<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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

       FOR THE QUARTER ENDED JULY 31, 1998


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


                         COMMISSION FILE NUMBER 0-13608

                           INNOSERV TECHNOLOGIES, INC.
             (Exact name of Registrant as specified in its charter)


                 CALIFORNIA                                    95-3619990
       (State or other jurisdiction of                      (I.R.S. Employer
       incorporation or organization)                      Identification No.)


  320 WESTWAY, SUITE 530, ARLINGTON, TEXAS                        76018
  (Address of principal executive offices)                     (Zip Code)


       Registrant's telephone number, including area code: (817) 468-3377


     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 
        -----    -----

     At September 11, 1998, the Registrant had outstanding 3,009,395 shares of
its common stock, $.01 par value.

<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
                                    FORM 10-Q
                                  JULY 31, 1998


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                      Page 
                                                                                      ---- 
<S>      <C>                                                                          <C>
PART I - FINANCIAL INFORMATION

         Item 1.  Financial Statements

              Consolidated Balance Sheets as of July 31, 1998 and April 30, 1998       3

              Consolidated Statements of Operations for the three months ended 
                July 31, 1998 and 1997                                                 4

              Consolidated Statements of Cash Flows for the three months ended 
                July 31, 1998 and 1997                                                 5

              Notes to Consolidated Financial Statements                               6

         Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                               11

PART II - OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K                                    14

SIGNATURES                                                                            15

INDEX TO EXHIBITS                                                                     16
</TABLE>


                                       2
<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                    July 31,
                                                     1998      April 30, 
                                                  (Unaudited)    1998    
                                                  -----------  --------  
<S>                                                <C>         <C>
ASSETS
Current assets
  Cash and cash equivalents                        $  4,605    $  3,088  
  Receivables                                         3,784       3,821  
  Inventory:
    Spare parts and supplies, net                     3,803       4,031  
    Inventory held for sale                             750         878  
  Prepaid expenses                                      747         572  
                                                   --------    --------  
    Total current assets                             13,689      12,390  

Capital equipment, net                                2,701       3,042  
Goodwill, net                                         3,202       3,240  
Other assets                                             41          41  
                                                   --------    --------  
                                                   $ 19,633    $ 18,713  
                                                   --------    --------  
                                                   --------    --------  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Current portion of long-term debt                $    317    $    479  
  Accounts payable                                    5,146       5,974  
  Accrued liabilities                                 2,158       2,283  
  Deferred revenues                                   3,617       4,248  
                                                   --------    --------  
      Total current liabilities                      11,238      12,984  

Shareholders' equity
  Preferred stock, $.01 par value: 5,000,000
    shares authorized; 700,000 shares of Series B
    issued at July 31, 1998                               7          --   
  Common stock, $.01 par value: 10,000,000
    shares authorized; 3,009,395 issued                  30          30   
  Paid-in capital                                    20,103      17,324   
  Accumulated deficit                               (11,745)    (11,625)  
                                                   --------    --------  
      Total shareholders' equity                      8,395       5,729  
                                                   --------    --------  
                                                   $ 19,633    $ 18,713  
                                                   --------    --------  
                                                   --------    --------  
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                  Three Months Ended  
                                                       July 31, 
                                                 --------------------  
                                                   1998        1997   
                                                 --------    --------  
<S>                                              <C>         <C>
Revenues:
  Service                                        $  8,229    $  7,534  
  Sale of parts and equipment                         922       1,610  
                                                 --------    --------  
      Total revenues                                9,151       9,144  
Costs:
  Cost of service                                   7,260       6,890  
  Cost of parts and equipment                         408         711  
                                                 --------    --------  
      Total cost of operations                      7,668       7,601  

  Gross profit                                      1,483       1,543  

Depreciation and amortization                         381         394  
Selling and administrative                          1,207       1,384  
                                                 --------    --------  
Loss from operations                                 (105)       (235)  

Interest expense, net                                   3          17  
                                                 --------    --------  
Loss before income taxes                             (108)       (252) 
Provision for income taxes                             12          --  
                                                 --------    --------  
Net loss                                         $   (120)   $   (252) 
                                                 --------    --------  
                                                 --------    --------  
Net loss per share - basic and diluted           $   (.04)   $   (.05)
                                                 --------    --------  
                                                 --------    --------  
Weighted average shares - basic and diluted         3,009       5,036  
                                                 --------    --------  
                                                 --------    --------  
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>

                            INNOSERV TECHNOLOGIES, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                  (In thousands)

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 July 31,
                                                           --------------------  
                                                             1998        1997    
                                                           --------    --------  
<S>                                                        <C>         <C>
Cash flows from:
Operations:
Net loss                                                   $   (120)   $   (252)  
Adjustments to reconcile net loss to net cash flows
  from operations:
    Depreciation and amortization                               381         394   
    Changes in assets and liabilities:
      Receivables                                                37         822   
      Inventory                                                 356        (135)  
      Prepaid expenses                                         (175)        125   
      Accounts payable                                         (828)        368   
      Accrued liabilities                                      (125)       (309)  
      Deferred revenues                                        (631)       (144)  
      Other assets                                               --           2   
                                                           --------    --------  
Net cash provided by (used for) operations                   (1,105)        871  

Investing activities:
  Purchase of equipment                                          (2)         (8) 
                                                           --------    --------  
Net cash used for investing activities                           (2)         (8) 

Financing activities:
  Net proceeds from issuance of Preferred Stock               2,786          --  
  Payments on long-term debt                                   (162)       (121) 
                                                           --------    --------  
Net cash provided by (used for) financing activities          2,624        (121)  
                                                           --------    --------  
Net increase in cash and cash equivalents                     1,517         742  

Cash and cash equivalents at beginning of period              3,088       1,806  
                                                           --------    --------  

Cash and cash equivalents at end of period                 $  4,605    $  2,548  
                                                           --------    --------  
                                                           --------    --------  
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 1998
                                   (UNAUDITED)


1.   GENERAL

     The consolidated financial statements included herein have been prepared by
InnoServ Technologies, Inc. ("InnoServ") without audit, include all adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results of operations for the three months ended July 31, 1998 and 1997,
pursuant to the rules and regulations of the Securities and Exchange Commission,
and include the accounts of InnoServ and its consolidated subsidiaries. All
significant intercompany accounts and transactions have been eliminated. Any and
all adjustments made are of a normal and recurring nature in accordance with
Rule 10-01(b)(8) of Regulation S-X. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, however, InnoServ believes that the disclosures in such
financial statements are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with
InnoServ's annual report on Form 10-K for the fiscal year ended April 30, 1998,
filed with the Securities and Exchange Commission. The results of operations for
the three months ended July 31, 1998, are not necessarily indicative of the
results that may be expected for the year ending April 30, 1999.

     Certain reclassifications have been made in the prior year's consolidated
financial statements to conform to the fiscal 1999 presentation.


2.   INTEREST EXPENSE, NET

     Interest expense is net of interest income of $40,000 and $16,000 for the
periods ended July 31, 1998 and 1997, respectively.


3.   SUPPLEMENTAL CASH FLOW DISCLOSURE

     Interest and income taxes paid in the three months ended July 31, 1998 and
1997 were as follows:

<TABLE>
<CAPTION>
                                           Three Months Ended
                                                July 31,
                                         ---------------------  
                                           1998         1997
                                         --------     --------  
                   <S>                   <C>          <C>
                   Interest              $ 45,000     $ 25,000  
                   Income taxes          $ 13,000     $  4,000  
</TABLE>


                                       6
<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  JULY 31, 1998
                                   (UNAUDITED)


4.   EARNINGS PER SHARE

     In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS No.
128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. All earnings per
share amounts for all periods have been presented and, where necessary, restated
to conform to the SFAS No. 128 requirements.

     Basic and diluted per share amounts were the same for all periods
presented, as stock options to purchase shares of common stock were not included
in the computation of diluted earnings per share as they were antidilutive.


5.   LONG-TERM DEBT

     On April 14, 1997, InnoServ entered into a new loan agreement with a bank
pursuant to which amounts outstanding under InnoServ's prior revolving line of
credit and term loan agreements with the bank were converted into a new term
loan aggregating $1,198,000. Borrowings under the new term loan bear interest at
the rate of prime (8.5% at July 31, 1998) plus 1% per annum. Monthly principal
installments of $54,000 plus interest are required through January 8, 1999.
Obligations under the loan agreement are secured by a security interest in
InnoServ's accounts receivable, inventory and capital equipment. The loan
agreement contains financial covenants including maintenance of certain
financial ratios, net worth requirements and restrictions on future borrowings
and payment of dividends. As a result of the loss for the period, InnoServ
failed to meet the cash flow ratio under the loan agreement as of July 31, 1998.
InnoServ's bank waived this event of default through January 8, 1999.


6.   MERGER AGREEMENT

     On May 19, 1998, InnoServ entered into an Agreement and Plan of Merger (the
"Merger Agreement") with General Electric Company ("GE") whereby GE Medical
Systems, a division of GE, will acquire all of the outstanding common stock of
InnoServ for $16,000,000 in cash (the "Merger"), including the MEDIQ Payment (as
hereinafter defined) and the Escrow Payment (as hereinafter defined). After
payment to MEDIQ Incorporated ("MEDIQ") pursuant to a Stock Purchase Agreement
dated November 13, 1997 (the "MEDIQ Agreement"), holders of InnoServ common
stock will receive a range of consideration between approximately $3.97 and
$4.25 per share, depending upon the final amount payable to MEDIQ.


                                       7
<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  JULY 31, 1998
                                   (UNAUDITED)

6.   MERGER AGREEMENT (CONTINUED)

     MEDIQ and InnoServ are currently in dispute as to the amount that would be
owed to MEDIQ under the terms of the MEDIQ Agreement upon consummation of the
Merger. If InnoServ and GE had entered into or consummated a change of control
on or prior to April 1, 1998, upon consummation of the Merger MEDIQ would have
been entitled to $6,437,994, based upon the Merger consideration. Pursuant to a
letter agreement dated May 19, 1998 among InnoServ, MEDIQ and GE (the "Letter
Agreement"), MEDIQ has acknowledged that it believes that, based on the accuracy
of the representations described below, it will be owed $4,052,876 upon
consummation of the Merger, while InnoServ has acknowledged that it believes
that MEDIQ will be owed $3,218,997, which amount is 50 percent of $6,437,994.
The Merger Agreement provides for the payment on the effective date of the
Merger by GE (i) to MEDIQ of an amount equal to $3,218,997 (the "MEDIQ Payment")
and (ii) to an escrow agent of an amount equal to $833,879 (the "Escrow
Payment"), to be held pursuant to an escrow agreement by and between MEDIQ and
InnoServ (the "Escrow Agreement"). In a letter agreement among InnoServ and
MEDIQ, the parties agreed to submit such dispute to binding arbitration pursuant
to the terms of the MEDIQ Agreement to determine the amount MEDIQ and/or holders
of outstanding shares of InnoServ's common stock on the effective date will
receive pursuant to the Escrow Agreement.

     Under the terms of the Letter Agreement, MEDIQ also released InnoServ from
any further obligations under the MEDIQ Agreement, contingent upon the receipt
of the MEDIQ Payment and subject to the representations of InnoServ and GE that
such parties did not affirmatively delay any such change of control transaction
and that a description (provided to MEDIQ) of the parties' discussions with
respect to the Merger was materially correct and not misleading. In connection
with the arbitration of the dispute over whether MEDIQ is owed $4,052,876 or
$3,218,997, MEDIQ has advised InnoServ that it has concerns as to the accuracy
of such representations and that MEDIQ will require discovery with respect to
that issue. MEDIQ has not specified the nature of its concerns and, in
depositions taken in connection with the arbitration proceedings referenced
herein, MEDIQ's Chief Executive Officer and its outside counsel have testified
that they knew of no facts to suggest that the representations are untrue or
that the description is inaccurate. While InnoServ believes that the
representations are accurate, MEDIQ may nevertheless claim that they are not
accurate and demand that the full amount of $6,437,994 be paid to MEDIQ upon
consummation of the Merger. Although InnoServ believes that any such claim would
be without merit, there is no assurance, if such a claim is asserted, that
InnoServ will prevail on the issue in the arbitration proceeding or otherwise;
however, the ultimate resolution of this issue will have no effect on the amount
of consideration to be received by InnoServ shareholders nor will it effect
InnoServ's or GE's obligations under the Merger Agreement. It is unlikely that
the amount MEDIQ is entitled to receive will be finally resolved before the
Merger is consummated. Should MEDIQ ultimately obtain a final judgment against
InnoServ that it is owed more than the sum of the MEDIQ Payment and the Escrow
Payment, InnoServ would be responsible for payment of that excess amount.


                                       8
<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  JULY 31, 1998
                                   (UNAUDITED)


6.   MERGER AGREEMENT (CONTINUED)

     The obligations of InnoServ and GE to consummate the Merger are subject to
fulfillment or waiver of the following conditions: (i) approval of the Merger
Agreement by the shareholders of InnoServ; (ii) the expiration or termination of
the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") and the absence of any order by any governmental entity
restraining, enjoining or prohibiting the Merger; (iii) the performance in all
material aspects of the agreements of each party, respectively, under the Merger
Agreement and the receipt by each party of certificates from an officer of the
other party to such effect; (iv) the representations and warranties contained in
the Merger Agreement of each party, respectively, being correct and true as of
the effective date of the Merger (except where the failure to be so true,
individually or in the aggregate, with other such failures would not have a
material adverse effect as such term is defined in the Merger Agreement), and
the receipt by each party of certificates from an officer of the other party to
such effect; and (v) the receipt by GE of an opinion of counsel of InnoServ.

     GE and InnoServ filed notification and report forms with the U.S. 
Department of Justice (the "DOJ") and the Federal Trade Commission (the 
"FTC") seeking early termination of the waiting period under the HSR Act on 
December 24, 1997 and December 30, 1997, respectively. On July 14, 1998, GE 
and InnoServ received written notice that the FTC has granted early 
termination of the waiting period under the HSR Act. Pursuant to the terms of 
the Merger Agreement, GE and InnoServ entered into a side agreement dated May 
19, 1998 (the "Side Agreement"), wherein GE had agreed to pay InnoServ 
$1,200,000 if the DOJ or FTC did not grant early termination or expiration of 
the waiting period under the HSR Act prior to the later of (i) June 22, 1998 
or (ii) the date of the meeting of the shareholders of InnoServ at which the 
Merger is approved. Since early termination has been granted, no amount is 
payable by GE to InnoServ under the Side Agreement.

     InnoServ has called a Special Meeting of Shareholders ("Special Meeting")
to be held on September 15, 1998 at 8:00 a.m., central daylight time, at the
Hilton Arlington Hotel located at 2401 E. Lamar Boulevard, Arlington, Texas
76006, to consider and vote upon a proposal to approve and adopt the Merger
Agreement and the Merger. Holders of record of InnoServ common stock at the
close of business on August 27, 1998 are entitled to notice of, and to vote at,
the Special Meeting. Proxy materials were mailed to holders of record on August
31, 1998. Certain InnoServ shareholders, representing 53 percent of InnoServ
shares (an amount sufficient to approve the Merger), have entered into
agreements with GE to vote in favor of the Merger.


                                       9
<PAGE>

                           INNOSERV TECHNOLOGIES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  JULY 31, 1998
                                   (UNAUDITED)


6.   MERGER AGREEMENT (CONTINUED)

     GE and InnoServ will close the Merger transaction as soon as all necessary
approvals are obtained, which is currently expected to occur on or shortly after
September 15, 1998, the date of the Special Meeting.

     As of July 31, 1998, InnoServ recorded prepaid expenses of $284,000 for
direct costs associated with the Merger Agreement. In the event the Merger does
not close, this amount, in addition to other estimated direct costs of $340,000,
will be charged to income.


7.   PREFERRED STOCK

     Under the terms of the Merger Agreement, GE purchased 700,000 shares of a
newly created Series B Preferred Stock of InnoServ ("Preferred Shares") for
$2,800,000, which payment was received by InnoServ on June 5, 1998. The
Preferred Shares have no voting rights, accrue dividends of $0.32 per share per
annum beginning six months from the issuance of such shares, whether or not
earned or declared, have a liquidation value of $4.00 per share plus any accrued
but unpaid dividends, and are redeemable by InnoServ at anytime, but mandatory
on May 19, 2008, at a price equal to $4.00 per share plus any accrued but unpaid
dividends. Each Preferred Share is also convertible into common stock of
InnoServ, at the option of the holders, at anytime after the earlier of (i) the
consummation of a reorganization of InnoServ with a third party or (ii) the
later of (A) September 30, 1998 or (B) the termination of the Merger Agreement.


                                      10
<PAGE>

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


RESULTS OF OPERATIONS

FIRST QUARTER FISCAL 1999 COMPARED TO FIRST QUARTER FISCAL 1998

     Consolidated revenues for the first quarter of fiscal 1999 were $9,151,000,
essentially unchanged from the first quarter of fiscal 1998 revenues of
$9,144,000. Revenues from asset management and multi-vendor services increased
approximately $595,000 as InnoServ continued to focus on the growing market for
these types of services. Revenues from magnetic resonance imaging ("MRI")
maintenance service agreements increased approximately $130,000 primarily as a
result of new service agreements. Revenues from computed tomography ("CT")
maintenance service agreements increased approximately $130,000 primarily as a
result of additional time and material billings associated with such agreements.
Offsetting these increases, revenues from the sale of parts and equipment
declined approximately $690,000 and revenues from InnoServ's diagnostic mobile
imaging operations declined approximately $160,000 due to lower customer demand
for parts and the mobile units, respectively.

     Cost of operations increased $67,000 from the same period in the prior
fiscal year. Gross profit as a percentage of revenues decreased to 16 percent in
the first quarter of fiscal 1999 as compared to gross profit of 17 percent in
the prior year's first quarter. The decrease in gross profit as a percentage of
revenues is the result of lower gross profit margins generally on asset
management contracts awarded to InnoServ during the past year due to competitive
pricing in the marketplace.

     Selling and administrative expenses decreased $177,000, or 13 percent, from
the prior year primarily as a result of lower staffing in sales and
administration following the announcement of the pending merger with General
Electric Company. Depreciation and amortization expenses decreased $13,000 from
the same period in the prior fiscal year primarily as a result of the completed
depreciation of certain capital equipment.

     The loss before income taxes for the first quarter of fiscal 1999 was
$108,000 as compared to a $252,000 loss in the first quarter of fiscal 1998.
Because InnoServ employs field service engineers over a wide geographic area,
the current level of revenues are not sufficient in certain locations to cover
the direct and indirect costs of providing maintenance and repair services.
Additionally, due to the broad range of equipment serviced under asset
management and multi-vendor service agreements, InnoServ experienced an
increasing utilization of other service providers to supplement InnoServ's own
staff of field service engineers to service equipment under such maintenance
service agreements and a greater need to source repair parts from third parties
rather than utilizing InnoServ's existing inventory of spare parts.

     In the first quarter of fiscal 1999, InnoServ recorded a tax provision of
$12,000 for income taxes due to certain states in which InnoServ conducts
business. InnoServ did not recognize a tax benefit from the operating losses for
the first quarter of fiscal 1998 or fiscal 1999. Under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," net
operating losses enter into the calculation of deferred tax assets and
liabilities. At July 31, 1998, InnoServ had a net deferred tax asset before
valuation allowance of approximately $6,460,000, primarily as a result of net
operating 


                                      11
<PAGE>

losses and tax credit carryforwards. Due to the cumulative losses incurred in 
recent years, the deferred tax assets do not meet the criteria for 
recognition under SFAS No. 109 and, accordingly, InnoServ has recorded a 
valuation allowance for the full amount of the net deferred tax asset.

MERGER AGREEMENT

     On May 19, 1998, InnoServ entered into an Agreement and Plan of Merger (the
"Merger Agreement") with General Electric Company ("GE") whereby GE Medical
Systems, a division of GE, will acquire all of the outstanding common stock of
InnoServ (the "Merger") (see Note 6 of the Notes to Consolidated Financial
Statements). The Merger is subject to approval by InnoServ's shareholders,
government regulatory approval and other customary contingencies. On July 14,
1998, GE and InnoServ received written notice that the Federal Trade Commission
has granted early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. A Special Meeting of Shareholders will be
held on September 15, 1998 (the "Special Meeting") to consider and vote upon a
proposal to approve and adopt the Merger Agreement and Merger. Certain InnoServ
shareholders, representing 53 percent of InnoServ's shares (an amount sufficient
to approve the Merger), have entered into agreements with GE to vote in favor of
the Merger. GE and InnoServ will close the Merger transaction as soon as all
necessary approvals are obtained, which is currently expected to occur on or
shortly after September 15, 1998, the date of the Special Meeting. Should the
Merger not close as expected, it could have a material adverse effect on
InnoServ's ongoing business due to anticipated termination of employees and
difficulty in attracting new employees and customers.

LIQUIDITY AND CAPITAL RESOURCES

     At July 31, 1998, InnoServ had working capital of $2,451,000, of which
$4,605,000 was in cash and cash equivalents. Cash and cash equivalents increased
by $1,517,000 for the three months ended July 31, 1998 primarily as a result of
$2,786,000 in net proceeds received from GE for the issuance of 700,000 shares
of a newly created Series B of Preferred Stock of InnoServ. Operations used
$1,105,000 of cash for the three month period ended July 31, 1998, primarily as
a result of net payments totaling $828,000 of accounts payable and $125,000 of
accrued liabilities and a reduction in deferred revenues of $631,000 as services
were provided in the period for which payment had been received in a prior
period. Cash was used for the prepayment of $175,000 of expenses primarily for
costs incurred in conjunction with the Merger Agreement with GE. Offsetting
these negative cash flows were the non-cash effect of depreciation and
amortization of $381,000 and a reduction in inventory of $356,000 due to the
amortization of spare parts inventory and the sale of x-ray tubes and equipment
held for resale. InnoServ also made debt payments of $162,000.

     InnoServ's allowance for doubtful accounts at July 31, 1998 was $719,000,
or 16 percent of gross accounts receivable. InnoServ's customers include
hospitals, physician practices, outpatient clinics and entrepreneurial
operations. Some of these customers are thinly capitalized, operate on small
margins and experience cash flow difficulties due to the lengthy time required
to receive reimbursements from Medicare and insurance companies. Factors
impacting InnoServ's allowance for doubtful accounts include the timing of
account write-offs and the changes occurring in the healthcare industry,
primarily the move to managed care, which has weakened healthcare providers'
ability to pay their debts and have forced some providers out of business.


                                      12
<PAGE>

     On April 14,1997, InnoServ entered into a new loan agreement with a bank
pursuant to which amounts outstanding under InnoServ's prior revolving line of
credit and term loan agreements with the bank were converted into a new term
loan aggregating $1,198,000. Borrowings under the new term loan bear interest at
the rate of prime (8.5% at July 31, 1998) plus 1% per annum. Monthly principal
installments of $54,000 plus interest are required through January 8, 1999.
Obligations under the loan agreement are secured by a security interest in
InnoServ's accounts receivable, inventory and capital equipment. The loan
agreement contains financial covenants including maintenance of certain
financial ratios, net worth requirements and restrictions on future borrowings
and payment of dividends. As a result of the loss for the period, InnoServ
failed to meet the cash flow ratio under the loan agreement as of July 31, 1998.
InnoServ's bank waived this event of default through January 8, 1999.

     InnoServ believes it has sufficient cash resources to meet its operating
needs and does not anticipate making any significant capital purchases for the
next twelve months.

YEAR 2000 ISSUE

     InnoServ maintains or services certain customer owned medical equipment
containing microprocessors and software programs with date functionality which
could malfunction in the year 2000 ("Year 2000 Issue"). InnoServ has, among
other actions, sent written communications to all of its customers to ensure
they are aware of the Year 2000 Issue as it pertains to their medical equipment
and they have initiated actions to bring their equipment into compliance with
the Year 2000 Issue, if applicable. Solutions for bringing equipment into
compliance range from a simple reprogramming of the software, to the replacement
of circuit boards or components, to retiring the equipment because it cannot be
brought into compliance cost effectively. These solutions, particularly if a
customer chooses to retire equipment, could have an adverse effect on InnoServ's
revenue stream.

     InnoServ has conducted an assessment of its own computer systems and other
date sensitive electronic systems and determined they are substantially
compliant with the Year 2000 Issue. No interruption of InnoServ's business is
expected to occur and the costs to bring systems in full compliance is not
expected to be material.

RISK FACTORS

     The statements in this Management's Discussion and Analysis and elsewhere
in this report that are not based on historical fact are forward looking
statements, which involve numerous risks and uncertainties. InnoServ's future
results of operations and financial condition may differ materially from these
expectations due to many factors, including the closing of the Merger with GE
and, in the absence of such closing, InnoServ's ability to implement its
operating plans to reduce costs while providing an increasing array of services
to its customers, to retain existing employees and customers and to attract new
employees and customers, competitive and regulatory conditions in the healthcare
industry generally, and other factors, many of which are beyond the control of
InnoServ.


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<PAGE>

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

         (a)  Exhibits:

         The information required by this portion of Item 6 is set forth
in the Index to Exhibits beginning on page 16.

         (b) Reports on Form 8-K:

         During the three months ended July 31, 1998, no reports were
filed by the Registrant on Form 8-K.












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<PAGE>

                                   SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                DATED: September 11, 1998

                                INNOSERV TECHNOLOGIES, INC.


                                By: /s/ Thomas Hoefert
                                   --------------------------------------------
                                    Thomas Hoefert
                                    Vice President and Chief Financial Officer
                                      (Duly Authorized Officer and
                                       Principal Financial and Accounting
                                       Officer)









                                      15
<PAGE>

                                INDEX TO EXHIBITS

     Exhibit
       No.                      Description of Exhibit
     -------                    ---------------------- 

       2.1     First Amended and Restated Agreement and Plan of Merger dated
                 as of May 19, 1998 by and among General Electric Company,
                 Diamond Merger Sub, Inc. and Registrant (previously filed as an
                 appendix to the Registrant's Information Statement on Schedule
                 14A dated August 31, 1998).

       4.1     Stock Purchase Agreement dated November 13, 1997 by and among
                 Registrant, MEDIQ Incorporated and MEDIQ Investment Services
                 (previously filed as an exhibit to the Registrant's Form 8-K
                 dated November 13, 1997).

      10.1     Agreement dated May 14, 1998 amending the Bonus Agreement dated
                 December 20, 1996, as amended, and the Letter Agreement of
                 Employment dated December 8, 1995 between Registrant and
                 Michael G. Puls.

      10.2     Letter dated July 2, 1998 waiving the violation of certain
                 financial covenants of the Loan Agreement dated as of April 14,
                 1997 by and between Registrant and Frost National Bank
                 (formerly Overton Bank and Trust, N.A.) (previously filed as an
                 exhibit to the Registrant's Annual Report on Form 10-K for the
                 year ended April 30, 1998).

       27.1    Financial Data Schedule.



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