<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarterly Period Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND 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.)
850 SW 35th Street, Corvallis, Oregon 97333
(Address of principal executive offices) (Zip Code)
(541) 754-3010
(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 December 31, 1997
Common Stock, $0.001 par value 8,411,434
1.
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ROGUE WAVE SOFTWARE, INC.
FORM 10-Q
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at
September 30, 1997 and December 31, 1997. . . . . . . . . . . 3
Consolidated Statements of Operations for the three
months ended December 31, 1996 and 1997 . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the
three months ended December 31, 1996 and 1997 . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . .18
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . . .19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . .19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
2.
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PART I - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS:
ROGUE WAVE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1997
------------ ------------
(Unaudited)
A S S E T S:
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,282 $ 6,750
Short-term investments 25,739 29,603
Accounts receivable,net 6,259 6,058
Prepaid and other current assets 1,221 966
------------ ------------
Total current assets 42,501 43,377
Furniture, fixtures and equipment, net 3,934 4,580
Other assets, net 2,255 2,168
------------ ------------
Total assets $ 48,690 $ 50,125
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 714 $ 936
Accrued expenses 2,625 2,307
Deferred revenue 5,393 5,599
Current portion of long-term obligations 202 184
------------ ------------
Total current liabilities 8,934 9,026
Long-term obligations, less current portion 351 321
------------ ------------
Total liabilities 9,285 9,347
------------ ------------
Stockholders' equity:
Common stock 8 8
Additional paid-in capital 36,695 36,806
Retained earnings 2,822 3,974
Cumulative translation adjustment (120) (10)
------------ ------------
Total stockholders' equity 39,405 40,778
------------ ------------
Total liabilities and stockholders' equity $ 48,690 $ 50,125
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
3.
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ROGUE WAVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
December 31,
------------------------
1996 1997
------------ -----------
<S> <C> <C>
Revenue:
License revenue $ 4,485 $ 5,971
Service and maintenance revenue 1,394 3,183
------------ -----------
Total revenue 5,879 9,154
------------ -----------
Cost of revenue:
Cost of license revenue 342 408
Cost of service and maintenance revenue 502 901
------------ -----------
Total cost of revenue 844 1,309
------------ -----------
Gross profit 5,035 7,845
------------ -----------
Operating expenses:
Product development 1,484 1,938
Sales and marketing 2,477 3,911
General and administrative 705 807
------------ -----------
Total operating expenses 4,666 6,656
------------ -----------
Income from operations 369 1,189
Other income, net 110 584
------------ -----------
Income before income taxes 479 1,773
Income tax expense 158 621
------------ -----------
Net income $ 321 $ 1,152
------------ -----------
------------ -----------
Basic earnings per share $ 0.07 $ 0.14
------------ -----------
------------ -----------
Diluted earnings per share $ 0.04 $ 0.13
------------ -----------
------------ -----------
Shares used in basic per share calculation 4,703 8,389
Shares used in diluted per share calculation 7,395 9,210
</TABLE>
See accompanying notes.
4.
<PAGE>
ROGUE WAVE SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months ended
December 31,
------------------------
1996 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $321 $1,152
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 334 626
Changes in assets and liabilities:
Accounts receivable 929 201
Prepaid and other current assets 323 255
Other assets (23) (61)
Accounts payable and accrued expenses 199 (96)
Deferred revenue 686 206
------------ -----------
Net cash from operating activities 2,769 2,283
------------ -----------
Cash flows from investing activities:
Purchase of furniture, fixtures, and equipment (388) (1,124)
Purchase of short-term investments -- (3,864)
------------ -----------
Net cash from investing activities (388) (4,988)
------------ -----------
Cash flows from financing activities:
Payments on long-term obligations (54) (48)
Net proceeds from issuance of common stock, net 25,628 --
Stock issuance costs -- (23)
Proceeds from exercise of stock options 46 135
------------ -----------
Net cash from financing activities 25,620 64
------------ -----------
Effect of exchange rate on cash and cash equivalents (2) 109
------------ -----------
Net change in cash and cash equivalents 27,999 (2,532)
Cash and cash equivalents at beginning of period 1,714 9,282
------------ -----------
Cash and cash equivalents at end of period $29,713 $6,750
------------ -----------
------------ -----------
</TABLE>
See accompanying notes.
5.
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ROGUE WAVE SOFTWARE, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, 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. 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
for the year ended September 30, 1997, as included in the Company's annual
report on Form 10-K.
2. Earnings per share
In 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS
No. 128 requires the replacement of previously reported primary and fully
diluted earnings per share required by Accounting Principles Board Opinion
No. 15 with basic earnings per share and diluted earnings per share. The
calculation of basic earnings per share excludes any dilutive effect of
stock options, while diluted earnings per share includes the dilutive
effect of stock options. Per share amounts for the quarter ended December
31, 1996 have been restated to conform to the requirements of SFAS No. 128.
3. Acquisition
During October 1997, the Company acquired 78% of the outstanding stock of
HotData Inc. ("HotData") for $1.3 million in cash and can contribute up to
a total of $2.0 million through February 1999. HotData, which began
operations in 1997, is developing technology to collect and verify data
across the Internet. The acquisition is accounted for under the equity
method and HotData is a majority-owned subsidiary with the financial
results of such subsidiary consolidated with the Company's as of October 1,
1997. The Company will have the option to purchase the minority interest
of the subsidiary during a specified time period in the future.
Consolidated pro forma results of operations as if the acquisition had
occurred at the beginning of fiscal year 1997 are not presented as the pro
forma effect is not material.
4. Subsequent Event
On January 20, 1998, the Company signed a definitive agreement to acquire
Stingray Software, Inc. ("Stingray"). The Company will acquire all of the
outstanding shares of Stingray common stock in exchange for approximately
1.68 million shares of Rogue Wave common stock. Stingray is a privately
held company that develops and distributes development tools for Windows
programmers. The acquisition, which will be accounted for as a pooling of
interests, is subject to certain closing conditions and is expected to be
consummated by February 28, 1998.
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, 1997.
6.
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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 was founded in 1989 to provide reusable software parts for
the development of object-oriented software applications. The Company
operated as a Subchapter S corporation until June 1994.
The Company has experienced significant revenue growth over the last
several years. During fiscal 1997, the Company's revenue grew primarily from
the continued strong demand for C++ and Java-based software parts and tools
and the establishment of a consulting group based in Boulder, Colorado. In
addition, the Company's international revenue increased from 19% of total
revenue in fiscal 1996 to 23% of total revenue in fiscal 1997 due primarily
to the expansion of the European sales channel by the acquisition of a Rogue
Wave products distributor.
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 and
shipment of the product if no significant contractual obligations remain and
collection of the resulting receivable is probable. Allowances for credit
risks and for estimated future returns are provided for 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
is recognized upon completion of the related activity. For all periods
presented, the Company has recognized revenue in accordance with Statement of
Position 91-1, SOFTWARE REVENUE RECOGNITION. See Note 1 of Notes to
Consolidated Financial Statements.
The Company markets its products primarily through its direct sales
force, and to a lesser extent through the Internet and an indirect channel
consisting of OEMs, VARs, 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.
International revenue accounted for approximately 19%, 23% and 30%
of total revenue in fiscal 1996, fiscal 1997, and the quarter ended December
31, 1997, respectively. In February 1997, the Company expanded its European
operations by acquiring Precision, a distributor of Rogue Wave software
products in Germany, the United Kingdom, France and the Benelux countries.
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. There can be no assurance, however, that the Company will
be able to maintain or increase international market demand for its products.
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 the risk associated with currency fluctuations. Although
exposure to currency fluctuations to date has been insignificant, to the
extent international revenue is denominated in local currencies, foreign
currency translations may contribute to significant fluctuations in, and
could have a material adverse effect upon, the Company's business, financial
condition and results of operations. See "Risk Factors-Risks Inherent in
International Operations."
The Company has developed technology relating to the collection
and verification of data across the Internet. The Company contributed such
technology, and made a funding commitment of $1.3 million on October 1, 1997
and can contribute up to a total of $2.0 million through February 1999, to a
majority-owned subsidiary, HotData, for further development and possible
commercialization of this technology. The Company will have the option to
purchase the minority interest of the subsidiary during a specified time
period in the future. Dan Whitaker,
7.
<PAGE>
the Company's former Executive Vice President, Marketing, resigned his office
and his position on the Company's Board of Directors to devote full time to
the management of HotData, but has agreed to serve as a consultant to the
Company through July 1998. The Company expects that such subsidiary will be
in the development stage through at least fiscal 1998. There can be no
assurance that the technology developed by such subsidiary will be
commercialized, and even if it is commercialized there can be no assurance
that the technology will receive market acceptance due to the subsidiary's
new and untested business model. The financial results of HotData have been
consolidated with the Company's financial results. Accordingly, fluctuations
in the operating results of HotData may have a material adverse effect on the
Company's operating results.
In April 1997, the Company established a consulting group in
Boulder, Colorado consisting of 15 employees. The addition of these employees
has resulted in an increase in service and maintenance revenue and a
corresponding increase in the cost of service and maintenance revenue. The
gross margin associated with such consulting work has been and is expected to
continue to be lower than the Company's historical gross margin on service
and maintenance revenue. More recently, the Company announced its intention
to move its administrative operations from its current location in Corvallis,
Oregon to Boulder, Colorado during fiscal 1998. The Company expects to incur
charges totaling approximately $1.5 million during fiscal 1998 in connection
with this move. Such charges will have a material adverse effect on the
operating results for the quarters in which they are incurred. Specifically,
the Company anticipates that it will incur the substantial majority of such
charges during the second quarter of fiscal 1998. Furthermore, the Company
may incur additional charges associated with the move which, if incurred, may
have a material adverse effect on the Company's operating results.
On January 20, 1998, the Company signed a definitive agreement
to acquire Stingray Software, Inc. ("Stingray"). The Company will acquire
all of the outstanding shares of Stingray common stock in exchange for
approximately 1.68 million shares of Rogue Wave common stock. Stingray is a
privately held company that develops and distributes development tools for
Windows programmers. The merger will add several new product lines to Rogue
Wave's current slate of object-oriented C++ and Java class libraries and
builders. Stingray offers an extensive line of add-on libraries that extend
and enhance the Microsoft Foundation Classes (MFC), providing additional,
prebuilt functionality for creating sophisticated GUI controls, grids,
diagrams and charts. Stingray also offers ActiveX components, and several
Java class libraries that will further strengthen Rogue Wave's offerings in
the Java marketplace. The acquisition, which will be accounted for as a
pooling of interests, is subject to certain closing conditions and is
expected to be consummated by February 28, 1998. The Company expects to
incur pooling related charges totaling approximately $750,000 during the
quarter ended March 31, 1998, which will have a material adverse effect on
the operating results for such quarter. The Company will incorporate the
financial results of Stingray and will include the results in the quarter
ended March 31, 1998 and will restate prior periods.
8.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
net revenues represented by certain line items in the Company's Consolidated
Statements of Operations.
<TABLE>
<CAPTION>
Percentage of total net revenues
--------------------------
Three Months ended
December 31,
--------------------------
1996 1997
------------ -----------
<S> <C> <C>
Revenue:
License revenue 76% 65%
Service and maintenance revenue 24% 35%
---- ----
Total revenue 100% 100%
---- ----
Cost of Revenue:
Cost of license revenue 6% 4%
Cost of service and maintenance revenue 8% 10%
---- ----
Total cost of revenue 14% 14%
---- ----
Gross profit 86% 86%
---- ----
Operating expenses:
Product development 25% 21%
Sales and marketing 42% 43%
General and administrative 13% 9%
---- ----
Total operating expenses 80% 73%
---- ----
Income from operations 6% 13%
Other income, net 2% 6%
---- ----
Income before income taxes 8% 19%
Income tax expense 3% 7%
---- ----
Net income 5% 12%
---- ----
</TABLE>
REVENUE
Total revenue increased 56% to $9.2 million for the three months ended
December 31, 1997 from $5.9 million for the three months ended December 31,
1996. License revenue increased 33% to $6.0 million for the three months
ended December 31, 1997 from $4.5 million for the three months ended December
31, 1996. License revenue increased primarily as a result of an increase in
the number of licenses sold to existing and new customers, reflecting
additional product offerings, an expanding market, increased market awareness
and expansion of the Company's telesales and direct sales organization and
international presence.
9.
<PAGE>
Service and maintenance revenue increased 128% to $3.2 million for the
three months ended December 31, 1997 from $1.4 million for the three months
ended December 31,1996. The increases in service and maintenance revenue were
primarily attributable to increased sales volume of the Company's support and
maintenance services associated with the growth of the Company's installed
base and an increase in consulting revenue resulting from the establishment
and growth of the Company's consulting business group.
COST OF REVENUE
Cost of license revenue increased 19% to $408,000 for the three months
ended December 31, 1997 from $342,000 for the three months ended December 31,
1996. The increase in the cost of license revenue is primarily attributable
to the increase in the number of licenses sold, offset by the cost savings
associated with increased shipments of the Company's products on CD-ROM and
online distribution. Such cost savings contributed to a decrease in cost of
license revenue as a percent of total revenue.
Cost of service and maintenance revenue increased 79% to $901,000 for the
three months ended December 31, 1997 from $502,000 for the three months ended
December 31, 1996. The increase was primarily the result of the
establishment of a consulting business group in April 1997.
OPERATING EXPENSES
Product development expenses increased 31% to $1.9 million for the three
months ended December 31, 1997 from $1.5 million for the three months ended
December 31, 1996. The increase in product development expenses was
primarily attributable to the hiring of additional product development
personnel. The decrease in product development expenses as a percent of
revenue was primarily due to the faster growth in revenue relative to the
growth in development expense. The Company anticipates that it will continue
to devote substantial resources to product development and that product
development expenses will increase in absolute dollars through fiscal 1998 as
the Company continues to increase its product development capacity, although
the Company does not believe such expenses will increase as a percentage of
total revenue.
Sales and marketing expenses increased 58% to $3.9 million for the three
months ended December 31, 1997 from $2.5 million for the three months ended
December 31, 1996. The increase was primarily due to continued investment in
systems and personnel to expand the Company's sales channels and the addition
of sales personnel through the acquisition of Precision during the second
quarter of fiscal 1997. 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.
General and administrative expenses increased 14% to $807,000 for the
three months ended December 31, 1997 from $705,000 for the three months ended
December 31, 1996. The increase in general and administrative expenses were
primarily due to increased staffing, investment in infrastructure and
associated expenses necessary to manage and support the Company's growing
operations. The Company believes that during the near term its general and
administrative expenses will continue to grow in absolute dollars as a result
of additional anticipated expansion and the Company's scheduled move of its
administrative operations to Boulder, Colorado.
OTHER INCOME, NET
Other income increased during the three months ended December 31, 1997
versus the three months ended December 31, 1996 as a result of higher
interest income due to a higher investment portfolio generated by cash from
the Company's public offerings of common stock and operations.
10.
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INCOME TAX EXPENSE
The Company's effective tax rate for the three months ended December 31,
1997 was 35%. The Company anticipates its fiscal 1998 effective tax rate will
be approximately 35% percent; however, this rate could change based on a
change in the percentage of total revenue derived from international sources.
LIQUIDITY AND CAPITAL RESOURCES
The increase in cash flows from operations was due primarily to the
increase in net income, decrease in accounts receivable, and increases in
accounts payable, accrued expenses and deferred revenues. The Company's
investing activities consist primarily of the purchase and sale of short-term
investments and purchases of equipment. 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 flow 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 "Risk Factors - Uncertainty of
Future Operating Results; Fluctuations in Quarterly Operating Results," and
"-Future Acquisitions."
FACTORS THAT MAY AFFECT FUTURE RESULTS
IN EVALUATING THE COMPANY'S BUSINESS, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER INFORMATION
PRESENTED IN THIS REPORT.
UNCERTAINTY OF FUTURE OPERATING RESULTS; FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS. Future operating results will depend upon many factors,
including the demand for the Company's products and services, the level of
product and price competition, the length of the Company's sales cycle, the
size and timing of individual license transactions, the delay or deferral of
customer implementations, the budget cycles of the Company's customers, the
Company's success in expanding its direct sales force and indirect
distribution channels, the timing of new product introductions and product
enhancements, the mix of products and services licensed or sold, levels of
international sales, activities of and acquisitions by competitors, changes
in pricing policy by the Company and its competitors, publication of opinions
about the Company, its products and object-oriented technology by industry
analysts, the hiring of new employees, changes in foreign currency exchange
rates, product lifecycles and the ability of the Company to develop and
market new products and control costs. The Company generally ships orders as
received and as a result typically has little or no backlog. Quarterly
revenue and operating results therefore depend on the volume and timing of
orders received during the quarter, which are difficult to forecast. In
addition, the Company has historically earned a substantial portion of its
revenue in the last weeks, or even days, of each quarter. To the extent this
trend continues, the failure to achieve such revenue during the last weeks of
any given quarter will have a material adverse effect on the Company's
business, financial condition and results of operations. Furthermore, due to
all of the foregoing factors, it is possible that in some future quarter the
Company's operating results may be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common
Stock would likely be materially and adversely affected.
Prior growth rates in the Company's revenue and net income should not be
considered indicative of future operating results. Service and maintenance
revenue tends to fluctuate as consulting contracts, which may extend over
several months, are undertaken, renewed, completed or terminated. License
fee revenue is difficult to forecast due to the fact that the Company's sales
cycle, from initial evaluation to purchase, varies substantially from
customer to customer. As a result of these and other factors, revenue for
any quarter is subject to significant variation, and the Company believes
that period-to-period
11.
<PAGE>
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indicators of future performance. Because the
Company's operating expenses are based on anticipated revenue trends and
because a high percentage of the Company's expenses are relatively fixed, 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 result in significant losses. The Company has announced its
intention to move its administrative operations from its current location in
Corvallis, Oregon to Boulder, Colorado during fiscal 1998. In connection with
this move, the Company expects to incur charges totaling approximately $1.5
million during fiscal 1998. Such charges will have a material adverse effect
on the operating results for the quarters in which they are incurred.
Specifically, the Company anticipates that it will incur the substantial
majority of such charges during the second quarter of fiscal 1998.
Furthermore, the Company may incur additional charges associated with the
move which, if incurred, may have a material adverse effect on the Company's
operating results. In addition, the Company created a majority-owned
subsidiary to develop technology relating to the collection and verification
of data across the Internet. The Company expects such subsidiary will be in
the development stage through at least fiscal 1998. There can be no assurance
that the technology developed by such subsidiary will be commercialized, or
even if it is commercialized there can be no assurance of market acceptance
due to such subsidiary's new and untested business model. The financial
results of such subsidiary will be consolidated with the Company's financial
results. Accordingly, fluctuations in the operating results of such
subsidiary may have a material adverse effect on the Company's operating
results. Fluctuations in operating results may also result in volatility in
the price of the Company's Common Stock.
MANAGEMENT OF GROWTH. The Company is experiencing a period of transition
and aggressive product introductions that has placed, and may continue to
place, a significant strain on its resources, including its personnel.
Expansion of the Company's product lines, additional product development and
product introductions, or acquisitions of other technologies or companies,
when added to the day-to-day activities of the Company, will place a further
strain on the Company's resources and personnel. In particular, the Company
has acquired a European distributor with offices and personnel in several
European countries and established a consulting group in Boulder, Colorado to
help expand its ability to provide consulting services. In addition, the
Company recently announced an agreement to acquire Stingray Software, Inc.
which develops and distributes development tools from their facilities in
Morrisville, North Carolina. Such additions involve a number of risks,
including risks related to the integration of new businesses or business
units, the substantial management time devoted to such activities, the
failure to achieve anticipated benefits, such as cost savings and increased
revenue, and the difficulties of managing additional operations. The
Company's acquisition of Inmark in October 1995 and the planned acquisition
of Stingray will result in the Company's product development team being
distributed in four separate sites across the country. Managing this
distribution requires a significant amount of attention from management,
particularly the Vice President, Development and the Chief Technology
Officer, to ensure that the Company's development efforts are timely,
consistent and well integrated. In addition, the Company recently announced
that it will move its administrative operations from Corvallis, Oregon to
Boulder, Colorado. This move will result in the distribution of the Company's
senior management team, which may make managing the Company's operations more
difficult. In particular, managing this transition will require a significant
amount of attention from management, particularly the Company's Chief
Operating Officer and Chief Financial Officer, both of whom will relocate as
part of the move.
Furthermore, the Company believes that its ability to achieve significant
revenue growth in the future will depend in large part on its success in
recruiting and training sufficient direct sales personnel and establishing
and maintaining relationships with its outside sales representatives.
Although the Company is currently investing, and plans to continue to invest,
significant resources to expand its direct sales force and to develop
distribution relationships with outside sales representatives, the Company
has
12.
<PAGE>
at times experienced and continues to experience difficulty in recruiting
qualified sales personnel and in establishing necessary sales representative
relationships. The Company believes that the hiring and retaining of
qualified individuals at all levels in the Company is essential to the
Company's ability to manage growth successfully, and there can be no
assurance that the Company will be successful in attracting and retaining the
necessary personnel. If Company management is unable to effectively manage
growth, the Company's business, financial condition and results of operations
will be materially and adversely affected.
DEPENDENCE ON EMERGING MARKET FOR C++ AND JAVA. The Company's product
lines are designed for use in object-oriented software application
development, specifically the C++ and Java programming languages, and
substantially all of the Company's revenue has been attributable to sales of
products and related maintenance and consulting services related to C++
programming and development. The Company believes that while the market for
object-oriented technology in general, and C++ tools and programming
applications in particular, is growing, the Company's growth depends upon
broader market acceptance of object-oriented technology and the C++
programming language. Even if broader market acceptance is achieved, the
object-oriented market may continue to be characterized by multiple software
environments, many of which are not supported by the Company's products, and
numerous competitors in the areas of tools, methodology and services.
Furthermore, the C++ programming language is very complex. Should the C++
programming language lose market acceptance or be replaced by another
programming language, the Company's business, financial condition and results
of operations would be materially and adversely affected. The Company's
financial performance will depend in part upon continued growth in the
object-oriented technology and C++ markets and the development of standards
that the Company's products address. There can be no assurance that the
market will continue to grow or that the Company will be able to respond
effectively to the evolving requirements of the market.
The number of software developers using the C++ programming language is
relatively small compared to the number of developers using more traditional
software development technology. The adoption of the C++ programming language
by software programmers who have traditionally used other technology requires
reorientation to significantly different programming methods, and there can
be no assurance that the acceptance of the C++ programming language will
expand beyond the early adopters of the technology. Furthermore, there can
be no assurance that potential corporate customers will be willing to make
the investment required to retrain programmers to build software using C++
rather than structured or other object-oriented programming techniques. Many
of the Company's customers have purchased only small quantities of the
Company's products and there can be no assurance that these or new customers
will broadly implement C++ programming or purchase additional products.
In addition, the Company has several products for use in the Java market.
The Company has spent and will continue to devote resources on the
development of new and enhanced products that address the Java market. There
can be no assurance that the Company will be successful in marketing its
existing or future Java products or that the market for Java products will
grow. If the Java market fails to grow, or grows more slowly than the
Company currently anticipates, the Company's business, financial condition
and results of operations could be materially and adversely affected.
COMPETITION. The market for the Company's products is intensely
competitive, subject to rapid change and significantly affected by new
product introductions and other market activities of industry participants.
The Company's products are targeted at the emerging market for C++ software
parts and programming tools and, to a lesser extent, at the emerging Java
market. The Company's competitors offer a variety of products and services
to address these markets. The Company believes that the principal
competitive factors in this market are product quality, flexibility,
performance, functionality and features, use of standards based technology,
quality of support and service, company reputation and price. While
13.
<PAGE>
price is less significant than other factors for corporate customers, price
can be a significant factor for individual programmers. 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 the Company's products. The Company faces direct competition
in the Java market from Borland, JavaSoft (a business unit of Sun
Microsystems), Microsoft, Sybase, Symantec and other companies for its
current Java products and it expects to face significant competition in the
future from such companies with respect to other Java products the Company
may introduce. Software applications can also be developed using software
parts and programming tools in environments other than C++ or Java. Indirect
competitors with such offerings include Microsoft (with its ActiveX
technology), Borland, Oracle, ParcPlace-Digitalk and Powersoft (a subsidiary
of Sybase). Many of these competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and larger installed bases of
customers than the Company. 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 the
Company 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 the
Company's current competitors, many of these companies have longer operating
histories, significantly greater resources and name recognition and larger
installed bases of customers than the Company. 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 the
Company.
The Company also faces competition from systems integrators and internal
development efforts. 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. There can be no
assurance that these third parties, many of which have significantly greater
resources than the Company, will not market competitive software products in
the future. It is also possible that new competitors or alliances among
competitors will emerge and rapidly acquire significant market share. The
Company also expects that competition will increase as a result of software
industry consolidation. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which could materially
and adversely affect the Company's business, operating results and financial
condition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that
competitive pressures faced by the Company will not materially and adversely
affect its business, financial condition and results of operations.
LIMITED OPERATING HISTORY. The Company was founded in September 1989 and
first shipped products in November 1989. Although the Company's total
revenue has increased in each of the last thirteen quarters and the Company
had net income in most of those quarters, the Company incurred a net loss in
the quarter ended June 30, 1996. The Company has devoted an increasing
amount of resources to the its product development, sales and marketing and
technical support organizations. The Company expects to continue to devote
substantial resources in these areas and as a result will need to recognize
significant quarterly revenue to achieve and maintain profitability. The
Company's limited operating history makes the prediction of future operating
results difficult or impossible. Although the Company has experienced
significant revenue growth in recent years, there can be no assurance that
the Company will sustain such growth, if any, or that the Company will remain
profitable on a quarterly basis or at all.
14.
<PAGE>
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS. The market for
software development tools is characterized by rapid technological advances,
changes in customer requirements and frequent new product introductions and
enhancements. The Company must respond rapidly to developments related to
hardware platforms, operating systems and applicable programming languages.
Such developments will require the Company to continue to make substantial
product development investments. Any failure by the Company to anticipate or
respond adequately to technological developments and customer requirements,
or any significant delays in product development or introduction, could
result in a loss of competitiveness or revenue.
The Company's future success will depend on its ability to continue to
enhance its current product line and to continue to develop and introduce new
products that keep pace with competitive product introductions and
technological developments, satisfy diverse and evolving customer
requirements and otherwise achieve market acceptance. There can be no
assurance that the Company will be successful in continuing to develop and
market on a timely and cost-effective basis fully functional product
enhancements or new products that respond to technological advances by
others, or that its enhanced and new products will achieve market acceptance.
In addition, the Company has in the past experienced delays in the
development, introduction and marketing of new or enhanced products. Such
delays were primarily associated with increasing product functionality and
implementing new customer requirements. To date, such delays have not
resulted in a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the
Company will not experience similar delays in the future. Any failure by the
Company to anticipate or respond adequately to changes in technology and
customer preferences, or any significant delays in product development or
introduction, would have a material adverse effect on the Company's business,
financial condition and results of operations.
FUTURE ACQUISITIONS. The Company frequently evaluates strategic
opportunities available to it and may in the future pursue acquisitions of
complementary technologies, products or businesses. Future acquisitions of
complementary technologies, products or businesses by the Company will result
in the diversion of management's attention from the day-to-day operations of
the Company's business and may include numerous other risks, including
difficulties in the integration of the operations, products and personnel of
the acquired companies. Future acquisitions by the Company may also result
in dilutive issuances of equity securities, the incurrence of debt and
amortization expenses related to goodwill and other intangible assets.
Failure of the Company to successfully manage future acquisitions may have a
material adverse effect on the Company's business, financial condition and
results of operations.
RISKS OF EXPANDING INTERNATIONAL SALES AND MARKETING. The Company opened
its first international sales office in Germany in January 1996. In February
1997, the Company expanded its European operations by acquiring Precision.
Precision is a distributor of the Company's software products in Germany, the
United Kingdom, France and the Benelux countries. International revenue
accounted for approximately 24% and 30% of the Company's total revenue in
fiscal 1997 and the quarter ended December 31, 1997, respectively. As of
December 31, 1997, the Company had 36 employees located outside of the United
States. The Company believes that in order to increase sales opportunities
and profitability it will be required to expand its international operations.
The Company has committed and continues to commit significant management
time and financial resources to developing direct and indirect international
sales and support channels. There can be no assurance, however, that the
Company will be able to maintain or increase international market demand for
its products. To the extent that the Company is unable to do so in a timely
manner, the Company's international revenue would be limited, and the
Company's business, financial condition and results of operations would be
materially and adversely affected.
15.
<PAGE>
RISKS INHERENT IN INTERNATIONAL OPERATIONS. International operations
are subject to inherent risks, including the impact of possible recessionary
environments in economies outside the United States, costs of localizing
products for foreign markets, longer receivables collection periods and
greater difficulty in accounts receivable collection, unexpected changes in
regulatory requirements, difficulties and costs of staffing and managing
foreign operations, reduced protection for intellectual property rights in
some countries, potentially adverse tax consequences, and political and
economic instability. There can be no assurance that the Company will be
able to sustain or increase international revenue from licenses or from
maintenance and service, or that the foregoing factors will not have a
material adverse effect on the Company's future international revenue and,
consequently, on the Company's business, financial condition and results of
operations. The Company's direct international revenue is generally
denominated in local currencies. As a result of recent fluctuations in
international exchange rates, the Company's Board of Directors has authorized
the Company to enter into forward exchange contracts to minimize the risks
associated with such fluctuations. Although exposure to currency
fluctuations to date has not been material, there can be no assurance that
fluctuations in currency exchange rates in the future will not have a
material adverse impact on international revenue and thus the Company's
business, financial condition and results of operations.
DEPENDENCE UPON KEY PERSONNEL. The Company's future performance depends
in significant part upon the continued service of its key technical, sales
and senior management personnel, none of whom is bound by an employment
agreement. The Company believes that the technological and creative skills of
its personnel are essential to establishing and maintaining a leadership
position, particularly in light of the fact that its intellectual property,
once sold to the public market, is easily replicated. The loss of the
services of one or more of the Company's executive officers or key technical
personnel would have a material adverse effect on the Company's business,
financial condition and results of operations. In particular, the services
of Thomas Keffer and Michael Scally, the Company's President and Chief
Executive Officer, and Chief Operating Officer, respectively, would be
difficult to replace. The Company has key person life insurance policies in
the amount of $1.0 million on each of Dr. Keffer and Mr. Scally. The
Company's future success also depends on its continuing ability to attract
and retain highly-qualified technical, sales and managerial personnel. In
the past, the Company has experienced some difficulty in attracting key
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company can retain its key technical, sales and managerial
employees or that it can attract, assimilate or retain other highly qualified
technical, sales and managerial personnel in the future.
VARIABILITY OF SALES CYCLES. The Company distributes its products
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 the Company's 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 the Company's 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 the Company's
products. For these and other reasons, the sales cycle associated with the
sale of the Company's products through its field sales force typically ranges
from two to six months and is subject to a number of significant delays over
which the Company has little or no control. Due to the foregoing factors,
quarterly revenue and operating results can be variable and are difficult to
forecast, and the Company believes that period-to-period comparisons of
quarterly revenue are not necessarily meaningful and should not be relied
upon as an indicator of future revenue.
PROPRIETARY RIGHTS, RISKS OF INFRINGEMENT AND SOURCE CODE RELEASE. The
Company relies primarily on a combination of copyright, trademark and trade
secret laws, confidentiality procedures and contractual provisions to protect
its proprietary rights. The Company also believes that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product
16.
<PAGE>
enhancements, name recognition and reliable product maintenance are essential
to establishing and maintaining a technological leadership position. The
Company seeks to protect its software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. The Company currently has one patent application pending in the
United States. There can be no assurance that the Company's pending patent
application, whether or not being currently challenged by applicable
governmental patent examiners, will be issued with the scope of the claims
sought by the Company, if at all. Furthermore, there can be no assurance
that others will not develop technologies that are similar or superior to the
Company's technology or design around the Company's pending patent. Despite
the Company's efforts to protect its proprietary rights, unauthorized parties
may attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. The nature of many of
the Company's products requires the release of the source code to all
customers. As such, policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be
a persistent problem. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights as fully as do the laws of the
United States. There can be no assurance that the Company's means of
protecting its proprietary rights in the United States or abroad will be
adequate or that competition will not independently develop similar
technology.
The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will
not claim infringement by the Company of their intellectual property rights.
The Company expects that software product developers will increasingly be
subject to infringement claims as the number of products and competitors in
the Company's industry segment grows and the functionality of products in
different industry segments overlaps. Any such claims, with or without
merit, could be time consuming to defend, result in costly litigation, divert
management's attention and resources, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to the Company, if at all. In the event of a successful claim of
product infringement against the Company and failure or inability of the
Company to license the infringed or similar technology, the Company's
business, financial condition and results of operations would be materially
and adversely affected.
UNCERTAINTY OF THE EFFECTS OF THE YEAR 2000 ON COMPUTER PROGRAMS AND
SYSTEMS. Many currently installed computer systems and software programs were
designed to use only a two digit date field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th
century dates. Until the date fields are updated, the systems and programs
could fail or give erroneous results when referencing dates following
December 31, 1999. Such failure or errors could occur prior to the actual
change in century. The Company relies on computer applications to manage and
monitor its accounting, sales, development and administrative functions. In
addition, the Company's customers, suppliers and service providers
(particularly financial institutions) are reliant upon computer applications,
some of which may contain software that may fail as a result of the upcoming
change in century, with respect to functions that materially affect their
interactions with the Company. While the Company does not believe its
computer systems or applications currently in use will be adversely affected
by the upcoming change in century, the Company has not made an assessment as
to whether any of its customers, suppliers or service providers will be so
affected. Failure of the Company's software or that of its customers,
suppliers or service providers could have a material adverse impact on the
Company's business, financial condition and result of operations.
PRODUCT LIABILITY. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the
limitation of liability provisions contained in the Company's license
agreements may not be effective under the laws of certain jurisdictions.
Although the Company has not experienced any
17.
<PAGE>
product liability claims to date, the sale and support of products by the
Company may entail the risk of such claims, and there can be no assurance
that the Company will not be subject to such claims in the future. A
successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
RISK OF PRODUCT DEFECTS. Software products as complex as those offered
by the Company 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. There can be no assurance that such errors
or performance problems will not be discovered in the future, causing delays
in product introduction and shipments or requiring design modifications that
could materially and adversely affect the Company's competitive position and
operating results. The Company's products are typically intended for use in
applications that may be critical to a customer's business. As a result, the
Company expects that its customers and potential customers have a greater
sensitivity to product defects than the market for software products
generally. Although the Company has not experienced material adverse effects
resulting from any such errors to date, there can be no assurance that,
despite testing by the Company and by current and potential customers, errors
will not 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 the Company's reputation, or increased service and
warranty costs, any of which could have a material adverse effect upon the
Company's business, financial condition and results of operations.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company enters into foreign exchange forward contracts to hedge
certain operational and balance sheet exposures from changes in foreign
currency exchange rates. Such exposures result from the portion of the
Company's operations, assets, and liabilities that are denominated in
currencies other than the U.S. dollar. These transactions are entered into
to hedge purchases, sales, and other normal recurring transactions and
accordingly are not speculative in nature. The Company does not hold or
issue financial instruments for trading purposes nor does it hold or issue
leveraged derivative financial instruments. Market value gains and losses on
such contracts that result from fluctuations in foreign exchange rates are
recognized as offsets to the exchange gains or losses on the hedged
transactions. By their nature, these transactions generally offset. The net
gain or loss on such foreign currency contracts and underlying transactions
was not material during the quarter ended December 31, 1997, however there
can be no assurance that fluctuations in currency exchange rates in the
future will not have a material adverse impact on international revenue and
thus the Company's business, financial condition and results of operations.
The Company had outstanding short-term forward exchange contracts to exchange
German marks for U.S. dollars in the amount of $1.1 million at December 31,
1997.
18.
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS
The effective date of the Company's first registration statement, filed
on Form SB-2 filed under the Securities Act of 1993 (No. 333-13517), was
November 21, 1996 (the "Registration Statement"). The class of securities
registered was Common Stock. The offering commenced on November 21, 1996 and
all securities were sold in the offering. The managing underwriters for the
offering were Hambrecht & Quist LLC and Wessels, Arnold & Henderson, L.L.C.
Pursuant to the Registration Statement, the Company sold 2,367,640 shares
of its Common Stock for its own account, for an aggregate offering price of
$28,411,680, and 449,860 shares of its Common Stock for the account of
certain selling stockholders, for an aggregate offering price of $5,398,320.
The Company incurred expenses of approximately $2,838,818, of which
$1,988,818 represented underwriting discounts and commissions and $850,000
represented estimated other expenses. All such expenses were direct or
indirect payments to others. The net offering proceeds to the issuer after
total expenses was $25,572,863.
The Company has used $1,500,000 of the net proceeds from the offering in
the acquisition of other businesses, $1,300,000 for the purchase of stock of
a majority owned subsidiary, $1,000,000 of the net proceeds from the offering
for repayment of indebtedness and $9,688,000 of the net proceeds for working
capital. All remaining net proceeds have been invested in commercial paper.
The use of proceeds from the offering does not represent a material change in
the use of proceeds described in the prospectus.
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1(1) Agreement and Plan of Reorganization between Registrant,
Inmark Development Corporation and RW Acquisition, Inc.,
dated as of September 19, 1995.
2.2(1) Agreement and Plan of Merger between the Registrant and
Rogue Wave Software, Inc., an Oregon corporation.
3.1(2) Amended and Restated Certificate of Incorporation of Rogue
Wave Software, Inc., a Delaware corporation.
3.2(1) Bylaws of Rogue Wave Software, Inc., a Delaware
corporation.
4.1(1) Reference is made to Exhibits 3.1 and 3.2.
4.2(1) Specimen Stock Certificate.
4.3(1) Amended and Restated Investors' Rights Agreement between
the Registrant and certain investors, dated November 10,
1995, as amended June 27, 1996.
10.1(1) Registrant's 1996 Equity Incentive Plan.
10.2(1) Registrant's Employee Stock Purchase Plan.
10.3(1) Form of Indemnity Agreement to be entered into between the
Registrant and its officers and directors.
10.4(1) Lease Agreement between Registrant and the State of
Oregon, dated May 1, 1996.
10.5(1) Lease Agreement between the Registrant and the Landmark,
dated April 22, 1996.
10.6(1) Loan and Security Agreement between the Registrant and
Silicon Valley Bank, dated October 16, 1996.
19.
<PAGE>
10.7(1) Collateral Assignment, Patent Mortgage and Security
Agreement between the Registrant and Silicon Valley Bank,
dated October 16, 1996.
27.1 Financial Data Schedule.
(1) Filed as an Exhibit to the Registrant's Registration Statement
on Form SB-2, as amended (No. 333 -13517)
(2) Filed as an Exhibit to the Registrant's quarterly report on
Form 10-Q for the quarter ended December 31, 1996.
ITEMS 1, 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
20.
<PAGE>
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: February 13, 1998 /S/ ROBERT M. HOLBURN, JR.
---------------------------------------
ROBERT M. HOLBURN, JR.
CHIEF FINANCIAL OFFICER
1.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
COMPANY'S QUARTERLY REPORT ON FORM 10Q FOR THE QUARTER ENDED
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-START> OCT-01-1997
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<CURRENT-ASSETS> 43,377
<PP&E> 6,754
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