SECURITIES AND EXCHANGE COMMISSION
                          Washington, DC   20549

                               FORM 10-KSB

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

                For the fiscal year ended: October 31, 1997

                                    OR

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

                           For the transition period from           to
                                                          ---------    ---------

                           Commission file number:         No. 2-86360
                                                  ------------------------------

                               INFORMEDICS, INC.
               (Name of small business issuer in its charter)

        Oregon                                        93-0750571
------------------------                 -------------------------------------
(State of incorporation)                 (I.R.S. Employer Identification No.)

      4000 Kruse Way Place, Bldg 3, Suite 300, Lake Oswego, OR 97035
      --------------------------------------------------------------
                 (Address of principal executive offices)

                 Issuer's telephone number: (503) 697-3000

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

Securities registered pursuant to Section 12(g)of the Act: Common Stock,
    $.01 Par Value

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


Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B contained in this Form,  and no disclosure  will be contained to
the best of issuer's  knowledge in definitive  proxy or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB [ X ]

State the issuer's revenues for its most recent fiscal year:  $ 3,249,785
                                                              -----------

State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked prices of such stock, as of December 31, 1997:
$2,910,103 based on the average bid and asked prices.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable date:  2,654,708 shares of $0.01 par value
common stock at December 31, 1997.


                     DOCUMENTS INCORPORATED BY REFERENCE

None

Transitional Small Business Disclosure Format (Check One): Yes   ; No X
                                                              ---    ---

<PAGE>


                            TABLE OF CONTENTS



Part I                                                                    Page
------

Item 1.   Business...........................................................3
Item 2.   Properties.........................................................6
Item 3.   Legal Proceedings..................................................6
Item 4.   Submission of Matters to a Vote of Security Holders................6


Part II
-------

Item 5.   Market for Common Stock and Related Shareholder Matters............7
Item 6.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations..............................................7
Item 7.   Financial Statements..............................................10
Item 8.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure..............................................23


Part III
--------

Item 9.   Directors and Executive Officers, Promoters and Control Persons;
          Compliance with Section 16 (a) of the Exchange Act................23
Item 10.  Executive Compensation............................................24
Item 11.  Security Ownership of Certain Beneficial Owners and Management....26
Item 12.  Certain Relationships and Related Transactions....................26


Part IV
-------

Item 13.  Exhibits and Reports on Form 8-K..................................27

Signatures..................................................................29





















Informedics,  IntraMed.net, LifeLine and StarPath are trademarks of Informedics,
Inc.


<PAGE>


                                   PART I
                                   ------


ITEM 1 - BUSINESS

General
-------

Informedics,  Inc.  (the  "Company")  develops  and  markets a line of  computer
software  applications  designed for use in the health care field.  The computer
systems typically consist of computers, peripheral hardware (such as disk drives
and printers), local area network (LAN) hardware and software, and the Company's
proprietary software applications.

From 1986 until 1989, the Company  focused all of its  development and marketing
efforts on a line of  proprietary  blood bank data  management  systems,  called
LifeLine.  In 1989, the Company  purchased a line of pathology  data  management
systems,  called StarPath.  The blood bank and pathology data management systems
are compatible in a number of ways.  Both systems are marketed  through the same
distribution  channels  to health care  providers,  both are written in the same
computer  programming  language,  and both  operate on the same type of computer
systems.

In October 1993, the Company  purchased a physician  practice  management system
and a  laboratory  order  entry and  results  reporting  system.  The  physician
practice  management  system was sold to Adaptive  Health Systems of Washington,
Inc.  ("Adaptive")  in October  1996.  The  laboratory  order  entry and results
reporting system is licensed  exclusively to Quest Diagnostics,  Inc. (formerly,
Corning Clinical  Laboratories,  Inc.), a major independent reference laboratory
company.

In the fourth quarter of 1995, the Company  completed the  development and pilot
phase of the  application  software for the Oregon  Medical  Electronic  Network
("OMEN") project,  which is being offered only by the Oregon Medical Association
("OMA").  The OMEN project is being marketed by the OMA to Oregon physicians and
other health care providers within the State of Oregon.

In the fourth  quarter of 1996,  the Company  completed the  development  of the
initial  extension  version of the OMEN software  named  IntraMed.net,  which is
designed for  Integrated  Healthcare  Delivery  Systems.  Integrated  Healthcare
Delivery Systems provides a flexible and  cost-effective  communication link via
the  Internet  between  organizations  and  professional  healthcare  providers.
IntraMed.net  software is currently  marketed  throughout  the United  States by
salespersons employed by the Company.

In addition to the sales of the Company's  product lines,  the Company  performs
ongoing  support and  maintenance  and  programming  services for its customers.
After the initial  installation of a system and related customer  training,  the
Company provides software support, furnishes customers with upgrades of software
and hardware and maintains hardware for customers who purchase such services.

The  computer  hardware  marketed by the Company  are  micro-computer  products,
running on either Windows or MS-DOS  operating  systems.  The Company has been a
dealer for numerous  hardware  manufacturers  and presently focuses its hardware
marketing efforts on products  manufactured by Compaq,  Novell,  Hewlett Packard
and Epson Pacific.

The Company is evaluating  its  anticipated  costs,  problems and  uncertainties
associated with the Year 2000.  Although the Company is not able to determine at
this time the impact on its financial results, the Company's management believes
that it may  incur  material  remedial  costs  associated  with  the  Year  2000
compliance  and  other  customer  warranty  issues.  The  Company  is  currently
developing a new software release for the LifeLine product,  which addresses the
Year  2000  issue,   expanded  bar  code  labeling  to  meet   anticipated   FDA
requirements,  and  customer-recommended   enhancements.  The  Company  is  also
analyzing staffing levels,  distribution  costs,  installation  requirements and
training in anticipation of this new release of the Company's  LifeLine  product
expected in late summer 1998.

The Company was organized under the laws of the state of Oregon in 1979.



<PAGE>


Description of the Company's Products
-------------------------------------

The blood bank data management systems,  called LifeLine, are modular, yet fully
integrated,  software systems which have been designed for the modern blood bank
and hospital transfusion service to monitor donor records,  unit inventory,  and
patient test and transfusion  history.  There are three primary  applications of
the LifeLine system.  The first application  supports the needs of the community
blood bank whose activities include drawing and managing blood donors as well as
testing,  processing and  distributing  blood products.  The second  application
meets the needs of a hospital  transfusion  service  which does not,  as a rule,
draw blood from donors.  The third provides the features  required by a hospital
which draws blood from donors,  manages  blood  product  inventory and maintains
related patient test and transfusion information.

IntraMed.net  is an example of the new class of application  software which uses
Internet  and World  Wide Web  technology  as its model  with a three  component
architecture;  a Web client, a Web server,  and an industry  standard  database.
IntraMed.net  provides  participants rapid, cost effective access to information
about patient eligibility,  plan care coverage and benefits,  plus an electronic
messaging system for pre-authorizations  and referrals.  Because of its Internet
and World Wide  Web-based  technology,  IntraMed.net  can be used as a physician
interface to laboratory,  pharmacy, radiology, hospital, and surgical scheduling
systems.  This allows  physicians to access their existing computer systems from
their clinic offices or remote locations via a standard  personal  computer with
web browser and Internet  access.  The Company believes that the national growth
of managed  care,  along  with the  related  consolidation  and  integration  of
healthcare delivery, offers a significant opportunity for this technology.

The pathology data management systems,  called StarPath,  are modular, yet fully
integrated,  software  systems that are  designed to fully  automate a pathology
department.  Each application  allows the pathology group to have direct control
over the content and  arrangement of work lists,  labels and reports.  There are
two primary applications of the StarPath system. The first application automates
the record keeping functions of a pathology  department in the areas of surgical
pathology,  cytology and  autopsies.  The second  application  is similar to the
first application except that it also includes the area of histology.

The  laboratory  order  entry and results  reporting  system,  developed  by the
Company for Quest  Diagnostics,  Inc.,  is designed to automate the ordering and
reporting  of lab  tests  from a  physician's  office  or  medical  clinic to an
independent  reference  laboratory.  The system  provides  improved  accuracy of
patient  demographics,  insurance  information  and lab test requests,  improved
efficiency and speed in ordering lab tests,  and more timely receipt of lab test
results.

Distribution of Products
------------------------

The Company's  revenues in fiscal 1997 included  sales from the product lines of
LifeLine,  StarPath and IntraMed.net.  Sales in fiscal 1997 included both direct
sales to hospitals,  medical  laboratories and blood donor centers, and sales of
software to companies which agree to act as resellers of the Company's systems.
The Company considers its operations to be in a single industry segment.

In fiscal 1997, the Company recognized revenues from one major customer, HBO and
Company,  representing  16% of the  Company's  revenue.  While  the loss of this
customer, which is a reseller of the Company's LifeLine product, might initially
have a material adverse impact on the Company's  operating  results,  management
believes  that the effect of such loss would be short term, as the Company would
concentrate its marketing resources on other resellers and on direct sales.

Competition
-----------

The  competition  for  IntraMed.net  are companies that have  developed  similar
healthcare  information  management  network  software.  While  the  market  and
technology are fairly new, two companies,  Integrated Medical Systems,  Inc. and
CommuniSys, Inc., have systems similar to IntraMed.net.

The competition for LifeLine systems includes companies that market a blood bank
system as part of a complete  laboratory  information  system and companies that
offer a blood  bank  system as a  stand-alone  module.  Currently,  the  primary
competitor  for  LifeLine  systems  is  Mediware   Information   Systems,   Inc.
("Mediware"),  which has a stand-alone  system similar to LifeLine.  The Company
has entered into an agreement  with Mediware  pursuant to which  Mediware  would
acquire the  Company.  See  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations."
<PAGE>

The  competition  for the  StarPath  system  includes  companies  that  market a
pathology  system  as part  of a  complete  laboratory  information  system  and
companies that offer a pathology system as a stand-alone module.  Although there
are numerous competing companies, no one company dominates the market.

One of the ways the Company has  attempted  to minimize  the impact of competing
products in the  marketplace is by licensing the Company's  software  systems to
providers of hospital  laboratory  information  systems to enable them to market
the  Company's  systems,  instead  of  developing  their own blood  bank  and/or
pathology systems.  The Company has agreements with qualified  resellers who use
the Company's  systems to supplement their existing lines of medical  laboratory
software.  Total revenue  recognized from these  agreements was $550,836 in 1997
and $660,793 in 1996.

The Company  believes its products  have a competitive  edge in the  marketplace
based on product sophistication,  design,  flexibility,  reliability, as well as
being price competitive.  In addition,  with respect to the LifeLine system, the
governmental  regulation of blood bank computerized systems places a significant
barrier to entry for such products.

Backlog
-------

At October 31,  1997 and 1996,  the backlog of system  orders was  $141,366  and
$235,740,  respectively.  These amounts  represent the unrecognized  revenue for
customer  work in  progress,  and  undelivered  hardware and software as of such
dates.

Non-expired  maintenance  service  contracts  at October  31, 1997 and 1996 were
$1,066,475 and $1,093,598, respectively.

Protection of Proprietary Software
----------------------------------

Under  existing law, most computer  software  cannot be patented,  and copyright
laws provide only limited protection.  To protect its proprietary products,  the
Company  relies upon  copyright  and trade secret laws,  internal  nondisclosure
safeguards,  and restrictions on disclosure and transferability  incorporated in
its software license agreements.  However, as with all software,  it is possible
for users and competitors to wrongfully copy the Company's products. The Company
believes that, because of the rapid pace of technological change in the computer
industry,  patent,  copyright and  contractual  protection is of less  practical
significance  than other  factors,  such as the knowledge and  experience of the
Company's  management  and  personnel  and their  ability to  acquire,  develop,
enhance and market new products.

Regulatory Compliance
---------------------

In 1994,  the Food and Drug  Administration  ("FDA")  notified all developers of
blood bank software that such software is considered a medical  device.  The FDA
required each developer to register as a medical device manufacturer and submit,
by March 31, 1995, a pre-market  notification  510(k)  report for its blood bank
software.  The FDA subsequently  extended the deadline for filing the pre-market
notification  report to March 31,  1996.  In fourth  quarter  1995,  the Company
prepared and filed the required pre-market notification report with the FDA. The
FDA is currently reviewing the Company's pre-market  notification report. At the
time of the 1994 notice,  the Company was already registered as a medical device
manufacturer.

In 1995,  the FDA  notified  the  Company  that prior  distributions  of certain
LifeLine  software updates "meet the formal definition of a recall." The Company
brought  closure to the recall in early 1996 when it issued a new release of the
LifeLine product which addressed all outstanding issues.

In December  1997,  the Company  received a request from the FDA for  additional
information and clarifications regarding its Section 510(k) submission.  The FDA
requested the Company identify additional safety critical functions, clarify the
hardware  platform on which its  LifeLine  product is used,  and expand its beta
test  information.  The  Company  has until  April 5, 1998 to respond to the FDA
requests.  If the  Company  is unable to  respond  by April 5,  1998,  or if the
response contains insufficient information,  the Company's ability to market the
LifeLine product may be adversely affected.
<PAGE>

The Company has  dedicated  substantial  time and resources to comply with FDA's
new  guidelines  and   regulations  and  believes  that  it  is  in  substantial
compliance.  The  Company,  however,  cannot  predict  whether  it  will  be  in
compliance  with future  changes to FDA  guidelines,  regulations  or inspection
procedures.  Non-compliance with any such guidelines,  regulations or procedures
could have a  material  adverse  effect on  vendors  of blood  bank  information
systems, including the Company.

Software Development Costs
--------------------------

The Company  capitalized  certain  software  development  costs incurred  during
fiscal  1997 and 1996 in  accordance  with  Statement  of  Financial  Accounting
Standards  ("SFAS") No. 86 "Accounting for the Costs of Computer  Software to be
Sold, Leased or Otherwise  Marketed." The Company is presently enhancing most of
its software  product lines and, in accordance with SFAS No. 86, is capitalizing
certain  costs  associated  with new  releases.  The Company  incurred  software
development  costs of $936,771 in 1997 and $1,510,657 in 1996, of which $109,032
and $194,365 were capitalized for 1997 and 1996, respectively.

Export Sales
------------

The  Company  made no export  sales for fiscal  1997 and sold $9,900 of products
outside the United States during fiscal 1996.

Employees
---------

At December 31, 1997, the Company had 24 full-time employees.


ITEM 2 - PROPERTIES
-------------------

The Company does not own any real property.  The Company presently leases office
and production space in Lake Oswego,  Oregon.  For additional  information about
the Company's leases,  see Note 5 to the financial  statements  included in this
report.


ITEM 3 - LEGAL PROCEEDINGS
--------------------------

None.

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

Not applicable.


<PAGE>


                                 PART II


ITEM 5 - MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
----------------------------------------------------------------

On February 12, 1997,  the National  Association  of  Securities  Dealers,  Inc.
("NASD"),  moved the  trading of the  Company's  stock from the Nasdaq  SmallCap
Market to the NASD Bulletin  Board.  The move initiated by Nasdaq  resulted from
the  Company's  inability to meet the Nasdaq  listing  standard of a minimum bid
price of $1.00 per share.  The Company's  current market makers trade securities
through the NASD Bulletin  Board and  management  anticipates  that these market
makers will continue to trade the  Company's  stock.  The  following  table sets
forth the high and low prices for the common  stock  during the two fiscal years
ended October 31, 1997:

<TABLE>
<CAPTION>

                            1997 Fiscal Year                            1996 Fiscal Year
                           ------------------                          ------------------

                      High                 Low                   High                 Low
                  ----------------     ----------------      ----------------    -----------------
<S>                  <C>                  <C>                   <C>                  <C>          

First Quarter        $ 0.938              $ 0.438               $ 1.688              $ 1.250
Second Quarter       $ 0.813              $ 0.438               $ 1.625              $ 1.000
Third Quarter        $ 1.063              $ 0.469               $ 2.063              $ 1.000
Fourth Quarter       $ 1.500              $ 0.656               $ 1.250              $ 0.750

</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 31, 1997, there were  approximately  1,100 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.


ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
 OF OPERATIONS
--------------

The following  discussion  includes certain  forward-looking  statements.  Those
statements involve a number of risks and uncertainties, which could cause actual
results  to  differ  materially  from  the  expectation  stated,  including  the
following: slower than expected sales of Informedics' products, deterioration of
business  conditions  generally or  specifically  in the  health-care  industry,
regulatory  changes  involving  health  care,   competitive  factors  and  price
pressures.  Given these uncertainties,  readers are cautioned not to place undue
reliance  on the  forward-looking  statements.  The  Company  does not intend to
update any forward-looking statements.

HIGHLIGHTS

On July 29, 1997,  the Company  signed a letter of intent to merge into Mediware
Information Systems, Inc. ("Mediware") of Melville, NY. The Company announced on
December 19, 1997 the signing of an  Agreement  and Plan of Merger to merge into
Mediware  in a stock  exchange  whereby  one share of  Mediware  stock  would be
exchanged for every 6.3 shares of the Company's  stock. The merger is subject to
the approval of the Company's shareholders.

On October  31,  1996,  the Company  sold  certain  assets of its  ClinicManager
product line to Adaptive  Health Systems of Washington,  Inc.  ("Adaptive")  for
$500,000,  most of which was payable on a monthly  basis  pursuant to a note due
October 31, 2001. In April 1997,  certain conditions of the sale were satisfied,
resulting in an acceleration of the note receivable from Adaptive.  In May 1997,
the Company  received  $406,500 from  Adaptive to pay off the note.  The Company
recognized a gain of $174,793 during the year ended October 31, 1997.

The  elimination of the  ClinicManager  product line from the Company's  revenue
base  resulted  in  decreased  product  sales and  customer  service and support
revenue. Total revenue decreased from $5,155,953 in fiscal 1996 to $3,249,785 in
fiscal 1997.  Due to the sale of the  ClinicManager  product line and associated
cost  cutting  measures,  the Company  reported  lower  pre-tax loss for 1997 as
compared  to 1996.  For fiscal  1997,  the  Company  reported a pre-tax  loss of
$569,160 compared to a pre-tax loss of $758,333 for fiscal 1996.
<PAGE>

During the third quarter of 1997, the Company's  management  determined that the
benefit of the Company's net operating loss  carryforwards  was not likely to be
realized.  Accordingly,  the Company  increased the valuation reserve to reserve
fully the deferred tax asset relating to the net operating  loss  carryforwards.
This  resulted in the Company  reporting a higher net loss (after taxes) in 1997
when compared to 1996  results.  For the year 1997,  the Company  reported a net
loss of $1,290,903 compared to a net loss of $472,906 for the year 1996.

RESULTS OF OPERATIONS - MATERIAL CHANGES

The decrease in product  sales of $930,166 or 58% for 1997, as compared to 1996,
resulted  primarily from the loss of revenue from the sale of the  ClinicManager
product line, and reduced sales of the Company's primary product,  LifeLine. The
decrease in customer  service  and support  revenue of $976,002 or 27%  resulted
from the sale of the  ClinicManager  product  line,  a decrease in the number of
customers who purchased the Company's hardware support services, and a reduction
in revenue from not charging  laboratory  systems' customers a regulatory fee in
1997 as it did in 1996.  In the  second  quarter  of  1997,  the  Company  began
marketing a new technical  support service to help replace the revenue lost from
the hardware support services resulting in sales of $13,171 in 1997.

The  decrease in the cost of products  sold of $486,454 or 78%  resulted  from a
decrease of $564,090 in hardware sales,  combined with a decrease in the cost of
the hardware. As a percentage of hardware sales, cost of products sold decreased
from 84% in 1996 to 76% in 1997.  Hardware  sales and  related  cost of products
sold were less in 1997,  primarily as a result of the sale of the Clinic Manager
product line.

Cost of customer  service and support  decreased by  $1,175,242  or 41% for 1997
when  compared to 1996.  This  decrease  resulted  from a reduction in staff and
other associated costs due to the sale of the ClinicManager product line.

Selling  and  administrative  expenses  were  $216,858  or 11%  less  in 1997 as
compared  to 1996,  as a result  of the  Company  sub-leasing  office  space,  a
reduction in staff and other related costs.

LIQUIDITY - CAPITAL RESOURCES

The  Company's  cash  position  on October  31,  1997 was  $207,692  compared to
$323,217 on October 31, 1996.  The decrease in the cash  position  resulted from
net cash used for operating and financing  activities,  partially  offset by the
payment of a note receivable from Adaptive. Based upon an anticipation of higher
product  sales and reduced  operating  expenses,  management  believes  that the
Company's  current cash will be sufficient to fund its operating and  investment
activities in fiscal 1998.

Continuing  losses resulted in a negative working capital of $597,145 on October
31, 1997, as compared to a negative  working  capital of $415,041 on October 31,
1996. Excluding the deferred revenue liability,  which is a liability for future
services,  the  Company's  working  capital on  October  31,  1997 was  $595,223
compared to $859,646 on October 31, 1996.

Capital  expenditures  for property  additions  were $43,512 in 1997 compared to
$104,762 in 1996. The decrease resulted from management's  continued decision to
reduce capital  expenditures  in 1997, due to the decrease in the Company's cash
position.   Management   anticipates  that  capital  expenditures  for  property
additions  will remain  relatively  flat, as the Company's cash will be used for
operating activities.

Total capitalized  software development costs were $109,032 and $194,365 in 1997
and 1996, respectively. The decrease resulted from the reduction of the software
development costs associated with the ClinicManager and IntraMed.net products.

In April 1997, the Company renewed its uncommitted revolving line of credit with
the Company's bank. There was no amount owing under this agreement as of October
31, 1997. The Company was not able to maintain the required  covenant ratios and
as a result the Company's bank reduced the credit line to $200,000 on August 20,
1997. The Company's bank agreed to waive this covenant through October 31, 1997.
All of the  assets of the  Company  were  pledged  as  security  for the line of
credit.  The credit line agreement  expired on December 31, 1997 and the Company
does not plan to pursue a credit line at this time.
<PAGE>

PROSPECTIVE ACCOUNTING CHANGES

SFAS No. 128,  "Earnings Per Share," requires  companies to present two measures
of earnings per share,  basic and diluted.  If SFAS No. 128 had been adopted for
all  periods  presented,  basic and  diluted  earnings  per share would not have
materially  differed  from  reported  earnings  per share.  SFAS No. 128 will be
adopted in the second quarter of 1998. Early adoption is not permitted.

SFAS No. 130, "Reporting  Comprehensive  Income,"  establishes  requirements for
disclosure of comprehensive income. The new standard becomes effective in fiscal
year 1999. SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information,"  establishes  standards for disclosure about operating segments in
annual  financial  statements  and requires  disclosure of selected  information
about operating segments in interim financial reports.  The new standard becomes
effective in fiscal year 1999. There will not be any substantial  changes to the
Company's disclosure at the time SFAS No. 131 is adopted.



<PAGE>




ITEM 7 - FINANCIAL STATEMENTS
-----------------------------

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                  YEAR ENDED OCTOBER 31,
                                                           ---------------- --- ------------------
                                                                  1997                  1996
                                                           ---------------- --- ------------------
<S>                                                          <C>                   <C>            

REVENUE:
Product Sales                                                $    671,038           $  1,601,204
Customer Service and  Support                                   2,578,747              3,554,749
                                                           ----------------     ------------------
                                                           ----------------     ------------------

Total Revenue                                                   3,249,785              5,155,953
                                                           ----------------     ------------------

COSTS AND EXPENSES:
Cost of Products Sold                                             137,331                623,785
Cost of Customer Service and Support                            1,719,778              2,895,020
Selling and Administrative Expenses                             1,747,543              1,964,371
Depreciation and Amortization                                     398,500                457,080
                                                           ----------------     ------------------

Total Costs and Expenses                                        4,003,152              5,940,256
                                                           ----------------     ------------------

 Operating Loss                                                  (753,367)               (784,303)
                                                           ----------------     ------------------

OTHER INCOME (EXPENSE):
Interest Expense                                                   (5,958)                (1,523)
Interest Income                                                    29,494                 15,903
Other Income (Expense)                                            160,671                 11,590
                                                           ----------------     ------------------

Total Other Income - Net                                          184,207                 25,970
                                                           ----------------     ------------------

Loss Before Income Taxes                                         (569,160)               (758,333)

Income Tax Provision (Benefit) (Note 8)                           721,743               (285,427)
                                                           ----------------     ------------------

Net  Loss                                                   $  (1,290,903)         $    (472,906)
                                                           ================     ==================

Weighted Average Number of Common Shares and
 Common Stock Equivalents Outstanding                           2,650,416              2,646,194
                                                           ================     ==================


Loss Per Share                                             $        (0.49)         $       (0.18)

                                                           ================     ==================


</TABLE>

See Notes to Financial Statements

<PAGE>


BALANCE SHEETS, OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>

ASSETS                                                                       1997                          1996
------
                                                                  --------------------         ---------------------
<S>                                                                       <C>                           <C>         

CURRENT ASSETS:
Cash and Cash Equivalents                                                 $  207,692                    $  323,217
Accounts Receivable, less allowance for doubtful
    accounts of $16,200 in 1997 and $28,439 in
    1996                                                                     445,879                       681,303
Inventories (Note 2)                                                           3,304                        23,833
Prepaid Expenses and Other Current Assets                                     55,267                        36,150
Deferred Income Taxes (Note 8)                                                90,500                       182,483
Current Portion of Long-Term Accounts Receivable                              11,928                        11,928
Current Portion of Notes Receivable (Note 3)                                     ---                        54,095
                                                                  --------------------         ---------------------

Total Current Assets                                                         814,570                     1,313,009
                                                                  --------------------         ---------------------

FIXED ASSETS:
Furniture and Fixtures                                                       135,505                       134,282
Machinery  and Equipment                                                     557,188                       583,961
Automobiles                                                                      ---                        29,138
Leasehold Improvements                                                        27,258                        20,442
Other Fixed Assets                                                           142,982                       136,805
                                                                  --------------------         ---------------------
                                                                             862,933                       904,628

Less accumulated depreciation and amortization                               737,093                       672,300
                                                                  --------------------         ---------------------

Total Fixed Assets                                                           125,840                       232,328
                                                                  --------------------         ---------------------

OTHER ASSETS:
Long-Term Accounts Receivable                                                 30,814                        42,742
Notes Receivable (Note 3)                                                        ---                       305,102
Software Development Costs,
   less accumulated  amortization of
   $787,791 in 1997 and  $542,884 in 1996                                    169,540                       305,415
Covenants Not to Compete,
   less accumulated amortization of
   $493,862 in 1997 and $479,698 in 1996                                         183                        14,348
Deferred Income Taxes (Note 8)                                               932,901                       613,060
Tax Valuation Allowance (Note 8)                                            (932,901)                          ---
Other                                                                         39,799                        41,816
                                                                  --------------------         ---------------------

Total Other Assets                                                           240,336                     1,322,483
                                                                  --------------------         ---------------------


TOTAL ASSETS                                                              $1,180,746                    $2,867,820
                                                                  ====================         =====================

</TABLE>
<PAGE>
<TABLE>
<CAPTION>


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                              1997                  1996
---------------------------------------------------------------      ----------------      -----------------

<S>                                                                    <C>                   <C>            

CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
   Trade Accounts                                                      $     87,917           $    115,543
   Customer Deposits                                                         22,590                  4,120
   Accrued Payroll Taxes and Employee Benefits                               86,362                175,285
   Other Accrued Liabilities                                                  9,445                    767
Revolving Line of Credit (Note 6)                                               ---                125,000
Deferred Revenue                                                          1,192,368              1,274,687
Current Portion of Deferred Rent (Note 5)                                    13,033                 13,033
Current Portion of Deferred Gain on Sale of Assets (Note 3)                     ---                 19,615
                                                                     ----------------      -----------------

Total Current Liabilities                                                 1,411,715              1,728,050

LONG-TERM OBLIGATIONS:
Deferred Rent (Note 5)                                                       17,378                 30,411
Deferred Tax Liability (Note 8)                                              16,700                    ---
Deferred Gain on Sale of Assets (Note 3)                                        ---                 87,375
                                                                     ----------------      -----------------

Total Current Liabilities and Long-Term Obligations                       1,445,793              1,845,836
                                                                     ----------------      -----------------

COMMITMENTS AND CONTINGENCIES                                                   ---                    ---

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, $0.01 par value:
   authorized 5,000,000 shares;
   no shares outstanding                                                        ---                    ---
Common Stock, $.01 per value:
   authorized 15,000,000 shares;
   shares outstanding:  2,654,708 in 1997 and 2,650,307
   in 1996                                                                   26,546                 26,503
Capital in Excess of Par Value                                            1,918,042              1,914,213
Note Receivable from Stockholder (Note 4)                                   (22,000)               (22,000)
Accumulated Deficit                                                      (2,187,635)              (896,732)
                                                                     ----------------      -----------------

Total Stockholders' Equity (Deficit)                                       (265,047)              1,021,984
                                                                     ----------------      -----------------


TOTAL LIABILITIES AND STOCKHOLDERS'
   EQUITY (DEFICIT)                                                      $1,180,746             $2,867,820
                                                                     ================      =================


</TABLE>


See Notes to Financial Statements

<PAGE>


STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                      YEAR ENDED OCTOBER 31,
                                                               ---------------- -- ----------------
                                                                     1997                1996
                                                               ---------------- -- ----------------
<S>                                                              <C>               <C>             

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Loss                                                       $ (1,290,903)      $    (472,906)
ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH  AND CASH EQUIVALENTS
(USED IN) OPERATING ACTIVITIES:
   Depreciation and Amortization                                      398,500             457,080
   Provision for Write-offs of
      Accounts Receivable                                             (12,239)            (36,184)
   Deferred Income Taxes                                              721,743            (200,009)
   Tax Benefits from Stock Options Exercised                              ---               1,395
   Gain on Sale of Assets (Note 3)                                  (154,293)            (11,888)
   Changes in Assets and Liabilities:
      Accounts Receivable                                             259,591             108,195
      Inventories                                                      20,529              50,439
      Prepaid Expenses and Other Current Assets                       (19,117)             62,879
      Accounts Payable and Accrued Expenses                           (89,401)           (135,777)
      Deferred Revenue                                                (82,319)             92,034
      Deferred Rent                                                   (13,033)            (13,033)
                                                               ----------------    ----------------
   Net Cash and Cash Equivalents Used In
      Operating Activities                                           (260,942)            (97,775)
                                                               ----------------    ----------------
INVESTING ACTIVITIES:
   Property Additions                                                 (43,512)           (104,762)
   Capitalized Software Development Costs                            (109,032)           (194,365)
    Proceeds from Sale of Product Line                                406,500              50,000
     and Related Assets (Note 3)
   Other                                                               12,589               3,436
                                                               ----------------    ----------------
   Net Cash Provided By (Used In) Investing Activities                 266,545           (245,691)
                                                               ----------------    ----------------
FINANCING ACTIVITIES:
   Increase (Decrease) in Revolving Line of Credit                   (125,000)            125,000
   Proceeds from Issuance of Common Stock                               3,872               7,423
                                                               ----------------    ----------------
   Net Cash Provided By (Used In) Financing Activities               (121,128)            132,423
                                                               ----------------    ----------------

NET DECREASE IN CASH AND CASH
   EQUIVALENTS                                                       (115,525)           (211,043)
CASH AND CASH EQUIVALENTS AT
   BEGINNING OF YEAR                                                  323,217             534,260
                                                               ----------------    ----------------
CASH AND CASH EQUIVALENTS AT
   END OF YEAR                                                  $     207,692       $     323,217
                                                               ================    ================

</TABLE>

<PAGE>



STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>


                                                              YEAR ENDED OCTOBER 31,
                                                     -------------------- -------------------
                                                           1997                  1996
                                                     -------------------- -------------------
<S>                                                      <C>                   <C>          

Supplemental Disclosures of Cash Flow
   Information:

Cash Paid for:
   Interest                                               $     5,959          $       1,523

   Income Taxes Received                                          ---                (86,823)

Supplemental Schedule of Non-Cash
  Investing and Financing Activities:

 Sale of Product Line and Related Assets
   for Note Receivable                                            ---                359,197




</TABLE>

See Notes to Financial Statements


<PAGE>



STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED OCTOBER 31, 1997 AND 1996

<TABLE>
<CAPTION>

                                                           
                                                            CAPITAL          NOTE
                                                              IN          RECEIVABLE           
                                                           EXCESS OF         FROM              
                                                PAR          PAR             STOCK-           ACCUMULATED
                                 SHARES        VALUE        VALUE            HOLDER              DEFICIT             TOTAL
                               ---------------------------------------------------------------------------------------------
<S>                            <C>             <C>          <C>             <C>                  <C>            <C>        

Balance at November 1, 1995     2,642,207      $26,422      $1,905,476      $  (22,000)          $(423,826)     $1,486,072

Issuance of Stock                   8,100           81           7,342              ---                 ---          7,342

Tax Benefits From
Stock Options Exercised               ---          ---           1,395              ---                 ---          1,395

Net Loss                              ---          ---             ---              ---           (472,906)       (472,906)
                               ------------  -----------  --------------  ---------------  ------------------  -------------

Balance at October 31, 1996     2,650,307       26,503       1,914,213         (22,000)           (896,732)      1,021,984


Issuance of Stock                    4401           43           3,872              ---                 ---          3,872


Net Loss                              ---          ---             ---              ---         (1,290,903)     (1,290,903)
                               ------------  -----------  --------------  ---------------  ------------------  -------------

Balance at October 31, 1997     2,654,708      $26,546      $1,918,042      $  (22,000)      $  (2,187,635)     $ (265,047)
                               ============  ===========  ==============  ===============  ==================  =============


</TABLE>

See Notes to Financial Statements

<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, 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.

LOSS PER SHARE is computed on the basis of the weighted average number of shares
outstanding.  Common stock  equivalents are excluded from the calculation of net
loss per share 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 was $244,907 in 1997 and $201,734 in 1996.

PURCHASED SOFTWARE is stated at cost and is being amortized on the straight-line
method over its estimated useful life. Purchased software was fully amortized in
1995. In October 1996, the Company retired all of its purchased software,  which
were among the assets sold to Adaptive. (See Note 3)

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 $14,165 in 1997 and $69,448 in 1996.

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 8).  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  includes cash on hand,  deposits in bank, and highly
liquid debt instruments  purchased with original  maturity dates of three months
or less.

CONCENTRATION OF CREDIT RISK - Financial  instruments which potentially  subject
the Company to  concentrations  of credit risks consist  principally of cash and
trade accounts  receivable.  The Company places substantially all of its cash in
demand deposit accounts with high credit quality financial  institutions.  Trade
accounts  receivable  are with a large number of customers  within the industry,
dispersed  across a wide geographic base.  Management  believes that any risk of
loss  is  significantly  reduced  by  its  ongoing  credit  evaluations  of  its
customers' financial condition.
<PAGE>

FINANCIAL INSTRUMENTS - SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments,"  requires  disclosure  of the  estimated  fair value of  financial
instruments  when it is practicable to estimate that value.  The carrying amount
of assets and  liabilities as reported on the balance sheet  approximates  their
fair market values.

ACCOUNTING CHANGES - In October 1995, the Financial  Accounting  Standards Board
issued SFAS No. 123,  "Accounting for Stock-Based  Compensation." This statement
establishes an  alternative  method of accounting  that requires  recognizing as
expense the fair value of employee stock options and other stock-based awards at
the grant  date.  SFAS No.  123,  also  allows the  continuation  of the current
accounting  treatment  under which the Company does not  recognize  compensation
expense  for the stock  options  it awards to  employees.  Since the  Company is
electing  to retain its  current  method,  it is  required  to present pro forma
disclosures in its 1997  financial  statements as if the fair value based method
had been applied.

ESTIMATES - The  preparation  of the financial  statements  in  conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that reflect the reported amount of assets and liabilities and
disclosures  of contingent  assets and  liabilities at the date of the financial
statements  as well as the  reported  amounts of revenue and expense  during the
reporting period. Actual results could differ from these estimates.

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

PROSPECTIVE  ACCOUNTING  CHANGES - SFAS No. 128,  "Earnings Per Share," requires
companies to present two measures of earnings per share,  basic and diluted.  If
SFAS No. 128 had been  adopted  for all  periods  presented,  basic and  diluted
earnings per share would not have materially differed from reported earnings per
share.  SFAS No.  128 will be  adopted  in the  second  quarter  of 1998.  Early
adoption is not permitted.

SFAS No. 130, "Reporting  Comprehensive  Income,"  establishes  requirements for
disclosure of comprehensive income. The new standard becomes effective in fiscal
year 1999. SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information,"  establishes  standards for disclosure about operating segments in
annual  financial  statements  and requires  disclosure of selected  information
about operating segments in interim financial reports.  The new standard becomes
effective in fiscal year 1999. There will not be any substantial  changes to the
Company's disclosure at the time SFAS No. 131 is adopted.

2.  INVENTORIES

Inventories at October 31 consisted of the following:

                             1997           1996
                          -------------  -------------
Computers                   $     ---       $  4,418
Peripheral equipment              759         11,517
Parts                           1,670          2,124
Software                          292          4,457
 Supplies and Forms               583          1,317
                          -------------  -------------

Total                         $ 3,304        $23,833
                          =============  =============


3.  NOTES RECEIVABLE

On October  31,  1996,  the Company  sold  certain  assets of its  ClinicManager
product line to Adaptive for $500,000,  subject to increase or decrease based on
revenues  received by Adaptive from the Company's  former  customers  during the
six-month period after closing.  Under the terms of an Asset Purchase Agreement,
Adaptive paid the Company  $50,000 on October 31, 1996,  and was required to pay
the remaining balance in 60 equal monthly payments of $7,500.
<PAGE>

In April 1997,  certain  conditions of the sale were satisfied,  resulting in an
acceleration of the note receivable payments due from Adaptive. In May 1997, the
Company  received  $406,500  from  Adaptive  to pay off the  note.  The  Company
recognized a gain of $174,793 during 1997 as a result of the funds received from
Adaptive.

4. NOTE RECEIVABLE FROM STOCKHOLDER

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 7% per year, payable quarterly.  The principal of
the  promissory  note was to be paid in full on September 30, 1996.  The Company
extended the due date of the  promissory  note to October 31, 1997. On September
19,  1997,  the Board of Directors  authorized  an extension of the note through
June 30, 1998 or the date of the proposed merger  transaction with Mediware (See
Note 11).  The shares of common stock issued upon the exercise of the option are
held by the Company as collateral for the promissory note.

5.  LEASE COMMITMENTS

The Company entered into an agreement  ("Agreement") to lease 16,851 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, 2000.  The Company has the option to extend the  Agreement for five
years.  Minimum lease  payments  under the Agreement  include  interior/exterior
maintenance,  utilities,  insurance  and  janitorial  services,  except that the
Company,  starting in calendar year 1996, is required to pay 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:

                          1998         $ 278,041
                          1999           278,041
                          2000            92,681
                                -----------------

                         TOTAL         $ 648,763
                                =================


On December  19,  1996,  the Company  entered  into a sub-lease  agreement  with
Southern  Pacific Funding,  Inc.  ("Southern") to sub-lease 5,222 square feet of
the Company's office space to Southern.  The term of the sub-lease  agreement is
January 15, 1997 to January 31, 1998. The Company expects Southern to vacate the
premises on or before January 31, 1998.  Future minimum  payments to be received
under the sub-lease agreement will be $21,540 in fiscal 1998.

On October 17, 1997, the Company entered into a sub-lease agreement with Pacific
Crest  Technologies,  Inc.  ("Pacific")  to  sub-lease  4,931 square feet of the
Company's  office  space to  Pacific.  The term of the  sub-lease  agreement  is
November 1, 1997 to February 28, 1998.  Provided certain conditions are met, the
term of the sub-lease may be extended and the space expanded.  The sub-lease may
be  canceled  by either  party  upon 60 days'  written  notice.  Future  minimum
payments to be received under the sub-lease  agreement will be $27,121 in fiscal
1998.

Rental expense for all operating leases for the years ended October 31, 1997 and
1996 was $204,579 and $269,445, respectively.

6.  CREDIT AGREEMENTS

In April 1997, the Company renewed its uncommitted revolving line of credit with
the Company's bank. There was no amount owing under this agreement as of October
31, 1997. The Company was not able to maintain the required  covenant ratios and
as a result the Company's bank reduced the credit line to $200,000 on August 20,
1997. The Company's bank agreed to waive this covenant through October 31, 1997.
All of the  assets of the  Company  were  pledged  as  security  for the line of
credit.  The credit line agreement expired December 31, 1997. The Company has no
plans to seek a new credit line.

<PAGE>

7. 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's  contribution up to a maximum
of 2-1/2% of the employee's wages. During 1997 and 1996, the Company contributed
$31,454 and $43,039, respectively, to the Plan.

8.  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
31was as follows:

<TABLE>
<CAPTION>

                                                                      1997                 1996
                                                                  --------------       --------------
          <S>                                                      <C>                 <C>    

          Deferred Tax Assets:
          Accrued Expenses                                         $    32,100         $     58,799
          Deferred Maintenance Contract                                 58,400              123,684
          Differences Between Book and Tax  Basis of
             Property and Equipment                                     45,500               66,589
          State Net Operating Loss Carryforward                        180,300              137,520
          Federal Net Operating  Loss Carryforward                     752,601              526,108

          Deferred Tax Liabilities:
          Capitalized Software Costs                                   (62,200)            (117,157)
                                                                  --------------       -------------

          Sub-Total                                                  1,006,701              795,543
          Valuation Allowance                                         (932,901)                 ---
                                                                  --------------       --------------

          Net Deferred Tax Asset                                   $    73,800          $   795,543
                                                                  ==============       ==============
</TABLE>


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

                                                                      1997                 1996
                                                                  ---------------      --------------
           <S>                                                      <C>                  <C>    


           Current Deferred Tax Assets                              $    90,500          $  182,483
           Deferred Tax Liability                                       (16,700)            613,060
                                                                  ---------------
                                                                                       ==============

           Net Deferred Tax Asset                                   $    73,800          $  795,543
                                                                  ===============      ==============

</TABLE>

The  Company's  management  determined  that the  benefit of the  Company's  net
operating loss  carryforwards  was not likely to be realized.  Accordingly,  the
Company  increased the valuation  reserve $932,901 to reserve fully the deferred
tax asset relating to the net operating loss carryforwards.

There are  approximately  $2,295,000 and $2,732,000 of unused net operating loss
carryforwards  which,  if not used, will expire in 2008 and 2009 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 1996, $1,395 was credited to capital in excess of
par value.
<PAGE>

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

                                                              1997                1996
                                                         ----------------    ----------------
<S>                                                          <C>                 <C>   

Computed income taxes based on statutory
   federal income tax rate of  34%                           $ (193,514)         $ (257,833)

Increase (reduction) in taxes resulting from:
   Valuation allowance                                           932,901                 ---
   State income tax, net of federal benefit                     (24,793)            (33,033)
   Other                                                          7,149               5,439
                                                         ----------------    ----------------

                                                             $   721,743         $ (285,427)
                                                         ================    ================
</TABLE>

The provision for income taxes, net of operating loss carryforwards, consists of
the following:
<TABLE>
<CAPTION>

                                                              1997                1996
                                                         ----------------    ----------------
<S>                                                          <C>                <C>     

Income taxes currently payable (receivable):
   Federal                                                    $                 $    1,395
   State                                                           ---
                                                                    10                 10
                                                         ----------------    ----------------
                                                                                $    1,405
                                                         ----------------    ----------------
Deferred taxes - net:
   Federal                                                   $  575,027         $ (237,482)
   State                                                        146,706            (49,350)
                                                         ----------------    ----------------
                                                                721,733           (286,832)
                                                         ----------------    ----------------

                                                             $  721,743         $ (285,427)
                                                         ================    ================
</TABLE>

9.    SIGNIFICANT CUSTOMER

The Company recorded revenue from one customer representing 16 and 13 percent of
total revenue during 1997 and 1996, respectively.


10.   STOCK OPTION PLANS

The Company has adopted two  employee  stock  option  plans that provide for the
issuance of incentive stock options and non-statutory stock options to employees
and officers and non-statutory 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, 1997, 159,766 shares were available under
the plans 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 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  grants
occur each year on the date of the annual shareholder  meeting, and the exercise
price of the options issued is the fair market value of the common stock on that
date.

As discussed in Note 1, the disclosure-only provisions of SFAS No. 123 have been
adopted. Accordingly, no compensation cost has been recognized for stock options
granted with an exercise price equal to the fair value of the  underlying  stock
on the date of  grant.  Had  compensation  costs  been  determined  based on the
estimated fair value of the options at the date of grant, the loss, and the loss
per share for the years  ended  October  31, 1997 and October 31, 1996 would not
have differed materially from the amounts reported.
<PAGE>

The following  table  summarizes  the stock option  activity under the Company's
option plans:
<TABLE>
<CAPTION>

                                                                  Shares under             Option Price
                                                                     Option              Weighted Average
                                                                 -----------------     -----------------------
                <S>                                                    <C>                    <C>            

                Options Outstanding at November 1, 1995                  679,144              $ 1.64

                Exercised                                                 (8,100)             $ 0.92
                Canceled or Expired                                     (191,858)             $ 2.13
                Granted                                                  131,750              $ 1.13
                                                                 -----------------     -----------------------

                Options Outstanding at October 31, 1996                  610,936              $ 1.38

                Exercised                                                 (4,401)             $ 0.88
                Canceled or Expired                                     (159,059)             $ 1.87
                Granted                                                   80,000              $ 0.55
                                                                 -----------------     -----------------------

                Options Outstanding at October 31, 1997                  527,476              $ 1.11
                                                                 =================     =======================

                Options Exercisable at October 31, 1997                  424,139              $ 1.15
                                                                 =================     =======================

</TABLE>

11.  SUBSEQUENT EVENTS

On July 29, 1997,  the Company  signed a letter of intent to merge into Mediware
Information Systems, Inc. ("Mediware") of Melville, NY. The Company announced on
December 19, 1997 the signing of an  Agreement  and Plan of Merger to merge into
Mediware  in a stock  exchange  whereby  one share of  Mediware  stock  would be
exchanged for every 6.3 shares of the Company's  stock. The merger is subject to
the approval of the Company's shareholders.


<PAGE>




















                        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,  1997  and  1996  and  the  related   statements   of   operations,
stockholders' equity (deficit),  and cash flows for each of the two years in the
period ended October 31, 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,  such  financial  statements  present  fairly,  in all material
respects, the financial position of the Company on October 31, 1997 and 1996 and
the  results of its  operations  and its cash flows for each of the two years in
the period  ended  October 31,  1997,  in  conformity  with  generally  accepted
accounting principles.




DELOITTE & TOUCHE LLP
Portland, Oregon
January 9, 1998











<PAGE>
ITEM 8 -  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
----------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.


                                                    PART III


ITEM  9 - DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND  CONTROL PERSONS; 
---------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------------------

Directors and Executive Officers
--------------------------------
The directors  and executive  officers of the Company as of October 31, 1997 are
as follows:
<TABLE>
<CAPTION>
<S>                                          <C>       <C>                                       <C>           
                                                                                                 Has served in
Name                                         Age       Office                                    Present Office
----                                         ---       ------                                    --------------

John Tortorici                               55        Chairman, President, Chief Executive      Since  1979
                                                       Officer, Chief Financial Officer and
                                                       Director

Richard R. Emery Jr.                         30        Vice President - Customer Service          Since 1996

Charles V. Dexter                            57        Director                                   Since 1991

Richard D. Glaser, Ph.D                      55        Director                                   Since 1986

Ronald G. Witcosky                           57        Director                                   Since 1991
</TABLE>


Background  information  on each of the  directors  and  executive  officers and
directors of the Company is as follows:

John  Tortorici  founded the Company in 1979,  and he has been a director  since
then.  He also  served  as the  Company's  President  until  1996  and as  Chief
Financial  Officer from 1985 to 1992.  He resumed  duties as President and Chief
Financial Officer in 1997.

Charles V. Dexter has been a director of the Company since 1991. He is President
of C. V. Dexter and Company, a management  consulting company,  which he founded
in 1991.  From  January  1996 to May  1996,  he was the  Company's  Senior  Vice
President--Lab  Products Division. He was the Company's Executive Vice President
and Chief Operating Officer from June 1994 until January 1996. In June 1993, Mr.
Dexter  became a principal and Vice  President of the Achen Group,  a healthcare
consulting and investment company located in Dana Point, California.

Richard D. Glaser,  Ph.D. has been a director of the Company since 1986. He is a
business  consultant to companies in the  biotechnology  industry  through RDG &
Associates  (a  consulting  company  in which he is a  principal).  He was Chief
Operating  Officer  and a director of  MacroChem  Corporation,  a drug  delivery
company,  between  March 1993 and June 1995.  He served as  President of Maximed
Corporation from 1988 to 1993 and of Bio Environmental Products Corporation from
1990 to 1993. Dr. Glaser  resigned as President of both these  companies when he
joined  MacroChem  Corporation.  He continues to serve these two  companies as a
director.  Both companies are engaged in biotechnical  research. Dr. Glaser also
serves  as  a  director  of   Benchmark   Communications,   Inc.,   a  corporate
communications company.

Ronald  G.  Witcosky  has been a  director  of the  Company  since  1991.  He is
President of Witcosky Associates,  a financial consulting firm, which he founded
in 1989.  Through that company,  he has served as President and Chief  Executive
Officer of Harris  Holdings,  Inc.  since  December  1995.  He also  serves as a
director of Harris Holdings,  Inc., three subsidiaries of Harris Holdings,  Inc.
and  Truax-Harris  Energy LLC (all of which are involved in petroleum  sales and
distribution in the Northwest). Mr. Witcosky is a certified public accountant.

Richard F.  Emery,  Jr. was named  Vice  President--Customer  Service in October
1996. From June 1996 to October 1996, he served as Vice President--Lab  Products
Division.  From November 1995 to June 1996, he served as Product  Manager.  From
December 1992 to November  1995, he served as Customer  Service  Supervisor.  He
joined the Company in 1991 as a customer service representative.

<PAGE>

Compliance With Section 16(a) of the Securities Exchange Act
------------------------------------------------------------

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
officers,  directors  and 10%  shareholders  to file  reports of  ownership  and
changes  in  ownership  with  the  Securities  and  Exchange   Commission   (the
"Commission").   Officers,  directors  and  10%  shareholders  are  required  by
Commission  regulations to furnish the Company with all Section 16(a) forms they
file.

Based  solely on the  company's  review of the copies of such forms the  Company
received and written  representations from the Company's officers and directors,
the Company believes that all required forms were timely filed in fiscal 1997.

ITEM 10 - EXECUTIVE COMPENSATION
--------------------------------

The following table sets forth the cash  compensation paid during the last three
fiscal years to the Company's Chairman,  President,  Chief Executive Officer and
Chief  Financial  Officer,  the only  officer of the Company  whose total annual
salary and bonus exceeded $100,000 for the last fiscal year:

                                        SUMMARY COMPENSATION TABLE
                                        --------------------------
<TABLE>
<CAPTION>

                                                                                   Long-Term
                                          Annual                                   Compensation
                                       Compensation                                Awards

                                                                                   Securities
                                                                 Other Annual      Underlying       All Other
   Name & Principal                      Salary(1)        Bonus  Compensation(2)   Options/SARs     Compensation(3)
          Position      Fiscal Year        ($)           ($)            ($)               ($)              ($)
---------------------- ------------- --------------- ----------- ----------------- ---------------- -----------------
<S>                         <C>          <C>            <C>                            <C>               <C>    

John Tortorici              1997          150,000       1,250                                            2,163
Chairman, President         1996          150,000       1,250                                            2,204
and Chief                   1995          143,750       1,250                           25,000           3,270
Executive Officer


(1) Includes amounts Mr. Tortorici contributed to the Company's 401(k) Savings Plan (the "Savings Plan").
    No director fees are paid to Mr. Tortorici for his service on the Board of Directors of the Company.

(2) Perquisites and other personal benefits, if any, did not exceed 10% of total annual salary and bonus for Mr.
    Tortorici for any of the periods indicated.

(3) Includes the Company's contributions to the Savings Plan for Mr. Tortorici's benefit.

</TABLE>

<PAGE>

Stock Option Information

No options to purchase  the  Company's  Common Stock were granted to the officer
named in the "Summary  Compensation  Table" during the fiscal year ended October
31, 1997,  and he exercised  no options to purchase the  Company's  Common Stock
during such fiscal year.

The following  table sets forth certain  information  regarding  options for the
purchase  of the  Company's  Common  Stock that were held by him at October  31,
1997:
<TABLE>
<CAPTION>

                                         Aggrageted Fiscal Year-End Options/SAR Values
                                         ---------------------------------------------

                                                   Number Securities                          Value of
                                            Underlying Unexercised Options/           Unexercised In-the-Money
Name                                              SARs at FY-End (#)                 Options/SARs at FY-end ($)(1)

                                        Exercisable       Unexercisable      Exercisable              Unexercisable
                                        -----------       ------------       -----------              -------------
<S>                                       <C>                  <C>               <C>                       <C>    

John Tortorici                            109,679              ---               10,891                    ---
</TABLE>

(1) On October 31,  1997,  the market  price of the  Company's  Common Stock was
$1.0625.  For purposes of the  foregoing  table,  stock options with an exercise
price  less  than  that  amount  are  considered  to be  "in-the-money"  and are
considered to have a value equal to the  difference  between that amount and the
exercise  price of the option  multiplied by the number of the shares covered by
the stock option.

Compensation of Directors
------------------------- 
The Company  paid no fees to Mr.  Tortorici  for  services  rendered as director
during the 1997 fiscal year. It paid $4,000 each to Mr.  Dexter,  Dr. Glaser and
Mr. Witcosky,  its outside directors,  for services rendered as directors during
the year.  The  Company  also paid  $8,000 to Mr.  Witcosky  for  service on the
Executive  Committee  during the 1997 fiscal  year.  A  nonstatutory  option for
10,000 shares is  automatically  granted  under the Company's  stock option plan
each year to each member of the  Compensation  Committee.  In March  1997,  such
options were granted to Mr. Dexter, Dr. Glaser and Mr. Witcosky. These five-year
options  have an exercise  price of $.46875 per share and vest over three years.
Also, in September 1997, Mr. Witcosky was granted a fully exercisable option for
20,000 shares at an exercise price of $.68 for additional  services  provided in
connection with the proposed acquisition of the Company by Mediware.

Agreements with Certain Officers
--------------------------------
The Company entered into an agreement in 1988 with Mr. Tortorici, which provides
that, if the Company  terminates  his  employment  for any reason other than for
"cause" (as defined in the agreement), including any termination in anticipation
of or following a change in control of the Company,  he will continue to be paid
his  then  current  base  salary  for a  period  of two  years  from the date of
termination,  or until he  obtains  permanent  full-time  employment,  whichever
occurs first.  If the salary  payable to him in his new  employment is less than
the annual base salary he received  prior to  termination,  the Company will pay
him an amount so that his total  compensation  will equal his annual base salary
in effect on termination.

In December  1997,  the Company  entered into an  amendment  to Mr.  Tortorici's
employment  agreement  effective and conditioned upon the closing of the Merger.
If the Merger occurs, Mr. Tortorici will continue as an employee of the Company,
but  not as an  officer  or  director,  at his  existing  base  salary  for  the
three-month  period  following the closing of the Merger.  If the Merger occurs,
any unvested  options held by Mr.  Tortorici  will  retroactively  become vested
effective December 5, 1997. For the two-year period following termination of Mr.
Tortorici's  employment (the "Consulting Period"), he will serve as a consultant
to the Company on such  matters as the Company  requests,  and the Company  will
continue to provide him coverage under the Company's  medical  insurance  plans.
Mr.  Tortorici  will be subject to an agreement not to compete with the business
of the Company or any affiliate during the period from the effective date of the
Merger to the end of the Consulting Period. As consideration for Mr. Tortorici's
non-compete  covenant,  the Company will pay him  $8,333.33 per month during the
Consulting Period.
<PAGE>


ITEM 11 -    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
---------------------------------------------------------------------------

The following  table shows, as of January 16, 1998, the number and percentage of
outstanding  shares of the  Company's  Common Stock  beneficially  owned by each
person  known by the  Company to  beneficially  own 5% or more of the  Company's
Common Stock,  by each director,  by the executive  officer named in the Summary
Compensation  Table, and by all directors and executive  officers of the Company
as a group.
<TABLE>
<CAPTION>

              Name and Address                           Amount and Nature                      Percentage of
            of Beneficial owner                    of Beneficial Ownership(1),(2)               Common Stock
            -------------------                    ------------------------------               ----------------
<S>                                                           <C>                                   <C>     

John Tortorici                                                309,012                               11.2%
Tigard, Oregon

Charles V. Dexter                                             110,333                                4.0%
Henderson, Nevada

Richard D. Glaser, Ph.D.                                       67,999                                2.5%
Carlisle, Massachusetts

Ronald G. Witcosky                                             62,499                                2.3%
Portland, Oregon

All officers and directors
as a group (five persons)                                     549,843                               18.7%
</TABLE>

(1) A person is considered to "beneficially own" any shares: (a) over which such
person exercises sole or shared voting or investment power; or (b) of which such
person  has the right to acquire  ownership  at any time  within 60 days  (e.g.,
through  conversion  of  securities  or exercise of stock  options).  Voting and
investment  power  relating  to the  above  shares  is  exercised  solely by the
beneficial owner.

(2) These figures  include 109,679 shares for Mr.  Tortorici,  39,333 shares for
Dr.  Glaser,  73,333 shares for  Mr.Dexter,  59,999 shares for Mr.  Witcosky and
291,462 shares for the group, which such persons and the group have the right to
acquire by exercise of stock options within 60 days after January 16, 1998.


ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
None.


<PAGE>


                                    PART IV

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

(a)   Exhibits

Exhibit           Description
-------           -----------
2                 Agreement and Plan of Merger

3(i)              Restated Articles of Incorporation, as amended (1)

3(ii)             Restated Bylaws, as amended (2)

4                 Form of Indemnification Agreement--
                  Directorship and Officership Agreement (3)

10(i)*            Restated 1983 Employees' Stock Option Plan (4)

10(ii)*           Restated 1988 Employees' Stock Option Plan, as amended (5)

10(iii)           Lease with Beim & James Properties, as amended (6)

10(iv)*           Incentive Compensation Plan (6)

10(v)             Amendments to Lease with Kruse Way Holdings, Inc. 
                  (formerly Beim & James Properties) (7)

10(vi)*           Employment Agreement with Mr. Tortorici, as amended

11                Computation of Earnings Per Share

23                Independent Auditors' Consent

27                Financial Data Schedule

* Management contract or compensatory plan or arrangement.

(1) Incorporated  herein  by  reference  from the  Company's  definitive  proxy
    material filed with the Securities and Exchange Commission on February 15,
    1996.

(2) Incorporated  herein by reference from the Company's  annual report on Form
    10-KSB for the year ended October 31, 1996.

(3) Incorporated  herein  by  reference  from the  Company's  definitive  proxy
    material  filed with the  Securities  and Exchange  Commission on April 28,
    1988.

(4) Restated  1983  Employees'  stock  option  plan is  incorporated  herein by
    reference  from the  Company's  quarterly  report Form 10-Q for the quarter
    ended  April 30,  1988.  Amendment  to the Plan is  incorporated  herein by
    reference from the  registration  statement on Form S-8 (Reg. No. 33-46474)
    filed with the Securities and Exchange Commission on March 19, 1992.

(5) Incorporated  herein  by  reference  from the  Company's  definitive  proxy
    material filed with the  Securities and Exchange  Commission on February 8,
    1992.

(6) Incorporated  herein by reference from the Company's  annual report on Form
    10-K for the year ended October 31, 1990.

(7) Incorporated  herein by reference from the Company's  annual report on Form
    10-KSB for the year ended October 31, 1994.

<PAGE>

Upon  written  request  to the  Chairman,  Chief  Executive  Officer  and  Chief
Financial Officer,  Informedics,  Inc., 4000 Kruse Way Place, Bldg 3, Suite 300,
Lake Oswego,  97035,  the Company will furnish  shareholders  with a copy of any
Exhibit upon payment of $.20 per page, which represents the Company's reasonable
expenses in furnishing the Exhibit requested.

(b)       Reports on Form 8-K - During the quarter ended October 31, 1997, the
          -------------------
          Company filed no reports on Form 8-K.

            ***************************************************


<PAGE>


                                   SIGNATURES
                                   ----------


Pursuant to the  requirements of section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                INFORMEDICS, INC.



Date:   January 29, 1998           By:  /s/ John Tortorici
      ------------------              --------------------
                                      John Tortorici, Chairman, President,
                                      Chief Executive Officer, Chief Financial
                                      Officer and Director


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.



Date:  January 29, 1998            By:   /s/ John Tortorici
     ------------------               ---------------------
                                      John Tortorici, Chairman, President,
                                      Chief Executive Officer, Chief Financial
                                      Officer and Director



Date:  January 29, 1998            By:   /s/ Richard D. Glaser
     ------------------               ------------------------
                                      Richard D. Glaser, Ph.D., Director


Date:  January 29, 1998            By:   /s/ Charles V. Dexter
     ------------------               ------------------------
                                      Charles V. Dexter, Director


Date:  January 29, 1998            By:   /s/ Ronald G. Witcosky
     ------------------               -------------------------
                                      Ronald G. Witcosky, Director