SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

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

                    For the quarter ended December 31, 1998

                                       OR

                    [ ] TRANSITION REPORT UNDER SECTION 13 OR
                     15(d) OF THE SECURITIES EXCHANGE ACT OF
                     1934 For the transition period from to

                         Commission File Number 0-19726


                                  CAMBIO, INC.
        (Exact name of small business issuer as specified in its charter)


                 Delaware                            94-3022377
      (State or other jurisdiction                (I.R.S. Employer
    of incorporation or organization)          Identification Number)


                        6006 North Mesa Street, Suite 515
                              El Paso, Texas 79912
                    (Address of principal executive offices)


                                 (915) 581-5828
                           (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

As of February 16, 1998,  3,832,411 shares of Class A Common Stock, no shares of
Class B Common Stock, and 14,823 shares of Series A Convertible  Preferred Stock
were outstanding.


<PAGE>


                                  CAMBIO, INC.

                                   Form 10-QSB


                                      INDEX


                                                                           Page
                                                                          Number
                                                                          ------
Part I.     Financial Information

            Item 1.     Financial Statements

                        Consolidated Balance
                        Sheet as of December 31, 1998                        1

                        Condensed Consolidated Statements
                        of Operations for the three months and
                        six months ended December 31, 1998 and 1997          2

                        Condensed Consolidated Statements
                        of Cash Flows for the six months
                        ended December 31, 1998 and 1997                     3

                        Notes to Financial Statements                     4 - 5

            Item 2.     Management's Discussion and
                        Analysis of Financial Condition
                        and Results of Operations                         6 - 12

Part II.    Other Information and Signatures                             13 - 14


<PAGE>



                                  CAMBIO, INC.
                           CONSOLIDATED BALANCE SHEET
                                December 31, 1998
                                   (Unaudited)

                                     ASSETS
Current assets:
 Cash and cash equivalents .....................   $     27,000
 Restricted cash ...............................        144,000
 Accounts receivable - net of allowance
   for doubtful accounts of $291,000 ...........        139,000
 Prepaids and deposits .........................         77,000
 Net assets of discontinued operations
   (net receivables and other assets of
   $1,330,000 less liabilities and estimated
   accrued disposal costs of $1,160,000)                170,000
                                                 --------------
    Total current assets .......................        557,000

Property and equipment, net                             141,000
Other assets:
 Goodwill ......................................      4,526,000
                                                 --------------
     Total assets ..............................   $  5,224,000
                                                 ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Short-term borrowings and notes payable .......   $  1,147,000
 Accounts payable - trade ......................      1,455,000
 Accrued expenses ..............................        214,000
 Deferred revenue and customer deposits                 153,000
                                                 --------------
     Total current liabilities .................      2,969,000

Long term obligations ..........................      1,008,000
Stockholders' equity:
 Common stock: $0.01 par value -
  Class A; 22,500,000 shares authorized; 2,672,911
   shares issued and outstanding                        26,000 
  Class B; 7,500,000 shares authorized; 1,159,500
   shares issued and outstanding ....... .......         12,000
 Paid in capital ...............................     18,212,000
 Accumulated deficit ...........................    (17,003,000)
                                                 --------------
      Total stockholders' equity ...............      1,247,000
                                                 --------------
      Total liabilities and stockholders' equity   $  5,224,000
                                                 ==============


         The accompanying notes are an integral part of this statement


                                     - 1 -


<PAGE>


                                  CAMBIO, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                      Three Months Ended                    Six Months Ended
                                                                         December 31,                         December 31,
                                                               ------------------------------        ------------------------------
                                                                     1998            1997                1998              1997
                                                                     ----            ----                ----              ----
<S>                                                            <C>                <C>                <C>                <C>      
Net revenue ............................................       $   267,000        $      --          $   387,000        $      --
Cost of sales ..........................................            63,000               --               73,000               --
                                                               -----------        -----------        -----------        -----------
     Gross profit ......................................           204,000               --              314,000               --

Selling, general and administrative expenses ...........         1,438,000            240,000          2,083,000            393,000
Research and development expense .......................           178,000               --              253,000               --
Depreciation and amortization ..........................           297,000             12,000            397,000             24,000
                                                               -----------        -----------        -----------        -----------
     Loss from operations ..............................        (1,709,000)          (252,000)        (2,419,000)          (417,000)
                                                               -----------        -----------        -----------        -----------
Other income (expense):
 Interest and other income .............................              --               41,000               --               81,000
 Interest expense ......................................           (27,000)            (4,000)           (27,000)           (13,000)
                                                               -----------        -----------        -----------        -----------
     Total other income (expense) ......................           (27,000)            37,000            (27,000)            68,000
                                                               -----------        -----------        -----------        -----------
     Loss before discontinued operations ...............        (1,736,000)          (215,000)        (2,446,000)          (349,000)
                                                               -----------        -----------        -----------        -----------
     Income (loss ) from operations of
       discontinued businesses .........................              --              (10,000)              --              793,000
                                                               -----------        -----------        -----------        -----------
     Net income (loss) .................................       $(1,736,000)       $  (225,000)       $(2,446,000)       $   444,000
                                                               ===========        ===========        ===========        ===========
Basic and diluted net (loss) per common share -
  continuing operations ................................       $     (0.45)       $     (0.07)       $     (0.74)       $     (0.12)
                                                               ===========        ===========        ===========        ===========
Basic and diluted net income per common
  share - discontinued operations ......................       $      --          $      --          $      --          $      0.27
                                                               ===========        ===========        ===========        ===========
 Basic and diluted net income (loss) per
   common share ........................................       $     (0.45)       $     (0.08)       $     (0.74)       $      0.15
                                                               ===========        ===========        ===========        ===========
Weighted average shares outstanding ....................         3,832,411          2,895,366          3,313,983          2,895,366
                                                               ===========        ===========        ===========        ===========

</TABLE>


                                     - 2 -


         The accompanying notes are an integral part of these statements


<PAGE>


                                  CAMBIO, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               Six Months Ended
                                                                                 December 31,
                                                                         ---------------------------
                                                                             1998            1997
                                                                             ----            ----
<S>                                                                      <C>            <C>
Cash flows from operating activities:
 Net income (loss) ...................................................   $(2,446,000)   $   444,000
 Adjustments to reconcile net income (loss) to net cash
  provided (used) by operations:
    Income from discontinued operations ..............................          --         (793,000)
    Depreciation and amortization ....................................       397,000        141,000
    Changes in operating assets and
     liabilities:
      Net assets of discontinued operations ..........................       632,000         26,000
      Accounts receivable ............................................       120,000           --
      Prepaids and deposits ..........................................          --             --
      Accounts payable and accrued expenses ..........................        74,000         18,000
      Deferred revenue and prepaid deposits ..........................       (72,000)          --
                                                                         -----------    -----------
     Net cash provided (used) by operating activities ................    (1,295,000)      (164,000)

Cash flows from investing activities:
 Capital expenditures ................................................          --             --
 Cash advance to acquired company ....................................      (638,000)          --
 Costs related to acquisition ........................................      (100,000)          --
 Discontinued operations, net ........................................          --          678,000
                                                                         -----------    -----------
     Net cash provided (used) by investing activities ................      (752,000)       678,000
                                                                         -----------    -----------
Cash flows from financing activities:
 Short-term borrowing ................................................       584,000        300,000
 Long-term borrowings ................................................         8,000           --
 Decrease in restricted cash .........................................       158,000          3,000
                                                                         -----------    -----------
     Net cash provided by financing activities .......................       750,000        303,000
                                                                         -----------    -----------
     Net change in cash and cash equivalents .........................    (1,297,000)       817,000

     Cash and cash equivalents at beginning of period ................     1,324,000      2,929,000
                                                                         -----------    -----------
     Cash and cash equivalents at end of period ......................   $    27,000    $ 3,746,000
                                                                         ===========    ===========
Supplemental disclosure of cash flow information:
  Cash paid during the period for:
    Interest .........................................................   $    22,000    $    45,000
    Income taxes .....................................................        10,000         17,000

Supplemental disclosure of noncash investing and financing activities:
 Purchase of Cambio Networks, Inc. ...................................
   Common stock issued to sellers ....................................   $   619,000
   Liabilities assumed ...............................................     4,658,000
   Acquisition costs .................................................       100,000
                                                                         -----------
    Assets acquired (including goodwill of $4,875,000) ...............     5,377,000
                                                                         ===========

</TABLE>

                                     - 3 -


         The accompanying notes are an integral part of these statements


<PAGE>


                                  CAMBIO, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       The accompanying  consolidated  financial statements of the Company for
         the six months ended  December 31, 1998 and 1997 have been  prepared on
         the same basis as the audited financial  statements.  In the opinion of
         management,   such  unaudited   information  includes  all  adjustments
         (consisting  only of normal  recurring  accruals)  necessary for a fair
         presentation of this interim  information.  Operating  results and cash
         flows for interim periods are not necessarily indicative of results for
         the entire year. The information included in this report should be read
         in  conjunction  with the Company's  audited  financial  statements and
         notes thereto  included in the  Company's  Annual Report on Form 10-KSB
         for the year ended June 30, 1998  previously  filed with the Securities
         and Exchange Commission.

2.       Cambio, Inc., formerly Meadowbrook  Rehabilitation  Group, Inc. and its
         subsidiaries  (collectively,  the "Company") have undergone significant
         operating  changes in fiscal years 1997 and 1998.  As of June 30, 1998,
         the  Company  had closed or was in the  process  of closing  all of its
         operating  facilities.   The  Company  previously  provided  outpatient
         rehabilitation services and acute and sub-acute care in several states.

         After  considering  continued  losses and a diminishing  market for the
         Company's  services,  the Company's  Board of Directors  decided in the
         fourth  quarter  of  fiscal  1998  to  close  the  Company's  remaining
         operations.  Previously, several of the Company's service locations and
         units  had  been  sold  or  otherwise  disposed.   All  operations  had
         substantially ceased as of June 30, 1998. The Company's  administrative
         operations are  continuing to pursue the collection of receivables  and
         to monitor the closing process.

         In connection with the decision to close, the Company recorded a charge
         relating to the disposal of the discontinued  operations of $1,563,000.
         This charge  includes the  estimated  losses on disposal,  write-off of
         tangible and intangible  assets,  and accrual for termination  benefits
         and other  closing  costs.  Prior to the  decision to  discontinue  the
         operations,  several  facilities were sold,  resulting in a net gain of
         $1,771,000 for the year ended June 30, 1998. These facilities were sold
         for cash and notes amounting to $2,126,000.  Prior years'  consolidated
         financial   statements   and  notes  were   restated   to  reflect  the
         discontinued operations.

         At December 31, 1998, net assets of discontinued  operations consist of
         the following:

               Receivables ...........................   $ 1,275,000
               Other current assets ..................        55,000
               Trade Payables, accrued liabilities and
                estimated accrued disposal costs .....    (1,160,000)
                                                         -----------
                                                         $   170,000
                                                         ===========

         Results of  discontinued  operations  for the six months ended December
         31, 1998 and 1997 are as follows:

                                                Six Months Ended
                                                  December 30,
                                          --------------------------
                                               1998          1997
                                               ----          ----
          Net revenues ................   $    66,000    $ 5,000,000
          Net expenses ................      (373,000)    (4,207,000)
          Accrued expenses ............       307,000           --
                                          -----------    -----------
          Net income from operations of
            discontinued businesses ...   $      --      $   793,000
                                          ===========    ===========


                                     - 4 -


<PAGE>


3.       On September 14, 1998, the Company  acquired Cambio  Networks,  Inc., a
         software  development  company,  pursuant to an  Agreement  and Plan of
         Merger,  dated as of April 3,  1998,  as amended  by the  Agreement  of
         Amendment,  dated as of July 27, 1998 (collectively,  the "Agreement").
         Under the terms of the  Agreement,  Cambio's  shareholders  received an
         aggregate  1,238,842  of shares of the  Company's  Class A Common Stock
         representing approximately 32.3% of the outstanding Class A and Class B
         Common  Stock with a fair market value of  $619,000.  In addition,  the
         Company  assumed  $4,658,000 in  liabilities  and incurred  $100,000 in
         transaction costs. The acquisition was accounted for using the purchase
         method of  accounting.  From September  1998, the Company's  operations
         consist  solely  of  the  operations  of  Cambio   Networks,   Inc.,  a
         wholly-owned  subsidiary  of the  Company.  Goodwill  in the  amount of
         $4,875,000  was  recorded as a result of the  acquisition  and is being
         amortized on a straight line basis over five years.

         The  following  table  presents  the  unaudited   proforma  results  of
         operations as if the  acquisition had occurred at the beginning of each
         period. This proforma  information does not purport to be indicative of
         the results that actually  would have been  obtained if the  operations
         had been combined  during the periods  presented and is not intended to
         be a projection of future results.

                                                 Six Months Ended
                                                   December 31,
                                           --------------------------
                                                1998          1997
                                                ----          ----
          Net revenues .................   $    607,000   $ 2,195,000

          Net loss .....................   $ (3,515,000)  $(1,432,000)
                                           ============   ===========
          Net loss per share:
          Basic .......................    $      (0.92)  $     (0.35)
                                           ============   ===========
           Diluted .....................   $      (0.92)  $     (0.35)
                                           ============   ===========
          Weighted average common shares
           outstanding ................      3,832,411     4,134,208
                                           ============   ===========

         The unaudited  proforma results of operations  include  adjustments for
         amortization of goodwill, depreciation and other proforma adjustments.

4.       Effective July 1, 1998, the Company adopted the provisions of Statement
         No. 130,  Reporting  Comprehensive  Income that  modifies the financial
         statement  presentation  of  comprehensive  income and its  components.
         Adoption of this  Statement  had no effect on the  Company's  financial
         position or operating results.

         Comprehensive  income (loss) for the six months ended December 31, 1998
         and 1997,  representing all changes in Stockholders' deficit during the
         period other than  changes  resulting  from the  Company's  stock,  was
         $(2,446,000) and $444,000, respectively.


                                     - 5 -


<PAGE>


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

RECENT EVENTS

Disposition of Healthcare Operations

     Prior to June 30, 1998, Cambio, Inc., formerly  Meadowbrook  Rehabilitation
Group,  Inc.  and its  subsidiaries  (collectively,  the  "Company" or "Cambio")
provided  outpatient,   home  health,  and  traditional  acute,   sub-acute  and
post-acute comprehensive  rehabilitation services. Since the beginning of Fiscal
1997, and as a result of poor operating results and poor prospects for growth in
their respective  markets,  the Company has sold or closed all of its healthcare
operating  assets.  As of June 30, 1998, the Company's  assets  consisted almost
exclusively of cash and accounts receivable.

     The termination of the Company's healthcare operations was completed during
the fourth  quarter of Fiscal  1998 after its Board of  Directors  approved  the
closure or  disposal of its home  health  agencies  in  Colorado  and Kansas and
physical therapy clinics in Colorado. The closing and/or sale of such operations
was substantially completed on June 30, 1998.

     Home health agencies have  traditionally  received Medicare  reimbursements
based on actual reasonable allowable costs subject to per visit limitations.  As
a result of  regulations  adopted by the Health  Care  Financing  Administration
effective July 1, 1998, such reimbursements were subject to new aggregate annual
per-beneficiary limitations. The decision to close its healthcare operations was
prompted  by the  receipt  of  Medicare's  notice  to  the  Company  of the  new
per-beneficiary  cost  limits  for each of its  locations.  These  reimbursement
amounts fell far below the Company's per-beneficiary operating expense. In order
for the Company to decrease its  operating  losses and be able to retain as much
capital as possible for its acquisition strategy, the Company decided to dispose
of its healthcare operations.

     The estimated loss on the disposition of these facilities  reflected in the
Company's  statements  of  operations  for the year ended June 30, 1998 ("Fiscal
1998")  includes the writedown of property and  equipment to market  value,  the
writeoff of goodwill,  closedown  expenses and the operating  losses through the
disposition date.

Acquisition of Cambio Networks, Inc.

     On September 14, 1998, the Company acquired Cambio Networks,  Inc. ("Cambio
Networks"),  pursuant to an Agreement  and Plan of Merger,  dated as of April 3,
1998,  as amended  by the  Agreement  of  Amendment,  dated as of July 27,  1998
(collectively,  the  "Agreement").  Under the terms of the  Agreement,  Cambio's
shareholders  received an aggregate 1,238,842 of shares of the Company's Class A
Common Stock  representing  approximately  32.3% of the outstanding  Class A and
Class  B  Common  Stock..  From  the  date  of the  acquisition,  the  Company's
operations consist solely of the operations of Cambio, a wholly-owned subsidiary
of the Company. Accordingly, the Company's historical results of operations will
not be comparable to its future operating results.

Delisting of Class A Common Stock From Nasdaq

     On October  20,  1998,  the  Company  received  notice of a decision by the
Nasdaq Stock Market to delist the Company's Class A Common Stock from the Nasdaq
National  Market  effective  with the close of  business  on October  20,  1998.
Additionally,  at that  time,  the  Company  did not  meet the  requirements  to
transfer its listing to the Nasdaq SmallCap Market. Accordingly,  trading in the
Company's Class A Common Stock is being conducted on the OTC Bulletin Board.

Name and Trading Symbol Change

     On   October   20,   1998,    Meadowbrook    Rehabilitation   Group,   Inc.
("Meadowbrook"),  changed its name to Cambio,  Inc. The name change was effected
by merging its wholly owned  subsidiary,  Cambio  Acquisition  Corporation  into
Meadowbrook,  and simultaneously  changing its name to Cambio, Inc. In addition,
the trading  symbol changed to CAMB and its new CUSIP number is 13200N 10 0. The
name change will serve to better reflect the development plans, current business
model, and future objectives of the organization.


                                     - 6 -


<PAGE>


Sale of Preferred Stock

     On January  31,  1999,  the  Company's  Board of  Directors  (the  "Board")
approved  the  issuance  of up to  37,500  shares  of a newly  created  Series A
Convertible  Preferred Stock (the  "Preferred  Stock") for $100.00 per share, an
aggregate  consideration  of up to $3,750,000.  Each share of Preferred Stock is
convertible  into 500 shares of the Company's  Class A Common Stock or $0.20 per
share and is entitled to receive  dividends in an amount equal to the equivalent
per share dividend  declared on the Class A Common Stock when and as declared by
the Board of Directors.  On February 3, 1999,  Frederick Adler and  Euro-America
II, L.P.  (collectively the "Investor  Group")  converted  certain  indebtedness
owing to them from the Company in the aggregate amount of $1,057,318 into 10,573
shares of the Company's  Preferred  Stock.  Upon  conversion  the Investor Group
would be issued an  equivalent  of  5,286,590  shares of the  Company's  Class A
Common Stock. The Investor Group also purchased an additional  $425,000 or 4,250
shares of Preferred  Stock,  which upon  conversion  the Investor Group would be
issued an equivalent of 2,125,000  shares of the Company's Class A Common Stock.
The Company  anticipates that it will be able to issue the additional  amount of
up to $2,267,682 through additional debt conversions and outside investment.

Management Changes

     On February 3, 1999,  Harvey Wm.  Glasser,  ("Dr.  Glasser")  the Company's
former  Chairman and Chief  Executive  Officer,  exchanged each share of Class B
Common  Stock held by him for one share of Class A Common  Stock of the Company,
and resigned  from his position as Chief  Executive  Officer and Chairman of the
Board.  Dr. Glasser remains as a director of the Company.  On that same day, Mr.
Ali Al-Dahwi was appointed  Chief  Executive  Officer and Mr. John P.  McCracken
resigned from the Board. The Company has yet to appoint a Chairman of the Board.

Forward-looking Statements

     In addition  to the  historical  information  contained  herein,  this Form
10-QSB  contains  forward-looking  statements  within  the  meaning of the "safe
harbor"  provisions  of the Private  Securities  Litigation  Reform Act of 1995.
These  forward-looking  statements  are  subject  to  risks  and  uncertainties,
including risks and uncertainties set forth in this Form 10-QSB,  that may cause
actual results to differ materially. These forward-looking statements speak only
as of the date hereof.  The Company disclaims any intent or obligation to update
these forward-looking statements.

RESULTS OF OPERATIONS

Three months ended December 31, 1998
as Compared to Three months ended December 30, 1997

     Net revenues from continuing operations for the three months ended December
31, 1998 ("Second  Quarter  Fiscal 1999") were  $267,000.  Revenues for the same
period last year were comprised only of  discontinued  operations.  The net loss
for the Second  Quarter  Fiscal 1999 was  $1,736,000  or $0.45 per share and was
primarily due to expenses  associated with the  development and  introduction of
the Company's new flagship product, netRunner.

Six months ended December 31, 1998
as Compared to Six months ended December 31, 1997

     Net revenues for the Six Months Fiscal 1999 were $387,000. Revenues for the
same period last year were comprised only of discontinued  operations.  Revenues
for the  current  period  include  five  months  of Cambio  Networks  operations
following its acquisition in September 1998.

     During the month of January 1999 the Company entered into two agreements to
license   its   netRunner    operations   support   system   with   two   global
telecommunications  companies. These agreements will generate over $1,000,000 in
revenues comprised of license,  professional  services and support fees over the
next 15 months. Cambio first introduced its flagship product, netRunner, in late
October 1998, and a few months later was selected by Hewlett-Packard,  a leading
global  provider  of  computing  solutions,  as a  subcontractor  to provide the
software  and  professional  services in  connection  with these  projects.  The
Company believes it will continue to see more orders from Hewlett-Packard in the
near future as it cultivates and solidifies its global presence.


                                     - 7 -


<PAGE>


     netRunner is designed to run under  Windows 95, 98 or NT operating  systems
using current development technologies. Extensions to netRunner are continuously
being  developed  to allow the  product to  integrate  and  interphase  to other
commonly used third party network element  management  products,  help desks and
data bases allowing the Company's  customers to economically  implement the plan
and design of their network and manage increasing network costs effectively.

     Immediately following the acquisition of Cambio Networks in September 1998,
the  Company   implemented  a  restructuring  plan  involving  the  closing  and
relocating of Cambio  Networks'  headquarters  from Belleview,  Washington to an
already  existing office in Dallas,  Texas.  In addition,  the Company moved its
research and  development  offices to El Paso,  Texas and it assimilated  Cambio
Networks'   finance  and  accounting   functions   into  its  already   existing
capabilities  in Emeryville,  California.  The Company  maintained its sales and
service  offices  domestically  in  Parsippany,  New Jersey until its closure in
December 1998, and internationally in Egypt and the United Kingdom. In an effort
to further consolidate its operations,  in February 1999 it decided to close its
Emeryville,  California office and move all finance and accounting  functions to
its El Paso, Texas office.

     Selling,  general and  administrative  ("SG&A") expenses for the Six Months
Fiscal 1999 were $2,083,000,  a 430% increase from SG&A expenses of $393,000 for
the Six Months  Fiscal 1998.  The increase in SG&A expenses was primarily due to
increased  expenses  associated  with  developing  and  launching  a new product
coupled with the closure and or relocation of its offices as described above. In
addition,  SG&A  expenses  for the Six  Months  Fiscal  1998  include  only  the
administrative costs not associated with the discontinued operations.

     Research and development ("R&D") expense for the Six Months Fiscal 1999 was
$253,000.  The Company  incurred R&D  expenses  primarily as a result of its new
product development.

     Depreciation  and  amortization  ("D&A")  expense for the Six Months Fiscal
1999 was $ 397,000,  a 1,554%  increase from D&A expense of $24 ,000 for the Six
Months  Fiscal 1998.  The  increase in D&A expense is primarily  due to the five
months  amortization  of the  goodwill  in the  amount of  $4,875,000  which was
recorded  as a result of the Cambio  Networks  acquisition  in  September  1998.
Goodwill is being amortized on a straight line basis over five years.

     Net interest expense for the Six Months Fiscal 1999 was $27,000 as compared
to a net interest  income of $68,000 for the Six Months Fiscal 1998. For the Six
Months  Fiscal  1999 five  months of Cambio  Networks'  interest  expense on its
existing debt was recorded.

     The costs  associated with the  discontinued  operations for the Six Months
Fiscal  1999  were  accrued  at June 30,  1998.  Therefore,  no  income  or loss
associated with discontinued  operations is reported.  For the Six Months Fiscal
1998,  the  Company  generated   $793,000  in  net  income  from  operations  of
discontinued businesses,  which is primarily the result of the Company recording
a gain of $1,172,000 on the sale of its Kansas operations.

     As a result of the  foregoing,  net loss for the Six Months Fiscal 1999 was
$2,446,000,  an increase in loss of $2,890,000 from a net income of $444,000 for
the Six Months Fiscal 1998. The decrease in net loss is primarily due to the one
time gain recorded  during the Six Months Fiscal 1998 related to the sale of its
Kansas operations.

     Basic and diluted  loss per share was $0.74 for the Six Months  Fiscal 1999
as  compared to a net income of $0.15 per share for the same period in the prior
fiscal year.


                                     - 8 -


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     At  December  31,  1998,  the  Company  had  negative  working  capital  of
$2,412,000,  compared to working  capital of  $2,176,000  at June 30, 1998.  The
Company's working capital position decreased following the acquisition of Cambio
Networks due to the  consolidation  of accounts and the elimination  receivables
from the  subsidiary . The Company had cash and cash  equivalents  of $27,000 at
December 31, 1998,  as compared to  $1,324,000  at June 30, 1998.  The Company's
cash  position  decreased  due to loans  made to  Cambio  Networks  prior to the
closing of the acquisition and the continued funding of the operations after the
closing of the acquisition.

     During the Six Months Fiscal 1999, the Company's operating  activities used
cash of $1,295,000, as compared to cash used by operating activities of $164,000
during the same period in the prior  fiscal  year.  The cash used for  operating
activities  during the Six Months  Fiscal  1999 is  primarily  the result of the
losses  incurred by the  continuing  operations  including five months of Cambio
Networks' operations.

     As of June 30, 1998,  the Company had net operating loss  carryforwards  of
approximately  $8,500,000.  Availability  of the Company's  net  operating  loss
carryforwards  if not  utilized  will expire at various  dates  through the year
2013.  Utilization of net operating loss carryforwards may be limited due to the
sale of its preferred stock in February 3, 1999.

     The Company's assets of discontinued  operations  include $1,275,000 in net
patient accounts  receivable and amounts due from Medicare  intermediaries.  The
Company's amount due from Medicare  intermediaries  includes amounts the Company
anticipates that it will receive in connection with cost report  settlements for
its Colorado  home health  agencies and its final cost report for the  Company's
former Gardner, Kansas facility.  Medicare reimbursement is generally based upon
reasonable direct and indirect  allowable costs incurred in providing  services.
There can be no  assurance  that the Company will collect in full the amounts it
has  requested or intends to request,  nor can there be any  assurance as to the
timing of any such  collection.  On Febuary 3, 1999, the Company entered into an
agreement  with  Imperial  Loan  Management  Corporation  ("Imperial"),  whereby
Imperial assumed control over certain  subsidiaries  related to the discontinued
operations  of the Company and agreed to use its best  efforts to collect  their
assets (principally accounts receivable due from Medicare).

     In December 1997, U.S. Trust Company of Florida Savings Bank ("U.S. Trust")
provided Cambio Networks with a Line of Credit of up to $2,000,000 (the "Loan").
Cambio  Networks  agreed to pay U.S. Trust  interest on the average  outstanding
principal  amount of the Loan at a per annum  rate of 7% and the Loan was due in
February 1999. The Loan was guaranteed by Frederick R. Adler and Euro-America II
L.P  (collectively  the "Investor  Group").  On September 14, 1998, the Investor
Group repaid  $1,000,000 in principal to U.S. Trust and converted it into shares
of Cambio  Networks'  common stock. In January,  1999, the Investor Group repaid
the remaining  $1,000,000 in principal due to U.S. Trust and on February 3, 1999
it converted an aggregate  amount of $1,057,318 in principal and interest due to
them from the Company into 10,573 shares of the Company's Preferred Stock.

     In September and November  1996,  Cambio  Networks  borrowed  $750,000 from
Greylock Equity L.P.,  Highland  Capital  Partners II L.P. and other  investment
groups  evidenced by  promissory  notes bearing 7% interest per annum and due on
demand after  September 1997. The Company agreed to the repayment of these notes
in four quarterly  principal and interest payments  commencing December 1998. As
of February 16, 1999, the outstanding balance on the notes was $250,000.

     In March 1998, Western Bank ("Western") provided the company with a line of
credit of up to $150,000 (the "Western  Loan").  Cambio  Networks  agreed to pay
Western  interest on the average  outstanding  principal amount of the Loan at a
per annum rate of 8.75% and the Western  Loan is due in March 1999.  The Western
Loan is guaranteed by Ms. Gari Grimm, Cambio Networks' former President and CEO,
and a current  member of the Company's  Board of  Directors.  As of February 16,
1999, the outstanding balance on the Western Loan was $150,000.

     As of December  31, 1998,  the parent  company had loaned  Cambio  Networks
$2,979,000 to fund its business  activities  prior and subsequent to the closing
of the  acquisition.  Such loans are evidenced by Secured Bridge Financing Notes
bearing interest at 8% per annum.

     On October 14, 1998,  the Company  borrowed  $800,000  from  Imperial  Loan
Management  Corporation  ("Imperial")  under the terms of a promissory note (the
"Note") bearing interest at a per annum rate of prime plus 2.25%, due in full on
October 13, 1999. The Note is secured by a first position  security  interest on
all of the accounts receivable of the Company.  In addition,  the Note is backed
by a personal  guarantee from Dr.  Glasser,  the Company's  former  Chairman and
Chief Executive Officer,  to Imperial Bank, the source of funds for the Imperial


                                     - 9 -


<PAGE>


Loan. On February 3, 1999, the Company  entered into an agreement with Imperial,
whereby  Imperial  assumed  control  over  certain  subsidiaries  related to the
discontinued  operations  of the Company  and agreed to use its best  efforts to
collect  their  assets  (principally  accounts  receivable  due from  Medicare).
Proceeds of such collections will be used to pay the obligations  owing from the
Company to Imperial and other obligations  including accounts payable,  property
and equipment leases and Medicare  obligations.  After the repayment of the Note
and all  reasonable  collection  expenses  and legal and  accounting  fees,  the
remaining  proceeds of the liquidation  shall be split equally between  Imperial
and the Company. As of February 16, 1999, $680,000 was due to Imperial under the
Note.

     The Company has no current material  commitments for capital  expenditures.
The Company also expects to make routine capital  improvements to its facilities
in the normal course of business.

     The Company's current  operations are cash flow negative and as of December
31, 1998, the Company had negative  working  capital of $2,412,000.  The Company
has only a limited amount of working  capital.  The Company will need additional
capital  to  fund  its  new  operations   resulting  from  the  Cambio  Networks
acquisition.  There can be no assurance that capital will be available, or that,
if available,  it can be obtained on terms favorable to the Company. If adequate
funds are not available,  the Company's liquidity could be impaired, which would
have a material adverse effect on its business.

     Inflation in recent years has not had a significant effect on the Company's
business  and is not  expected  to  adversely  effect the  Company in the future
unless the current rate of inflation increases significantly.

Other Factors That May Affect Future Operating Results

     Accumulated Deficits;  Uncertain Profitability.  On September 14, 1998, the
Company  acquired  Cambio  Networks.  Subsequent  to that  date,  the  Company's
operations  will consist  solely of the  operations of Cambio  Networks.  Cambio
Networks has incurred  significant  net losses since its  inception,  and had an
accumulated  deficit  of  approximately  $26,998,000  at June 30,  1998.  Cambio
Networks  incurred net losses of  $7,466,000  and  $3,175,000 on net revenues of
$7,232,000  and  $5,515,000  for the years  ended  December  31,  1996 and 1997,
respectively.  There can be no assurance  that the Company will be profitable in
any  future  period.  The  Company's  business  will also  subject  to the risks
inherent in the  operation  of a new  business  enterprise,  and there can be no
assurance it will be able to successfully address such risks.

     Fluctuating  Operating  Results.  Factors  that may  contribute  to  future
fluctuations in the Company's  quarterly and annual  operating  results include,
but are not  limited  to: (i)  development  and  introduction  of new  operating
systems and new product development  expenses;  (ii) introduction or enhancement
of products by the Company;  (iii) changes in pricing policies of the Company or
its  competitors;  (iv)  increased  competition;  (v)  technological  changes in
computer  systems  and  environments;  (vi) the ability of the Company to timely
develop,  introduce and market new products;  (vii) quality  control of products
sold;  (viii)  market  readiness  to  deploy  systems  management  products  for
distributed computing  environments;  (ix) market acceptance of new products and
product  enhancements;  (x)  customer  order  deferrals in  anticipation  of new
products and product  enhancements;  (xi) the Company's success in expanding its
sales and marketing programs;  (xii) personnel changes;  (xiii) foreign currency
exchange rates;  (xiv) mix of products sold; (xv)  acquisition  costs; and (xvi)
general economic conditions.

     Intense  Competition.  The  markets  in  which  the  Company  competes  are
intensely  competitive,  highly  fragmented  and rapidly  changing.  In order to
compete effectively,  the Company will have to enhance current products, enhance
the  operability  of its products with one another and develop new products in a
timely fashion.

     The  Company   anticipates   continued   growth  in   competition   in  the
telecommunications  industry and  consequently,  the entrance of new competitors
into the  software  systems  market in the future.  To maintain  and improve its
competitive position,  the Company must continue to develop and introduce,  in a
timely and  cost-effective  manner,  new product sets, new product  features and
services and support that keep the Company competitive with its competitors. The
principal competitive factors in the Company's market are quality,  performance,
price,  customer  support  and  training,   business  reputation,   and  product
attributes such as scalability, compatibility,  functionality and acceptance. In
addition,   the  Company   competes  with  a  number  of  companies   that  have


                                     - 10 -


<PAGE>


substantially greater financial, technical, sales, marketing and other resources
as well as greater name recognition than the Company. As a result, the Company's
competitors  may be able to adapt more  quickly to new or emerging  technologies
and changes in customer  requirements,  or to devote  greater  resources  to the
promotion and sale of their  products and services  than can the Company.  There
can be no assurance that the Company will be able to compete  successfully  with
its existing competitors or with new competitors.

     Risks Associated With International Operations. Historically, revenues from
sales  outside the United  States have  accounted  for a  significant  amount of
Cambio  Networks' total revenues.  The Company believes that its success depends
upon continued expansion of its international operations.  The Company currently
has sales and service  offices in the United  Kingdom  and Egypt.  International
expansion may require the Company to establish additional foreign offices,  hire
additional personnel and recruit additional  international  resellers.  This may
require  significant  management  attention  and  financial  resources and could
adversely affect the Company's  operating margins.  To the extent the Company is
unable to effect these additions efficiently and in a timely manner, its growth,
if any, in  international  sales will be limited,  and its  business,  operating
results and financial condition could be materially  adversely  affected.  There
can be no  assurance  that the  Company  will be able to  maintain  or  increase
international market demand for its products.

     International  operations subject the Company to a number of risks inherent
in  developing  products for sale outside of the United  States,  including  the
potential loss of developed  technology,  imposition of  governmental  controls,
export license requirements,  restrictions on the export of critical technology,
political and economic instability, trade restrictions, difficulties in managing
international  operations,  cultural  differences  in the  conduct of  business,
extended accounts receivable  collection cycles,  greater difficulty in accounts
receivable collection, unexpected changes in regulatory requirements and royalty
and withholding  taxes that restrict the  repatriation of earnings,  tariffs and
other trade  barriers,  the burden of  complying  with a wide variety of foreign
laws,  and the risk of  foreign  currency  gains  and  losses.  There  can be no
assurance  that any of the  factors  described  herein  will not have a material
adverse effect on the Company's future  international  sales and operations and,
consequently, its business, operating results and financial condition.

     Reliance  on  Significant  Customers.  Historically,  Cambio  Networks  has
generated a significant  portion of its total  revenues from a limited number of
customers,  some of which have exceeded 10% of revenues.  This  concentration of
customers  can cause the  Company's  revenues  and  earnings to  fluctuate  from
quarter  to quarter  based on these  customers'  requirements  and the timing of
their orders.  Although the Company believes it has good  relationships with its
largest  customers  and has in the past  received a  substantial  portion of its
revenues from repeat business with established customers,  none of the Company's
major customers has any obligation to purchase  additional products or services,
and  these  customers  generally  have  acquired  fully-paid  licenses  to their
installed  systems.  Therefore,  there  can  be no  assurance  that  any  of the
Company's  major  customers  will  continue to  purchase  new  systems,  systems
enhancements  and services in amounts  similar to previous  years.  A reduction,
delay or  cancellation  in orders from any of its major  customers  would have a
material  adverse  effect on the Company's  results of operations  and financial
condition. In addition, the acquisition by a third party of one of the Company's
major  customers  could result in the loss of that  customer and have a material
adverse effect on the Company's results of operations and financial condition.

     Rapid   Technological   Change  and   Requirement   for  Frequent   Product
Transitions.  The market for the  Company's  products is intensely  competitive,
highly  fragmented  and  characterized  by  rapid  technological   developments,
evolving  industry  standards  and rapid changes in customer  requirements.  The
introduction  of products  embodying  new  technologies,  the  emergence  of new
industry  standards  or  changes  in  customer  requirements  could  render  the
Company's  existing  products  obsolete  and  unmarketable.  As  a  result,  the
Company's  success  depends  upon its ability to  continue  to enhance  existing
products, respond to changing customer requirements and develop and introduce in
a timely manner, new products that keep pace with technological developments and
emerging industry standards.  Customer requirements include, but are not limited
to,   product   operability   and  support  across   distributed   and  changing
heterogeneous  hardware platforms,  operating systems,  relational databases and
networks.  There can be no assurance  that the  Company's  products will achieve
market  acceptance  or  will  adequately  address  the  changing  needs  of  the
marketplace  or that the Company will be successful in developing  and marketing
enhancements  to  its  existing  products  or  new  products  incorporating  new
technology on a timely basis. The Company has in the past experienced  delays in
product  development,  and there can be no  assurance  that the Company will not
experience further delays in connection with its current product  development or
future development activities. If the Company is unable to develop and introduce
new  products,  or  enhancements  to existing  products,  in a timely  manner in
response to changing market conditions or customer  requirements,  the Company's


                                     - 11 -


<PAGE>


business, operating results and financial condition will be materially adversely
affected.  Because the Company has limited resources,  the Company must restrict
its product  development  efforts and its porting efforts to a relatively  small
number of products and operating  systems.  There can be no assurance that these
efforts will be successful or, even if successful,  that any resulting  products
or operating systems will achieve market acceptance.

     Dependence  on Key  Employees.  The  Company  is  highly  dependent  on the
principal  members of its  management  staff,  including Mr. Ali  Al-Dahwi,  its
President and Chief Executive  Officer,  the loss of whose services would have a
material adverse effect on the Company's  business.  The Company has not entered
into any employment  agreements  with Mr. Al-Dahwi and does not maintain any key
person life insurance policy on the life of any employee. Failure to attract and
retain  key  personnel  could have a material  adverse  effect on the  Company's
business, financial condition and results of operations.

     Year 2000  Compliance.  The Company is currently  evaluating  the potential
impact  of the  Year  2000  difficulties  on the  processing  of  date-sensitive
information  by the Company's  computerized  information  system.  The Year 2000
problem  is the  result of  computer  programs  being  written  using two digits
(rather than four) to define the applicable year. Any of the Company's  computer
programs  that have  time-sensitive  software may recognize a date using "00" as
the year 1900 rather than the year 2000,  which could result in  miscalculations
or system failures.  Based on preliminary  information,  the costs of addressing
the  potential  problems are not currently  expected to have a material  adverse
effect on the Company's financial  position,  liquidity or results of operations
in future  periods.  The  software  currently  offered by the  Company is either
designed  to be Year  2000  compliant  or has  been  upgraded  to be  Year  2000
compliant.  However, if the Company, or its customers or vendors,  are unable to
resolve  such  processing  issues in a timely  manner,  it could pose a material
financial risk. Accordingly, the Company plans to devote the necessary resources
to resolve all significant Year 2000 issues in a timely manner.


                                     - 12 -


<PAGE>


Part II. Other Information

Item 1.  Legal Proceedings
                None

Item 2.  Changes in Securities
                On January 31,  1999,  the  Company's  Board of  Directors  (the
                "Board") approved the issuance of up to 37,500 shares of a newly
                created  Series A Convertible  Preferred  Stock (the  "Preferred
                Stock") for $100.00 per share, an aggregate  consideration of up
                to $3,750,000. Each share of Preferred Stock is convertible into
                500 shares of the  Company's  Class A Common  Stock or $0.20 per
                share and is entitled to receive dividends in an amount equal to
                the equivalent per share dividend declared on the Class A Common
                Stock when and as declared by the Board of Directors.

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.     Exhibit No.

               10.1 Series A  Convertible  Preferred  Stock summary of principal
                    terms.

               10.2 Agreement  dated  February 2, 1999 by and between Harvey Wm.
                    Glasser, Cambio, Inc. and certain security holders.

               10.3 Agreement  dated  February 2, 1999 by and  between  Imperial
                    Loan Management Corporation,  Cambio, Inc. and Medbrook Home
                    Health, Inc.

               27   Financial Data Schedule.

         B.     Reports on Form 8-K

                None


                                     - 13 -


<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.


Cambio, Inc.



/s/ Ali Al-Dahwi
--------------------------------
Ali Al-Dahwi
President and Chief Executive
Officer



/s/ Wm. Samuel Veazey
--------------------------------
Wm. Samuel Veazey
Vice President of Finance, Chief
Financial Officer, Treasurer and
Secretary (Principal Accounting
and Financial Officer)





February 19, 1999