UNITED
      STATES
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C.
      20549





FORM
      10-Q





xQUARTERLY
      REPORT PURSUANT TO SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      quarterly period ended December 31, 2007




OR




oTRANSITION
      REPORT PURSUANT TO SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      transition period from
      to




Commission
      file number:1-10768




MEDIWARE
      INFORMATION
      SYSTEMS, INC.


(Exact
      name of registrant as specified in its charter)




New
                York
            11-2209324(State
                or other jurisdiction of incorporation or
                organization)
            (I.R.S.
                Employer Identification No.)11711
                West 79th StreetLenexa,
                Kansas
            66214(Address
                of principal executive offices)
            (Zip
                Code)




(Registrant's
      telephone number, including area code):(913)
      307-1000


(Former
      name, former address and former fiscal year, if changed since last
      report)













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.   x Yes o No






Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.




Large
                accelerated filer
            o
            
            Accelerated
                Filer
            xNon-accelerated
                filer
            o
            
            Smaller
                reporting company
            o


(Do
      not
      check if a smaller reporting company)




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).      o
      Yes   x No




APPLICABLE
      ONLY TO CORPORATE ISSUERS:




As
      of
      February 1, 2008, there were 8,156,000 shares of Common Stock, $0.10 par value,
      of the registrant outstanding.





-2-





MEDIWARE
      INFORMATION SYSTEMS, INC.




INDEX




PagePART
                I
            Financial
                InformationITEM
                1.
            Financial
                StatementsCondensed
                Consolidated Balance Sheets as of December 31, 2007 (Unaudited) and
                June
                30, 2007
            4Condensed
                Consolidated Statements of Operations and Comprehensive Income (Loss)
                (Unaudited) for the Three and Six Months Ended December 31, 2007
                and
                2006
            5Condensed
                Consolidated Statements of Cash Flows (Unaudited) for the Six Months
                Ended
                December 31, 2007 and 2006
            6Notes
                to Unaudited Condensed Consolidated Financial
                Statements
            7Review
                Report of Independent Registered Public Accounting
                Firm
            18ITEM
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            19ITEM
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            29ITEM
                4.
            Controls
                and Procedures
            30PART
                II
            Other
                InformationITEM
                1.
            Legal
                Proceedings
            30ITEM
                1A.
            Risk
                Factors
            31ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders
            31ITEM
                6.
            Exhibits
            32Signatures
            
            33




-3-
 Index




PART
      I     FINANCIAL INFORMATION




1.      FINANCIAL
      STATEMENTS




MEDIWARE
      INFORMATION SYSTEMS, INC.


CONDENSED
      CONSOLIDATED BALANCE SHEETS


(Amounts
      in thousands except shares)





(Unaudited)December
                31,
            
            
            June
                30,2007
            
            
            2007ASSETSCurrent
                AssetsCash
                and cash equivalents
            
            $
            20,949
            
            
            $
            22,789Accounts
                receivable (net of allowance of $933 and $1,079)
            
            
            9,578
            
            
            
            11,481Inventories
            
            
            95
            
            
            
            196Deferred
                income taxes
            
            
            697
            
            
            
            957Prepaid
                expenses and other current assets
            
            
            964
            
            
            
            843Total
                current assets
            
            
            32,283
            
            
            
            36,266Fixed
                assets, net
            
            
            1,553
            
            
            
            1,210Capitalized
                software costs, net
            
            
            16,819
            
            
            
            18,005Goodwill,
                net
            
            
            7,086
            
            
            
            3,739Other
                intangible assets, net
            
            
            1,520
            
            
            
            -Other
                long-term assets
            
            
            35
            
            
            
            100Total
                Assets
            
            $
            59,296
            
            
            $
            59,320LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                LiabilitiesAccounts
                payable
            
            $
            912
            
            
            $
            1,171Current
                portion of note payable
            
            
            -
            
            
            
            4Advances
                from customers
            
            
            8,182
            
            
            
            7,246Accrued
                expenses and other current liabilities
            
            
            2,483
            
            
            
            3,511Total
                current liabilities
            
            
            11,577
            
            
            
            11,932Deferred
                income taxes
            
            
            5,317
            
            
            
            5,357Total
                liabilities
            
            
            16,894
            
            
            
            17,289Stockholders'
                EquityPreferred
                stock, $.01 par value; authorized 10,000,000 shares; none
                issued
            
            
            -
            
            
            
            -Common
                stock, $.10 par value; authorized 25,000,000 shares; 8,156,000 and
                8,151,000 shares issued and outstanding at December 31, 2007 and
                June 30,
                2007, respectively
            
            
            815
            
            
            
            815Additional
                paid-in capital
            
            
            30,941
            
            
            
            30,690Retained
                earnings
            
            
            10,539
            
            
            
            10,413Accumulated
                other comprehensive income
            
            
            107
            
            
            
            113Total
                stockholders' equity
            
            
            42,402
            
            
            
            42,031Total
                Liabilities and Stockholders' Equity
            
            $
            59,296
            
            
            $
            59,320





See
      Notes
      to Unaudited Condensed Consolidated Financial Statements.





-4-
 Index





MEDIWARE
      INFORMATION SYSTEMS, INC.


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
      (LOSS)


(Amounts
      in thousands, except earnings per share)





(Unaudited)
              Three
                months ended
              December
                31,
            
            
            (Unaudited)
              Six
                Months ended
              December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006RevenueSystem
                sales
            
            $
            2,032
            
            
            $
            4,890
            
            
            $
            6,222
            
            
            $
            7,213Services
            
            
            6,627
            
            
            
            6,372
            
            
            
            13,181
            
            
            
            12,524Total
                revenue
            
            
            8,659
            
            
            
            11,262
            
            
            
            19,403
            
            
            
            19,737Cost
                and ExpensesCost
                of systems (1)
            
            
            685
            
            
            
            772
            
            
            
            1,374
            
            
            
            1,331Cost
                of services
            
            
            2,298
            
            
            
            1,952
            
            
            
            4,514
            
            
            
            3,920Amortization
                of capitalized software costs
            
            
            1,431
            
            
            
            1,362
            
            
            
            2,871
            
            
            
            2,628Software
                development costs
            
            
            963
            
            
            
            941
            
            
            
            1,946
            
            
            
            1,984Selling
                general and administrative
            
            
            4,092
            
            
            
            5,076
            
            
            
            8,676
            
            
            
            8,679Total
                costs and expenses
            
            
            9,469
            
            
            
            10,103
            
            
            
            19,381
            
            
            
            18,542Operating
                income (loss)
            
            
            (810
            )
            
            
            1,159
            
            
            
            22
            
            
            
            1,195Interest
                and other income
            
            
            249
            
            
            
            250
            
            
            
            539
            
            
            
            485Interest
                and other (expense)
            
            
            (7
            )
            
            
            44
            
            
            
            (34
            )
            
            
            46Income
                (loss) before income taxes
            
            
            (568
            )
            
            
            1,453
            
            
            
            527
            
            
            
            1,726Income
                tax benefit (expense)
            
            
            231
            
            
            
            (548
            )
            
            
            (401
            )
            
            
            (657
            )Net
                income (loss)
            
            
            (337
            )
            
            
            905
            
            
            
            126
            
            
            
            1,069Other
                comprehensive incomeForeign
                currency translation adjustment
            
            
            (41
            )
            
            
            (11
            )
            
            
            (6
            )
            
            
            28Comprehensive
                income (loss)
            
            $
            (378
            )
            
            $
            894
            
            
            $
            120
            
            
            $
            1,097Net
                income (loss) per Common ShareBasic
            
            $
            (0.04
            )
            
            $
            0.11
            
            
            $
            0.02
            
            
            $
            0.13Diluted
            
            $
            (0.04
            )
            
            $
            0.11
            
            
            $
            0.01
            
            
            $
            0.13Weighted
                Average Common Shares OutstandingBasic
            
            
            8,156
            
            
            
            8,116
            
            
            
            8,154
            
            
            
            8,104Diluted
            
            
            8,156
            
            
            
            8,384
            
            
            
            8,469
            
            
            
            8,367





(1)
      Excludes amortization of capitalized software costs







See
      Notes
      to Unaudited Condensed Consolidated Financial Statements.





-5-
 Index





MEDIWARE
      INFORMATION SYSTEMS, INC.


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
      in thousands)




(Unaudited)Six
                Months EndedDecember
                31,2007
            
            
            2006Cash
                Flows From Operating ActivitiesNet
                income
            
            $
            126
            
            
            $
            1,069Adjustments
                to reconcile net income, to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            3,236
            
            
            
            2,970Loss
                on write-off of fixed assets
            
            
            10
            
            
            
            -Stock
                based compensation expense
            
            
            251
            
            
            
            147Deferred
                tax provision
            
            
            352
            
            
            
            615Provision
                for doubtful accounts
            
            
            109
            
            
            
            278Changes
                in operating assets and liabilities, net of effect of
                acquisition:Accounts
                receivable
            
            
            2,295
            
            
            
            (1,446
            )Inventories
            
            
            101
            
            
            
            8Prepaid
                expenses and other assets
            
            
            (49
            )
            
            
            (128
            )Accounts
                payable, accrued expenses and advances from customers
            
            
            (436
            )
            
            
            360Net
                cash provided by operating activities
            
            
            5,995
            
            
            
            3,873Cash
                Flows From Investing ActivitiesAcquisition
                of fixed assets
            
            
            (638
            )
            
            
            (196
            )Capitalized
                software costs
            
            
            (1,686
            )
            
            
            (1,985
            )Acquisition
                of business
            
            
            (5,501
            )
            
            
            -Net
                cash used in investing activities
            
            
            (7,825
            )
            
            
            (2,181
            )Cash
                Flows From Financing ActivitiesProceeds
                from exercise of stock options
            
            
            -
            
            
            
            246Excess
                tax benefit from exercise of stock options
            
            
            -
            
            
            
            24Principal
                payments on note payable
            
            
            (4
            )
            
            
            (12
            )Net
                cash provided by (used in) financing activities
            
            
            (4
            )
            
            
            258Foreign
                currency translation adjustments
            
            
            (6
            )
            
            
            28Net
                increase (decrease) in cash and cash equivalents
            
            
            (1,840
            )
            
            
            1,978Cash
                at beginning of period
            
            
            22,789
            
            
            
            18,996Cash
                at end of period
            
            $
            20,949
            
            
            $
            20,974Supplemental
                disclosures of cash flow information:Cash
                paid during the period for:Interest
                on notes payable
            
            $
            -
            
            
            $
            6Income
                taxes paid (received)
            
            $
            152
            
            
            $
            (52
            )




-6-
 Index




MEDIWARE
      INFORMATION SYSTEMS, INC.


NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS








1.     BASIS
      OF PRESENTATION





In
      the
      opinion of management, the accompanying unaudited, condensed, consolidated
      financial statements contain all adjustments necessary to present fairly the
      financial position of Mediware Information Systems, Inc. (“Mediware” or the
“Company”) and its results of operations and cash flows for the interim periods
      presented. Such financial statements have been condensed in accordance with
      the
      applicable regulations of the Securities and Exchange Commission and, therefore,
      do not include all disclosures required by accounting principles generally
      accepted in the United States of America. These financial statements should
      be
      read in conjunction with Mediware's audited financial statements for the fiscal
      year ended June 30, 2007 included in Mediware's Annual Report filed on Form
      10-K
      for such fiscal year.





The
      results of operations for the three and six months ended December 31, 2007
      are
      not necessarily indicative of the results to be expected for the entire fiscal
      year.





2.     EARNINGS
      (LOSS) PER SHARE





Basic
      earnings (loss) per share is computed by dividing net income (loss) by the
      weighted average number of shares of common stock outstanding, par value $0.10
      (“Common Stock”), of Mediware.  For the three months ended December
      31, 2006 and the six months ended December 31, 2007 and 2006, the dilutive
      effect of Common Stock equivalents is included in the calculation of diluted
      earnings per share using the treasury stock method.  There was no
      dilutive effect for the three months ended December 31, 2007 due to the net
      loss
      reported for the period.








3.     ACQUISITIONS





On
      October 31, 2007, Mediware acquired substantially all of the assets of
      Integrated Marketing Solutions, LLC, a Maryland limited liability company
      (“IMS”).  IMS is a leading provider of software products and services
      to blood and plasma donation centers.  IMS services the blood donor
      center industry by providing integrated software, programs and services which
      support donor recruitment, call centers, customer service, hospital services,
      sales and prospecting.   Following the acquisition, the Company
      began to provide software products and services targeting blood and plasma
      donation centers in North America and Europe.  This software addresses
      the competitive nature of the blood supply market by enabling blood and plasma
      collection facilities with web-based tools to better manage relationships with
      donors, staffing and hospitals.  These products facilitate blood and
      plasma donor centers’ donors recruitment and retention, improve blood drives,
      and enable hospitals with electronic tools to order, ship and track
      products.




IMS
      generates revenue
      through subscription sales of its web-based applications and by providing
      professional and promotional services to its customers. Subscription revenues
      are recognized evenly over the subscription period. Service revenues are
      recognized as the service is delivered. Promotional revenues are recognized
      as
      the promotional goods and services are delivered.




The
      purchase price paid for the assets of IMS consists of an initial purchase price
      of $5,458,000 paid in cash at the closing, plus contingent consideration up
      to
      $575,000 based upon IMS attaining certain revenue milestones.  The
      purchase price is also subject to a working capital adjustment.  The
      Company incurred $43,000 of legal and accounting fees related to this
      transaction which have been included in goodwill.  The Company expects
      to finalize the purchase price, including all contingent consideration, by
      October 2008. The results of the IMS acquisition are included from the date
      of acquisition.





The
      Company has accounted for the acquisition of IMS as the purchase of a business
      under U.S. Generally Accepted Accounting Principals.  The assets and
      liabilities of IMS were recorded as of the acquisition date, at their respective
      fair values.  The purchase price allocation is based on the estimated
      fair value of assets acquired and liabilities assumed.  The
      preparation of the valuation required the use of significant assumptions and
      estimates.  These estimates were based on assumptions that the Company
      believes to be reasonable.  However, actual results may differ from
      these estimates.





-7-
 Index





The
      following summarizes the preliminary purchase price allocation:





Purchase
                Price
              AllocationAccounts
                receivable
            
            $
            501,000Fixed
                assets
            
            
            35,000Intangible
                assets subject to amortization
            
            
            1,564,000Goodwill
            
            
            3,479,000Other
                long-term assets
            
            
            7,000Accounts
                payable
            
            
            (50,000
            )Customer
                advances
            
            
            (35,000
            )Total
                Purchase Price
            
            $
            5,501,000





The
      excess of the purchase price over the fair value of net tangible assets acquired
      was allocated to specific intangible asset categories as follows:





Amount
              Assigned
            
            Weighted
              Average
              Amortization
              Period
            
            Risk-Adjusted
              Discount
                Rate
              Used
                in Purchase Price
              AllocationAmortizable
                Intangible AssetsPurchased
                technology
            
            $
            473,000
            
            5.0
                years
            
            
            25.9
            %Customer
                relationships
            
            
            1,056,000
            
            7.0
                years
            
            
            25.9
            %Non-compete
                agreements
            
            
            35,000
            
            1.5
                years
            
            
            24.0
            %$
            1,564,000
            
            6.3
                yearsGoodwill
            
            $
            3,479,000





The
      Company believes that the estimated tangible assets represent fair value at
      the
      date of acquisition.  The fair value of an asset is defined as the
      amount for which an asset or liability could be bought or sold in a current
      transaction between knowledgeable, unrelated willing parties when neither party
      is acting under compulsion.





The
      Company valued the purchased technology using the relief from royalty method,
      which is considered an income approach. The underlying principal of the relief
      from royalty method is that the value of purchased technology can be estimated
      by determining the cost savings the company achieves by not having to license
      the software and pay royalties. This method requires the use of certain
      estimates, including forecasted sales, royalty rates and discount rates. Based
      on this methodology the Company assigned the value of purchased technology
      at
      $473,000. The Company will amortize this amount over its estimated useful life
      of 5 years.





The
      Company valued the customer relationships using the income
      approach.  Utilizing this approach, the company projected revenue and
      related expenses.  These projected income amounts were then reduced by
      the return on contributory assets and discounted to present
      value.  This method requires the use of certain estimates, including
      revenue growth rates, customer attrition, expenses, contributory asset charges
      and discount rates.  Based on this methodology the Company assigned
      the value of customer relationships at $1,056,000.  The Company will
      amortize this amount over its estimated useful life of 7 years.





The
      Company valued the non-compete agreements using an income
      approach.  This methodology determines the impact on discounted net
      cash flow should the restricted parties decide to compete directly against
      the
      Company.  This method requires the use of certain estimates, including
      projected cash flows, discount rates and probability factors related to the
      likelihood of future competition.  Based on this methodology the
      Company assigned the value of non-compete agreements at $35,000.  The
      Company will amortize this amount over its estimated useful life of 1.5
      years.





Goodwill
      is expected to be deductible for tax purposes.





-8-
 Index





GOODWILL
      AND OTHER INTANGIBLE ASSETS





Goodwill





The
      change in the carrying amount of our goodwill during the six months ended
      December 31, 2007 is as follows (in thousands):





Carrying
                amount as of June 30, 2007
            
            $
            3,739,000Increase
                from acquisition of business
            
            
            3,479,000Tax
                benefit of amortization
            
            
            (132,000
            )Carrying
                amount as of December 31, 2007
            
            $
            7,086,000








Other
      Intangible Assets





Gross
                Carrying
              Amount
            
            
            Accumulated
              Amortization
            
            
            Net
                Carrying Amount
            
            
            Weighted
              Average
              Useful
                Life
              (in
                years)Purchased
                technology
            
            $
            473,000
            
            
            $
            (16,000
            )
            
            $
            457,000
            
            
            
            5.0Customer
                relationships
            
            
            1,056,000
            
            
            
            (25,000
            )
            
            
            1,031,000
            
            
            
            7.0Non-compete
                agreements
            
            
            35,000
            
            
            
            (3,000
            )
            
            
            32,000
            
            
            
            1.5$
            1,564,000
            
            
            $
            (44,000
            )
            
            $
            1,520,000





Amortization
      expense for other intangible assets amount to $44,000 for the three and six
      months ended December 31, 2007.  The following represents the expected
      amortization in future periods:





Fiscal
              Year
            
            Expected
              Amortization2008
            
            $
            135,0002009
            
            
            270,0002010
            
            
            249,0002011
            
            
            249,0002012
            
            
            249,000Thereafter
            
            
            368,000$
            1,520,000





5.     STOCK
      BASED COMPENSATION





Stock
      Based Plans





The
      Company's 2003 Equity Incentive Plan, approved by the shareholders in December
      2003, provides additional compensation incentives to encourage high levels
      of
      performance and employee retention, other key employees of the Company,
      directors, and persons who render services to the Company as consultants,
      advisors or independent contractors.  In February 2005, the
      shareholders approved an increase in the number of shares that may be issued
      under such plan from 500,000 to 1,000,000.  In December 2005, the
      shareholders approved increasing the number of shares that may be issued under
      such plan from 1,000,000 to 2,000,000.  Shares may be issued as either
      incentive stock options, nonqualified stock options, or restricted Common
      Stock.  Options may be granted for a period of up to ten
      years.  Restricted Common Stock awards may be subject to vesting
      restrictions and may be forfeited if certain performance factors are not
      maintained.  The plan provides that a maximum of 1,700,000 shares may
      be issued as any combination of restricted stock, options and restricted stock
      unit awards.  The additional 300,000 shares of Common Stock can only
      be granted as option awards.  As of December 31, 2007, there were
      1,203,000 shares available for issuance under this Plan.





-9-
 Index





The
      Company's 2001 Stock Option Plan, approved by the shareholders in January 2002,
      provides additional compensation incentives for high levels of performance
      and
      productivity by management, other key employees of the Company, directors,
      and
      persons who render services to the Company as consultants, advisors or
      independent contractors.  Up to 900,000 shares may be issued and sold
      under such plan and may be issued as either incentive stock options, to eligible
      persons, or nonqualified stock options.  Options may be granted for a
      period of up to ten years, with option prices not less than fair market value
      on
      the date of grant for incentive stock options, not less than 85% of fair market
      value for nonqualified stock options, and not less than 110% of fair market
      value for owners of more than 10% of the Company's outstanding voting
      stock.  As of December 31, 2007 no options were available to be issued
      under this Plan.





The
      Company's 1997 Stock Option Plan for Non-Employee Directors, which provided
      compensation to directors for their services without the expenditure of cash,
      was intended to increase ownership interest of the non-employee directors.
      Options granted under this plan were exercisable at 100% of the fair market
      value on the date of grant and were for terms of eight years and vested in
      two
      equal installments during the year issued. Shares granted under this plan were
      limited to 500,000. This Plan was terminated effective January 2002, and no
      additional options are available to be issued under this Plan.





The
      Company's Equity Incentive Plan, approved by its shareholders in January 1992
      and amended in March 2000, provided additional compensation incentives for
      high
      levels of performance and productivity by management and other key employees
      of
      the Company. The combined number of shares issued or available for issuance
      under this plan could not exceed thirty percent of the issued and outstanding
      Common Stock of the Company and not more than 700,000 shares could have been
      issued as incentive stock options. Options could have been granted for a period
      up to ten years, with option prices not less than fair market value on the
      date
      of grant for incentive stock options, not less than 50% of fair market value
      for
      nonqualified stock options, and not less than 110% of fair market value for
      owners of more than 10% of the Company's outstanding voting stock. This plan
      was
      terminated effective January 2002, and no additional options are available
      to be
      issued under this Plan.





The
      Company accounts for stock-based compensation following the provisions of SFAS
      123R, which establishes a fair value-based method of accounting for stock-based
      compensation.  The aggregate noncash stock based compensation expense
      totaled $98,000 and $57,000 for the three months ended December 31, 2007 and
      2006, respectively, and $251,000 and $147,000 for the six months ended December
      31, 2007 and 2006, respectively.





Stock
      Option Awards





The
      fair
      value of stock options is determined at the date of grant and is charged to
      compensation expense over the vesting period of the options.  The fair
      value of options at date of grant was estimated using the Black-Scholes option
      pricing model utilizing the following assumptions:





For
                the Three Months
              Ended
                December 31,
            
            For
                the Six Months
              Ended
                December 31,2007
            
            2006
            
            2007
            
            2006Risk-free
                interest rates
            No
                Options
            
            No
                Options
            
            4.6%
                - 4.8%
            
            4.5%
                - 4.6%Expected
                option life in years
            Granted
            
            Granted
            
            1
                -
                5
            
            2
–
                3Expected
                stock price volatility
            
            
            
            
            34%
                - 35%
            
            36%
                - 37%Expected
                dividend yield
            
            
            
            
            -
            
            -





The
      risk-free rate for periods within the contractual life of the option is based
      on
      the U.S. Treasury yield curve in effect at the time of the grant.  The
      Company uses historical data to estimate option exercise and employee and
      director termination within the valuation model; separate groups of employees
      and directors that have similar historical exercise behavior are considered
      separately for valuation purposes.  The expected term of options
      granted represents the period of time that options granted are expected to
      be
      outstanding; the range given above results from groups of employees and
      directors exhibiting different behavior.  Expected volatilities are
      based on historical volatility of the Company’s stock.  The Company
      has not paid any dividends in the past and does not expect to pay any in the
      near future.





-10-
 Index





The
      following table sets forth summarized information concerning the Company's
      stock
      options as of December 31, 2007:





Shares
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Weighted
              Average
              Remaining
              Contractual
              Term
            
            
            Aggregate
              Intrinsic
                ValueOutstanding
                at June 30, 2007
            
            
            1,022,000
            
            
            $
            8.97Granted
            
            
            142,000
            
            
            $
            6.97Exercised
            
            
            -
            
            
            
            -Forfeited
                or expired
            
            
            (179,000
            )
            
            $
            8.95Outstanding
                at December 31, 2007
            
            
            985,000
            
            
            $
            8.68
            
            
            
            4.1
            
            
            $
            506,000Expected
                to vest at December 31, 2007
            
            
            985,000
            
            
            $
            8.68
            
            
            
            4.1
            
            
            $
            506,000Options
                exercisable at December 31, 2007
            
            
            855,000
            
            
            $
            8.95
            
            
            
            3.3
            
            
            $
            506,000





The
      strike price of the options is determined based on the average trading price
      of
      the Company’s shares on the grant date.





Cash
      received from options exercised under all stock-based payment arrangements
      for
      the six months ended December 31, 2006 was $246,000.  The excess tax
      benefit realized for the tax deductions related to option exercises of the
      share-based payment arrangements totaled $24,000 for the six months ended
      December 31, 2006.  The aggregate intrinsic value of options exercised
      during the six months ended December 31, 2006 was $63,000.  There were
      no options exercised during the six months ended December 31,
      2007.  Historically, the Company has issued new shares upon the
      exercise of stock options.





The
      weighted average fair value at date of grant for options granted during the
      six
      months ended December 31, 2007 and 2006 was $2.38 and $2.30 per option,
      respectively.  The Company recorded $46,000 and $57,000 of
      compensation expense for stock option plans for the three months ended December
      31, 2007 and 2006, respectively, and $69,000 and $147,000 for the six months
      ended December 31, 2007 and 2006, respectively.





Estimated
      future stock-based compensation expense relating to stock options is as
      follows:





Fiscal
                Years Ending
                June 30,
            
            Future
              Stock
                Option
              Compensation
              Expense2008
            
            $
            91,0002009
            
            
            103,0002010
            
            
            52,0002011
            
            
            20,0002012
            
            
            3,000Total
                estimated future stock-based compensation expense
            
            $
            269,000




-11-
 Index





A
      summary
      of the status of the Company’s nonvested options as of December 31, 2007, and
      changes during the six months ended December 31, 2007, is presented
      below:





Nonvested
                Options
            
            Shares
            
            
            Weighted
              Average
              Grant
                Date
              Fair
                ValueNonvested
                at June 30, 2007
            
            
            -
            
            
            $
            -Granted
            
            
            142,000
            
            
            $
            6.97Canceled
                or expired
            
            
            -
            
            
            $
            -Vested
            
            
            (12,000
            )
            
            $
            7.50Nonvested
                at December 31, 2007
            
            
            130,000
            
            
            $
            6.93





As
      of
      December 31, 2007, there was $269,000 of total unrecognized compensation cost
      related to nonvested options granted under existing stock option
      plans.  The total fair value of stock options vested during the six
      months ended December 31, 2007 was $90,000.





The
      following table presents information relating to stock options at December
      31,
      2007:





Options Outstanding
            
            
            Options ExercisableRange of
              Exercise Prices
            
            
            Shares
            
            
            Weighted
              Average
              Exercise Price
            
            
            Weighted Average
              Remaining Life in
              Years
            
            
            Shares
            
            
            Weighted
              Average
              Exercise Price$
            0.00
              - $ 4.49
            
            
            
            163,000
            
            
            $
            3.61
            
            
            
            1.8
            
            
            
            163,000
            
            
            $
            3.61$
            4.50
              - $ 7.49
            
            
            
            195,000
            
            
            $
            6.86
            
            
            
            6.6
            
            
            
            65,000
            
            
            $
            6.74$
            7.50
              - $ 8.99
            
            
            
            134,000
            
            
            $
            8.11
            
            
            
            2.6
            
            
            
            134,000
            
            
            $
            8.11$
            9.00
              - $ 10.49
            
            
            
            218,000
            
            
            $
            10.07
            
            
            
            4.4
            
            
            
            218,000
            
            
            $
            10.07$
            10.50
              - $11.99
            
            
            
            103,000
            
            
            $
            10.89
            
            
            
            2.5
            
            
            
            103,000
            
            
            $
            10.89$
            12.00
              - $13.49
            
            
            
            117,000
            
            
            $
            12.45
            
            
            
            5.5
            
            
            
            117,000
            
            
            $
            12.45$
            13.50
              - $14.99
            
            
            
            45,000
            
            
            $
            13.74
            
            
            
            6.2
            
            
            
            45,000
            
            
            $
            13.74$
            15.00
            +
            
            
            10,000
            
            
            $
            15.00
            
            
            
            0.9
            
            
            
            10,000
            
            
            $
            15.00985,000
            
            
            
            
            
            
            
            
            
            
            
            855,000







Restricted
      Common Stock Awards





During
      fiscal 2006, the Company entered into agreements to provide long-term incentive
      compensation opportunities to certain key employees.  Under the terms
      of these agreements, the Company granted the employees 200,000 restricted shares
      of Common Stock (the “Performance Shares”).  The Performance Shares
      vest in fiscal 2007, 2008 and 2009 only if Mediware achieves certain performance
      goals based on revenue and earnings per share.  The Company has not
      recorded any compensation expense related to the Performance Shares because
      it
      is not probable the performance goals will be met.  The Company will
      continue to assess whether or not the achievement of any performance goals
      are
      probable at each reporting period, and will begin recognizing the related
      expense if and when the performance conditions become
      probable.  During the six months ended December 31, 2007, 125,000 of
      these Performance Shares were canceled due to the resignation of certain key
      employees.  The Performance Shares may result in compensation expense
      in future periods of up to $699,000, representing the fair value on the date
      of
      the grant.





-12-
 Index





During
      fiscal 2007, the Company entered into agreements to provide long-term incentive
      compensation opportunities to certain employees.  Under the terms of
      these agreements, the Company granted the employees 25,000 restricted shares
      of
      Common Stock (the “Time-Based Shares”). The Time-Based Shares vest over a
      three-year period based upon the continued employment of the key
      employee.  For the six months ended December 31, 2007, the Company
      recorded $63,000 of compensation expense related to the Time-Based Shares,
      including a benefit of $18,000 related to the forfeiture of 5,000 unvested
      Time-Based Shares.  The Time-Based Shares will result in compensation
      expense in future periods of up to $38,000, representing the fair value on
      the
      date of the grant less the amount of compensation expense already
      recorded.





During
      fiscal 2008, the Company entered into agreements to provide long-term incentive
      compensation opportunities to certain employees.  Under the terms of
      these agreements, the Company granted the employees 160,000 restricted shares
      of
      Common Stock (the “Enhanced Performance Shares”).  The Enhanced
      Performance Shares vest partially upon continued employment of the key employees
      and partially upon the achievement of certain performance goals.  For
      the six -months ended December 31, 2007, the Company recorded $119,000 of
      compensation expense related to the Enhanced Performance Shares.  The
      Company will continue to assess whether or not the achievement of any
      performance goals is probable at each reporting period, and will recognize
      the
      related expense if and when the performance conditions become
      probable.  The Enhanced Performance Shares may result in compensation
      expense in future periods of up to $972,000, representing the fair value on
      the
      date of the grant less the amount of compensation expense already
      recorded.  This amount includes $276,000 of unrecognized compensation
      expense related to the continued employment of the key employees.





Estimated
      future stock-based compensation expense to be charged to operations is as
      follows:





Fiscal
                Years Ending
                June 30,
            
            Time-Based
                Shares
            
            
            Enhanced
              Performance
              Shares
                (Time-
              Based
                Portion)
            
            
            Total2008
            
            $
            18,000
            
            
            $
            97,000
            
            
            $
            115,0002009
            
            
            18,000
            
            
            
            119,000
            
            
            
            137,0002010
            
            
            2,000
            
            
            
            54,000
            
            
            
            56,0002011
            
            
            -
            
            
            
            6,000
            
            
            
            6,000Total
                estimated future stock-based compensation expense
            
            $
            38,000
            
            
            $
            276,000
            
            
            $
            314,000





A
      Summary
      of the status of the Company’s nonvested restricted Common Stock as of December
      31, 2007, and changes during the six months ended December 31, 2007, is
      presented below:





Nonvested
              Performance
              Shares
            
            
            Weighted
              Average
              Grant
                Date
              Fair
                Value
            
            
            Nonvested
              Enhanced
              Performance
              Shares
            
            
            Weighted
              Average
              Grant
                Date
              Fair
                Value
            
            
            Nonvested
              Time-Based
              Shares
            
            
            Weighted
              Average
              Grant
                Date
              Fair
                ValueNonvested
                at June 30, 2007
            
            
            200,000
            
            
            $
            8.80
            
            
            
            -
            
            
            $
            -
            
            
            
            22,000
            
            
            $
            8.50Granted
            
            
            -
            
            
            $
            -
            
            
            
            160,000
            
            
            $
            6.81
            
            
            
            -
            
            
            $
            -Canceled
                or expired
            
            
            (125,000
            )
            
            $
            8.48
            
            
            
            -
            
            
            $
            -
            
            
            
            (5,000
            )
            
            $
            8.50Vested
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            
            (5,000
            )
            
            $
            8.50Nonvested
                at December 31, 2007
            
            
            75,000
            
            
            $
            9.32
            
            
            
            160,000
            
            
            $
            6.81
            
            
            
            12,000
            
            
            $
            8.50





The
      fair
      value of the nonvested shares is determined based on the average trading price
      of the Company’s shares on the grant date.





-13-
 Index





6.   INCOME
      TAXES





The
      Company accounts for income taxes under the asset and liability
      approach.  Deferred tax assets and liabilities are recognized for the
      expected future tax consequences attributed to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases.  Deferred tax assets and liabilities are
      measured using the enacted rates expected to apply to taxable income in the
      years in which those temporary differences are expected to reverse.  A
      valuation allowance is provided against net deferred tax assets when it is
      not
      more likely than not that a tax benefit will be realized.  Income
      taxes include U.S. and foreign taxes.  Effective July 1, 2007, the
      Company adopted FASB Interpretation No. 48, “Accounting for Uncertainties
      in
      Income Taxes – an interpretation of FASB Statement No. 109”, (“FIN
      48”).  There was no impact to the Company’s results of operations and
      financial position upon adoption.  At June 30, 2007, the Company had
      unrecognized tax benefits of $100,000, which included estimated interest and
      penalties.   The Company intends to classify any future expenses
      for income tax-related interest and penalties as a component of income
      taxes.





The
      Company files income tax returns in the U.S. federal jurisdiction and various
      state and foreign jurisdictions.  In general, the Company’s filed
      income tax returns are no longer subject to examination by taxing authority
      examinations for years ending before June 30, 2003.





During
      the six months ended December 31, 2007, the Company reduced its deferred tax
      asset by approximately $225,000 in connection with fully vested non-qualified
      employee stock options which terminated as a result of the departure of certain
      employees.








7.
      SEGMENT INFORMATION





The
      Company has three distinct product lines:  Medication Management
      systems, Blood Management systems and Perioperative Management
      systems.   Based on similar economic characteristics, as well as
      the nature of products, production processes, customers and distribution
      methods, the Company has aggregated these operating divisions into one reporting
      segment.  Revenue by product line are as follows (in
      thousands):





For the Three Months
              Ended December 31,
            
            
            For the Six Months
              Ended December 31,2007
            
            
            2006
            
            
            2007
            
            
            2006Medication
                Management Systems
            
            $
            3,906
            
            
            $
            4,068
            
            
            $
            9,766
            
            
            $
            7,379Blood
                Management Systems
            
            
            4,553
            
            
            
            6,858
            
            
            
            9,227
            
            
            
            11,704Perioperative
                Management Systems
            
            
            200
            
            
            
            336
            
            
            
            410
            
            
            
            654Total
            
            $
            8,659
            
            
            $
            11,262
            
            
            $
            19,403
            
            
            $
            19,737




-14-
 Index





Selected
      financial information by geographic area is as follows (in
      thousands):








For the Three Months
              Ended December 31,
            
            
            For the Six Months
              Ended December 31,2007
            
            
            2006
            
            
            2007
            
            
            2006Revenue
                from Unaffiliated Customers:United
                States
            
            $
            7,304
            
            
            $
            10,126
            
            
            $
            16,946
            
            
            $
            17,801United
                Kingdom
            
            
            1,355
            
            
            
            1,136
            
            
            
            2,457
            
            
            
            1,936Total
            
            $
            8,659
            
            
            $
            11,262
            
            
            $
            19,403
            
            
            $
            19,737Net
                Income (Loss):United
                States
            
            $
            (425
            )
            
            $
            805
            
            
            $
            7
            
            
            $
            1,050United
                Kingdom
            
            
            88
            
            
            
            100
            
            
            
            119
            
            
            
            19Total
            
            $
            (337
            )
            
            $
            905
            
            
            $
            126
            
            
            $
            1,069





December
                31,2007
            
            
            2006Identifiable
                Assets:United
                States
            
            $
            55,064
            
            
            $
            52,790United
                Kingdom
            
            
            4,232
            
            
            
            3,681Total
            
            $
            59,296
            
            
            $
            56,471








8.     EXIT
      ACTIVITIES





In
      July
      2007, the Company announced the consolidation of its three business units into
      a
      single operating unit.  The consolidation of operations and
      elimination of redundant business functions is intended to reduce costs and
      lower corporate overhead and to accelerate the growth of the Company’s two
      primary businesses, blood and medication management.  In conjunction
      with this restructuring, the Company closed an office and reduced its workforce
      by approximately 20 employees.  In addition, the Company no longer
      intends to invest in the growth of its perioperative management
      systems.





Costs
      to
      be incurred in connection with this exit activity comprise one-time benefits
      to
      employees who are involuntarily terminated, costs related to the early
      termination of certain contracts, and costs of consolidating
      facilities.  As management had not communicated the plan of
      termination associated with the restructuring as of June 30, 2007, the Company
      did not incur an exit activity liability in its June 30, 2007 consolidated
      financial statements.  The following table provides a reconciliation
      of the beginning and ending balances of the exit activity
      liability:





Employee
              Termination
              Benefits
            
            
            Contract
              Termination
              Costs
            
            
            Facilities
              Consolidation
              Costs
            
            
            TotalBalance,
                June 30, 2007
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Additional
                expense incurred
            
            
            273,000
            
            
            
            7,000
            
            
            
            97,000
            
            
            
            377,000Amounts
                paid
            
            
            (240,000
            )
            
            
            (7,000
            )
            
            
            (97,000
            )
            
            
            (344,000
            )Balance,
                December 31, 2007
            
            $
            33,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            33,000




-15-
 Index





The
      Company recorded all expenses related to exit activity costs as Selling, General
      and Administrative expenses in the accompanying financial statements for the
      six
      months ended December 31, 2007.





The
      following table provides a reconciliation of beginning and ending balances
      of
      the exit activity liability by business units:








Medication
                Management
            
            
            Perioperative
                Management
            
            
            TotalBalance,
                June 30, 2007
            
            $
            -
            
            
            $
            -
            
            
            $
            -Additional
                expense incurred
            
            
            268,000
            
            
            
            109,000
            
            
            
            377,000Amounts
                paid
            
            
            (250,000
            )
            
            
            (94,000
            )
            
            
            (344,000
            )Balance,
                December 31, 2007
            
            $
            18,000
            
            
            $
            15,000
            
            
            $
            33,000








9.     CONTINGENCIES





On
      March
      6, 2006, Triad Laboratory Alliance, LLC d/b/a Spectrum Laboratory Network
      (“Spectrum”) filed suit against Mediware in the General Court for Justice,
      Superior Court Division, County of Guilford, North Carolina. The case was
      subsequently removed from North Carolina state court to the United States
      District Court for the Middle District of North Carolina. Spectrum seeks an
      unspecified amount of damages (exceeding $300,000) due to, among other things,
      Mediware’s alleged misrepresentations and breaches of warranties under its
      license agreement and the alleged violation of the North Carolina unfair trade
      practices statute.  Mediware filed a counterclaim alleging, among
      other things, breach of contract and misappropriation by Spectrum of Mediware’s
      intellectual property.  In July 2007, the parties agreed to enter into
      binding arbitration.  The lawsuits have been stayed while the case in
      proceeding through the arbitration process.





On
      August
      16, 2006, Mediware filed a lawsuit against Korchek Technologies, LLC (“Korchek”)
      in the United States District Court for the Eastern District of New York
      alleging breach of contract and tortious interference with Mediware's
      contractual relationships with certain customers.  On September 28,
      2006, Korchek filed an answer to Mediware's lawsuit denying any wrongdoing
      and
      filed a counterclaim. The counterclaim seeks unspecified damages and alleges,
      among other things, that Mediware has improperly interfered with Korchek’s
      prospective business relationships; disparaged Korchek, its president and its
      products and improperly induced Korchek’s customers to breach their contractual
      relationship with Korchek.





In
      February 2007, the California Supreme Court denied the petition for a review
      filed by former Mediware employee Donnie L. Jackson, Jr. regarding the decision
      of the Third Appellate District in Sacramento, California to vacate the award
      of
      attorney’s fees previously obtained by Mr. Jackson and to remand the case to
      Superior Court of El Dorado County, California for further
      proceedings.  Mr. Jackson had previously successfully moved for
      summary judgment on claims by GlobalMed Technologies, Inc. (“Global
      Med”)  that he misappropriated trade secrets and breached certain
      contractual covenants.  The trial court had awarded fees, costs and
      interest against Global Med based on Mr. Jackson’s employment contracts. In the
      event that Mr. Jackson ultimately prevails in this case, which was commenced
      on
      September 23, 2002 by Global Med, the Company would be eligible to be reimbursed
      for certain attorney’s fees and costs plus interest advanced to Mr. Jackson by
      the Company in connection with Global Med’s claims.  If Mr. Jackson
      does not prevail, Mediware could be responsible under an agreement with Mr.
      Jackson for damages and certain fees and costs awarded to Global Med, which
      could be material.





In
      addition to the foregoing, the Company is subject to legal proceedings and
      claims that arise in the ordinary course of business.  The Company
      believes that the outcome of such pending legal proceedings in the aggregate
      will not have a material adverse effect on its business, financial condition,
      results of operations or cash flows.





-16-
 Index





10.     CONCENTRATION
      OF REVENUE





The
      Company recorded $2,029,000 of revenue related to one contract signed during
      the
      quarter ended September 30, 2007.  The Company had an outstanding
      accounts receivable balance of $1,015,000 at December 31, 2007 related to this
      customer.  No other customer represented more than 10% of revenue for
      the three or six months ended December 31, 2007 or 2006.








11.    RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS




In
      December 2007, the FASB issued Statement No. 141 (revised), Business Combinations(SFAS
      No. 141(R)). The standard changes the accounting for business combinations
      including the measurement of acquirer shares issued in consideration for a
      business combination, the recognition of contingent consideration, the
      accounting for pre-acquisition gain and loss contingencies, the recognition
      of
      capitalized in-process research and development, the accounting for
      acquisition-related restructuring cost accruals, the treatment of acquisition
      related transaction costs and the recognition of changes in the acquirer’s
      income tax valuation allowance. SFAS No. 141(R) is effective for fiscal
      years beginning after December 15, 2008, with early adoption prohibited.
      The Company is currently evaluating the impact of the pending adoption of FAS
      141(R) on its results of operations and financial condition.




In
      December 2007, the FASB issued Statement No. 160, Noncontrolling Interests
      in
      Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS
      No. 160). The standard changes the accounting for noncontrolling (minority)
      interests in consolidated financial statements including the requirements to
      classify noncontrolling interests as a component of consolidated stockholders’
equity, and the elimination of “minority interest” accounting in results of
      operations with earnings attributable to noncontrolling interests reported
      as
      part of consolidated earnings. Additionally, SFAS No. 160 revises the
      accounting for both increases and decreases in a parent’s controlling ownership
      interest. SFAS No. 160 is effective for fiscal years beginning after
      December 15, 2008, with early adoption prohibited. The Company is currently
      evaluating the impact of the pending adoption of SFAS No. 160 on its
      results of operations and financial condition.




In
      June
      2007, the FASB ratified Emerging Issues Task Force (EITF) 07-3, Accounting for Nonrefundable
      Advance
      Payments for Goods or Services Received for Use in Future Research and
      Development Activities(EITF 07-3). EITF 07-3 requires that
      nonrefundable advance payments for goods or services that will be used or
      rendered for future research and development activities be deferred and
      capitalized and recognized as an expense as the goods are delivered or the
      related services are performed. EITF 07-3 is effective, on a prospective
      basis, for fiscal years beginning after December 15, 2007. The Company is
      currently evaluating the impact of the pending adoption of EITF 07-3 on its
      results of operations and financial condition.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS No. 159”).  Under
      this standard, the Company may elect to report financial instruments and certain
      other items at fair value on a contract-by-contract basis with changes in value
      reported in earnings.  Any such election is
      irrevocable.  SFAS No. 159 is effective for fiscal years beginning
      after November 15, 2007.  Management is currently assessing
      the
      potential impact of SFAS No. 159 on the Company’s financial condition and
      results of operations.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (“SFAS
      No. 157”), which defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles, and expands disclosures
      about
      fair value measurements.  SFAS No. 157 does not require any new fair
      value measurements, but provides guidance on how to measure fair value by
      providing a fair value hierarchy used to classify the source of the
      information.  This statement is effective for fiscal years beginning
      after November 15, 2007.  Management is currently assessing the
      potential impact of SFAS No. 157 on the Company’s financial condition and
      results of operations.





-17-
 Index





REVIEW
      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
      FIRM




To
      The
      Board of Directors and Shareholders of


Mediware
      Information Systems, Inc.





We
      have
      reviewed the accompanying condensed consolidated balance sheet of Mediware
      Information Systems, Inc. and subsidiaries (the "Company") as of December 31,
      2007, and the related condensed consolidated statements of operations and
      comprehensive income, and cash flows for the three and six month periods ended
      December 31, 2007 and 2006.  These interim condensed consolidated
      financial statements are the responsibility of the Company's
      management.




We
      conducted our reviews in accordance with standards established by the Public
      Company Accounting Oversight Board (United States). A review of interim
      financial information consists principally of applying analytical procedures
      to
      financial data and making inquiries of persons responsible for financial and
      accounting matters. It is substantially less in scope than an audit conducted
      in
      accordance with the standards of the Public Company Accounting Oversight Board
      (United States), the objective of which is the expression of an opinion
      regarding the financial statements taken as a whole. Accordingly, we do not
      express such an opinion.




Based
      on
      our reviews, we are not aware of any material modifications that should be
      made
      to the accompanying interim condensed consolidated financial statements in
      order
      for them to be in conformity with accounting principles generally accepted
      in
      the United States of America.


We
      have
      previously audited, in accordance with the standards of the Public Company
      Accounting Oversight Board (United States), the consolidated balance sheet
      of
      the Company as of June 30, 2007, and the related consolidated statements of
      operations and comprehensive income, shareholders' equity, and cash flows for
      the year then ended (not presented herein), and in our report dated September
      11, 2007, we expressed an unqualified opinion on those consolidated financial
      statements. In our opinion, the information set forth in the accompanying
      condensed consolidated balance sheet as of June 30, 2007 is fairly stated
      in all material respects in relation to the consolidated balance sheet from
      which it has been derived.





Eisner
      LLP


New
      York,
      New York




January
      30, 2008





-18-
 Index





ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND
                ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS





Forward-Looking
      Statements





This
      Quarterly Report on Form 10-Q contains forward-looking statements. Any
      statements contained herein that are not statements of historical fact may
      be
      deemed to be forward-looking statements within the meaning of Section 21E of
      the
      Securities Exchange Act. The words “believes,” “anticipates,” “plans,” “seeks,”
“expects,” “intends” and similar expressions identify some of the
      forward-looking statements. Forward-looking statements are not guarantees of
      performance or future results and involve risks, uncertainties and assumptions.
      The factors discussed elsewhere in this Form 10-Q and in Mediware’s Form 10-K
      for the year ended June 30, 2007 and in subsequent Quarterly Reports on Form
      10-Q, could also cause actual results to differ materially from those indicated
      by the Company’s forward-looking statements.  Mediware undertakes no
      obligation to publicly update or revise any forward-looking
      statements.





Overview





Mediware
      Information Systems, Inc. (including its subsidiaries, “Mediware” or the
“Company”) is a New York corporation incorporated in 1970 with its corporate
      headquarters at 11711 West 79th Street, Lenexa, Kansas.  The Company
      maintains an Internet website at www.mediware.com, at which reports filed with
      the Securities Exchange Commission (“SEC”) under the Securities Exchange Act of
      1934 (the “Securities Exchange Act”), can be obtained under “Investor Relations”
without charge as soon as reasonably practicable after filed or furnished with
      the SEC.





Mediware
      develops, markets, licenses, implements and supports clinical management
      information solutions.  The Company's solutions are primarily designed
      to create an automated “closed loop” clinical system for the management of
      medication and blood in hospitals, blood and plasma centers, and long-term
      care
      and behavioral health facilities.  The Company’s solutions typically
      consist of the Company's proprietary application software, third-party licensed
      software and third-party hardware.  Mediware sells implementation,
      training, and annual software support services with software
      systems.  The Company also maintains a perioperative management
      software product used by hospitals in the United
      States.   Mediware provides annual software support services to
      its perioperative software customers, but on July 20, 2007, Mediware announced
      that it stopped actively marketing its perioperative management products and
      does not expect to market these products in fiscal year 2008.





Mediware
      markets its blood management products primarily in the United
      States.  The Company markets its medication management solutions in
      the United States and in the United Kingdom, with different software systems
      designed for the specific requirements of each market.  The Company
      has operations in the United Kingdom relating to the systems licensed and sold
      primarily in that market.  All other operations are in the United
      States.





Market
      Positioning





Mediware’s
      products have been designed to address significant clinical issues in the
      healthcare industry.   Traditional healthcare environments
      include collections of disparate information systems and manual processes used
      by clinicians throughout the care process.  The result is reduced
      efficiency and increased safety risks due to the potential for human error
      and
      delayed access to patient information and records as patients progress through
      the continuum of care. When dealing with blood or medications, errors and delays
      can often result in tragic consequences.   The Company’s products
      address these clinical issues with “suites” of applications that provide
      clinicians one data environment for the information relating to the prescribing,
      preparation, and administration of drug and/or blood therapies.  The
      Company’s two primary product lines, Blood Management and Medication Management
      solutions, manage each step of the therapeutic process, including: ordering,
      fulfillment, administration, and documentation.  Mediware’s products
      provide care providers a “closed loop” process for blood and medication
      therapies.  The Company believes this closed loop process
      differentiates it from the industry’s catalog and “best of breed”
vendors.  The process-centric integrated data environments provided by
      Mediware’s blood and medication management solutions seamlessly extend the
      discipline and controls of the pharmacy and blood bank to patient units,
      operating room suites, donation centers, and other venues where adverse events
      occur.





-19-
 Index





On
      July
      20, 2007, Mediware announced the consolidation of its three business divisions
      into a single operating unit to eliminate redundant business functions, improve
      efficiencies and lower operating costs. The Company expects the consolidation
      to
      permit more investment in the blood and medication management product lines
      and
      to accelerate the growth of the Company's closed loop blood and medication
      management product lines without negatively impacting the delivery of its
      services. At the same time, the Company also announced its intention to stop
      actively marketing its perioperative management products to focus resources
      on
      enhancing and expanding its strategic product direction.





In
      October 2007, the Company acquired substantially all the assets of Integrated
      Marketing Solutions, LLC, a Maryland limited liability company (“IMS”), which
      provides software products and services targeting blood and plasma donation
      centers in North America and Europe.





The
      Healthcare Information Systems Industry





The
      healthcare industry in the United States is highly fragmented, complex, and
      inefficient. Comparatively, the healthcare industry has invested less in
      information technology than many other industries. While advances in medical
      technology have provided physicians, nurses and other caregivers leading edge
      diagnostic and therapeutic technologies, the information systems supporting
      the
      management of clinical processes in complex healthcare organizations have made
      insufficient progress.  A substantial portion of clinical workflow
      still depends upon manual paper-based processes interfaced with various
      automated or semi-automated functionally oriented clinical
      systems.  Examples of functionally oriented clinical systems include
      pharmacy, radiology, blood bank and nursing documentation.





As
      a
      result, the health care industry is generally economically inefficient and
      produces significant variances in medical outcomes.While waste and
      utilization rates are rarely made public, patient safety and the publicity
      surrounding medical errors have focused a tremendous amount of scrutiny on
      hospitals and care providing institutions. Recent news reports and professional
      studies have highlighted patient safety errors and influenced governmental
      activity.





The
      Company anticipates that the continued increase in government regulation, public
      and competitive pressure regarding errors occurring in hospitals, and new health
      threats, will increase the industry’s expenditures on clinical information
      systems.  Mediware believes that its product strategy and offerings
      provide an alternative to monolithic solutions architectures of disparate
      systems and can play a role in moving healthcare IT standards forward to deliver
      significant results for customers.





Competition
      in the market for clinical information systems is intense.  The
      principal competitive factors are the functionality of the system, its design
      and capabilities, site references, ability to install, process redesign
      capabilities, reputation, software platform, the potential for enhancements,
      price, departmental versus enterprise sales and salesmanship.  Also
      key is the strategic position the incumbent, or major healthcare information
      systems vendor, has in the customer site. Different dynamics and competitors,
      however, affect each of the Company's products and each sale.





Blood
      Management
      Products





The
      Company supplies information and management software systems to blood and plasma
      donor and transfusion centers.  Hospitals and blood and plasma centers
      face pressures to manage blood and plasma inventory and improve the safety
      of
      the blood and plasma supply by reducing errors, improving screening and
      increasing throughput and cost efficiencies.  These pressures exist
      despite pressures across the healthcare industry to reduce costs and to address
      ongoing personnel shortages.  Mediware's user-friendly blood
      management software systems are intended to help hospitals and blood and plasma
      centers address these issues.  The software is designed to reduce
      costs through automatic report production, decreased paperwork, and automated
      billing.  The Company's products are also designed to improve blood
      supply safety and the productivity of blood and plasma center personnel through
      the use of user-defined truth tables and automatic linking to donors' historical
      records, among other features.  Donor recruitment programs may also be
      enhanced though Mediware’s donor software by making tele-recruiters more
      productive.





-20-
 Index





The
      Company’s current blood transfusion product is  HCLLTM.  During
      fiscal 2005, the Company received 510(k) clearance for its complementary HCLL
      donor software product for use in hospital-based donor centers.  HCLL
      Transfusion and HCLL Donor are clinical applications that address blood donor
      recruitment, blood processing and transfusion activities for hospitals and
      medical centers.  These systems are designed to be user intuitive,
      scalable, and support product management, resource management, quality control
      and testing.  They include advanced data mining and data management
      intelligence capabilities, which can be utilized by facilities of all sizes,
      including small hospitals, large medical centers, multi-facility enterprises
      and
      central transfusion services.  HCLL software also can address the
      needs of hospitals for operating centralized transfusion services, an area
      identified as a key to controlling the rising cost of blood
      products.  The HCLL software is already in productive use at nearly
      100 sites.





The
      Company also provides large complex blood centers tools for donor targeting,
      donor recruitment, donation management, unit testing, blood component
      manufacturing, inventory control and distribution through its LifeTrak®
      software.  LifeTrak software can operate in multiple operating
      environments enabling each customer to configure hardware according to its
      own
      needs and budgetary constraints. The Unix-based LifeTrak software system is
      more suitable for larger complex customer donor sites, while the HCLL Donor
      system is generally a more cost effective solution for hospitals and smaller
      donor centers.





The
      Company continues to concentrate on increasing the number of users and licensees
      of its HCLL and LifeTrak software, with a focus on large sophisticated
      healthcare institutions that are best positioned to take advantage of the robust
      functionality and enterprise-level capabilities in the software.





The
      Company is also looking to new products and markets to continue its
      growth.  In early fiscal year 2008, the Company announced its new
      BloodSafeTM suite of products.  The BloodSafe suite includes hardware
      and software which enable healthcare facilities to securely store, monitor,
      distribute and track blood products from locations removed from the hospital’s
      physical blood bank. Components of the BloodSafe suite include blood tracking
      and monitoring software, computer controlled refrigerators, and handheld point
      of care tools to verify accurate patient identification and document transfusion
      activities. BloodSafe can be integrated with Mediware’s HCLL system or operate
      on a stand-alone basis.  Additionally, the Company believes it is
      positioned to benefit from the emerging biologics market, which includes, among
      other things, bone, tissue and cord blood stem cells.  The Company
      expects the biologics markets to become subject to regulatory
      scrutiny.  As a result, the Company is developing software products
      that address the management of non-blood biologics, and is planning a product
      launch in the coming months.





Following
      its October 2007 acquisition of substantially all the assets of IMS, the Company
      began to provide software products and services targeting blood and plasma
      donation centers in North America and Europe.  This software addresses
      the competitive nature of the blood supply market by enabling blood and plasma
      collection facilities with web-based tools to better manage relationships with
      donors, staffing and hospitals.  These products, which will be
      re-branded as part of the Mediware product line, facilitate blood and plasma
      donor centers’ donors recruitment and retention, improve blood drives, and
      enable hospitals with electronic tools to order, ship and track
      products.





In
      addition to its sale of software, the Company generates revenue from
      professional services and post-contract support.  These ongoing
      service and support contracts have recently accounted for over 75% of revenue
      from blood management operations and are recurring in nature.





The
      blood
      management products are marketed primarily through the Company’s direct sales
      force.  Additionally, the Company is working to develop complementary
      reseller relationships for products.





The
      blood
      management products compete primarily with vendors of laboratory information
      systems (“LIS”) providing a blood bank subsystem as a part of their laboratory
      product, as well as other companies that market stand-alone blood banksystems. The LIS vendors
      are much larger companies with greater technical, marketing, financial and
      other
      resources than the Company.  The Company believes, however, that due
      to the functionality of the HCLL software, the Company is well-positioned in
      the
      blood bank system market and that it has a good reputation with its customers,
      including many of the most sophisticated healthcare systems in the United
      States.





-21-
 Index





Medication
      Management
      Products





The
      Company supplies medication management solutions to hospitals, mental health
      facilities, penal institutions and other institutions that require the
      administration and management of medication.  The Company’s medication
      management solutions are designed to help customers improve patient safety
      while
      reducing costs and improving clinical documentation.  Additionally,
      the solutions help medical facilities comply with increasing regulatory and
      governmental requirements.





The
      Company’s principal software product for medication management is WORx®, a core
      pharmacy
      information system designed to manage inpatient and outpatient pharmacy
      operations.  WORx has features and functions designed to help improve
      patient safety and manage pharmacy operations effectively.  Since its
      introduction, WORx has been licensed for use at approximately 250 customer
      sites.  The product's market acceptance encompasses hospitals of all
      sizes, including multi-facility healthcare systems.





In
      fiscal
      2004, the Company released two new medication management products, MediCOETM
      and
      MediMAR®.  These
      products are fully integrated with the WORx software and provide a complete
      closed loop drug therapy management system with a physician order entry module
      (MediCOE) and nurse point of care administration and bedside documentation
      module (MediMAR).  The MediCOE software provides clinicians an
      efficient, effective method to enter medication orders and manage drug
      therapy.  Orders entered in the MediCOE software undergo a prospective
      evaluation based on the patient’s current medical profile to identify potential
      adverse outcomes.  Potential problems can be identified by the
      clinician at order entry and can be corrected or explained at the point of
      care.  The MediMAR software, on the other hand, serves as an
      electronic medication administration and bedside documentation
      record.  It produces a dynamic and complete representation of the
      patient’s medication profile, including clinician orders, medication list,
      allergies and notes or alerts to increase patient safety. The MediMAR software
      uses bar code, wireless, handheld, and other technologies to allow caregivers
      efficient and accurate methods to document patient medication
      administration.  The MediCOE and MediMAR products have been installed
      and are in productive use in three and six separate customer sites,
      respectively.





In
      March
      2007, the Company introduced MediREC, a new medication management
      tool.  This new product assists in achieving compliance with a recent
      mandate by the Joint Commission on Accreditation of Healthcare Organizations,
      which requires hospitals to document all of a patient’s home medications when a
      patient is admitted or enters the emergency room, and to reconcile that list
      with the medications prescribed in the hospital.  That process must be
      repeated each time the patient is transferred within the hospital and again
      when
      the patient is discharged.





The
      Company continues to target its large WORx software customer base and new
      customers with the MediCOE and MediMAR products and has begun marketing MediREC
      to this customer base and new customers as well.  The Company is also
      beginning to increase its focus on behavioral health and other specialty
      healthcare markets where the integrated features and functionality included
      in
      the WORx, MediMAR, MediCOE and MediREC software products can provide a fully
      integrated medication management solution.





The
      Company is also planning to introduce a hosted version of our medication
      management products. This will allow for the medication management software
      to be remotely hosted for customers that have smaller IT departments or are
      not
      as well positioned to complete an implementation or full-roll out of the
      medication management system components. When completed, we believe this
      approach will provide a broader market for our products, including smaller
      acute
      care hospitals and behavioral health facilities.





Selling
      the Company’s full suite of medication management products (WORx, MediMAR,
      MediCOE and MediREC) is a complex process involving multiple hospital
      departments and, therefore, results in substantially longer sales cycles
      compared to stand-alone WORx sales.  This has resulted in less
      predictable contract closures and a need to recognize software license revenue
      over multiple quarters (in some cases).  The Company generates revenue
      from medication management software sales, professional services and
      post-contract support.  Support contracts currently account for
      approximately half of the revenue from medication management
      operations.  As the sales of MediCOE and MediMAR products increase,
      the Company expects that license fee revenue will increase and support revenue
      will make up a smaller portion of the Company’s revenue.





-22-
 Index





The
      Company’s medication management products compete against the products of the
      other niche competitors’ and some of the largest providers of healthcare
      information technology, including Cerner, General Electric, Siemens, Eclipsys
      and others.  These competitors often have significantly greater
      resources than Mediware, but the Company believes that its products are well
      positioned and have functionality that can lead to growth.  The
      medication management products are marketed directly through the Company’s sales
      force and other marketing channels, including reseller agreements with
      distribution partners and focused sales channels.





The
      Company's United Kingdom operating business is JAC Computer Services, Ltd.
      (“JAC”).   JAC markets and provides support for its pharmacy
      management and electronic prescribing systems throughout the U.K., Ireland
      and
      South Africa.  JAC includes an installed base of over 250 customer
      sites, representing over 90 National Health Service acute hospitals or
      trusts.  JAC’s product offering includes JAC’s Pharmacy Management
      System and Electronic Prescribing module.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts reported in the consolidated
      financial statements and related notes to financial statements. Actual results
      could differ from those estimates.  The Company’s significant areas of
      estimation include determining the allowance for uncollectible accounts, valuing
      certain accrued liabilities and determining whether the carrying value of
      goodwill and capitalized software development costs is impaired.





-23-
 Index





Results
      of Operations for the Three Months Ended December 31, 2007 as Compared to the
      Three Months Ended December 31, 2006





Total
      revenue for the second quarter of fiscal 2008 was $8,659,000 compared to
      $11,262,000 in the comparable quarter of fiscal 2007, a decrease of $2,603,000,
      or 23%. The decrease in revenue is largely due to a decline in blood management
      system sales. Blood management products and services (including IMS products
      and
      services) recorded total revenue of $4,553,000 in the second quarter of fiscal
      2008, representing a decrease of $2,305,000, or 34%, compared to $6,858,000
      in
      the same period of fiscal 2007. Medication management products and services
      (excluding the United Kingdom operations, JAC Computer Services, Ltd., “JAC”)
      recorded a decrease in total revenue of $380,000, or 13% from $2,932,000 in
      the
      second quarter of fiscal 2007 to $2,552,000 in the same period of fiscal
      2008.  JAC recorded total revenues of $1,354,000 in the second quarter
      of fiscal 2008, representing an increase of $218,000, or 19%, compared to
      $1,136,000 in the same period of fiscal 2007.  Perioperative
      management products and services recorded revenues of $200,000 in the second
      quarter of fiscal 2008, representing a decrease of $136,000, or 40%, compared
      to
      $336,000 in the same quarter in fiscal 2007.





System
      sales, which include proprietary software, third party software, hardware
      revenue and subscription revenue, amounted to $2,032,000 for the quarter ended
      December 31, 2007, a decrease of $2,858,000, or 58%, from $4,890,000 in the
      same
      period in fiscal 2007.  System sales for the blood management
      products, including subscription revenue from the recently acquired IMS
      products, were $950,000 for the second quarter of fiscal 2008, a decrease of
      $2,633,000, or 73%, compared to $3,583,000 in the same quarter of fiscal
      2007.  This decrease is consistent with Mediware’s expected lower
      system sales for blood management products in fiscal 2008 due to the completion
      of the Hemocare and LifeLine sunset program in June 2007.  System
      sales for the medication management products (excluding JAC) decreased from
      $910,000 in fiscal 2007 to $695,000 in fiscal 2008, representing a decrease
      of
      $215,000, or 24%.  This decrease reflects a decline in WORx and
      MediMAR sales, partially offset by an increase in MediREC sales.  The
      perioperative management products recorded no system sales in fiscal 2008 as
      compared to $27,000 in the second quarter of fiscal 2008 due to the previously
      announced cessation of marketing.  JAC recorded system sales of
      $387,000 for the second quarter of fiscal 2008, representing an increase of
      $17,000, or 5%, compared to $370,000 reported for the same period in fiscal
      2007.  While the Company believes revenue at JAC will continue to
      increase, the ongoing delays and changes to the Connecting for Health Program
      in
      the United Kingdom could create uncertainty and could adversely impact JAC’s
      revenues.





Service
      revenue, which includes recurring post contract support revenues, implementation
      services and promotional services increased $255,000, or 4%, to $6,627,000
      in
      the second quarter of fiscal 2008 compared to $6,372,000 for the same period
      in
      fiscal 2007.  Service revenue for the blood management products,
      including promotional revenue from the recently acquired IMS products, totaled
      $3,603,000 for the second quarter of fiscal 2008, representing an increase
      of
      $328,000, or 10%, compared to $3,275,000 in the second quarter of fiscal
      2007.  This increase primarily reflects an increase in implementation
      activity for the HCLL software systems, which were licensed as part of the
      sunset program.  Mediware anticipates that service revenue will
      continue to increase throughout fiscal 2008 as the Company expands
      implementation activity on HCLL projects.  Service revenue for the
      medication management products (excluding JAC) decreased $165,000, or 8%, to
      $1,857,000 in the second quarter of fiscal 2008 compared to $2,022,000 for
      the
      same quarter of fiscal 2007.  This decrease is a result of fewer
      ongoing implementations in 2008 as compared to the same period in fiscal
      2007.  Service revenue for perioperative management products decreased
      $109,000, or 35%, to $200,000 in the second quarter of fiscal 2008 compared
      to
      $309,000 in the same quarter of fiscal 2007.  This decrease is
      primarily a result of fewer implementation projects in the first quarter of
      fiscal 2008 as compared to the same period in fiscal 2007.  Mediware
      expects service revenue for perioperative management products to continue to
      decline in the future due to the previously announced cessation of marketing
      for
      this business.  However, the Company continues to provide support
      service to its existing perioperative management products and will consider
      other strategic alternatives for this product line.  Service revenue
      for JAC increased $201,000, or 26%, to $967,000 in the second quarter of fiscal
      2008 compared to $766,000 in the second quarter of fiscal 2007.  This
      increase is a result of an increase in the overall size of the customer base
      resulting in increased support revenue, coupled with an increase in the number
      of ongoing implementation projects compared to the same quarter in fiscal
      2007.





Cost
      of
      systems includes the cost of computer hardware and sublicensed software
      purchased from computer and software manufacturers by Mediware as part of its
      complete system offering.  These costs can vary as the mix of revenue
      varies between high margin proprietary software and lower margin computer
      hardware and sublicensed software components.  Cost of systems
      decreased $87,000, or 11%, to $685,000 in the second quarter of fiscal 2008
      as
      compared to $772,000 in the same period in fiscal 2007 due to the increase
      in
      system sales.  The gross margin, excluding amortization of capitalized
      software costs, on system sales was 66% in the second quarter of fiscal 2008
      compared to 84% in the same quarter in fiscal 2007.  The decrease in
      gross margin is primarily due to the decline in high margin proprietary system
      sales during the second quarter of fiscal 2008 compared to the same period
      in
      fiscal 2007.





-24-
 Index





Cost
      of
      services includes the salaries and direct expenses of client service personnel
      and the direct costs associated with providing promotional
      services.  Cost of services increased $346,000, or 18%, to $2,298,000
      in the second quarter of fiscal 2008 as compared to $1,952,000 in the same
      period of fiscal 2007.  The increase in cost of services is primarily
      attributed to increases in customer service personnel to facilitate the
      implementation of new HCLL projects.  Gross margin on service revenue
      is 65% for the second quarter of fiscal 2008 compared to 69% for the second
      quarter of fiscal 2007.  The Company believes, but cannot assure, that
      cost of services as a percentage of service revenue in fiscal 2008 will remain
      consistent with its rate in fiscal 2007, as the Company continues to implement
      the HCLL software.





Amortization
      of capitalized software increased $69,000, or 5%, to $1,431,000 in the second
      quarter of fiscal 2008 compared to $1,362,000 in the second quarter of fiscal
      2007.  This increase is primarily due to increased amortization of
      capitalized software costs related to recent releases of the HCLL and MediMAR
      products.  Mediware expects amortization to continue to increase
      during fiscal 2008 as new software releases occur.





Software
      development costs include the non-capitalizable portions of salaries,
      consulting, documentation, office and other direct expenses incurred in product
      development activities.  Software development costs increased $22,000,
      or 2%, to $963,000 in the second quarter of fiscal 2008 compared to $941,000
      in
      the second quarter of fiscal 2007. Expenditures for software development include
      amounts paid for both capitalizable and noncapitalizable development
      projects.  Total expenditures for software development were $1,721,000
      in the second quarter of fiscal 2008 compared to $2,043,000 in the second
      quarter of fiscal 2007, resulting in a decrease of $322,000, or
      16%.  This decrease is primarily a result of the operational
      restructuring announced in July 2007, along with slower than expected recruiting
      of developers.  The Company expects to modestly increase the
      investment in product development in its blood management and medication
      management products in the near term.





Selling,
      general and administrative (“SG&A”) expenses include marketing and sales
      salaries, commissions, travel and advertising expenses.  Also included
      is bad debt expense; legal, accounting and professional fees; salaries and
      bonus
      expenses; utilities, rent, communications and other office expenses; stock-based
      compensation expenses and other related direct administrative
      expenses.  SG&A expenses decreased $984,000, or 19%, from
      $5,076,000 in the second quarter of fiscal 2007 to $4,092,000 in the second
      quarter of fiscal 2008.  This decrease is primarily due to lower sales
      commissions, bad debt expense, management bonuses and to cost savings associated
      with the operational restructuring during the first quarter of fiscal
      2008.  This decrease was partially offset by increased employee
      medical insurance costs and legal expenses.





Income
      tax expense decreased $779,000, from an income tax expense of $548,000 in the
      second quarter of fiscal 2007 to an income tax benefit of $231,000 in the same
      period of fiscal 2008, primarily related to the reduction in operating
      income.  In conjunction with this decrease, the effective tax rate
      increased from 37.7% for the three months ending December 31, 2006 to 40.7%
      in
      the same period of fiscal 2008.





Mediware
      experienced a net loss for the second quarter of fiscal 2008 of $337,000,
      compared to net income of $905,000 during the second quarter of fiscal
      2007.  This decrease is primarily attributable to a decrease in system
      sales, partially offset by an increase in service revenue and a decrease in
      expenses due to the 2008 organizational restructuring.





-25-
 Index





Results
      of Operations for the Six Months Ended December 31, 2007 as Compared to the
      Six
      Months Ended December 31, 2006





Total
      revenue for the six-month period ended December 31, 2007 was $19,403,000
      compared to $19,737,000 in the comparable period of fiscal 2007, a decrease
      of
      $334,000, or 2%.  The decrease in revenue is largely due to a decline
      in blood management system sales, partially offset by increases in medication
      management system sales and increases in blood management service
      revenue.  Blood management products and services recorded total
      revenue of $9,228,000 during the six-month period of fiscal 2008, representing
      a
      decrease of $2,476,000, or 21%, compared to $11,704,000 in the same period
      of
      fiscal 2007.  Medication management products and services (excluding
      the United Kingdom operations, JAC Computer Services, Ltd., “JAC”) recorded an
      increase in total revenue of $1,867,000, or 34% from $5,443,000 in the first
      six
      months of fiscal 2007 to $7,310,000 in the same period of fiscal
      2008.  JAC recorded total revenues of $2,456,000 during fiscal 2008,
      representing an increase of $519,000, or 27%, compared to $1,937,000 in the
      same
      period of fiscal 2007.  Perioperative management products and services
      recorded revenues of $409,000 in the first six months of fiscal 2008,
      representing a decrease of $244,000, or 37%, compared to $653,000 in the same
      period in fiscal 2007.





System
      sales amounted to $6,222,000 for the six months ended December 31, 2007, a
      decrease of $991,000, or 14%, from $7,213,000 in the same period in fiscal
      2007.  System sales for the blood management products were $2,104,000
      for the first six months of fiscal 2008, a decrease of $3,190,000, or 60%,
      compared to $5,294,000 in the same period of fiscal 2007.  This
      decrease is consistent with Mediware’s expected lower system sales for blood
      management products in fiscal 2008 due to the completion of the Hemocare and
      LifeLine sunset program in June 2007.  System sales for the medication
      management products (excluding JAC) increased from $1,417,000 in fiscal 2007
      to
      $3,499,000 in fiscal 2008, representing an increase of $2,082,000, or
      147%.  This increase reflects an increase in MediMAR revenue due to
      the signing of a significant MediMAR contract during the first quarter of fiscal
      2008 and, to a lesser extent, and increase in MediREC revenue.  The
      perioperative management products incurred $6,000 revenue in fiscal 2008 as
      compared to $58,000 in the same period of fiscal 2008 due to the previously
      announced cessation of marketing of the perioperative management
      products.   JAC recorded system sales of $613,000 for the first
      six-month period of fiscal 2008, representing an increase of $169,000, or 38%,
      compared to $444,000 reported for the same period in fiscal
      2007.  While the Company believes revenue at JAC will continue to
      increase, the ongoing delays and changes to the Connecting for Health Program
      in
      the United Kingdom could adversely impact JAC’s revenues.





Service
      revenue increased $657,000, or 5%, to $13,181,000 in the first six months of
      fiscal 2008 compared to $12,524,000 for the same period in fiscal
      2007.  Service revenue for the blood management products totaled
      $7,124,000 for the first six-month period of fiscal 2008, representing an
      increase of $714,000, or 11%, compared to $6,410,000 in the same period of
      fiscal 2007.  This increase primarily reflects an increase in
      implementation activity for the HCLL software systems, which were licensed
      as
      part of the sunset program.  Service revenue for the medication
      management products (excluding JAC) decreased $215,000, or 5%, to $3,811,000
      in
      fiscal 2008 compared to $4,026,000 for the same period of fiscal
      2007.  This decrease is a result of fewer ongoing implementations in
      2008 as compared to the same period in fiscal 2007.  Service revenue
      for perioperative management products decreased $192,000, or 32%, to $403,000
      in
      the first six months of fiscal 2008 compared to $595,000 in the same period
      of
      fiscal 2007.  This decrease is primarily a result of fewer
      implementation projects in the first quarter of fiscal 2008 as compared to
      the
      same period in fiscal 2007.  Service revenue for JAC increased
      $350,000, or 23%, to $1,843,000 in the six-month period of fiscal 2008 compared
      to $1,493,000 in the same period of fiscal 2007.  This increase is a
      result of an increase in the overall size of the customer base resulting in
      increased support revenue, coupled with an increase in the number of ongoing
      implementation projects compared to the same period in fiscal 2007.





-26-
 Index





Cost
      of
      systems can vary as the mix of revenue varies between high margin proprietary
      software and lower margin computer hardware and sublicensed software
      components.  Cost of systems increased $43,000, or 3%, to $1,374,000
      during the first six months of fiscal 2008 as compared to $1,331,000 in the
      same
      period in fiscal 2007.  The gross margin, excluding amortization of
      capitalized software costs, on system sales was 78% in the six-month period
      of
      fiscal 2008 compared to 82% in the same period in fiscal
      2007.   The decrease in gross margin is primarily due to the
      decline in high margin proprietary system sales during the first six months
      of
      fiscal 2008 compared to the same period is fiscal 2007.





Cost
      of
      services increased $594,000, or 15%, to $4,514,000 during the first six months
      of fiscal 2008 as compared to $3,920,000 in the same period of fiscal
      2007.  The increase in cost of services is primarily attributed to
      increases in customer service personnel to facilitate the implementation of
      new
      HCLL projects.  Gross margin on service revenue is 66% for the six
      months of fiscal 2008 compared to 69% for the same period last
      year.  The Company believes, but cannot assure, that cost of services
      as a percentage of service revenue in fiscal 2008 will remain consistent with
      its rate in fiscal 2008, as the Company continues to implement the HCLL
      software.





Amortization
      of capitalized software increased $243,000, or 9%, to $2,871,000 in the first
      six months of fiscal 2008 compared to $2,628,000 in fiscal 2007.  This
      increase is primarily due to increased amortization of capitalized software
      costs related to recent releases of the HCLL and MediMAR products.





Software
      development costs decreased $38,000, or 2%, to $1,946,000 in fiscal 2008
      compared to $1,984,000 in the same period of fiscal 2007. Expenditures for
      software development include amounts paid for both capitalizable and
      noncapitalizable development projects.  Total expenditures for
      software development were $3,632,000 in the first six-month period of fiscal
      2008 compared to $3,969,000 in the same period 2007, a decrease of $337,000,
      or
      9%.  This decrease is primarily a result of the operational
      restructuring announced in July 2007, along with longer than expected hiring
      times.  The Company expects to modestly increase the investment in
      product development in the blood management and medication management products
      in the near term.





Selling,
      general and administrative (“SG&A”) expenses include marketing and sales
      salaries, commissions, travel and advertising expenses.  Also included
      is bad debt expense; legal, accounting and professional fees; salaries and
      bonus
      expenses; utilities, rent, communications and other office expenses; stock-based
      compensation expenses and other related direct administrative
      expenses.   SG&A expenses decreased $3,000, from $8,679,000
      in the first six months of fiscal 2007 to $8,676,000 in the same period of
      fiscal 2008.  The decrease in SG&A expenses is primarily
      attributable to decreases in sales commission, bonuses, bad debt expense and
      marketing, partially offset by increases in stock-based compensation, employee
      medical insurance costs and legal expense.  Mediware is beginning
 to realize the cost savings anticipated from its operational
      restructuring announced during the first quarter of fiscal 2008.





Income
      tax expense decreased $256,000, from $657,000 during the first six months of
      fiscal 2007 to $401,000 in the same period of fiscal 2008, due to the reduction
      in operating income.  In conjunction with this decrease, the effective
      tax rate increased from 38.1% for the six months ending December 31, 2006 to
      76.1% in the same period of fiscal 2008.  The increase in the
      effective tax rate is primarily attributable to a $225,000 non-cash write-off
      of
      certain deferred tax assets relating to fully vested non-qualified stock options
      that were forfeited as a result of the departure of certain employees during
      the
      first quarter of fiscal 2008.





Net
      income during the first six months of fiscal 2008 was $126,000, compared to
      net
      income of $1,069,000 during the same period of fiscal 2007, resulting in a
      decrease of net income of $943,000 or 88%.  This decrease is primarily
      attributable to a decrease in system sales, partially offset by an increase
      in
      service revenue and a decrease in expenses due to the 2008 organizational
      restructuring.





-27-
 Index




Liquidity
      and Capital Resources




As
      of
      December 31, 2007, Mediware had cash and cash equivalents of $20,949,000
      compared to $22,789,000 at June 30, 2007.  Working capital was
      $20,706,000 and $24,334,000 at December 31, 2007 and June 30, 2007,
      respectively.  The current ratio was 2.8 to 1 at December 31, 2007
      compared to 3.0 to 1 at June 30, 2007.  The Company does not have any
      material capital lease obligations, purchase obligations or long-term
      liabilities.





Cash
      provided by operating activities was $5,995,000 during the first six months
      of
      fiscal year 2008 compared to $3,873,000 during the same period a year
      ago.  The increase in cash provided by operating activities is
      primarily due to a reduction in accounts receivable, partially offset by a
      decrease in net income and a decrease in accounts payable, accrued expenses
      and
      advances from customers.





Cash
      used
      in investing activities was $7,825,000 during the first six months of fiscal
      year 2008 compared to $2,181,000 during the same period a year
      ago.  The increase in cash used in investing activities is primarily
      due to the IMS acquisition in October 2007 of $5,501,000.  Also
      contributing to the increase was an increase in capital
      expenditures.  These increases were partially offset by a decrease in
      capitalized software costs for the period.





Cash
      used
      in financing activities was $4,000 during the first six months of fiscal year
      2008 compared to cash provided by financing activities of $258,000 during the
      same period a year ago.  The change primarily reflects a reduction in
      the amount of proceeds received from stock option exercises during fiscal 2008
      compared to fiscal 2007.





The
      Company’s liquidity is influenced by its ability to perform on a “Best of Suite”
basis in a competitive industry.  Factors that may affect liquidity
      are the Company’s ability to penetrate the market for its products, maintain or
      reduce the length of the selling cycle, and collect cash from clients as systems
      are implemented.  Exclusive of activities involving any future
      acquisitions of products or companies that complement or augment the Company’s
      existing line of products, the Company believes that current available funds
      and
      cash generated from operations will provide sufficient liquidity to meet
      operating requirements for the foreseeable future.  The Company
      continues to review its long-term cash needs.  Currently, there are no
      plans for additional outside financing, except that Mediware is considering
      establishing a new line of credit.





-28-
 Index





ITEM
                3.
            QUANTITATIVE
                AND QUALITATIVE
                DISCLOSURES ABOUT MARKET
                RISK





Mediware
      is subject to market risks from interest rates due to the fluctuating rates
      paid
      on its cash equivalent balances and foreign currency fluctuations due to the
      operations of JAC. To date, Mediware has not entered into any derivative
      financial instruments or engaged in other hedging transactions to reduce its
      exposure to such risks.





Interest
      Rate Risk


Mediware
      is exposed to the impact of interest rate changes because of its substantial
      cash equivalent balances. These balances are not held for trading
      purposes.





Balance
                at
              December
                31,
              2007
              ($
                in 000)
            
            
            Effective
              Interest
                Rate at
              December
                31,
              2007
            
            
            Effect
                of 1%
              Change
              ($
                in 000)Cash
                Equivalents
            
            $
            20,949
            
            
            
            4.94
            %
            
            $
            209





At
      December 31, 2007, a 1% decrease in the current per annum interest rate for
      our
      cash equivalents each would result in $209,000 less interest income during
      the
      next fiscal year.  The foregoing calculation assumes an instantaneous
      one percentage point decrease in the rates of all of our cash equivalents and
      that the equivalents balance is the amount outstanding as of December 31,
      2007.  The calculation therefore does not account for any differences
      in the market rates upon which the interest rates of our equivalents is based,
      or other possible actions, such as reinvestment in higher yielding instruments,
      that we might take in response to any rate decrease.





Foreign
      Currency Exchange Rate Risk





Operating
      in international markets involves exposure to the possibility of volatile
      movements in foreign exchange rates. The currencies in each of the countries
      in
      which JAC operates affect:





•
            the
                results of Mediware’s international operations reported in United States
                dollars; and





•
            the
                value of the net assets of JAC reported in United States dollars.








These
      exposures may impact future earnings or cash flows. Revenue from JAC represented
      approximately 12.7% and 9.8% of Mediware’s consolidated revenue for the six
      months ended December 31, 2007 and 2006, respectively. The economic impact
      of
      foreign exchange rate movements is complex because such changes are often linked
      to variability in real growth, inflation, interest rates, governmental actions
      and other factors. These changes, if material, could cause Mediware to adjust
      its financing and operating strategies. Therefore, to isolate the effect of
      changes in currency does not accurately portray the effect of these other
      important economic factors. As foreign exchange rates change, translation of
      the
      income statements of JAC into U.S. dollars affects year-over-year comparability
      of operating results.  Assets and liabilities for JAC are matched in
      the local currency, which reduces the need for dollar conversion. Any foreign
      currency impact on translating assets and liabilities into dollars is included
      as a component of stockholders’ equity. Our revenue results for the three months
      ended December 31, 2007 and 2006 were negatively impacted by a $41,000 and
      $11,000 foreign currency movement, respectively, and for the six month periods,
      negatively impacted by $6,000 in 2008 and positively impacted by $28,000 in
      2007.  These foreign currency adjustments are primarily due to the
      currency valuation of the British pound against the United States
      dollar.





-29-
 Index





ITEM
        4. CONTROLS
        AND
        PROCEDURES





Mediware’s
      management, under the supervision and with the participation of Mediware’s Chief
      Executive Officer and Chief Financial Officer, has reviewed and evaluated the
      effectiveness of Mediware’s disclosure controls and procedures as of the end of
      the quarter covered by this report.  Disclosure controls and
      procedures are defined in the Securities Exchange Act as controls and other
      procedures of Mediware designed to ensure that information required to be
      disclosed by Mediware in the reports that it files or submits under the
      Securities Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in the SEC’s rules and forms and include controls and
      procedures designed to ensure that information required to be disclosed by
      Mediware in the reports that it files or submits to the SEC is accumulated
      and
      communicated to Mediware’s management, including the CEO and CFO, to allow
      timely decisions regarding required disclosure.  Based on the
      foregoing review and evaluation, Mediware’s CEO and CFO have concluded that
      Mediware’s disclosure controls and procedures are effective as of December 31,
      2007.





There
      were no material changes in Mediware’s internal controls over financial
      reporting that occurred during the three months ended December 31, 2007 that
      have materially affected, or are reasonably likely to materially affect, its
      internal controls over financial reporting.








PART
      II     OTHER INFORMATION





ITEM
        1. LEGAL
        PROCEEDINGS





Mediware
      is from time to time involved in routine litigation incidental to the conduct
      of
      its business, including employment disputes and litigation alleging product
      defects, intellectual property infringements, violations of law and breaches
      of
      contract and warranties.  Mediware believes that no such routine
      litigation currently pending against it, if adversely determined, would have
      a
      material adverse effect on its consolidated financial position, results of
      operations or cash flows.





-30-
 Index





Item
      1A.  RISK FACTORS





We
      have
      recently consummated a strategic acquisition and may pursue additional strategic
      acquisitions, investments, and relationships in the future, and we may not
      be
      able to successfully manage our operations if we fail to successfully integrate
      acquired businesses and technologies, which could adversely affect our operating
      results.





As
      part
      of our business strategy, we may seek and complete strategic business
      acquisitions that that are complementary to our business. On October 31, 2007,
      we acquired substantially all of the business and assets and assumed certain
      liabilities of IMS, a company that provides software products and services
      targeting blood and plasma donation centers in North America and Europe.
      Acquisitions, such as our acquisition of the business of IMS, have inherent
      risks which may have a material adverse effect on our business, financial
      condition, operating results or prospects, including, but not limited to, the
      following:





·
            failure
                to successfully integrate the business and financial operations,
                services,
                intellectual property, solutions or personnel of the acquired business





·
            diversion
                of management’s attention from other business concerns





·
            failure
                to achieve projected synergies and performance targets





·
            loss
                of customers or key personnel of the acquired business





·
            possibility
                that the due diligence process in any such acquisition may not completely
                identify material issues associated with product quality, product
                architecture, product development, intellectual property issues,
                key
                personnel issues or legal and financial contingencies, and





·
            a
                possible write-off of software development costs and amortization
                of
                expenses related to intangible assets.





In
      the
      case of IMS, we have acquired a business with offices in cities where we
      previously had no offices and with products that rely upon technology which
      is
      different than and may not be compatible with the technology of our other
      products. If we fail to successfully integrate IMS or other acquired businesses
      or fail to implement our business strategies with respect to these acquisitions,
      we may not be able to achieve projected results or support the amount of
      consideration paid for such acquired businesses.





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





(a)
            We
                held our annual stockholders’
                meeting on December 6, 2007.





(b)
            At
                our annual shareholders’ meeting we voted on (1) a proposal to elect
                Lawrence Auriana, Roger Clark and Robert F. Sanville for three-year
                terms
                as Class I directors;  (2) a proposal to elect T. Kelly Mann for
                a one-year term as a Class II director;  and (3) a proposal to
                elect The Honorable Richard Greco for a two-year term as a Class
                III
                director.  Joseph Delario, Ira S. Nordlicht and John Gorman,
                M.D. continued as directors after the
                meeting.





(c)
            We
                voted on two proposals at the annual shareholders’ meeting: the election
                of directors and the ratification of Eisner LLP, as independent registered
                public accounting firm for the Company for the year ending June 30,
                2008.





(1)
                Election of DirectorsFor
            
            
            Withhold
            
            
            AbstainLawrence
                Auriana
            
            
            4,260,782
            
            
            
            2,118,045
            
            
            
            -Roger
                Clark
            
            
            6,163,363
            
            
            
            215,464
            
            
            
            -Robert
                F. Sanville
            
            
            6,162,246
            
            
            
            216,581
            
            
            
            -T.
                Kelly Mann
            
            
            5,967,818
            
            
            
            411,009
            
            
            
            -The
                Honorable Richard Greco
            
            
            5,353,556
            
            
            
            1,025,271
            
            
            
            -





(2)
            Proposal
                to ratify selection of Eisner LLP as independent registered public
                accounting firm for the Company for the year ending June 30, 2008.





For
            
            
            Against
            
            
            AbstainEisner
                LLP
            
            
            6,346,816
            
            
            
            350
            
            
            
            31,661




-31-
 Index





ITEM
      6.      EXHIBITS


Exhibit
                3.1
            By-laws,
                restated as of December 6, 2007Exhibit
              10.1
            Asset
                Purchase Agreement, dated October 16, 2007, by and among Mediware
                Information Systems, Inc., Integrated Marketing Solutions, LLC, T.J.C.
                Investments, Inc., S.M.C., Inc., Todd Collins and Scott Ceccorulli
                (incorporated by reference to Current Report on Form 8-K filed October
                22,
                2007)Exhibit
                11
            Schedule
                of Computation of Net Earnings Per ShareExhibit
                15
            Consent
                of Independent Registered Public Accounting FirmExhibit
                31.1
            Rule
                13a-14(a)/15d-14(a) CertificationExhibit
                31.2
            Rule
                13a-14(a)/15d-14(a) CertificationExhibit
                32.1
            Certification
                Pursuant to 18 U.S.C. 1350




-32-
 Index




SIGNATURES




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






MEDIWARE
      INFORMATION
      SYSTEMS, INC.


(Registrant)




February
                5, 2008
            
            /s/   T.
                KELLY
                MANNDate
            
            T.
                KELLY MANNPRESIDENT
                AND CHIEF EXECUTIVE OFFICERFebruary
                5, 2008
            
            /s/   MARK
                B.
                WILLIAMSDate
            
            MARK
                B. WILLIAMSCHIEF
                FINANCIAL OFFICER






-33-