<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

                                       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 000-22172

                              MIDISOFT CORPORATION
        (Exact name of small business issuer as specified in its charter)



                 Washington                            91-1345532
          (State of incorporation)      (I.R.S. Employer Identification No.)


                        1605 NW Sammamish Rd., Suite 205
                           Issaquah, Washington 98027
                    (Address of principal executive offices)

                                 (206) 391-3610
                           (Issuer's telephone number)



Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
                                      ---        ---

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

            Common stock, no par value; 4,691,066 shares outstanding
                              as of October 4, 1996

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

<PAGE>

                              MIDISOFT CORPORATION
                              INDEX TO FORM 10-QSB



                                                                            PAGE
                                                                            ----

                                     PART I

                              FINANCIAL INFORMATION

Item 1.   Financial Statements . . . . . . . . . . . . . . . . . . . . . .     3

          a)   Balance Sheets - September 30, 1996 and December 31, 1995

          b)   Statements of Operations - For the Three and Nine Months
               Ended September 30, 1996 and 1995

          c)   Statements of Cash Flows - For the Nine Months Ended
               September 30, 1996 and 1995

          d)   Notes to Financial Statements - For the Three and Nine
               Months Ended September 30, 1996 and 1995

Item 2.   Management's Discussion and Analysis  of Financial Condition or
               Plan of Operation . . . . . . . . . . . . . . . . . . . . .     8


                                     PART II

                                OTHER INFORMATION

Item 1.   Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . . .    11

Item 2.   Changes in Securities. . . . . . . . . . . . . . . . . . . . . .    11

Item 3.   Defaults Upon Senior Securities. . . . . . . . . . . . . . . . .    11

Item 4.   Submission of Matters to a Vote of Security Holders. . . . . . .    11

Item 5.   Other Information. . . . . . . . . . . . . . . . . . . . . . . .    11

Item 6.   Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .    11


SIGNATURE                                                                     12


                                        2

<PAGE>

ITEM 1.                       MIDISOFT CORPORATION

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>

                                                                   (Unaudited)           (Audited)
                                                                 At September 30,     At December 31,
                                                                       1996                1995
                                                                 ---------------     ---------------
<S>                                                              <C>                 <C>
Current assets:
  Cash and cash equivalents                                         $    928,000        $  2,143,000
  Short term investments                                                                   1,540,000
  Accounts receivable - net of allowances of
    $1,131,000 in 1996 and $1,550,000 in 1995                          1,471,000           2,329,000
  Inventories                                                            498,000             494,000
  Prepaid expenses                                                       324,000             266,000
                                                                 ---------------     ---------------
    Total current assets                                               3,221,000           6,772,000
Property & equipment, net                                                450,000             562,000
Capitalized software and other costs, net                                609,000           1,230,000
                                                                 ---------------     ---------------
    Total assets                                                    $  4,280,000        $  8,564,000
                                                                 ---------------     ---------------
                                                                 ---------------     ---------------

                       LIABILITIES & SHAREHOLDERS' EQUITY


Current liabilities:
  Trade accounts payable                                            $    158,000        $    429,000
  Accrued wages & payroll taxes                                          183,000             260,000
  Other accrued expenses                                               1,666,000           1,804,000
  Deferred revenue                                                       914,000             807,000
                                                                 ---------------     ---------------
    Total current liabilities                                          2,921,000           3,300,000
                                                                 ---------------     ---------------
Shareholders' equity
  Common stock, no par value; 10,000,000 shares authorized,
    4,691,066 issued and outstanding in 1996 and
    4,662,441 issued and outstanding in 1995                          17,178,000          17,106,000
  Retained deficit                                                   (15,819,000)        (11,842,000)
                                                                 ---------------     ---------------
    Total shareholders' equity                                         1,359,000           5,264,000
                                                                 ---------------     ---------------
    Total liabilities and shareholders' equity                      $  4,280,000        $  8,564,000
                                                                 ---------------     ---------------
                                                                 ---------------     ---------------
</TABLE>


                 See accompanying notes to financial statements


                                        3

<PAGE>

                              MIDISOFT CORPORATION

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                          Three Months Ended             Nine Months Ended
                                             September 30,                  September 30,
                                      ---------------------------   ---------------------------
                                          1996           1995           1996           1995
                                      ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>
Revenues                               $ 1,158,000    $ 1,234,000    $ 2,161,000    $ 4,461,000
Cost of revenues                           588,000        552,000      1,400,000      1,700,000
                                      ------------   ------------   ------------   ------------
Gross profit                               570,000        682,000        761,000      2,761,000
Operating expenses:
  Sales and marketing                      723,000      1,182,000      2,459,000      2,948,000
  General and administrative               488,000      1,804,000      1,708,000      2,754,000
  Research and development                 244,000        603,000        666,000      1,222,000
  Restructuring charge                                  2,369,000                     2,369,000
                                      ------------   ------------   ------------   ------------
     Total operating expenses            1,455,000      5,958,000      4,833,000      9,293,000
                                      ------------   ------------   ------------   ------------
Operating loss                            (885,000)    (5,276,000)    (4,072,000)    (6,532,000)
Interest and other income                   17,000         90,000         95,000        339,000
                                      ------------   ------------   ------------   ------------
Loss before taxes                         (868,000)    (5,186,000)    (3,977,000)    (6,193,000)
Provision for income taxes                       -        326,000              -              -
                                      ------------   ------------   ------------   ------------
Net loss                               $  (868,000)   $(5,512,000)   $(3,977,000)   $(6,193,000)
                                      ------------   ------------   ------------   ------------
                                      ------------   ------------   ------------   ------------

Net loss per share                     $     (0.19)   $     (1.23)   $     (0.85)   $     (1.37)
                                      ------------   ------------   ------------   ------------
                                      ------------   ------------   ------------   ------------

Weighted average shares outstanding      4,691,000      4,497,000      4,677,000      4,512,000
                                      ------------   ------------   ------------   ------------
                                      ------------   ------------   ------------   ------------
</TABLE>



                 See accompanying notes to financial statements


                                        4

<PAGE>

                              MIDISOFT CORPORATION
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                          Nine Months Ended
                                                                             September 30,
                                                                  ----------------------------------
                                                                       1996                1995
                                                                  --------------      --------------
<S>                                                               <C>                 <C>
CASH FLOWS FROM OPERATIONS:
  Net loss                                                          $ (3,977,000)       $ (6,193,000)
                                                                  --------------      --------------
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
     Depreciation & amortization                                         792,000             914,000
     Deferred rent provision                                                                  46,000
     Writedown of capitalized software                                                     2,369,000
     (INCREASE) DECREASE IN ASSETS:
       Accounts receivable, net                                          858,000             386,000
       Inventories                                                        (4,000)           (226,000)
       Prepaid expenses                                                  (58,000)             83,000
     INCREASE (DECREASE) IN LIABILITIES:
       Trade accounts payable                                           (271,000)             82,000
       Accrued wages & payroll taxes                                     (77,000)            367,000
       Other accrued expenses                                           (138,000)            407,000
       Deferred income taxes                                                   -             (18,000)
       Deferred revenue                                                  107,000                   -
                                                                  --------------      --------------
           Total adjustments                                           1,209,000           4,410,000
                                                                  --------------      --------------
           Net cash (used) for operations                             (2,768,000)         (1,783,000)
                                                                  --------------      --------------
CASH FROM/(USED FOR) INVESTMENTS:
  Redemption of short term investments                                 1,540,000                   -
  Additions to plant & equipment                                         (59,000)           (400,000)
  Captialized software                                                         -          (2,384,000)
                                                                  --------------      --------------
           Net cash from/(used for) investments                        1,481,000          (2,784,000)
                                                                  --------------      --------------
CASH FLOWS FROM FINANCING:
  Stock options exercised                                                 72,000              29,000
  Stock buyback                                                                -             (17,000)
                                                                  --------------      --------------
           Net cash provided by financing                                 72,000              12,000
                                                                  --------------      --------------
Net change in cash and cash equivalents                               (1,215,000)         (4,555,000)
Cash and cash equivalents, beginning of year                           2,143,000           9,601,000
                                                                  --------------      --------------
Cash and cash equivalents, end of period                            $    928,000        $  5,046,000
                                                                  --------------      --------------
                                                                  --------------      --------------
SUPPLEMENTAL CASH FLOW INFORMATION:
  Income taxes paid                                                 $          -        $      2,000
  Common stock issued for purchase of other assets                  $          -        $  1,991,000
                                                                  --------------      --------------
                                                                  --------------      --------------
</TABLE>


                 See accompanying notes to financial statements


                                        5

<PAGE>

                              MIDISOFT CORPORATION
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995


INTERIM FINANCIAL INFORMATION

     The condensed financial statements included herein have been prepared by
Midisoft Corporation (the "Company") without audit, according to the rules and
regulations of the Securities and Exchange Commission.  Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations.  However, in the opinion of management,
the accompanying unaudited financial statements contain all adjustments
(consisting of only normal recurring accruals) considered necessary to present
fairly the results for the interim periods presented.  The accompanying
condensed financial statements and related notes should be read in conjunction
with the Company's 1995 audited financial statements included in its Annual
Report on Form 10-KSB filed March 29, 1996.

     The results of operations for the nine months ended September 30, 1996 are
not necessarily indicative of the results to be expected for the full calendar
year.

ACCOUNTS RECEIVABLE AND MAJOR CUSTOMER INFORMATION

     Accounts receivable from Original Equipment Manufacturers (OEM) and other
resellers are summarized as follows:


                                               September 30,       December 31,
                                                   1996                1995
                                                   ----                ----
     OEM                                        $  1,689,000       $  2,398,000
     Resellers and other                             913,000          1,481,000
                                              --------------     --------------
       Subtotal                                    2,602,000          3,879,000
     Less: Allowance for doubtful accounts          (895,000)        (1,120,000)
           Allowance for sales returns              (236,000)          (430,000)
                                              --------------     --------------
       Total accounts receivable                $  1,471,000       $  2,329,000
                                              --------------     --------------
                                              --------------     --------------


     Accounts receivable consist principally of amounts due from OEMs and
reseller customers for licensing fees, royalties and direct sales of products.
OEM customer payment terms typically are one year in duration and require
payments to be made in quarterly installments.  At September 30, 1996, OEM
accounts receivable amounts not yet due were $329,000, equal to 19.5% of total
OEM receivables compared to $971,000, equal to 40% at December 31, 1995.
Reseller payment terms typically are standardized and similar to those given
software distributors.  At September 30, 1996, reseller accounts receivable
amounts not yet due were $776,000, equal to 85% of total reseller receivables
compared to $421,000, equal to 28% at December 31, 1995.

     The Company's primary credit concentrations involve domestic and foreign
OEM and reseller customers. Foreign customers are primarily located in Western
Europe, Taiwan, Singapore, Korea and Japan.  Domestic customers comprised
$1,812,000 of accounts receivable at September 30, 1996 compared to $2,769,000
at December 31, 1995.  Foreign customers comprised $790,000 of accounts
receivable at September 30, 1996 compared to $1,110,000 at December 31, 1995.

INCOME TAXES

     No income taxes are payable at September 30, 1996, the result of the
Company's year-to-date loss and the result of Federal net operating losses at
December 31, 1995 of approximately $11.3 million that will reduce taxes due in
future periods and expire beginning in 2008.


                                        6

<PAGE>

CAPITALIZED SOFTWARE AND OTHER COSTS

     Capitalized software and other costs are summarized as follows:


                                               September 30,      December 31,
                                                   1996               1995
                                                   ----               ----
     Purchased software technology, net of
      accumulated amortization of $353,000
      and $177,000, respectively, in 1996
      and 1995                                 $     252,000      $    428,000
     Purchased contract software technology,
      net of accumulated amortization of
      $337,000 and $131,000, respectively,
      in 1996 and 1995                               157,000           364,000
     Capitalized software development costs,
      net of accumulated amortization of
      377,000 and $139,000, respectively,
      in 1996 and 1995                               200,000           438,000
                                              --------------     --------------
        Total capitalized software             $     609,000      $  1,230,000
                                              --------------     --------------
                                              --------------     --------------


OTHER ACCRUED EXPENSES

The following table summarizes the components of the other current liabilities:


                                               September 30,      December 31,
                                                   1996               1995
                                                   ----               ----
     Shareholder litigation settlement         $   1,544,000      $   1,644,000
     Other accrued expenses                          122,000            160,000
                                              --------------     --------------
                                               $   1,666,000      $   1,804,000
                                              --------------     --------------
                                              --------------     --------------


The shareholder litigation settlement is comprised of 650,000 shares of the
Company's common stock expected to be issued in the fourth quarter of 1996.  The
cash payment portion of the settlement in the amount of $100,000 was made in
May, 1996.

LITIGATION

       On February 26, 1996, the Company settled the shareholders' class action
lawsuit which had been filed against it in March 1995.  See "PART II, ITEM 1.
Legal Proceedings".


                                        7

<PAGE>

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

     THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE NOTES THERETO APPEARING ELSEWHERE IN THIS FORM 10-QSB.

GENERAL

     The Company is a leading provider of innovative applications for the use of
sound on the personal computer (PC).  The Company was incorporated in Washington
in 1986 and introduced its first product, METATRAK, the precursor to Studio, in
that year.  The Company has focused its product lines to include music learning
and creativity and the integration of sound and media in today's PC environment.
The Company divides these product lines into two development categories, music
products and strategic products.  The Company's music products enable users to
enjoy, explore, learn, create and share music.  The Company pioneered the
development of MIDI technology, including the ability of users to instantly view
musical notation of sounds played through a piano keyboard, or other MIDI-
equipped instrument, linked to a PC.  Midisoft's strategic products promote the
convergence of sound with other technologies into the personal computer desktop.
The products allow users to enhance their computing experience, and to
communicate more effectively with and through computers.  The Company markets
its products on a worldwide basis to (i) original equipment manufacturers
(OEMs), which "bundle" one or more of Midisoft's products with their own
products, (ii) distributors and resellers, which directly supply the retail
distribution channel, and (ii) end users, catalog companies, and businesses.

     Sales to software distributors and resellers, together with direct sales,
represented 60% and 65% of revenues in the three and nine months ended September
30, 1996, and OEM sales represented 40% and 35% during the same periods.
International sales accounted for 18% and 17% of the Company's revenues during
the three and nine months ended September 30, 1996.  Midisoft's customer base
tends to vary from period to period as it establishes new relationships in each
of its customer segments.  During the three months ended September 30, 1996, two
different software distributors individually accounted for greater than 10% of
the Company's total revenues, collectively accounting for 25%.  During the three
months ended September 30, 1996, one OEM customer accounted for 11% of the
Company's total revenues.

     The Company's revenues include sales of software, software licenses and
services, less returns and sales return reserves.  Cost of revenues includes the
costs of manuals, diskettes and duplication, packaging materials, assembly,
paper goods, shipping and amortization of purchased software technology and
capitalized software development costs.  Cost of revenues as a percentage of
sales is lower for OEM sales than for distributor and direct sales because few
direct costs are involved.  Sales and marketing expenses consist primarily of
salaries of sales and marketing personnel, customer service and technical
support costs and advertising and promotion expenses. General and administrative
expenses consist of salaries of administrative personnel, legal and accounting
costs of litigation.  Research and development expenses consist primarily of
personnel and equipment costs required to conduct the Company's development
efforts.  Software development costs are expensed as incurred, until
technological feasibility is established, after which any additional costs may
be capitalized until the software is ready for release.  Amortization of
capitalized software development costs begins when the related product is
available for release to customers.

     Revenues from sales to distributors and resellers and direct sales are
recognized when products are shipped.  The Company's software sales agreements
generally do not involve any significant obligations to customers subsequent to
delivery.  Revenues from products licensed to OEMs, consisting of one-time
license fees, are recognized at the time the software master is delivered and
when the criteria for fixed fee revenue recognition under Statement of Position
No. 91-1 "Software Revenue Recognition" are satisfied.  Additional royalty use
or unit copy royalty fees are recognized when they are received pursuant to
license agreements upon notification of shipment from OEMs.

SEASONALITY

     Sales to distributors tend to be greater in the fourth and first quarters
as consumers buy software to supplement their holiday computer hardware
purchases.  OEM sales are concentrated in a small number of large customer
contracts and tend to occur sporadically.  Direct sales generally increase when
software upgrades become available.


                                        8

<PAGE>

COMPARISON OF THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 TO 1995

     Revenues for the three months ended September 30, 1996 were $1,158,000, a
decrease of $76,000, compared to $1,234,000 for the same period in 1995.
Revenues for the nine months ended September 30, 1996 were $2,161,000, a
decrease of $2,300,000 or 52%, compared to $4,461,000 for the same period in the
prior year.  Sales to software distributors and resellers, together with direct
sales were $691,000 and $1,415,000 represented 60% and 65% of revenues in the
three and nine months ended September 30, 1996, respectively, while such sales
represented 10% and 38% of revenues for the same periods in 1995.  OEM sales of
$468,000 and $746,000 represented 40% and 35% in the three and nine months ended
September 30, 1996, respectively, while such sales represented 90% and 62% of
revenues for the same periods in 1995.  International sales accounted for 18%
and 17% of the Company's revenues for the three and nine months ended September
30, 1996 and accounted for 12% and 19% for the same periods in 1995.  Four new
products were released by the Company at the end of July, 1996 which the Company
expects to result in an increase in domestic distributor sales.  One of these
products is also expected to favorably impact OEM domestic and international
revenues.

     Gross profit for the three months ended September 30, 1996 was $570,000, a
decrease of $112,000, compared to $682,000 for the same period the prior year.
Gross profit for the nine months ended September 30, 1996 was $761,000, a
decrease of $2,000,000 as compared with the same period the prior year.  As a
percentage of revenues, gross profit decreased to 49% in the three months ended
September 30, 1996 from 55% in 1995.  As a percentage of revenues, gross profit
decreased to 35% in the nine months ended September 30, 1996 from 62% in 1995.
The reduced gross profit percentages for both the three and nine month periods
were primarily the result of a change to the product mix to increase sales to
distributors versus higher profit margin sales to OEM.  Software amortization
costs for the three months ended September, 1996 fell to $193,000 as compared
with $436,000 for the same period during 1995.  Software amortization costs for
the nine months ended September 30, 1996 decreased to $621,000 as compared with
$764,000 for the same period in the prior year.

     Sales and marketing expenses for the three months ended September 30, 1996
were $723,000, a reduction of $459,000, compared to $1,182,000 for the same
period in the prior year.  Sales and marketing expenses for the nine months
ended September 30, 1996 were $2,459,000, a decrease of $489,000 compared to
$2,948,000 for the same period in the prior year.  As a percentage of revenues,
sales and marketing expenses decreased to 62% in the three months ended
September 30, 1996 from 96% for the same period in 1995.  As a percentage of
revenues, sales and marketing expenses increased to 114% in the nine months
ended September 30, 1996 from 66% for the same period in 1995.  The sales and
marketing expenses incurred during the nine months ended September 30, 1996
represent the base level of personnel, travel and advertising expenses necessary
to sell the current product lines.

     General and administrative expenses for the three months ended September
30,1996 were $488,000, a decrease of $1,316,000, compared to $1,804,000 for the
same period of the prior year.  General and administrative expenses for the nine
months ended September 30, 1996 were $1,708,000 a decrease of $1,046,000,
compared to $2,754,000 for the same period in the prior year.  As a percentage
of revenues, these expenses for the three months ended September 30, 1996
decreased to 42% in 1996 from 146% for the same period in 1995.  As a percentage
of revenues, general and administrative for the nine months ended September 30,
1996 increased to 79% from 62% for the same period in 1995.  The current expense
represents base levels for the Company's general and administrative expenses.

     Research and development expenses for the three months ended September
30,1996 were $244,000, a decrease of $359,000, compared to $603,000 for the same
period the prior year. As a percentage of revenues, research and development
expenses decreased to 21% in the three months ended September 30, 1995 from 49%
for the same period in 1995.  Research and development expenses for the nine
months ended September 30, 1996 were $666,000, a decrease of $556,000, compared
to $1,222,000 for the same period the prior year.  As a percentage of revenues,
research and development expenses increased to 31% in the nine months ended
September 30, 1996 from 27% for the same period the prior year.  Research and
development costs in 1995 were substantially higher as the result of efforts to
diversify the product line in the second and third quarters of that year.

     The Company incurred a restructuring charge of $2,369,000 for the nine
months ended September 30, 1995 as a result of the writedown of capitalized
software assets to net realizable value.

     Interest and other income for the three months ended September 30,1996 was
$17,000, compared to $90,000 for the same period the prior year.  Interest and
other income for the nine months ended September 30, 1996 was $95,000,


                                        9

<PAGE>

compared to $339,000 for the same period the prior year.  The decrease in income
is the result of the reduction of investments caused by the negative cash flow
from operations of the Company.

     No income taxes are payable at September 30, 1996, the result of the
Company's year-to-date loss and the result of Federal net operating losses at
December 31, 1995 of approximately $11,300,000.  The net operating losses will
reduce taxes due in future periods and begin to expire in 2008.


LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 1996, the Company's principal sources of liquidity
included cash and cash equivalents of $928,000 and net accounts receivable of
$1,471,000.  This compares to cash, cash equivalents and short term investments
of $3,683,000 and net accounts receivable of $2,329,000 at December 31, 1995.
The decline in liquidity and capital resources is due largely to negative cash
flow from operations as the result of unprofitable business decisions made in
1995 and the subsequent need for current management to restructure the Company
and its product lines.  Management believes that the Company has established
conservative allowances for doubtful accounts and returns.

     The Company's current liabilities at September 30, 1996 were $2,921,000
compared to $3,300,000 at December 31, 1995.  The Company has had no long term
debt since inception, and has no present commitments or agreements that could
require any long-term debt to be incurred.  As of September 30, 1996, working
capital totaled $1,844,000, excluding accrued expenses of $1,544,000 to be
satisfied through the issuance of common stock.

     Historically, the Company has relied on external sources of liquidity and
the existing cash and cash equivalents consisting largely of proceeds remaining
from the 1994 public offering.  Although the current rate of cash consumption
has decreased from the third and fourth quarters of 1995, the Company's future
viability is dependent on the success of its latest product releases or on its
ability to obtain additional financing, none of which can be assured.

     The Company is dependent to a material degree on OEM sales.  These sales
are concentrated in a small number of large customer contracts and tend to occur
sporadically.  OEM sales were adversely affected during the quarter ended March
31, 1996 by a reorganization of the Company's sales department and in the second
quarter by the anticipated release of Sound Bar, the primary OEM product, which
was released in July, 1996.  If the Company is unable to close significant OEM
contracts in the future, its results of operations and liquidity will be
materially affected. If the sales increase fails to materialize, the Company's
liquidity will be severely affected.

     The Company's operating activities used cash of $2,768,000 for the nine
month period ended September 30, 1996, reflecting increased working capital
needs as a result of the introduction of new products during the third quarter.
The primary components of changes in working capital were operating losses of
$3,977,000 and a decrease in current liabilities of $379,000 mitigated
principally by a decrease in gross receivables of $1,277,000.

     Cash from investments was $1,540,000, consisting of the redemption of short
term investments.  Cash used for investments totaled $59,000 for the nine months
ended September, 1996.  These investments consisted of additions to equipment.


SUBSEQUENT EVENTS

     In October, 1996, the Company raised $1,100,000 through the sale of 1,100
shares of Preferred Stock as Series A Convertible Preferred Stock (the "Series A
Preferred Stock").  All 1,100 shares were issued at a price of $1,000 per share
in an offshore private placement made to two investors.  The Series A Preferred
Stock is convertible at the holder's option into shares of Common Stock at a
price which is equal to the lesser of 85% of the closing bid as of the date of
conversion or 100% of the closing bid price of the Common Stock as of the date
of issuance of the Series A Preferred Stock.  The holders have the right to
convert one-third of their shares commencing 60 days after the date of issuance;
one-third of their shares commencing 90 days after the date of issuance; and
one-third of their shares commencing 120 days after the date of issuance.  The
Series A Preferred Stock is also subject to mandatory conversion two years after
its date of issuance based upon the conversion formula described above.  Holders
of the Series A Preferred Stock are entitled to an 8% cumulative dividend
payable in Common Stock at the time of conversion.  At the time of conversion,
the Company is also obligated to issue one warrant (the "Warrant") with respect
to each share of Common Stock which is issued.  Each Warrant will entitle the
holder to purchase one share of Common Share at a price equal to 200% of the
closing bid price of the Common Stock as of the date of issuance of the Series A
Preferred Stock.  The Warrants shall be exercisable for two years.


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<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     On March 24, 1995 a shareholders' class action was filed against the
Company and three of the Company's former officers.  The complaint, captioned as
SMITH, ET AL. V. MIDISOFT, ET AL., was filed in the United States District Court
for the Western District of Washington. The action was brought on behalf of
purchasers of the Company's Common Stock during the period April 26, 1994 to
August 18, 1995, as extended.  Among other things, the complaint alleged that
the defendants made various misrepresentations and/or omissions with respect to
the Company's business.  On February 26, 1996 the parties entered into an
agreement pursuant to which the case was settled subject to final court
approval.  Pursuant to the settlement agreement, the Company has paid $100,000
in cash and will issue 650,000 shares of Common Stock to the plaintiffs; the
Company is also obligated to register the Common Stock under the Securities
Exchange Act of 1933 in order to allow the plaintiffs to sell the stock.  The
Company expects to file a registration statement covering the Common Stock to be
issued to the plaintiffs in 1996.

     The SEC has concluded its investigation into the restatement of the 
Company's financial statements for the year ended December 31, 1994 and the 
Company has entered into a settlement agreement with the SEC.  Pursuant to 
the settlement agreement the Company, without admitting or denying any of the 
SEC's findings, was ordered to cease and desist from permitting or causing 
any violation of certain reporting and accounting requirements contained in 
the federal securities laws.  The settlement is not expected to effect the 
Company's future operating results. The Company believes that the SEC 
investigation has encompassed the participation of Raymond Bily in events 
leading to the restatement of Company financial statements. The Company 
expects that Mr. Bily will make an offer of settlement to the SEC. Mr. Bily's 
term as a director of the Company expires in 1997, and the Board of Directors 
has determined that he will not be renominated.

TEM 2.    CHANGES IN SECURITIES - None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  -None

ITEM 5.   OTHER INFORMATION. - None

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

     a)   EXHIBITS:

          4.2  Designation of Rights and Preferences of Series A
               Convertible Stock

          4.3  Form of Subscription Agreement

          4.4  Form of Warrant


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<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                        MIDISOFT CORPORATION
                                            (Registrant)


                                        Date: November 8, 1996

                                        BY:    /s/ Melinda A. Bryden
                                           ---------------------------------
                                        Melinda A. Bryden, Vice President of
                                        Finance and Chief Financial Officer


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