2001
     and the nine months ended June 30, 2000 and 2001, all options are anti-
     dilutive and, accordingly, the number of shares used in computing the basic
     and diluted shares is the same. For the nine months ended June 30, 2000 and
     the three months and nine months ended June 30, 2001, the number of
     outstanding options excluded from the calculation because of their anti-
     dilutive effect was 100,078, 62,916, and 63,795, respectively.

                                       6.
<PAGE>

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

<TABLE>
<CAPTION>
                                                                      Three months ended              Nine months ended
                                                                             June 30,                        June 30,
                                                               --------------------------------------------------------------
                                                                      2000           2001            2000            2001
                                                                     -------       -------         -------         -------
<S>                                                            <C>                <C>             <C>             <C>
Numerator:
 Net income (loss).........................................        $   266        $  (192)        $  (353)        $  (480)
                                                                   =======        =======         =======         =======
Denominator:
 Historical common shares outstanding for basic and
  diluted income (loss) per share at beginning of period...         10,677         10,996          10,117          10,909

 Weighted average number of common equivalent shares
  issued during the period.................................              9             --             348              49
                                                                   -------        -------         -------         -------
 Denominator for basic and diluted income (loss) per share
  -  weighted average shares...............................         10,686         10,996          10,465          10,958
                                                                   =======        =======         =======         =======
 Incremental common shares attributable to shares issuable
  under equity incentive plans (Treasury Stock Method).....            141             --              --              --
                                                                   -------        -------         -------         -------
 Denominator for diluted net income (loss) per share -
  weighted average shares..................................         10,827         10,996          10,465          10,958
                                                                   =======        =======         =======         =======

 Basic and diluted earnings (loss) per share...............          $0.02        $ (0.02)         $(0.03)         $(0.04)
                                                                   =======        =======         =======         =======
</TABLE>

4.   Restructuring and Severance

     Stingray

          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 restructured 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 $2.9 million. As part of this restructuring, during
     the three months ended June 30, 2001, the Company recognized a
     restructuring charge of $621,250, related primarily to severance costs
     associated with the termination of 27 employees as well as certain lease
     exit fees. The Stingray products, which primarily consist of development
     tools for Windows Programmers, will continue to be sold and supported by
     the Company. The following table summarizes restructuring costs by primary
     component and related reserve at June 30, 2001. The remaining restructuring
     costs of $278,317 at June 30, 2001 are expected to be paid by December 31,
     2001.

<TABLE>
<CAPTION>
                                            Employee
                                          Severance &
                                            Related         Lease Exit        Other             Total
                                        --------------------------------------------------------------------
<S>                                        <C>               <C>            <C>                <C>
Stingray restructuring estimate at
 May 31, 2001........................      $ 432,000         $154,250       $ 35,000           $ 621,250
Cash payments........................       (313,933)              --        (29,000)           (342,933)
                                           ---------         --------       --------           ---------
Balance at June 30, 2001............       $ 118,067         $154,250       $  6,000           $ 278,317
                                           =========         ========       ========           =========
</TABLE>


                                       7.
<PAGE>

  Fornova

          Following a decision to discontinue the Fornova project, the Company
    recognized a restructuring charge of approximately $447,100 during March
    2001. 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 U.S.
    economy, coupled with the slowing of third party investment in such
    ventures, the project was abandoned with the termination of 12 employees. In
    the third fiscal quarter of 2001, the Company revised its estimate of the
    initial restructuring costs by $194,859, as a result of the successful
    renegotiation of certain contract termination fees as well as the
    finalization of severance costs.

          The following table summarizes restructuring costs by primary
    component and related reserve at June 30, 2001. The remaining restructuring
    costs of $92,554 at June 30, 2001 are expected to be paid in the three
    months ending September 30, 2001.

<TABLE>
<CAPTION>
                                                    Contract       Employee
                                                Termination Fees   Severance         Other          Total
                                               ----------------------------------------------------------------
<S>                                            <C>                 <C>             <C>            <C>
Fornova restructuring estimate at
 March 31, 2001...........................         $ 304,900       $ 133,400       $  8,800       $ 447,100
Cash payments.............................           (38,627)       (103,458)       (17,602)       (159,687)
Adjustments for revised estimates.........          (174,519)        (29,942)         9,602        (194,859)
                                                   ---------       ---------       --------       ---------
Balance at June 30, 2001..................         $  91,754       $      --       $    800       $  92,554
                                                   =========       =========       ========       =========
</TABLE>

          The Company recognized expenses of approximately $720,100, $793,000
    and $88,743 of product development costs associated with the Fornova
    project during the first, second, and third quarters of fiscal 2001,
    respectively.

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 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.

                                       8.
<PAGE>

          The notional amount of foreign exchange contracts outstanding at June
     30, 2001 was $1,792,618 with a fair value of $1,728,108. The fair value of
     the forward contracts is estimated based on quoted exchange rates at June
     30, 2001. The effective or unrealized gain related to the outstanding
     contracts was $36,320 and the ineffective or realized gain was $28,191 at
     June 30, 2001. Also during the nine months ended June 30, 2001, certain
     foreign currency contracts matured resulting in a total realized net gain
     of $48,294 of which a net gain of $64,200 and $34,285 were recognized in
     the first and second quarters of fiscal 2001, respectively, and a net loss
     of $50,191 was recognized in the third quarter of fiscal 2001.

6.   Worldwide Operations

          Revenue by geographic area for the three months ended June 30, 2000
     and 2001 was 82% and 66% in the United States and 18% and 34% in Europe,
     respectively.

     Information regarding worldwide operations is as follows:

<TABLE>
<CAPTION>
                                                        United
                                                        States         Europe         Japan         Eliminations        Total
                                                        ------         ------         -----         ------------        -----
<S>                                                     <C>            <C>            <C>           <C>                <C>
June 30, 2000, and for the quarter then ended:
 Revenue to unaffiliated customers................        $11,532       $2,529         $ --            $    --         $14,061
 Intercompany transfers...........................            743           --           --               (743)             --
                                                          -------       ------         ----            -------         -------
  Net revenue.....................................         12,275        2,529           --               (743)         14,061
 Operating income (loss)..........................           (123)         252          (52)                --              77
 Long-lived assets................................          4,429          410           --               (114)          4,725

June 30, 2001, and for the quarter then ended:
 Revenue to unaffiliated customers................        $ 9,682       $4,902         $ 61            $    --         $14,645
 Intercompany transfers...........................          1,977           --           --             (1,977)             --
                                                          -------       ------         ----            -------         -------
  Net revenue.....................................         11,659        4,902           61             (1,977)         14,645
 Operating income (loss)..........................         (2,049)       1,535          (54)                --            (568)
 Long-lived assets................................          5,156          754            1               (208)          5,703
</TABLE>

                                       9.
<PAGE>

          Revenue by geographic area for the nine months ended June 30, 2000 and
    2001 was 80% and 70% in the United States, 20% and 29% in Europe and 0% and
    1% in Japan, respectively.

    Information regarding worldwide operations is as follows:

<TABLE>
<CAPTION>
                                                        United
                                                          States       Europe         Japan        Eliminations         Total
                                                          ------       ------         -----        ------------         -----
<S>                                                      <C>           <C>            <C>          <C>                  <C>
June 30, 2000, and for the nine months then ended:
 Revenue to unaffiliated customers.................      $31,785       $ 7,934         $  --            $    --        $39,719
 Intercompany transfers............................        2,656            --            --             (2,656)            --
                                                         -------       -------         -----            -------        -------
  Net revenue......................................       34,441         7,934            --             (2,656)        39,719
 Operating income (loss)...........................       (1,900)          760           (52)                --         (1,192)
 Long-lived assets.................................        4,429           410            --               (114)         4,725

June  30, 2001 and for the nine months then ended:
 Revenue to unaffiliated customers.................      $30,842       $12,858         $ 259            $    --        $43,959
 Intercompany transfers............................        5,001            --            --             (5,001)            --
                                                         -------       -------         -----            -------        -------
  Net revenue......................................       35,843        12,858           259             (5,001)        43,959
 Operating income (loss)...........................       (4,581)        3,026          (273)                --         (1,828)
 Long-lived assets.................................        5,156           754             1               (208)         5,703
</TABLE>

7.  New Accounting Pronouncements

          On June 30, 2001, the Financial Accounting Standards Board ("FASB")
    issued Statement of Financial Accounting Standards ("SFAS") 141, "Business
    Combinations", and SFAS 142, "Goodwill and Other Intangible Assets". Major
    provisions of these Statements are as follows: all business combinations
    initiated after June 30, 2001 must use the purchase method of accounting;
    the pooling of interest method of accounting is prohibited except for
    transactions initiated before July 1, 2001; intangible assets acquired in a
    business combination must be recorded separately from goodwill if they arise
    from contractual or other legal rights or are separable from the acquired
    entity and can be sold, transferred, licensed, rented or exchanged, either
    individually or as part of a related contract, asset or liability; goodwill
    and intangible assets with indefinite lives are not amortized but are tested
    for impairment annually, except in certain circumstances, and whenever there
    is an impairment indicator; all acquired goodwill must be assigned to
    reporting units for purposes of impairment testing and segment reporting;
    and effective January 1, 2002, goodwill will no longer be subject to
    amortization. Although it is still reviewing the provisions of these
    Statements, management's preliminary assessment is that these Statements
    will not have a material impact on the Company's financial position,
    results of operations or cashflows.

          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 views in applying generally accepted accounting
    principles to revenue recognition in financial statements. In June 2000, the
    SEC issued SAB 101B, which delayed 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 an impact on the
    Company's financial position, results of operations or cash flows.

          In March 2000, the FASB issued interpretation No. 44, ("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

                                      10.
<PAGE>

    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.

                                      11.
<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. was founded in 1989 to provide reusable software
components for the development of object-oriented software applications.  The
Company is a leading provider of object-oriented software solutions, including
component technology, upon which customers around the world build enterprise
systems.  The Company offers C++ components for building distributed enterprise,
Intranet and Internet applications, which scale, honor legacy investments, and
are highly customizable.  Rogue Wave's products, which allow customers to build
business software solutions in a more expeditious manner, are designed to be
general purpose in nature, supporting both back-end and user interface
development.  The Company's products also provide customers with proven object-
oriented frameworks and development services so that they can realize better
performance, reliability and maintainability as well as apply the principles of
software reuse in their own development efforts.

     Rogue Wave's products are marketed to information technology and
information systems development managers, independent software vendors, value
added resellers, original-equipment-manufacturers and professional programmers
in all industry segments and in all geographic locations through direct sales
and multiple distribution channels.  The Company's products are designed to
enable customers to construct robust applications quickly, with higher quality.
They provide a common development foundation for various operating system
platforms including Windows, Unix and OS/390.  Cross platform foundation
components both reduce complexity and speed the development process.  All of
Rogue Wave's components enable a company to efficiently migrate to additional
platforms with minimal cost.

     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 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 risk 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.

                                      12.
<PAGE>

     Historically, the Company has marketed 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 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.

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 business model, including
the transition to the new SourcePro C++ product line, and pricing strategy 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 first quarter of fiscal 2002, providing the foundation for further
expansion of this business.

                                      13.
<PAGE>

International Operations

     During 2000 and 2001, Rogue Wave has continued to solidify its worldwide
presence.  International revenue accounted for approximately 24%, 24% and 30% of
total revenue in fiscal 1999, 2000 and the nine months ended June 30, 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 "Factors That May
Affect Future Results."

                                      14.
<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      Nine months ended
                                                                            June 30,               June 30,
                                                                     --------------------    --------------------
                                                                        2000         2001      2000       2001
<S>                                                                  <C>          <C>          <C>        <C>
Revenue:
 License revenue..................................................        57%          55%       55%         51%
 Service and maintenance revenue..................................        43           45        45          49
                                                                        ----         ----      ----        ----
   Total revenue..................................................       100          100       100         100
                                                                        ----         ----      ----        ----
Cost of revenue:
 Cost of license revenue..........................................         4            2         4           2
 Cost of service and maintenance revenue..........................        15           21        15          22
                                                                        ----         ----      ----        ----
   Total cost of revenue..........................................        19           23        19          24
                                                                        ----         ----      ----        ----
   Gross profit...................................................        81           77        81          76
                                                                        ----         ----      ----        ----
Operating expenses:
 Product development..............................................        26           22        27          25
 Sales and marketing..............................................        43           44        44          43
 General and administrative.......................................        10           11        10          10
 Restructuring, severance and goodwill amortization...............         3            4         3           3
                                                                        ----         ----      ----        ----
   Total operating expenses.......................................        82           81        84          81
                                                                        ----         ----      ----        ----
   Income (loss) from operations..................................         1           (4)       (3)         (4)
Other income, net.................................................         4            3         3           3
                                                                        ----         ----      ----        ----
   Income (loss) before income taxes..............................         5           (1)        -          (1)
Income tax expense (benefit)......................................         3            -         1           -
                                                                        ----         ----      ----        ----
   Net income (loss)..............................................         2%         (1)%      (1)%        (1)%
                                                                        ====         ====      ====        ====
</TABLE>


Revenue

     Total revenue for the three and nine months ended June 30, 2001 was $14.6
million and $44.0 million, respectively, versus $14.1 million and $39.7 million
for the three and nine months ended June 30, 2000, respectively, representing an
increase of 4% and 11%, respectively.  License revenue remained flat during the
current quarter at $8 million when compared to the same quarter last year.
License revenue for the nine months ended June 30, 2001 was $22.5 million
compared to $21.8 million for the nine months ended June 30, 2000, representing
an increase of 3%.  Although license revenue stayed the same for the three
months ended June 30, 2001 and increased during the nine months ended June 30,
2001, as expected the number of licenses sold to existing and new customers
decreased.  This decrease is primarily due to the launch of the SourcePro C++
product line, which considers scope of deployment, in contrast to the
historically employed "license per developer" approach. These decreases were
offset by increases in license revenue from cross platform deployment rights
sales.

     Service and maintenance revenue for the three and nine months ended June
30, 2001 was $6.6 million and $21.5 million, respectively, versus $6.0 million
and $17.9 million for the three and nine months ended June 30, 2000,
respectively, representing an increase of 10% and 20%, respectively.  The
increases in service and maintenance revenue were primarily attributable to
increased sales volume of the

                                      15.
<PAGE>

Company's support and maintenance services related to the Company's core
products as well as two customized software consulting contracts totaling $5.2
million of which $798,000 and $4.5 million were recognized during the three and
nine months ended June 30, 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 nine months ended June 30, 2001 was $234,000 and $713,000,
respectively, versus $541,000 and $1.3 million for the three and nine months
ended June 30, 2000, respectively, representing a decrease of 57% and 47%,
respectively.  The decrease in cost of license revenue during the three and nine
months ended June 30, 2001 is primarily the result of a decrease in the number
of manuals produced due to an increase in product offerings delivered through
the Internet versus physically shipped 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
nine months ended June 30, 2001 was $3.0 million and $9.5 million, respectively,
versus $2.1 million and $6.0 million for the three and nine months ended June
30, 2000, respectively, representing an increase of 46% and 58%, respectively.
The increases in the three and nine months ended June 30, 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 significant 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 months ended June 30, 2001 and
2000 were $3.3 million and $3.6 million, respectively, representing a decrease
of 9%.  Product development expenses for the nine months ended June 30, 2001
remained flat at $10.8 million when compared to the same period last year.  As a
percent of revenue, product and development expense for the three and nine
months ended June 30, 2001 was 22% and 25%, respectively, as compared to 26% and
27% for the three and nine months ended June 30, 2000, respectively.  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 nine months ended June 30,
2001 were $6.4 million and $19.0 million, respectively, versus $6.1 million and
$17.4 million for the three and nine months ended June 30, 2000, respectively,
representing an increase of 6% and 9%, respectively.  As a percentage of total
revenue, sales and marketing expenses were 44% and 43%, respectively, for the
three and nine months ended June 30, 2001 and 43% and 44% for the three and nine
months ended June 30, 2000, respectively. 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.

                                      16.
<PAGE>

     General and administrative expenses for the three months and nine months
ended June 30, 2001 were $1.7 million and $4.5 million, respectively, as
compared to $1.3 million and $4.1 million for the 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 nine months ended June 30, 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, severance and goodwill expenses totaling approximately
$596,000 were recognized during the three months ended June 30, 2001.  During
the three months ended June 30, 2001, as part of an ongoing effort to optimize
its corporate organizational structure and in conjunction with continuing cost
containment programs, the Company restructured 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 $2.9 million.  As part of this reorganization, during the three
months ended June 30, 2001, the Company recognized a restructuring charge of
$621,250, related primarily to severance costs associated with the resulting
termination of 27 employees as well as lease exit costs. The Stingray products,
which primarily consist of development tools for Windows Programmers, will
continue to be sold and supported by the Company.  See Note 4 of Notes to
Condensed Consolidated Financial Statements.

     Following a decision to discontinue the Fornova project, the Company
recognized a restructuring charge of approximately $447,100 during March 2001.
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 U.S.
economy, coupled with the slowing of third party investment in such ventures,
the project was abandoned with the termination of 12 employees. During the three
months ended June 30, 2001, the Company revised its estimate of the initial
restructuring costs by $194,859 as a result of the successful renegotiation of
certain contract fees as well as the finalization of severance costs.  The
Company had recognized expenses of approximately $720,100, $793,000 and $88,743
of product development costs associated with the Fornova project during the
first, second, and third quarters of fiscal 2001, respectively.  See Note 4 of
Notes to Condensed Consolidated Financial Statements.

Other Income, Net

     Other income for the three and nine months ended June 30, 2001 and June 30,
2000 primarily consists of interest income on the Company's cash, cash
equivalents and short-term investments. The decrease in other income of 34% and
5% for the three and nine months ended June 30, 2001, compared to the three
months and nine months ended June 30, 2000, is primarily due to a decrease in
interest rates during the current fiscal quarter as compared to the same fiscal
quarter last year.  See Note 5 of Notes to Condensed Consolidated Financial
Statements.

                                      17.
<PAGE>

Income Tax Expense (Benefit)

     Income taxes for the three and nine month periods ended June 30, 2001 are
provided on an interim basis based on the expected tax rate for the year.  The
provision for income taxes for the three and nine month periods ended June 30,
2001, includes federal, state and foreign income taxes.

Liquidity and Capital Resources

     The decrease in cash flows from operations during the nine months ended
June 30, 2001 compared to the nine months ended June 30, 2000 was primarily due
to an increase of $4.5 million in accounts receivable resulting primarily from
the difference in the timing of the sale of products completed during the
comparable nine month period.

     The Company's investing activities consist primarily of the purchase and
sale of short-term investments and purchases of equipment.  During the nine
months ended June 30, 2001, net cash used in investing activities was $7.8
million, which included the purchase of short-term investments of $5.5 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."

Factors That May Affect Future Results

     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.

                                      18.
<PAGE>

     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 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 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

                                      19.
<PAGE>

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 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.

                                      20.
<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

                                      21.
<PAGE>

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

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 customers
for offering enterprise-wide solutions to software programming needs.  Systems
integrators may market competitive software products in the future.

                                      22.
<PAGE>

     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.

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 June 30, 2001, short-term investments of $17.2 million were held
available for sale with maturities of less than 365 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.

                                      23.
<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:  August 13, 2001   /s/ Merle A.Waterman
                         -----------------------------------------------------
                         MERLE A. WATERMAN
                         VICE PRESIDENT, CHIEF FINANCIAL OFFICER
                         AND SECRETARY

                                      24.
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UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q

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

                    For Quarterly Period Ended June 30, 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  July 31, 2001
Common Stock, $0.001 par value                             11,088,933
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 September 30, 2000
          and June 30, 2001.......................................................   3

          Condensed Consolidated Statements of Operations and Other Comprehensive
          Income (Loss) for the Three and Nine Months Ended June 30, 2000 and
          2001....................................................................   4

          Condensed Consolidated Statements of Cash Flows for the Nine
          Months Ended June 30, 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.....................................  12

          Factors That May Affect Future Results..................................  18

Item 3.   Quantitative and Qualitative Disclosures About Market Risk..............  23

SIGNATURES........................................................................  24
2.
PART I - FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

                           ROGUE WAVE SOFTWARE, INC.
                                AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (in thousands)
September 30,           June 30,
                                                                           2000                 2001
                                                                     ---------------       --------------
                                                                                            (unaudited)
ASSETS

Current assets:
   Cash and cash equivalents.........................................        $21,823              $11,792
   Short-term investments............................................         11,703               17,206
   Accounts receivable, net..........................................         12,101               16,617
   Prepaid expenses and other current assets.........................          1,499                1,443
   Deferred income taxes.............................................          1,603                1,776
                                                                             -------              -------
   Total current assets..............................................         48,729               48,834

Equipment, net.......................................................          5,208                5,159
Intangibles, net.....................................................            822                  373
Other assets, net....................................................            860                  544
                                                                             -------              -------
   Total assets......................................................        $55,619              $54,910
                                                                             =======              =======

         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable..................................................        $   880              $   201
   Accrued expenses..................................................          5,746                5,882
   Deferred revenue..................................................         11,700               12,147
                                                                             -------              -------
   Total current liabilities.........................................         18,326               18,230

Stockholders' equity:
   Common stock......................................................             11                   11
   Additional paid-in capital........................................         40,801               41,212
   Accumulated deficit...............................................         (3,419)              (3,902)
   Accumulated other comprehensive loss..............................           (100)                (641)
                                                                             -------              -------
   Total stockholders' equity........................................         37,293               36,680
                                                                             -------              -------
   Total liabilities and stockholders' equity........................        $55,619              $54,910
                                                                             =======              =======
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                       3.
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              Nine months ended
                                                                             June 30,                       June 30,
                                                                      ---------------------------  --------------------------
                                                                           2000          2001           2000           2001
                                                                         -------       -------        -------        -------
Revenue:
 License revenue..................................................      $ 8,023       $ 8,020        $21,848        $22,489
 Service and maintenance revenue..................................        6,038         6,625         17,871         21,470
                                                                        -------       -------        -------        -------
   Total revenue..................................................       14,061        14,645         39,719         43,959
                                                                        -------       -------        -------        -------
Cost of revenue:
 Cost of license revenue..........................................          541           234          1,349            713
 Cost of service and maintenance revenue..........................        2,083         3,048          6,008          9,500
                                                                        -------       -------        -------        -------
   Total cost of revenue..........................................        2,624         3,282          7,357         10,213
                                                                        -------       -------        -------        -------
   Gross profit...................................................       11,437        11,363         32,362         33,746
                                                                        -------       -------        -------        -------
Operating expenses:
 Product development..............................................        3,598         3,258         10,755         10,790
 Sales and marketing..............................................        6,072         6,410         17,425         19,020
 General and administrative.......................................        1,336         1,667          4,065          4,528
 Restructuring, severance and goodwill amortization...............          354           596          1,309          1,236
                                                                        -------       -------        -------        -------
   Total operating expenses.......................................       11,360        11,931         33,554         35,574
                                                                        -------       -------        -------        -------
   Income (loss) from operations..................................           77          (568)        (1,192)        (1,828)
Other income, net.................................................          551           364          1,242          1,179
                                                                        -------       -------        -------        -------
   Income (loss) before income taxes..............................          628          (204)            50           (649)
Income tax expense (benefit)......................................          362           (12)           403           (169)
                                                                        -------       -------        -------        -------
   Net income (loss)..............................................      $   266       $  (192)       $  (353)       $  (480)
                                                                        =======       =======        =======        =======

Basic and diluted income (loss) per share.........................        $0.02        $(0.02)        $(0.03)        $(0.04)
                                                                        =======       =======        =======        =======

Shares used in basic per share calculation........................       10,686        10,996         10,465         10,958
Shares used in diluted per share calculation......................       10,827        10,996         10,465         10,958
                                                                        =======       =======        =======        =======
   Net income (loss)..............................................      $   266       $  (192)       $  (353)       $  (480)

Other comprehensive income (loss):
 Foreign currency translation losses..............................          (77)         (127)          (261)          (541)
                                                                        -------       -------        -------        -------
   Total other comprehensive income (loss)........................      $   189       $  (319)       $  (614)       $(1,021)
                                                                        =======       =======        =======        =======
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                       4.
ROGUE WAVE SOFTWARE, INC.
                                AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (in thousands, unaudited)
Nine Months
                                                                                            Ended
                                                                                           June  30,
                                                                                    ----------------------
                                                                                       2000          2001
                                                                                     -------      --------
Cash flows from operating activities:
   Net loss....................................................................      $  (353)     $   (480)
   Adjustments to reconcile net loss to net cash from (used in) operating
    activities:
      Depreciation and amortization............................................        3,569         2,709
      Loss on disposal of assets...............................................           --            77
      Changes in assets and liabilities:
        Accounts receivable....................................................         (270)       (4,516)
        Prepaid expenses and other current assets..............................          338            56
        Deferred income taxes..................................................          (16)         (173)
        Other noncurrent assets................................................          321           276
        Accounts payable and accrued expenses..................................          811          (543)
        Deferred revenue.......................................................          290           447
                                                                                     -------      --------
          Net cash from (used in) operating activities.........................        4,690        (2,147)
                                                                                     -------      --------
Cash flows from investing activities:
   Short-term investments......................................................       (2,499)       (5,503)
   Equipment acquisitions......................................................       (1,861)       (2,251)
                                                                                     -------      --------
          Net cash used in investing activities................................       (4,360)       (7,754)
                                                                                     -------      --------
Cash flows from financing activities:
   Payments on debt and capital lease obligations..............................           (4)           --
   Proceeds from exercise of stock options.....................................        4,772             3
   Proceeds from Employee Stock Purchase Plan..................................          260           408
                                                                                     -------      --------
          Net cash from financing activities...................................        5,028           411
                                                                                     -------      --------
Effect of exchange rate changes on cash and cash equivalents...................         (261)         (541)
                                                                                     -------      --------
          Net change in cash and cash equivalents..............................        5,097       (10,031)
Cash and cash equivalents at beginning of period...............................       13,875        21,823
                                                                                     -------      --------
Cash and cash equivalents at end of period.....................................      $18,972      $ 11,792
                                                                                     =======      ========
The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                       5.
ROGUE WAVE SOFTWARE, INC.
                                    NOTES TO
                  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

1.   Basis of Presentation

          The accompanying unaudited 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 earnings (loss) per share for the three and nine months ended
     June 30, 2001 and 2000 is computed on the basis of the weighted average
     number of common shares outstanding. Diluted earnings (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 earnings per share and diluted earnings per share is due to
     the effect of outstanding stock options. For the three months ended June
     30, 2000, the dilutive effect of outstanding options was 140,471. As a
     result of the net loss incurred for the three months ended June 30, 2001
     and the nine months ended June 30, 2000 and 2001, all options are anti-
     dilutive and, accordingly, the number of shares used in computing the basic
     and diluted shares is the same. For the nine months ended June 30, 2000 and
     the three months and nine months ended June 30, 2001, the number of
     outstanding options excluded from the calculation because of their anti-
     dilutive effect was 100,078, 62,916, and 63,795, respectively.

                                       6.
Calculation of basic and diluted income (loss) per share is as follows (in
  thousands, except per share amounts):
Three months ended              Nine months ended
                                                                             June 30,                        June 30,
                                                               --------------------------------------------------------------
                                                                      2000           2001            2000            2001
                                                                     -------       -------         -------         -------
Numerator:
 Net income (loss).........................................        $   266        $  (192)        $  (353)        $  (480)
                                                                   =======        =======         =======         =======
Denominator:
 Historical common shares outstanding for basic and
  diluted income (loss) per share at beginning of period...         10,677         10,996          10,117          10,909

 Weighted average number of common equivalent shares
  issued during the period.................................              9             --             348              49
                                                                   -------        -------         -------         -------
 Denominator for basic and diluted income (loss) per share
  -  weighted average shares...............................         10,686         10,996          10,465          10,958
                                                                   =======        =======         =======         =======
 Incremental common shares attributable to shares issuable
  under equity incentive plans (Treasury Stock Method).....            141             --              --              --
                                                                   -------        -------         -------         -------
 Denominator for diluted net income (loss) per share -
  weighted average shares..................................         10,827         10,996          10,465          10,958
                                                                   =======        =======         =======         =======

 Basic and diluted earnings (loss) per share...............          $0.02        $ (0.02)         $(0.03)         $(0.04)
                                                                   =======        =======         =======         =======
4.   Restructuring and Severance

     Stingray

          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 restructured 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 $2.9 million. As part of this restructuring, during
     the three months ended June 30, 2001, the Company recognized a
     restructuring charge of $621,250, related primarily to severance costs
     associated with the termination of 27 employees as well as certain lease
     exit fees. The Stingray products, which primarily consist of development
     tools for Windows Programmers, will continue to be sold and supported by
     the Company. The following table summarizes restructuring costs by primary
     component and related reserve at June 30, 2001. The remaining restructuring
     costs of $278,317 at June 30, 2001 are expected to be paid by December 31,
     2001.
Employee
                                          Severance &
                                            Related         Lease Exit        Other             Total
                                        --------------------------------------------------------------------
Stingray restructuring estimate at
 May 31, 2001........................      $ 432,000         $154,250       $ 35,000           $ 621,250
Cash payments........................       (313,933)              --        (29,000)           (342,933)
                                           ---------         --------       --------           ---------
Balance at June 30, 2001............       $ 118,067         $154,250       $  6,000           $ 278,317
                                           =========         ========       ========           =========
7.
Fornova

          Following a decision to discontinue the Fornova project, the Company
    recognized a restructuring charge of approximately $447,100 during March
    2001. 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 U.S.
    economy, coupled with the slowing of third party investment in such
    ventures, the project was abandoned with the termination of 12 employees. In
    the third fiscal quarter of 2001, the Company revised its estimate of the
    initial restructuring costs by $194,859, as a result of the successful
    renegotiation of certain contract termination fees as well as the
    finalization of severance costs.

          The following table summarizes restructuring costs by primary
    component and related reserve at June 30, 2001. The remaining restructuring
    costs of $92,554 at June 30, 2001 are expected to be paid in the three
    months ending September 30, 2001.
Contract       Employee
                                                Termination Fees   Severance         Other          Total
                                               ----------------------------------------------------------------
Fornova restructuring estimate at
 March 31, 2001...........................         $ 304,900       $ 133,400       $  8,800       $ 447,100
Cash payments.............................           (38,627)       (103,458)       (17,602)       (159,687)
Adjustments for revised estimates.........          (174,519)        (29,942)         9,602        (194,859)
                                                   ---------       ---------       --------       ---------
Balance at June 30, 2001..................         $  91,754       $      --       $    800       $  92,554
                                                   =========       =========       ========       =========
The Company recognized expenses of approximately $720,100, $793,000
    and $88,743 of product development costs associated with the Fornova
    project during the first, second, and third quarters of fiscal 2001,
    respectively.

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 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.

                                       8.
The notional amount of foreign exchange contracts outstanding at June
     30, 2001 was $1,792,618 with a fair value of $1,728,108. The fair value of
     the forward contracts is estimated based on quoted exchange rates at June
     30, 2001. The effective or unrealized gain related to the outstanding
     contracts was $36,320 and the ineffective or realized gain was $28,191 at
     June 30, 2001. Also during the nine months ended June 30, 2001, certain
     foreign currency contracts matured resulting in a total realized net gain
     of $48,294 of which a net gain of $64,200 and $34,285 were recognized in
     the first and second quarters of fiscal 2001, respectively, and a net loss
     of $50,191 was recognized in the third quarter of fiscal 2001.

6.   Worldwide Operations

          Revenue by geographic area for the three months ended June 30, 2000
     and 2001 was 82% and 66% in the United States and 18% and 34% in Europe,
     respectively.

     Information regarding worldwide operations is as follows:
United
                                                        States         Europe         Japan         Eliminations        Total
                                                        ------         ------         -----         ------------        -----
June 30, 2000, and for the quarter then ended:
 Revenue to unaffiliated customers................        $11,532       $2,529         $ --            $    --         $14,061
 Intercompany transfers...........................            743           --           --               (743)             --
                                                          -------       ------         ----            -------         -------
  Net revenue.....................................         12,275        2,529           --               (743)         14,061
 Operating income (loss)..........................           (123)         252          (52)                --              77
 Long-lived assets................................          4,429          410           --               (114)          4,725

June 30, 2001, and for the quarter then ended:
 Revenue to unaffiliated customers................        $ 9,682       $4,902         $ 61            $    --         $14,645
 Intercompany transfers...........................          1,977           --           --             (1,977)             --
                                                          -------       ------         ----            -------         -------
  Net revenue.....................................         11,659        4,902           61             (1,977)         14,645
 Operating income (loss)..........................         (2,049)       1,535          (54)                --            (568)
 Long-lived assets................................          5,156          754            1               (208)          5,703
9.
Revenue by geographic area for the nine months ended June 30, 2000 and
    2001 was 80% and 70% in the United States, 20% and 29% in Europe and 0% and
    1% in Japan, respectively.

    Information regarding worldwide operations is as follows:
United
                                                          States       Europe         Japan        Eliminations         Total
                                                          ------       ------         -----        ------------         -----
June 30, 2000, and for the nine months then ended:
 Revenue to unaffiliated customers.................      $31,785       $ 7,934         $  --            $    --        $39,719
 Intercompany transfers............................        2,656            --            --             (2,656)            --
                                                         -------       -------         -----            -------        -------
  Net revenue......................................       34,441         7,934            --             (2,656)        39,719
 Operating income (loss)...........................       (1,900)          760           (52)                --         (1,192)
 Long-lived assets.................................        4,429           410            --               (114)         4,725

June  30, 2001 and for the nine months then ended:
 Revenue to unaffiliated customers.................      $30,842       $12,858         $ 259            $    --        $43,959
 Intercompany transfers............................        5,001            --            --             (5,001)            --
                                                         -------       -------         -----            -------        -------
  Net revenue......................................       35,843        12,858           259             (5,001)        43,959
 Operating income (loss)...........................       (4,581)        3,026          (273)                --         (1,828)
 Long-lived assets.................................        5,156           754             1               (208)         5,703
7.  New Accounting Pronouncements

          On June 30, 2001, the Financial Accounting Standards Board ("FASB")
    issued Statement of Financial Accounting Standards ("SFAS") 141, "Business
    Combinations", and SFAS 142, "Goodwill and Other Intangible Assets". Major
    provisions of these Statements are as follows: all business combinations
    initiated after June 30, 2001 must use the purchase method of accounting;
    the pooling of interest method of accounting is prohibited except for
    transactions initiated before July 1, 2001; intangible assets acquired in a
    business combination must be recorded separately from goodwill if they arise
    from contractual or other legal rights or are separable from the acquired
    entity and can be sold, transferred, licensed, rented or exchanged, either
    individually or as part of a related contract, asset or liability; goodwill
    and intangible assets with indefinite lives are not amortized but are tested
    for impairment annually, except in certain circumstances, and whenever there
    is an impairment indicator; all acquired goodwill must be assigned to
    reporting units for purposes of impairment testing and segment reporting;
    and effective January 1, 2002, goodwill will no longer be subject to
    amortization. Although it is still reviewing the provisions of these
    Statements, management's preliminary assessment is that these Statements
    will not have a material impact on the Company's financial position,
    results of operations or cashflows.

          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 views in applying generally accepted accounting
    principles to revenue recognition in financial statements. In June 2000, the
    SEC issued SAB 101B, which delayed 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 an impact on the
    Company's financial position, results of operations or cash flows.

          In March 2000, the FASB issued interpretation No. 44, ("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

                                      10.
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.

                                      11.
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. was founded in 1989 to provide reusable software
components for the development of object-oriented software applications.  The
Company is a leading provider of object-oriented software solutions, including
component technology, upon which customers around the world build enterprise
systems.  The Company offers C++ components for building distributed enterprise,
Intranet and Internet applications, which scale, honor legacy investments, and
are highly customizable.  Rogue Wave's products, which allow customers to build
business software solutions in a more expeditious manner, are designed to be
general purpose in nature, supporting both back-end and user interface
development.  The Company's products also provide customers with proven object-
oriented frameworks and development services so that they can realize better
performance, reliability and maintainability as well as apply the principles of
software reuse in their own development efforts.

     Rogue Wave's products are marketed to information technology and
information systems development managers, independent software vendors, value
added resellers, original-equipment-manufacturers and professional programmers
in all industry segments and in all geographic locations through direct sales
and multiple distribution channels.  The Company's products are designed to
enable customers to construct robust applications quickly, with higher quality.
They provide a common development foundation for various operating system
platforms including Windows, Unix and OS/390.  Cross platform foundation
components both reduce complexity and speed the development process.  All of
Rogue Wave's components enable a company to efficiently migrate to additional
platforms with minimal cost.

     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 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 risk 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.

                                      12.
Historically, the Company has marketed 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 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.

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 business model, including
the transition to the new SourcePro C++ product line, and pricing strategy 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 first quarter of fiscal 2002, providing the foundation for further
expansion of this business.

                                      13.
International Operations

     During 2000 and 2001, Rogue Wave has continued to solidify its worldwide
presence.  International revenue accounted for approximately 24%, 24% and 30% of
total revenue in fiscal 1999, 2000 and the nine months ended June 30, 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 "Factors That May
Affect Future Results."

                                      14.
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.
Percentage of Total Net Revenue
                                                                     --------------------------------------------
                                                                      Three months ended      Nine months ended
                                                                            June 30,               June 30,
                                                                     --------------------    --------------------
                                                                        2000         2001      2000       2001
Revenue:
 License revenue..................................................        57%          55%       55%         51%
 Service and maintenance revenue..................................        43           45        45          49
                                                                        ----         ----      ----        ----
   Total revenue..................................................       100          100       100         100
                                                                        ----         ----      ----        ----
Cost of revenue:
 Cost of license revenue..........................................         4            2         4           2
 Cost of service and maintenance revenue..........................        15           21        15          22
                                                                        ----         ----      ----        ----
   Total cost of revenue..........................................        19           23        19          24
                                                                        ----         ----      ----        ----
   Gross profit...................................................        81           77        81          76
                                                                        ----         ----      ----        ----
Operating expenses:
 Product development..............................................        26           22        27          25
 Sales and marketing..............................................        43           44        44          43
 General and administrative.......................................        10           11        10          10
 Restructuring, severance and goodwill amortization...............         3            4         3           3
                                                                        ----         ----      ----        ----
   Total operating expenses.......................................        82           81        84          81
                                                                        ----         ----      ----        ----
   Income (loss) from operations..................................         1           (4)       (3)         (4)
Other income, net.................................................         4            3         3           3
                                                                        ----         ----      ----        ----
   Income (loss) before income taxes..............................         5           (1)        -          (1)
Income tax expense (benefit)......................................         3            -         1           -
                                                                        ----         ----      ----        ----
   Net income (loss)..............................................         2%         (1)%      (1)%        (1)%
                                                                        ====         ====      ====        ====
Revenue

     Total revenue for the three and nine months ended June 30, 2001 was $14.6
million and $44.0 million, respectively, versus $14.1 million and $39.7 million
for the three and nine months ended June 30, 2000, respectively, representing an
increase of 4% and 11%, respectively.  License revenue remained flat during the
current quarter at $8 million when compared to the same quarter last year.
License revenue for the nine months ended June 30, 2001 was $22.5 million
compared to $21.8 million for the nine months ended June 30, 2000, representing
an increase of 3%.  Although license revenue stayed the same for the three
months ended June 30, 2001 and increased during the nine months ended June 30,
2001, as expected the number of licenses sold to existing and new customers
decreased.  This decrease is primarily due to the launch of the SourcePro C++
product line, which considers scope of deployment, in contrast to the
historically employed "license per developer" approach. These decreases were
offset by increases in license revenue from cross platform deployment rights
sales.

     Service and maintenance revenue for the three and nine months ended June
30, 2001 was $6.6 million and $21.5 million, respectively, versus $6.0 million
and $17.9 million for the three and nine months ended June 30, 2000,
respectively, representing an increase of 10% and 20%, respectively.  The
increases in service and maintenance revenue were primarily attributable to
increased sales volume of the

                                      15.
Company's support and maintenance services related to the Company's core
products as well as two customized software consulting contracts totaling $5.2
million of which $798,000 and $4.5 million were recognized during the three and
nine months ended June 30, 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 nine months ended June 30, 2001 was $234,000 and $713,000,
respectively, versus $541,000 and $1.3 million for the three and nine months
ended June 30, 2000, respectively, representing a decrease of 57% and 47%,
respectively.  The decrease in cost of license revenue during the three and nine
months ended June 30, 2001 is primarily the result of a decrease in the number
of manuals produced due to an increase in product offerings delivered through
the Internet versus physically shipped 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
nine months ended June 30, 2001 was $3.0 million and $9.5 million, respectively,
versus $2.1 million and $6.0 million for the three and nine months ended June
30, 2000, respectively, representing an increase of 46% and 58%, respectively.
The increases in the three and nine months ended June 30, 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 significant 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 months ended June 30, 2001 and
2000 were $3.3 million and $3.6 million, respectively, representing a decrease
of 9%.  Product development expenses for the nine months ended June 30, 2001
remained flat at $10.8 million when compared to the same period last year.  As a
percent of revenue, product and development expense for the three and nine
months ended June 30, 2001 was 22% and 25%, respectively, as compared to 26% and
27% for the three and nine months ended June 30, 2000, respectively.  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 nine months ended June 30,
2001 were $6.4 million and $19.0 million, respectively, versus $6.1 million and
$17.4 million for the three and nine months ended June 30, 2000, respectively,
representing an increase of 6% and 9%, respectively.  As a percentage of total
revenue, sales and marketing expenses were 44% and 43%, respectively, for the
three and nine months ended June 30, 2001 and 43% and 44% for the three and nine
months ended June 30, 2000, respectively. 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.

                                      16.
General and administrative expenses for the three months and nine months
ended June 30, 2001 were $1.7 million and $4.5 million, respectively, as
compared to $1.3 million and $4.1 million for the 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 nine months ended June 30, 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, severance and goodwill expenses totaling approximately
$596,000 were recognized during the three months ended June 30, 2001.  During
the three months ended June 30, 2001, as part of an ongoing effort to optimize
its corporate organizational structure and in conjunction with continuing cost
containment programs, the Company restructured 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 $2.9 million.  As part of this reorganization, during the three
months ended June 30, 2001, the Company recognized a restructuring charge of
$621,250, related primarily to severance costs associated with the resulting
termination of 27 employees as well as lease exit costs. The Stingray products,
which primarily consist of development tools for Windows Programmers, will
continue to be sold and supported by the Company.  See Note 4 of Notes to
Condensed Consolidated Financial Statements.

     Following a decision to discontinue the Fornova project, the Company
recognized a restructuring charge of approximately $447,100 during March 2001.
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 U.S.
economy, coupled with the slowing of third party investment in such ventures,
the project was abandoned with the termination of 12 employees. During the three
months ended June 30, 2001, the Company revised its estimate of the initial
restructuring costs by $194,859 as a result of the successful renegotiation of
certain contract fees as well as the finalization of severance costs.  The
Company had recognized expenses of approximately $720,100, $793,000 and $88,743
of product development costs associated with the Fornova project during the
first, second, and third quarters of fiscal 2001, respectively.  See Note 4 of
Notes to Condensed Consolidated Financial Statements.

Other Income, Net

     Other income for the three and nine months ended June 30, 2001 and June 30,
2000 primarily consists of interest income on the Company's cash, cash
equivalents and short-term investments. The decrease in other income of 34% and
5% for the three and nine months ended June 30, 2001, compared to the three
months and nine months ended June 30, 2000, is primarily due to a decrease in
interest rates during the current fiscal quarter as compared to the same fiscal
quarter last year.  See Note 5 of Notes to Condensed Consolidated Financial
Statements.

                                      17.
Income Tax Expense (Benefit)

     Income taxes for the three and nine month periods ended June 30, 2001 are
provided on an interim basis based on the expected tax rate for the year.  The
provision for income taxes for the three and nine month periods ended June 30,
2001, includes federal, state and foreign income taxes.

Liquidity and Capital Resources

     The decrease in cash flows from operations during the nine months ended
June 30, 2001 compared to the nine months ended June 30, 2000 was primarily due
to an increase of $4.5 million in accounts receivable resulting primarily from
the difference in the timing of the sale of products completed during the
comparable nine month period.

     The Company's investing activities consist primarily of the purchase and
sale of short-term investments and purchases of equipment.  During the nine
months ended June 30, 2001, net cash used in investing activities was $7.8
million, which included the purchase of short-term investments of $5.5 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."

Factors That May Affect Future Results

     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.

                                      18.
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 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 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

                                      19.
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 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.

                                      20.
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

                                      21.
service and warranty costs, any of which could have a material adverse effect on
our business and results of operations.

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 customers
for offering enterprise-wide solutions to software programming needs.  Systems
integrators may market competitive software products in the future.

                                      22.
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.

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 June 30, 2001, short-term investments of $17.2 million were held
available for sale with maturities of less than 365 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.

                                      23.
SIGNATURES

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

                         ROGUE WAVE SOFTWARE, INC.
                         (Registrant)

Date:  August 13, 2001   /s/ Merle A.Waterman
                         -----------------------------------------------------
                         MERLE A. WATERMAN
                         VICE PRESIDENT, CHIEF FINANCIAL OFFICER
                         AND SECRETARY

                                      24.