U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

                      Annual Report Pursuant to Section 13
                 or 15(d) of the Securities Exchange Act of 1934

                   For the Fiscal Year Ended December 31, 1998

                           Commission File No. 0-12968

                        INMEDICA DEVELOPMENT CORPORATION

             Utah                                       87-0397815
------------------------------------    ----------------------------------------
     (State of Incorporation)              (I.R.S. Employer Identification No.)

                               825 North 300 West
                           Salt Lake City, Utah 84103
                                 (801) 521-9300

Securities Registered Pursuant to Section 12(g) of the Act:

                                                Name of Each Exchange
     Title of Each Class                         on which Registered 
     -------------------                        ---------------------

Common Stock, $.001 par value                           None

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or Section  15(d) of the Exchange Act during the past 12 months,  and (2) has
been subject to such filing requirements for the past 90 days.  X  yes     no
                                                              -----   -----

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation SB contained in this form, and no disclosures  will be contained,  to
the best of  registrant's  knowledge,  in any  definitive  proxy or  information
statement  incorporated  by  reference  in Part III of this  Form  10-KSB or any
amendments to this Form 10-KSB [X]

Issuer's revenues for its most recent fiscal year: $ 247,400

The  aggregate  market  value  of  voting  stock  held by  nonaffiliates  of the
registrant  as of March 16, 1999 was  approximately  $1,661,359.1  The number of
shares  outstanding of the issuer's  common stock,  $.001 par value, as of March
15, 1999 was 8,660,899.

DOCUMENTS INCORPORATED BY REFERENCE: None


---------------------
     1 - Based on 4,746,739  non-affiliate  shares at $.35 per share,  which was
the average of the bid and asked price on that date.


<PAGE>

Item 1. Business  General.  InMedica  Development  Corporation  ("InMedica") was
incorporated  as a Utah  corporation  on June 16,  1983.  During  the last three
fiscal years, InMedica's primary business activity has been the operation of the
business of MicroCor,  Inc. ("MicroCor"),  a wholly owned subsidiary,  which was
acquired effective December 31, 1985.  MicroCor is presently engaged in research
and development of an experimental  device to measure hematocrit  non-invasively
(see  "Product  Development").  MicroCor  has  historically  been engaged in the
development  or sale of certain  medical  technology  products.  Royalty  income
received  by  MicroCor  from  the  development  and sale of  certain  technology
pursuant  to a  contract  with  Johnson & Johnson  Medical,  Inc.  is  presently
InMedica's  only revenue source (see "Results of  Operations").  The Company has
been advised that the royalty is expected to terminate  during 1999 as Johnson &
Johnson Medical, Inc. phases out the product line on which the royalty is paid.
See Report of Independent Public Accountants, page F-1.

     Preferred Stock. See Note 5 to the  Consolidated  Financial  Statements for
information  regarding the preferred stock of the Company.  The Company has five
preferred  stockholders  holding an aggregate  of 25,356  shares of the Series A
Preferred  Stock,  which is 8% cumulative  convertable  preferred  stock.  Total
aggregate  dividends  payable on the preferred  stock  outstanding is $9,128 per
year.

     Principal  Products.  During the years 1986 and 1987,  MicroCor  developed,
manufactured and marketed a portable  electrocardiograph  ("ECG") monitor. About
450 units were  manufactured and sold. In July 1989,  MicroCor signed a research
and  development  contract  with  Critikon  (predecessor  to  Johnson  & Johnson
Medical,  Inc.) to develop a medical  instrument  which  would  incorporate  and
enhance the technologies  already developed in the MicroCor portable ECG monitor
and combine  them with  technologies  developed  by  Critikon.  The research and
development  portion of the contract was completed in July 1990, and resulted in
the design of a new product line. Critikon  manufactures and markets the product
line under the name Dinamap  Plus(TM).  MicroCor is the  beneficiary  of royalty
income  based upon a specified  amount per unit sold.  The  Company's  income is
generated  exclusively from the agreement with Johnson & Johnson  Medical,  Inc.
(see "Results of  Operations").  MicroCor has been advised that the portable ECG
is now being phased out of the product line of Johnson & Johnson  Medical,  Inc.
and that the royalty is expected to terminate during 1999.

     Product  Development.  For the past nine years,  the Company has  conducted
research on a method for measuring  hematocrit non- invasively  (without drawing
blood) and has applied for patents covering this  technology.  Hematocrit is the
percentage of blood volume made up by red blood cells and is a common laboratory
test currently performed  invasively by drawing a blood sample from the patient.
For several years,  the Company  conducted  research and  development  in-house,
under the  direction of Dr.  Allan  Kaminsky,  former  president of the Company.



                                        2

<PAGE>

Subsequently,  the Company  engaged  outside  consultants to work on the project
including Paul W. Ruben and the Northern Ireland Bio-Engineering Centre.

     During May 1997,  the Company  employed Dr. Gail  Billings,  a  bio-medical
researcher and,  effective August 29, 1997, the Company engaged Medical Physics,
Inc., a biomedical  research  company located in Salt Lake City, Utah to conduct
further  research  and  development  on the project.  The Company  agreed to pay
Medical Physics $11,111 per month for nine months and granted options to Medical
Physics to purchase  54,000  shares of the common  stock of the Company  with an
exercise price of $.73 per share,  exercisable for three years. The Company also
granted Medical Physics options to purchase an additional  54,000 shares with an
exercise  price of $.73 per share for a period of three years from the date, not
later than May 30, 1998,  on which  Medical  Physics  demonstrates  a hematocrit
measuring device to InMedica which measures human hematocrit with an accuracy of
plus or minus 3.5 hematocrit points through all ranges from 20 to 60.

     Beginning   December  1997,  the  Company  began  paying  Medical   Physics
approximately $15,000 per month for research services.  Effective March 1, 1998,
the Company and Medical Physics modified their agreement to provide that Medical
Physics  do the  following:  (1) accept a total of 25,000  restricted  shares of
common  stock and $10,000  per month as  compensation  during the period  March,
April and May 1998, and (2) conduct such demonstrations of the hematocrit device
during April and May 1998 as InMedica may direct.  Effective  March 1, 1998, the
Company issued 20,000 shares of its restricted  common stock to Dr.  Billings in
satisfaction  of one half of Dr.  Billings'  salary  during the months of March,
April and May,  1998.  Dr.  Billings and Medical  Physics  continue  work on the
research and  development  of the project  however there is no assurance  that a
commercially viable hematocrit measuring device can be developed.

     The Company  agreed  effective  October 29, 1998 to issue an  aggregate  of
65,000  shares of  restricted  common  stock valued at $.60 per share as partial
compensation for services rendered during the months of June through  September,
1998 by researchers  working on the hematocrit project.

     Government Regulation. Medical products may be subject to regulation by the
Food and Drug  Administration (the "FDA") pursuant to the Federal Food, Drug and
Cosmetic  Act and  other  federal  and  state  laws  regarding  the  regulation,
manufacture  and  marketing of products in which  InMedica may be involved.  The
laws of foreign  nations may also apply to any  international  marketing of such
products.  To the extent  InMedica  has  acquired  or  developed  an interest in
medical  products  or the  companies  manufacturing  such  products,  InMedica's
business may be indirectly  affected by such regulation.  As the manufacturer of
the Dinamap Plus(TM) (see "Principal Products") Johnson & Johnson's predecessor,
Critikon,  was  responsible  for obtaining  FDA 510(K)  approval on that product
line. Testing of the Company's non-invasive  hematocrit technology is subject to
prior approval and supervision of an Internal Review Board of a medical facility
overseeing the testing.


                                        3

<PAGE>

Marketing  of any new  product  line  which  might  be  developed  based  on the
Company's  non-invasive  hematocrit device would be subject to prior approval by
the FDA.

     Patents.  As of December 12, 1995, the Company's  application  for a patent
entitled "Method and Apparatus for Non-Invasively  Determining  Hematocrit," was
allowed by the U.S.  Patent Office and the Patent issued on June 18, 1996 with a
term of 17 years. The Company has filed an application for an additional  patent
which claims  priority from October 4, 1990, the date of filing of the Company's
"Method and Apparatus for  Non-Invasively  Determining  Hematocrit".  The second
patent has been allowed and is expected to issue in due course.  The patent term
is expected to run from October 4, 1990 for a period of 17 years.

     Raw Materials.  Materials and electronic  components used in the production
and  development  of ECG  monitors  and like  products  are  components  readily
available through various suppliers.

     Competition.  InMedica is not presently a significant factor in the medical
products  industry  and does  not  presently  compete  directly  in the  medical
products  field.  The medical  products  industry is dominated by large and well
established  corporations with vastly greater financial and personnel  resources
than  those of  InMedica.  There  can be no  assurance  that the  companies  and
products in which InMedica has an interest will be able to compete profitably in
the marketplace. Further, there is no assurance that the Company will be able to
complete  research,  development  and marketing of its hematocrit  technology in
advance of any competitors who may be developing competing technologies.

     Research and Development Costs.  Research and development costs for the two
years  ended   December  31,  1998  and  1997,   were   $224,618  and  $165,803,
respectively.  None of the expenses were incurred on customer-sponsored research
activities relating to the development of new products.

         Employees.  InMedica  and  MicroCor  had two part time  employees as of
December 31, 1998.


Item 2.  Properties
         ----------

     Office. The Company presently uses facilities  provided by Medical Physics,
Inc., at no cost, for its offices.

Item 3.  Legal Proceedings.
         ------------------

     During the third quarter of 1996, a former officer of the Company, Allan L.
Kaminsky, threatened to bring legal proceedings affecting the Company or a proxy
contest to obtain  control of the  Company.  Among other  things,  Dr.  Kaminsky


                                        4

<PAGE>

objected to the number of options issued to officers,  directors,  employees and
consultants  of the Company.  At a board meeting held July 31, 1996, the Company
voluntarily  reduced  the  number of options  by 25%  effective  August 1, 1996,
reducing the total  options  granted from  1,100,000  to 825,000.  Dr.  Kaminsky
thereafter  offered to continue to be associated with the Company on terms which
were subsequently rejected by the Board of Directors after due consideration. On
September 17, 1996, Dr. Kaminsky advised the Company that his offer to negotiate
had  expired,  that he had no further  association  (employment,  consulting  or
advisory) with  InMedica/MicroCor,  other than being a passive  shareholder  and
that his action was permanent and irreversible.

     At the Company's annual  shareholder  meeting held August 29, 1997, Company
personnel advised the shareholders that they believed notice of meeting had been
inadequate  due to  inadvertent  failure to mail notice to beneficial  owners of
stock held in street  name,  although  there  appeared to be  sufficient  shares
present to  constitute  a quorum and ballots were  accepted at the meeting.  The
following  week the Company mailed a letter to  shareholders  advising them that
the meeting would be rescheduled.

     Following the mailing,  Dr. Kaminsky demanded through his attorney that the
Company  disclose  the results of the tallies of the August 29, 1997 ballots and
proxies  under threat of  litigation.  He also claimed the meeting was valid and
that  proper  notice had been given.  After  reviewing  the matter,  the Company
disclosed the results of the meeting and concluded  that the incumbent  Board of
Directors  had been  re-elected  at the  meeting  by a  plurality  of the shares
present and voting at the  meeting.  Dr.  Kaminsky  continues  to be a principal
shareholder of the Company (see "Security Ownership of Certain Beneficial Owners
and Management").


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

     There were no  matters  submitted  during the fourth  quarter of the fiscal
year covered by this report to a vote of security holders.


                                        5

<PAGE>

                                     PART II

Item 5.  Market for the  Registrant's  Common Stock and Related  Security Holder
         -----------------------------------------------------------------------
Matters.
--------

         (a)  Price Range of Common Stock.
              ---------------------------

         The Common Stock of InMedica is traded in the  over-the-counter  market
and is quoted on the "NASD OTC Bulletin Board".  The following table sets forth,
for the calendar quarters indicated, the high and low closing bid prices for the
InMedica  Common  Stock  as  reported  by the  NASD OTC  Bulletin  Board.  These
quotations  represent  prices  between  dealers  without  adjustment  for retail
markups, markdowns or commissions and may not represent actual transactions.

                                                 Bid Price
       Quarter Ended                          High       Low
       -------------                          ----       ---

     March 31, 1997                         $  .75    $  .34
     June 30, 1997                             .44       .34
     September 30, 1997                        .47       .25
     December 31, 1997                         .38       .25

     March 31, 1998                         $  .72    $  .25
     June 30, 1998                            1.00       .56
     September 30, 1998                        .75       .31
     December 31, 1998                         .44       .22


     As of March 15,  1999,  there  were  approximately  512  record  holders of
InMedica   Common  Stock.   Such  record  holders  do  not  include   individual
participants in securities position listings.  The Company also has five holders
of its  Series A  Preferred  Stock.  There is no public  market for the Series A
Preferred Stock (see "Preferred Stock").

     InMedica  has not  paid  any  cash  dividends  on its  Common  Stock  since
organization.  For the foreseeable  future,  InMedica expects that earnings,  if
any,  will be retained for use in the business or be used to retire  obligations
of the Company.  For information as to the Company's obligation to pay dividends
on Preferred Stock, see "Preferred Stock."

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
of Operations.
--------------


                                        6

<PAGE>

     Liquidity and Capital Resources

     For the years ended  December 31, 1998 and 1997,  liquidity  was  generated
from royalty income received from Johnson & Johnson Medical, Inc. ("JJMI"). This
income source is not expected to be sufficient to provide  liquidity  needs over
time and is not  expected  to be  adequate  to retire debt when it comes due and
fund continued research and development.  The Company's line of credit agreement
with its Chief Executive Officer expires on June 22, 1999. InMedica continues to
look for other funding sources, however to date it has no commitments.

     The  Company's  royalty  agreement  with  JJMI has been  pledged  to secure
repayment of the $145,000 debt owed to the Company's  Chief  Executive  Officer.
Funds invested to develop the  hematocrit  device have been expensed as research
and  development.  The  ability  of the  Company to use the device as a means of
securing  funding  for the  Company is  totally  dependent  upon the  success of
further  research and development  efforts in producing a viable device suitable
for commercialization.



     Results of Operations

     InMedica  achieved  profitable  operations during 1996, but the Company has
incurred net losses in 1997 and 1998. The Company has an accumulated  deficit of
$7,080,726 as of December 31, 1998.  Included in the net loss for the year ended
December  31,  1998 was  non-cash  expense of $48,281  related to stock  options
issued to consultants.

     Operating  revenues  have been  derived  only  from  royalties  during  the
two-year  period ended  December 31, 1998.  During the years ended  December 31,
1998 and 1997  royalty  revenue  totaled  $247,400 and  $420,960,  respectively.
InMedica  has been  advised  that the royalty  stream is  expected to  terminate
during 1999. See Report of Independent Public Accountants, page F-1.

     The net loss of $241,188 for the year ended  December 31, 1998  compared to
the net loss of $153,609 for 1997,  resulted  primarily from a $173,560 decrease
in royalty revenues and from recording  $103,863 of expense related to stock and
stock options issued as compensation for services rendered.  The Company met all
its debt  service,  research  and  development  and  administrative  expenditure
requirements from existing cash,  royalty receipts and the issuance of stock and
stock  options.  General and  administrative  expense  decreased  as the Company
restricted  expenditures  in this area to allow for an increase in research  and
development efforts from 1997 to 1998.


                                        7

<PAGE>

Item 7.     Financial Statements                            Beginning at Page
            --------------------                            -----------------

   Report of Independent Public Accountants                        F-1

   Consolidated Balance Sheet as of December 31, 1998              F-2

   Consolidated Statements of Operations for the
   years ended December 31, 1998 and 1997                          F-3

   Consolidated Statements of Stockholders' Deficit
   for the years ended December 31, 1998 and 1997                  F-4

   Consolidated Statements of Cash Flows for the
   years ended December 31, 1998 and 1997                          F-5

   Notes to Consolidated Financial Statements                      F-7


                                        8
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To InMedica Development Corporation:

We  have  audited  the  accompanying  consolidated  balance  sheet  of  InMedica
Development  Corporation (a Utah  corporation) and subsidiary as of December 31,
1998,  and the related  consolidated  statements  of  operations,  stockholders'
deficit and cash flows for the years  ended  December  31, 1998 and 1997.  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,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial   position  of  InMedica   Development
Corporation  and  subsidiary  as of December 31, 1998,  and the results of their
operations  and their cash flows for the years ended  December 31, 1998 and 1997
in conformity with generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements,  the Company generated net losses of $241,188
and $153,609 during 1998 and 1997,  respectively,  and there can be no assurance
of  profitability  in the  future.  The  Company's  sole  source of revenue is a
royalty  arrangement  and the Company has been  notified  that the royalties are
expected to  terminate  in 1999.  As of December  31,  1998,  the Company had an
accumulated deficit of $7,080,726, a total stockholders' deficit of $122,123 and
negative working capital of $125,890.  These conditions raise  substantial doubt
about the Company's ability to continue as a going concern.  Management's  plans
in  regard  to these  matters  also are  discussed  in Note 1. The  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.


ARTHUR ANDERSEN LLP

Salt Lake City, Utah
March 25, 1999


                                      F-1
<PAGE>

<TABLE>
                 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 1998
<CAPTION>

                                                    ASSETS
                                                    ------
<S>                                                                                <C>
 CURRENT ASSETS:
    Cash                                                                           $    38,565
    Royalties receivable                                                                45,920
    Prepaid expenses and other                                                          16,787
                                                                                   -----------
                 Total current assets                                                  101,272

 EQUIPMENT AND FURNITURE, at cost, less accumulated
   depreciation of $251,418                                                              1,571

 OTHER ASSETS                                                                            2,196
                                                                                   -----------
                 Total assets                                                      $   105,039
                                                                                   ===========

                                       LIABILITIES AND STOCKHOLDERS' DEFICIT
                                       -------------------------------------
CURRENT LIABILITIES:
   Note payable to related party                                                   $   145,000
   Consulting fees payable to related party                                             51,996
   Accrued payroll                                                                       1,068
   Accounts payable                                                                     29,098
                                                                                   -----------
                Total current liabilities                                              227,162
                                                                                   -----------

COMMITMENTS AND CONTINGENCIES (Notes 1 and 6)

STOCKHOLDERS' DEFICIT:
   Preferred stock,  10,000,000 shares authorized;  Series A preferred stock, 8%
     cumulative and convertible,  $4.50 par value,  1,000,000 shares designated,
     25,356 shares outstanding
     (aggregate liquidation preference of $114,102)                                    114,102
   Common stock, $.001 par value; 20,000,000 shares authorized,
     8,660,899 shares outstanding                                                        8,661
   Additional paid-in capital                                                        6,835,840
   Accumulated deficit                                                              (7,080,726)
                                                                                   -----------

                Total stockholders' deficit                                           (122,123)
                                                                                   -----------

                Total liabilities and stockholders' deficit                        $   105,039
                                                                                   ===========
</TABLE>


          The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.


                                       F-2
<PAGE>

                 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

                                                       1998             1997
                                                   -----------      ------------
ROYALTY REVENUES                                   $   247,400      $   420,960
                                                   -----------      -----------
OPERATING EXPENSES:
   General and administrative                          251,737          381,183
   Research and development                            224,618          165,803
                                                   -----------      -----------
                Total operating expenses               476,355          546,986
                                                   -----------      -----------
LOSS FROM OPERATIONS                                  (228,955)        (126,026)
                                                   -----------      -----------
OTHER INCOME (EXPENSE):
   Interest, net                                       (11,594)         (28,768)
   Other                                                  (639)           1,185
                                                   -----------      -----------
                Total other expense, net               (12,233)         (27,583)
                                                   -----------      -----------
NET LOSS                                              (241,188)        (153,609)

PREFERRED STOCK DIVIDENDS                               (9,128)          (9,128)
                                                   -----------      -----------
NET LOSS APPLICABLE TO
   COMMON STOCKHOLDERS                             $  (250,316)     $  (162,737)
                                                   ===========      ===========

NET LOSS PER COMMON SHARE                          $      (.03)     $      (.02)
   (BASIC AND DILUTED)                             ===========      ===========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
   OUTSTANDING (BASIC AND DILUTED)                   8,599,350        8,164,527
                                                   ===========      ===========


          The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.


                                      F-3
<PAGE>

<TABLE>
                                            INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY

                                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                            FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<CAPTION>

                                            Series A
                                         Preferred Stock               Common Stock        Additional                         Total
                                   ---------------------------   ------------------------    Paid-in      Accumulated  Stockholders'
                                      Shares        Amount         Shares        Amount      Capital        Deficit          Deficit
                                   -------------------------------------------------------------------------------------------------
<S>                                     <C>      <C>             <C>         <C>           <C>           <C>            <C>         
BALANCE, December 31, 1996              25,356   $   114,102     7,999,232   $     7,999   $ 6,482,369   $(6,667,673)   $   (63,203)

   Common stock options exercised         --            --         551,667           552       146,318          --          146,870

   Common stock options granted for
     services rendered                    --            --            --            --         103,400          --          103,400

   Preferred stock dividends              --            --            --            --            --          (9,128)        (9,128)

   Net loss                               --            --            --            --            --        (153,609)      (153,609)
                                   -----------   -----------   -----------   -----------   -----------   -----------    -----------

BALANCE, December 31, 1997              25,356       114,102     8,550,899         8,551     6,732,087    (6,830,410)        24,330

   Common stock issued for
     services rendered                    --            --         110,000           110        48,171          --           48,281

   Common stock options granted for
     services rendered                    --            --            --            --          55,582          --           55,582

   Preferred stock dividends              --            --            --            --            --          (9,128)        (9,128)

   Net loss                               --            --            --            --            --        (241,188)      (241,188)
                                   -----------   -----------   -----------   -----------   -----------   -----------    -----------

BALANCE, December 31, 1998              25,356   $   114,102     8,660,899   $     8,661   $ 6,835,840   $(7,080,726)   $  (122,123)
                                   ===========   ===========   ===========   ===========   ===========   ===========    ===========
</TABLE>


          The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.


                                      F-4
<PAGE>

<TABLE>
                INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

                          Increase (Decrease) in Cash
<CAPTION>
                                                                                 1998         1997
                                                                              -----------------------
<S>                                                                           <C>          <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                   $(241,188)   $(153,609)
   Adjustments to reconcile net loss to net cash (used in) provided by
     operating activities-
       Depreciation and amortization                                                864        1,494
       Expense related to stock options issued as compensation for services
         rendered                                                                55,582         --
       Expense related to common stock issued as compensation for services
         rendered                                                                48,281      103,400
       Gain on sale of equipment and furniture                                     --           (700)
       Change in assets and liabilities-
         Decrease in royalties receivable                                        21,280      142,080
         Decrease in prepaid expenses and other                                   1,676        3,877
         Increase in accounts payable                                            28,067        1,031
         Decrease in accrued payroll                                             (5,876)      (2,294)
         Decrease in accrued interest                                            (4,752)      (3,843)
         Increase (decrease) in consulting fees payable
            to related party                                                     30,330      (17,335)
                                                                              -----------------------

                Net cash (used in) provided by operating activities             (65,736)      74,101
                                                                              -----------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of equipment and furniture                                   --          1,500
                                                                              -----------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock                                          --        146,870
   Principal payments on note payable to related party                          (25,000)    (185,000)
   Principal payments on notes payable                                             --        (67,500)
   Preferred stock dividends                                                     (9,128)      (9,128)
                                                                              -----------------------

                Net cash used in financing activities                           (34,128)    (114,758)
                                                                              -----------------------
</TABLE>


          The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.


                                      F-5
<PAGE>

                 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

                           Increase (Decrease) in Cash


                                                       1998         1997
                                                    -----------------------

NET DECREASE IN CASH                                $ (99,864)   $ (39,157)

CASH AT BEGINNING OF THE YEAR                         138,429      177,586
                                                    -----------------------

CASH AT END OF THE YEAR                             $  38,565    $ 138,429
                                                    =======================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid during the year for interest           $  17,657    $  32,611

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
 AND FINANCING ACTIVITIES:

 During 1997, the  Company's  president paid a $355,000 note payable owed by the
  Company  to  a  bank  in  exchange  for  the  Company  entering  into  a  note
  agreement for the same amount with the president.


           The accompanying notes to consolidated financial statements
             are an integral part of these consolidated statements.


                                       F-6
<PAGE>

                 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

InMedica Development  Corporation  ("InMedica") and its wholly owned subsidiary,
MicroCor,  Inc.  ("MicroCor")  (collectively,  the "Company")  historically have
engaged in the research,  development  and sale of medical  technology  and fund
raising  to support  such  activity.  During  the years 1986 and 1987,  MicroCor
developed  and  marketed  a  portable  electrocardiograph  ("ECG")  monitor  and
manufactured and sold about 450 units. In July 1989,  MicroCor signed a research
and development contract with a predecessor of Johnson and Johnson Medical, Inc.
("Johnson and Johnson"),  for further  development of the ECG  technology.  As a
result of the  agreement,  Johnson and Johnson  now  manufactures  and markets a
product line under the name of Dinamap Plus(TM) which incorporates the Company's
ECG  technology.  Royalties  received from Johnson and Johnson are presently the
Company's sole source of revenue.

Since 1989,  the Company has engaged in research and  development of a device to
measure hematocrit  non-invasively (the "Non-Invasive  Hematocrit  Technology").
During  1996,  the  Company  was issued  patent No.  5526808  related to certain
aspects  of its  Non-Invasive  Hematocrit  Technology.  Additionally,  a  patent
application was allowed in November 1996 related to this technology.  Hematocrit
is the percentage of red blood cells in a given volume of blood.  At the present
time, the test for hematocrit is performed  invasively by drawing blood from the
patient and testing the blood sample in the laboratory. Commercialization of the
Non-Invasive Hematocrit Technology is dependent upon favorable testing, Food and
Drug Administration approval, financing of further research and development and,
if warranted,  financing of manufacturing and marketing activities.  The Company
has been  advised  that the  royalties  from Johnson and Johnson are expected to
terminate  in 1999.  The Company  generated  net losses of $241,188 and $153,609
during  1998  and  1997,  respectively,   and  there  can  be  no  assurance  of
profitability  in the  future.  As of  December  31,  1998,  the  Company had an
accumulated deficit of $7,080,726, a total stockholders' deficit of $122,123 and
negative working capital of $125,890.  These conditions raise  substantial doubt
as to the  Company's  ability to  continue  as a going  concern.  The  Company's
continued  existence is dependent upon its ability to achieve a viable operating
plan and to obtain additional debt or equity financing.

Management's   operating  plan  includes  continuing  to  search  for  financing
alternatives,  including the formation of strategic alliances or partnerships to
continue  research  and,  if  warranted,  the  manufacture  and sale of products
developed from the Non-Invasive Hematocrit Technology.  However, at present, the
Company has no commitments related to these matters.


                                      F-7
<PAGE>

Principles of Consolidation

The  consolidated  financial  statements  include the  accounts of InMedica  and
MicroCor.   All  material  intercompany  accounts  and  transactions  have  been
eliminated.

Revenue Recognition

Royalty  revenues are  recognized as sales  information is received from Johnson
and Johnson and cash receipts are assured.

Equipment and Furniture

Equipment  and  furniture  are  recorded  at  cost  and  depreciated  using  the
straight-line  method over the estimated  useful lives of the assets.  The asset
cost and  accumulated  depreciation  for property  retirements and disposals are
eliminated from the respective accounts, and any gain or loss is included in the
determination  of net loss. The costs of major  additions and  improvements  are
capitalized  while the cost of maintenance and repairs are charged to expense as
incurred.

Equipment and furniture consisted of the following at December 31, 1998.


         Equipment                                 $       242,260
         Furniture                                          10,729
                                                 ---------------------

                                                           252,989
         Less accumulated depreciation                    (251,418)
                                                 =====================

                                                   $         1,571
                                                 =====================

Depreciation has been computed using the straight-line  method over the three to
five year useful lives of the related assets.

Included  in  equipment  and  furniture  is  approximately   $248,700  of  fully
depreciated equipment and furniture.

Net Loss Per Common Share

The net loss per  common  share  computation  is based on the  weighted  average
number of shares of common stock outstanding  during each year.  Preferred stock
dividends are deducted from net loss in calculating net loss per common share.

Basic net loss per common share ("Basic EPS") excludes  dilution and is computed
by dividing net loss by the weighted average number of common shares outstanding
during the year.  Diluted net loss per common share ("Diluted EPS") reflects the
potential  dilution  that could  occur if stock  options or other  common  stock
equivalents  were exercised or converted into common stock.  The  computation of
Diluted EPS does not assume exercise or conversion of securities that would have
an antidilutive effect on net loss per common share.


                                      F-8
<PAGE>

At  December  31,  1998 and 1997,  there were  outstanding  options to  purchase
849,000  and  862,500  shares  of common  stock,  respectively,  which  were not
included in the computation of Diluted EPS because they would be anti dilutive.

Income Taxes

The Company accounts for income taxes using the liability method. Deferred taxes
are determined based on the estimated future tax effects of differences  between
the financial  reporting and tax reporting bases of assets and liabilities given
the provisions of currently enacted tax laws.

Pervasiveness 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  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Fair Value of Financial Instruments

The book value of the Company's financial  instruments  approximates fair value.
The  estimated  fair  values  have  been  determined  using  appropriate  market
information and valuation methodologies.

2. INCOME TAXES

As of December 31, 1998, deferred income tax assets consisted of the following:


       Net operating loss carryforwards                   $   1,014,236
       Future deductible temporary differences
          related to compensation, reserves and
          accruals                                              186,830

       Less:  valuation allowance                            (1,201,866)
                                                     ---------------------

       Net deferred income tax asset                      $          - 
                                                     =====================

At  December  31,  1998,  the  Company  has   consolidated  net  operating  loss
carryforwards   ("NOLs")  for  federal  income  tax  purposes  of  approximately
$2,574,700. These NOLs expire at various dates through December 31, 2013. An NOL
generated  in a  particular  year will expire for  federal  tax  purposes if not
utilized within 15 years. Additionally, the Internal Revenue Code contains other
provisions which could reduce or limit the availability and utilization of NOLs.
For  example,  limitations  are  imposed on the  utilization  of NOLs if certain
ownership changes have taken place or will take place. A valuation  allowance is
provided  when it is more  likely  than  not  that  all or some  portion  of the
deferred  income tax asset will not be  realized.  Due to the  uncertainty  with
respect to ultimate  realization,  the Company established a valuation allowance
for the entire deferred income tax asset.


                                      F-9
<PAGE>

3. COMMON STOCK TRANSACTIONS

During 1998, the Company authorized the issuance of 110,000 shares of restricted
common stock to  consultants  and to one  employee for research and  development
services.  As of December 31,  1998,  45,000 of these shares were issued and the
Company is obligated to issue the  remaining  65,000  shares.  As a result,  the
65,000  shares  have  been  reflected  as  outstanding  in  the  1998  financial
statements  even though they will not be  physically  issued until 1999.  During
1998, the Company  recognized  $48,281 in expense,  which represented the market
price of the stock at the dates of approval.

4. STOCK OPTIONS

With  respect to employees  and  directors,  the Company  accounts for its stock
incentive  plan,  formula stock option plan and certain  options granted outside
the plans under APB Opinion No. 25. Had  compensation  cost for these plans been
determined  consistent with Statement of Financial Accounting Standards ("SFAS")
No. 123, the  Company's  pro forma net loss and Basic and Diluted EPS would have
been as follows:

                                                   1998              1997
                                             ----------------- -----------------

      Net loss applicable to common
       stock:
             As reported                       $   (250,316)     $   (162,737)
             Pro forma                             (250,316)         (183,362)

      Basic and Diluted EPS:
             As reported                       $      (.03)       $      (.02)
             Pro forma                                (.03)              (.02)


The Company did not grant  options to employees  during 1998.  However,  for the
options granted in 1997, the fair value of each option grant is estimated on the
date of grant using the  Black-Scholes  option  pricing model with the following
weighted average assumptions used for grants in 1997: risk-free interest rate of
6.04 percent;  no expected  dividend yield;  expected life of 3 years;  expected
volatility of 111 percent.

Stock Incentive Plan

The Company has in place an incentive  stock  option plan (the "Stock  Incentive
Plan")  for  eligible  directors  and key  employees  of the  Company,  covering
1,350,000  shares of the Company's  common  stock.  Under the terms of the Stock
Incentive  Plan, the options  granted may be either  incentive  stock options as
defined in the Internal Revenue Code or nonqualified  stock options. A committee
composed of  disinterested  members of the Board of Directors  has  authority to
determine,  among other matters,  which eligible key employees and directors are
to receive options, the price at which the nonqualified options will be granted,
the period in which the  options are  exercisable  and the type of options to be
granted. The exercise price for the incentive stock options may not be less than
100  percent of the fair  market  value of the  common  stock on the date of the
grant. The Stock Incentive Plan contains  antidilution  provisions which provide
for  adjustments to option prices or quantities in the event of certain  changes
in the number of outstanding shares of common stock or the capitalization of the
Company.


                                      F-10
<PAGE>

The following  table presents the aggregate  options granted and exercised under
the Stock Incentive Plan during the years ended December 31, 1998 and 1997.

<TABLE>
<CAPTION>
                                                                      1998                             1997
                                                         -------------------------------- -------------------------------
                                                                             Wtd. Avg.                        Wtd. Avg.
                                                                             Exercise                         Exercise
                                                             Shares           Prices                Shares     Prices
                                                         ---------------- --------------- --------------- ---------------
<S>                                                             <C>            <C>              <C>           <C>  
Shares under option, beginning of year, at prices
   ranging from $.08 to $1.00 per share                         31,500         $.60             152,445       $ .26

Options granted at a price of $.60 per share                      --                             31,500         .60

Options exercised at prices ranging from $.08 to $.15
   per share                                                      --                           (101,667)        .12

Options forfeited at prices ranging from $.15 to $.60
   per share                                                      --                            (50,778)        .55
                                                         ----------------                 ---------------

Shares under option, end of year at
   $.60 per share                                               31,500         $.60              31,500       $ .60
                                                         ================                 ===============
</TABLE>

All of the 31,500 options  outstanding and exercisable at December 31, 1998 have
exercise prices at $.60 and a remaining contractual life of 3.5 years.

At December 31, 1998,  options for the purchase of 980,769 shares were available
for granting under the Stock Incentive Plan.

Formula Stock Option Plan

The Company has in place a formula  stock option plan (the  "Formula  Plan") for
eligible  directors of the Company,  covering  100,000 shares of common stock. A
committee of the Board of Directors has the authority to determine,  among other
matters,  the term of the  options and the period  during  which the options are
exercisable.  Under the terms of the Formula Plan,  each member of the committee
which  administers the Stock Incentive Plan is eligible to receive  nonqualified
stock options  pursuant to a formula set forth in the Formula Plan. The exercise
price for options  granted  shall be 30 percent of the fair market  value of the
common stock on the date of the grant.  The Formula Plan  contains  antidilution
provisions  which provide for  adjustments to option prices or quantities in the
event of certain changes in the number of outstanding  shares of common stock or
the capitalization of the Company.

There were no options  granted or  exercised  under the Formula  Plan during the
years ended  December 31, 1998 and 1997.  At December  31,  1998,  there were no
shares  under  option  under the Formula  Plan and  options for the  purchase of
95,500 shares were available for granting.


                                      F-11
<PAGE>

Other Stock Options

During  1995,  the Company  granted  nonqualified  options  for the  purchase of
1,050,000  shares of common  stock at  prices  ranging  from $.30 to $.39 with a
weighted  average  exercise price of $.32. The options were granted to officers,
directors, employees and consultants to the Company. A total of 500,000 of these
nonqualified  options were issued to the Company's president and chief executive
officer in consideration of collateral provided by him with respect to a Company
bank  loan  described  in  Note  6.  All  options  granted  during  1995  vested
immediately upon granting and are exercisable  through 2005.  During 1996, these
option grants were reduced to 788,500 by resolution of the board of directors of
the Company.  During 1997,  450,000 options were exercised at $.30 per share and
the Company  received  $135,000.  As of December 31, 1998,  338,500 options were
outstanding and exercisable with exercise prices ranging from $.30 to $.39, with
a  weighted  average  exercise  price of $.33 and a weighted  average  remaining
contractual life of 7.8 years.

During  1996,  the Company  granted  nonqualified  options  for the  purchase of
338,500  shares of common stock at prices  ranging from $1.16 to $1.22 per share
with a weighted  average  exercise  price of $1.17.  The options were granted to
consultants  to the  Company.  A total of 38,500 of these  nonqualified  options
vested  immediately  upon granting and are exercisable  through 2006. A total of
300,000  of  these  nonqualified   options  were  issued  in  consideration  for
engineering work related to the Company's Non-Invasive Hematocrit Technology.  A
total of 175,000 of the  300,000  options are vested as of  December  31,  1998.
Effective June 2, 1998, the agreement with the consultant was terminated and all
remaining unvested options were cancelled.  Total compensation  expense recorded
over the  vesting  period  of two  years  was  $222,275.  The  weighted  average
remaining contractual life of these options is 4.2 years.

During 1997, the Company  granted  nonqualified  options to consultants  and one
employee for the  purchase of a total of 154,000  shares of common stock with an
exercise  price of $.73.  A total  of  100,000  of the  154,000  options  vested
immediately upon granting. The remaining 54,000 options become exercisable for a
period of three  years from the  completion  date (not later than  December  31,
1998) of  satisfactory  clinical  trials  related to the Company's  Non-Invasive
Hematocrit Technology.  As of December 31, 1998, successful clinical trials were
not completed,  therefore  these options did not vest.  During 1997, the Company
recorded  $14,400 in expense related to the options issued to  consultants.  The
options expire in August 2000.

During 1998,  the Company  issued  nonqualified  options to a consultant for the
purchase of a total of 12,500  shares of common stock with an exercise  price of
$.73 per share.  These options vested in April 1998 and are exercisable  through
2000. The Company recorded $5,375 in expense related to these options.

During 1998, the Company  entered into an agreement  whereby an existing  option
holder agreed to transfer 37,500 options to another consultant.  The options are
exercisable  through 2000 with an exercise price of $1.22 per share. The Company
recorded $13,125 in expense related to these options.

5. Preferred Stock

The Company is authorized to issue  10,000,000  shares of preferred  stock.  The
Company's board of directors designated 1,000,000 shares of this preferred stock


                                      F-12
<PAGE>

as Series A Cumulative Convertible Preferred Stock ("Series A Preferred") with a
par value of $4.50 per share.  Holders of the Series A Preferred  receive annual
cumulative  dividends of eight percent,  payable quarterly,  which dividends are
required to be fully paid or set aside before any other dividend on any class or
series  of stock of the  Company  is paid.  Holders  of the  Series A  Preferred
receive no voting  rights but do receive a  liquidation  preference of $4.50 per
share, plus accrued and unpaid dividends.  Series A Preferred  stockholders have
the right to convert  each share of Series A Preferred to the  Company's  common
stock at $3.00 per common share.

6. NOTE PAYABLE TO RELATED PARTY

During 1997,  the Company's  president  paid a $355,000 note payable owed by the
Company to a bank (on which the  president was the  co-obligor)  and the Company
entered  into a line  of  credit  loan  agreement  (the  "Agreement")  with  the
president,  and borrowed an initial amount thereunder of $355,000. The Agreement
provides  for  the  Company  to  borrow  up to a  maximum  amount  of  $450,000.
Borrowings  under the Agreement carry terms that are not less favorable than the
terms of a loan that the  president  has with a bank  which loan was used by the
president to fund the advance under the Agreement to the Company. As of December
31,  1998,   outstanding  principal  under  the  Agreement  was  $145,000.   All
outstanding  borrowings  accrue interest at a bank's prime rate (7.75 percent at
December  31,  1998) plus .25  percent.  The Company is required to make minimum
principal payments of $12,500. The Agreement is secured by the Company's royalty
stream from the Johnson and Johnson agreement (see Note 1).

7. RELATED-PARTY TRANSACTIONS

During  1998 and 1997,  the  Company  incurred  interest  expense of $12,905 and
$11,011, respectively, on the related-party note payable described in Note 6.

The Company has a consulting  arrangement  with an entity owned by the Company's
president  whereby  the  Company was to pay $4,333 per month  during  1998.  The
arrangement  can be  terminated  by either party at any time. As of December 31,
1998, $51,996 was owed under the arrangement.


                                      F-13
<PAGE>

Item 8.  Disagreements With Accountants on Accounting and Financial Disclosures.
         -----------------------------------------------------------------------

There have been no changes in or  disagreements  with  accountants on accounting
and financial disclosures, as provided in Regulation S-B, Item 304.

                                    PART III

Item 9.  Directors,   Executive   Officers,   Promoters  and  Control   Persons;
         -----------------------------------------------------------------------
Compliance with Section 16(a) of the Exchange Act.
--------------------------------------------------

     Directors and Executive Officers of InMedica. The following table furnishes
information  concerning  the  executive  officers and  directors of InMedica and
their business backgrounds for at least the last five years.

     Name                    Age              Director Since
     ----                    ---              --------------

     Larry E. Clark           77                   1995

     John R. Merendino        60                   1995

     David L. Dingman         62                   1995

     Richard Bruggeman        43                   1995

     LARRY E. CLARK - Chairman,  Principal  Executive  Officer  and  Director of
InMedica.  Mr. Clark was president of Clark-Knoll & Associates,  Inc., a Denver,
Colorado  management  consulting firm  specializing in mergers and  acquisitions
from 1963 to 1969. He served as president of Petro-Silver,  Inc., a small public
company based in Salt Lake City, Utah, which engaged in the oil and gas business
from 1970 to 1975.  From 1975 to 1981 Mr.  Clark was  president of Larry Clark &
Associates,  a  private  company  which  engaged  in  a  corporate  mergers  and
acquisitions business. In 1981, Mr. Clark formed Hingeline-Overthrust Oil & Gas,
Inc., a Utah public company,  which merged with Whiting Petroleum Corporation of
Denver,  Colorado in December  1983.  Mr.  Clark served as a director of Whiting
Petroleum from 1983 until 1992 when Whiting Petroleum merged with IES Industries
and Mr.  Clark  returned to full time  employment  as president of Larry Clark &
Associates.  Mr. Clark graduated from the U.S. Merchant Marine Academy with a BS
degree in Naval Science in 1943 and received a degree in Business Administration
from the University of Wyoming in 1948.

     JOHN R.  MERENDINO,  M.D. -  Director.  Dr.  Merendino  obtained a D.A.  in
chemistry from Lafayette  College,  Pennsylvania in 1960 and an M.D. degree from


                                        9

<PAGE>

New  Jersey  College  of  Medicine  and  Dentistry  in 1964.  He  completed  his
internship and residency at Monmouth Medical Center in New Jersey.  From 1976 to
1984 he was an Associate  Clinical Professor at the University of Utah School of
Medicine.  He  also  served  as a  member  of  the  residency  committee  of the
University  of Utah School of Medicine from 1978 to 1984. He was Chairman of the
Division of Orthopedics at Holy Cross  Hospital,  Salt Lake City, Utah from 1977
to 1984 and Chairman  (or Chairman  elect) of the  Department  of Surgery,  Holy
Cross  Hospital.  Since  1984,  he has  been  engaged  in  private  practice  in
Orthopedics and Sports  Medicine.  He also acts as an independent  consultant to
the Honolulu  Athletic Club,  Alta View Sports  Medicine  Clinic and Diversified
Tech Inc. He is a Director of the  Snowbird  Clinic,  physician  to the U.S. Ski
Team and a member of the Board of Advisors to Nautilus Physical Fitness Centers.
He  previously  served as the Team  Physician to the Salt Lake Golden Eagles and
the Salt Lake Gulls, professional sports teams.

     DAVID L.  DINGMAN,  M.D.  -  Director  of the  Company.  Dr.  Dingman  is a
Professor of Surgery, Emeritus, at the University of Utah Medical Center. He was
Associate Professor and Professor of Surgery from 1989-1993. He was an Attending
Staff Surgeon at the Veterans  Administration  Medical  Center,  Salt Lake City,
Utah from 1984-1989.  He also served as Chairman of the Department of Surgery at
Holy Cross  Hospital in Salt Lake City,  Utah from  1986-1989 and as Chairman of
the Department of Plastic  Surgery at Holy Cross Hospital from  1982-1985.  From
1972-1989 he was a Clinical Associate  Professor of Surgery at the University of
Utah Medical Center.  He graduated in pre-med from Dartmouth College in 1957 and
received his M.D. degree from the University of Michigan in 1961.

     RICHARD  BRUGGEMAN - Director and  Secretary/Treasurer  and Chief Financial
Officer of the  Company.  Since  1993,  he has been  employed as  Controller  of
Kitchen Specialties, Inc., a Salt Lake City firm distributing kitchen appliances
in the United  States and  Canada.  From 1986 until 1993 he was  employed by the
Company's  subsidiary,  MicroCor,  Inc. as financial manager.  During the period
1983-1985,  he was a sole  practitioner  in accounting and from 1981-1983 he was
employed by the Salt Lake City public  accounting  firm of Robison Hill & Co. He
graduated from the University of Utah in 1981 with a B.S. degree in accounting.

     ROBERT  GAIL  BILLINGS  - Dr.  Billings,  age 63, has been  employed  by or
consulted  with the Company since May 1997, in research and  development  on its
hematocrit  project.  From 1992 until 1997,  Dr.  Billings  was employed as Vice
President for Research and  Development of Utah Medical  Products,  Inc., a Salt
Lake City based publicly held company specializing in medical technology.  Prior
to that time,  he was  employed as an engineer  for Utah Medical in research and
development.  From 1976  until  1990,  he was Vice  President  of  Research  and


                                       10

<PAGE>

Development for Tenet Information  Services of Salt Lake City, which was engaged
in the development of computer systems and software for pulmonary  function test
analysis. During the period 1971-1976, he conducted medical research for Primary
Children's Medical Center,  Salt Lake City, Utah as a graduate student and later
as a  post-doctoral  fellow.  Prior to that time he was employed for 15 years in
the  aerospace  industry.  He  holds a BS in  Electrical  Engineering  from  the
University  of Utah  (1956),  an MS in  Electrical  Engineering  from Utah State
University (1965) and a PhD in Biophysics from the University of Utah (1975).

     Each director serves until the next annual meeting of shareholders or until
a successor  is elected and  qualified.  Officers  serve at the  pleasure of the
board of directors.

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity  securities to file with the Securities
and Exchange  Commission  initial reports of ownership and reports of changes in
ownership of equity securities of the Company.  Officers,  directors and greater
than ten percent shareholders are required to furnish the Company with copies of
all Section 16(a) forms they file. To the Company's  knowledge,  based solely on
review of the copies of any such reports  furnished  to the Company,  during the
fiscal  year ended  December  31,  1998 all Section  16(a)  filing  requirements
applicable to officers, directors and greater than ten percent shareholders were
complied with.


Item 10. Executive Compensation.
         ----------------------

     Executive  Compensation.  No executive  officer of the Company has received
compensation  during the three fiscal years ended  December 31, 1998,  except as
disclosed in the table below:

<TABLE>
<CAPTION>
                                                             Annual Compensation
                                                                 Long Term
                                                             Compensation Awards
Name                       Year     Salary     Bonus    Common Stock underlying Options     Other
                           ----    --------    -----    -------------------------------     -----
<S>                        <C>     <C>           <C>                <C>                    <C>
Larry E. Clark    (CEO)    1998    $   -         -                  -                      $51,996*
Larry E. Clark    (CEO)    1997    $   -         -                  -                      $51,996**
Larry E. Clark    (CEO)    1996    $39,000       -                  -                         -
</TABLE>

* -  consulting  fees  accrued  for payment to a  corporation  owned by Larry E.
Clark.
** - includes  consulting  fees  paid  ($30,331)  and  consulting  fees  accrued
($21,665) for payment to a corporation owned by Larry E. Clark.

     Director Compensation. Directors may be compensated at the rate of $100 for
attendance at each board meeting,  but did not receive compensation for meetings
in 1998 and 1997.

     Compensation Committee Interlocks and Insider  Participation.  Compensation
of officers and employees is determined by the Board of Directors.  Mr. Larry E.
Clark, chief executive officer, is chairman of the Board of Directors.


                                       11

<PAGE>

     Other Compensation  Plans. On December 6, 1991, the Company adopted a stock
incentive plan (the "Stock Incentive Plan") and a formula stock option plan (the
"Formula  Plan").  On May 30,  1992,  at the  annual  shareholder  meeting,  the
shareholders approved the Stock Incentive Plan and the Formula Plan.

     The Stock Incentive Plan covers  1,350,000  shares of the Company's  common
stock.  Under  the  terms of the plan,  the  options  granted  to  eligible  key
employees and directors,  shall be either  incentive stock options as defined in
Section 422 of the Internal  Revenue Code of 1986, as amended,  or non-qualified
stock options.  A committee  composed of  disinterested  members of the Board of
Directors has authority to determine,  among other  matters,  which eligible key
employees  and  directors  are to  receive  options,  the  price  at  which  the
non-qualified  options  will be  granted,  the period in which the  options  are
exercisable  and  the  type of  options  granted.  The  exercise  price  for the
incentive  stock  options  shall not be less than 100 percent of the fair market
value of the common stock on the date of the grant.

     The Formula Plan covers 100,000 shares of common stock.  Under the terms of
the plan each member of the committee which administers the Stock Incentive Plan
is eligible to receive  non-qualified  stock  options  pursuant to a formula set
forth in the plan. The exercise price for options granted shall be 30 percent of
the fair market value of the common stock on the date of the grant.  A committee
of the Board of Directors has the authority to determine,  among other  matters,
the term of options and the period during which the options are exercisable.

     The  following  tables show certain  information  regarding  stock  options
granted to and exercised by officers named in the executive compensation table:


                     OPTIONS GRANTED IN THE LAST FISCAL YEAR

                                      % of Total
                                      Options
                                      Granted to    Exercise
                        Options       Employees in  Price        Expiration
       Name             Granted       FY 1997       ($/Share)    Date       
       ----             -------       ------------  ---------    -----------

       None


                AGGREGATED OPTIONS EXERCISED IN LAST
            FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

                                                            Value of Unexercised
                                        Number of           In-The-Money
                                        Unexercised Options Options at Fiscal
            Shares                      at Fiscal Year End  Year End
            Acquired on   Value         Exercisable/        Exercisable/
      Name  Exercise (#)  Realized ($)  Unexercisable       Unexercisable
      ----  ------------  ------------  -------------       -------------

      None

                                    12

<PAGE>

     The Company presently has no plan for the payment of any annuity or pension
retirement  benefits  to  any  of  its  officers  or  directors,  and  no  other
remuneration payments,  contingent or otherwise,  are proposed to be paid in the
future to any officer or director, directly or indirectly.


                                       13

<PAGE>

Item 11. Security  Ownership of Certain  Beneficial  Owners and Management.  The
         -----------------------------------------------------------------
following table furnishes  information  concerning the common stock ownership of
directors, officers, and principal shareholders as of March 15, 1999:

                            Nature of       Number of
   Name and Position        Ownership      Shares Owned   Percent
   -----------------        ---------      ------------   -------

   Larry E. Clark            Direct          1,553,000     17.9%

   Allan L. Kaminsky         Direct            798,875      9.2%
   4602 S. Fortuna Way
   S.L.C., Utah 84124
   Principal Shareholder

   Paul J. Diehl             Direct            719,230 2    8.3%
   2963 E. Fallentine Rd.    and Indirect
   Sandy, Utah   84092
   Principal Shareholder

   J. Lynn Smith             Direct            452,048 3    5.2%
   5770 S. 250 East #115     and Indirect
   Murray, Utah 84107-8100
   Principal Shareholder

   John R. Merendino         Options            75,000      0.9%
   Director

   David L. Dingman          Options            75,000      0.9%
   Director

   Richard Bruggeman         Direct             174,387 4   2.0%
   Director, Chief           and Indirect
   Financial Officer         Options           106,500      1.2%
                                               -------
                             Total             280,887      3.2%
                                               =======
   All Executive Officers    Direct          1,727,387     19.9%
   and Directors as a        and Indirect
   group (4 persons)         Options           256,500      2.9%
                                             ---------
                             Total           1,992,887     22.5%
                                             =========
----------------

     2 - Includes  639,599  shares held by the Paul J. Diehl,  M.D. P.C.  profit
sharing  plan,  one share held by Paul J. Diehl,  P.C. and 79,630 shares held by
Dr. Diehl as custodian for his wife's daughter, Shanon.

     3 - Includes  186,048  shares held directly by Dr. Smith and 266,000 shares
held by the J. Lynn Smith Family Limited Partnership.

     4 - Includes 400 shares held in  individual  retirement  accounts and 4,620
shares held in a family trust of which Mr. Bruggeman is Trustee.


                                       14

<PAGE>

Shares shown in the forgoing table as directly owned are owned  beneficially and
of  record,  and such  record  shareholder  has  sole  voting,  investment,  and
dispositive  power.  Calculations  of the  percentage  of  ownership  of  shares
outstanding in the foregoing table assumes the exercise of options, to which the
percentage  relates.  Percentages  calculated  for totals assume the exercise of
options comprising such totals.



Item 12. Certain Relationships and Related Transactions.
         -----------------------------------------------

     The Company owes $145,000 to its Chief  Executive  Officer,  Larry E. Clark
,for loans made by Mr.  Clark in prior years.  The Company pays  interest at the
prime rate plus .25%.  During  1998,  interest  payments to Mr.  Clark  totalled
$12,905.  Repayment  of the loan is  secured  by an  assignment  of the  royalty
contract with Johnson & Johnson Medical, Inc.


Item 13. Exhibits and Reports on Form 8-K.
         ---------------------------------

(a) Exhibits
    --------

Exhibit No.   S-K No.               Description
-----------   -------               -----------

               (3)     Articles  of  Incorporation  and Bylaws  incorporated  by
                       reference to the exhibits to Form 10-K for the year ended
                       December 31, 1983

               (3)     Articles of Amendment to the Articles of Incorporation of
                       the Company  changing  the  Company's  name to  "InMedica
                       Development  Corporation"  incorporated  by  reference to
                       Exhibit 1 to Form 10-K for the year  ended  December  31,
                       1984

               (4)     Articles  of  Amendment,  dated  June  16,  1995  to  the
                       Articles of Incorporation of the Company adopting a class
                       of Preferred Stock,  incorporated by reference to Exhibit
                       1 to Form 10-QSB for the period ended September 30, 1995

               (4)     Articles of  Amendment,  dated  September 25, 1995 to the
                       Articles  of  Incorporation  of the  Company  adopting  a
                       Series A Preferred  Stock,  incorporated  by reference to
                       Exhibit 2 to Form 10-QSB for the period  ended  September
                       30, 1995

              (10)     Agreement  between  MicroCor,  Inc. and Johnson & Johnson
                       Medical,  Inc.  dated  June  15,  1995,  incorporated  by
                       reference to Form 8-K dated June 30, 1995


                                       15

<PAGE>

              (10)     Agreement  dated  September  3,  1996  between   InMedica
                       Development   Corporation   and  Paul   Ruben  dba  Ruben
                       Engineering  and Calvin Ruben,  incorporated by reference
                       to the Exhibits to Form 8-K dated September 20, 1996.

              (10)     Loan  Agreement  between  Larry E. Clark and the InMedica
                       Development Corporation dated June 23, 1997, incorporated
                       by  reference  to  Exhibits of Form 10QSB for the Quarter
                       ended June 30, 1997.

              (10)     Hematocrit   Development  and  Option  Agreement  between
                       InMedica  Development  Corporation  and Medical  Physics,
                       dated  August  29,  1997  incorporated  by  reference  to
                       Exhibits  of Form 10QSB for the Quarter  ended  September
                       30, 1997.

              (10)     First Amendment to the Hematocrit  Development and Option
                       Agreement  between InMedica  Development  Corporation and
                       Medical Physics, dated March 1, 1998.

              (10)     Agreement among InMedica Development  Corporation,  David
                       Wheeler,  Nevada Cancer Center and Chris Bringhurst dated
                       April 16, 1998,  incorporated by reference to Exhibits of
                       Form 10QSB for the Quarter ended March 31, 1998.

              (11)     Statement  regarding  Computation  of Per Share Loss (see
                       Consolidated Statements of Operations for the years ended
                       December 31, 1997 and 1996

              (21)     Subsidiaries  of  the  Company  (MicroCor,  Inc.,  a Utah
                       corporation)

              (27)     Financial Data Schedule


(b) No  reports on Form 8-K were  filed  during  the fourth  quarter of the year
ended December 31, 1998.


                                       16

<PAGE>

                                   SIGNATURES


     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                   INMEDICA DEVELOPMENT CORPORATION



                                   By /s/ Larry E. Clark
                                      -------------------------
                                      LARRY E. CLARK, President



                                      /s/ Larry E. Clark
                                      -----------------------
Date: March 26,1999                   RICHARD BRUGGEMAN,
      -------------                   Chief Financial Officer



     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  Registrant and in the capacities and on
the dates indicated.



                                      /s/ Larry E. Clark
                                      -----------------------
 March 26 , 1999                      LARRY E. CLARK
----------                            Director
                                      President and Principal
                                       Executive Officer     



                                      /s/ John R. Merendino
                                      -----------------------
 March 24 , 1999                      JOHN R. MERENDINO
----------                            Director



                                      /s/ Richard Bruggeman
                                      -----------------------
 March 26 , 1999                      RICHARD BRUGGEMAN
----------                            Director and Principal
                                       Financial Officer


                                      /s/ David L. Dingman
                                      -----------------------
 March 26 , 1999                      DAVID L. DINGMAN
----------                            Director


<PAGE>

                                    EXHIBITS


Exhibits  filed with the Form 10-KSB of InMedica  Development  Corporation,  SEC
File No. 0-12968, for the year ended 12/31/98:


Exhibit No.      SB Item No.       Description
--------------------------------------------------------------------------------
   1                (27)           Financial Data Schedule