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

U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

X Quarterly Report Pursuant to Section 13 or 15(d) of the
----- Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1998

Transition Report Pursuant to Section 13 or 15(d) of the
----- Securities Exchange Act of 1994
Commission File Number. 0-21819

HealthDesk Corporation
(Exact name of Company as specified in charter)

California 94-3165144
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2560 Ninth Street, Suite 220, Berkeley, California 94710
(Address of principal executive offices) (Zip Code)

(510) 883-2160
(Company's telephone number, including area code)

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 August 10, 1998, there were 5,792,845 shares of the Company's Common
Stock outstanding, 425 shares of the Company's Series B Preferred Stock
outstanding, 1,955,000 Redeemable Warrants outstanding and 340,000 Underwriter's
Warrants outstanding.

Transitional Small Business Disclosure Format Yes No X
----- -----

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

INDEX

Part I Page

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

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 3

Part II

Item 1 Legal Proceedings.............................................................................. 7

Item 2 Changes in Securities and Use of Proceeds...................................................... 7

Item 3 Defaults Upon Senior Securities................................................................ 7

Item 4 Submission of Matters to a Vote of Security Holders............................................ 7

Item 5 Other Information.............................................................................. 8

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

Part I

Item 1. Financial Statements.

The following Financial Statements are filed with this report as pages F-1
through F-7 following the signature page:
Index to Interim Financial Statements
Condensed Balance Sheets
Condensed Statements of Operations
Condensed Statements of Cash Flows
Notes to Condensed Financial Statements

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

The Company's operating performance each quarter is subject to various
risks and uncertainties as discussed in the Company's Form 10-KSB for the year
ended December 31, 1997. The following discussion should be read in conjunction
with the section entitled "Factors Affecting the Company's Business, Operating
Results and Financial Condition" in the Form 10-KSB.

The information set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" below includes "forward-looking
statements" within the meaning of Section 21E of the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"), and is subject to the safe harbor
created by such section. Readers are cautioned not to place undue reliance on
these forward-looking statements as they speak only as of the date hereof.

Overview

The Company was organized in August 1992 and is still in the development
stage. Since inception, the Company has been engaged primarily in product
development activities. The Company's initial product was introduced in early
1993 and the Company has not yet proven to be commercially viable.

The Company has not yet generated any meaningful revenues, and will not
generate any meaningful revenues until after the Company successfully completes
market testing and subsequent commercialization of CareTeam Connect and
HealthDesk OnLine for Diabetes and the commercialization of HealthDesk OnLine,
and then attracts and retains a significant number of subscribers for such
products. For the period August 28, 1992 (inception) to June 30, 1998, the
Company incurred a cumulative net loss of approximately $11,767,066.

In May 1998, as a result of ongoing difficulties in marketing its
HealthDesk OnLine products, the Company announced a major restructuring of its
operations. In connection therewith, in June 1998, the Company executed a letter
of intent to merge (the "Merger") with MC Informatics, Inc. ("MCI"). In the
event the Company enters into a definitive merger agreement, the Merger will
still be subject to a number of closing conditions, including the approval of
the Merger by the Company's shareholders. If the Merger closes, the Company will
merge with MCI and assume its operations. MCI is a healthcare consulting firm
that provides a wide range of information technology and strategic and
operations management consulting services to a broad cross-section of healthcare
industry participants and healthcare information system vendors. If the Merger
is consummated, HealthDesk would issue approximately five million (5,000,000)
shares of Common Stock to the current shareholders of MCI, representing
approximately 40% of the Company's total outstanding shares following the
Merger.

In June 1998, the Company announced that as part of its restructuring
process, it intends to sell substantially all of its assets relating to its
HealthDesk OnLine products.

As a result of its restructuring, the Company's Chief Executive Officer,
Peter O'Donnell, and its Chief Financial Officer, Timothy Yamauchi, resigned
from the Company in May 1998. In addition, the Company eliminated seven other
positions. During the restructuring process, the Company has established an
Operating Committee, consisting of Messrs. Dunham, Brandt and Zieg, to manage
the Company's operations.

The statements below regarding the Company's future cash requirements are
forward looking statements that are subject to risks and uncertainties, which
could result in, the Company's inability to meet its funding requirements for
the time period indicated.

Software development costs (consisting primarily of salaries and related
expenses) incurred prior to establishing technological feasibility are expensed
in accordance with Financial Accounting Standards Board (FASB) Statement No. 86.
In accordance with FASB 86, the Company will capitalize software development
costs at such time as the technological feasibility of the product has been
established.

In June 1998, Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" and Statement of Financial Accounting Standards
No. 131 "Disclosures About Segments of An Enterprise and Related Information"
were issued and are also effective for the year ending December 31, 1998. The
Company believes the adoption of these pronouncements will not have a material
effect on its financial statements.

In October 1997, the Accounting Standards Executive Committee issued
Statement of Position 97-2 (SOP 97-2), Software Revenue Recognition, which
delineates the accounting for software product and maintenance revenue. SOP 97-2
supersedes the Accounting Standards Executive Committee Statement of Position
91-1, Software Revenue Recognition, and is effective for transactions entered
into in fiscal years beginning after December 15, 1997. The Company anticipates
that SOP 97-2 will not have a material impact on its financial statements.

Results of Operations

Revenue, which consists primarily of software development and licensing
fees, increased from $25,558 for the three months ended June 30, 1997 to $43,276
for the three months ended June 30, 1998, and decreased from $226,043 for the
six months ended June 30, 1997 to $56,186 for the six months ended June 30,
1998. The six-month decrease was primarily attributable to a decrease in
development fee revenue associated with the development of HealthDesk OnLine for
Diabetes.

Product development costs decreased by 33.0% from $607,714 for the three
months ended June 30, 1997 to $407,015 for the three months ended June 30, 1998,
and by 41.0% from $1,304,931 for the six months ended June 30, 1997 to $770,227
for the six months ended June 30, 1998. The decrease in product development
costs was principally related to the hiring of full-time programming staff
instead of using higher cost contractors. The decrease in product development
costs was also due to the Company's re-negotiation of an existing content
license agreement which resulted in reduced royalty costs of approximately
$95,000 and the elimination of certain engineering and programmer positions as a
result of the Company's restructuring that was announced in May 1998.

Sales and marketing costs decreased by 40.2% from $370,691 for the three
months ended June 30, 1997 to $221,624 for the three months ended June 30, 1998,
and by 35.6% from $809,409 for the six months ended June 30, 1997 to $521,491
for the six months ended June 30, 1998. This decrease in sales and marketing
costs resulted primarily from the reduction in headcount in connection with the
Company's restructuring that was announced in May 1998.

General and administrative costs decreased by 59.1% from $168,688 for the
three months ended June 30, 1997 to $69,019 for the three months ended June 30,
1998 and by 42.8% from $312,605 for the six months ended June 30, 1997 to
$178,806 for the six months ended June 30, 1998. The decrease in general and
administrative costs was primarily attributable to the reversal of certain
professional fees over accruals and the reduction in personnel as a result of
the Company's restructuring that was announced in May 1998.

Other income (expense), net (including interest expense, interest income
and non-recurring restructuring costs) changed from income of $40,471 for the
three months ended June 30, 1997 to expense of ($202,488) for the three months
ended June 30, 1998. Other income (expense), net (including interest expense,
interest income, amortization of discount and issuance costs and non-recurring
restructuring costs) changed from expense of ($81,604) for the six months ended
June 30, 1997 to expense of ($186,639) for the six months ended June 30, 1998.
The increase in other expenses was primarily attributable to the fact that
during the first half of 1998, the Company recorded non-recurring costs, which
consisted principally of employee termination severance packages, of $220,697
associated with the Company's restructuring of its operations in May 1998.

As a result of the foregoing, the Company incurred a net loss of $857,070
and $1,601,377 for the three months and six months ended June 30, 1998,
respectively, as compared to a net loss of $1,081,264 and $2,282,906 for the
comparable periods in 1997.

Liquidity and Capital Resources

On February 25, 1998, the Company completed an $800,000 private placement.
The placement consisted of the sale of 400,000 shares of Common Stock, at a
price of $2.00 per share to two of the Company's existing shareholders.

As of June 30, 1998, the Company has a total of 425 shares of Series B
Preferred Stock issued and outstanding as a result of the following private
placements. On March 31, 1998, two existing shareholders agreed to purchase 250
shares of the Company's Series B Preferred Stock for proceeds of $500,000. On
May 13, 1998, the Company received the $500,000 proceeds. On June 30, 1998,
three existing shareholders purchased 175 shares of the Company's Series B
Preferred Stock for total proceeds of $350,000, of which $300,000 was received
on June 30, 1998 and $50,000 was received on July 8, 1998. The outstanding
shares of Series B Preferred Stock are convertible, at any time, at the option
of the holders into an aggregate of 1,700,000 shares of the Company's Common
Stock. The shares of Series B Preferred Stock are subject to automatic
conversion upon the closing of the contemplated Merger with MCI or five years
from the date of their issuance at a conversion price of $0.50 per share.

On April 13, 1998, the Company announced that with respect to its
outstanding publicly traded warrants, it was reducing (i) the exercise price
from $5.00 per share to $2.50 per share, and (ii) the call price for the
warrants from $7.50 to $3.75.

At June 30, 1998, the Company had cash and cash equivalents of $1,268,165,
as compared to $1,405,430 at December 31, 1997.

During the first half of 1998, $1,698,748 of cash was used in operating
activities, principally as a result of the $1,601,377 loss incurred in the first
half of 1998. The decrease in accounts payable and accrued liabilities was
attributable to the lower volume as a result of the Company's May 1998
restructuring. During the first half of 1997, $2,299,346 of cash was used in
operating activities, principally as a result of the $2,282,906 loss incurred in
the first half of 1997. The decrease in accounts payable and accrued
liabilities, offset by the non-cash discount associated with the Company's
bridge financing in October 1996 and prepaid expenses and deferred costs, was
attributable to the non-recurring costs associated with the Company's initial
public offering in January 1997. Working capital at June 30, 1998 was
$1,150,172, as compared to $2,469,731 at June 30, 1997.

In the event the Company is unable to sell its assets relating to its
HealthDesk OnLine products, the Company expects to incur significant expenses in
connection with its operations, including expenses associated with marketing and
sales personnel and the research and development of product lines. However, the
Company believes that it has working capital sufficient to meet its projected
cash requirements through the end of 1998. The Company is actively seeking
additional equity financing. There can be no assurance that the Company will be
able to obtain public or private third-party sources of financing or, if
obtained, that favorable terms for such financing would be obtained. In
addition, given the trading history of the Company's Common Stock and Warrants
since the initial public offering, there can be no assurance that the Company
will be able to raise additional cash through public or private offerings of its
Common Stock. There also can be no assurance that the Company's funding
requirements will not increase significantly as a result of unforeseen
circumstances or that the Company's cash used for operating activities will not
increase. In the event the Company completes the proposed Merger with MCI, the
Company anticipates that its current operations will cease and it will assume
the operations of MCI.

The Company's capital requirements relating to the development and
commercialization of HealthDesk OnLine have been and will continue to be
significant. Other than as described in this Form 10-QSB, the Company has no
material commitments for capital expenditures. For the period August 28, 1992
(inception) to June 30, 1998, the Company had capital expenditures of
approximately $1,115,843 relating primarily to purchases of servers, PCs and
telecommunications equipment.

Year 2000

The Company is working to resolve the potential impact of the Year 2000 on
the ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. Any of the Company's programs
that recognize a date using "00" as the Year 1900 rather than the Year 2000
could result in errors or system failures. The Company utilizes a number of
computer programs across its entire operation. The Company has not completed its
assessment, but currently believes that costs of addressing this issue will not
have a material adverse impact on the Company's financial position. However, if
the Company and third parties upon which it relies are unable to address this
issue in a timely manner, it could result in a material financial risk to the
Company. The Company currently expects that its internal-use software
application will be Year 2000 compliant by no later than January 1999. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and loss of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.

Factors that May Affect Future Operating Results

The Company's future operating results are dependent on a number of
factors, including those set forth below and in the Company's Form 10-KSB filed
with the Securities and Exchange Commission on March 10, 1998.

Transition of Company. The Company has recently announced that it intends
to sell substantially all of its assets relating to its HealthDesk OnLine
products, and to merge its remaining operations with MC Informatics, a
healthcare consulting firm. Individually and in combination these transactions
represent a fundamental change in the nature of the Company's business, assets
and operations. Each of these proposed transactions is subject to a number of
conditions, including the negotiation and execution of definitive agreements and
the approval of such transactions by the Company's shareholders. There can be no
assurance that either or both of the transactions will be consummated, or that
if they are consummated, the Company will be able to successfully transition its
business to become a healthcare consulting firm. The Company's failure to
transition its operations upon completion of these proposed transactions could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, if the Company's proposed sale of its
HealthDesk OnLine assets or the merger with MC Informatics are not completed,
there can be no assurance that the Company will be able to continue its current
operations.

Possible Delisting of Securities from NASDAQ System; Disclosure Relating to
Low-Priced Stocks. The Common Stock and Warrants are currently quoted on NASDAQ
SmallCap Market ("NASDAQ"). As of June 30, 1998, the Company did not meet the
maintenance criteria for continued listing on NASDAQ because its total assets
are below $2,000,000. Because of its failure to meet these maintenance criteria,
the Company's securities may be delisted from NASDAQ in which case trading, if
any, in the Company's securities would thereafter be conducted in the non-NASDAQ
over-the-counter market. As a result of such delisting, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the market
value of, the Company's securities. In addition, if the Common Stock were
delisted from trading on NASDAQ and the trading price of the Common Stock was
less than $5.00 per share, trading in the Common Stock would also be subject to
certain rules promulgated under the Exchange Act, which require additional
disclosure by broker-dealers in connection with any trades involving a stock
defined as a penny stock (generally, any non-NASDAQ equity security that has a
market price of less than $5.00 per share, subject to certain exceptions). Such
rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker-dealers who
sell penny stock to persons other than established customers and accredited
investors (generally institutions). For these types of transactions, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transactions prior to
sale. The additional burdens imposed upon broker-dealers by such requirements
may discourage broker-dealers from effecting transactions in the Common Stock,
which could severely limit the market liquidity of the Common Stock and the
ability of purchasers in the offering to sell the Common Stock in the secondary
market.

Part II

Item 1. Legal Proceedings.

None.

Item 2. Changes in Securities and Use of Proceeds.

On February 19, 24 and 25, 1998, the Company sold an aggregate of 400,000
shares of Common Stock at a purchase price of $2.00 to two existing shareholders
of the Company. On May 13, 1998, the Company received the proceeds of a $500,000
private placement of shares of Series B Preferred Stock with two existing
shareholders of the Company. On June 30 and July 8, 1998, the Company received
aggregate proceeds of $350,000 in connection with the private placement of
additional shares of Series B Preferred Stock to three existing shareholders of
the Company. The conversion price of the Series B Preferred Stock is $0.50 per
share. The foregoing transactions were not registered under the Securities Act
of 1933, as amended (the "1933 Act") in reliance upon the exemptions provided by
Section 4 (2) of the 1933 Act and/or Regulation D promulgated thereunder as a
transaction by an issuer not involving a public offering.

Item 3. Defaults Upon Senior Securities.

None.

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

The Company's Annual Meeting of Shareholders (the "Annual Meeting") was
held on June 17, 1998 at 9:00a.m., local time, at the Radisson Hotel Berkeley at
200 Marina Boulevard, Berkeley, California. The Annual Meeting was held for the
purpose of (a) electing the Board of Directors, (b) ratifying and approving the
Company's independent auditors for the fiscal year ending December 31, 1998 and
(c) transacting other business as may properly come before the Annual Meeting.
The two matters below were voted upon and approved:

Matter No. 1 - Election of Board of Directors:

The following persons were duly elected to the Board for the ensuing year and
until their successors are duly elected and qualified:

NOMINATION FOR AGAINST
---------- --- -------
John Pappajohn 4,320,797 11,900
James A. Gordon 4,320,797 11,900
Dr. Joseph Rudick, Jr. 4,320,797 11,900
Molly C. Coye MD 4,320,797 11,900
Joseph R. Dunham II 4,320,797 11,900

Matter No. 2 - Ratification of the Appointment of Coopers & Lybrand L.L.P.
as the Independent Auditors for the Fiscal Year Ending December 31, 1998:

NOMINATION FOR AGAINST ABSTAINED
---------- --- ------- ---------
Coopers & Lybrand L.L.P. 4,322,697 -- 10,000

Item 5. Other Information.

The Company's proxy for its next Annual Meeting of Shareholders may confer
discretionary authority to vote on any proposal submitted by a shareholder if
written notice of such proposal is not delivered to the Company at its offices
at 2560 Ninth Street, Suite 220, Berkeley, California 94710, on or before March
22, 1999. Any proposals of shareholders to be included in the Company's proxy
statement for that meeting must be received by the Company at its offices not
later than January 4, 1999, and must satisfy the conditions established by the
Securities and Exchange Commission for shareholder proposals to be included in
the Company's proxy statement for that meeting.

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

a) Exhibits:
10.12 Form of Convertible Securities Subscription Agreement
11.1 Statement Regarding Computation of Earnings per Share
27 Financial Data Schedule

b) No reports have been filed on Form 8-K in the quarter ended June 30, 1998.

SIGNATURE

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

HealthDesk Corporation

By: /s/ Joseph R. Dunham II Date: August 14, 1998
---------------------------------------
Joseph R. Dunham II
Director and member of the Operating Committee

/s/ Ledia L. Ouyang Date: August 14, 1998
---------------------------------------
Ledia L. Ouyang
Controller

HealthDesk Corporation
(A Development Stage Company)

CONTENTS

Page
----
Condensed Balance Sheets as of December 31, 1997 and
June 30, 1998 (unaudited).......................................... F-2

Condensed Statements of Operations for the three months and the six
months ended June 30, 1997 and 1998, and period from inception to
June 30, 1998 (unaudited) .......................................... F-3

Condensed Statements of Cash Flows for the six months ended June 30,
1997 and 1998 and period from inception to June 30, 1998
(unaudited)......................................................... F-4

Notes to Condensed Financial Statements................................ F-5

F-1

HealthDesk Corporation
(A Development Stage Company)

CONDENSED BALANCE SHEETS

December 31, June 30
ASSETS 1997 1998
---- ----
(unaudited)

Current assets:
Cash and cash equivalents ............................ $ 1,405,430 $ 1,268,165
Stock subscription receivable ........................ -- 50,000
Prepaid expenses and other ........................... 78,724 207,194
------------ ------------
Total current assets .............................. 1,484,154 1,525,359
------------ ------------
Property and equipment, net .......................... 472,561 352,838
Other assets ......................................... 15,850 19,288
------------ ------------
Total assets .................................. $ 1,972,565 $ 1,897,485
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable ..................................... $ 133,992 $ 76,620
Accrued liabilities .................................. 351,070 298,567
------------ ------------
Total liabilities ................................. 485,062 375,187
------------ ------------
Shareholders' equity:
Convertible preferred stock, no par value; none at
December 31, 1997 and authorized 750 shares; issued
and outstanding 425 shares at June 30, 1998 ....... -- 836,172
Common stock, no par value; authorized 17,000,000
shares; issued and outstanding, 5,392,845 and
5,792,845 at December 31, 1997, and June 30, 1998,
respectively ...................................... 11,457,505 12,257,505
Warrants ............................................. 195,687 195,687
Deficit accumulated during the development stage ..... (10,165,689) (11,767,066)
------------ ------------
Total shareholders' equity ........................ 1,487,503 1,522,298
------------ ------------
Total liabilities and shareholders' equity .... $ 1,972,565 $ 1,897,485
============ ============

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

F-2

HealthDesk Corporation
(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS
(unaudited)

August 28,
1992
(Inception)
Three Months Ended June 30, Six Months Ended June 30, to
--------------------------- ---------------------------- June 30,
1997 1998 1997 1998 1998
---- ---- ---- ---- ----

Revenue:
Software development and licensing............ $ 25,558 $ 41,866 $ 226,043 $ 54,776 $ 1,178,121
Other......................................... -- 1,410 -- 1,410 14,124
------------ ------------ ------------ ------------ ------------
Total revenue............................... 25,558 43,276 226,043 56,186 1,179,335
------------ ------------ ------------ ------------ ------------

Costs and expenses:
Product development........................... 607,714 407,015 1,304,931 770,227 5,728,362
Sales and marketing........................... 370,691 221,624 809,409 521,491 3,870,092
General and administrative.................... 168,688 69,019 312,605 178,806 2,170,368
------------ ------------ ------------ ------------ ------------
Total costs and expenses................... 1,147,093 697,658 2,426,945 1,470,524 11,768,822
------------ ------------ ------------ ------------ ------------
Loss from operations....................... (1,121,535) (654,382) (2,200,902) (1,414,338) (10,576,577)

Interest expense................................. -- -- (14,900) -- (127,232)
Interest income.................................. 40,471 18,209 78,319 34,058 206,212
Amortization of discount and issuance cost
associated with bridge financing............. -- -- (145,023) -- (1,029,250)
Non-recurring restructuring costs................ -- (220,697) -- (220,697) (220,697)
Other expenses................................... -- -- -- -- (14,322)
------------ ------------ ------------ ------------ ------------
Loss before income taxes.................... (1,081,064) (856,870) (2,282,506) (1,600,977) (11,761,866)

Provision for income taxes....................... 200 200 400 400 (5,200)
------------ ------------ ------------ ------------ ------------
Net loss................................... $ (1,081,264) $ (857,070) $ (2,282,906) $ (1,601,377) $(11,767,066)
============ ============ ============ ============ ============

Basic net loss per share......................... $ (0.20) $ (0.15) $ (0.45) $ (0.28)
============ ============ ============ ============
Diluted net loss per share....................... $ (0.20) $ (0.15) $ (0.45) $ (0.28)
============ ============ ============ ============

Weighted average number of shares of common
stock, basic and diluted...................... 5,392,845 5,792,845 5,028,279 5,679,309
============ ============ ============ ============

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

F-3

HealthDesk Corporation
(A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)

Six Months Ended June 30, August 28, 1992
----------------------------------- (inception) to
1997 1998 June 30,1998
---- ---- ------------

Cash flows from operating activities:
Net loss ...................................... $ (2,282,906) $ (1,601,377) $(11,767,066)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ............... 130,166 144,410 707,926
Amortization of non cash discount ........... 145,023 -- 1,029,250
Other ....................................... -- -- 28,800
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses and
deferred costs ........................... 548,816 (128,470) (184,349)
(Increase) decrease in other assets ....... 833 (3,438) (19,288)
Increase (decrease) in accounts payable ... (741,032) (57,372) 76,620
Increase (decrease) in accrued liabilities (100,246) (52,501) 302,001
------------ ------------ ------------
Net cash used in operating activities .... (2,299,346) (1,698,748) (9,826,106)
------------ ------------ ------------

Cash flows from investing activities:
Additions to property and equipment ........... (97,557) (24,689) (1,115,843)
------------ ------------ ------------
Net cash used in investing activities ..... (97,557) (24,689) (1,115,843)
------------ ------------ ------------

Cash flows from financing activities:
Payments of short-term notes payable .......... (2,000,000) -- (2,000,000)
Proceeds of short-term notes payable, net
accrued offering costs ....................... -- -- 970,750
Repayment of convertible notes payable ........ -- -- (500,000)
Proceeds from issuance of convertible notes
payable ...................................... -- -- 1,800,000
Proceeds from issuance of common stock and
warrants, net of offering costs .............. 7,018,788 800,000 8,858,965
Net proceeds from issuance of preferred stock . -- 786,172 2,969,208
Proceeds from shareholders' loans ............. -- -- 118,164
Repayment of loans from shareholders .......... -- -- (118,164)
Proceeds from the exercise of stock options ... 4,816 -- 111,191
------------ ------------ ------------
Net cash provided by financing activities .. 5,023,604 1,586,172 12,210,114
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents ................................ 2,626,701 (137,265) 1,268,165
Cash and cash equivalents at beginning of period . 198,277 1,405,430 --
------------ ------------ ------------
Cash and cash equivalents at end of period ....... $ 2,824,978 $ 1,268,165 $ 1,268,165
============ ============ ============

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

F-4

HealthDesk Corporation
(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)

The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting of all normal
recurring adjustments necessary for a fair statement of results for the interim
periods. The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. Operating results
for the six months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998.

The organization and the business of the Company, the accounting policies
followed by the Company and other information are contained in the notes to the
Company's consolidated financial statements filed as part of the Company's
annual report for the fiscal year ended December 31, 1997 on Form 10-KSB. This
quarterly report should be read in conjunction with such annual report.

1. Organization and Basis of Presentation:

In May 1998, as a result of ongoing difficulties in marketing its
HealthDesk OnLine products, the Company announced a major restructuring of its
operations. In connection therewith, in June 1998, the Company executed a letter
of intent to merge (the "Merger") with MC Informatics, Inc. ("MCI"). In the
event the Company entered into a definitive merger agreement, the Merger will
still be subject to a number of closing conditions, including the approval of
the Merger by the Company's shareholders. If the Merger closes, the Company will
merge with MCI and assume its operations. MCI is a healthcare consulting firm
that provides a wide range of information technology and strategic and
operations management consulting services to a broad cross-section of healthcare
industry participants and healthcare information system vendors.

2. Recently Issued Accounting Pronouncements:

F-5

HealthDesk Corporation
(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)

3. Concentrations of Credit Risk:

The Company places its temporary cash investments with one financial
institution. The Company performs ongoing credit evaluations of its customers
and generally does not require collateral. Two customers accounted for
approximately 98% of revenues in the six months ended June 30, 1998.

4. Legal Proceedings:

The Company is subject to a complaint filed by a former employee with the
California Department of Fair Employment & Housing. The claim alleges wrongful
termination as a result of alleged denial of reasonable accommodation for a
wrist and neck injury. The Company intends to defend this matter vigorously.
There can be no assurance, however, that such matter will be resolved in a
manner favorable to the Company.

5. Net Loss Per Share:

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which
establishes standards for computing and presenting earnings (loss) per share.
Under the new standard, basic earnings per share is computed based on the
weighted average number of common shares outstanding and excludes any potential
dilution; diluted earnings per share reflects potential dilution from the
exercise or conversion of securities into common stock. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997. The financial statements presented have been prepared in accordance with
SFAS No. 128 and loss per share data for the prior period presented has been
restated to conform with current year presentation. 425 shares of the Company's
Series B Preferred Stock with a conversion price of $0.50 per share were
outstanding as of June 30, 1998. Options to purchase 762,412 and 652,923 shares
of common stock with exercise prices ranging from $1.04 to $5.00 and $1.00 to
$5.00, respectively, were outstanding as of June 30, 1997 and 1998. Both the
Series B Preferred Stock and options to purchase Common Stock were excluded from
the loss per share calculation for the quarters then ended as they have the
effect of decreasing loss per share.

6. Convertible Preferred Stock:

7. Repricing of Warrants:

F-6

HealthDesk Corporation
(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)

8. Stock Options:

On May 26, 1998, the Company authorized a voluntary stock option repricing
program in which options exercisable for an aggregate of 250,850 shares of
Common Stock originally issued with exercise prices ranging from $3.13 to $3.75
per share, were reissued with an exercise price of $1.00 per share, the fair
market value of the Company's Common Stock on May 26, 1998.

9. Subsequent Events:

On August 14, 1998, the Company loaned to MC Informatics, Inc. $250,000
pursuant to the terms of a promissory note. The interest rate on the loan is
8.50% and is payable on demand or August 14, 1999.

F-7

Exhibit Index

Description
-----------
10.12 Form of Convertible Securities Subscription Agreement

11.1 Statement Regarding Computation of Earnings per Share

27 Financial Data Schedule