<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549
                                   FORM 10-KSB/A1

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934
                 For the Fiscal Year Ended December 31, 1996 or
[ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

                       Commission File Number:  000-22172

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



WASHINGTON                                              91-1345532
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)

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

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

           Securities registered pursuant to Section 12(b) of the Act:
                                                       Name of each exchange
Title of each class                                    on which registered
-------------------                                    -------------------
      None                                                     N/A

           Securities registered pursuant to Section 12(g) of the Act:
                           COMMON STOCK, NO PAR VALUE
                                (Title of Class)

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 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year were $3,113,000.

Aggregate market value of voting stock held by non-affiliates of the 
registrant as of March 10, 1997 was $8,868,800  (based upon the closing sale 
price of $1.88 per share on the Nasdaq National Market on such date).  Number 
of shares of Common Stock outstanding as of March 10, 1997:  5,624,951 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III is incorporated by reference from the definitive proxy statement to be
filed in connection with the Company's 1997 Annual Meeting of Shareholders.


<PAGE>

ITEM 3.
LEGAL PROCEEDINGS

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

The Securities and Exchange Commission ("SEC") has concluded its investigation
into the restatement of the Company's financial statements for the year ended
December 31, 1994.  In anticipation of an administrative proceeding being
commenced by the SEC alleging violation of certain reporting and accounting
requirements, the Company entered into a settlement agreement with the SEC in
October 1996.  Pursuant to the settlement agreement, the Company, without
admitting or denying any of the SEC's findings, was ordered to cease and desist
from permitting or causing any violation of certain reporting and accounting
requirements contained in the federal securities laws.  The settlement has not
had an adverse effect on the Company's operating results or financial condition.

On May 9, 1997, Ask Me Multimedia Corporation ("AMM") served a Demand for 
Arbitration (the "Arbitration") on the Company. The Arbitration was filed 
with the American Arbitration Association in Seattle, Washington. The 
Arbitration alleges that in connection with the Company's purchase of 
certain AMM assets in early 1995, the Company breached certain of the 
representations, warranties and covenants made to AMM. The Arbitration seeks 
damages in excess of $1.1 million for, among other things, breach of 
contract. The Company intends to vigorously defend the Arbitration and to 
assert all available counterclaims against AMM. The Company believes that it 
has certain valid defenses and counterclaims to the Arbitration, however, the 
Company cannot predict the outcome of the Arbitration. Given the Company's 
limited working capital, a significant damage award against the Company could 
have a material adverse affect on future operations. In addition, the 
existence of the Arbitration may adversely affect the Company's ability to 
raise additional capital.

ITEM 7.   FINANCIAL STATEMENTS

Item 7 is hereby amended in order to (i) make certain technical corrections 
to the report of Price Waterhouse LLP, (ii) change the order of the 
Statements of Cash Flows and the Statements of Shareholders' Equity, 
(iii) modify the numbers assigned to the Notes to Financial Statements 
(iv) add a new note 15 to Notes to Financial Statements describing the 
repurchase of certain shares of common stock pursuant to a buy-sell agreement 
and (v) add Note 16 describing a certain subsequent event.  The Company has 
not restated or modified any amounts appearing in the Financial Statements or 
the Notes to Financial Statements set forth below.


                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders of Midisoft Corporation

We have audited the accompanying balance sheet of Midisoft Corporation as of 
December 31, 1996 and the related statement of operation, shareholders' 
equity, and cash flow for the year then ended.  These financial statements 
are the responsibility of the Company's management.  Our responsibility is to 
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audit provides a 
reasonable basis for our opinion.

In our opinion, the 1996 financial statements referred to above present 
fairly, in all material respects, the financial position of Midisoft 
Corporation at December 31, 1996 and the results of its operations and its 
cash flows for the year then ended in conformity with generally accepted 
accounting principles.

The accompanying financial statements have been prepared assuming that the 
Company will continue as a going concern. As more fully described in Note 1, 
the Company has incurred recurring losses from operations and has negative 
operating cash flows. These conditions raise substantial doubt about the 
Company's ability to continue as a going concern. Management's plans in 
regard to these matters are also described in Note 1. The financial 
statements do not include any adjustments to reflect the possible future 
effects on the recoverability and classification of assets or the amounts and 
classifications of liabilities that may result from the outcome of this 
uncertainty.

Seattle, Washington                                          Ernst & Young LLP
March 13, 1997


             REPORT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS

To the Board of  Directors
and Shareholders of Midisoft Corporation

In our opinion, the accompanying balance sheet and the related statements of 
operations, of shareholders' equity and of cash flows present fairly, in all 
material respects, the financial position of Midisoft Corporation at December 
31, 1995 and the results of its operations and its cash flows for the year 
then ended in conformity with generally accepted accounting principles.  
These financial statements are the responsibility of the Company's 
management; our responsibility is to express an opinion on these financial 
statements based on our audit.  We conducted our audit of these statements in 
accordance with generally accepted auditing standards which require that we 
plan and perform the audit to obtain reasonable assurance about whether the 
financial statements are free of material misstatements.  An audit includes 
examining, on a test basis, evidence supporting the amounts and disclosures 
in the financial statements, assessing the accounting principles used and 
significant estimates made by management, and evaluating the overall 
financial statement presentation.  We believe that our audit provides a 
reasonable basis for the opinion expressed above.

Price Waterhouse  LLP
Seattle, Washington
March 27, 1996

                                                                              2

<PAGE>

                              MIDISOFT CORPORATION
                                 BALANCE SHEETS

<TABLE>
<CAPTION>

                                                               ASSETS
                                                                                            Year ended December 31,
                                                                                       -----------------------------------
                                                                                            1996               1995
                                                                                       ---------------     ---------------
Current assets:
<S>                                                                                    <C>                 <C>
           Cash and cash equivalents                                                    $    709,000        $  2,143,000
           Short term investments                                                                              1,540,000
           Accounts receivable - net of allowances of
            $1,052,000 in 1996 and $1,550,000 in 1995                                      1,282,000           2,329,000
           Inventories                                                                       942,000             494,000
           Prepaid expenses and other receivable                                             282,000             266,000
                                                                                       ---------------     ---------------
             Total current assets                                                          3,215,000           6,772,000
Property & equipment, net                                                                    421,000             562,000
Capitalized software and other costs, net                                                    455,000           1,230,000
                                                                                       ---------------     ---------------
             Total assets                                                               $  4,091,000        $  8,564,000
                                                                                       ---------------     ---------------
                                                                                       ---------------     ---------------

                                                 LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities:
           Trade accounts payable                                                       $    691,000        $    429,000
           Accrued wages & payroll taxes                                                     186,000             260,000
           Other accrued expenses                                                            118,000           1,804,000
           Deferred revenue                                                                  821,000             807,000
                                                                                       ---------------     ---------------
             Total current liabilities                                                     1,816,000           3,300,000
                                                                                       ---------------     ---------------
Commitments & contingencies (Note 13)
Shareholders' equity
           Preferred stock, Series A Convertible, no par value; 2,500,000 shares
             authorized, 1,100 shares issued and outstanding in 1996 and
             none in 1995                                                                  1,100,000
           Common stock, no par value; 10,000,000 shares authorized,
             5,345,425 issued and outstanding in 1996 and
             4,662,441 issued and outstanding in 1995                                     18,733,000          17,106,000
           Retained deficit                                                              (17,558,000)        (11,842,000)
                                                                                       ---------------     ---------------
             Total shareholders' equity                                                    2,275,000           5,264,000
                                                                                       ---------------     ---------------
             Total liabilities and shareholders' equity                                 $  4,091,000        $  8,564,000
                                                                                       ---------------     ---------------
                                                                                       ---------------     ---------------
</TABLE>




See accompanying notes to financial statements.


                                                                              3

<PAGE>

                              MIDISOFT CORPORATION
                              STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                            Year ended December 31,
                                                                                       -----------------------------------
                                                                                            1996               1995
                                                                                       ---------------     ---------------
<S>                                                                                    <C>                 <C>
CASH FLOWS FROM OPERATIONS:
    Net loss                                                                           $  (5,716,000)      $ (12,132,000)
    Adjustments to reconcile net loss to net cash
     provided by operating activities:
       Depreciation                                                                          222,000             204,000
       Amortization                                                                          780,000             948,000
       Loss on disposal of leasehold                                                                              16,000
       Deferred rent provision                                                                                    65,000
       Writedown of capitalized software                                                                       3,898,000
       Settlement of litigation                                                                                  150,000
       (INCREASE) DECREASE IN ASSETS:
        Accounts receivable, net                                                           1,047,000           1,515,000
        Inventories                                                                         (448,000)            185,000
        Prepaid expenses                                                                     (16,000)             15,000
        Deferred income taxes                                                                                    283,000
       INCREASE (DECREASE) IN LIABILITIES:
        Trade accounts payable                                                               262,000             (38,000)
        Accrued wages & payroll taxes                                                        (74,000)            120,000
        Other accrued expenses                                                              (142,000)          1,624,000
        Deferred income taxes                                                                      -            (291,000)
        Deferred revenue                                                                      14,000              22,000
                                                                                       ---------------     ---------------
              Total adjustments                                                            1,645,000           8,716,000
                                                                                       ---------------     ---------------
              Net cash used for operations                                                (4,071,000)         (3,416,000)
                                                                                       ---------------     ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Redemption of short term investments                                                   1,540,000
    Purchases of short term investments                                                                       (1,540,000)
    Purchases of property & equipment                                                        (86,000)           (407,000)
    Capitalized software                                                                           -          (2,384,000)
                                                                                       ---------------     ---------------
              Net cash provided by/(used in) investing activities                          1,454,000          (4,331,000)
                                                                                       ---------------     ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from common stock option exercises                                               83,000             306,000
    Proceeds from sale of preferred stock                                                  1,100,000
    Stock repurchased                                                                                            (17,000)
                                                                                       ---------------     ---------------
              Net cash provided by financing activities                                    1,183,000             289,000
                                                                                       ---------------     ---------------
Net decrease in cash and cash equivalents                                                 (1,434,000)         (7,458,000)
Cash and cash equivalents, beginning of year                                               2,143,000           9,601,000
                                                                                       ---------------     ---------------
Cash and cash equivalents, end of period                                               $     709,000       $   2,143,000
                                                                                       ---------------     ---------------
                                                                                       ---------------     ---------------
SUPPLEMENTAL CASH FLOW INFORMATION:
    Common stock issued for purchase of other assets                                   $           -       $   1,991,000
    Common stock and stock options issued in settlement of claims                          1,544,000             150,000
    Income taxes paid                                                                              -               2,000


                                                                              4
<PAGE>

</TABLE>
     STOCK COMPENSATION
     The Company has elected to apply the disclosure-only provisions of
     Statement of Financial Accounting Standards No. 123, "Accounting for stock
     Based Compensation."  Accordingly, the Company accounts for stock-based
     compensation using the intrinsic value method prescribed in Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees," and related interpretations.  Compensation cost for stock
     options is measured as the excess, if any, of the fair market value of the
     Company's common stock at the date of grant over the exercise price.

     RECLASSIFICATIONS

     Certain prior year balances have been reclassified to conform to the
     current year presentation.

3.   RESTRUCTURING OF OPERATIONS

     During the third and fourth quarters of 1995, the Company recorded charges
     of $2,369,000 and $1,529,000, respectively, for restructuring associated
     with the Company's determination that certain software assets were not
     compatible with the reorganized product strategy. The charges consists of
     the write-down of previously capitalized software development costs. The
     Company's entire research and development, marketing and sales efforts were
     refocused upon the Company's core competence in sound and music.  Products
     that represented education, entertainment and business were written off as
     it was determined that no further internal resources would be spent to
     develop or promote them.  The Company has established licensing agreements
     for these products to third party publishers for per unit royalty payments.


4.   ACCOUNTS RECEIVABLE AND MAJOR CUSTOMER INFORMATION

     The Company operates in a single business segment.  During the years ended
     December 31, 1996 and 1995, the Company had revenue from foreign customers
     of $603,000 and $944,000, respectively.  Foreign sales as a percentage of
     the Company's total revenue in 1996 and 1995 were 19% and 17%,
     respectively.  In 1996 and 1995 separate domestic reseller customers
     accounted for revenues of $2,071,000 and $2,255,000, respectively, equal to
     67% and 42% of the Company's total revenue in the periods.

     Accounts receivable are summarized as follows:

                                                      1996           1995
                                                      ----           ----
          OEM                                     $  1,600,000   $  2,398,000
          Resellers and other                          734,000      1,481,000
                                                 -------------- --------------
           Subtotal                                  2,334,000      3,879,000
          Less:  Allowance for doubtful accounts      (781,000)    (1,120,000)
                 Allowance for sales returns          (271,000)      (430,000)
                                                 -------------- --------------
          Total accounts receivable               $  1,282,000   $  2,329,000
                                                 -------------- --------------
                                                 -------------- --------------


     Accounts receivable consist principally of amounts due from OEMs and
     reseller customers for licensing fees, royalties and direct sales of
     products.  OEM customer payment terms typically are one year in duration
     and require payments to be made in quarterly installments.  At December 31,
     1996 and 1995, OEM accounts receivable amounts not yet due were $173,000
     and $971,000, equal to 11% and 40%, respectively, of total OEM receivables.
     At December 31, 1996 and 1995, reseller accounts receivable amounts not yet
     due were $154,000 and $421,000 equal to 21% and 28%, respectively, of total
     reseller receivables.

     The Company's primary credit concentrations involve domestic and foreign
     OEM and reseller customers.  Foreign customers are primarily located in
     Western Europe, Taiwan, and Japan.


                                                                              5

<PAGE>

     Domestic customers comprise $1,540,000 and $2,769,000 of accounts
     receivable at December 31, 1996 and 1995, respectively.  Foreign customers
     comprised $794,000 of accounts receivable at December 31, 1996 compared to
     $1,110,000 at December 31, 1995.

5.   INVENTORIES

     Inventories are summarized as follows:
                                                          December 31,
                                                          ------------
                                                      1996           1995
                                                      ----           ----

          Raw materials                            $  760,000     $  455,000
          Finished goods                              287,000        284,000
          Less:  Allowance for obsolescence          (105,000)      (245,000)
                                                 -------------- --------------
          Total inventory                          $  942,000     $  494,000
                                                 -------------- --------------
                                                 -------------- --------------

6.   PROPERTY AND EQUIPMENT

     Property and equipment are summarized as follows:

                                                         December 31,
                                                         ------------
                                                      1996          1995
                                                      ----          ----

          Equipment                                $  917,000    $  839,000
          Furniture                                    81,000        79,000
          Leasehold improvement                        30,000        23,000
                                                 -------------- --------------
          Property and equipment, at cost           1,028,000       941,000
          Less:  Accumulated depreciation            (599,000)      (376,000)
                  Accumulated amortization             (8,000)        (3,000)
                                                 -------------- --------------
          Property and equipment, net                 421,000       562,000
                                                 -------------- --------------
                                                 -------------- --------------

7.   CAPITALIZED SOFTWARE AND OTHER COSTS

     Capitalized software and other costs are summarized as follows:
<TABLE>
<CAPTION>

                                                                                  December 31,
                                                                                  ------------
                                                                              1996           1995
                                                                              ----           ----
     <S>                                                                   <C>           <C>
     Purchased software technology, net of accumulated amortization of
      $412,000 and $177,000, respectively, in 1996 and 1995                $  193,000     $  428,000
     Purchased contract software technology, net of accumulated amorti-
      zation of $380,000 and $131,000, respectively, in 1996 and 1995         115,000        364,000
     Capitalized software development costs, net of accumulated amorti-
      zation of 430,000 and $139,000, respectively,  in 1996 and 1995         147,000        438,000
                                                                          -------------  -------------
   Total capitalized software                                              $  455,000    $ 1,230,000
                                                                          -------------  -------------
                                                                          -------------  -------------
</TABLE>

     PURCHASED SOFTWARE TECHNOLOGY
     The Company purchased software technology from various sources during 1995.
     The estimated useful lives of the remaining product costs range from
     eighteen months to two years.  Amortization expense related to purchased
     software technology for the years ended December 31, 1996 and 1995 was
     $235,000 and $561,000, respectively.

     PURCHASED CONTRACT SOFTWARE TECHNOLOGY


                                                                              6

<PAGE>

     Purchased contract software technology costs represent contract software
     development costs incurred for work performed by external contract software
     engineers in developing computer software.  Amortization expense related to
     purchased contract software technology was $249,000 and $111,000 for 1996
     and 1995, respectively.


     CAPITALIZED SOFTWARE DEVELOPMENT COSTS
     Capitalized software development costs represent software product
     development and product enhancements consisting of salaries and related
     benefits, incurred internally in developing computer software after
     technological feasibility has been established.  Amortization expense
     related to capitalized software development costs was $291,000 and $148,000
     for 1996 and 1995, respectively.

8.   BANK CREDIT LINE FACILITY

     The Company has a bank line of credit facility, from U.S. Bank of
     Washington.  Pursuant to the terms of the agreement, the Company may borrow
     on a secured basis up to $3,000,000 at the bank's prime rate and up to
     $120,000 on corporate bank cards.  The credit facility has a 1/4%
     commitment fee, matures May 31, 1997.  At December 31, 1996, no amount was
     drawn on either credit facility.

9.  OTHER ACCRUED EXPENSES

     The following table summarizes the components of the other current
     liabilities:
                                                          December 31,
                                                          ------------
                                                      1996          1995
                                                      ----          ----

          Shareholder litigation settlement        $        -   $  1,644,000
          Other accrued expenses                      118,000        160,000
                                                 -------------- --------------
                                                   $  118,000   $  1,804,000
                                                 -------------- --------------
                                                 -------------- --------------

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

10.  INCOME TAXES

     There is no provision for income taxes for the years ended December 31,
     1996 and 1995 due to the net loss incurred.

     The components of deferred income taxes are summarized as follows:


                                                                              7

<PAGE>

                                                         December 31,
                                                         ------------
                                                     1996           1995
                                                     ----           ----

          Deferred income tax assets
           Net operating losses                     6,152,000      3,861,000
           Accrued liabilities and allowances         403,000      1,193,000
           Capitalized software                       226,000
           Other                                      214,000         72,000
                                                 -------------- --------------
                                                    6,995,000      5,126,000
          Deferred income tax liabilities
           Capitalized software                                     (482,000)
           Other                                       (6,000)

          Valuation allowance                      (6,989,000)    (4,644,000)
                                                 -------------- --------------
          Net deferred tax liabilities                      -              -
                                                 -------------- --------------
                                                 -------------- --------------


     At December 31, 1996, the Company had net operating losses of $18.1 million
     that will reduce taxes due in future periods and expire beginning in 2008.
     In certain circumstances, as specified in the Internal Revenue Code, a 50%
     or more ownership change by certain combination of the Company's
     stockholders during any three-year period would result in limitations on
     the Company's ability to utilize its net operating loss carry-forward.


11.  SHAREHOLDERS' EQUITY

     In 1996, the Company's Board of Directors designated 1,100 shares of
     Preferred Stock as Series A Convertible Preferred Stock (the "Series A
     Preferred Stock").  All 1,100 shares were issued at a price of $1,000 per
     share in an offshore private placement completed in October, 1996.  The
     Series A Preferred Stock is convertible at the holder's option into shares
     of Common Stock at a price which is equal to the lesser of 85% of the
     closing bid as of the date of conversion or 100% of the closing bid price
     of the Common Stock as of the date of issuance of the Series A Preferred
     Stock.  The Series A Preferred Stock is also subject to mandatory
     conversion two years after its date of issuance based upon the conversion
     formula described above.  Holders of the Series A Preferred Stock are
     entitled to an 8% cumulative dividend payable in cash or Common Stock, at
     the holder's option, at the time of conversion.  Holders of Series A
     Preferred Stock are entitled to one vote for each share of stock held.

     During 1995, the Company repurchased from one of the co-founders, 53,000
     shares of common stock for $17,000 under the Founders' buy-sell agreement.

     At December 31, 1996, the Company has reserved the following shares of
     Common Stock:


                    Warrants                                     163,000
                    Stock Options                                896,936

     WARRANTS
     In connection with the July 26, 1994 and the July 19, 1993 public stock
     offerings, the Company has agreed to issue and sell to the Underwriter
     Representatives, for nominal consideration, warrants to purchase an
     aggregate of 38,000 and 100,000 shares of common stock, respectively, at a
     price of $12.90 and $4.20, respectively.  The warrants expire in 1998.

     In connection with the October, 1996 sale of Series A Preferred Stock, the
     Company is also obligated to issue one warrant (the "Warrant") with respect
     to each share of Common Stock which is issued.  Each Warrant will entitle
     the holder to purchase one share of common stock at a price equal to $8.50
     per share.


                                                                              8

<PAGE>

     amounts of the company's net loss and net loss per share for the years
     ended December 31, 1996 and 1995 would have been as follows:

                                               1996               1995
                                               ----               ----
                                                               (Unaudited)

          Net loss as reported            $  (5,716,000)     $  (12,132,000)
                                         ---------------    -----------------
                                         ---------------    -----------------
          Net loss pro forma              $  (6,613,000)     $  (12,882,000)
                                         ---------------    -----------------
                                         ---------------    -----------------
          Loss per share as reported           $  (1.22)           $  (2.60)
                                         ---------------    -----------------
                                         ---------------    -----------------
          Loss per share pro forma             $  (1.41)           $  (2.76)
                                         ---------------    -----------------
                                         ---------------    -----------------

     The fair value of each option grant was estimated using the Black-Scholes
     option-pricing model with the following weighted average assumptions: risk-
     free interest rates of 4.74% to 8.34%; expected option life of five years;
     expected volatility of 1.17%; and no expected dividends.  The weighted-
     average fair value of options granted during the years 1996 and 1995 was
     $2.88 and $3.61, respectively.

12.  LICENSE AGREEMENTS

     The Company has license agreements with various developers and producers of
     computer software which require the Company to pay royalties.  During the
     years ended December 31, 1996 and 1995, total royalty costs were $48,000
     and $195,000, respectively.

13.  COMMITMENTS AND CONTINGENCIES

     The Company leases office facilities and a warehouse for its operations.
     The leases contain renewal and expansion provisions, exerciseable at the
     discretion of the Company.  The Company's leases include scheduled rent
     increases over the term of the lease.  The total payment amount is being
     recognized to expense on a straight-line basis over the term of the lease.
     Future minimum lease rental commitments for all non-cancelable operating
     leases are summarized as follows:


               YEAR

               1997                     $    270,000
               1998                          271,000
               1999                          273,000
               2000                           73,000
                                        ------------
                                        $    887,000
                                        ------------
                                        ------------

     Rent expense for 1996 and 1995 was $263,000 and $191,000, respectively.
     The Company received $69,000 from sublease income for 1996.  There was no
     sublease income in 1995.

     The Company is subject to various claims and lawsuits in the ordinary
     course of business.  In the opinion of management, the ultimate resolution
     of these matters will not have a material adverse effect on the Company's
     financial condition, results of operations or cash flows.

14.  EMPLOYEE BENEFIT PLANS

     In June 1996, the Company adopted a qualified profit-sharing plan under the
     provisions of Internal Revenue Code 401(k).  The plan is available to all
     employees meeting the eligibility requirements.

15.  RELATED PARTY TRANSACTIONS

     During 1995, the Company repurchased from one of its Co-Founders, Mr. 
     McCulley, 63,000 shares of common stock for $17,000 under the Founder's
     buy-sell agreement.

16.   SUBESQUENT EVENT (UNAUDITED)

      On May 9, 1997, Ask Me Multimedia Corporation ("AMM") served a 
      Demand for Arbitration (the "Arbitration") on the Company. The 
      Arbitration was filed with the American Arbitration Association in 
      Seattle, Washington. The Arbitration alleges that in connection with 
      the Company's purchase of certain AMM assets in early 1995, the Company 
      breached certain of the representations, warranties and covenants made 
      to AMM. The Arbitration seeks damages in excess of $1.1 million for, 
      among other things, breach of contract. The Company is still in the 
      process of evaluating AMM's claims and therefore is not in a position at 
      this time to estimate possible outcome. The Company intends to defend 
      against the Arbitration vigorously.


                                                                             9

<PAGE>

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     1.     Previous independent accountants.
     (i)    Midisoft Corporation (the "Company") dismissed Price Waterhouse LLP
            (the "Former Accountants") as its independent accountants on January
            2, 1997.

     (ii)   The Former Accountants reported on the Company's financial
            statements for the fiscal years ended December 31, 1994 and 1995.
            The reports of the Former Accountants on the financial statements
            for such years contained no adverse opinion or disclaimer of opinion
            and were not qualified or modified as to uncertainty, audit scope or
            accounting principles.

     (iii)  The Company's Board of Directors approved the dismissal of the
            Former Accountants and the selection of Ernst & Young LLP as the
            Company's new accountants.

     (iv)   Except as described below, during the Company's fiscal years ended
            December 31, 1994 and 1995, and through the date of this report,
            there were no disagreements with the Former Accountants on any
            matter of accounting principles or practices, financial statement
            disclosure, or auditing scope or procedure, which disagreements if
            not resolved to the satisfaction of the Former Accountants would
            have caused them to make reference thereto in their report on the
            financial statements for such years.  In connection with their audit
            of the Company's financial statements for fiscal year 1994, the
            Former Accountants advised the Company and the Company's former
            management that they disagreed with the Company recognizing revenue
            for certain OEM contracts.  The disagreement was discussed by the
            Former Accountants with the Company's former management and with the
            Company's Board of Directors and the matter was resolved to the
            Former Accountant's satisfaction.

          Except as described below, during the fiscal years ended December 31,
          1994 and 1995 and through the date of this report, the Former
          Accountants did not advise the Company with respect to the matters
          described in paragraphs (a) (1) (vi) (B) (1) through  (3) of Item 304
          of Regulation S-B.  In connection with the Former Accountants' audit
          of the Company's financial statements for fiscal year 1994 subsequent
          to original issuance of the financial statements, information came to
          the attention of the Former Accountants which caused them to perform
          additional procedures which resulted in their unwillingness to rely
          upon the representations of the Company's former management regarding
          the December 31, 1994 financial statements, and to expand the scope of
          their audit work.  These matters were discussed with the Company's
          former management and the Company's Board of Directors.  The Former
          Accountants' further audit work led to a restatement of the Company's
          financial statements for the year ended December 31, 1994 to reverse
          certain revenue previously recognized in the Company's 1994 financial
          statements in a manner satisfactory to the Former Accountants.  The
          Former Accountants also advised the Board of Directors and former
          management of matters considered to be reportable conditions related
          to internal accounting controls under standards established by the
          AICPA.  These matters related to the Company's policies and procedures
          for recognizing revenue in its financial statements.  The Company's
          current management has adopted and implemented additional internal
          accounting controls to address these matters, and the Former
          Accountants have not issued any subsequent reports to the Company
          which include reportable conditions.

          Each of the events described in this report occurred prior to the
          appointment of the Company's existing executive officers.  In
          particular, the Company's executive officers at the time of each of
          the events described herein consisted of Raymond Bily, Chairman;
          Ronald Risdon, President; and Calvin Dyer, Chief Financial Officer.

                                                                              10

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Item 12 is hereby incorporated by reference to the information in the Proxy
     Statement.

ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

          FINANCIAL STATEMENTS:  The following are filed as a part     
          of this report under Financial Statements
                                                                        Page

          Report of Ernst & Young LLP. . . . . . . . . . . . . . . . .  16
          Report of Price Waterhouse LLP . . . . . . . . . . . . . . .  16
          Balance Sheets - At December 31, 1996 and 1995 . . . . . . .  17
          Statements of Operations - For the Years Ended December 31,
            1996 and 1995. . . . . . . . . . . . . . . . . . . . . . .  18
          Statements of Shareholders' Equity - For the Years
            Ended December 31, 1996 and 1995 . . . . . . . . . . . . .  19
          Statements of Cash Flows - For the Years Ended
            December 31, 1996 and 1995 . . . . . . . . . . . . . . . .  20
          Notes to Financial Statements - For the Years
            Ended December 31, 1996 and 1995 . . . . . . . . . . . . .  21


                                                                              11

<PAGE>

SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                   MIDISOFT CORPORATION
                                        (Registrant)


Date: June 17, 1997                By:    /S/ Larry Foster
                                      -------------------------------------
                                   Larry Foster, Chairman of the Board,
                                   President and Chief Executive Officer




In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

     SIGNATURE                        TITLE                           DATE
     ---------                        -----                           ----

   /S/ LARRY FOSTER        Chairman of the Board,                 June 17, 1997
-------------------------  President and Chief Executive
Larry Foster               Officer


  /S/ MELINDA A. BRYDEN    Vice President, Finance and            June 17, 1997
-------------------------  and Chief Financial Officer
Melinda A. Bryden          (Principal Accounting Officer)


  /S/ JOHN BAUER           Director                               June 17, 1997
-------------------------
John Bauer


  /S/ MARSHA MURRY         Director                               June 17, 1997
-------------------------
Marsha Murry


 /S/ A. PETER PARSONS      Director                               June 17, 1997
-------------------------
A. Peter Parsons


                           Director                               June 17, 1997
-------------------------
Stephen Sedmak
                                                                              12