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 September 30, 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)


                         2000 Powell Street, Suite 1203
                          Emeryville, California 94608
                    (Address of principal executive offices)


                                 (510) 420-0900
                           (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 November 12, 1998,  2,672,911 shares of Class A Common Stock and 1,159,500
shares of Class B Common 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 September 30, 1998                       1

                        Consolidated Statements of
                        Operations for the three months
                        ended September 30, 1998 and 1997                    2

                        Consolidated Statements of
                        Cash Flows for the three months
                        ended September 30, 1998 and 1997                    3

                        Notes to Financial Statements                        4

            Item 2.     Management's Discussion and
                        Analysis of Financial Condition
                        and Results of Operations                         6 - 10

Part II.    Other Information and Signatures                             12 - 13


<PAGE>


                                  CAMBIO, INC.
                           CONSOLIDATED BALANCE SHEET
                               September 30, 1998
                                   (Unaudited)

                                     ASSETS
Current assets:
Cash and cash equivalents .....................................    $    289,000
Restricted cash ...............................................         171,000
Accounts receivable - net of allowance
  for doubtful accounts of $230,000 ...........................         198,000
Prepaids and deposits .........................................          83,000
Net assets of discontinued operations (net
 receivables and other assets of $1,842,000
 less liabilities and estimated accrued
 disposal costs of $1,295,000) ................................         547,000
                                                                   ------------
     Total current assets .....................................       1,288,000

Property and equipment, net ...................................         188,000

Other assets:
 Goodwill .....................................................       4,769,000
                                                                   ------------
     Total assets .............................................    $  6,245,000
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Short-term borrowings and notes payable ......................    $    521,000
 Accounts payable - trade .....................................       1,350,000
 Accrued expenses .............................................         167,000
 Deferred revenue and customer deposits .......................         216,000
                                                                   ------------

     Total current liabilities ................................       2,254,000

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 ..........................................     (15,267,000)
      Total stockholders' equity ..............................       2,983,000
                                                                   ------------
      Total liabilities and stockholders' equity ..............    $  6,245,000
                                                                   ============


         The accompanying notes are an integral part of this statement

                                      -1-


<PAGE>


                                  CAMBIO, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)


                                                            Three Months Ended
                                                              September 30,
                                                            1998         1997
                                                            ----         ----
Net revenue ..........................................   $ 120,000    $    --   
Cost of sales ........................................      10,000         --   
                                                         ---------    ---------

     Gross profit ....................................     110,000         --

Selling, general and administrative expenses .........     637,000      152,000
Research and development expense .....................      75,000         --
Depreciation and amortization ........................     100,000       12,000
                                                         ---------    ---------
     Loss from operations ............................    (702,000)    (164,000)
                                                         ---------    ---------
Other income (expense):
 Interest and other income ...........................        --         40,000
 Interest expense ....................................      (7,000)      (9,000)
                                                         ---------    ---------
     Total other income (expense) ....................      (7,000)      31,000
                                                         ---------    ---------
     Loss before discontinued operations .............    (709,000)    (133,000)

     Income from operations of discontinued businesses        --        802,000
                                                         ---------    ---------
     Net income (loss) ...............................   $(709,000)   $ 669,000
                                                         =========    =========
Basic and diluted net (loss) per common share
  - continuing operations ............................   $   (0.25)   $   (0.05)

Basic and diluted net income per common share
  - discontinued operations ..........................   $    --      $    0.28
                                                         ---------    ---------
Basic and diluted net income (loss) per common
  share ..............................................   $   (0.25)   $    0.23
                                                         =========    =========
Weighted average shares outstanding ..................   2,795,554    2,895,366
                                                         =========    =========


        The accompanying notes are an integral part of these statements

                                      -2-


<PAGE>


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


                                                           Three Months Ended
                                                              September 30,
                                                           1998           1997
                                                           ----           ----
Cash flows from operating activities:
  Net income (loss) ..............................   $  (709,000)   $   669,000
  Adjustments to reconcile net income (loss) to
   cash provided (used) by operations:
    Income from discontinued operations ..........          --         (802,000)
    Depreciation and amortization ................       100,000         88,000
    Changes in operating assets and liabilities:
     Net assets of discontinued operations .......       255,000        593,000
     Accounts receivable .........................        61,000           --
     Prepaids and deposits .......................        (6,000)          --
     Accounts payable and accrued expenses .......       (79,000)        (3,000)
     Deferred revenue and prepaid deposits .......        (9,000)          --
                                                     -----------    -----------
      Net cash provided (used) by operating
       activities ................................      (387,000)       545,000
                                                     -----------    -----------
Cash flows from investing activities:
  Capital expenditures ...........................        (7,000)          --
  Cash advance to acquired company ...............      (638,000)          --
  Costs related to acquisition ...................      (100,000)          --
  Discontinued operations, net ...................          --          722,000
                                                     -----------    -----------

      Net cash provided (used) by investing
       activities ................................      (745,000)       722,000
                                                     -----------    -----------
Cash flows from financing activities:
 Short-term borrowings ...........................       (42,000)        16,000
 Long-term borrowings ............................         8,000           --
 Decrease in restricted cash .....................       131,000          5,000
                                                     -----------    -----------
      Net cash provided by financing activities ..        97,000         21,000
                                                     -----------    -----------
      Net change in cash and cash equivalents ....    (1,035,000)     1,288,000

      Cash and cash equivalents at beginning of
       the period ................................     1,324,000      2,929,000
                                                     -----------    -----------
      Cash and cash equivalents at end of
       the period ................................   $   289,000    $ 4,217,000
                                                     ===========    ===========

Supplemental  disclosure of cash flow
 information:
  Cash paid during the period for:
    Interest .....................................   $     2,000    $    45,000
    Income taxes .................................         9,000         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
                                                     ===========


        The accompanying notes are an integral part of these statements


                                      -3-


<PAGE>


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

1.   The accompanying consolidated condensed financial statements of the Company
     for the three months ended  September  30, 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 September 30, 1998, net assets of discontinued operations consist of the
     following:

           Receivables                                 $1,764,000 
           Other current assets                            78,000 
           Trade Payables, accrued liabilities
           and estimated accrued disposal costs        (1,295,000)
                                                       -----------
                                                       $  547,000
                                                       ===========

     Results of discontinued  operation for the three months ended September 30,
     1998 and 1997 are as follows:

                                                         Three Months Ended
                                                            September 30,
                                                         1998          1997
                                                         ----          ----
           Net revenues                            $     66,000   $ 3,060,000
           Net expenses                                (299,000)   (2,258,000)
           Accrued expenses                             233,000           --
                                                   ------------    -----------
           Net income from operations of
             discontinued businesses               $      --      $   802,000
                                                   ============   ===========

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


                                       -4-


<PAGE>


     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  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.

                                                Three Months Ended
                                                  September 30,
                                            -------------------------
                                               1998           1997
                                               ----           ----
          Net revenues .................   $   340,000    $ 1,208,000

          Net loss .....................   $(1,779,000)   $  (259,000)
                                           ===========    ===========
          Net loss per share:
           Basic .......................   $     (0.46)   $     (0.06)
                                           ===========    ===========
           Diluted .....................   $     (0.46)   $     (0.06)
                                           ===========    ===========
          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 three months ended  September 30, 1998
     and 1997,  representing  all changes in  Stockholders'  deficit  during the
     period  other  than  changes   resulting  from  the  Company's  stock,  was
     $(709,000) and $669,000, 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
("HCFA"),  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>


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 September 30, 1998
as Compared to Three months ended September 30, 1997

     Net revenues for the First Quarter  Fiscal 1999 were  $120,000.  Because of
the change in business as a result of the Cambio  Networks  acquisition  and the
discontinuance of the healthcare business, the results of operation for the same
period in the prior year are not  comparable.  Revenues  for the current  period
include one month of Cambio  Networks  operations  following its  acquisition in
September 1998.

     The Company  intends to concentrate  its efforts on increasing its level of
sales and  decreasing  its  operating  expenses  in order to achieve  profitable
operations.  In that regard,  following the completion of the  acquisition,  the
Company appointed Ali Al-Dahwi as President and Chief Operating Officer. In June
1998,  immediately  after his appointment as President of Cambio  Networks,  Mr.
Al-Dahwi developed a new business model by which a new product was developed for
the Company by engineers from the Phifer  Consulting  Group, Inc. in association
with the Company's  existing  research and  development  ("R&D") group.  The new
application,  netRunner,  is the  Company's  new  flagship  network  information
management platform.  In October 1998, the Company officially launched netRunner
at the InterOp,  Atlanta and InterOp,  Paris tradeshows.  The new product has an
entirely new  architecture and advanced  capabilities.  The Company is currently
aggressively  marketing its new  application  and expects to generate  increased
level of sales.

     netRunner is designed to run under  Windows 95, 98 or NT operating  systems
using current development technologies.  Extensions to netRunner are continously
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,   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
and internationally in the United Kingdom and Egypt.

     Selling, general and administrative ("SG&A") expenses for the First Quarter
Fiscal 1999 were $637,000,  a 319.1% increase from SG&A expenses of $152,000 for
the First Quarter  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 First  Quarter  Fiscal 1998  include only the
administrative costs not associated with the discontinued operations.

     R&D expense for the First  Quarter  Fiscal  1999 was  $75,000.  The Company
incurred R&D expenses  primarily as a result of its new product  development  by
the Phifer Group.

     Depreciation and amortization  ("D&A") expense for the First Quarter Fiscal
1999 was $100,000,  a 733.3%  increase from D&A expense of $12,000 for the First
Quarter  Fiscal 1998.  The  increase in D&A expense is primarily  due to the one
month  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 First  Quarter  Fiscal  1999 was  $7,000 as
compared to a net interest  income of $31,000 for the First Quarter Fiscal 1998.
For the First Quarter Fiscal 1999 interest expense includes interest on existing
debt of Cambio Networks.

     The costs associated with the discontinued operations for the First Quarter
Fiscal  1999  were  accrued  at June 30,  1998.  Therefore,  no  income  or loss
associated  with  discontinued  operations  is reported.  For the First  Quarter
Fiscal 1998,  the Company  generated  $802,000 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.

                                       -7-


<PAGE>


     As a result of the  foregoing,  net loss for the First Quarter  Fiscal 1999
was $709,000,  an increase in loss of  $1,378,000  from a net income of $669,000
for the First Quarter  Fiscal 1998. The decrease in net loss is primarily due to
the one time gain recorded during the First Quarter Fiscal 1998.

     Basic and  diluted  loss per share was $0.25 for the First  Quarter  Fiscal
1999 as  compared  to a net income of $0.23 per share for the same period in the
prior fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

     At  September  30,  1998,  the  Company  had  negative  working  capital of
$966,000,  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 of receivables
due from Cambio Networks.  The Company had cash and cash equivalents of $289,000
at September 30, 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
acquisition.

     During the First Quarter  Fiscal 1999, the Company's  operating  activities
used cash of $387,000,  as compared to cash provided by operating  activities of
$545,000  during the same  period in the prior  fiscal  year.  The cash used for
operating  activities  during the First  Quarter  Fiscal 1999 is  primarily  the
result of the losses incurred by the continuing  operations  including one month
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.

     The Company's assets of discontinued  operations  include $1,764,000 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.  Such amount also includes amounts the Company
expects to receive upon regulatory  approval of the Company's annual application
for an exception from the routine cost limitation under the Medicare program for
fiscal years 1992 through 1996 for its 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.

     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 is due after
February 1999. The Loan is guaranteed by Frederick R. Adler and  Euro-America II
L.P, two of the Company's majority  shareholders.  As of September 30, 1998, the
outstanding balance on the Loan was $1,000,000.

     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. As of September 30, 1998, the outstanding  balance
on the notes was $250,000. The Company agreed to the repayment of these notes in
four quarterly principal and interest payments commencing December 1998.

     As of  September  30,  1998,  the  Company  had  advanced  Cambio  Networks
$1,810,000 to fund its business  activities  prior and subsequent to the closing
of the  acquisition.  Such  advances 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 (the "Imperial Loan") evidenced by a promissory note (the
"Note")  bearing  interest  at a per annum  rate of prime  plus  2.25%  with the
principal  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 Imperial Loan is enhanced by a personal guarantee from Harvey Wm.
Glasser,  the Company's Chairman and Chief Executive Officer,  to Imperial Bank,
the source of funds for the Imperial  Loan.  The Imperial  Loan is being used to
provide working capital for current operations.


                                       -8-


<PAGE>

     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 September
30, 1998, the Company had negative working capital of $966,000.  The Company has
only a limited  amount of working  capital.  Although the  Company's  management
believes  that its expected  funds from  discontinued  operations  and currently
available  working capital will be sufficient to meet its forecasted  short-term
cash  commitments,  in the future,  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
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


                                       -9-


<PAGE>


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,  andits  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,
longer  accounts  receivable  payment  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  translation 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
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 Dr. Harvey Wm. Glasser, its
Chief  Executive  Officer,  Ali  Al-Dahwi,  its  President  and Chief  Operating
Officer,  and Wm. Samuel Veazey, its Vice President and Chief Financial 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 any of
such persons 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.

                                      -10-

<PAGE>


     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.  Although  most of the  software  currently  offered  by the
Company is either  designed to be Year 2000 compliant or has been upgraded to be
Year 2000  compliant,  the Company still offers some software  which is not Year
2000 compliant.  The Company anticipates these software products to be Year 2000
compliant  by the end of 1998.  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.


                                      -11-


<PAGE>


Part II. Other Information

Item 1. Legal Proceedings

     On November  12,  1998,  the  Company was served with a complaint  filed by
     Thomas C. Barron  ("Barron"),  a former employee of Cambio  Networks,  Inc.
     entitled  Thomas C.  Barron  v.  Cambio  Networks,  Inc.,  and  Meadowbrook
     Rehabilitation  Group,  Inc.,  Docket No.  605493/98,  Supreme Court of the
     State of New York, County of New York. The complaint alleges damages in the
     amount of  $224,999.96,  plus the value of Mr.  Barron's  accrued  vacation
     through the last day of his employment at Cambio Networks,  Inc. for breach
     of contract and anticipatory breach of contract.  The Company regards these
     allegations  as  inaccurate  and  is  vigorously   defending  Mr.  Barron's
     complaint.

Item 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.   Exhibit No.

          27 Financial Data Schedule.

     B.   Reports on Form 8-K

          The  Registrant  filed a Form 8-K dated August 10, 1998 which reported
          the  change  of  Artur  Andersen  LLP  as the  Registrant's  principal
          independent  accountant  engaged to audit the  Registrant's  financial
          statements  and  the  appointment  of  Grant  Thornton  LLP as its new
          independent accountants.

          The  Registrant  filed a Form  8-K  dated  September  14,  1998  which
          reported that it had acquired Cambio  Networks,  Inc.,  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.


                                      -12-


<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/ Harvey Wm. Glasser
--------------------------------
Harvey Wm. Glasser
Chairman of the Board and
Chief Executive Officer



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



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



November 13, 1998


                                      -13-