UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10-QSB/A
                                 AMENDMENT NO. 1

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

     For The Quarterly Period Ended June 30, 1998

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

     For the transition period from _________________ to _________________

Commission File Number: 0-25530


                             LIFERATE SYSTEMS, INC.
             (Exact name of Registrant as specified in its charter)

                  MINNESOTA                              41-1682994
       (State or other jurisdiction of      (I.R.S. Employer Identification No.)
       incorporation or organization)

                              7210 METRO BOULEVARD
                             EDINA, MINNESOTA 55439
          (Address of principal executive offices, including zip code.)

                                 (612) 844-0599
                         (Registrant's telephone number)



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X]   No [ ]

As of July 31, 1998, there were 12,487,000 shares of Common Stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes ___  No _X_

<PAGE>


                             LIFERATE SYSTEMS, INC.
                                      INDEX


PART I
                                                                         PAGE
                                                                         ----
ITEM 1.  FINANCIAL STATEMENTS

         Condensed Balance Sheets -                                         3
         June 30, 1998 and December 31, 1997

         Statements of Operations -                                         4
         Three Months Ended June 30, 1998 and 1997 and
         Six Months Ended June 30, 1998 and 1997 and
         Date of Inception to June 30, 1998.

         Condensed Statements of Cash Flow -                                5
         Six Months Ended June 30, 1998 and 1997 and
         Date of Inception to June 30, 1998.

         Notes to Condensed Financial Statements                            6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS                               7

PART II

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                  10


                                        2

<PAGE>


                             LIFERATE SYSTEMS, INC.
                          (A Development Stage Company)
                            Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                      JUNE 30,      December 31,
                                                                       1998            1997
                                                                     Restated        Restated
                                                                   ------------    ------------
ASSETS                                                              (Unaudited)       (Note)
<S>                                                                <C>             <C>         
Current assets:
      Cash and cash equivalents                                    $  1,251,400    $    764,200
      Accounts receivable, less allowance of $62,500,
      at June 30, 1998 and $62,850 at December 31, 1997                 163,600         278,200
      Prepaid expenses and other current assets                          58,100          59,800
                                                                   ------------    ------------
Total current assets                                                  1,473,100       1,102,200

Furniture and fixtures                                                  177,600         177,600
Computer equipment                                                      861,800         872,000
                                                                   ------------    ------------
                                                                      1,039,400       1,049,600
Less accumulated depreciation                                           743,900         635,600
                                                                   ------------    ------------
                                                                        295,500         414,000
Software development costs, net of amortization
 of $16,200 at June 30, 1998                                             97,000          28,600
                                                                   ------------    ------------

Total Assets                                                       $  1,865,600    $  1,544,800
                                                                   ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
      Accounts payable and other accrued liabilities               $    396,200    $    299,600
      Other current liabilities                                           3,400           3,200
      Current portion of long-term debt
       and capitalized lease obligations                                  7,900          12,300
                                                                   ------------    ------------
Total current liabilities                                               407,500         315,100

Long-term debt and capital lease obligations                          3,120,300       3,106,500
Deferred rent                                                              --             4,900
Deferred revenue                                                        130,300         172,300

Shareholders' equity (deficit):
      Preferred stock, no par value:
        Authorized shares - 1,000,000
        Issued and outstanding shares-none in 1998 and 1997                --              --
      Common stock, no par value:
        Authorized shares - 75,000,000
        Issued and outstanding shares - 12,487,000 at June 30,
        1998 and 8,485,000 at December 31, 1997                      21,972,300      20,016,400
      Deficit accumulated during the development stage              (23,764,800)    (22,070,400)
                                                                   ------------    ------------
Total shareholders' equity (deficit)                                 (1,792,500)     (2,054,000)
                                                                   ------------    ------------

Total liabilities and shareholders' equity (deficit)               $  1,865,600    $  1,544,800
                                                                   ============    ============
</TABLE>

Note: The December 31, 1997 balance sheet has been derived from the restated
December 31, 1997 audited financial statements


                                       3

<PAGE>


                             LIFERATE SYSTEMS, INC.
                          (A Development Stage Company)
                            Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                            JULY 18, 1990
                                                                                                               (DATE OF
                                                  THREE MONTHS                      SIX MONTHS              INCEPTION) TO
                                                  ENDED JUNE 30                    ENDED JUNE 30               JUNE 30,
                                             1998                              1998                              1998
                                           RESTATED           1997           RESTATED           1997           RESTATED
                                         ------------     ------------     ------------     ------------     ------------
<S>                                      <C>              <C>              <C>              <C>              <C>         
Net revenues                             $    121,600     $     44,800     $    395,500     $    243,600     $  2,206,100
Cost of revenues                              222,400          220,900          444,700          520,600        2,507,200
                                         ------------     ------------     ------------     ------------     ------------
Gross profit                                 (100,800)        (176,100)         (49,200)        (277,000)        (301,100)


Operating Expenses:
  Sales and marketing                         151,700          387,200          354,500          765,000        6,310,000
  Research and development                    332,300          360,900          553,800          742,000        9,398,200
  General and administrative                  462,500          655,100          763,300        1,143,400        8,047,200
                                         ------------     ------------     ------------     ------------     ------------
  Total operating expenses                    946,500        1,403,200        1,671,600        2,650,400       23,755,400
                                         ------------     ------------     ------------     ------------     ------------
Loss from operations                       (1,047,300)      (1,579,300)      (1,720,800)      (2,927,400)     (24,056,500)
Interest income and other, net                 21,000            9,000           46,000           24,000          447,600
Interest expense                                9,900           71,400           19,600           71,700          355,900
                                         ------------     ------------     ------------     ------------     ------------
Net loss before extraordinary item         (1,036,200)      (1,641,700)      (1,694,400)      (2,975,100)     (23,964,800)
Extraordinary item-debt restructuring              --               --               --               --          200,000
                                         ------------     ------------     ------------     ------------     ------------

Net loss                                 $ (1,036,200)    $ (1,641,700)    $ (1,694,400)    $ (2,975,100)    $(23,764,800)
                                         ============     ============     ============     ============     ============

Net loss per share - basic and diluted   $      (0.08)    $      (0.43)    $      (0.14)    $      (0.78)    $      (9.84)
                                         ============     ============     ============     ============     ============

Weighted average number of
 common shares outstanding                 12,485,000        3,819,708       11,818,333        3,819,708        2,413,922
                                         ============     ============     ============     ============     ============
</TABLE>

See accompanying notes


                                       4

<PAGE>


                             LIFERATE SYSTEMS, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                JULY 18, 1990
                                                                                                                  (DATE OF
                                                                                        SIX MONTHS              INCEPTION) TO
                                                                                       ENDED JUNE 30,              JUNE 30,
                                                                                   1998                              1998
                                                                                 RESTATED           1997           RESTATED
                                                                               ------------     ------------     ------------
<S>                                                                            <C>              <C>              <C>          
OPERATING ACTIVITIES
Net loss                                                                       $ (1,694,400)    $ (2,975,100)    $(23,764,800)
Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation                                                                  141,400          148,400          777,600
      Amortization of software development costs                                     16,200           50,500          167,500
      Amortization of discounts on long-term debt                                    13,800               --           63,200
      Value of stock options granted for services rendered                               --            8,300        1,001,500
      Value of warrants issued to note holders                                           --               --           43,500
      Convertible subordinated note issued for services rendered                         --               --        2,250,000
      Writedown of software development costs to net realizable value                    --               --          599,600
      Stock issued for services                                                          --               --          187,500
      Changes in operating assets and liabilities:
        Accounts receivable                                                         114,600          (94,200)        (163,600)
        Prepaid and other current assets                                              1,700           13,200          (52,800)
        Accounts payable and other accrued liabilities                               96,800           59,000          735,400
        Deferred revenue                                                            (42,000)          58,700          130,300
        Deferred rent                                                                (4,900)          (5,900)              --
                                                                               ------------     ------------     ------------
Net cash used in operating activities                                            (1,356,800)      (2,737,100)     (18,025,100)

INVESTING ACTIVITIES
Software development costs                                                          (84,600)              --         (864,100)
Purchase of furniture and equipment                                                 (23,800)         (30,700)      (1,016,300)
Proceeds from equipment sales                                                           900               --              900
                                                                               ------------     ------------     ------------
Net cash used in investing activities                                              (107,500)         (30,700)      (1,879,500)

FINANCING ACTIVITIES
Payments on notes payable and capital lease obligations                              (4,400)          (9,700)        (430,800)
Stock subscription received                                                              --               --            5,000
Proceeds from issuance of notes payable                                                  --        1,017,500        2,027,700
Proceeds from issuance of common stock                                            1,955,900           30,900       19,554,100
                                                                               ------------     ------------     ------------
Net cash provided by financing activities                                         1,951,500        1,038,700       21,156,000
                                                                               ------------     ------------     ------------

Increase in cash and cash equivalents                                               487,200       (1,729,100)       1,251,400
Cash and cash equivalents at beginning of period                                    764,200        2,072,000               --
                                                                               ------------     ------------     ------------
Cash and cash equivalents at end of period                                     $  1,251,400     $    342,900     $  1,251,400
                                                                               ============     ============     ============
</TABLE>

See accompanying notes


                                       5

<PAGE>


                             LIFERATE SYSTEMS, INC.
                          (A Development Stage Company)
                     Notes to Condensed Financial Statements
                                  June 30, 1998


1.    Organization and Description of Business

      LifeRate Systems, Inc. is a development stage enterprise engaged in
      marketing proprietary clinical software systems to health care providers
      and payors to produce information to measure and quantify the quality and
      cost of health care.

2.    Basis of Presentation

      The financial information presented as of June 30, 1998 and 1997 has been
      prepared from the books and records without audit. Financial information
      as of December 31, 1997 is based on audited financial statements of
      LifeRate Systems, Inc. but does not include all disclosures required by
      generally accepted accounting principles. In the opinion of management,
      all adjustments, consisting only of normal recurring adjustments necessary
      for a fair presentation of the financial information for the periods
      indicated have been included. For further information regarding the
      Company's accounting policies, refer to the financial statements and
      attached notes included in the Company's Form 10-KSB for the fiscal year
      ended December 31, 1997 as filed with the Securities and Exchange
      Commission.

3.    Significant Accounting Policies

      In October 1997, the American Institute of Certified Public Accountants
      approved Statement of Position 97-2, "Software Revenue Recognition" ("SOP
      97-2"), which supersedes Statement of Position 91-1, "Software Revenue
      Recognition". SOP 97-2 was effective for transactions entered into in the
      first quarter of 1998. The adoption of the standards in SOP 97-2 did not
      have a significant impact on the Company's financial statements.

4.    Reclassified

      Certain prior year amounts have been reclassified to conform to the
      current year presentation.

5.   Restatement

     The Company has restated previously issued financial results for the year
     ended December 31, 1997. The restated financial results reflect the
     correction of an error related to the extraordinary gain recognized in a
     transaction recorded as a troubled debt restructuring. The following
     summarizes the impact of the restatement on operations for the six months
     ended March 31, 1998:

                                         As reported       Restated
                                        ------------    -------------

          Net loss                      $(1,799,500)     $(1,694,400)

          Net loss per share --
            basic and diluted           $   (0.15)     $   (0.14)



                                       6

<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

Introduction

During the second quarter of 1998, the Company reduced its head count from 27 to
13 employees. Decreases in head count were made in all areas of the Company and
will result in significantly lower operating expenses in all areas of the
Company for the balance of 1998. These changes were made in order to control
expenses and focus the Company's resources on development of the next version of
its cardiovascular information system, rather than generating revenues from the
current version of its system. Accordingly, the Company's revenues decreased
from the first quarter of 1998 to the second quarter of 1998. The Company does
not expect revenues to begin to increase until after it has completed
development of the next version of its cardiovascular information system in
1999. The Company will be seeking additional capital during 1998 to finance
operations beyond the fourth quarter of 1998.

At the end of the second quarter, the Company's Cardiovascular Outpatient System
was in use by eight cardiovascular practice groups. The Company's CLE products
for cardiac catheterization laboratories were in use at two sites and the Asthma
and Allergy Outpatient System was in use at four asthma and allergy practice
groups.

The Company is reevaluating its asthma and allergy product in light of decreased
market demand. The Company had a development agreement with National Jewish
Medical and Research Center to develop a clinical information system for their
disease management program. During the second quarter, National Jewish Medical
and Research Center elected under the agreement not to continue with the next
development phase of the project. The Company also has an agreement with
National Asthma and Allergy System ("NAAS") for the development and installation
of an allergy and asthma outpatient system at up to eight asthma and allergy
practice groups affiliated with NAAS. At the end of 1997, the Company had
installed the system at four asthma and allergy practice groups. NAAS is in the
process of discontinuing operations and has asked to terminate the exclusive
marketing agreement between the Company and NAAS.


Results of Operations

The Company reported revenues of $121,600 for the three months ended June 30,
1998. Revenues consisted of installation and interface development fees of
$75,300 and recurring license fees of $46,300 for the quarter. Revenues for the
current quarter increased by $76,800, or 171%, over the same quarter one year
ago. Revenues for the quarter ended June 30, 1997 were $44,800 and consisted of
recurring license fees only.

Revenues for the six-month period ended June 30, 1998 totaled $395,500, an
increase of $151,900, or 62%, over the same period one year ago. Revenues
consisted of $304,700 of installation and interface fees and $90,800 of
recurring license fees for the six months ended June 30, 1998. Revenues for the
six months ended June 30, 1997 totaled $243,600 and consisted of $150,000 of
development fees, recurring fees of $92,800 and miscellaneous revenue of $800.

During 1997, the Company implemented a cost reduction program to reduce levels
of expenditures and conserve cash funds. As part of this cost reduction program,
the Company reduced employee head count during 1997 in order to more effectively
match expenses with revenues. During the second quarter of 1998, the Company
decreased its employee head count further in order to more effectively match
expenses with present revenue levels.

Cost of revenues was $222,400 and $220,900 for the three months ended June 30,
1998 and 1997, respectively. Amortization of capitalized software development
costs included in cost of revenues was $10,300 and $25,200 for the three months
ended June 30, 1998 and 1997, respectively. Royalty expense included in cost of
revenues was zero for the second quarter of both years. Cost of revenues was
$444,700 and $520,600 for the six months ended June 30, 1998 and 1997,
respectively. Amortization of capitalized software development costs included in
cost of revenues was $16,200 and $50,400 for the six months ended June 30, 1998
and 1997, respectively. Royalty


                                       7

<PAGE>


expense included in cost of sales was $0 and $14,900 for the six months ended
June 30, 1998 and 1997, respectively.

Sales and marketing expense was $151,700 and $387,200 for the three and six
months ended June 30, 1998, respectively. This compares to $354,500 and $765,000
for the three and six months ended June 30,1997, respectively. Expenses for the
three and six months ended June 30, 1998 have declined compared to the same
periods last year due to the cost reduction program mentioned above which
resulted in reductions in payroll expenses, travel expenses and other sales and
marketing expenses.

Research and development expenses for the three months ended June 30, 1998 were
$332,300 compared to $360,900 for the three months ended June 30, 1997. For the
six months ended June 30, 1998 research and development expenses were $553,800
compared to $742,000 for the six months ended June 30, 1997. The Company
capitalizes software development costs after technological feasibility is
achieved on new products and enhancements to existing products. In the first
quarter of 1998, the Company capitalized $84,600 of development costs. No
development costs were capitalized in the second quarter of 1998 or for the
first six months of 1997. Research and development costs have decreased from one
year ago due to the cost reduction program mentioned above. The cost reduction
program resulted in reductions in payroll, travel and other development
expenses. These decreases have been partially offset by increased consulting
expense related to new product development for the three and six months ended
June 30, 1998.

General and administrative expenses were $462,500 and $655,100 for the three
months ended June 30, 1998 and 1997, respectively. Expenses for the six months
ended June 30, 1998 and 1997 were $763,300 and $1,143,400, respectively.
Expenses for 1998 are lower in the areas of payroll and travel expenses due to
the cost reduction program mentioned above offset by the additional bad debt
expense of $161,000 recorded in the second quarter. Expenses for the three
months ended March 31,1997 included one-time expenses consisting of $93,900 of
legal fees for the renegotiation of certain royalty agreements and $53,900 of
recruiting expenses for a new chief executive officer. Expenses for the three
months ended June 30, 1997 included one-time expenses of a $100,000 milestone
payment under one of the royalty agreements and $22,100 of additional recruiting
expenses for a chief executive officer.

Interest income and other income and expenses were $21,000 and $9,000 for the
three months ended June 30, 1998 and 1997, respectively. For the six months
ended June 30, 1998 and 1997 interest income and other income and expenses were
$46,000 and $24,000, respectively. Changes in interest income are due to
fluctuations in the Company's cash balances. The Company completed a significant
equity financing in January 1998.

Interest expense was $9,900 and $71,400 for the three months ended June 30, 1998
and 1997, respectively. Interest expense for the six months ended June 30, 1998
was $19,600, a decrease of $52,100 over the same period one year ago. The
decrease is a result of the November 1997 restructuring of the convertible
subordinated notes payable issued by the Company during 1997 to be non-interest
bearing notes.

Liquidity and Capital Resources

The Company has financed its operations since inception primarily through
private and public placement of Common Stock, and, secondarily from revenues.

At June 30, 1998 the Company had $1,251,400 in cash and cash equivalents, an
increase of $487,200 from December 31, 1997. The increase was due to the sale of
Common Stock in January 1998, which resulted in net proceeds to the Company of
$1,955,300. During the first six months of 1998, the Company has used $1,356,800
of cash to fund operations, $84,600 to fund capitalized software development
costs, $22,900 to purchase capital equipment and $4,400 to make payments on
capital leases. The Company does not have significant capital equipment purchase
commitments.


                                       8

<PAGE>


The Company estimates that its current cash balances will be sufficient to fund
operations of the Company through the end of 1998. Additional operating capital
will be needed to fund operations of the Company in 1999. There can be no
assurance that the Company will be able to obtain additional financing on
satisfactory terms, or at all. If the Company is unable to obtain additional
financing, it will be forced to cease operations.


                                       9

<PAGE>


                           PART II - OTHER INFORMATION


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

      ITEM NUMBER                  ITEM                       METHOD OF FILING

      27.1             Amended Financial Data Schedule         Filed herewith


(b)   Reports on Form 8-K

      None.


                                       10

<PAGE>


                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the Registrant has
caused this Amendment to be signed on its behalf by the undersigned, thereunder
duly authorized.


Dated: November 5, 1998


                                         LIFERATE SYSTEMS, INC.




                                         By: /s/ F.G. Hamilton
                                             -----------------
                                         F.G. Hamilton
                                         Acting Chief Executive Officer
                                         (Principal Executive Officer)




                                         By: /s/ Kenneth G. Tarr
                                             -------------------
                                         Kenneth G. Tarr
                                         Acting Chief Financial Officer
                                         (Principal Financial and Accounting
                                         Officer)


                                       11

<PAGE>


                             LIFERATE SYSTEMS, INC.

                           EXHIBIT INDEX TO QUARTERLY
                              REPORT ON FORM 10-QSB
                  for the Quarterly Period ended June 30, 1998


ITEM NUMBER                     ITEM                        METHOD OF FILING

27.1              Amended Financial Data Schedule            Filed herewith


                                       12