<PAGE>

                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC. 20549
                                    FORM 10-QSB


(MARK ONE)

     [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
          ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 OR

     [ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 
EXCHANGE ACT FOR THE TRANSITION PERIOD FROM            TO           .
                                            ----------    ----------


                          COMMISSION FILE NUMBER:  0-24738
                                          
                                          
                         LORONIX INFORMATION SYSTEMS, INC.
         (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
                                          


            NEVADA                                         33-0248747
(STATE OR OTHER JURISDICTION OF                          (IRS EMPLOYER
 INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)


                     820 AIRPORT ROAD, DURANGO, COLORADO 81301
                      (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                          
                     ISSUER'S TELEPHONE NUMBER:  (970) 259-6161
                                          
                                          
                                          
     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    
              ---

     AS OF OCTOBER 16, 1998 THERE WERE 4,646,836 SHARES OF THE ISSUER'S COMMON
STOCK OUTSTANDING.

<PAGE>
                                          
                          LORONIX INFORMATION SYSTEMS, INC.
                                          
                                       INDEX



PART I.     FINANCIAL INFORMATION                                       PAGE NO.

            ITEM 1. FINANCIAL STATEMENTS

               CONDENSED CONSOLIDATED BALANCE SHEET                        1
                  AS OF SEPTEMBER 30, 1998

               CONDENSED CONSOLIDATED STATEMENTS                           3
                  OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
                  SEPTEMBER 30, 1998 AND 1997

               CONDENSED CONSOLIDATED STATEMENTS OF                        4
                  CASH FLOWS FOR THE NINE MONTHS ENDED 
                  SEPTEMBER 30, 1998 AND 1997

               NOTES TO CONDENSED CONSOLIDATED FINANCIAL                   6
                  STATEMENTS

            ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF                8
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS


PART II.   OTHER INFORMATION

            ITEM 1. LEGAL PROCEEDINGS                                      16

            ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                       16


SIGNATURES.                                                                17

<PAGE>

                         PART I - FINANCIAL INFORMATION

                       LORONIX INFORMATION SYSTEMS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                     ASSETS

<TABLE>
<CAPTION>

                                                            SEPTEMBER 30,
                                                                1998
                                                            -------------
                                                             (UNAUDITED)
<S>                                                         <C>
Current assets:                                            

     Cash and cash equivalents                              $ 2,790,069 
     Accounts receivable:
        Trade, net of allowance for doubtful accounts
           of $162,980                                        3,193,220 

        Officers and employees                                  150,685 
     Inventory, net                                           2,100,904 
     Prepaid expenses and other assets                          122,302 
     Note receivable                                            107,734 
     Notes receivable, related parties                           38,454 
                                                            -----------
            Total current assets                              8,503,368 


     Property and equipment, net of accumulated
          depreciation of $2,256,609                          4,104,193 
     Capitalized software costs, net of accumulated
          amortization of $1,163,893                            886,676 
     Notes receivable, related parties                           48,065 
     Deposits and other assets                                   37,239 
                                                            -----------
             Total assets                                   $13,579,541 
                                                            -----------

</TABLE>

                                   (continued)
                                        1

<PAGE>

                       LORONIX INFORMATION SYSTEMS, INC.
                CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                            SEPTEMBER 30,
                                                                 1998
                                                            -------------
                                                             (UNAUDITED)
<S>                                                         <C>
Current liabilities:

     Accounts payable                                       $ 1,683,798 
     Accrued liabilities                                        480,416 
     Debt, current portion                                       76,996 
     Capital lease                                               10,780 
     Customer deposits                                          426,438 
     Deferred maintenance revenue                                47,935 
                                                            -----------
          Total current liabilities                           2,726,363 


     Debt, net of current portion                             1,098,073 
     Capital lease                                                  898 
                                                            -----------
           Total liabilities                                  3,825,334 
                                                            -----------
Stockholders' equity:
   Preferred stock, $.001 par value, 
     authorized 2,000,000 shares, no shares                           - 
     issued and outstanding
   Common stock, $.001 par value, authorized
     20,000,000 shares, issued and outstanding,
     4,646,836 shares                                             4,647 
   Additional paid-in capital                                15,199,175 
   Notes receivable from stockholders                          (147,883)

   Accumulated deficit                                       (5,301,732)
                                                            -----------
          Total stockholders' equity                          9,754,207 
                                                            -----------
          Total liabilities and stockholders' equity        $13,579,541 
                                                            -----------
                                                            -----------

</TABLE>

                See accompanying notes to financial statements.
                                      2

<PAGE>

                      LORONIX INFORMATION SYSTEMS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                THREE MONTHS ENDED                     NINE MONTHS ENDED
                                                                   SEPTEMBER 30,                         SEPTEMBER 30,
                                                           ---------------------------           -------------------------------
                                                              1998             1997                1998                 1997
                                                           ----------       ----------           ----------           ----------
                                                                    (UNAUDITED)                            (UNAUDITED)
<S>                                                        <C>              <C>                  <C>                  <C>

Systems, supplies and maintenance                        
   Revenue                                                 $5,336,735       $2,027,404           $9,225,281           $6,154,818
                                                           ----------       ----------           ----------           ----------
Operating costs and expenses:

  Cost of products sold                                     2,863,504        1,064,947            4,932,997            3,326,705
  Operations and customer support                             486,630          334,532            1,147,937            1,147,523
  Selling, general and administrative                       1,521,904        1,025,062            3,585,020            2,809,302

  Research and development                                    363,587          373,304            1,043,246            1,078,386
                                                           ----------       ----------           ----------           ----------
       Total cost and expenses                              5,235,625        2,797,845           10,709,200            8,361,916

        Income (loss) from operations                         101,110         (770,441)          (1,483,919)          (2,207,098)


Other income (expense):
  Interest income, net                                         21,175           12,279               54,436              102,441 
  Other expense                                               (18,186)         (18,315)             (22,383)             (35,898)
                                                           ----------       ----------           ----------           ----------
        Net other income (expense)                              2,989           (6,036)              32,053               66,543 

        Income (loss) before income tax
          (expense) benefit                                   104,099         (776,477)          (1,451,866)          (2,140,555)
 
Income tax (expense) benefit                                       --         (213,158)                (800)             184,866 
                                                           ----------       ----------           ----------           ----------
        Net income (loss)                                    $104,099        ($989,635)         ($1,452,666)         ($1,955,689)
                                                           ----------       ----------           ----------           ----------
                                                           ----------       ----------           ----------           ----------

Net income (loss) per share:

        Basic                                                   $0.02           ($0.21)              ($0.31)              ($0.42)
        Diluted                                                 $0.02           ($0.21)              ($0.31)              ($0.42)

Weighted-average shares outstanding

        Basic                                               4,646,836        4,663,186            4,646,384            4,662,467 
        Diluted                                             4,689,394        4,663,186            4,646,384            4,662,467 

</TABLE>

                   See accompanying notes to financial statements.
                                         3

<PAGE>

                       LORONIX INFORMATION SYSTEMS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                          NINE MONTHS ENDED
                                                            SEPTEMBER 30,      
                                                      --------------------------
                                                          1998          1997
                                                      -----------   ------------
                                                      (UNAUDITED)    (UNAUDITED)
<S>                                                   <C>           <C>

Cash flows from operating activities:
   Net loss                                           $(1,452,666)  $(1,955,689)
   Adjustments to reconcile net loss to net cash
     (used in) operating activities:
       Depreciation and amortization                      881,889       768,391 
       Loss on disposal of capital equipment                   --        27,466 
       (Gain) loss on foreign currency exchange            (3,156)        5,614 
       Provision for deferred income taxes                     --      (204,400)
       Changes in operating assets and liabilities:
          Increase in accounts receivable, net           (744,279)   (1,624,242)
          Increase in inventory, net                     (704,518)   (1,341,096)
          Decrease in prepaid expenses and other          786,145       248,352 
          Increase in accounts payable                    829,264       346,547 
          Increase in accrued liabilities                 198,612        77,886 
          Increase in customer deposits                   283,026            --
          (Decrease) increase in deferred revenue         (15,535)       47,054 
                                                      -----------   ------------
                Net cash provided by (used in)
                  operating activities:                    58,782    (3,604,117)
                                                      -----------   ------------

Cash flows from investing activities:
   Capital expenditures                                  (860,519)     (686,186)
   Proceeds from disposal of capital equipment                           15,000 
   Decrease in notes receivable                            65,533        72,017 
   Decrease (increase) in deposits and other assets         8,276       (17,260)
   Capitalized software                                  (289,869)     (356,100)
                                                      -----------   ------------
                Net cash used in investing
                  activities:                          (1,076,849)     (972,529)

                                                      -----------   ------------

Cash flows from financing activities:
    Proceeds from bank borrowings                         500,000            --
    Proceeds from facility mortgage, net of principal
      payments                                                 --       700,000 
    Payments on facility mortgage                         (16,506)       (3,366)
    Payments on capital lease                             (11,296)           --
    Proceeds from exercise of stock options                 1,814         3,593 
                                                      -----------   ------------
                Net cash provided by financing
                  activities:                             474,012       700,227 

Net decrease in cash and cash equivalents                (544,055)   (3,876,419)
Cash and cash equivalents, beginning of year            3,334,124     6,126,484 
                                                      -----------   ------------
Cash and cash equivalents, end of September            $2,790,069    $2,250,065 
                                                      -----------   ------------
                                                      -----------   ------------

</TABLE>

                                   (continued)
                                        4

<PAGE>

                       LORONIX INFORMATION SYSTEMS, INC.
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>

                                                           NINE MONTHS ENDED
                                                             SEPTEMBER 30,
                                                      --------------------------
                                                          1998          1997
                                                      -----------   ------------

                                                      (UNAUDITED)   (UNAUDITED)
<S>                                                   <C>           <C>

Supplemental cash flow information:
   Interest paid                                          $50,259       $11,253 
                                                      -----------   ------------
                                                      -----------   ------------
   Income taxes paid                                           --            --
                                                      -----------   ------------
                                                      -----------   ------------

Noncash investing activities:
  In 1998, the Company transferred inventory valued at $114,662 to 
    property and equipment.
  In 1997, the Company transferred inventory valued at $333,955 to
    property and equipment.

</TABLE>

                  See accompanying notes to financial statements.
                                        5

<PAGE>

LORONIX INFORMATION SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(SEPTEMBER 30, 1998 - UNAUDITED)



NOTE 1:   BASIS OF PRESENTATION

     The accompanying condensed consolidated financial statements have been 
prepared in accordance with Securities and Exchange Commission requirements 
for interim financial statements.  Therefore, they do not include all of the 
information and footnotes required by generally accepted accounting 
principles for complete financial statements.  The financial statements 
should be read in conjunction with the Form 10-KSB for the year ended 
December 31, 1997 of Loronix Information Systems, Inc. (the "Company").

     The results of operations for the interim periods shown in this report 
are not necessarily indicative of results to be expected for the full year.  
In the opinion of management, the information contained herein reflects all 
adjustments necessary to make the results of operations for the interim 
periods a fair statement of such operations.  All such adjustments are of a 
normal recurring nature.

NOTE 2:   REPORTING COMPREHENSIVE INCOME

     Effective January 1, 1998, the Company adopted the Financial Accounting 
Standards Board SFAS No. 130, REPORTING COMPREHENSIVE INCOME. This statement 
established standards for reporting and display of comprehensive income and 
its components (revenue, expenses, gains and losses) in a full set of 
general-purpose financial statements.  Reclassification of financial 
statements for earlier periods provided for comparative purposes is required. 
The adoption of this statement had no material impact on the Company's 
financial condition or results of operation as of September 30, 1998 and for 
the three and nine-month periods ended September 30, 1998 and 1997.  Total 
comprehensive income did not differ from (i) the Company's net income for the 
three months ended September 30, 1998 or (ii) the Company's net loss for the 
three months ended September 30, 1997 or the Company's net loss for the nine 
months ended September 30, 1998 and 1997.

NOTE 3:   EARNINGS PER SHARE

     The Company presents net income and net loss per share in accordance 
with SFAS No. 128, "Earnings per Share."  As required by SFAS No. 128,  the 
Company must present basic and diluted net income and net loss per share as 
defined. Basic net income and net loss per common share is computed using the 
weighted average number of common shares outstanding during the period.  
Diluted net income and net loss per common share is computed to incorporate 
the incremental dilutive shares issuable upon the assumed exercise of stock 
options.  All prior period net income and net loss per common share 
information are presented in accordance with SFAS No. 128.
     
     Stock options and warrants outstanding at September 30, 1998 totaled 
1,372,073.  For the three months ended September 30, 1998, 42,558 were 
included in computing the diluted net income per share.  For the nine months 
ended September 30, 1998 stock options and warrants were not included in 
computing the diluted net loss per share because the effect would have been 
anitdilutive. Stock options and warrants totaling 1,282,133 shares for the 
three and nine months ended September 30, 1997 were not included in computing 
the diluted net loss per share because the effect would have been 
antidilutive.

                                       6

<PAGE>


NOTE 4:   LEGAL PROCEEDINGS

     On October 17, 1997, the Company received notice that it had been named 
as a defendant in a patent infringement lawsuit brought by a competitor, 
Prima Facie, Inc. ("PFI"), in the U.S. District Court for the District of 
Maryland. The lawsuit alleged that the Company's CCTVware Transit product 
infringed certain claims of two patents held by PFI and that the Company has 
interfered with PFI's business relationships.  The claim was amended in June 
1998 to allege infringement by the Company's other CCTVware products.  The 
suit seeks injunctive relief against further infringement and damages.  The 
lawsuit also names one of the Company's domestic distributors as a 
co-defendant.  The Company believes that these claims are without merit and 
is defending itself vigorously.

     On July 6, 1998, the Company filed counterclaims against PFI.  These 
counterclaims include a Declaratory Judgment of Patent Invalidity and six 
other counterclaims.  The Company and PFI have agreed to separate the patent 
infringement claims from all other claims and resolve the patent infringement 
issues first.  To date no trial has been scheduled.

     On August 25, 1998, PFI filed a motion to enjoin the Company from 
disseminating allegedly false and misleading information concerning the 
capabilities of PFI's products.  Although the Company has objected to this 
motion, the Company has advised the court hearing the matter that neither the 
Company, nor its representatives, will distribute any information concerning 
the capabilities of PFI's products.

                                       7

<PAGE>

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

     The following discussion and analysis should be read in conjunction with 
the Company's condensed consolidated financial statements and the notes 
related thereto included herein.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED 
SEPTEMBER 30, 1997

     REVENUE
     
     The Company's revenue is derived from sales of systems and supplies and 
from maintenance services.  Historically, systems and supplies have accounted 
for greater than 90% of total revenue, with systems accounting for a 
substantial majority of total revenue.  The Company expects this trend to 
continue for the foreseeable future.  Revenue increased from $2.03 million in 
the third quarter of 1997 to $5.34 million in the third quarter of 1998, 
representing a 163% increase.  Revenue in the third quarters of 1997 and 1998 
included approximately $1.14 million, or 56% of total revenue, and 
approximately $4.67 million, or 87% of total revenue, respectively, of 
digital recording related products ("CCTVware-Registered Trademark- 
Products").  The Company attributes the increase in revenue to the shipment 
of approximately $3.4 million of its approximately $4.0 million third quarter 
1998 beginning backlog and increasing general acceptance in the marketplace 
of digital recording technology.
 
     COSTS AND EXPENSES

     COST OF PRODUCTS SOLD.  The cost of products sold, consisting 
principally of the costs of hardware components and supplies as well as 
software amortization, increased from $1.06 million in the third quarter of 
1997 to $2.86 million in the third quarter of 1998, and represented 52% and 
54% of revenue, respectively.  The increase in the cost of products sold as a 
percentage of revenue was primarily attributable to a shift in the product 
mix.
 
     OPERATIONS AND CUSTOMER SUPPORT.  Operations and customer support 
expenses increased from approximately $334,500 in the third quarter of 1997 
to approximately $486,600 in the third quarter of 1998, and represented 16% 
and 9% of revenue, respectively.  The increase in such expenses in absolute 
terms resulted primarily from headcount and compensation-related increases 
and increases in travel and telecommunications expenses associated with 
increased business levels including customer installations and support.  The 
decrease in these expenses in percentage terms is the result of higher 
revenue in the third quarter of 1998.
 
     SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and 
administrative expenses increased from $1.03 million in the third quarter of 
1997 to $1.52 million in the third quarter of 1998, and represented 51% and 
28% of revenue, respectively.  The increase in such expenses in absolute 
terms resulted primarily from an increase in legal fees associated with the 
Company's patent litigation with PFI and an increase in the allowance for 
doubtful accounts.  The decrease in these expenses in percentage terms is the 
result of higher revenue in the third quarter of 1998.  Approximately 
$250,000 of the increase in the allowance for doubtful accounts relates to 
the Company's agreement to accept the return of certain equipment from one of 
its customers that is experiencing financial difficulty.     

     RESEARCH AND DEVELOPMENT.  Research and development expenses, net of 
capitalized software costs, decreased from approximately $373,300 in the 
third quarter of 1997 to approximately $363,600 in the third quarter of 1998, 
and represented 18% and 7% of revenue, respectively.  The research and 

                                       8

<PAGE>

development expenses in the third quarter of 1998 did not change materially 
from such expenses in the third quarter of 1997, and the difference in 
percentage terms is the result of higher revenue in the third quarter of 1998.

     INTEREST INCOME, NET.  Net interest income increased from approximately 
$12,300 in the third quarter of 1997 to approximately $21,200 in the third 
quarter of 1998.  This increase was due to an increase in the average cash 
available for investment.

     INCOME TAX EXPENSE/BENEFIT.  An income tax expense of approximately 
$213,200 for the third quarter of 1997 was attributed to an increase in the 
valuation allowance for previously recognized deferred tax assets.  In the 
third quarter of 1998, any tax expense from the operating income was offset 
by prior quarters' losses. 

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 
30, 1997

REVENUE
     
     Revenue increased from $6.15 million in the first nine months of 1997 to 
$9.23 million in the first nine months of 1998, representing a 50% increase. 
Revenue in the first nine months of 1997 and 1998 included approximately 
$3.54 million, or 58% of total revenue, and approximately $7.57 million, or 
82% of total revenue, respectively, of CCTVware Products.  The Company 
attributes the increase in revenue to the shipment of approximately $3.4 
million of its approximately $4.0 million third quarter 1998 beginning 
backlog and the increasing general acceptance in the market of digital 
recording technology.

     COSTS AND EXPENSES

     COST OF PRODUCTS SOLD.  The cost of products sold increased from $3.33 
million in the first nine months of 1997 to $4.93 million in the first nine 
months of 1998, and represented 54% and 53% of revenue, respectively. 
 
     OPERATIONS AND CUSTOMER SUPPORT.  Operations and customer support 
expenses of $1.15 million was essentially the same in the first nine months 
of 1997 and 1998, and represented 19% and 12% of revenue, respectively.  The 
decrease in these expenses in percentage terms is the result of higher 
revenue in the first nine months of 1998.
 
     SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and 
administrative expenses increased from $2.81 million in the first nine months 
of 1997 to $3.59 million in the first nine months of 1998, and represented 
46% and 39% of revenue, respectively.  The increase in such expenses resulted 
primarily from an increase in legal fees associated with the Company's patent 
litigation with Prima Facie, Inc. and an increase in the allowance for 
doubtful accounts. Approximately $250,000 of the increase in the allowance 
for doubtful accounts relates to the Company's agreement to accept the return 
of certain equipment from one of its customers that is experiencing financial 
difficulty. The decrease in these expenses in percentage terms is the result 
of higher revenue in the first nine months of 1998.

     RESEARCH AND DEVELOPMENT.  Research and development expenses, net of 
capitalized software costs, decreased from $1.08 million in the first nine 
months of 1997 to $1.04 in the first nine months of 1998, and represented 18% 
and 11% of revenue, respectively.  The research and development expenses in 
the first nine months of 1998 did not change materially from such expenses in 
the first nine months of 1997, and the difference in percentage terms is the 
result of higher revenue in the first nine months of 1998.

                                       9

<PAGE>
 
     INTEREST INCOME, NET.  Net interest income decreased from approximately 
$102,400 in the first nine months of 1997 to approximately  $54,400 in the 
first nine months of 1998.  This decrease was due to a reduction in the 
average cash available for investment and an increase in interest expense due 
to an increase in the average outstanding debt.

     INCOME TAX EXPENSE/BENEFIT.  An income tax benefit of $184,900 for the 
first nine months of 1997 was estimated at 9% of the pretax loss.  In the 
first nine months of 1998, any tax benefit from the operating loss was offset 
by an increase in the valuation allowance for deferred tax assets.
     
     YEAR 2000 CONVERSION

     Many computer systems experience problems handling dates beyond the year 
1999.  Therefore, some computer hardware and software will need to be 
modified prior to the year 2000 in order to remain functional.  The Company 
is assessing the readiness and compliance of its computer-based products 
available for sale and of its computer-based systems used internally, and the 
Company expects to implement successfully the system and programming changes 
necessary to address year 2000 issues by mid 1999.  The Company does not 
believe that the cost of such actions will have a material effect on the 
Company's results of operations or financial condition.  There can be no 
assurance, however, that there will not be a delay in, or increased costs 
associated with, the implementation of such changes, and the Company's 
inability to implement such changes on a timely basis could have an adverse 
effect on future results of operations, liquidity or financial condition.

     COMPUTER BASED PRODUCTS AVAILABLE FOR SALE.  The Company has two primary 
product lines available for sale consisting of CCTVware Products and 
Identification  Products ("ID" products).  The Company is currently assessing 
the state of readiness of these products to address Year 2000 issues. The 
Company expects to complete its assessment of its state of readiness by mid 
1999.
     
     CCTVWARE PRODUCTS.  The CCTVware product line consists of two major 
components including: CCTVware Enterprise products ("Enterprise") and the 
CCTVware Transit product ("Transit").  Recently, the Company created and 
executed a series of tests to determine the possible problems the Year 2000 
will have on the operation of Enterprise products version 1.2.  Enterprise 
products specifically include; Communications Server, Tape Server, Tape 
Library Server, Review Software, Control Software, Administrator Software, 
Vision Recorder and M Series Recorder.  These tests indicated that the Year 
2000 did not adversely affect the performance of Enterprise, and the Company 
expects that Enterprise products will operate successfully in the days 
leading up to year 2000, and beyond.  

     A key component of determining the Company's Year 2000 state of 
readiness is to identify those areas of operation where Enterprise products 
incorporate software and hardware products supplied by third party vendors 
and thus, where Year 2000 problems may arise as a result of products supplied 
by third parties. Third party software products include, but are not limited 
to: Microsoft Windows NT 4.0 Server, Microsoft Windows NT 4.0 Workstation, 
Microsoft Windows 95, Microsoft SQL Server 6.5 and Microsoft Visual C++.  
Third party hardware products include, but are not limited to: video capture 
cards, export cards, network switches, motherboards, modems and various 
workstations.  Because Enterprise products are dependent, in certain 
respects, on products supplied by third party vendors, an important part of 
the Company's Year 2000 effort is to contact those vendors who supply product 
that the Company considers critical to the operation of Enterprise and gauge 
their Year 2000 compliance efforts.  Tests to date indicate that certain 
third party supplied products do not appear to adversely affect the 
performance of the Enterprise products with respect to the Year 2000 issue.  
     
     The Company expects to release new versions of Enterprise in the future. 
The Company will incorporate, as part of its product release process, 
procedures that will audit and test compliance with 

                                       10

<PAGE>

Year 2000 performance of its internally developed products as will as those 
products supplied by third party vendors.
 
     To date the Company has not tested its Transit product for Year 2000 
compliance.  The Company expects to perform Year 2000 compliance testing 
within the next several months. 
     
     ID PRODUCTS.  The Company is creating a series of tests to determine the 
possible problems the Year 2000 will have on the operation of the Company's 
currently supported ID products.  The Company's current ID products include; 
ImageShare 1.21, 2.5 and 3.1, Instant ID 2.0, ImageShare Express, Ready Key 
interface 3.1, Color Card Creator and ImageShare 95.  The core programs of 
these products support 4 digit year date formats and if configured properly 
for specific users applications, the Company does not expect to uncover any 
issues that are material to Year 2000 compliance.  

     Certain of the Company's ID products also include interfaces to various 
access control applications including: Ccure with Badges 1.66, Ccure with 
ImageShare 1.21, Card Key with Badges 1.6x, Casi Rusco with ImageShare 1.21, 
Casi Rusco with Badges 1.66+, DAQ with ImageShare 1.21, Oracle Based DAQ with 
ImageShare 1.21 and ICAM with ImageShare 1.21.  The interface design 
methodology used to integrate the ID products are primarily controlled by the 
access control vendors.  The Company can make no assurances that these 
interfaces are Year 2000 compliant.
 
     A key component of determining the Company's Year 2000 state of 
readiness is to identify those areas of operation where ID products 
incorporate hardware and software products supplied by third party vendors 
and thus, where Year 2000 problems may arise as a result of third party 
supplied products.  Third party hardware products include, but are not 
limited to; computers, network adapter cards, video capture cards, controller 
cards, printers, encoders, cameras and various types of cabling.  For older 
ID product configurations, many of the third party vendor hardware products 
are no longer manufactured or supported by the supplier.  The Company can 
make no assurances that these devices are Year 2000 compliant.  Of most 
concern are older computers that may have embedded problems in the BIOS for 
processing Year 2000 dates.  Certain routines within the ID products use the 
BIOS date information to calculate current dates. Computers that possess this 
problem will require the BIOS to be updated and/or the computer replaced.  
Third party software products include, but are not limited to; Microsoft 
Windows 3.1 and 3.11, Microsoft Windows NT 4.0 Workstation, Microsoft Windows 
95 and 98, Microsoft SQL Server, Microsoft Access, Paradox, Informix, Sybase, 
IBM DB2, Microsoft Foxpro, Oracle, Microsoft Visual C++, Borland 3.1, 4.5 and 
5.01, Strategic Reporting's ReportSmith, and various Open DataBase 
Connectivity drivers provided by Intersolv, Microsoft and IBM.  Because ID 
products are dependent, in certain respects, on products supplied by third 
party vendors, an important part of the Company's Year 2000 effort is to 
contact those vendors who supply product that the Company considers critical 
to the operation of ID products and gauge their Year 2000 compliance efforts. 
 
     From 1989 through 1995, the company developed seven different ID 
products including: Badges 1.64 - 1.66, Loronix Color Image Management System 
Foxpro Based, Dos Based Foxpro BW Imaging System, ImageShare V (Visitor BW, 
Foxpro), ImageShare I (Color Foxpro), Laser ID Card Creator and Entry Check.  
In 1996, the Company recognized that the lack of availability of peripheral 
replacement equipment from third party vendors and inadequate technical 
resources, made it infeasible for the Company to continuing supporting these 
products. Accordingly, the Company notified its customers that it would no 
longer support these products and made available upgrade options to allow 
customers to migrate to newer products that would be supported by the Company.

     COMPUTER-BASED SYSTEMS USED INTERNALLY.  The Company uses various 
computer-based systems to operate its business on a day-to-day basis.  These 
systems include, but are not limited to: (i) software programs, including; 
Macola (for accounting, customer order processing, purchasing and inventory 
control), CardKey Access Control, Novel Network Operating System, SourceSafe, 
Microsoft Windows, 

                                       11

<PAGE>

and various software application programs and; (ii) hardware devices, 
including; servers, hubs, proximity readers, motion detectors, phone systems, 
and personal computers. 

     The Company's current version of its Macola software is not Year 2000 
compliant.  The Company has purchased the Year 2000 compliant version of 
Macola software and expects to implement this version by December 1998.  The 
Company is assessing its other internally used computer-based systems to 
determine their possible impact relative to the Year 2000 issue.

     COST OF YEAR 2000 CONVERSION.  To date the Company estimates that it has 
spent less than $10,000 on the Year 2000 issue and estimates that future 
costs associated with its Year 2000 compliance efforts will not exceed 
$50,000.

     CONTINGENCY PLANS.  The Company is currently in the information 
collection phase of addressing Year 2000 issues and has not created a 
contingency plan. Although the Company does not anticipate any significant 
issues relating to the Year 2000, it will create contingency plans as 
information becomes available indicating non-compliance issues that could 
have an adverse effect on the Company's future results of operations, 
liquidity or financial condition.     
     

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     During the nine months ended September 30, 1997 and 1998, the Company 
financed its operations primarily from working capital.

     The Company's principal uses of cash during the nine months ended 
September 30, 1997 and 1998 were to (i) in 1997, fund operating activities; 
(ii) acquire property and equipment; and (iii) invest in the development of 
software.
 
     During the first nine months of 1997, the Company's cash and cash 
equivalents decreased from $6.13 million at December 31, 1996 to $2.25 
million at September 30, 1997.  Net cash used in operating activities of 
$3.60 million consisted primarily of a net loss of $1.96 million, increases 
in deferred income taxes, accounts receivable and inventory offset by 
depreciation and amortization, a decrease in prepaid expenses and other 
assets and increases in accounts payable, accrued liabilities and deferred 
revenue.  Net cash used in investing activities of $972,500 consisted 
primarily of $686,200 of capital expenditures and $356,100 of capitalized 
software.  Net cash provided by financing activities of $700,200 consisted 
primarily of $700,000 in proceeds from the financing of the facility.

     During the first nine months of 1998, the Company's cash and cash 
equivalents decreased from $3.33 million at December 31, 1997 to $2.79 at 
September 30, 1998.  Net cash provided by operating activities of $58,800 
consisted primarily of a net loss of $1.45 million and increases in accounts 
receivable and inventory offset by depreciation and amortization and a 
decrease in prepaid expenses and other assets and increases in accounts 
payable, accrued liabilities and customer deposits.  Net cash used in 
investing activities of $1.08 million consisted primarily of capital 
expenditures of $860,800 and $289,900 of capitalized software.  Net cash 
provided by financing activities of $474,000 consisted primarily of $500,000 
from a bank borrowing.  The bank borrowing consists of a three-year balloon 
note with a fifteen-year amortization schedule with an interest rate of 8.5%. 
     
     At September 30, 1998, the Company had $5.8 million in working capital, 
including $3.19 million of trade accounts receivable and $2.10 million of 
inventory.  Days sales outstanding, calculated using an average accounts 
receivable balance, were approximately 53 days as of September 30, 1998, 
compared to 126 days for the same period a year ago.  The Company has 
provided and may continue to provide payment term extensions to certain of 
its customers from time-to-time.  As of September 30, 1998, the Company had 
payment term extensions equal to approximately $350,000.  With the exception 

                                       12

<PAGE>

of the Company's specific provision for bad debt related to one of its 
customers (see SELLING, GENERAL AND ADMINISTRATIVE under the caption "Results 
of Operation") the Company has historically collected its outstanding 
receivables and believes that it will be successful in the collection of its 
net receivable balance as of September 30, 1998. 
     
     The Company's inventory balance at September 30, 1998 and 1997 was $2.10 
million and $2.0 million, respectively.  Annualized inventory  turns, 
calculated using an average inventory balance, were 4.9 and 2.1 as of 
September 30, 1998 and 1997, respectively. 
     
     The Company's principal sources of liquidity are its cash and cash 
equivalents and cash generated from operating activities, if any.  The 
Company also has available up to a $1.0 million line of credit based on a 
percentage of the Company's eligible accounts receivable.  The line of credit 
facility expires in May 1999.  The line of credit has not been used to date.  
The Company anticipates capital expenditures for the remainder of 1998 of 
approximately $100,000.  The Company believes that, based on its current 
financial projections, it has sufficient working capital, inclusive of its 
line of credit facility, to meet its capital requirements and fund operations 
for at least the next twelve months.
     
CERTAIN FACTORS BEARING ON FUTURE RESULTS

     The statements in the third sentence under the caption "Revenue" on page 
8, and the third and fourth sentences of the first paragraph, the last 
sentence of the second paragraph, the fifth paragraph, the last sentence of 
the sixth paragraph, the thirteenth paragraph, and the second sentence of the 
fourteenth paragraph under the caption "Year 2000 Conversion", and the last 
sentence of the fifth paragraph and the last two sentences of the seventh 
paragraph under the caption "Financial Condition, Liquidity and Capital 
Resources", and the first sentence under the caption "Capital Requirements" 
on page 15 are forward-looking statements.  In addition, the Company may from 
time to time make oral forward-looking statements.  The following are 
important factors that could cause results to differ materially from those 
projected in any such forward-looking statements.

     DISTRIBUTION RELATIONSHIPS.  The Company believes that its success in 
penetrating markets for its identification products ("ID Products") and 
CCTVware Products depends in part on its ability to maintain distribution 
relationships with manufacturing representatives, dealers, systems 
integrators and distributors and to cultivate additional, similar 
relationships.  There can be no assurance that the Company will be successful 
in maintaining or expanding its distribution relationships.  The loss of 
certain distribution relationships could adversely affect the Company's 
business, operating results and financial condition.  Further, there can be 
no assurance that the businesses with which the Company has developed or is 
seeking to develop such relationships, some of whom have significantly 
greater financial and marketing resources than the Company, will not develop 
and market products in competition with the Company's products or will not 
otherwise discontinue their relationships with the Company. 

     INTERNATIONAL SALES.  The Company is seeking to expand its international 
presence by developing new distribution channels in certain foreign countries 
where it has not previously had a presence.  International sales are subject 
to a number of risks, including political and economic instability, 
unexpected changes in regulatory requirements, tariffs and other trade 
barriers, fluctuating exchange rates and the possibility of greater 
difficulty in accounts receivable collection.  There can be no assurance that 
these and other factors will not have a material adverse effect on the 
Company's future international sales, if any, and, consequently, the 
Company's business, operating results and financial condition.

     COMPETITION.  Certain of the Company's current and prospective 
competitors have substantially greater technical, financial and marketing 
resources than the Company.  In addition, there can be no assurance that any 
of the Company's products will be competitive in the face of advances in 
product technology developed by the Company's current or future competitors.  
Moreover, while the Company 

                                       13

<PAGE>

believes that the price/performance characteristics of its products are 
currently competitive, increased competition has created, and will continue 
to create, pricing pressures which could materially and adversely affect the 
Company's business, operating results and financial condition.

     PROPRIETARY RIGHTS. The Company is not aware that its products, 
trademarks or other proprietary rights infringe on the proprietary rights of 
any other third parties, except that a claim of infringement has been 
asserted against the Company by PFI.  Although the Company believes that this 
claim is without merit, an adverse result in this litigation with PFI could 
have a negative impact on the financial position and results of operations of 
the Company.  There can be no assurance that other third parties will not 
assert infringement claims against the Company in the future with respect to 
current or future products. As the number of software products in the 
industry increases and the functionality of these products further overlaps, 
the Company believes that software developers may become increasingly subject 
to infringement claims.  Any such claims against the Company, with or without 
merit, could result in costly litigation or might require the Company to 
enter into royalty or licensing agreements.  Such royalty and licensing 
agreements, if required, may not be available on terms acceptable to the 
Company.

     PRODUCT OBSOLESCENCE.  The Company's current products and products under 
development are limited in number and concentrated primarily in the markets 
for identification and surveillance products.  The life cycles of the 
Company's products are difficult to estimate due in large measure to changing 
and developing technology as well as the unknown future effect of products 
introduced by the Company's competition.  Price reductions or declines in 
demand for the Company's products, whether as a result of competition, 
technological change or otherwise, would have a materially adverse effect on 
the Company's results of operations or financial position.

     DEPENDENCE ON NEW PRODUCTS.  The market for the Company's products is 
characterized by ongoing technological development and evolving industry 
standards.  The Company's success will depend upon its ability to enhance its 
current products and to introduce new products which address technological 
and market developments and satisfy the increasingly sophisticated needs of 
customers.  For instance, the Company has released several products based on 
its CCTVware technology and expects to release additional products based on 
newer technology.  There can be no assurance that the Company will be 
successful in developing, marketing and selling sufficient volumes of its new 
CCTVware products or developing and marketing on a timely basis any other 
fully functional product enhancements or new products that respond to the 
technological advances by others.  For instance, the Company expected to 
introduce its Solo Remote-TM- product in the second quarter of 1998, but 
because of resource allocations and customer requested product enhancements, 
the Company has delayed the introduction of the Solo Remote product until 
1999.  There also can be no assurance that the Company's new products will be 
accepted by customers.  The Company's failure to enhance existing products, 
develop and release new products on a timely basis and gain market acceptance 
for such new products could materially and adversely affect the Company's 
business, operating results and financial condition.

     YEAR 2000 ISSUES.  The "Year 2000 issue" arises because most computer 
systems and programs were designed to handle only a two-digit year, not a 
four-digit year.  When the Year 2000 begins, these computers may interpret 
"00" as the year 1900 and could either stop processing date-related 
computations or could process them incorrectly.  The Company is taking steps 
to implement new information systems and migrate to Year 2000 compatible 
software for its accounting, customer order processing, purchasing and 
inventory control software, and accordingly, the Company does not currently 
anticipate any internal Year 2000 issues from this software.  However, the 
Company could be adversely impacted by Year 2000 issues related to other 
internally used computer-based systems and issues faced by major suppliers, 
customers, vendors and distributors with which the Company interacts.  The 
Company has begun a testing program to gauge the Year 2000 compliance of its 
products, and the Company is beginning the process of corresponding with 
certain third parties to determine whether they are Year 2000 compliant.  The 
Company will then evaluate and follow up on the responses to determine 

                                       14

<PAGE>

the impact that third parties who are not Year 2000 compliant may have on the 
operations and products of the Company.  As a result of the unprecedented and 
potentially complex nature of the Year 2000 issue however, there can be no 
assurance that this issue will not have a material and adverse impact on the 
business, operating results and financial condition of the Company, despite 
the Company's efforts.

     VARIABILITY OF OPERATING RESULTS.  The Company's revenue and operating 
results have fluctuated significantly from quarter to quarter, and may 
continue to fluctuate, due to a combination of factors.  These factors 
include relatively long sales cycles for certain products, the timing or 
cancellation of orders from major customers, the timing of new product 
introductions by the Company or its competitors, the Company's use of 
third-party distribution channels, the fulfillment of large one-time orders 
to particular customers and general economic conditions and other factors 
affecting capital spending.  Further, the Company generally ships orders in 
the quarter in which such orders are received, and accordingly, revenue in 
any quarter is substantially dependent on the orders booked and shipped in 
that quarter.  The Company has typically recognized a substantial portion of 
its revenue in the last month of the quarter, with much of this revenue 
concentrated in the last two weeks of the quarter.  Because the Company's 
operating expense levels are relatively fixed and based, to some extent, on 
anticipated revenue levels, a small variation in revenue can cause 
significant variations in operating results from quarter to quarter and may 
result in losses.  Due to all of the foregoing, the Company believes that 
period-to-period comparisons of its results of operations are not necessarily 
meaningful and should not be relied upon as indications of future performance.

     LEGAL PROCEEDINGS.  On October 17, 1997, the Company received notice 
that it had been named as a defendant in a patent infringement lawsuit 
brought by a competitor, PFI, in the U.S. District Court for the District of 
Maryland.  The lawsuit alleged that the Company's CCTVware Transit product 
infringed certain claims of two patents held by PFI and that the Company has 
interfered with PFI's business relationships.  The claim has recently been 
amended to allege infringement by the Company's other CCTVware products.  The 
suit seeks injunctive relief against further infringement and damages.  The 
lawsuit also names one of the Company's domestic distributors as a 
co-defendant.  Although the Company believes that these claims are without 
merit and is defending itself vigorously, an adverse result in the litigation 
could have a negative impact on the financial position and the results of 
operations of the Company.

     MANAGEMENT AND EMPLOYEES.  The Company's future success depends in 
significant part upon the continued service of its key technical and senior 
management personnel and its continued ability to attract and retain highly 
qualified technical and managerial personnel in the future.  The Company has 
in the past encountered some difficulties in fulfilling its hiring needs in 
the Durango, Colorado employment market, and there can be no assurance that 
the Company will be successful in hiring and retaining qualified employees in 
the future.

     CAPITAL REQUIREMENTS.  The Company believes that, based on its current 
projections, it has sufficient working capital to meet its requirements for 
at least the next 12  months.  However, to the extent that the Company 
experiences growth generally, or the Company's CCTVware line of products 
generates high demand, or the Company receives extraordinary large orders for 
certain CCTVware products from large business, institutional or government 
buyers, the Company's capital requirements may exceed the Company's available 
capital resources. Additionally, the Company has suffered losses in six of 
the past seven quarters, and such losses, which may occur in the foreseeable 
future, will diminish the Company's cash and cash equivalents.  There can be 
no assurance that the Company will be able to raise equity or debt financing 
on favorable terms, or at all. If the Company fails in such circumstances to 
raise additional capital as needed, the Company would likely be required to 
reduce the scope of its product development, selling and marketing activities 
and other operations, which would have a material adverse effect on the 
Company's business, financial condition and results of operation.

                                       15

<PAGE>

     VOLATILITY OF STOCK PRICE.  The market price of the Company's Common 
Stock has experienced significant volatility, and is likely to continue to be 
significantly affected by factors such as actual or anticipated fluctuations 
in the Company's operating results, the Company's failure to meet or exceed 
published earnings estimates, changes in earnings estimates or 
recommendations by securities analysts, announcements of technological 
innovations, new products or new contracts by the Company or its existing or 
potential competitors, developments with respect to patents, copyrights or 
proprietary rights, adoption of new accounting standards affecting the 
software industry, general market conditions and other factors.  In addition, 
the stock market has from time to time experienced significant price and 
volume fluctuations that have particularly affected the market prices for the 
common stock of technology companies which have often been unrelated to the 
operating performance of such companies.  These broad market fluctuations may 
materially adversely affect the market price of the Company's common stock.  
There can be no assurance that the trading price of the Company's Common 
Stock will not experience substantial volatility in the future. 


                                       16

<PAGE>

PART II.    OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS

     On October 17, 1997, the Company received notice that it had been named 
as a defendant in a patent infringement lawsuit brought by a competitor, PFI, 
in the U.S. District Court for the District of Maryland.  The lawsuit alleged 
that the Company's CCTVware Transit product infringed certain claims of two 
patents held by PFI and that the Company has interfered with PFI's business 
relationships.  The claim has recently been amended to allege infringement by 
the Company's other CCTVware products.  The suit seeks injunctive relief 
against further infringement and damages.  The lawsuit also names one of the 
Company's domestic distributors as a co-defendant.  (see Legal Proceedings 
under the caption "Certain Risks Bearing on Future Results").

     On July 6, 1998 the Company filed counterclaims against PFI.  These 
counterclaims include a Declaratory Judgment of Patent Invalidity and six 
other counterclaims.  The Company and PFI have agreed to separate the patent 
infringement claims from all other claims and resolve the patent infringement 
issues first.  To date no trial has been scheduled.

     On August 25, 1998, PFI filed a motion to enjoin the Company from 
disseminating allegedly false and misleading information concerning the 
capabilities of PFI's products.  Although the Company has objected to this 
motion, the Company has advised the court hearing the matter that neither the 
Company, nor its representatives, will distribute any information concerning 
the capabilities of PFI's products.

Item 2.   EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
          <S>   <C>
          (a)   27  Financial Data Schedule

          (b)   No reports on Form 8-K were filed by the Company during 
                the quarter ended September 30, 1998
</TABLE>


                                       17

<PAGE>

                                     SIGNATURES
                                          

     In accordance with the requirements 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.

                              Loronix Information Systems, Inc.

October 23, 1998                        /s/ Jonathan C. Lupia
----------------                        ---------------------
      Date                              Jonathan C. Lupia,
                                        Chief Operating Officer and 
                                        Chief Financial Officer

                                       18