FORM 10-K
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549
                           
                           
(Mark One)

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

         For the fiscal year ended December 31, 1997
                              
OR

[       ]TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR 15(d)
         OF THE   SECURITIES   EXCHANGE  ACT   OF   1934    (NO FEE
         REQUIRED)

             For   the   transition   period      to


             Commission file number 0-6933

                              CAMBEX CORPORATION
              (Exact  name  of  registrant  as  specified in  its charter)


Massachusetts                                    04 244 2959
(State or other                                  (I.R.S. Employer
jurisdiction   of                                 Identification No.)
incorporation or
organization)

360 Second Avenue                                02451
Waltham, Massachusetts                           (Zip Code)
(Address of principal
executive offices)

Registrant's telephone number, including area code: 781-890-6000



Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value

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

Indicate by check mark if disclosure of delinquent filers
pursuant to  Item  405 of Regulation S-K is not contained
herein, and  will not  be  contained,  to  the  best of
registrant's  knowledge,  in definitive proxy  or  information
statements  incorporated   by reference in Part III of this Form 10-K
or any amendment  to this Form 10-K.       [     ]

An  Exhibit  Index  setting forth the exhibits filed  herewith
or incorporated by reference herein is included herein at Page A-1.
The  aggregate  market  value of the voting  stock  held  by
nonaffiliates  of  Cambex  Corporation  as  of  June  29,  1998
was $4,703,439, based on the closing price of the common stock on
that date.

The   number  of  shares  of  Cambex  Corporation's  common
stock outstanding as of June 29, 1998: 9,337,909.



                                    - 2 -



                                    PART I
                              Item 1.  Business.
General

The  Company  is engaged in the design, development, manufacture, lease  and
sale of direct access storage products used  with  IBM mainframe and
open systems computer platforms.

Products

The  Company offers direct access storage solutions.  The products include
add-in memories including STOR/9000 memories for the  IBM 9672  CMOS and
the ES/9000 Model 9021 mainframe computers,  Cache memory for the IBM 3990
Model 3 and Model 6 and the IBM 9390  Disk Controllers, Mainframe or Enterprise
Server Disk Storage Products, Open Systems Disk Arrays, and the Centurion
Storage Manager. The products  are priced for under $10,000 to approximately 
$500,000. The Company also sells or leases trade-in memory which it acquires 
from its customers when this memory is replaced by new memory.  In most
transactions, when the Company upgrades  a  computer  system with its memory,
the customer pays the Company in whole or in part with memory already 
resident on the machine. On certain occasions, the  memory  already resident 
on the customer's machine  is  more valuable  than  the  Company's memory, 
and  in those  cases,  the Company  pays the difference to the customer,
net of  a  customary gross profit for the Company.

Maintenance

The  Company arranges for maintenance of its products at the time of  lease  
or sale on a monthly or lifetime fee per system basis. It  normally provides 
this maintenance through its own maintenance personnel or through authorized 
maintenance companies supported by the Company's personnel.

Research and Development and New Products
The  Company maintains a research and development program directed to the 
development of new products and systems, to the improvement and  refinement  
of its present products and systems and  to  the expansion  of  their  uses  
and applications.   The new  products include  memory  and  cached  high 
availability RAID  disk  array products.  The dollar amount spent by the
Company during  each  of its  last  three fiscal years on such activities was 
approximately $2,322,000  in 1997, $3,433,000 in 1996, $1,659,000  in  the  
four months ended December 31, 1995 and $6,345,000 in fiscal year ended 
August 31, 1995.




                                    - 3 -


Manufacturing

The production of  the  Company's  products  involves primarily electronics 
assembly and testing.  These operations are  performed primarily  at the 
Company's plant in Waltham, Massachusetts.  The Company also subcontracts some  
of its assembly  operations  to several  circuit board assembly companies. Most 
of the electronic components used in the Company's products are purchased from 
outside suppliers and are either standard items or custom manufactured to the
Company's design and specifications and are generally available from several 
sources.

Marketing

In the United States, Europe, the Far East and Canada, the Company has its own  
marketing organization, sales representatives and distributors.  Sales are made 
to end users,  original  equipment manufacturers and distributors.  The Company
established  European sales  and marketing subsidiaries in the Netherlands, the 
United Kingdom and Germany during fiscal 1991 and in France during fiscal 1993.


Competition

The  market  for  the Company's memory products is dominated by International 
Business Machines Corporation (IBM). In the direct access storage market, the 
Company's current competitors include several large companies in addition to 
IBM.   IBM announcements concerning  new  systems, improved performance
characteristics  of existing systems and price reductions have had adverse 
effects  on the markets for the Company's products in the past.

The Company believes that its success in competing with IBM is dependent upon  
its ability to offer products with substantially better cost/performance 
characteristics than those provided by IBM.  In  relation to other independent
companies with which it competes, the Company believes that the most important 
competitive factors are non-price factors such as product quality, reliability 
and product features, as well as service and support capability.

Competition  in  the  IBM-compatible and  disk  array  markets is intense. The 
industry is one characterized by rapid technological advances resulting in the
frequent introduction of new products and services and by price reductions  in
established product categories. A number of other companies, some of which  are
substantially larger and have substantially greater resources than the Company, 
are  engaged in the manufacture  and  marketing  of products  similar to those  
manufactured  and  marketed  by  the Company.

                                    - 4 -

Backlog
As of December 31, 1997, the dollar amount of the Company's firm backlog  was 
approximately $144,000.  On the same date of the preceding year, the comparable 
amount was approximately $163,000. All  such backlog was deliverable within a 
year.  Such backlog has no material seasonal characteristics.  All equipment  
ordered by customers is subject to acceptance and satisfactory performance as 
well as the Company's ability to meet delivery schedules.  The Company believes 
that backlog is not a meaningful  indication of future business.

Patents

Although the Company owns 26 patents, it does not consider its patent position 
to be significant from a competitive standpoint.

Significant Customers

No single customer accounted for 10% or more of sales during fiscal years ended 
December 31, 1997 and August 31, 1995, and for the four month period ended 
December 31, 1995. During fiscal 1996, sales to one customer accounted for 14% 
of the Company's sales. 

Employees

On June 29, 1998, the Company employed 36 persons.





                             Item 2.  Properties

The Company leases approximately 68,000 square feet of floor space in Waltham, 
Massachusetts, under a lease for a term ending May 31, 2003.  This facility 
consists of office, manufacturing and R & D space. The Company subleases 8,000 
square feet of this space for a term  ending December 31, 1998.  On January 16,
1998, the Company entered into a sublease agreement with a third party pursuant
to which the Company sublet approximately 20,000 square feet in  its Waltham, 
Massachusetts facility (which is approximately 30% of the Company's  total  
leased space).  The term of the sublease is coterminous with the primary lease 
and expires on May  31,  2003. The  Company also leases additional sales  and 
support  offices throughout the United States and Europe.




                          Item 3.  Legal Proceedings




The Company filed a voluntary petition for relief under Chapter 11 of  the 
bankruptcy code on October 10, 1997 with the United States Bankruptcy  Court  
(the  "Court") in Boston, Massachusetts. The Company filed a reorganization

                                    - 5 -


plan  (the "Plan") with the Court on February 9, 1998 and filed a Disclosure 
Statement and amended the Plan on March 17, 1998.

The  Court approved the Disclosure Statement on March 17, 1998 as containing 
information of a kind and in sufficient detail adequate to enable the holders 
of claims against the Company to  make  an informed decision with respect to 
acceptance or rejection  of  the Plan.

On April 23, 1998, following the unanimous approval of the Plan by the 
Company's unsecured creditors, the Court confirmed the Company's Plan and the
Company emerged from Chapter 11. Under the terms of the Plan, creditors will 
receive a full payout over the next 36 months either in the form of all cash 
or a combination of 80% cash and two shares of common stock for each dollar 
of the remaining 20% of their claims. The maximum  number of new shares to be 
issued under the Plan is approximately 550,000.

Subsequent to confirmation of the Plan, the Company paid approximately $300,000 
of pre-petition debt and $400,000 in legal and professional fees.  
The remaining balance of unsecured debt of approximately $4,300,000 will be 
paid over a thirty month  period commencing in October, 1998.

The Company incurred approximately $400,000 in legal and professional expenses 
relative to its Chapter 11 proceeding,  of which approximately $200,000 was 
accrued as of December 31, 1997.

The Company is involved in certain legal proceedings arising in the  ordinary 
course of business, including those relating to prepetition  creditor claims. 
The Company believes that the outcome of  these  proceedings will not have a 
material adverse effect  on the Company's financial condition.




         Item  4.   Submission of Matters to a  Vote  of Security Holders.

                                 None.



                                -6-




                                PART II

              Item 5.  Market for the Registrant's Common Equity
                       and Related Stockholder Matters.

The Company's common stock is traded over the counter. The approximate number 
of shareholders of record at June 29, 1998 was 626.   The high and low sales 
prices for the Company's stock for each quarter during the years ended December 
31, 1997 and December 31, 1996 are as follows:




                                         1997                     1996
                                   High          Low       High          Low

         First  Quarter            1.94         1.31       8.13         5.13
         Second  Quarter           1.56         0.97       7.13         5.38
         Third  Quarter            1.56         0.41       5.75         3.00
         Fourth  Quarter           0.41         0.13       3.88         1.69



The Company has not paid dividends on its common stock in the past and does not 
expect to do so in the foreseeable future.



                      Item 6.  Selected Financial Data.

The following selected financial data should be read in conjunction with the  
financial statements and related notes appearing elsewhere in this Form 10-K.

                                    - 7 -



                  Year        Year       Four     Year       Year       Year
                  Ended       Ended     Months    Ended      Ended      Ended
                 December    December   December  August     August     August
                   1997       1996       1995      1995       1994       1993

                        (In thousands, except per share amounts)

Revenues         $  10,066   $ 22,917   $ 8,509    $35,152   $40,549   $46,160
Net income(loss)   ( 6,597)   ( 8,632)   (2,855)    (9,899)      590   ( 2,407)

Per share data:
Net income(loss)   (  0.72)   (  0.96)  (  0.32)   (  1.14)     0.07    ( 0.28) 

Weighted Average
   Common and Common
   Equivalent Shares
   Outstanding       9,100      9,000     8,920      8,700     8,550     8,650
Total  assets     $  3,928   $ 13,033   $26,212    $32,027   $38,048   $36,119

Long-term  debt      -----     ------    ------     ------     3,900     2,050


            Item  7.   Management's  Discussion  and  Analysis of Financial
                       Condition and Results of Operations.

Fiscal 1997 as compared with Fiscal 1996

The  Company's revenues were $10,066,000 and $22,917,000  in 1997 and  1996, 
respectively. The Company's revenues for the mainframe memory products for the 
IBM ES/9021 declined significantly in 1997.  Historically, the Company's 
mainframe revenues have been cyclical, dependent on the technological changes 
initiated by IBM. During 1997, IBM introduced a new CMOS mainframe processor, 
and as a result, customers reduced their purchases of incremental memory for
the ES/9021 machines. The demand for additional memory usually lags  the 
introduction of new generations of mainframes by twelve to eighteen months, but 
the Company is unable to predict whether or when the market will return to its 
former position. The Company had planned to balance the decline in mainframe 
memory revenues by selling mainframe and client/server disk storage products. 
Initial shipments of the Company's mainframe disk storage product (Cascade) 
experienced operating problems, which required additional time to resolve. 
These problems were corrected  by the end of 1997.

The Company has reduced its general level of expenses since 1994 as a result of 
decreasing annual revenues. The total number of employees has decreased each 
year. These staff reductions have impacted all functional areas and should be
considered  when analyzing comparative financial statements.

                                    8


Cost  of sales as a percentage of revenues was 94% and 75% in 1997 and 1996, 
respectively. The major reason for the increased cost of sales is the decrease 
in total revenues and the resulting effect of fixed overhead costs. Inventory 
write-downs in 1997 and 1996 were  approximately $2,700,000 and $3,000,000, 
respectively. Their effect on the cost of sales percentage was 28% and 13% in 
1997 and 1996, respectively.

Research and development expenses represented 23% ($2,322,000) and 15% 
($3,433,000) in 1997 and 1996, respectively. The reduction in total expenses is 
due mainly to reduced staffing.  Sales and general and administrative expenses 
were $4,489,000 and $8,986,000 in 1997 and 1996, respectively. The reduction in
expenses is  due primarily to lower staffing levels.

The Company recognized a net expense of $1,823,000 in 1996, which was entirely 
due to amortization of a technology license and marketing agreement that was 
acquired in 1992. The amortization was over a five year period, ending in 1996.
The Company recognized   a  net  expense  of  $295,000  in  1997, of which 
approximately $200,000 relates to accrued professional services in conjunction  
with the Chapter 11 services. The Company recorded $244,000 in interest expense
in 1996, which  was  related to a revolving credit agreement with a bank. The 
entire balance of  the outstanding loan was repaid in February 1997.

The Company recorded no income tax provision or credit in 1997 and a net credit 
of $200,000 in1996.


Fiscal 1996 as compared with Fiscal 1995

The year to year comparisons as they relate to the  results of operations are 
being made between the twelve months ended December 31, 1996 and the twelve 
months ended August 31, 1995.  The balance sheet  comparisons are between 
December 31, 1996 and December  31, 1995.

The  Company's revenues decreased 35% to $22,900,000  in  1996 as compared to 
$35,200,000 in 1995 due to lower mainframe memory and client/server product 
revenues and the delay in the development of the cost-reduced Cascade expanded 
disk array product.  During 1995, there was an unprecedented slowdown and price 
erosion in the ES/9000  mainframe  computer  market. This slowdown continued 
throughout 1996.  The Company was unable to gain significant market share with 
its mainframe and client server  disk  storage products to offset the slowdown.

Gross profit decreased 53% to $5,600,000 (24% of revenues) in 1996 from 
$11,700,000 (33% of revenues), before the recognition of the decline in value 
of IBM trade-in memory as described in the next section, in 1995. The decrease 
in the gross profit percentage  in 1996 is  due  to inventory write-downs and
increase in reserves approximating $3,000,000 in the aggregate, lower margins  
on the Company's mainframe disk storage products and significantly lower volume
which prevented  the  full  absorption  of  manufacturing overhead.

                                9

                                
Operating  expenses  decreased 28% to  $12,400,000  in  1996 from $17,200,000  
in 1995  due principally to  cost  savings achieved through several expense 
control actions.  Research and development expenses decreased 46% due to 
completion of major projects in 1995 in addition to the expense control actions.

Interest  expense decreased to $244,000 in 1996 from  $254,000 in 1995 due to 
lower bank borrowings. Interest income decreased to $92,000 in 1996  from 
$108,000 in 1995.  Other expense included $1,842,000 in 1996 and $1,700,000 
in 1995 in amortization expenses related to a technology acquisition.

The  Company recorded a credit for income taxes in both  1996 and 1995. The  
Company's  prepaid tax asset  is  realizable through carrybacks against taxes 
paid in prior years.  The full amount  of the prepaid taxes, as it related to 
the United States portion, was received from the Internal Revenue Service
subsequent to  the  end of  1996.   Total accounts receivable decreased to  
$1,900,000 in 1996 from $2,600,000 in 1995 due to lower revenues. Inventories 
decreased  to $6,200,000 in 1996 from $12,000,000 in 1995 due to decreased  
purchases, significantly lower levels of IBM trade-in memory and an additional 
$3,000,000 in inventory writedowns and reserves in 1996. Property and 
equipment (net)  decreased  to $1,000,000  in 1996 from $1,500,000 in 1995 
since total purchases amounted  to  $100,000  while depreciation  and
amortization  was $600,000.

During  the  second quarter of 1996, the Company agreed  with its bank  to 
extend and modify its Revolving Credit Agreement. Under the terms of the 
Modification Agreement, the outstanding balance at that time, $3,020,000 
would be repaid, after an initial payment of  $320,000, over a period of 
twenty four (24) months at $120,000 per  month, with interest at the prime rate
plus one percent.  The Company  granted to its bank a security interest in 
the Company's accounts receivable, inventory and general intangibles. In 
addition, the Company agreed to apply its anticipated refund from the 
Internal Revenue Service of not less than $1,900,000 to  the outstanding  
balance  upon  receipt.  As  of  December 31,  1996, $1,800,000 remained 
outstanding under this Agreement. In February 1997, the  Company received its 
refund from the Internal  Revenue Service and repaid its bank in full and the  
agreement was terminated. Consequently, the bank released its security interest 
in  the  Company's  accounts receivables, inventory  and  general intangibles.


Four  months ended December 31, 1995 as compared with four
months ended December 31, 1994.

Revenues for the four months ended December 31, 1995 decreased 26% from the 
comparable four months of the prior year due principally to decreased sales 
of the Company's STOR/9000 memory products for the IBM ES/9000 computers.

Operating expenses for the four months ended  December  31, 1995 increased  6% 
from the comparable four months of the  prior year. Selling and general and 
administrative expenses increased 16% due to expansion in  Europe. Research  
and  development  expenses decreased 12% due to completion of major projects 
in fiscal 1995.

                             - 10 -

                                
Other expense in the four months ended December 31, 1995 and December 31, 1994 
included approximately $567,000 in amortization expenses  relating  to the 
Company's technology license/marketing agreement.

Accounts receivable decreased due to a lower volume of sales.

Inflation

The  Company  did not experience any material adverse  effects
in 1997, 1996 and 1995 due to general inflation.

Liquidity and Capital Resources

As discussed more fully in Note 1 to the financial statements, the Company 
has suffered recurring losses from operations. Consequently, the Company's
ability  to  continue  as a  going concern is  dependent upon several factors, 
including the Company's ability to raise additional capital.  The additional 
financing  will  be used to pay certain expenses, fees and prepetition 
administrative claims relative to consummation of  the Plan  and  then  to  
fund continuing operations  of  the  Company, particularly in development, 
sales and marketing.

On  June  1,  1998,  the Company raised approximately $1,060,000, including  
approximately $460,000 from Joseph F. Kruy,  Chairman, President and Chief 
Executive Officer of the Company, in cash from the  issuance  of 10% Secured 
Subordinated Convertible  Promissory Notes  (the "Notes"). Under the terms of
the Notes, which are due on  April 30, 2003, the holders may convert the notes 
into  shares of  common stock  at a conversion price of $0.22  per  share.  
In addition to the Note, each holder was issued a Stock Purchase Warrant (the
"Warrant"), the exercise of which will allow the warrant holder to purchase one 
share of common stock, at $0.50 per share, for each dollar invested through the
issuance of the Notes.

The Company's management believes it has taken the appropriate corrective 
actions to reduce expenses through consolidation of the workforce and to 
increase revenue through new strategic alliances and selling products with
improved gross margins.  There are no assurances that such actions will 
increase revenues. 

The Company's cash and marketable securities were $476,000 and $616,000 at
December 31, 1997 and December 31, 1996, respectively.  Working capital was
$2,512,000 at December 31, 1997 compared to $3,160,000 at December 31, 1996.
During 1997, the Company expended $22,000 for capital equipment to support its
growth.  During fiscal 1998, the Company expects to acquire less than $100,000
of capital equipment.

                                -11-

Year 2000

The Company has evaluated the impact of changes necessary to achieve a year
2000 date conversion.  Software failures due to processing errors arising from
calculations using the year 2000 date are a known risk.  Major areas of 
potential impact have been identified and it is management's opinion that the
software currently in use, or that which will be in use at the time is year
2000 compliant.  Therefore, the Company does not expect a material impact on
future resultsdue to conversion or noncompliance.

Forward-Looking Statements

The statements contained in "Manangement Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere throughout this Annual
Report on Form 10-K that are not historical facts are "forward-looking 
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.  These forward-looking
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those reflected in the forward-looking
statements. These forward-looking statements reflect management's analysis,
judgement, belief or expectation only as of the date hereof.  The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof or to publicly
release the results of any revisions to such forward-looking statements that
may be made to reflect events or circumstances after the date hereof. In
addition to the disclosure contained herein, readers should carefully review
any disclosure of risks and uncertainties contained in other documents the
Company files or has filed from time to time with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.

           Item 8. Financial Statements and Supplememtary Data

See financial statements, beginning at page F-2, incorporated by
reference.

Unaudited quarterly financial data pertaining to the results of operations for
1997 and 1996 are as follows:

                       Q1          Q2           Q3          Q4
                        (in thousands, except per share amounts)
December 31, 1997
Revenues            $ 3,027       $ 4,376      $ 1,225     $ 1,438
Gross Profit (Loss)   1,179         1,525          130      (2,269)
Net Income (Loss)    (1,212)       (  583)      (1,684)     (3,118)
Earnings (Loss)
 Per Share           ( 0.13)       ( 0.06)      ( 0.18)     ( 0.35)

December 31, 1996
Revenues            $ 8,020       $ 7,124      $ 4,193     $ 3,580
Gross Profit (Loss)   3,538         3,789        1,604      (3,370)
Net Income (Loss)    (  988)          204       (1,919)     (5,929)
Earnings (Loss)
 Per Share           ( 0.11)         0.02       ( 0.21)     ( 0.66)

             Item 9. Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure.

                           None.

                               -12-


                            PART III

                  Item 10. Directors and Executive Officers of the Registrant.

Directors and Executive Officers of the Company are as follows:

Name                 Positions and Offices with the Company;
                     Business Experience During Last Five Years          

Joseph F. Kruy       President and a Director from incorporation in
Age:   66            1968 to December, 1975 and from June, 1976 to
                     date; Chairman of the Board of Directors from
                     December, 1975 to date; Treasurer from June, 1985
                     to April, 1987 and January, 1988 to April, 1988 
                     and August, 1997 to date.

Philip C. Hankins    Director since 1979. President, Charter
Age:   66            Information Corporation (Informatio Processing).

Robert Spain         Director since 1995. President CFC, Inc.
Age:   60            (Electronic Components Manufacturing).

Sheldon M. Schenkler Vice President of Finance and Chief Financial
Age:   47            Officer from April, 1988 to date; Treasurer from
                     April, 1988 to June, 1991.


                                -13-


                    Item 11.  Executive Compensation.

The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the other executive officers of the Company
(determined as of the end of the last fiscal year) for the fiscal years ended
December 31, 1997, December 31, 1996, and August 31, 1995.

                          Summary Compensation Table

                             Annual Compensation

                                                                   Commissions
                                       Salary       Salary        and Incentive
Name and Position              Year     Paid       Deferred(1)        Bonuses   

Joseph F. Kruy                 1997   $136,270     $63,730            $  -
Chairman, President and CEO    1996   $200,000     $  -               $  -
                               1995   $195,385     $  -               $8,962

Sheldon M. Schenkler           1997   $ 96,091     $13,909            $  -
Vice President of Finance and  1996   $110,000     $  -               $  -
Chief Financial Officer        1995   $110,000     $  -               $  -

                             Long Term Compensation Awards

                                                                  All Other
Name and Position                Year          Option(#)       Compensation(2)

Joseph F. Kruy                   1997             -               $  -
Chairman, President and CEO      1996             -               $3,854
                                 1995             -               $2,250

Sheldon M. Schenkler             1997             -               $  -
Vice President of Finance and    1996           10,000            $3,237
Chief Financial Officer          1995             -               $1,832

(1) Salary deferred is a prepetition obligation of the Company and will be paid
    as an unsecured claim pursuant to the Plan and to the extent applicable, a
    portion was treated as a priority claim. Under the terms of the 
    Reorganization Plan, Mr. Kruy was entitled to receive the salary deferral
    as an executory contract.  Rather than receive the deferral in cash, the
    entire  amount was incorporated into Mr. Kruy's loan  to the Company in
    exchange for a 10% secured subordinated promissory note.
                                
(2) Company  contribution in Company Common  Stock  on officer's behalf to the
    Company's 401(K) Plan.


Directors who are not employed by the Company receive an annual fee 
of $10,000 and a fee of $1,000 for each meeting of the  Board attended.


                                          14




Stock Options

No  options were granted to or exercised by the executive
officers named in the Summary Compensation Table.

Aggregate Fiscal Year End Option Value
                  Number of Options           Value of Unexercised In-the-money
                  at December 31, 1997         Options at December31, 1997(1)
Name              Exercisable/Unexercisable      Exercisable/Unexercisable

Joseph F. Kruy               -                               -

Sheldon M. Schenkler   31,100/9,000                         -/-

(1)  The  closing price of the Company's Common Stock on December 31, 1997 was
     $0.14.  The numbers shown reflect the value of options accumulated over all
     years of employment.


Compensation Committee Interlocks and Insider Participation

The Compensation Committee is presently comprised of the Board
of Directors.  Mr.  Kruy,  the  Company  Chairman  of  the
Board  of Directors,  President and CEO, participates as  a
member  of  the Board in compensation decisions, excluding
decisions regarding his own compensation.


Employment Contracts and Termination Agreements

Mr.  Kruy  is employed under an agreement which provides  for
his full-time  employment  as  Chairman of  the  Board  of
Directors, President  and  Chief  Executive  Officer  of  the
Company  until December  31,  1998.  Pursuant to an  employment
agreement  dated November 18, 1994, the Company has agreed to
pay Mr. Kruy  minimum base  compensation  of $200,000 per year
and  an  incentive  bonus pursuant to the Company's Incentive
Bonus Plan in an amount  equal to  4%  of the Company's pre-tax
profit, as defined, beginning  in fiscal 1995 for each fiscal
year during the term of the agreement. If  another person is
given either the title or the powers of  the Chief  Executive
Officer, Mr. Kruy will be entitled to resign  and continue to be
paid his fixed and incentive compensation,  subject to
mitigation, through December 31, 1998.


Report on Executive Compensation

The  Company  has designed its compensation program to
compensate employees,  including  its executives, in a
consistent  manner  to promote  a  cooperative  effort toward
common  goals  of  quality performance.  Compensation  is set at
levels  which  the  Company believes  will  attract, motivate,
and retain  employees  who  can achieve these goals.

Compensation for the Company's executive officers consists of
base salary,  bonus and stock options.  Base salaries and stock
options are approved by the

                                    15


Compensation  Committee  presently  comprised  of  the  Board of
Directors  based  upon  a  review of the responsibilities  of
the officer as well as a review of the base salaries and stock
options of  similar  positions  in  other  high  technology
companies  of comparable revenues.

The  Company believes that a substantial portion of an
employee's compensation  should be based on the performance of
the  Company. Therefore, the Company has an Incentive Bonus Plan
which  provides for  annual  cash bonuses to certain key
employees of the  Company based  on  the Company's operating
results for the year up  to  an aggregate maximum of 15% of the
Company's pre-tax income.   As  of December  31,  1997,
approximately 10 employees were  eligible  to participate in
this plan.  Of the executive officers, Messrs. Kruy and
Schenkler were participants in this plan in 1997.  The amount of
each individual bonus is determined at the discretion  of  the
Board of Directors.

The  Company  also  has  the  Cambex  Corporation  Employee
Stock Purchase Plan which is an equity purchase plan designed to
attract and retain employees who can make significant
contributions to the success of the Company.

                              BOARD OF DIRECTORS
                              Joseph F. Kruy 
                              Philip C. Hankins
                              C.V. Ramamoorthy 
                              Robert J. Spain
                              
                              
 Item  12.  Security Ownership of Certain Beneficial Owners  and Management.

                       (#)Shares of Common
                       Stock Beneficially Owned
Name                       as of December 31, 1997     Percent of Class

Joseph F. Kruy                 1,404,940(1)                 15.43%

Philip C. Hankins                106,358                     1.17%

C.V. Ramamoorthy                  99,156                     1.09%

Robert Spain                          -                       -

Sheldon M. Schenkler              10,900(2)                  0.11%

All directors and
executive officers
as a group (5 persons)         1,621,354(3)                 17.80%

(1) Includes 56,250 shares owned by Mr. Kruy as co-trustee for his wife and
    children. Excludes  960,194 shares held by CyberFin Corporation, which is
    owned  by  Mr. Kruy's son.  Mr. Kruy disclaims any beneficial interest in
    such shares.
(2) Excludes 31,100 shares as to which options  are exercisable currently or
    within 60 days, of which none are in-the-money options.
(3) Directors and officers have shared investment  power with respect to 56,250
    shares and sole voting power with respect to 1,565,104 shares.

                                    16

Solely  for the purpose of calculating the aggregate market
value of voting stock held by non-affiliates of the Company as
set forth on  the  Cover  Page,  it  was assumed  that  only
directors  and executive  officers on the calculation date
together with  spouses and dependent children of such persons
constituted affiliates.

             Item   13.    Certain   Relationships   and Related Transactions.

During  the  third  quarter of 1996, the Company  entered  into
a Manufacturing Agreement with Jupiter Technology, Inc.
("Jupiter"), the  majority  of which is owned by Joseph F. Kruy,
Chairman  and Chief  Executive Officer of Cambex Corporation,
and his son, Peter Kruy. Under the terms of this Agreement,  Cambex  agreed  to
manufacture,  sell  and deliver products exclusively  to
Jupiter. Cambex  agreed  to  purchase  approximately  $300,000
of  Jupiter inventory  from  Jupiter and paid Jupiter  $100,000
towards  that amount.   During 1996, the Company shipped and
billed  to  Jupiter $298,000 for Jupiter products plus $43,000
for expenses related to a sublease agreement.  During 1997, the Company 
shipped and billed to  Jupiter  $174,000  for  Jupiter  products  plus  $118,000
for expenses  related  to a sublease agreement.  As  of December  31, 1997,  
Cambex  owed Jupiter $267,000 for inventory purchases and Jupiter owed Cambex 
$504,000 for revenue shipments plus expenses. In  January, 1998, substantially 
all of the  assets  of  Jupiter Technology were purchased by an
unrelated third party.  In  March, 1998, Jupiter paid the
Company $230,000, which represented the net amount due the Company.

On  June  1,  1998,  the Company raised approximately
$1,060,000, including  approximately $460,000 from Joseph F.
Kruy,  Chairman, President and Chief Executive Officer of the
Company, in cash from the issuance of 10%"Warrant"), the
exercise of which will allow the warrant holder to purchase  one
share of common stock, at $0.50 per share, for  each dollar
invested through the issuance of the Notes.

                                    - 17 -


                                   PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

        (a)  The following documents are filed as part  of this report:

             (1)   The financial statements listed in the index to
                   financial statements appearing at page F-1 of this
                   report,  which index is incorporated  in this item by
                   reference.

             (2)   The financial statement schedules as set forth in the
                   above-mentioned index to financial statements.

             (3)   See the exhibit index following on page A-1.

        (b)  No  reports on Form 8-K were filed during the last quarter
             of the period covered by this report.
                                
                                
                                
                                
                                
                                

                                    - 18 -


                                EXHIBIT INDEX


The following exhibits are filed herewith or incorporated by reference herein.

Exhibit

3.1        Articles  of  Organization of  Cambex  Corporation, as amended
           (incorporated herein by reference to Exhibit 1.1 to Form 10-K
           for the fiscal year ended August 31, 1981).
                                
3.1.1      Articles of Amendment to Articles of Organization filed with
           the  Massachusetts Secretary of State on  December 11, 1987
           (incorporated herein by reference to Exhibit 3.1.1 to
           Form 10-K for the fiscal year ended August 31, 1987).
          
3.1.2      Articles of Amendment to Articles of Organization filed with
           the Massachusetts Secretary of State on June 8, 1988
           (incorporated herein by reference to Exhibit 3.1.2 to
           Form 10-K for the fiscal year ended August 31, 1988).
          
3.1.3      Articles of Amendment to Articles of Organization filed with
           the Massachusetts Secretary of State on January 23,
           1992 (incorporated herein by reference to Exhibit
           3.1.3 to Form 10-K for the fiscal year ended August 31, 1993).
          
3.2        By-Laws of Cambex Corporation, as amended (incorporated herein
           by reference to Exhibit 1.2 to Form 10-K for the fiscal year
           ended August 31, 1981).

10.1       Employment Agreement between Joseph F. Kruy and Cambex
           Corporation,  dated as of April 22, 1987 (incorporated herein
           by  reference to Exhibit 10.1.1 to Form  10-K  for the fiscal
           year ended August 31, 1987).

10.2       Incentive Bonus Plan (incorporated herein by reference to
           Exhibit 10.3 to Form 10-K for the fiscal year ended
           August 31, 1983).
          
10.4       1985  Non-Qualified  Stock  Option  Plan (incorporated herein by
           reference  to Exhibit 10.6 to Form 10-K for the fiscal year
           ended August 31, 1985).

10.6       1987 Combination Stock Option Plan (incorporated herein by
           reference  to Exhibit 10.8 to Form 10-K for the fiscal year
           ended August 31, 1987).

10.8       9021  Memory  Products Business  Acquisition Agreement dated
           January 10, 1992 between the Company and EMC Corporation 
           (incorporated herein by reference to Exhibit 1 to Form 8-K
           dated January 14, 1992).


                                    - 19 -


                          Exhibit Index - Continued

Exhibit - Continued

10.9       Cambex   Corporation  Employee  Stock  Purchase Plan (incorporated
           herein by reference to Exhibit 10.9 to Form 10-K for
           the fiscal year ended August 31, 1994).
          
10.10      Revolving Credit Agreement dated April 15, 1993 between the
           Company and the First  National  Bank  of Boston (incorporated
           herein  by reference to Exhibit 10.10 to Form 10-K for the
           fiscal year ended August 31, 1994).

10.11      Cambex  Corporation Reorganization  Plan (incorporated herein by
           reference  to Exhibit 10.11 to Form 8-K for  April 23, 1998).

23.        Consent of Independent Public Accountants.








                                    - 20 -



                     CAMBEX CORPORATION AND SUBSIDIARIES
                          DEBTOR-IN-POSSESSION
                 (Information required by Part II, Item 8
                        and Part IV, Item 14 of Form 10-K)
                        
                        
                             FINANCIAL STATEMENTS

                                                                 Page

Report of Independent Public Accountants                         F - 2

Consolidated Balance Sheets - December 31, 1997 and 1996         F - 3

Consolidated Statements of Operations for the Years
       Ended December 31, 1997, December 31, 1996 and
       August 31, 1995 and for the Four Months Ended
       December 31, 1995                                         F - 4

Consolidated Statements of Stockholders' Investment
       for the Years Ended December 31, 1997,
       December 31, 1996 and August 31, 1995 and for
       the Four Months Ended December 31, 1995                   F - 5

Consolidated Statements of Cash Flows for the
       Years Ended December 31, 1997, December 31, 1996          
       and August 31, 1995 and for the Four Months
       Ended December 31, 1995                                   F - 6

Notes to Consolidated Financial Statements                       F - 7


                            SUPPLEMENTARY SCHEDULE

                   FOR THE YEARS ENDED DECEMBER 31, 1997,
               DECEMBER 31, 1996 AND AUGUST 31, 1995 AND FOR THE
                     FOUR MONTHS ENDED DECEMBER 31, 1995
                     
Schedule Number


       II         Valuation and Qualifying Accounts              F - 24


Schedules other than those referred to above have been omitted,
as they are not required or the information is included
elsewhere  in the financial statements or the notes thereto.


                                    - 21 -
                                                               F-1



                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To The Stockholders of Cambex Corporation:


We  have  audited the accompanying consolidated balance sheets of Cambex   
Corporation   (Debtor-In-Possession)   (a Massachusetts corporation)  and 
subsidiaries as of December 31, 1997, and the related consolidated statements  
of operations,  stockholders' investment  and  cash  flows  for the year then  
ended.  These financial statements and the schedule referred to below are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements based on  our audit.   The financial  
statements  of  Cambex  Corporation and subsidiaries as of December 31, 1996 
and 1995 and August 31, 1995 were audited by other auditors whose report dated 
March 4, 1997, on  those  statements included an explanatory paragraph 
describing conditions that raised substantial doubt about the Company's ability 
to continue as a going concern discussed in Note 1 to the financial statements. 

We have conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial statements.  An audit 
also  includes  assessing the accounting  principles used and significant  
estimates made by management, as well  as evaluating the  overall financial 
statement presentation. We believe that our audit provides a reasonable basis 
for our opinion.

In our opinion, the 1997 financial statements referred to above present fairly, 
in all material respects, the financial position of Cambex Corporation and 
subsidiaries as of December 31, 1997 and the  results of their operations 
and their cash flows for the year then  ended  in  conformity  with  generally
accepted  accounting principles.

The  accompanying financial statements have been prepared assuming that  the 
Company will continue as a going concern. As discussed in  Note  1 to the 
financial statements, the Company has suffered recurring losses from operations 
that raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in  Note  1. 
The  financial statements do not include any adjustments  relating to the 
recoverability and classification of asset carrying amounts or  the amount and
classification of liabilities that might result should the Company be unable 
to continue as a going concern.

Our audit was made for the purpose of forming an opinion on the basic financial 
statements taken as a whole. The schedule listed in the index of the financial 
statements is presented for  the purpose of complying with the


Report of Independent Public Accounts
Page - 2 -



Securities and Exchange Commission's rules and is not part of the basic  
financial statements.  This schedule has been subjected  to the  auditing  
procedures applied in our audit of the basic financial statements and, in our 
opinion, fairly states, in all material respects, the financial data required
to be set forth therein in relation to the basic financial statements taken  
as a whole.


                                 BELANGER & COMPANY, P.C.
                                 CERTIFIED PUBLIC ACCOUNTANTS


                                 


                                 


                                 


                                 


                                 


                                 


                                 


Chelmsford, Massachusetts
June 15, 1998

                                    F-2
                                    22


<TABLE>
<S>    <C>
             CAMBEX CORPORATION AND SUBSIDIARIES 
                  (DEBTOR-IN-POSSESSION)
               CONSOLIDATED BALANCE SHEETS
               DECEMBER 31, 1997 and 1996

                                 ASSETS
                                    
                                                         1997           1996
CURRENT ASSETS:

  Cash and cash equivalents                         $   476,246   $    615,949
  Accounts receivable, less reserves of $131,000
    in 1997 and $131,000 in 1996                      1,200,343      1,934,708


  Current portion of investment in sales-type
    leases, net of unearned interest income of
    $4,000 in 1997 and $34,000 in 1996                  59,299         423,220
  Inventories                                        1,412,925       6,200,033
  Refundable income taxes                               -            2,335,295
  Prepaid expenses                                     121,183         135,721

      Total current assets                          $3,269,996    $ 11,644,926

LONG-TERM INVESTMENT IN SALES-TYPE LEASES,
  net of unearned interest income of $1,000
  in 1997 and $5,000 in 1996                        $   25,820    $    162,971


LEASED EQUIPMENT, at cost, net of
  accumulated depreciation of $183,000
  in 1997 and $244,000 in 1996                      $   37,886    $    140,417


PROPERTY AND EQUIPMENT, at cost
    Machinery and equipment                         $3,036,699    $  7,379,202
    Furniture and fixtures                             247,173         304,666
    Leasehold improvements                             620,949         620,949

                                                    $3,904,821    $  8,304,817

    Less- Accumulated depreciation and amortization  3,347,941       7,258,383

                                                    $  556,880    $  1,046,434

OTHER ASSETS
  Technology License/Marketing Agreement,
    net of accumulated amortization of $8,500,000
    in 1997 and $8,500,000 in 1996                  $    -        $      -
  Other                                                 37,830          37,830


    Total Assets                                    $3,928,412    $ 13,032,578
                                                    ==========    ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

               -23-
                                   F-3
<TABLE>
<S>    <C>
             CAMBEX CORPORATION AND SUBSIDIARIES
                   (DEBTOR-IN-POSSESSION)
                 CONSOLIDATED BALANCE SHEETS
                 DECEMBER 31, 1997 AND 1996
                  
             LIABILITIES AND STOCKHOLDERS' INVESTMENT
                                                        1997           1996
                         
   LIABILITIES NOT SUBJECT TO COMPROMISE:
 CURRENT LIABILITIES:
  Revolving Credit Agreement                      $      -       $   1,800,000
  Accounts payable                                    296,419        4,329,638
  Obligations for trade-in memory                        -           1,036,235
  Accrued expenses -
    Payroll and related                                96,713          839,945
    Income and other taxes                             12,143          176,991
    Other                                             352,869          302,301
                      
      Total current liabilities                   $   758,144    $   8,485,110


 DEFERRED REVENUE                                 $    15,478    $   1,022,751


LIABILITIES SUBJECT TO COMPROMISE -
    Accounts payable and accrued expenses         $ 6,325,273    $       -


    Total Liabilities                             $ 7,098,895    $   9,507,861


COMMITMENTS AND CONTINGENCIES

 STOCKHOLDERS' INVESTMENT
  Preferred Stock, $1.00 par value per share -
    Authorized--3,000,000 shares
    Issued--None                                  $              $
  Common Stock, $.10 par value per share -
    Authorized--25,000,000 shares
    Issued- 10,636,108 shares in 1997 and
    10,614,139 shares in 1996                       1,063,611        1,061,414
  Capital in excess of par value                   15,814,783       15,792,105
  Cumulative translation adjustment                    60,756          183,355
  Retained earnings (deficit)                     (19,254,867)     (12,657,391)
  Less - Cost of shares held in treasury--
    1,534,356 shares in 1997 and 1996                (854,766)        (854,766)



    Total Stockholders' Investment                $(3,170,483)   $   3,524,717

    Total Liabilities and Stockholders'
    Investment                                    $ 3,928,412    $  13,032,578
</TABLE>
              F-3                                                        23

<TABLE>
<S>    <C>
                    CAMBEX CORPORATION AND SUBSIDIARIES
                       (DEBTOR-IN-POSSESSION)
                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                      Four Months 
                                           Year Ended     Year Ended       Ended     Year Ended
                                         December 31,   December 31,   December 31,  August 31,
                                            1997           1996           1995         1995

   REVENUES
    Sales                                  $ 6,667,693    $17,741,399    $ 5,913,934   $ 28,038,337
    Maintenance and operating leases         3,398,699      5,083,624      2,561,759      7,013,674
    License fees                                 -             91,667         33,333        100,000

        Total revenues                     $10,066,392    $22,916,690    $ 8,509,026   $ 35,152,011    

    COST OF SALES                            9,501,543     17,355,948      5,029,670     23,414,676       
       
    DECLINE IN VALUE OF IBM TRADE-IN MEMORY      -              -              -          4,647,499  
                       
         Gross profit                      $   564,849    $ 5,560,742    $ 3,479,356   $  7,089,836           -    -

    OPERATING EXPENSES:
     Research and development              $ 2,321,925    $ 3,432,772    $ 1,659,480   $  6,345,165
     Selling                                 3,193,271      6,839,807      3,156,471      8,242,981
     General and administrative              1,295,465      2,146,060        916,718      2,606,476

                                           $ 6,810,661    $12,418,639    $ 5,732,669   $ 17,194,622                        

    OPERATING INCOME (LOSS)                $(6,245,812)   $(6,857,897)   $(2,253,313)  $(10,104,786)  

    OTHER INCOME (EXPENSE):
     Interest expense                          (74,477)      (243,694)       (92,726)      (253,747)    
     Interest income                            17,674         92,361         43,217        107,559
     Other income (expense)                    (84,861)    (1,822,873)      (549,103)    (1,426,935)     
     
    INCOME (LOSS) BEFORE REORGANIZATION
    ITEMS AND INCOME TAXES                 $(6,387,476)   $(8,832,103)   $(2,851,925)  $(11,677,909)
        
     Reorganization professional fees         (210,000)         -              -              - 

    INCOME (LOSS) BEFORE INCOME TAXES      $(6,597,476)   $(8,832,103)   $(2,851,925)  $(11,677,909)

     Credit (Provision) for income taxes         -            200,000         (3,000)     1,779,000
       
    NET INCOME (LOSS)                      $(6,597,476)   $(8,632,103)   $(2,854,925)  $ (9,898,909)  

    NET INCOME (LOSS) PER COMMON SHARE       $(0.72)        $(0.96)        $(0.32)        $(1.14)

    Weighted Average Common and
    Common Equivalent Shares Outstanding     9,100,000      9,000,000      8,920,000      8,700,000

    The accompanying notes are an integral part of these consolidated financial statements.                          
</TABLE>
        F-4                                  -24-
<TABLE>
<S>    <C>
                                                       CAMBEX CORPORATION AND SUBSIDIARIES
                                                        (DEBTOR-IN-POSSESSION)
                                             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT


                                        Common Stock  Capital in    Cumulative    Retained    Cost of
                                          $.10        Excess of     Translation   Earnings    Shares Held
                                         Par Value    Par Value     Adjustment    (Deficit)   in Treasury


BALANCE AT AUGUST 31, 1994              $ 1,015,706  $14,154,516   $  68,862     $  8,728,546  $ (854,766)

ADD:
   Net loss                             $     -      $    -        $    -        $ (9,898,909) $    -   
   Exercise of employee stock options        12,524      230,985        -              -            -
   401(k) Employer match                      4,354      202,456        -              -            -
   Stock Purchase Plan Shares                 9,444      274,166        -              -            -
   Tax benefits related to stock options      -          299,857        -              -            -
   Translation adjustment                     -            -          178,752          -            -

BALANCE AT AUGUST 31, 1995              $ 1,042,028  $15,161,980   $  247,614    $ (1,170,363) $ (854,766)

ADD:
   Net loss                             $     -      $     -       $    -        $ (2,854,925) $    -
   Exercise of employee stock options         3,080      224,706        -              -            -
   401(k) Employer match                        191       22,419        -              -            -
   Tax benefits related to stock options      -           36,899        -              -            -
   Translation adjustment                     -            -           40,149          -            -

BALANCE AT DECEMBER 31, 1995            $ 1,045,299  $15,446,004   $  287,763    $ (4,025,288) $ (854,766)

ADD:
   Net loss                             $    -       $    -        $    -        $ (8,632,103) $    -
   Exercise of employee stock options         7,627       53,864        -              -            -
   401(k) Employer match                      3,482      100,990        -              -            -
   Stock Purchase Plan Shares                 5,006      191,247        -              -            -
   Translation adjustment                    -             -         (104,408)         -            -

BALANCE AT DECEMBER 31, 1996            $ 1,061,414  $15,792,105   $  183,355    $(12,657,391) $ (854,766)

ADD:
   Net loss                             $    -       $     -       $    -        $ (6,597,476) $    -
   Exercise of employee stock options            90          135        -              -            -
   Stock Purchase Plan Shares                 2,107       22,543        -              -            -
   Translation adjustment                    -             -         (122,599)         -            -

BALANCE AT DECEMBER 31, 1997            $ 1,063,611  $15,814,783   $   60,756    $(19,254,867) $ (854,766)


The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                                                -25-
                                                                F-5
<TABLE>
<S>    <C>
                              CAMBEX CORPORATION AND SUBSIDIARIES
                                  (DEBTOR-IN-POSSESSION)
                              CONSOLIDATED STATEMENTS OF CASH FLOW

                                                                  YEAR ENDED    YEAR ENDED   FOUR MONTHS ENDED   YEAR ENDED
                                                                  DECEMBER 31,  DECEMBER 31,   DECEMBER 31,      AUGUST 31,
                                                                      1997         1996          1995              1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)                                                 $ (6,597,476)  $ (8,632,103)   $ (2,854,925)    $ (9,898,909)
Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
  Depreciation                                                    $    569,207   $    658,191    $    262,460     $    879,659
  Amortization                                                           -          1,841,671         566,668        1,700,004
  Provision for losses on accounts receivable                            -              -               -                -
  Provision for losses on inventory                                  2,300,000      2,800,000           -            1,881,428
  Amortization of prepaid expenses                                      28,990         14,074           9,383           23,135
  Common stock/warrants issued in lieu of cash                           -            104,472          22,610          206,810
  Decline in value of IBM trade-in memory                                -              -               -            4,647,499
  Change in assets and liabilities:
     Decrease (increase) in accounts receivable                        734,365        694,070       2,516,198        1,708,257
     Decrease (increase) in inventory                                2,487,108      3,030,291        (462,252)      (3,943,260)
     Decrease (increase) in investment in sales-type leases            501,072        170,085         165,968          (41,722)
     Decrease (increase) in prepaid taxes                            2,335,295      4,053,364         116,370       (3,559,004)
     Decrease (increase) in prepaid expenses                           (14,452)        29,196          54,507          491,056
     Decrease in other assets                                            -                 45              20               63
     Increase (decrease) in accounts payable                        (4,033,219)      (209,214)     (1,094,333)       1,224,438
     Increase (decrease) in obligations for trade-in memory         (1,036,235)      (903,422)       (772,660)       2,050,250
     Increase (decrease) in accrued liabilities                       (857,512)    (2,398,454)       (363,533)        (292,878)
     Increase (decrease) in deferred revenue                        (1,007,273)       105,664        (406,330)        (107,894)
     Increase in liabilities subject to compromise                   6,325,273          -               -                -

       Total adjustments                                           $ 8,332,619    $ 9,990,033    $    615,076      $ 6,867,841

       Net cash provided by (used in) operating activities         $ 1,735,143    $ 1,357,930    $ (2,239,849)     $(3,031,068)
  CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of equipment, net                                   $    22,878    $   (83,639)   $    (73,016)     $  (645,444)

      Net cash used in investing activities                        $    22,878    $   (83,639)   $    (73,016)     $  (645,444)
  CASH FLOWS FROM FINANCING ACTIVITIES:
      Decrease in notes payable                                    $     -        $     -        $      -          $  (159,152)
      Proceeds from sale of common stock                                24,875        257,744         264,685          826,976
      Net borrowings (repayments) under revolving credit agreement  (1,800,000)    (1,400,000)       (650,000)         (50,000)

      Net cash provided by (used in) financing activities          $(1,775,125)   $(1,142,256)   $   (385,315)     $   617,824
   Effect of exchange rate changes on cash                            (122,599)      (104,408)         40,149          178,752

  Net increase (decrease) in cash and cash equivalents             $  (139,703)   $    27,627    $ (2,658,031)     $(2,879,936)
  Cash and cash equivalents at beginning of year                       615,949        588,322       3,246,353        6,126,289

  Cash and cash equivalents at end of year                         $   476,246    $   615,949    $    588,322      $ 3,246,353

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for:  Interest                         $    43,477    $   269,364    $     92,096      $   241,491
                                  Income Taxes                           -             13,613          19,947           34,941
  Refunds received from the Internal Revenue Service                 2,335,295      2,189,984         144,630            -
  Reorganization professional fees                                     210,000          -               -                -    

          The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
             -26-
                                    F-6
                                     
                     CAMBEX CORPORATION AND SUBSIDIARIES
                            (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

(1)   Liquidity

     The  Company  filed  a voluntary petition  for  relief  under
     Chapter  11 of the bankruptcy code on October 10,  1997  with
     the  United States Bankruptcy Court in Boston, Massachusetts.
     The  Company filed a reorganization plan which was  confirmed
     by  the  Court in April, 1998. Subsequently, the Company emerged 
     from Chapter 11 on April 23, 1998. As described in the Company's
     Plan,  the  success  of  the Plan is dependent  upon  several
     factors,  including the Company's ability to raise additional
     capital.   The  additional financing  will  be  used  to  pay
     certain expenses, fees and pre-petition administrative claims
     relative  to  consummation  of the  Plan  and  then  to  fund
     continuing   operations  of  the  Company,  particularly   in
     development,  sales and marketing.  As further  described  in
     Note  13,  the  Company raised $1,060,000 in  cash  from  the
     issuance of 10% Subordinated Convertible Promissory Notes, of
     which  $700,000 was used to pay pre-petition debt  and  legal
     and professional fees.

     The Company has suffered recurring losses from operations that raises     
     substantial doubt about its ability to continue as a going concern.  
     The Company's management believes it has taken the appropriate  
     corrective  actions to reduce expenses through consolidation of the 
     workforce and to increase revenue through new strategic alliances and
     selling products with improved gross margins. These consolidated financial
     statements do not include any adjustments relating to the recoverability
     and classification of asset carrying  amounts or the amount and 
     classification of liabilities that  might result  should the company 
     be unable to continue as  a  going concern.
     
(2)  Summary of Significant Accounting Policies

     Principles of Consolidation

     The  accompanying  consolidated financial statements  include
     the  accounts  of  Cambex Corporation  and  its  wholly-owned
     subsidiaries   (the  Company).   All  material   intercompany
     transactions   and   balances   have   been   eliminated   in
     consolidation.
     
     Revenue Recognition

     The   Company  manufactures  equipment  for  sale  or  lease.
     Revenue  from  product sales is recognized at  the  time  the
     hardware  and  software  are shipped.   The  Company  accepts
     memory   in   trade  as  consideration  in  certain   revenue
     transactions.  Revenue is recorded at the net cash  received.
     When the memory is subsequently sold, the amount received  is
     recorded   as  revenue.   Service  and  other  revenues   are
     recognized  ratably over the contractual  period  or  as  the
     services are provided.  Under certain equipment leases  which
     qualify as sales type leases, the present value of
     
                                    - 27 -
                                                       F-7

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                        (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(2)  Summary of Significant Accounting Policies - Continued

     noncancelable payments is currently included in  revenues  as
     sales, and all related costs, exclusive of the residual value
     of  the  equipment, are currently included in cost of  sales.
     The  unearned  interest is recognized over the  noncancelable
     term   of  the  lease.   The  Company  has  deferred  revenue
     associated with the sale of certain products that have future
     performance   obligations.   For   equipment   leased   under
     operating  lease agreements, revenue is recognized  over  the
     lease  term  and  the  equipment  is  depreciated  over   its
     estimated useful life.
     
     
     License  fees  are  amortized over the  useful  life  of  the
     technologies being licensed.
     
     Inventories
     Inventories, which include materials, labor and manufacturing
     overhead,  are stated at the lower of cost (first-in,  first
     out) or market and consist of the following:
                                            December 31,        December 31,
                                                1997              1996

       Raw  materials                      $    987,920          $2,386,454
       Work-in-process                          255,377             861,073
       Finished goods                           169,628           2,765,006
       Trade-in memory                             -                187,500

                                          $   1,412,925          $6,200,033

      Property and Equipment

     The  Company provides for depreciation and amortization on  a
     straight-  line  basis to amortize the cost of  property  and
     equipment over their estimated useful lives as follows:
     
             Leasehold improvements          2-10 Years
             Machinery and equipment         3- 8 Years
             Furniture and fixtures          3- 8 Years
             Leased equipment                3- 5 Years

     Maintenance  and  repair items are charged  to  expense  when
     incurred; renewals or betterments are capitalized.
     
                                  - 28 -

                                                              F-8

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                       (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(2)  Summary of Significant Accounting Policies - Continued

     If  property is sold or otherwise disposed of, the  Company's
     policy   is  to  remove  the  related  cost  and  accumulated
     depreciation  from the accounts and to include any  resulting
     gain or loss in income.

     Depreciation  expense  of $614,161, $658,191,  $262,460,  and
     $879,659  was  recorded for the periods  ended  December  31,
     1997,  December  31, 1996, December 31, 1995 and  August  31,
     1995, respectively.
     
     
     Net Income (Loss) Per Common Share

     On   January  1,  1997,  the  Company  adopted  Statement  of
     Financial Accounting Standards (SFAS) No. 128, "Earnings  Per
     Share".  SFAS  No. 128 replaces the presentation  of  primary
     income  (loss)  per share with a dual presentation  of  basic
     income  (loss) per share and diluted income (loss) per  share
     for  each  year  for  which  a  statement  of  operations  is
     presented.
     
     Basic  income  (loss)  per share amounts  are  based  on  the
     weighted  average number of common shares outstanding  during
     each  year. Diluted income (loss) per share amounts are based
     on  the  weighted average number of common shares and  common
     share  equivalents outstanding during each year to the extent
     such  equivalents have a dilutive effect on the income (loss)
     per share.
     
     For the years ended December 31, 1997 and 1996 and August 31,
     1995  and  the  four months ended December 31,  1995,  common
     share  equivalents were not included in diluted income (loss)
     per  share because the Company incurred a loss for each year.
     The  inclusion of the common stock equivalents would have had
     an  antidilutive effect on the computation of diluted  income
     (loss) per share.
     
     Cash and Cash Equivalents

     Cash   and  cash  equivalents  are  recorded  at  cost  which
     approximates   market   value.   Cash   equivalents   include
     certificates  of  deposit, government  securities  and  money
     market  instruments purchased with maturities  of  less  than
     three months.
     
                                  - 29 -
                                                              F-9
                     CAMBEX CORPORATION AND SUBSIDIARIES 
                         (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)

(2)   Summary of Significant Accounting Policies - Continued

      Stock Options and Employee Stock Purchase Plan

      Proceeds  from  the sale of newly issued stock  to  employees under
      the  Company's stock option plans and  Employee  Stock Purchase
      Plan are credited to common stock to the extent  of par  value and
      the excess to capital in excess of par  value. Income  tax
      benefits  attributable  to  stock  options   are credited to
      capital in excess of par value.
     
      Disclosures about the Fair Value of Financial Instruments

      The  Company's financial instruments consist mainly of  cash,
      cash  equivalents, accounts receivable, investment in  sales
      type  leases, property held for sale, accounts payable, notes
      payable,  and  a  revolving credit agreement.   The  carrying
      amounts of these financial instruments approximate their fair value
      due to the short-term nature of these instruments, except for the
      following. Under the reorganization plan described in Note 14 to the 
      financial statements, accounts payable subject to compromise of
      approximately $4,300,000 are expected  to  be  paid over a 30 month 
      period commencing in October 1998, without interest. Accordingly, the 
      net present value  of these payments approximate $4,000,000 at  
      December 31, 1997 assuming an interest rate of 9%.
      
     Use of Estimates
     
     The  preparation  of financial statements in conformity  with
     generally  accepted accounting principles requires management
     to  make  estimates and assumptions that affect the  reported
     amounts   of  assets  and  liabilities  and  disclosures   of
     contingent  assets  and liabilities as of  the  date  of  the
     financial statements, and the reported amounts of income  and
     expenses during the reporting periods.  Actual results  could
     differ from those estimates.
     
     Accounting for Impairment of Long-Lived Assets and for  Long
     Lived Assets To Be Disposed Of
     
     On   January  1,  1996,  the  Company  adopted  Statement  of
     Financial  Accounting Standards (SFAS) No.  121,  "Accounting
     for  the  Impairment of Long-Lived Assets and for  Long-Lived
     Assets To Be Disposed Of".  SFAS No. 121 requires that  long
     lived assets and certain identifiable intangibles to be  held
     and  used  by  an entity be reviewed for impairment  whenever
     events or changes in circumstances indicate that the carrying
     amount of an asset
     
                                    - 30 -
                                                             F-10
                     CAMBEX CORPORATION AND SUBSIDIARIES 
                         (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997
                                 (Continued)

(2)   Summary of Significant Accounting Policies - Continued

     may  not  be  recoverable.  The statement also requires  that
     certain long-lived assets and identifiable intangibles to  be
     disposed  of be reported at the lower of the carrying  amount
     or  fair  value less cost to sell.  Based on its review,  the
     Company does not believe that any material impairment of  its
     long-lived  assets  has occurred.  The Company's  review  was
     based on the assumption that the Company continues as a going
     concern.   The  financial  statements  do  not  include   any
     adjustments relating to the recoverability and classification
     of asset carrying amounts or the amount and classification of
     liabilities that might result should the company be unable to
     continue as a going concern.
     
     Investment Securities

     On  January  1,  1994,  the Company  adopted  SFAS  No.  115,
     "Accounting  for  Certain  Investments  in  Debt  and  Equity
     Securities."   This  statement addresses the  accounting  and
     reporting  for  all  investments in debt securities  and  for
     investments   in   equity  securities   that   have   readily
     determinable  fair  values.  When securities  are  purchased,
     they  are classified as securities held to maturity if it  is
     management's intent and ability to hold them until  maturity.
     These   securities   are  carried  at  cost,   adjusted   for
     amortization  of  premiums and accretion of  discounts,  both
     computed   by  the  effective  yield  method.    If   it   is
     management's intent at the time of purchase not to  hold  the
     securities  to  maturity, these securities are classified  as
     securities available for sale and are carried at market value
     with unrealized gains and losses reported, net of the related
     tax  effect, as a separate component of stockholders' equity.
     When  securities are sold, the adjusted cost of the  specific
     security  sold is used to compute gain or loss on  the  sale.
     The  Company had no investment securities as of December  31,
     1997 and 1996.

     Stock-Based Compensation

     SFAS  No.  123,  "Accounting  for Stock-Based  Compensation",
     encourages   but  does  not  require  companies   to   record
     compensation cost for stock-based employee compensation plans
     at fair value.  The Company has chosen to continue to account
     for such plans using the intrinsic value method prescribed in
     Accounting  Principles Board Opinion  No.  25.   Accordingly,
     compensation  cost  for  stock options  is  measured  as  the
     excess,  if any, of the quoted market price of the  Company's
     stock  at  the date of grant over the exercise price  of  the
     stock (See Note 9).
     
     
     
                                    - 31 -
                                                             F-11

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                        (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)

(3)   Business, Operations and Segment Information

     The   Company   is   in  the  business  of   developing   and
     manufacturing hardware and software for use with a variety of
     IBM  computer  systems.   The  Company's  principal  products
     include  memory storage systems for large-scale IBM mainframe
     computers and storage subsystems for open systems platform computers.
     
     The  Company  sells its equipment to both end  users  and  to
     distributors. The Company's principal customers operate in  a
     wide  variety of industries and in a broad geographical area.
     No  single customer or distributor accounted for 10% or  more
     of  total  sales in fiscal years ended December 31, 1997  and
     August  31, 1995 or the four month period ended December  31,
     1995.   During the year ended December 31, 1996, one customer
     accounted for 14% of total revenues. Foreign sales  were  23%
     in  1997, 20% in 1996 and less than 10% of total revenues  in
     fiscal 1995.
     
(4)  Income Taxes
    
     In  accordance  with  SFAS No. 109,  "Accounting  For  Income
     Taxes",  deferred tax assets and liabilities  are  determined
     based  on the difference between the financial statement  and
     tax  basis of assets and liabilities using enacted tax  rates
     in  effect for the year in which the differences are expected
     to reverse.
    
     The  following table presents the components of income (loss)
     before income taxes:
                                              Four months
            Year ended        Year ended         ended          Year ended
            December 31,      December  31,   August   31,      August 31,
                1997             1996            1995              1995


Domestic    $(5,689,000)      (6,506,000)     $(2,191,000)      $ (8,552,000)

Foreign      (  908,000)      (2,326,000)      (  661,000)        (3,126,000)

            $(6,597,000)     $(8,832,000)     $(2,852,000)      $(11,678,000)



                                  - 32 -

                                                      F-12

                          CAMBEX CORPORATION AND SUBSIDIARIES
                          (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(4)   Income Taxes - Continued

The  following  table  presents  a  reconciliation  between  taxes
provided  at the statutory federal income tax rate and the  actual
tax provision recorded for the
following periods:

                                                  Four months
                        Year ended   Year ended      ended      Year ended
                        December     December      December      August
                           1997          1996        1995         1995

Provision (credit) at
federal statutory rate $(2,243,000) $(3,003,000) $(  969,000) $(3,970,000)

State tax provision
(credit), net of federal
tax benefit               (358,000)  (  380,000)  (  143,000)    (700,000)

Foreign and other losses
for which no benefits have
been recorded              309,000      853,000      155,000      973,000

Change in valuation
allowances               2,007,000    2,711,000      759,000    1,976,000

Other                      285,000   (  381,000)     201,000      (58,000)
                        $    -0-    $(  200,000)  $    3,000  $(1,779,000)

The  1996 and 1995 tax benefit recognized is primarily for current

federal and foreign tax refunds receivable.



                                  - 33 -

                                                           F-13

                          CAMBEX CORPORATION AND SUBSIDIARIES
                          (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(4)   Income Taxes - Continued

     Refundable income taxes as of December 31, 1996 and 1995  and
     August   31,  1995  consisted  of  approximately  $2,335,000,
     $6,389,000  and  $6,505,000 of federal  and  foreign  incomes
     taxes  refundable  as  a  result of taxable  losses  incurred
     during fiscal 1995, 1994 and 1993.
     
     The   Company  has  federal  net  operating  loss  carryovers
     totalling  $13,356,000 which expire through  the  year  ended
     December 31, 2012.
     
     The  tax effects of the significant items which comprise  the
     deferred tax liability and tax asset, as of fiscal 1997, 1996
     and 1995 are as follows:
     
                               December     December     December   August
                                 1997         1996         1995      1995

Assets:
Reserves not currently deductible
 for tax purposes           $ 1,874,000  $ 1,186,000  $   961,000 $ 1,290,000
State tax net operating loss
 carryforward                 1,335,000    1,223,000      844,000     700,000
Federal net operating loss
 carryforward                 4,114,000    2,965,000      813,000       -
Employee benefits                96,000      112,000      148,000     152,000
Other                            76,000       75,000      112,000     166,000

 Total deferred tax assets  $ 7,495,000  $ 5,561,000  $ 2,878,000 $ 2,308,000

Liabilities:
Fixed asset basis difference $    0      $(   67,000) $(   95,000)$(  145,000)
Other                           (42,000)  (   48,000)  (   48,000) (  187,000)

 Total deferred tax liabilities (42,000) $(  115,000) $(  143,000)$(  332,000)

Net deferred tax asset      $ 7,453,000  $ 5,446,000  $ 2,735,000 $ 1,976,000
Valuation allowance          (7,453,000)  (5,446,000)  (2,735,000)$(1,976,000)
Tax asset                         0            0            0           0

Tax refunds receivable            0        2,335,000    6,389,000   6,505,000

Total tax asset                   0      $ 2,335,000  $ 6,389,000   6,505,000



                                  - 34 -

                                                   F-14

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                        (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997


                                 (Continued)


(4)   Income Taxes - Continued

     Due  to  the uncertainty of the realizability of the deferred
     tax assets, the Company has established a valuation allowance
     for the net deferred tax assets.
     
     
(5)   Technology/Marketing Agreement

     During  the  second  quarter  of  fiscal  1992,  the  Company
     acquired  from EMC Corporation technology rights,  inventory,
     and  other assets associated with EMC's IBM 3090 and ES/9000,
     Model 9021 compatible mainframe memory products. The purchase
     price  of $11,500,000 was paid in fiscal 1992 and 1993.   The
     use  of the technology was exclusive to Cambex for five years.
     The  financial  statement impact included  the  recording  of
     inventory  in the amount of $3,000,000, a marketing agreement
     in   the  amount  of  $7,500,000  and  a  technology  license
     amounting   to  $1,000,000.   The  marketing  agreement   and
     technology  license were amortized over a  five-year  period,
     ending December 31, 1996.  Amortization of $1,700,000 related
     to   the  technology  license  and  marketing  agreement  was
     recognized  as  other expense for the year ended August 31, 1995,  
     $1,842,000  for the year ended December 31, 1996  and  $567,000  
     for the four months ended  December  31, 1995.

(6)   Revolving Credit Agreement

     During  1993,  the Company obtained a $10 million  unsecured,
     revolving line of bank credit, bearing interest at the  prime
     rate plus one-half percent with a commitment fee of 3/8 of 1%
     per year on the unused portion.  The Company was required  to
     repay  any  borrowings under this revolving  credit  line  on
     March 29, 1996.
     
     
     
     
                                    - 35 -
                                                             F-15

                     CAMBEX CORPORATION AND SUBSIDIARIES (DEBTOR-IN-
                          POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)





(6)   Revolving Credit Agreement - Continued

     During  the  second quarter of 1996, the Company agreed  with
     its bank to extend and modify its Revolving Credit Agreement.
     Under   the   terms  of  the  Modification   Agreement,   the
     outstanding balance at that time, $3,020,000 would be repaid,
     after an initial payment of $320,000, over a period of twenty
     four (24) months at $120,000 per month, with interest at  the
     prime rate plus one percent.  The Company granted to its bank
     a  security  interest  in the Company's accounts  receivable,
     inventory and general intangibles.  In addition, the  Company
     agreed  to  apply  its anticipated refund from  the  Internal
     Revenue   Service  of  not  less  than  $1,900,000   to   the
     outstanding balance upon receipt.

     As  of  December  31,  1996, $1,800,000 remained  outstanding
     under this Agreement.  Subsequent to the end of the year, the
     Company received its refund from the Internal Revenue Service
     and repaid its bank in full and the agreement was terminated.
     Consequently, the bank released its security interest in  the
     Company's   accounts  receivable,  inventory   and   general
     intangibles.
     
     
     The  Company's debt consists of the following at December 31,
     1997 and 1996:
     
     
                                              1997        1996

            Revolving Credit Agreement         -       $1,800,000

                                    - 36 -
                                                             F-16

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                          (DEBTOR-IN-POSSESSION)
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(7)   Earnings Per Share

     Options  to  purchase 259,305, 415,715, 468,008, and 562,342 weighted
     average shares of common stock during the periods ended December 31, 
     1997, 1996, 1995 and August 31, 1995, respectively, were not included in
     the computation of diluted loss per share because to do so would have had
     an antidilutive effect on the computation of loss per share.
                                 
     As  more  fully  described in Note  9,  options  to  purchase
     187,420, 368,820, 471,458, and 437,508 shares of common stock
     outstanding at December 31, 1997, 1996, 1995 and  August  31,
     1995,  respectively,  could potentially dilute  basic  income
     (loss) per share in the future.
     
(8)   Commitments and Contingencies

     At   December  31,  1997,  the  Company  had  minimum  rental
     commitments  under long-term, noncancelable operating  leases
     for facilities and other equipment as follows:
     
            Due during Fiscal Year

                  1998              $  381,924
                  1999              $  381,924
                  2000              $  381,924
                  2001              $  381,924
                  2002-2003         $  541,059
                                    $2,068,755

     Total  rental  expense,  including  the  cost  of  short-term
     equipment leases, real estate taxes and insurance paid to the
     landlord  and  charged to operations approximated  $1,160,000
     for the year ended December 31, 1997, $1,691,000 for the year
     ended  December 31, 1996, $436,000 for the four months  ended
     December  31, 1995, and $1,733,000 for the year ended  August
     31,  1995.   During 1997 and 1998, the Company  entered  into
     agreements to sublet portions of its facilities to  unrelated
     parties.
     
     In  the  ordinary course of business, the Company is involved
     in  legal  proceedings,  including  those  relating  to  pre
     petition  creditor  claims.  The Company  believes  that  the
     outcome of these proceedings will not have a material adverse
     effect  on  the Company's financial condition or  results  of
     operations.
     
     
                                  - 37 -
                                                   F-17

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                         (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(9)   Stock Options and Warrants

     On  March  7,  1997, the Company established the  1997  Stock
     Option  Plan  (subject to stockholder  approval).   The  1997
     Stock  Option  Plan  provides  for  the  issuance  of  up  to
     1,000,000 shares in the aggregate and up to 300,000 shares to
     any  one employee.  At December 31, 1997, the Company had two
     stock  option plans for officers and certain employees  under
     which   1,187,420  shares  were  reserved  and  options   for
     1,000,000  shares were available for future grants.   Options
     are  granted at not less than 85%, or in certain  cases,  not
     less  than 100%, of the fair market value of the common stock
     on the date of grant.  Options outstanding have a term of ten
     years and become exercisable in installments as determined by
     the  Board of Directors. The plan's options vest between  one
     through  six years and all expire between April 29, 1998  and
     November 11, 2006.
     
     Stock  option  activity for the three years and  four  months
     ended December 31, 1997 was as follows:
     
     
     Option Shares                        Number            Option
     Price

     Outstanding at August 31, 1994      576,088           .25   - 16.15

      Granted                             138,250          3.19  - 10.41
      Exercised, cancelled or
          expired                        (276,830)          .27  - 16.15
      Outstanding at August 31, 1995      437,508           .25  - 16.15

      Granted                             182,500          7.22  -  7.65
      Exercised, cancelled or
          expired                        (148,550)          .92  - 11.69
      Outstanding at December 31, 1995    471,458           .25  - 16.15

      Granted                             217,000          2.23  -  5.95
      Exercised, cancelled or
          expired                        (319,638)         3.19  - 11.69
      Outstanding at December 31, 1996    368,820           .25  - 16.15

      Granted                                -                   -
      Exercised, cancelled or
          expired                        (181,400)          .25  - 10.41
      Outstanding at December 31, 1997    187,420           .35  - 16.15



                                  - 38 -
                                                             F-18

                     CAMBEX CORPORATION AND SUBSIDIARIES
                          (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)

(9)   Stock Options and Warrants - Continued

     As  of  December  31, 1997 and 1996, options for  35,100  and
     140,218 shares were exercisable at aggregate option prices of
     $250,655 and $435,613, respectively.
     
     
     Had   compensation  cost  for  these  plans  been  determined
     consistent with SFAS No. 123, the Company's net loss and loss
     per  share  would  have been increased to the  following  pro
     forma amounts:
                                                         Four months
                                Year ended  Year ended     ended     Year ended
                               December 31, December 31, December 31,August 31,
                                     1997         1996       1995     1995

Net Income (Loss) (000's):
                      As Reported   (6,597)     (8,632)    (2,855)   ( 9,889)
                      Pro Forma     (6,597)     (9,456)    (3,120)   (10,280)

Basic and Diluted EPS:As Reported   (  .72)     (  .96)      (.32)   (  1.14)
                      Pro Forma     (  .72)     ( 1.05)      (.35)   (  1.18)

     The  fair value of each option grant is estimated on the date
     of  the  grant  using the Black-Scholes option pricing  model
     with  the  following weighted average assumptions and  values
     for grants in the periods presented.
                                                         Four months
                                Year ended  Year ended     ended    Year ended
                               December 31, December 31, December31,August 31,
                                    1997         1996         1995     1995

Assumptions:
      Risk free interest rate          N/A        6.35%       6.03%    6.38%
      Expected dividend yield          N/A           0%          0%       0%
      Expected life in years           N/A          10          10       10
      Expected volatility              N/A       65.56%      65.56%   65.56%

Values:
      Weighted average fair
         value of options granted        0        4.35        7.22     8.95

      Weighted average exercise price 1.94        4.58        7.64     8.40

     Because  the SFAS No. 123 method of accounting has  not  been
     applied  to options granted prior to September 1,  1994,  the
     resulting   pro   forma  compensation   cost   may   not   be
     representative of that to be expected in future years.
     
                                    - 39 -
                                                      F-19

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                      (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) Incentive Bonus Plan and 401(K) Profit Sharing Retirement Plan
     The Company has an incentive bonus plan under which certain 
     key employees as a group are entitled to receive additional 
     compensation up to a maximum of 15% of the Company's  pre-tax
     income,  as  defined.  There was no provision in  1997.   The
     provision  for  incentive  bonus  amounted  to  approximately
     $35,000   and  $55,000,  in  fiscal  years  1996  and   1995,
     respectively  and  $5,000  for the four  month  period  ended
     December 31, 1995.
     
     On  September  1,  1988, the Company established  the  Cambex
     Corporation 401(k) Profit Sharing Retirement Plan (the Plan).
     Under  the  Plan,  employees  are  allowed  to  make  pre-tax
     retirement  contributions.   In  addition,  the  Company  may
     provide matching contributions based on pre-established rates
     as  determined  by  the  Board  of  Directors.   The  Company
     provided  approximately  $400,000 in  fiscal  year  1994  for
     matching  contributions. In fiscal 1995, the Company recorded
     a  net  reversal of prior accruals of approximately $200,000.
     The  Company's contributions have been in the form of  Cambex
     common stock since fiscal 1994.
     
     The  Company  offers no post-retirement benefits  other  than
     those provided under the Plan.
     
(11)  Employee Stock Purchase Plan

     On  December  20,  1993, the Company established  the  Cambex
     Corporation  Employee Stock Purchase Plan (the  Plan),  which
     was  approved by the shareholders.  Under the Plan, employees
     may  elect  to  have a specified percentage  of  their  wages
     withheld through payroll deduction and purchase common  stock
     shares at 85% of the lower of the fair market value of Common
     Stock  on  the  first or last trading day  of  each  Purchase
     Period.  There are two (2) Purchase Periods each year  -  the
     first  six  months and the last six months of  each  calendar
     year.  During fiscal 1997, fiscal 1996 and fiscal 1995, there
     were  21,069, 50,060 and 94,440 shares issued under the Plan,
     respectively.   At  December 31,  1997,  there  were  191,521
     shares reserved for issuance under the Plan.
                                  - 40 -

                                                           F-20

                          CAMBEX CORPORATION AND SUBSIDIARIES
                          (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(12)  Decline in Value of IBM Trade-In Memory

     During  the  year  ended  August 31, 1995,  the  Company  was
     negatively  impacted  by the decreasing  demand  and  rapidly
     declining  prices  in  the ES/9000 mainframe  memory  market.
     Consequently, the Company wrote down the value of its ES/9000
     trade-in  memory by $4,647,000 in fiscal 1995 to levels  that
     were  expected  to  be realized in light of  the  changes  in
     market  conditions. These charges have been shown  separately
     in the financial statements as "Decline in Value of IBM TradeIn
     Memory."
     
(13)  Related Party Transactions

     During the third quarter of 1996, the Company entered into  a
     Manufacturing   Agreement  with  Jupiter   Technology,   Inc.
     ("Jupiter"),  the  majority of which is owned  by  Joseph  F.
     Kruy,   Chairman  and  Chief  Executive  Officer  of   Cambex
     Corporation, and members of his family. Jupiter is a supplier
     of  multiprotocol  frame  relay access  devices  (FRADs)  and
     network   integration  systems.  Under  the  terms  of   this
     Agreement,  Cambex agreed to manufacture,  sell  and  deliver
     products  exclusively to Jupiter.  Cambex agreed to  purchase
     approximately $300,000 of Jupiter inventory from Jupiter  and
     paid Jupiter $100,000 towards that amount.  During 1997,  the
     Company  shipped and billed to Jupiter $174,000  for  Jupiter
     products  plus  $118,000  ,000  for  expenses  related  to  a
     sublease  agreement.   During 1996, the Company  shipped  and
     billed  to Jupiter $298,000 for Jupiter products plus $43,000
     for expenses related to a sublease agreement.  As of December
     31,   1997,   Cambex  owed  Jupiter  $267,000  for  inventory
     purchases  and  Jupiter  owed  Cambex  $504,000  for  revenue
     shipments plus expenses.  In January, 1998, substantially all
     of  the  assets  of Jupiter Technology were purchased  by  an
     unrelated  third  party.  In March, 1998,  Jupiter  paid  the
     Company  $230,000, which represented the net amount  due  the
     Company.
     
     On June 1, 1998, the Company raised approximately $1,060,000,
     including  approximately  $460,000  from  Joseph   F.   Kruy,
     Chairman,  President  and  Chief  Executive  Officer  of  the
     Company,  in  cash  from  the issuance  of  10%  Subordinated
     Convertible Promissory Notes.  Under the terms of the  Notes,
     which are due on April 30, 2003, the holders may convert  the
     notes  into shares of common stock at a conversion  price  of
     $0.22  per  share. In addition to the Note, each  holder  was
     issued  a Stock Purchase Warrant, the exercise of which  will
     allow  the  warrant holder to purchase one  share  of  common
     stock,  at $0.50 per share, for each dollar invested  through
     the issuance of the Notes.
                                  - 41 -
                                                           F-21

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                         (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(14)  Events  (Unaudited)  Subsequent  to  date  of  Report   of Independent
      Public Accountants

     The  Company  filed  a voluntary petition  for  relief  under
     Chapter  11 of the bankruptcy code on October 10,  1997  with
     the  United States Bankruptcy Court (the "Court") in  Boston,
     Massachusetts.  The Company filed a reorganization plan  (the
     "Plan")  with the Court on February 9, 1998 and  amended  the
     Plan  on March 17, 1998.  The Company also filed a Disclosure
     Statement with the Court on March 17, 1998.
     
     The Court approved the Disclosure Statement on March 17, 1998
     as  containing information of a kind and in sufficient detail
     adequate to enable the holders of claims against the  Company
     to  make  an informed decision with respect to acceptance  or
     rejection of the Plan.
     
     On  April 23, 1998, following the unanimous approval  of  the
     Plan   by  the  Company's  unsecured  creditors,  the   Court
     confirmed  the Company's Plan. Subsequently, the Company emerged 
     from Chapter 11 on April 23, 1998. Under the terms of  the  Plan,
     creditors will receive a full payout over the next 36  months
     either  in the form of all cash or a combination of 80%  cash
     and  two  shares  of  common stock for  each  dollar  of  the
     remaining  20%  of their claims. The maximum  number  of  new
     shares to be issued under the Plan is approximately 550,000.
     
     As  described in the Company's Plan, the success of the  Plan
     is  dependent  upon several factors, including the  Company's
     ability   to   raise  additional  capital.   The   additional
     financing will be used to pay certain expenses, fees and pre
     petition  administrative claims relative to  consummation  of
     the  Plan  and  then  to fund continuing  operations of the Company,
     particularly in development, sales, and marketing.
 
     On June 1, 1998, the Company raised approximately $1,060,000, 
     including approximately $460,000 from Joseph F. Kruy, Chairman, 
     President and Chief Executive Officer of the Company, in cash from     
     the issuance  of  10% Subordinated Convertible Promissory Notes 
     (the "Notes"). Under  the  terms of  the  Notes, which are due on 
     April 30, 2003, the  holders may convert the notes into shares of 
     common  stock  at  a conversion price of $0.22 per share. In addition 
     to the Note, each holder was  issued  a Stock Purchase Warrant ( the
     "Warrant"),  the  exercise of which will  allow  the  warrant
     holder  to  purchase one share of common stock, at $0.50  per
     share,  for each dollar invested through the issuance of  the
     Notes.

                                  - 42 -
                                                             F-22

                     CAMBEX CORPORATION AND SUBSIDIARIES 
                       (DEBTOR-IN-POSSESSION)
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1997

                                 (Continued)


(14)  Events  (Unaudited)  Subsequent  to  date  of  Report   of Independent
      Public Accountants - Continued


     Subsequent  to  confirmation of the Plan,  the  Company  paid
     approximately $300,000 of pre-petition debt and  $400,000  in
     legal  and  professional  fees.   The  remaining  balance  of
     unsecured debt of approximately $4,300,000 will be paid  over
     a thirty month period commencing in October, 1998.
     
     The  Company  incurred approximately $400,000  in  legal  and
     professional expenses relative to its Chapter 11  proceeding,
     of  which  approximately $200,000 was accrued as of  December
     31, 1997.
     
     On  January  16,  1998, the Company entered into  a  Sublease
     Agreement  with a third party pursuant to which  the  Company
     sublet  approximately  20,000 square  feet  in  its  Waltham,
     Massachusetts  facility (which is approximately  30%  of  the
     Company's  total leased space).  The term of the sublease  is
     coterminous  with the primary lease and expires  on  May  31,
     2003.
     
     
(15)  Credit Risk

     The Company maintains cash balances at financial institutions
     located  in Massachusetts.  Accounts at each institution  are
     insured  by the Federal Deposit Insurance Corporation  up  to
     $100,000.  At December 31, 1997, the Company's uninsured cash
     balances total $325,009.
     
     The  Company's subsidiaries maintain cash balances at several
     financial institutions located throughout Europe.  These cash
     balances    are   subject   to   normal   currency   exchange
     fluctuations.  At  December 31, 1997, the Company's  overseas
     cash balances total $49,939.
     
     
     
     
                                  - 43 -

                                                             F-23

                                    CAMBEX CORPORATION  AND SUBSIDIARIES
                                     (DEBTOR-IN-POSSESSION)
                          SCHEDULE  II - VALUATION AND  QUALIFYING ACCOUNTS


                                             Additions
                                             Charged To
                                 Balance at  (Recovered              Balance
                                 Beginning      From)   Writeoffs/   at End
                                  of  Year     Income   Deductions   of Year



YEAR ENDED AUGUST 31, 1995:

Reserve  for  doubtful accounts $  138,000  $     -     $  (3,000)  $135,000




FOUR MONTHS ENDED DECEMBER 31, 1995:

Reserve  for doubtful accounts $  135,000  $     -       $   1,000  $136,000




YEAR ENDED DECEMBER 31, 1996:

Reserve  for doubtful accounts $  136,000  $    -      $   (5,000)  $131,000




YEAR ENDED DECEMBER 31, 1997:

Reserve  for  doubtful accounts  $   131,000   $    -      $     -  $131,000


                                  - 44 -


                                                                F24




                                  SIGNATURES

Pursuant  to  the  requirements of Section 13  of  the  Securities
Exchange  Act of 1934, the Company has duly caused this report  to
be  signed  on  its  behalf  by  the undersigned,  thereunto  duly
authorized.
CAMBEX CORPORATION
By:   /s/Joseph F. Kruy
          Joseph  F. Kruy, President                          June 29, 1998

Pursuant  to  the requirements of the Securities Exchange  Act  of
1934,  this report has been signed below by the following  persons
on  behalf  of the Company and in the capacities indicated  as  of
June 29, 1998.


By:   /s/   Joseph F. Kruy
             Joseph F. Kruy, Chairman of the Board, President  and
             Director
            (Principal Executive Officer)


By:   /s/   Sheldon M. Schenkler
            Sheldon M. Schenkler, Vice President of Finance
            (Principal Financial and Accounting Officer)
            
            
By:   /s/   Robert J. Spain
            Robert J. Spain, Director


By:   /s/   Philip C. Hankins
            Philip C. Hankins, Director


By:   /s/   C. V. Ramamoorthy
            C. V. Ramamoorthy, Director





                                  - 45 -

                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS




As  independent  public  accountants, we  hereby  consent  to  the
incorporation of our report included in this Form 10-K,  into  the
Company's  previously filed Registration Statements  on  Form  S-8
(File Nos. 2-77667 and 33-18072).




Chelmsford, Massachusetts
June 15, 1998










                                   - 46 -