SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
June 30, 1998
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from ____ to ____.
Commission file number 0-27988
MICROWARE SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
IOWA 42-1073916
(State of incorporation) (I.R.S. Employer Identification No.)
1500 N.W. 118TH ST. DES MOINES, IOWA 50325
(Address of principal executive office)
(515) 223-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
COMMON STOCK: 14,584,692 SHARES OUTSTANDING AS OF JUNE 30, 1998
<PAGE>
MICROWARE SYSTEMS CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying financial information is unaudited but, in the opinion
of management, reflects all adjustments (which include only normally
recurring adjustments) necessary for a fair presentation of the results
for the periods shown. The unaudited consolidated financial statements
and analyses should be read in conjuction with the audited consolidated
financial statements and notes thereto for the year ended March 31, 1998
included in the Annual Report on Form 10-K previously filed with the
Securities and Exchange Commission.
The results for the quarter ended June 30, 1998 are not necessarily
indicative of the results to be expected for the entire year.
<PAGE>
MICROWARE SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues:
Product $ 3,600 $ 2,711
Services 1,611 1,368
-------- --------
5,211 4,079
Cost of revenues:
Product 622 578
Services 705 703
-------- --------
1,327 1,281
-------- --------
Gross profit 3,884 2,798
Operating expenses:
Research & development 1,738 1,881
Sales & marketing 2,765 2,463
General & administrative 653 780
-------- --------
Total operating expenses 5,156 5,124
-------- --------
Operating loss (1,272) (2,326)
-------- --------
Other income and (expense):
Foreign currency loss, net (29) (13)
Interest income 158 221
Interest expense (134) (30)
-------- --------
(5) 178
-------- --------
Loss before income tax expense (1,277) (2,148)
Income tax expense 111 34
-------- --------
Net loss $ (1,388) $ (2,182)
======== ========
Loss per share $ (0.10) $ (0.15)
======== ========
Shares used in per share
calculation-basic 14,569 14,120
======== ========
Diluted loss per share $ (0.10) $ (0.15)
======== ========
Shares used in per share
calculation-diluted 14,569 14,120
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MICROWARE SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
(unaudited)
--------- ---------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,591 $ 2,009
Short-term investments 9,659 11,611
Trade receivables, net of allowance for
doubtful accounts of $387 and $502 4,431 4,064
Income taxes receivable 3 6
Inventories 68 66
Prepaid royalties 346 370
Prepaid expenses and other current assets 838 780
Deferred tax assets 408 465
--------- ---------
Total current assets 17,344 19,371
Property and equipment:
Land and improvements 2,529 2,529
Building 8,426 8,426
Furniture, fixtures & equipment 3,438 3,264
Research and development equipment 2,598 2,571
Leasehold improvements 50 50
--------- ---------
17,041 16,840
Accumulated depreciation and amortization 3,278 3,176
--------- ---------
Net property and equipment 13,763 13,664
Other assets:
Intangible assets, net of amortization 2,884 3,050
Deposits and other 1,399 1,414
--------- ---------
Total other assets 4,283 4,464
--------- ---------
$ 35,390 $ 37,499
========= =========
<PAGE>
Liabilities
Current liabilities:
Notes payable to banks $ 282 $ 300
Current portion of long-term debt 67 66
Accounts payable 1,370 1,386
Accrued expenses 1,577 2,317
Deferred revenue 797 833
Income taxes payable 64 56
--------- ---------
Total current liabilities 4,157 4,958
Long-term debt, less current installments 6,901 6,918
Deferred income taxes 309 268
--------- ---------
Total liabilties 11,367 12,144
--------- ---------
Shareholders' equity
Series A preferred stock, $14.71 par
value; 340,000 shares authorized;
none issued or outstanding - -
Series I preferred stock, no par value;
500,000 shares authorized; none
issued or outstanding - -
Common stock, voting, no par value;
50,000,000 shares authorized;
14,809,792 and 14,778,092
shares issued, 14,584,692 and
14,552,992 shares outstanding 36,777 36,735
Retained earnings (deficit) (11,245) (9,857)
Accumulated other comprehensive loss (732) (746)
--------- ---------
24,800 26,132
Less cost of common shares acquired for the
treasury, 225,100 and 225,100 shares 777 777
--------- ---------
Total shareholders' equity 24,023 23,355
--------- ---------
$ 35,390 $ 37,499
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MICROWARE SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1998 1997
-------- --------
($ in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,388) $ (2,182)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 697 491
Deferred income taxes 98 59
Change in assets and liabilities:
Trade receivables, net (378) 2,373
Inventories (2) 4
Prepaid royalties 24 (48)
Other current assets (58) (361)
Income taxes receivable 3 (19)
Other assets (218) (1,126)
Accounts payable 7 (651)
Accrued expenses (550) 70
Deferred revenue (216) 107
Income taxes payable 8 (24)
-------- --------
Net cash used in operating activities (1,973) (1,307)
-------- --------
Cash flows from investing activities:
Capital expenditures (440) (2,595)
Purchase of short-term investments - (5,794)
Maturities of short-term investments 1,951 3,592
-------- --------
Net cash provided by (used in) investing
activities 1,511 (4,797)
-------- --------
Cash flows from financing activities:
Principal payments on notes payable
to banks and long-term debt (16) (567)
Proceeds from issuance of notes
payable to banks and long-term debt - 2,129
Proceeds from issuance of common stock 43 249
Cost of issuance of common stock (1) (34)
-------- --------
Net cash provided by financing activities 26 1,777
Effect of foreign currency exchange rate -------- --------
changes on cash 18 34
-------- --------
Net decrease in cash and cash equivalents (418) (4,293)
Cash and cash equivalents at beginning
of period 2,009 6,758
-------- --------
Cash and cash equivalents at end of period $ 1,591 $ 2,465
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 87 $ 141
========== ========
Cash paid for taxes $ 13 $ 27
========== ========
</TABLE>
<PAGE>
MICROWARE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In accordance with the rules and regulations of the Securities and
Exchange Commission, the preceding unaudited financial statements omit
or condense certain information and footnote disclosure normally
required for complete financial statements prepared in accordance with
generally accepted accounting principles. In the opinion of management,
all adjustments (which include reclassifications and normal recurring
adjustments) necessary to present fairly the financial position, results
of operations and cash flows at June 30, 1998 and for all periods
presented, have been made.
Certain amounts in the fiscal 1998 consolidated financial statements
have been reclassified to conform to the fiscal 1999 presentation.
2. REVENUE RECOGNITION
The Company has adopted the provisions of Statement of Position (SOP)
97-2, "Software Revenue Recognition", as amended by SOP 98-4," Deferral
of the Effective Date of Certain Provisions of SOP 97-2", effective
April 1, 1998. SOP 97-2 and SOP 98-4 provide guidance on recognizing
revenue on software transactions and supercede SOP 91-1. The adoption
of SOP 97-2 and SOP 98-4 did not have a significant impact on the
Company's current licensing or revenue recognition practices. However,
should the Company adopt new or change its existing licensing practices,
the Company's revenue recognition practices may be subject to change to
comply with the accounting guidance provided in SOP 97-2 and 98-4.
3. COMPUTATION OF NET LOSS PER SHARE
Net loss per share is calculated in accordance with the provisions of
Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share". Basic EPS
has been computed by dividing net loss by the weighted average number of
common shares outstanding during the periods presented. Diluted EPS is
computed by dividing net loss by the weighted average common and, when
dilutive, common equivalent shares outstanding during the periods
presented. Dilutive common equivalent shares are calculated using the
treasury stock method and consist of common stock issuable upon the
exercise of options and warrants. Prior period EPS calculations have
been restated.
4. COMPREHENSIVE INCOME
On April 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". Comprehensive income is defined as the change in
equity of a company during a period from transactions and other events
and circumstances, excluding transactions resulting from investments by
owners and distributions to owners. For the Company, the primary
difference between net income and comprehensive income results from
foreign currency translation adjustments.
<PAGE>
Comprehensive loss for the three months ended June 30, 1997 and 1998 is
as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
---------------------------
1998 1997
-------- --------
($ in thousands)
<S> <C> <C>
Net loss $ (1,388) $ (2,182)
Foreign currency translation adjustment 14 138
-------- --------
Total comprehensive loss $ (1,374) $ (2,044)
======== ========
</TABLE>
5. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information". This statement establishes
standards for reporting information about operating segments in annual
financial statements. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. The disclosures prescribed by SFAS No. 131 will be effective
for the Company's consolidated financial statements for the year ending
March 31, 1999.
In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". SOP 98-1 provides guidance for
determining whether computer software is internal-use software and on
accounting for the proceeds of computer software originally developed or
obtained for internal use and then subsequently sold to the public. It
also provides guidance on capitalization of the losses incurred for
computer software developed or obtained for internal use. The Company
has not yet determined the impact, if any, of adopting this statement.
The disclosures prescribed by SOP 98-1 will be effective for the year
ending March 31, 2000 consolidated financial statements.
<PAGE>
MICROWARE SYSTEMS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FORWARD-LOOKING INFORMATION IS SUBJECT TO UNCERTAINTY
This discussion and analysis of the Company's financial condition and
results of operations includes forward-looking statements that involve
risk and uncertainty, including management's expectations for fiscal
1999 and known trends and uncertainties in the business. Actual future
results and trends may differ materially depending on a variety of
factors, including the volume and timing of orders received during the
quarter, the timing and acceptance of new products and product
enhancements by the Company or its competitors, changes in pricing,
product life cycles, seasonality of customer buying patterns, the
existence of product errors, extraordinary events, such as litigation
or acquisition, including related charges, and economic conditions
generally or in various geographic areas. All of the foregoing factors,
and others not mentioned, make operating results difficult to forecast.
The Company's operating results have varied significantly from quarter
to quarter in the past, and the future operating results of the Company
may fluctuate as a result of the above and other risk factors detailed
in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998 and other documents filed by the Company with the
Securities and Exchange Commission. Due to all of the foregoing
factors, the Company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be
relied upon as an indication of future performance. In prior years, the
Company's actual financial performance has not always met market
expectations. It is likely that, in some future quarter, the Company's
financial performance will again fall below market expectations.
OVERVIEW
Microware develops, markets and supports sophisticated real-time
operating system software and development tools for the traditional
embedded, communications and consumer products markets. Microware's
product line is built around the OS-9 family of real-time operating
systems for advanced 16-bit and 32-bit microprocessors. The Company's
OS-9 product family includes options for programming languages,
networking, graphical interfaces and productivity tools.
The Company has historically derived revenues from development licenses
and run-time license royalty fees along with sales of related software
productivity tools, maintenance support and custom contract engineering
work. Custom contract engineering revenues are typically derived from
discrete software engineering projects porting the OS-9 operating system
along with customized software products to a customer's product.
Commonly, license royalty fees follow the completion of these contracts
and the successful deployment of the customer's product. For financial
reporting purposes, product revenues primarily consist of software
licenses and software development tool products, along with license run-
time royalty fees earned, including non-refundable prepaid royalties.
Services revenues principally consist of revenues from custom contract
engineering and maintenance support agreements, along with consulting
and training activity.
<PAGE>
A key element of the Company's long-term strategy is to develop product
which can be embedded into successful, high volume customer products;
thereby significantly increasing license run-time royalty fees. Any
increase in the percentage of revenues attributable to license run-time
royalties will depend on the Company's successful negotiation of license
run-time royalties and on the successful commercialization by the
Company's customer of the underlying product. Recently, the Company has
been negatively impacted by target markets, such as cellular phones,
two-way paging, personal Internet devices and digital and interactive
television emerging much slower than anticipated. In addition, there
can be no assurances that the Company will be successful when the
markets, for which the Company products are targeted, emerge. In an
effort to lessen the variability of its quarterly operating results and
attain profitability, the Company substantially increased its emphasis
on the traditional embedded and communications markets in the past
year. While the Company believes all these markets present significant
opportunities for growth, this change in market emphasis, along with the
Company's continued involvement on emerging consumer products markets
whose development is uncertain, exposes the Company's business to
significant risks and uncertainties.
The Company has entered into software license and custom contract
engineering agreements with Motorola to provide or develop various
software solutions. Motorola has maintained a significant equity
position in the Company since July 1995. Product revenues of
approximately $10,000 and $1,260,000 resulted from such agreements in
the first quarter of fiscal 1998 and 1999, respectively. Services
revenues of approximately $315,000 and $540,000 resulted from custom
contract engineering services for Motorola in the first quarters of
fiscal 1998 and 1999, respectively. These revenues relate to products
under development which Motorola has not yet begun to distribute. The
Company believes that all transactions with Motorola have been, and the
Company's Board of Directors has adopted a policy stating that any
future transactions with significant equity owners will be, on terms
which are considered to be no less favorable to the Company than those
obtained in arm's length transactions with unaffiliated third parties.
<PAGE>
RESULTS OF OPERATIONS
First Quarter of Fiscal 1999 Compared to the First Quarter of Fiscal 1998
Revenues
Total revenues increased 28% or $1.1 million from $4.1 million in the
first quarter of fiscal 1998 to $5.2 million in the first quarter of
fiscal 1999. Product revenues increased 33% or $889,000 from $2.7
million in the first quarter of fiscal 1998 to $3.6 million in the first
quarter of fiscal 1999. The increase in product revenues between
periods resulted from an increase in non-refundable prepaid royalties
from Motorola for the Company's Digital Television and Java product
offerings. Services revenues increased 18% or $243,000 from $1.4
million in the first quarter of fiscal 1998 to $1.6 million in the first
quarter of fiscal 1999. The increase in services revenues from the
first quarter of fiscal 1998 to the same period in fiscal 1999 resulted
from an increase in funded development, principally from Motorola, of
advanced processor ports.
International revenues represented 53% or $2.2 million and 44% or $2.3
of total revenues in the first quarter of fiscal 1998 and 1999,
respectively. The decrease in international revenues as a percentage of
total revenues between periods was due to a decline of $343,000 from the
Company's operations in Japan. The decline in revenues from Japan
resulted primarily from a decrease in funded porting and custom services
work compounded by the increased strength of the U.S. dollar against the
Japanese yen. The reduction in revenues from the Company's operations
in Japan were offset by an increase of $454,000 in revenues from the
Company's operations in Europe. The increase in Europe resulted from an
increase in OEM license sales. The Company expects international sales
to continue to represent a significant portion of its revenues, although
the percentage may fluctuate significantly from period to period. In
Europe and Japan, revenues and expenses are primarily denominated in
local currencies. The Company's operating and pricing strategies take
into account changes in exchange rates over time, however, the Company's
results of operations may be significantly affected in the short-term by
fluctuations in foreign currency exchange rates.
Cost of Revenues
Cost of revenues totaled $1.3 million for both the first quarters of
fiscal 1998 and 1999. As a percentage of product revenues, cost of
product revenues decreased from 21% in the first quarter of fiscal 1998
to 17% in the first quarter of fiscal 1999, primarily as a result of the
increased product revenues between periods. As a percentage of services
revenues, cost of services revenues decreased from 51% in the first
quarter of fiscal 1998 to 44% in the first quarter of fiscal 1999. This
decrease resulted from higher margin custom contract work being
performed in the first quarter of fiscal 1999 as compared to the first
quarter of fiscal 1998.
<PAGE>
Research and Development
Research and development expense decreased 8% or $143,000 from $1.9
million in the first quarter of fiscal 1998 to $1.7 million in the first
quarter of fiscal 1999. The decrease in overall dollars between periods
resulted primarily from a decrease in personnel partially offset by
increased salary and purchased software maintenance costs.
Sales and Marketing
Sales and marketing expense increased 12% or $302,000 from $2.5 million
in the first quarter of fiscal 1998 to $2.8 million in the first quarter
of fiscal 1999. The increase in sales and marketing expense from the
first quarter of fiscal 1998 to the first quarter of fiscal 1999
resulted primarily from the overall increase in revenues between
periods. As a percentage of revenues, sales and marketing expense
decreased 7% from the first quarter of fiscal 1998 to the first quarter
of fiscal 1999. Additionally the Company increased advertising and
trade-show related costs in Japan by approximately $110,000 between
periods. The Company expects to continue investing in sales and
marketing over the remainder of fiscal 1999 to expand its sales force
and customer base and to introduce new products.
General and Administrative Expense
General and administrative expenses decreased 16% or $127,000 from
$780,000 to $653,000 in the first quarters of fiscal 1997 and 1998,
respectively. The decrease in general and administrative expenses
between periods primarily resulted from a reduction in relocation and
recruiting fees which were partially offset by increased salary and
personnel costs.
Other Income (Expense)
Other income (expense) decreased from $178,000 to ($5,000) in the first
quarters of fiscal 1998 and 1999, respectively. Overall, the decrease is
attributable to a reduction in interest income due to cash used in
operations along with an increase in interest expense related to the
Company's long-term debt on its new headquarters facility.
Liquidity and Capital Resources
At June 30, 1998, the Company had working capital of $13.2 million and
approximately $11.2 million in cash, cash equivalents and short-term
investments.
Net cash used in operating activities in the first three months of
fiscal 1998 and 1999 totaled $1.3 million and $2.0 million,
respectively. In the first three months of fiscal 1998, the net loss
of $2.2 million and an increase in other assets of $1.1 million were
partially offset by a decrease in trade receivables of $2.4 million. The
increase in other assets was due primarily to additional purchases of
third party software to be bundled with the Company's software
products. The net loss of $1.4 million along with the reduction in
accrued expenses of $550,000 were the primary reason for the cash used
in operations in the first three months of fiscal 1999.
<PAGE>
Net cash provided by (used in) investing activities in the first three
months of fiscal 1998 and 1999 totaled ($4.8) million and $1.5 million,
respectively. Uses of cash in the first quarter of fiscal 1998 resulted
from construction expenditures made on the Company's new headquarters
facility along with net purchases of short-term investments. Cash
provided from investing activities during the first quarter of fiscal
1999 resulted from maturaties of short-term investments of $2.0 million
offset by capital expenditures of $440,000.
Net cash provided by financing activities in the first three months of
fiscal 1998 and 1999 totaled $1.8 million and $26,000, respectively.
The cash provided by financing activities in the first quarter of fiscal
1998 resulted primarily from proceeds received on the Company's
construction loan for it new headquarters facility.
The Company believes its existing cash and short-term investments along
with other working capital will be sufficient to meet its operating and
capital expenditure needs for at least the next 12 months.
"Year 2000" Issues
The Company is aware of the numerous issues associated with the
programming code in existing computer systems as the year 2000
approaches. The "Year 2000" problem is pervasive and complex, as many
computer systems will be affected in some way by the rollover of the two
digit year value to 00. Systems that do not properly recognize such
information may generate erroneous data or cause a system to fail. The
"Year 2000" issue creates risk for the Company from unforeseen problems
in its own computer systems and from third parties with whom the Company
deals worldwide. Failures in the Company's and/or third party's
computer systems could have a material adverse impact on the Company's
operations. To address this concern, the Company has evaluated its
products to assess their Year 2000 compliance. The Company believes
that the most current release of all of its products will not cease to
perform nor generate incorrect or ambiguous data or results solely due
to a change in date to or after January 1, 2000. The Company believes
that the current versions of its products are in material compliance
with the Year 2000 papers by the British Standards Institute. While
copies of old versions of the Company's software may be embedded in
deployed products developed by OEM licensees, some of which may be used
in mission critical functions, the Company has made commercially
available Year 2000 fixes to all of its past licensees, and believes
that the term of its license agreements preclude any liability for Year
2000 related failures in such products. The Company is also currently
in the process of evaluating its infrastructure along with its external
suppliers for "Year 2000" compliance. Management believes its internal
infrastructure and external suppliers used will be compliant by the year
2000. Management does not believe the costs related to achieving "Year
2000" compliance will be material. There can be no assurance that the
systems of other companies on which the Company relies have been or will
be accurately converted to be "Year 2000" compliant and will not have an
adverse effect on the Company's operations.
<PAGE>
"Euro" Issues
The Economic and Monetary Union ("EMU") and the introduction of a new
currency (the "Euro"), will begin in Europe on January 1, 1999. The new
currency enables the European Union ("EU") to blend the economies of
EU's member states into one large market with unrestricted and
unencumbered trade and commerce across borders. Eleven European
countries are expected to participate in the first membership wave,
including the Netherlands, Belgium, Luxembourg, Germany, France,
Ireland, Finland, Austria, Italy, Spain and Portugal. Other member
states are expected to join in the years to come. The Company has
begun to evaluate the impact of the introduction of the new currency
but has not determined the impact, if any, on the Company's financial
position, results of operations or cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
a) Subsequent to the end of the fiscal quarter ended June 30,
1998, the Company accepted the resignation of an executive
vice president, Kent R. Kelderman, who had been serving as
the Company's Chief Financial Officer. Following Mr.
Kelderman's resignation, the Board of Directors appointed
M. Denis Connaghan, the Company's Chief Operating Officer,
to be acting Chief Financial Officer.
b) The Securities and Exchange Commission has recently amended
Rules 14a-4 and 14a-5 promulgated under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in
respect of the Company's exercise of discretionary voting
authority in connection with annual shareholder meetings,
and in particular with respect to matters not submitted
under the Shareholder Proposal rule set forth in Rule 14a-8
under the 1934 Act.
Under the amended Rules, a company is permitted
discretionary voting authority in those instances in which
the company did not have notice of the matter by a date
more than 45 days before the month and day in the current
year corresponding to the date on which the company first
mailed its proxy materials for the prior year's annual
meeting of shareholders, or by a date established by an
overriding advance notice provision in a company's articles
of incorporation or bylaws. The Company has not
implemented such an advance notice provision. Accordingly,
in connection with the 1999 Annual Meeting of Stockholders
of the Company, the date after which notice of a
stockholder proposal submitted outside the processes of
Rule 14a-8 under the 1934 Act is considered untimely is
June 8, 1999.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a.) Exhibit 27 - Financial Data Schedule (EDGAR version
only).
(b.) None.
No other items.
SIGNATURE
Pursuant to the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned
thereunto authorized.
MICROWARE SYSTEMS CORPORATION
Date: August 14, 1998 /s/ M. Denis Connaghan
-----------------------
M. Denis Connaghan
Chief Operating Officer &
Executive Vice President
(Acting Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of 6/30/98 and Consolidated Statement of
Operations for the quarter ended 6/30/98 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,591
<SECURITIES> 9,659
<RECEIVABLES> 4,818
<ALLOWANCES> 387
<INVENTORY> 68
<CURRENT-ASSETS> 17,344
<PP&E> 17,041
<DEPRECIATION> 3,278
<TOTAL-ASSETS> 35,390
<CURRENT-LIABILITIES> 4,157
<BONDS> 0
0
0
<COMMON> 36,777
<OTHER-SE> (12,754)
<TOTAL-LIABILITY-AND-EQUITY> 35,390
<SALES> 3,600
<TOTAL-REVENUES> 5,211
<CGS> 622
<TOTAL-COSTS> 1,327
<OTHER-EXPENSES> 5,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134
<INCOME-PRETAX> (1,277)
<INCOME-TAX> 111
<INCOME-CONTINUING> (1,388)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,388)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
