COMMON STOCK AND RELATED SHAREHOLDER INFORMATION

The  Company's  common  stock is traded on Nasdaq  under the  symbol  IMED.  The
following  table sets forth the high and low  prices  for the common  stock,  as
reported on Nasdaq, during the two fiscal years ended October 31, 1995:

<TABLE>
<CAPTION>

                                    1995 Fiscal Year                           1994 Fiscal Year
                               High                 Low                   High                 Low
                          ----------------     ----------------      ----------------    -----------------
<S>                       <C>                  <C>                   <C>                 <C>    
First Quarter                $ 2.188              $ 1.438                $ 1.250             $ 0.875                                
Second Quarter               $ 2.188              $ 1.563                $ 1.250             $ 0.625
Third Quarter                $ 1.750              $ 1.250                $ 1.063             $ 0.500
Fourth Quarter               $ 1.500              $ 1.125                $ 1.563             $ 0.938


</TABLE>

The prices quoted above may reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.


At December 29, 1995, there were approximately 1,200 beneficial owners of the 
Company's common stock.


The Company has not declared any dividends and has no intention of doing so in 
the near future.

<PAGE>

<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS

                                                       YEAR ENDED OCTOBER 31,
                                                    ----------------------------
                                                         1995           1994
                                                    --------------  ------------
<S>                                                 <C>             <C>    
REVENUE:
Product Sales ..................................    $ 1,908,079     $ 2,573,767                  
Customer Service and  Support ..................      3,243,468       2,969,508
                                                    -----------     -----------
Total Revenue ..................................      5,151,547       5,543,275
                                                    -----------     -----------

COSTS AND EXPENSES:
Cost of Products Sold ..........................        734,857         898,588
Cost of Customer Service and Support ...........      2,757,960       1,912,025
Selling and Administrative Expenses ............      1,999,094       1,817,187
Depreciation and Amortization ..................      1,642,541         646,172
                                                    -----------     -----------
Total Costs and Expenses .......................      7,134,452       5,273,972
                                                    -----------     -----------

Operating Income (Loss) ........................     (1,982,905)        269,303 
                                                    -----------     ------------

OTHER INCOME (EXPENSE):
Interest Expense ...............................           (901)           --
Interest Income ................................         53,441          16,531
Other Income (Expense) .........................         (9,411)         10,823
                                                    -----------     -----------
Total Other Income .............................         43,129          27,354
                                                    -----------     -----------

Income (Loss) Before Income Taxes ..............     (1,939,776)        296,657

Income Tax Provision (Benefit) (Note 7) ........       (762,286)        128,228
                                                    -----------     -----------

Net  Income (Loss) .............................    $(1,177,490)    $   168,429
                                                    ===========     ===========

Weighted Average Number of Common Shares and
 Common Stock Equivalents Outstanding ..........      2,635,368       2,707,139
                                                    ===========     ===========


Earnings  (Loss) Per Share: ....................    $     (0.45)    $      0.06
                                                    ===========     ===========





SEE NOTES TO FINANCIAL STATEMENTS

</TABLE>

<PAGE>

<TABLE>
<CAPTION>


BALANCE SHEETS, OCTOBER 31, 1995 AND 1994

ASSETS  
------
                                                           1995          1994
                                                        ---------     ----------
<S>                                                     <C>           <C>

CURRENT ASSETS:
Cash ...............................................    $  534,260    $1,055,378
Accounts Receivable, less allowance for doubtful
    accounts of $64,623 in 1995 and $66,000 in 1994        807,984     1,127,173
Inventories (Note 2) ...............................        74,272        25,707
Prepaid Expenses and Other Current Assets ..........       104,378        96,102
Income Taxes Receivable (Note 7) ...................        86,823        60,577
Deferred Income Taxes (Note 7) .....................       254,804       303,113
                                                        ----------    ----------

Total Current Assets ...............................     1,862,521     2,668,050
                                                        ----------    ----------

FIXED ASSETS:
Furniture and Fixtures .............................       132,830       103,818
Machinery  and Equipment ...........................       597,175       580,807
Automobiles ........................................        29,138        29,138
Leasehold Improvements .............................        20,142        32,735
Other Fixed Assets .................................       118,009       109,538
                                                        ----------    ----------
                                                           897,294       856,036

Less accumulated depreciation and amortization .....       581,259       565,506
                                                        ----------    ----------

Total Fixed Assets .................................       316,035       290,530
                                                        ----------    ----------

OTHER ASSETS:
Software Development Costs,
   less accumulated  amortization of
   $1,464,073 in 1995 and  $2,014,711 in 1994 ......       576,433     1,386,856
Purchased Software,
   less accumulated amortization of $266,084 in
   1995 and $320,675 in 1994 .......................          --         194,020
Covenants Not to Compete,
   less accumulated amortization of
   $410,249 in 1995 and $333,085 in 1994 ...........        83,796       160,960
Deferred Income Taxes (Note 7) .....................       253,907          --
Other ..............................................        45,252        53,570
                                                        ----------    ----------

Total Other Assets .................................       959,388     1,795,406
                                                        ==========    ==========

TOTAL ASSETS .......................................    $3,137,944    $4,753,986
                                                        ==========    ==========
</TABLE>

<PAGE>
 
<TABLE>
<CAPTION>




LIABILITIES AND STOCKHOLDERS' EQUITY                           1995          1994
--------------------------------------------------        -------------  -------------
<S>                                                       <C>            <C>      
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
   Trade Accounts ................................        $   215,354    $   169,023
   Customer Deposits .............................             25,923         27,933
   Accrued Payroll Taxes and Employee Benefits ...            183,945        141,702
   Other Accrued Liabilities .....................              6,270          8,023
Income Taxes Payable (Note 7) ....................               --           64,693
Deferred Revenue .................................          1,163,903      1,200,980
Current Portion of Long-Term Obligations .........             13,033          7,420
                                                          -----------    -----------

Total Current Liabilities ........................          1,608,428      1,619,774

LONG-TERM OBLIGATIONS:
Deferred Rent (Note 4) ...........................             43,444           --
Deferred Income Taxes (Note 7) ...................               --          490,166
Commitments and Contingencies ....................               --             --
                                                          -----------    -----------

Total Current Liabilities and Long-Term Obligations         1,651,872      2,109,940
                                                          -----------    -----------

STOCKHOLDERS' EQUITY:
Common Stock, $.01 per value:
   authorized 10,000,000 shares;
   shares outstanding:  2,642,207 in 1995 and 2,626,519
   in 1994 .......................................             26,422         26,265
Capital in Excess of Par Value ...................          1,905,476      1,886,117
Note Receivable from Stockholder (Note 3) ........            (22,000)
                                                                             (22,000)
Retained Earnings (Accumulated Deficit) ..........           (423,826)       753,664
                                                          -----------    -----------

Total Stockholders' Equity .......................          1,486,072      2,644,046
                                                          -----------    -----------
TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY ..........................        $ 3,137,944    $ 4,753,986
                                                          ===========    ===========





SEE NOTES TO FINANCIAL STATEMENTS

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

STATEMENTS OF CASH FLOWS


                                                                     YEAR ENDED OCTOBER 31,
                                                               -----------------------------------
                                                                     1995              1994
                                                               ----------------    ---------------
<S>                                                            <C>                 <C>    
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                                            $(1,177,490)        $  168,429
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
   Depreciation and Amortization                                 1,642,541            646,172
   Provision for losses on (write-offs of)
      accounts receivable                                           (1,377)            40,852
   Deferred Income Taxes                                          (695,764)           126,369
   Tax benefits from stock options exercised                         3,161               ----
   Changes in Assets and Liabilities:
      Accounts Receivable                                          320,566            156,866
      Income Taxes Receivable                                      (26,246)            64,279
      Inventories                                                  (48,565)            49,892
      Prepaid Expenses and Other Current Assets                     (8,276)           (57,877)
      Accounts Payable and Accrued Expenses                         84,811           (251,453)
      Income Taxes Payable                                         (64,693)            64,693
      Deferred Revenue                                             (37,077)           168,784
      Deferred Rent                                                 49,057            (33,439)
                                                               ----------------    ---------------
   Net cash provided by operating activities                        40,648          1,143,567
                                                               ----------------    ---------------
INVESTING ACTIVITIES:
   Property additions                                             (221,423)          (185,144)
   Capitalized software development costs                         (365,016)          (306,106)
   Other                                                             8,318            (41,542)
                                                               ----------------    ---------------
   Net cash used in investing activities                          (578,121)          (532,792)
                                                               ----------------    ---------------
FINANCING ACTIVITIES:
   Proceeds from issuance of common stock                           16,355               ----
                                                               ----------------    ---------------
   Net cash provided by financing activities                        16,355               ----
                                                               ----------------    ---------------

NET INCREASE (DECREASE) IN CASH                                   (521,118)           610,775
CASH AT BEGINNING OF YEAR                                        1,055,378            444,603
                                                               ----------------    ---------------
CASH AT END OF YEAR                                            $   534,260         $1,055,378
                                                               ================    ===============
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION

                                                                     YEAR ENDED OCTOBER 31,
                                                             -----------------------------------------
                                                                    1995               1994
                                                             ------------------    -------------------
<S>                                                          <C>                   <C>  

Supplemental Disclosures of Cash Flow
   Information:

Cash paid for:
   Interest                                                  $         901         $   ----

   Income Taxes Paid (Received)                                     21,933         (127,113)
 



SEE NOTES TO FINANCIAL STATEMENTS

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE
YEARS ENDED OCTOBER 31, 1995 AND 1994



                                                            CAPITAL                        
                                                              IN              NOTE            RETAINED
                                                           EXCESS OF      RECEIVABLE           EARNINGS
                                                PAR           PAR            FROM           (ACCUMULATED
                                 SHARES        VALUE         VALUE       STOCKHOLDER          DEFICIT)           TOTAL
                               --------------------------------------------------------------------------------------------
<S>                            <C>            <C>         <C>             <C>              <C>                 <C>

Balance at November 1,  1993    2,626,519     $ 26,265    $ 1,886,117     $ (22,000)       $   585,235         $2,475,617


Net Income                                                                                     168,429            168,429
                               ------------   ----------  -------------  ---------------   ------------------  ------------

Balance at October 31, 1994     2,626,519       26,265      1,886,117       (22,000)           753,664          2,644,046

Issuance of Stock                  15,688          157         16,198                                              16,355

Tax benefits from
stock options excerised                                         3,161                                               3,161

Net Loss                                                                                    (1,177,490)        (1,177,490)
                               ------------   ----------  -------------   --------------   ------------------  ------------
Balance at October 31, 1995     2,642,207     $ 26,422    $ 1,905,476     $ (22,000)       $  (423,826)        $1,486,072
                               ============   ==========  =============   ==============   ==================  ============




SEE NOTES TO FINANCIAL STATEMENTS

</TABLE>


<PAGE>

NOTES TO FINANCIAL STATEMENTS  

1. SIGNIFICANT ACCOUNTING POLICIES 

INDUSTRY  SEGMENT - The Company  derives  its revenue  solely from the sales and
servicing of microcomputer software and related hardware.

INVENTORIES are stated at the lower of cost or market.  Specific  identification
is used to determine the costs of hardware and software inventory.

FIXED ASSETS are stated at cost, less accumulated depreciation and amortization.
The costs of fixed assets are depreciated  over the estimated  useful lives (two
to  five  years)  of  the  assets  using  the  straight-line  method.  Leasehold
improvements are depreciated over the term of the lease (five years).

CUSTOMER SERVICE AND SUPPORT REVENUE represents revenue earned from hardware and
software  maintenance  contracts,  training,  installation  of new systems,  and
general software support and programming  services provided to customers.  Under
renewable maintenance  contracts,  the Company provides, for a term of generally
not more than one year  essentially all  maintenance and repairs  resulting from
the normal and intended use of its  products.  Deferred  revenue on  maintenance
contracts  is  amortized  by the  straight-line  method  over  the  life  of the
contracts.

REVENUE  RECOGNITION  - Revenue from sales of software and hardware is generally
recorded  when the product is shipped.  Revenue from custom  software  products,
which are marketed to customers primarily under perpetual license  arrangements,
is recorded at the time the product is installed  and accepted by the  customer.
Revenue  from  services  other  than  maintenance  contracts  is  recognized  as
performed.

EARNINGS  (LOSS) PER SHARE - Earnings (Loss) per share are computed on the basis
of  the  weighted  average  number  of  shares  outstanding  plus  common  stock
equivalents  which would arise from the exercise of stock  options and warrants.
Common stock equivalents are excluded from the calculation of net loss per share
for the year ended October 31, 1995, as they are antidilutive.

SOFTWARE  DEVELOPMENT  COSTS -  Certain  software  development  costs  are being
capitalized and amortized over the estimated  economic life of the software on a
straight-line  method,  commencing when each product or enhancement is available
for general release. Amortization using the straight-line method was $868,742 in
1995 and $318,465 in 1994.

In 1995,  the Company  reduced the estimated  economic life of certain  software
products to coincide with the period remaining before the next anticipated major
release of each software product. This shortening of the estimated economic life
of the software  products  increased  the  amortization  expense by $417,105 and
reduced net income by $253,183 or $0.09 per share in 1995.

Based upon the Company's  sales  activity in the first half of 1995, the Company
in 1995 decided to reduce the carrying value of the software  development  costs
relating to the StarPath and StarQuality  products.  The effect of this non-cash
write-down  was to  increase  amortization  expense by  $306,697  and reduce net
income by $185,858 or $0.07 per share in 1995.

In 1995, the Company  changed its practice for estimating the economic life of a
software  product.  For software  released for general  distribution on or after
February 1, 1995,  the  estimated  economic life of the software is two years or
the  period  until  a new  major  release  of the  software  is  expected  to be
distributed, whichever is shorter.

PURCHASED SOFTWARE is stated at cost and is being amortized on the straight-line
method over its  estimated  useful life.  Amortization  using the  straight-line
method was $194,020 in 1995 and $66,521 in 1994.

In 1995, the Company  reduced the estimated  economic life of certain  purchased
software  products  to  coincide  with  the  period  remaining  before  the next
anticipated  major  release of each  software  product.  This  shortening of the
estimated  economic life of the software  products  increased  the  amortization
expense  by  $127,499  and  reduced  net income by $77,392 or $0.03 per share in
1995.

COVENANTS NOT TO COMPETE are stated at the estimated value of the  consideration
given for the covenants  (including the present value of any future  payments to
be made under each agreement),  less accumulated amortization.  The costs of the
covenants are being amortized over four or seven years,  using the straight-line
method. Amortization was $77,164 in both 1995 and 1994.

INCOME TAXES are accounted for using the methodology established by Statement of
Financial  Accounting  Standards (SFAS) No. 109,  'Accounting for Income Taxes,'
which  requires an asset and a liability  approach to financial  accounting  and
reporting  for  income  taxes  (see Note 7).  Deferred  income  tax  assets  and
liabilities  are  computed  annually  for  differences   between  the  financial
statement and tax bases of assets and liabilities that will result in taxable or
deductible  amounts in the future.  A valuation  allowance is  established  when
necessary to reduce deferred tax assets to amounts expected to be realized based
on enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income.  Income tax expense is the tax payable or
refundable  for the  period,  plus or minus  the  change  during  the  period in
deferred tax assets and liabilities.

CASH AND CASH  EQUIVALENTS  - The Company  considers  cash on hand,  deposits in
bank, and highly liquid debt instruments  purchased with original maturity dates
of generally three months or less as cash.

RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the current year presentation.  These reclassifications have no effect on net
income.


2. INVENTORIES

Inventories at October 31 consisted of the following:

                               1995           1994
                          -------------  -------------
Computers                  $   37,005    $       252
Peripheral equipment           29,141         19,125
Parts                             690            175
Software                        6,077          4,035
Supplies and Forms              1,359          2,120
                          -------------  -------------

Total                         $74,272        $25,707
                          =============  =============

3.  NOTES RECEIVABLE

In  September  1993,  the  Company  accepted  a $22,000  promissory  note from a
director, when he exercised an option to purchase 25,000 shares of common stock.
The  promissory  note bears an  interest  rate of seven  percent  (7%) per year,
payable quarterly. The principal of the promissory note is to be paid in full no
later than September 30, 1996. However, a portion of the principal is to be paid
whenever the director  sells any shares of the  Company's  common stock owned by
him.  The shares of common stock issued upon the exercise of the option are held
by the Company as collateral for the promissory note.

4. LEASE COMMITMENTS

In 1994,  the  Company  leased  12,976  square  feet of space  under a five-year
operating  lease which was scheduled to expire in March 1995. In September 1994,
the Company entered into an agreement  ("Agreement")  to extend the lease of its
current  leased  space and to lease an  additional  3,875  square feet of office
space.  The  Agreement  provided  for three  months of free rent  which is being
amortized over the life of the Agreement.  The agreement expires on February 28,
1999. The Company has the option to extend the Agreement for five years. Minimum
lease   payments   under   the   Agreement   include    utilities,    insurance,
interior/exterior  maintenance and janitorial services, except that the Company,
starting in 1996,  is required to pay for its pro-rata  share of the increase in
such costs over the base established in calendar year 1995.

Future minimum lease payments under the Agreement are as follows:

                          1996       $   278,041
                          1997           278,041
                          1998           278,041
                          1999           278,041
                          2000            92,681
                                -----------------
                  
                         Total       $ 1,204,845
                                =================


Rental expense for all operating leases for the years ended October 31, 1995 and
1994 was $259,956 and $196,237, respectively.

5. CREDIT AGREEMENTS

The Company has a revolving loan  agreement with United States  National Bank of
Oregon.  The loan  agreement  allows the  Company to borrow up to  $700,000  and
requires the Company to maintain  certain  financial  ratios.  All assets of the
Company are pledged as security  for the loan  agreement.  In 1995,  the Company
renewed the agreement under the same terms and  conditions.  The Company met all
of the  required  ratios and did not borrow any funds  under the loan  agreement
during fiscal 1994 and 1995. The agreement expires April 15, 1996.

6. EMPLOYEE BENEFIT PLAN 

The Company has a 401(k) Savings Plan ("Plan").  All regular full-time employees
(over 21 years old) are  eligible  to  participate  in the Plan.  The  Company's
contribution to the Plan is 50% of the employee' contribution up to a maximum of
2 and 1/2 percent of the  employee'  wages.  During  1995 and 1994,  the Company
contributed $39,727 and $24,165, respectively, to the Plan.


7. INCOME TAXES

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying amount of assets and  liabilities  for financial  reporting
purposes and the amounts used for income tax purposes. The effect of significant
items comprising the Company's net deferred tax asset or liability as of October
31 are as followsgnificant items comprising the Company's net deferred tax asset
or liability as of October 31 are as follows:

<TABLE>
<CAPTION>


                                                                      1995                 1994
                                                                  --------------       --------------
<S>                                                               <C>                  <C> 
          Deferred Tax Assets:
          Accrued Expenses                                           $  69,277         $    41,299
          Deferred Maintenance Contract                                185,527             261,814
          Differences Between Book and Tax  Basis of
             Property and Equipment                                    149,156              53,589
          State Net Operating Loss Carryforward                         79,408              16,495
          Federal Net Operating  Loss Carryforward                     246,463          
                                                                                              ----

          Deferred Tax Liabilities:
          Capitalized Software Costs                                 (221,120)            (560,250)
                                                                  --------------       --------------

          Net Deferred Tax Asset (Liabilities)                        $508,711         $  (187,053)
                                                                  ==============       ==============

</TABLE>


The deferred tax assets and  liabilities  are included in the following  balance
sheet accounts at October 31:

<TABLE>
<CAPTION>

                                                                        1995                 1994
                                                                  ---------------      --------------

<S>                                                               <C>                  <C> 
           Current Deferred Tax Assets                                $ 254,804         $   303,113
           Deferred Tax Assets (Liabilities)                            253,907            (490,166)
                                                                  ---------------      --------------

           Net Deferred Tax Asset (Liability)                         $ 508,711         $  (187,053)
                                                                  ===============      ==============
</TABLE>


In order for the Company to realize all  deferred  tax assets  recognized  under
SFAS No.  109,  future  taxable  income must be at least  comparable  to the net
income of 1994 and prior  years.  Although  the Company  believes  such  taxable
income  levels will be  achieved,  lower  amounts  could  negatively  affect the
provision for income taxes in future years.

There are  approximately  $720,000 and  $1,223,000 of unused net operating  loss
carryforwards  which, if not used, will expire between 2007 and 2008 for federal
and state tax reporting purposes, respectively.

The  Company may  realize  tax  benefits as a result of the  exercise of certain
employee  stock  options.  For financial  reporting  purposes,  any reduction of
income tax  obligations as a result of these tax benefits is credited to capital
in excess of par value. During 1995, $3,161 was credited to capital in excess of
par value.

A reconciliation  between income taxes  calculated at the statutory  federal tax
rate and the tax provision reflected in the financial statements is as follows:


                                                    1995         1994
                                                ----------    ---------  
Computed income taxes based on statutory
   federal income tax rate of 34% ...........   $(659,524)    $ 100,863
Increase (reduction) in taxes resulting from:
   State income tax, net of federal benefit .     (94,524)       15,564
   Benefit from graduated tax rates .........        --          (1,656)
   Adjustment from Change in Tax Method .....        --          11,238
   Other ....................................      (8,238)        2,219
                                                ---------     ---------

                                                $(762,286)    $ 128,228
                                                =========     =========


The provision for income taxes, net of operating loss carryforwards, consists of
the following:


                                                           1995          1994
                                                        ----------    ----------

Income taxes currently payable (receivable):
   Federal ........................................     $ (66,532)     $   1,849
   State ..........................................            10             10
                                                        ---------      ---------
                                                        $ (66,522)         1,859
                                                        ---------      ---------
Deferred taxes - net:
   Federal ........................................      (552,547)       102,777
   State ..........................................      (143,217)        23,592
                                                        ---------      ---------
                                                         (695,764)       126,369
                                                        ---------      ---------

                                                        $(762,286)     $ 128,228
                                                        =========      =========


8. STOCK OPTION PLANS

The Company has adopted two  employee  stock  option  plans that provide for the
issuance of incentive stock options and nonstatutory  stock options to employees
and officers and nonstatutory  stock options to directors who are not employees.
The stock option plans  authorize the issuance of up to 1,250,000  shares of the
Company's  common stock. On October 31, 1995,  179,658 shares were available for
future grant.

The  plans  are  administered  by the  Compensation  Committee  of the  Board of
Directors.  The exercise price for the options granted under the option plans is
determined by the Committee and cannot be less than the fair market value of the
common stock as of the date of the grant.  The term of each option is determined
by the  Committee,  but may not be more than ten years.  Vesting  schedules  are
established by the  Compensation  Committee.  All outstanding  stock options are
exercisable  at a price of not less than the fair market value of the  Company's
common stock on the date of the grant.  All  outstanding  options have a term of
five years and vest over a three year period.

One of the stock option plans  provides for an automatic  grant of  nonstatutory
stock options to members of the  Compensation  Committee.  The  automatic  grant
occurs  each  year on the  date of the  annual  shareholders'  meeting,  and the
exercise  price of the  options  issued  under the  automatic  grant is the fair
market value of the common stock on that date.  The following  table  summarizes
the stock option activity under the Company's option plans:

<TABLE>
<CAPTION>

                                                                  Shares under          Option Price
                                                                     Option                Range
                                                                ------------------    ------------------
<S>                                                             <C>                   <C> 
                Options Outstanding at October 31, 1993                 499,237       $  0.88 -  $4.75

                Exercised                                                  ----                 ----
                Canceled or Expired                                    (349,065)      $  0.88  - $3.88
                Granted                                                 514,414       $  0.625 - $1.38
                                                                ------------------    ------------------

                Options Outstanding at October 31, 1994                 664,586       $   0.625- $4.75

                Exercised                                               (15,688)      $   0.88 - $1.38
                Canceled or Expired                                     (49,754)      $   0.88 - $1.38
                Granted                                                  80,000       $   1.69 - $1.75
                                                                ------------------    ------------------
                 
                Options Outstanding at October 31, 1995                 679,144       $  0.625 - $4.75
                                                                ==================    ==================

                Options Excerisable at October 31, 1995                 306,267       $  0.625 - $4.75
                                                                ==================    ==================
</TABLE>

9.   COMMON STOCK

During  1991,  the Company  issued a stock  warrant for 70,000  shares of common
stock as part of an agreement for  financial  consulting,  public  relations and
investment  banking services.  Shares are purchasable under the stock warrant as
follows: 15,000 shares at $2.00; 15,000 shares at $2.50; 20,000 shares at $3.00;
and 20,000 shares at $4.00.

The stock  warrant term is five years.  At October 31, 1995,  no shares had been
purchased under the stock warrant.

10.  SIGNIFICANT  CUSTOMERS  During 1995, the Company  recorded revenue from two
customers representing 20 percent and 10 percent of total revenue.  During 1994,
the Company recorded  revenue from two customers  representing 30 percent and 11
percent of total revenue.


                          INDEPENDENT AUDITORS' REPORT

To The Board of Directors 
  and Stockholders of Informedics, Inc.
Lake  Oswego,  Oregon 

We have  audited the  accompanying  balance  sheets of  Informedics,  Inc. as of
October  31,  1995  and  1994  and  the  related   statements   of   operations,
stockholders'  equity,  and cash  flows for each of the two years in the  period
ended October 31, 1995. These financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  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 audits provide a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects, the financial position of the Company on October 31, 1995 and 1994 and
the  results of its  operations  and its cash flows for each of the two years in
the period ended  October 31, 1995, in  conformity  with  generally  accepted
accounting principles.





/S/DELOITTE & TOUCHE LLP 
Portland, Oregon 
December 15, 1995
 
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS  

HIGHLIGHTS  

In 1995, the Company reduced the carrying value of certain software products and
shortened the estimated economic life of other software products.  The effect of
the  write-off  and  shortening  the  estimated  economic  lives was to increase
amortization expense by $851,301 in 1995, as compared to 1994.

During 1995,  the Company  expanded its  activities  in the  development  of new
software and the enhancement and maintenance of existing software.  As a result,
the Company  incurred  software  development  costs of  $1,377,906  in 1995,  an
increase of $675,914 over 1994 costs of $701,992.  Of the total costs  incurred,
the Company capitalized $365,016 in 1995 compared to $306,106 in 1994.

Lower than expected  product sales,  increased  software  development  costs and
higher  amortization  expense  resulted in a net loss of $1,777,490 or $0.45 per
share for 1995 compared to net income of $168,429 or $0.06 per share for 1994.

RESULTS OF OPERATIONS - MATERIAL CHANGES

The decrease in product  sales of $665,688 or 26% for 1995, as compared to 1994,
resulted  from a 30% decrease in the number of laboratory  and physician  office
systems  sold.  The decrease in the number of  laboratory  systems sold resulted
primarily from the sale of fewer StarPath  systems,  as the Company  focused its
1995  laboratory  products  marketing  efforts  on its  LifeLine  products.  The
decrease  in  physician  office  systems  sold  resulted  from a  change  in the
Company's  marketing strategy by concentrating on larger  independent  physician
associations  (IPAs) and  physician  hospital  organizations  (PHOs) rather than
individual clinics and physician offices. Management believes that, although the
change  negatively  impacted 1995 sales,  anticipated  sales to IPAs and PHOs in
1996 are expected to outpace the 1995 level of sales to  individual  clinics and
physician offices.

The increase of $273,960 or 9% in customer  service and support revenue resulted
from  increases in support  prices and in the size of the customer  base as more
systems were installed in 1995.

A decrease  in 1995  hardware  sales,  primarily  relating to  physician  office
products,  resulted in a decrease in the cost of products sold of $163,731. As a
percentage of hardware  sales,  cost of products sold increased from 83% in 1994
to 90% in 1995. The increase in the 1995 percentage resulted from fewer hardware
sales relating to physician office products,  which are typically sold at higher
margins than hardware sales relating to the laboratory products.

The 1995 increase of $845,935 or 44% in the cost of customer service and support
resulted from an increase in the amount of software  development costs that were
expensed rather than capitalized and higher labor and related costs for customer
service.  As stated earlier,  during 1995 the Company expanded its activities in
the  development of new software and the enhancement and maintenance of existing
software.  In 1995,  the  Company  expensed  $1,012,890  of its total  software
development  costs  compared  to $395,887  expensed in 1994.  The 1995 labor and
related costs for customer service increased by $161,659, when compared to 1994,
as a result of a December  1994  salary  increase  and the hiring of  additional
staff to serve the Company's growing customer base.

Selling  and  administrative  costs for 1995  increased  by  $181,907  over 1994
amounts due to an increase in labor and related  costs,  higher rent expense and
an increase in marketing costs for the physician office  products.  The increase
in labor and  related  costs  resulted  from a salary  increase  implemented  in
December 1994 and an increase in the size of the sales and marketing  staff. The
higher rent  expense  resulted  from the  expansion  of office space in November
1994.  The increase in marketing  costs for  physician  office  products was the
result of increased  advertisements in trade  publications and the attendance at
more trade shows in 1995 as compared to 1994.

As  previously  discussed,  the Company in 1995  reduced the  carrying  value of
certain  software  products and shortened  the estimated  economic life of other
software products.  As a result,  depreciation and amortization expense for 1995
was $1,642,541 compared to $646,172 for 1994.

LIQUIDITY - CAPITAL RESOURCES

The Company's  financial  condition remains strong.  The Company's cash position
and  working   capital  on  October  31,  1995  were   $534,260  and   $254,093,
respectively.  The Company is virtually debt free. The single largest  liability
on October 31, 1995 was the deferred revenue liability of $1,163,903, which is a
liability for future services.  The current ratio on October 31, 1995 was 1.2 to
1.0.

Net cash  provided by operations  during 1995 of $40,648 and the Company's  cash
position at October  31,1994 of $1,055,378,  were more than  sufficient to cover
the net cash used to acquire  additional  assets and fund the development of the
Company's software in 1995.

Capital  expenditures for property  additions were $221,423 and $185,144 in 1995
and 1994, respectively. Capitalized software development costs totalled $365,016
and  $306,106  in 1995 and  1994,  respectively.  Management  expects  that 1996
expenditures  for property  additions  will be somewhat less than those in 1995.
Management  anticipates that expenditures for capitalized  software  development
costs will be comparable to those in 1995. All  expenditures  are expected to be
funded through cash provided by operations  and from the Company's  current cash
position.

In 1995,  the Company  renewed a $700,000  uncommitted  revolving line of credit
with US National Bank of Oregon. All of the assets of the Company are pledged as
security for the line of credit.  Terms of the revolving  line of credit require
the Company to maintain certain  financial ratios. As of the date of this Annual
Report, the Company has not borrowed under the line of credit and has maintained
the required ratios. The line of credit expires April 15, 1996.