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

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FORM 10-K

(Mark One)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED APRIL 30, 1998

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________

COMMISSION FILE NUMBER 0-13608

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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

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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common stock, $.01 Par Value NASDAQ National Market

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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 ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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 From 10-K or any amendment to this
Form 10-K. / /

The aggregate market value of voting stock held by non-affiliates of the
Registrant as of July 17, 1998 was $5,855,640.

At July 17, 1998, the Registrant had outstanding 3,009,395 shares of its
common stock, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the proxy statement for
the Annual Meeting of Shareholders to be held on October 13, 1998.

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PART I

ITEM 1. BUSINESS.

GENERAL

InnoServ Technologies, Inc.-Registered Trademark- ("InnoServ") is a
California corporation organized in 1981. InnoServ provides comprehensive asset
management programs and services, multi-vendor maintenance and repair services
and other specialized services to radiology, cardiology, biomedical and
laboratory departments of hospitals and other healthcare providers. The
foregoing business is reported as one segment. Except where the context
otherwise requires, the term "InnoServ" and "Registrant" as used in this report
refers to InnoServ Technologies, Inc. and its subsidiaries.

InnoServ operates its business primarily through its wholly-owned
subsidiary, InnoServ Technologies Maintenance Services, Inc. ("InnoServ
Maintenance"), and through its imaging operation.

On May 19, 1998, InnoServ entered into an Agreement and Plan of Merger 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 15 to the Notes to Consolidated Financial Statements). The Merger, which is
subject to approval by InnoServ's shareholders, government regulatory approval
and other customary contingencies, is planned to close in late August 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. 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.

INNOSERV TECHNOLOGIES MAINTENANCE SERVICES, INC.

InnoServ Maintenance provides maintenance, consulting and technical services
for customer operated magnetic resonance imaging ("MRI") and computed tomography
("CT") scanners and a wide array of diagnostic imaging, biomedical and
laboratory equipment on a nationwide basis. Comprehensive maintenance service
agreements covering virtually all the equipment operated by a hospital's
radiology, biomedical and laboratory departments ("Asset Management") usually
have terms of three years or more. Maintenance agreements for individual MRI and
CT scanners and x-ray tube replacement agreements typically have terms of one to
three years, with limited termination provisions, and pricing is determined on
either a fixed or volume related basis. Maintenance services are performed at a
customer's site by InnoServ Maintenance's field service engineers and equipment
specialists. InnoServ Maintenance's personnel, through the use of proprietary
software information systems, also provide customers of the Asset Management
services with an array of analytical reports and consultative services to help
manage the customer's imaging, biomedical and laboratory capital equipment. In
addition to performing regular preventive maintenance services, InnoServ
Maintenance's engineers are on call 24 hours a day, seven days a week, to
provide emergency maintenance of medical equipment. InnoServ Maintenance also
sells x-ray tubes and spare parts for many different makes and models of MRI and
CT scanners. InnoServ Maintenance also sells used and refurbished diagnostic
imaging equipment as a service to its customers.

In support of its field service operations, InnoServ Maintenance maintains a
supply of spare parts in strategic locations across the nation. Analysis and
repair of defective parts are performed at InnoServ's Arlington, Texas,
facility. In addition to having the capability to repair electronic circuit
boards and systems, InnoServ Maintenance reloads x-ray tubes and rebuilds high
voltage components such as transformers.

IMAGING OPERATION

InnoServ owns 6 mobile CT scanners and 6 cardiac catheterization
laboratories (the "Imaging Operation") which are offered to customers under
lease agreements. Customers typically enter into these

leases while their in-house equipment is being installed, serviced or upgraded
or to supplement in-house equipment during periods of heavy patient volume.
InnoServ may also provide technologists and other additional support services
pursuant to the lease. Typically, customers execute an agreement for a specific
period ranging from one month to periods in excess of one year and are billed
monthly on a fixed rate basis regardless of the number of procedures performed.

CUSTOMERS AND MARKETING

InnoServ markets its services to healthcare providers through a direct sales
force consisting of sales representatives and supervisory personnel. InnoServ's
strategy emphasizes its multi-vendor, multi-modality Asset Management programs,
the skill and experience of its service engineers, the quality of its equipment,
the reliability and cost effectiveness of its service, and its ability to tailor
service programs to specific customer needs.

Hospitals and other healthcare providers which operate MRI and CT scanners
and other diagnostic, biomedical and laboratory equipment require regular
preventive maintenance programs and emergency repair services for their
equipment. Since the quality and reliability of patient care depends in part
upon the reliability of the equipment used, hospitals arrange for regular
maintenance of the equipment and contract for maintenance and repair services
with the equipment manufacturers or independent maintenance companies such as
InnoServ.

When larger hospitals desire to replace, upgrade or augment their existing
CT or cardiac catheterization equipment, they may require interim rental
equipment such as that provided by InnoServ. By using such equipment for an
interim period, hospitals may continue to offer their regular services during a
major renovation.

During fiscal 1998, InnoServ provided its Asset Management, maintenance,
distribution and diagnostic services in 41 states to customers including
hospitals, health maintenance organizations, out-patient clinics and private
physician offices. Revenues from an Asset Management service agreement with IHC
Health Services, Inc. accounted for 13 percent of InnoServ's consolidated
revenues for fiscal 1998.

COMPETITION

The healthcare industry in general and the market for medical equipment
maintenance, distribution and diagnostic imaging services in particular is
highly competitive.

With respect to its medical equipment maintenance services, InnoServ
competes with both medical equipment manufacturers, most of which have
substantially greater financial and marketing resources than InnoServ, and other
third party maintenance service companies. Certain large hospital systems also
provide in-house maintenance service on their own equipment.

With respect to its distribution services, InnoServ competes with other
distributors, manufacturers and equipment resellers such as brokers, leasing
companies, and individual healthcare providers, many of whom have financial and
marketing resources substantially greater than those of InnoServ.

INTELLECTUAL PROPERTY

Most of InnoServ's diagnostic software products were developed by InnoServ
or its acquired businesses. Software products including certain diagnostic
software programs are licensed to InnoServ by various vendors and equipment
manufacturers, some of whom are competitors. If selected licensed software
products were no longer available, a material hardship on InnoServ could result.

Software products developed or used by InnoServ may from time to time raise
questions of infringement of patents or copyrights owned by others and not
licensed to InnoServ. No claims of such infringement have been raised; however,
if such claims are raised and it is determined that licenses under

patents or copyrights owned by others are essential, but not available, a
material hardship on InnoServ might result.

SOURCES AND AVAILABILITY OF REPAIR PARTS

Most of the mechanical, electrical and electronic parts and components used
in the performance of repair service are purchased from medical equipment
manufacturers and after-market part suppliers. InnoServ believes that materials,
components and parts of the type and in the quantities necessary for its
continued service operations are readily available, and in many cases alternate
sources currently exist. InnoServ procures certain x-ray tubes and other
proprietary components from certain sole source suppliers. In the event any sole
source item becomes unavailable from the present supplier or the supplier's time
to deliver such items is abruptly extended beyond normal, InnoServ could
experience difficulty, delay and expense in obtaining delivery from other
sources and InnoServ's ability to maintain and repair customers' equipment could
be impeded.

INSURANCE

InnoServ maintains a comprehensive insurance program which covers the
replacement value of its equipment and vehicles, subject to normal deductibles,
when appropriate. Additionally, InnoServ maintains professional and general
liability, and employee health insurance coverage, subject to normal
deductibles. InnoServ believes its present insurance coverage is adequate.

EMPLOYEES

At June 30, 1998, InnoServ had 207 employees. None of InnoServ's employees
are represented by a labor organization and InnoServ is not aware of any
activity seeking such organization. InnoServ considers its relationship with its
employees generally to be satisfactory.

ITEM 2. PROPERTIES.

InnoServ leases approximately 76,000 square feet of office, maintenance and
storage facilities in nine locations at an approximate annual cost of $690,000.
Individual lease terms extend up to 41 months with various renewal options.

While InnoServ believes that its facilities are adequate for its current and
near-term needs, to the extent InnoServ expands its activities either
geographically or with respect to the number of hospitals, clinics or group
practices to which it provides its services, InnoServ may be required to obtain
additional office, maintenance or storage facilities.

ITEM 3. LEGAL PROCEEDINGS.

Pursuant to a stock purchase agreement dated November 13, 1997 (the "MEDIQ
Agreement"), by and among InnoServ and MEDIQ Incorporated and MEDIQ Investment
Services, Inc. (collectively "MEDIQ"), InnoServ repurchased 2,026,438 shares of
InnoServ's common stock (the "MEDIQ Shares") from MEDIQ in exchange for an
agreement that InnoServ would not enter into or consummate a change of control
(as defined in the MEDIQ Agreement) unless the other party or parties thereto
agree, as a condition precedent to such transaction, to pay to MEDIQ the amount
that would have been received by MEDIQ in connection with the change of control
transaction if all of the MEDIQ Shares were outstanding and held by MEDIQ at the
effective time of such change of control transaction. The MEDIQ Agreement
further provides that, after April 1, 1998 and through September 30, 1998,
InnoServ shall not enter into or consummate a change of control unless the other
party or parties thereto agree, as a condition precedent to such transaction, to
pay MEDIQ 50% of the amount that would have been received by MEDIQ in connection
with the change of control transaction if all of the MEDIQ Shares were
outstanding and held by MEDIQ at the effective time of such change of control
transaction.

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, MEDIQ would have been entitled to $6,437,994,
based upon the Merger consideration, upon consummation of the Merger. 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% 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, to be held pursuant to an
escrow agreement by and between MEDIQ and InnoServ.

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. 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.

InnoServ is involved in various legal actions, claims, and proceedings of a
nature considered normal to the conduct of its business. InnoServ believes,
after reviewing such matters and consulting with counsel, that any liability
which may ultimately be incurred with respect to these matters is not expected
to have a material effect on either InnoServ's financial condition or results of
operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

InnoServ's common stock is traded in the NASDAQ National Market under the
symbol ISER. The ranges of high and low transaction prices for the common stock
as reported by The National Stock Market, Inc. for fiscal 1998 and 1997 are set
forth in the following table. Such quotations are prices between dealers without
retail markups, markdowns or commissions and do not represent actual
transactions.

HIGH LOW
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1998
4th Quarter....................................................................... $ 3 5/8 $ 1 15/16
3rd Quarter....................................................................... $ 3 $ 1 11/16
2nd Quarter....................................................................... $ 2 1/4 $ 1 1/2
1st Quarter....................................................................... $ 2 1/4 $ 1 11/16

1997
4th Quarter....................................................................... $ 3 1/8 $ 1 13/16
3rd Quarter....................................................................... $ 3 1/8 $ 2 1/8
2nd Quarter....................................................................... $ 5 $ 2 7/8
1st Quarter....................................................................... $ 5 5/8 $ 3 5/8

InnoServ estimates that it had approximately 650 beneficial shareholders as
of July 17, 1998.

In April 1995, InnoServ's Board of Directors discontinued the payment of
dividends for an indefinite period. InnoServ's current loan agreement prohibits
the payment of cash dividends.

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth certain selected financial data for each of
the five years in the period ended April 30, 1998. The acquired operations of
MEDIQ Equipment and Maintenance Services, Inc. have been included effective
August 3, 1994. The operations of Advanced Imaging Technologies, Inc. were
disposed of effective March 17, 1997 (see Note 4 to the Notes to Consolidated
Financial Statements). The selected financial data presented below should be
read in conjunction with the consolidated financial statements of InnoServ and
the notes thereto appearing in Item 8 of Part II of this report and the
information set forth in Management's Discussion and Analysis of Financial
Condition and Results of Operations.

YEAR ENDED
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APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 29,
1998 1997 1996 1995 1994
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Operating Data:
Revenues................................................. $ 36,889 $ 42,387 $ 45,727 $ 46,366 $ 40,464
Net income (loss)........................................ (2,664) (1,573) (7,189) (3,630) 1,507
Net income (loss) per share (a):
Basic.................................................. (0.65) (0.31) (1.43) (0.81) 0.51
Diluted................................................ (0.65) (0.31) (1.43) (0.81) 0.49
Cash Dividends Per Share................................... $ -- $ -- $ -- $ 0.23 $ 0.16
Weighted Average Shares (a):
Basic.................................................... 4,098 5,036 5,036 4,511 2,944
Diluted.................................................. 4,098 5,036 5,036 4,511 3,049
Balance Sheet Data:
Total assets............................................. $ 18,713 $ 19,102 $ 23,840 $ 30,506 $ 21,430
Working capital.......................................... (594) 978 1,023 4,077 6,784
Total long-term debt..................................... -- 479 910 141 --
Total shareholders' equity............................... $ 5,729 $ 8,393 $ 9,966 $ 17,155 $ 15,400

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(a) 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 above have been presented
and, where necessary, restated to conform to the SFAS No. 128 requirements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

RESULTS OF OPERATIONS

FISCAL 1998 COMPARED TO FISCAL 1997

Consolidated revenues for fiscal 1998 were $36,889,000, a decrease of
$5,498,000 from fiscal 1997 consolidated revenues of $42,387,000. The decline in
revenues is primarily attributable to a decrease of $5,221,000 resulting from
the disposition of substantially all of the revenue producing assets of Advanced
Imaging Technologies, Inc. ("AIT") on March 17, 1997 (see Note 4 to the Notes to
Consolidated Financial Statements). Revenues from computed tomography ("CT") and
magnetic resonance imaging ("MRI") maintenance service agreements decreased
approximately $2,400,000 and $210,000, respectively, primarily as a result of
the continued decline in the number and average contract amount of maintenance
service

agreements in effect as older equipment is being upgraded or removed from
service by customers. Revenues from InnoServ's diagnostic mobile imaging
operations declined approximately $180,000 due to lower customer demand for
these units. Offsetting these declines, revenues from asset management and
multi-vendor services increased approximately $2,050,000 as InnoServ continues
to focus on the growing market for these types of services. In addition, after
taking into effect the disposal of AIT, sale of spare parts, x-ray tubes and
equipment increased by approximately $560,000 as InnoServ experienced a greater
demand for its spare parts and x-ray tubes from other service providers and
distributors.

Cost of operations, excluding the costs of AIT, increased $1,430,000 from
fiscal 1997 to fiscal 1998 as the costs in fiscal 1997 were 84 percent of
revenues, increasing to 88 percent of revenues in fiscal 1998. This increase as
a percentage of revenues was due primarily to a higher failure rate of equipment
under maintenance service agreements than previously experienced, an increasing
utilization of other service providers to supplement InnoServ's own staff of
field engineers to service equipment under maintenance service agreements, a
greater need to source repair parts from third parties rather than utilizing
InnoServ's existing inventory of spare parts, and lower gross margins generally
on asset management contracts awarded to InnoServ during the last year due to
competitive pricing in the marketplace.

Depreciation and amortization expenses decreased $291,000, or 15 percent,
from the prior year primarily as a result of the completed depreciation of
certain capital equipment. Selling and administrative expenses decreased
$996,000, or 16 percent, primarily as a result of reductions in InnoServ's
administrative functions resulting from the disposal of AIT, representing
approximately $680,000 of the total decline, and cost containment activities.

The loss before income taxes increased by $1,026,000 to $2,646,000 in fiscal
1998 from $1,620,000 in fiscal 1997 primarily as a result of the factors
identified in the discussion of cost of operations above.

In fiscal 1998 InnoServ recorded a tax provision of $18,000 for income taxes
due to certain states in which InnoServ conducts business. InnoServ did not
recognize a federal tax benefit from the operating loss in fiscal 1998. Under
SFAS No. 109, "Accounting for Income Taxes", net operating losses enter into the
calculation of deferred tax assets and liabilities. At April 30, 1998, InnoServ
had an estimated net deferred tax asset before valuation allowance of
$6,416,000, primarily as a result of net operating losses and tax credit
carryforwards. Due to the cumulative losses incurred in recent years the
deferred tax assets do not currently 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.

On May 19, 1998, InnoServ entered into an Agreement and Plan of Merger
("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 15 to the Notes to Consolidated Financial
Statements). The Merger, which is subject to approval by InnoServ's
shareholders, government regulatory approval and other customary contingencies,
is planned to close in late August 1998. 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. 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. Should the
Merger not close as expected, it could have a material adverse effect on
InnoServ's ongoing business due to anticipated terminations of employees and
difficulty in attracting new employees and customers.

FISCAL 1997 COMPARED TO FISCAL 1996

Consolidated revenues for fiscal 1997 were $42,387,000, a decrease of
$3,340,000 from fiscal 1996 consolidated revenues of $45,727,000. The decrease
occurred primarily as a result of the continued decline in the number and
average contract amount of CT maintenance service agreements in effect as a
result of older equipment being upgraded or removed from service by customers
and InnoServ's decision to not renew certain CT maintenance contracts in
unprofitable locations. Revenues for fiscal 1997 related to CT

maintenance contracts declined by approximately $6,200,000 as compared to fiscal
1996 revenues. In addition, sales of spare parts, supplies, x-ray tubes and
equipment declined by $815,000 primarily due to the disposition of substantially
all of the revenue producing assets of AIT on March 17, 1997 (see Note 4 to the
Notes to Consolidated Financial Statements). AIT's business was no longer
consistent with the strategic focus of InnoServ. These declines were partially
offset by revenue increases in InnoServ's other product lines, principally asset
management and multi-vendor services which grew by $3,680,000 as compared to
1996 revenues as InnoServ continued to focus on the growing market for these
types of services. In addition, the decline was partially offset by a reduction
of approximately $200,000 in the reserve for sales allowances during the fourth
quarter of fiscal 1997. This reduction was a result of management's ongoing
analysis of service billings.

Cost of operations for fiscal 1997 decreased by $3,958,000 as those costs
were approximately 85 percent of fiscal 1997 revenues as compared to
approximately 87 percent of revenues in fiscal 1996. These decreases were the
result of the cost reduction actions, including employment terminations, taken
in fiscal 1997 and 1996 by management as well as the increase in asset
management services which generally had higher operating margins than the
operating margins of most of InnoServ's other product lines, including CT
maintenance contracts, which have margins that continue to decline. In addition,
during the fourth quarter of fiscal 1997, InnoServ recorded a reduction of
approximately $300,000 in certain accruals as determined through management's
ongoing evaluation of estimated liabilities.

Depreciation and amortization expenses for fiscal 1997 were $98,000 less
than in fiscal 1996 which reflects the reduction in expenditures for capital
equipment, principally test equipment used in the maintenance service product
lines as InnoServ concentrated its activities on the asset management services
which require less capital than the other InnoServ product lines.

Selling and administrative expenses decreased in fiscal 1997 by $2,134,000
to $6,223,000 which is the result of management's efforts to reduce expenses in
fiscal 1997 which included reductions in InnoServ's sales force and
administrative personnel. Additionally, the decrease is due to the elimination
of certain nonrecurring costs incurred in fiscal 1996 of $313,000 in
restructuring costs recorded in the third quarter of fiscal 1996 as well as
other training and duplicate salary expenses for the relocation of InnoServ's
headquarters.

Loss before income taxes declined by $3,090,000 to $1,620,000 in fiscal 1997
from $4,710,000 in fiscal 1996, partially as a result of improved operating
margins resulting from the increase in revenue from asset management services
which had higher operating margins than the other product lines. In addition,
the loss before income taxes in fiscal 1996 reflected special charges of
$2,267,000, restructuring costs to effect the relocation of InnoServ's
headquarters and spare parts repair operations, and unfavorable operating
margins associated with the CT maintenance business. Because InnoServ employs
field service engineers over a wide geographic area, the level of revenues were
not sufficient in certain locations to cover the direct costs of providing
maintenance and repair services and the infrastructure costs to support these
activities.

InnoServ recorded a $47,000 tax benefit in fiscal 1997 representing an
estimated tax refund for state income taxes paid in prior years. InnoServ did
not recognize a federal tax benefit from the operating loss for fiscal 1997. At
April 30, 1997, InnoServ had an estimated net deferred tax asset before
valuation allowance of $5,513,000, primarily as a result of net operating losses
and tax credit carryforwards. In accordance with SFAS No. 109, InnoServ recorded
a valuation allowance for the full amount of the net deferred tax asset. The
ultimate realization of the deferred tax asset depends on the ability of
InnoServ to generate sufficient taxable income in the future. Due to the
cumulative losses incurred in recent years, the deferred tax assets did not meet
the criteria for recognition under SFAS No. 109.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents at April 30, 1998, totaled $3,088,000. The
principal source of cash for fiscal 1998 was operations which generated
$2,017,000 due primarily to an increase in accounts payable of $2,316,000 due to
the timing of payments, the non-cash effect of depreciation and amortization of
$1,707,000, a reduction in inventory of $347,000 due to the amortization of
spare parts inventory partially offset by additional purchases of spare parts
and x-ray tubes required to service newer technology CT and MRI scanners, and an
increase in deferred revenues of $529,000 as payments received for services to
be provided exceeded services provided during the period. Offsetting these
positive cash flows, receivables increased by $128,000 as a result of the timing
of cash receipts from customers and prepaid expenses increased by $119,000 for
costs incurred in conjunction with the Merger Agreement with GE, which costs
have been deferred until consummation of the Merger. The funds generated from
operations financed purchases of new capital equipment of $106,000 and debt
payments of $629,000.

Under the terms of the Merger Agreement, GE purchased 700,000 shares of a
newly created Series B Preferred Stock of InnoServ (the "Preferred Shares") for
$2,800,000, which payment was received by InnoServ on June 5, 1998. The
Preferred Shares accrue dividends of $0.32 per share per annum, beginning six
months from the issuance of such shares, whether or not earned or declared, and
are redeemable by InnoServ at anytime 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.

InnoServ's allowance for doubtful accounts at April 30, 1998 was $869,000,
or 19 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 reimbursement 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 honor their debts and have forced some of the providers out of
business.

On April 14, 1997 InnoServ entered into a new loan agreement with a bank
pursuant to which amounts outstanding under InnoServ's term loan and revolving
line of credit with the bank were converted into a new term loan of $1,198,000.
Borrowings under the new term loan bear interest at the rate of prime (8.5% at
April 30, 1998) plus 1% per annum. Monthly 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
net loss for the period, InnoServ failed to meet the net worth covenant, the
current ratio and the cash flow ratio required under the loan agreement as of
April 30, 1998. InnoServ's bank waived these events of noncompliance effective
April 30, 1998 and through September 30, 1998 for the net worth covenant and the
current ratio and through January 8, 1999 for the cash flow ratio. As a result
of the $2,800,000 in proceeds received on June 5, 1998 from the issuance of the
Preferred Shares, InnoServ expects to be in compliance with the net worth
covenant and current ratio at September 30, 1998.

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

YEAR 2000 ISSUES

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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

The following financial statements and financial statement schedule of
InnoServ and the Report of Independent Auditors are included herein on the pages
indicated:

PAGE
----

Consolidated Financial Statements:

Report of Independent Auditors......................................... 13

Consolidated Balance Sheets at April 30, 1998 and 1997................. 14

Consolidated Statements of Operations for the years ended April 30,
1998, 1997 and 1996.................................................. 15

Consolidated Statements of Shareholders' Equity for the years ended
April 30, 1998, 1997 and 1996........................................ 16

Consolidated Statements of Cash Flows for the years ended April 30,
1998, 1997 and 1996.................................................. 17

Notes to Consolidated Financial Statements............................. 18

Financial Statement Schedule:

Schedule II--Valuation and Qualifying Accounts......................... 30

Schedules not filed herewith are omitted because of the absence of
conditions under which they are required or because the information called for
is shown in the Consolidated Financial Statements or Notes thereto.

REPORT OF INDEPENDENT AUDITORS

Board of Directors
InnoServ Technologies, Inc.

We have audited the accompanying consolidated balance sheets of InnoServ
Technologies, Inc. as of April 30, 1998 and 1997, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended April 30, 1998. Our audits also included the
financial statement schedule listed in the Index at Item 8. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
InnoServ Technologies, Inc. at April 30, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended April 30, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Fort Worth, Texas
June 17, 1998

INNOSERV TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

APRIL 30, APRIL 30,
1998 1997
---------- ----------

ASSETS
Current assets
Cash and cash equivalents............................................................... $ 3,088 $ 1,806
Receivables, net........................................................................ 3,821 3,693
Inventory............................................................................... 4,909 5,256
Prepaid expenses........................................................................ 572 453
---------- ----------
Total current assets.................................................................. 12,390 11,208

Capital equipment, net.................................................................... 3,042 4,491
Goodwill, net............................................................................. 3,240 3,392
Other assets.............................................................................. 41 11
---------- ----------
$ 18,713 $ 19,102
---------- ----------
---------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt....................................................... $ 479 $ 629
Accounts payable........................................................................ 5,974 3,658
Accrued liabilities..................................................................... 2,283 2,224
Deferred revenues....................................................................... 4,248 3,719
---------- ----------
Total current liabilities............................................................. 12,984 10,230
Long-term debt, less current portion...................................................... -- 479
Commitments and contingencies.............................................................
Shareholders' equity
Preferred stock, $.01 par value: 5,000,000 shares authorized; no shares issued.......... -- --
Common stock, $.01 par value: 10,000,000 shares authorized; 3,009,395 issued at April
30, 1998 and 5,035,833 issued at April 30, 1997....................................... 30 51
Paid-in capital......................................................................... 17,324 17,303
Accumulated deficit..................................................................... (11,625) (8,961)
---------- ----------
Total shareholders' equity............................................................ 5,729 8,393
---------- ----------
$ 18,713 $ 19,102
---------- ----------
---------- ----------

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

INNOSERV TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

FOR THE YEARS ENDED APRIL 30, 1998, 1997 AND 1996

1998 1997 1996
---------- ---------- ----------

Revenues:
Service..................................................................... $ 31,452 $ 33,819 $ 36,344
Sale of parts and equipment................................................. 5,437 8,568 9,383
---------- ---------- ----------
Total revenues............................................................ 36,889 42,387 45,727
Costs:
Cost of service............................................................. 30,198 30,303 32,873
Cost of parts and equipment................................................. 2,401 5,551 6,939
---------- ---------- ----------
Total cost of operations.................................................. 32,599 35,854 39,812
Depreciation and amortization................................................. 1,707 1,998 2,096
Selling and administrative.................................................... 5,227 6,223 8,357
---------- ---------- ----------
Loss from operations.......................................................... (2,644) (1,688) (4,538)
Interest expense, net......................................................... (2) (112) (172)
Other income.................................................................. -- 180 --
---------- ---------- ----------
Loss before income taxes...................................................... (2,646) (1,620) (4,710)
Provision (benefit) for income taxes.......................................... 18 (47) 2,479
---------- ---------- ----------
Net loss...................................................................... $ (2,664) $ (1,573) $ (7,189)
---------- ---------- ----------
---------- ---------- ----------
Net loss per share--basic and diluted......................................... $ (0.65) $ (0.31) $ (1.43)
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares--basic and diluted.................................... 4,098 5,036 5,036
---------- ---------- ----------
---------- ---------- ----------

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

INNOSERV TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

FOR THE YEARS ENDED APRIL 30, 1998, 1997 AND 1996

COMMON STOCK
($.01 PAR VALUE)
------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ------ ------- ----------- -------

Balance, April 30, 1995..................................... 5,035,833 $ 51 $17,303 $ (199) $17,155
Net loss.................................................. -- -- -- (7,189) (7,189)
---------- ------ ------- ----------- -------
Balance, April 30, 1996..................................... 5,035,833 51 17,303 (7,388) 9,966
Net loss.................................................. -- -- -- (1,573) (1,573)
---------- ------ ------- ----------- -------
Balance, April 30, 1997..................................... 5,035,833 51 17,303 (8,961) 8,393
Repurchase of shares...................................... (2,026,438) (21) 21 -- --
Net loss.................................................. -- -- -- (2,664) (2,664)
---------- ------ ------- ----------- -------
Balance, April 30, 1998..................................... 3,009,395 $ 30 $17,324 $(11,625) $ 5,729
---------- ------ ------- ----------- -------
---------- ------ ------- ----------- -------

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

INNOSERV TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

FOR THE YEARS ENDED APRIL 30, 1998, 1997 AND 1996

1998 1997 1996
--------- --------- ---------

Cash flows from:
Operations:
Net loss.......................................................................... $ (2,664) $ (1,573) $ (7,189)
Adjustments to reconcile net loss to net cash flows from operations:
Depreciation and amortization................................................... 1,707 1,998 2,096
Gain on disposal of equipment................................................... -- -- (98)
Provision for deferred income taxes............................................. -- -- 3,347
Changes in assets and liabilities:
Receivables................................................................... (128) 977 (701)
Inventory..................................................................... 347 1,840 1,741
Prepaid expenses.............................................................. (119) (105) 182
Accounts payable.............................................................. 2,316 (942) 1,398
Accrued liabilities........................................................... 59 (849) (1,138)
Deferred revenues............................................................. 529 (529) 1,894
Other assets.................................................................. (30) 112 459
--------- --------- ---------
Net cash provided by operations................................................... 2,017 929 1,991
Investing activities:
Sale of capital equipment....................................................... -- -- 180
Sale of AIT assets.............................................................. -- 788 --
Purchase of capital equipment................................................... (106) (188) (1,427)
--------- --------- ---------
Net cash provided by (used for) investing activities.............................. (106) 600 (1,247)
Financing activities:
Payments on long-term debt...................................................... (594) (500) (125)
Payments under capital lease obligations........................................ (35) (106) (356)
Decrease in borrowings from line of credit...................................... -- (256) (2,649)
Proceeds from the issuance of long-term debt.................................... -- 198 1,500
--------- --------- ---------
Net cash used for financing activities............................................ (629) (664) (1,630)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents.............................. 1,282 865 (886)
Cash and cash equivalents at beginning of period.................................. 1,806 941 1,827
--------- --------- ---------
Cash and cash equivalents at end of period........................................ $ 3,088 $ 1,806 $ 941
--------- --------- ---------
--------- --------- ---------

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

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 1998

1. DESCRIPTION OF BUSINESS

InnoServ provides comprehensive asset management systems and services and
multi-vendor maintenance and repair services for healthcare facilities, offers
mobile computed tomography and cardiac catheterization units for lease and
distributes radiology parts and equipment on a nationwide basis.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of InnoServ and
its subsidiaries, all of which are wholly-owned. All significant intercompany
accounts and transactions have been eliminated.

Certain reclassifications have been made in the prior years' consolidated
financial statements to conform to the fiscal 1998 presentation.

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

CASH EQUIVALENTS

Cash equivalents include highly liquid investments with an original maturity
of three months or less.

RECEIVABLES

Receivables are stated net of an allowance for doubtful accounts of $869,000
and $910,000 at April 30, 1998 and 1997, respectively.

CONCENTRATIONS OF CREDIT RISK

Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising InnoServ's customer base.
InnoServ reviews a potential customer's credit history before extending credit.
An allowance for doubtful accounts is established based upon factors surrounding
the credit risk of specific customers, historical trends and other information.

INVENTORY

Equipment held for resale, x-ray tubes, and other radiological supplies are
carried at the lower of cost or market value. Spare parts relating to
maintenance services are carried at average cost and expensed when used or sold.
Spare parts inventory is amortized over the estimated useful life of the parts
which has been determined to be seven years. Spare parts inventory is stated at
cost net of such accumulated amortization and allowances of $5,819,000 and
$5,040,000 at April 30, 1998 and 1997, respectively. The estimated useful life
and carrying value of spare parts inventory are evaluated based upon historical
usage

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
and the type and duration of the maintenance contracts in effect. Inventory at
April 30, 1998 and 1997 consisted of the following (in thousands):

APRIL 30, APRIL 30,
1998 1997
----------- -----------

Spare parts and supplies, net............................................ $ 4,031 $ 4,484
Inventory held for resale................................................ 878 772
----------- -----------
$ 4,909 $ 5,256
----------- -----------
----------- -----------

CAPITAL EQUIPMENT

Capital equipment is stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over estimated useful
lives ranging from three to ten years. Maintenance and repairs are charged
against income and betterments are capitalized. Capital equipment at April 30,
1998 and 1997 consisted of the following (in thousands):

APRIL 30, APRIL 30,
1998 1997
---------- ----------

Cost.................................................................. $ 27,065 $ 27,907
Less accumulated depreciation......................................... (24,023) (23,416)
---------- ----------
$ 3,042 $ 4,491
---------- ----------
---------- ----------

Depreciation expense for the years ended April 30, 1998, 1997 and 1996 was
$1,555,000, $1,846,000, and $1,942,000, respectively.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the anticipated
future tax effects of differences between their carrying amounts for financial
reporting purposes and the amounts used for income tax purposes (see Note 10).

GOODWILL

Cost of approximately $4,445,000 in excess of the net assets acquired in
purchase transactions is being amortized using the straight-line method over
periods ranging from 20 to 40 years. Related accumulated amortization at April
30, 1998 and 1997 was $1,205,000 and $1,053,000, respectively.

LONG-TERM ASSETS

InnoServ evaluates the carrying value of long-term assets, including
goodwill, based upon future anticipated undiscounted cash flows and recognizes
an impairment when it is probable that such estimated future cash flows will be
less than the carrying value of the asset.

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUES

Generally, revenues are recognized when services are rendered or when parts,
supplies and equipment are shipped. Revenues from the sale of major items of
equipment are recognized when the customer accepts the equipment. Such
acceptance is generally conditioned upon successful installation of the
equipment on the customer's premises. Revenues under lease agreements are
recognized ratably over the term of the lease.

Amounts invoiced in advance of the provision of service under maintenance
contracts are not included in receivables if payment has not been received as of
the balance sheet date. Such amounts are classified as deferred revenues if
payment was received as of the balance sheet date.

INTEREST EXPENSE, NET

Interest expense is net of interest income of $83,000, $33,000, and $22,000
for the years ended April 30, 1998, 1997, and 1996, respectively.

STOCK BASED COMPENSATION

InnoServ grants stock options for a fixed number of shares to employees and
non-employee directors with an exercise price equal to the fair value of the
underlying common stock at the date of grant. InnoServ has elected to follow
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its employee
stock options because, as discussed in Note 6, the alternative fair value
accounting provided for under Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of InnoServ's stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Proceeds from common stock issued pursuant
to InnoServ's employee stock option plans are credited to common stock and
paid-in capital at the time an option is exercised.

EARNINGS PER SHARE

Basic earnings per share amounts are computed based upon the weighted
average shares of common stock outstanding during each period. Outstanding stock
options, if dilutive, are included in the computation of diluted earnings per
share.

3. SUPPLEMENTAL CASH FLOW DISCLOSURE

Interest and income taxes paid in the years ended April 30, 1998, 1997 and
1996 were as follows (in thousands):

1998 1997 1996
--------- --------- ---------

Interest.............................................................. $ 81 $ 211 $ 209
Income taxes.......................................................... $ 13 $ 55 $ 20

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

4. ASSET SALES

On March 17, 1997, InnoServ sold substantially all of the net assets of
Advanced Imaging Technologies, Inc. ("AIT") for $788,000 in cash, which
approximated the net carrying value of such assets. In connection with the sale,
InnoServ also entered into a consulting agreement pursuant to which InnoServ
received $180,000. InnoServ believes all services which were required to be
provided under the consulting agreement were provided before April 30, 1997.
Accordingly, the amount received by InnoServ for consulting services is
reflected as "Other income" in the Consolidated Statement of Operations for
fiscal 1997. Revenues for AIT in fiscal 1998, 1997, and 1996 were $0,
$5,221,000, and $6,186,000, respectively.

5. LONG-TERM DEBT

Long-term debt at April 30, 1998 and 1997 consisted of the following (in
thousands):

APRIL 30, APRIL 30,
1998 1997
--------- ---------

Bank term loan.............................................. $ 479 $1,073
Capital lease obligations payable through December 1997, at
a fixed rate of interest of 9.56%......................... -- 35
--------- ---------
479 1,108
Less amount classified as current........................... (479) (629)
--------- ---------
Total long-term debt........................................ $ -- $ 479
--------- ---------
--------- ---------

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 April 30, 1998) plus 1% per annum. Monthly
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 net loss for the period, InnoServ
failed to meet the net worth covenant, the current ratio and the cash flow ratio
required under the loan agreement as of April 30, 1998. InnoServ's bank waived
these events of noncompliance effective April 30, 1998 and through September 30,
1998 for the net worth covenant and the current ratio and through January 8,
1999 for the cash flow ratio. As a result of the $2,800,000 in proceeds received
on June 5, 1998 from the issuance of the Preferred Shares (see Note 15),
InnoServ expects to be in compliance with the net worth covenant and current
ratio at September 30, 1998.

The outstanding principal balance of $479,000 on long-term debt is required
to be paid under the terms of the loan agreement in the year ending April 30,
1999.

6. STOCK OPTIONS

InnoServ has an incentive plan which provides for the granting of stock
options to key employees and non-employee directors to purchase common stock at
a purchase price of not less than fair market value, as defined by such plan, on
the date of the grant. InnoServ has also entered into a stock option agreement

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

6. STOCK OPTIONS (CONTINUED)
with its chief executive officer to purchase 150,000 shares of common stock at a
purchase price that was equal to the fair market value of the common stock at
the time of grant. The options granted under the plan and agreement are
exercisable in three equal installments over a three year vesting period and
expire over periods ranging from five to ten years after the grant date. The
changes in stock options outstanding for the years ended April 30, 1998, 1997
and 1996 were as follows:

NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------

Outstanding at April 30, 1995............................... 327,834 $4.34
Granted................................................... 373,000 3.51
Canceled.................................................. (266,934) 4.39
--------- -----
Outstanding at April 30, 1996............................... 433,900 3.60
Granted................................................... 46,000 3.52
Canceled.................................................. (48,500) 3.35
--------- -----
Outstanding at April 30, 1997............................... 431,400 3.62
Granted................................................... 46,000 2.59
Canceled.................................................. (72,200) 3.42
--------- -----
Outstanding at April 30, 1998............................... 405,200 $3.52
--------- -----
--------- -----
Options exercisable at April 30, 1998....................... 245,872 $3.66
--------- -----
--------- -----
Options exercisable at April 30, 1997....................... 152,069 $3.77
--------- -----
--------- -----
Options exercisable at April 30, 1996....................... 44,500 $4.06
--------- -----
--------- -----

The weighted average fair value of options granted during fiscal 1998 is
$1.03.

At April 30, 1998 and 1997, there were 74,800 and 48,600 shares of common
stock available for future grants, respectively. The outstanding options at
April 30, 1998 had exercise prices ranging from $1.50 to $5.25 per share and the
weighted average remaining contractual life of such options was 5.6 years.

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if InnoServ had accounted
for its stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option valuation model with the following weighted-average
assumptions for fiscal 1998, 1997 and 1996, respectively: risk-free interest
rates of 5.76%, 6.25% and 6.25%; no expected dividend yields for all years;
volatility factors of the expected market price of InnoServ's common stock of
.373, .405 and .504; and a weighted-average expected life of all options of 4.5
years.

The Black-Scholes option valuation model is used in estimating the fair
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility and the
average life of options. Because InnoServ's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

6. STOCK OPTIONS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense on a straight-line basis over the options'
vesting period. The pro forma effects on the net loss for fiscal 1998, 1997 and
1996 are not representative of the pro forma effect on net income in future
years because they do not take into consideration pro forma compensation expense
related to grants made prior to fiscal 1996. InnoServ's pro forma information
follows (in thousands of dollars, except for earnings per share information):

1998 1997 1996
--------- --------- ---------

Pro forma net loss............................................ $ (2,812) $ (1,679) $ (7,232)
Pro forma net loss per share--basic and diluted............... $ (0.69) $ (0.33) $ (1.44)

7. SHARES AND WARRANT REPURCHASE

The MEDIQ Shares and Warrant were repurchased in exchange for an agreement
that InnoServ would not enter into or consummate a change of control (as defined
in the MEDIQ Agreement) unless the other party or parties thereto agree, as a
condition precedent to such transaction, to pay to MEDIQ the amount that would
have been received by MEDIQ in connection with the change of control transaction
if all of the MEDIQ Shares were outstanding and held by MEDIQ at the effective
time of such change of control transaction. The MEDIQ Agreement further provides
that, after April 1, 1998 and through September 30, 1998, InnoServ shall not
enter into or consummate a change of control unless the other party or parties
thereto agree, as a condition precedent to such transaction, to pay MEDIQ 50% of
the amount that would have been received by MEDIQ in connection with the change
of control transaction if all of the MEDIQ Shares were outstanding and held by
MEDIQ at the effective time of such change of control transaction. 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 (as
hereinafter defined) with General Electric Company (see Note 15).

Additionally, in connection with the transaction, MEDIQ and InnoServ agreed
to terminate certain continuing arrangements including the right to designate
two directors. Consequently, Thomas E. Carroll, President and Chief Executive
Officer of MEDIQ, who had been serving at MEDIQ's designation, resigned from
InnoServ's Board of Directors. Michael Sandler, the former Chief Financial
Officer of MEDIQ, who also had been serving at MEDIQ's designation, continues as
a director of InnoServ.

8. RETIREMENT PLAN

InnoServ sponsors a voluntary retirement benefit plan (the "Plan") under the
provisions of Section 401(k) of the Internal Revenue Code. The Plan is available
to all employees of InnoServ who have

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

8. RETIREMENT PLAN (CONTINUED)
completed three months of continuous service and are age twenty-one or older.
Employee contributions are based on a percentage of pre-tax compensation as
elected by the employee to a maximum of 15 percent. InnoServ contributes an
amount equal to 25 percent of the employee's pre-tax contributions limited to a
maximum matching of $500 annually. InnoServ's costs related to the Plan for the
years ended April 30, 1998, 1997 and 1996 were $72,000, $96,000, and $85,000,
respectively.

9. SPECIAL CHARGES

In fiscal 1996, InnoServ's management team undertook a detailed assessment
of InnoServ's internal operations, customers, competition, and InnoServ's
positioning within its marketplace. This assessment led to a strategic focus
which emphasizes the asset management capabilities and services of InnoServ
Technologies Maintenance Services, Inc. In support of this strategy, InnoServ
adopted a plan to reorganize its operations and evaluated the realization of its
assets. The financial impact of these actions was recorded as special charges of
approximately $2,267,000 in the fourth quarter of fiscal 1996. These charges
were included in cost of operations and consisted of the following (in
thousands):

Inventory:
Writedown for impairment of inventory(1).......................... $ 1,003
Writedown of equipment held for resale(2)......................... 292
Writedown for physical inventory of spare parts................... 192
Other............................................................. 149
---------
1,636
Capitalized development costs expensed(3)........................... 394
Severance arrangements(4)........................................... 154
Equipment accumulated depreciation(5)............................... 83
---------
$ 2,267
---------
---------

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

Notes:

(1) Represents the unamortized balance of spare parts inventory no longer
required to support InnoServ's on-going business.

(2) Certain CT scanners and other equipment held for resale were written down to
their estimated market value.

(3) Engineering development costs of certain diagnostic software which were
previously capitalized have been charged to expense.

(4) Relates to severance amounts estimated to be paid to employees as a result
of InnoServ's plan to reorganize its operations to strategically focus on
its asset management business.

(5) Represents additional depreciation as a result of lowering the estimated
useful lives of certain equipment.

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

10. INCOME TAXES

The provision (benefit) for income taxes for the years ended April 30, 1998,
1997 and 1996 consisted of the following (in thousands):

1998 1997 1996
--------- --------- ---------

Current:
Federal............................................................ $ -- $ -- $ (868)
State.............................................................. 18 (47) --
--------- --------- ---------
18 (47) (868)
Deferred:
Federal............................................................ -- -- 2,983
State.............................................................. -- -- 364
--------- --------- ---------
-- -- 3,347
--------- --------- ---------
$ 18 $ (47) $ 2,479
--------- --------- ---------
--------- --------- ---------

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred tax asset at April 30, 1998 and 1997 were as follows (in
thousands):

APRIL 30, APRIL 30,
1998 1997
--------- ---------

Deferred tax assets:
Net operating loss carryforwards....................................... $ 3,797 $ 3,137
Tax credits............................................................ 1,400 1,400
Accrued expenses....................................................... 214 350
Allowance for doubtful accounts........................................ 330 335
Inventory.............................................................. 419 343
Deferred compensation.................................................. 223 268
Capital equipment...................................................... 33 --
--------- ---------
Gross deferred tax asset............................................. 6,416 5,833
Valuation allowance for deferred tax asset............................. (6,416) (5,513)
--------- ---------
Total deferred tax asset............................................. -- 320

Deferred tax liabilities:
Capital equipment...................................................... -- (320)
--------- ---------
Net deferred tax asset............................................... $ -- $ --
--------- ---------
--------- ---------

In accordance with SFAS No. 109, "Accounting for Income Taxes", InnoServ has
recorded a valuation allowance to reduce its net deferred tax asset potentially
available to InnoServ to the amount that is "more likely than not to be
realized". The ultimate realization of the deferred tax assets depends on the
ability of InnoServ to generate sufficient taxable income in the future. Due to
the cumulative losses incurred in

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

10. INCOME TAXES (CONTINUED)
recent years the deferred tax assets do not currently meet the criteria for
recognition under SFAS No. 109 and, accordingly, the net deferred asset has been
reduced to zero.

The net change in the valuation allowance during fiscal 1998 was $903,000.
Approximately $1,214,000 of the recorded valuation allowance of $6,416,000
relates to deferred tax assets resulting from the acquisition of MEMS, a
wholly-owned subsidiary of MEDIQ, on August 3, 1994. To the extent realized, any
tax benefit related to the valuation allowance arising from the acquisition will
be applied to reduce costs in excess of net assets acquired.

The following is a reconciliation of income tax computed at the U.S. federal
statutory tax rates to the rates utilized to compute the provision (benefit) for
income taxes for the years ended April 30, 1998, 1997, and 1996:

1998 1997 1996
----- ----- -----

Tax at U.S. statutory rates................................. (34.0)% (34.0)% (34.0)%
State income taxes net of federal tax benefit............... (2.9) (3.5) (3.8)
Change in valuation allowance............................... 34.0 30.7 88.6
Other....................................................... 3.6 3.8 1.8
----- ----- -----
0.7% (3.0)% 52.6%
----- ----- -----
----- ----- -----

For federal income tax purposes, InnoServ has approximately $1,200,000 of
investment tax credit carryforwards which expire between 2000 through 2002.
InnoServ also has an alternative minimum tax credit carryforward of
approximately $200,000 for federal income tax purposes. InnoServ has net
operating loss carryforwards for federal income tax purposes of approximately
$9,905,000 as of April 30, 1998 which will begin to expire in 2011.

As a result of the transactions pursuant to the MEDIQ Agreement (see Note
7), InnoServ has potentially undergone a change in ownership under Internal
Revenue Code Section 382. If such change in ownership has occurred, an annual
limitation may be applicable to the utilization of net operating loss and other
tax credit carryforwards. Such a limitation could cause a portion of such
carryforwards to go unused.

11. EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued 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. At April
30, 1998, stock options to purchase 405,200 shares of common stock were
outstanding and could potentially dilute earnings per share in future periods.

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

12. OPERATING LEASES

InnoServ leases real properties under operating leases expiring on various
dates through September 2001. Some of the leases contain renewal options. All
real property leases require the payment by InnoServ of property taxes,
maintenance, insurance and other incidental expenses. Rent expense for the years
ended April 30, 1998, 1997, and 1996 was approximately $702,000, $732,000, and
$779,000, respectively.

Future minimum rental payments, including interest thereon, under
noncancelable operating leases with third parties at April 30, 1998 were as
follows (in thousands):

OPERATING
FISCAL YEAR ENDING LEASES
- ----------------------------------------------------------------------------------- -----------

1999............................................................................... $ 613
2000............................................................................... 551
2001............................................................................... 551
2002............................................................................... 230
2003............................................................................... --
-----------
$ 1,945
-----------
-----------

13. COMMITMENTS AND CONTINGENCIES

InnoServ is involved in various legal actions, claims and proceedings of a
nature considered normal to the conduct of its business. InnoServ believes,
after reviewing such matters and consulting with counsel, that any liability
which may ultimately be incurred with respect to these matters is not expected
to have a material effect on either InnoServ's financial condition or results of
operations.

14. MAJOR CUSTOMER

InnoServ provides asset management services to IHC Health Services, Inc.
("IHC") under an agreement which expires on December 31, 2000. Revenues from IHC
under this asset management services agreement for the years ended April 30,
1998, 1997 and 1996 amounted to approximately 13 percent, 9 percent and 3
percent of consolidated revenues, respectively.

15. SUBSEQUENT EVENT

On May 19, 1998, InnoServ entered into an Agreement and Plan of Merger
("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
payments to MEDIQ pursuant to the MEDIQ Agreement dated November 13, 1997 (see
Note 7), holders of InnoServ common stock will receive a range of consideration
between approximately $3.97 and $4.25 per share, depending upon the amount
payable to MEDIQ, upon consummation of the Merger.

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

15. SUBSEQUENT EVENT (CONTINUED)
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% 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 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 will close the Merger transaction as soon as all necessary
approvals are obtained, which is expected to occur in late August 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.

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 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 did not grant

INNOSERV TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

APRIL 30, 1998

15. SUBSEQUENT EVENT (CONTINUED)
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.

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.

As of April 30, 1998, InnoServ recorded prepaid expenses of $114,000 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 $350,000,
will be charged to income.

16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Unaudited summarized financial data by quarter for the years ended April 30,
1998 and 1997 were as follows (in thousands, except per share amounts):

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------

1998
Revenues.............................................................. $ 9,144 $ 9,207 $ 9,210 $ 9,328
Gross profit.......................................................... 1,543 1,273 891 583
Loss before income taxes.............................................. (252) (467) (845) (1,082)
Net loss.............................................................. (252) (467) (845) (1,100)
Net loss per share--basic and diluted(a).............................. $ (0.05) $ (0.09) $ (0.26) $ (0.37)
Weighted average shares--basic and diluted(a)......................... 5,036 5,036 3,274 3,009

1997
Revenues.............................................................. $ 11,788 $ 10,684 $ 10,231 $ 9,684
Gross profit.......................................................... 1,765 1,563 2,102 1,103
Income (loss) before income taxes(b).................................. (627) (456) 36 (573)
Net income (loss)..................................................... (627) (456) 36 (526)
Net income (loss) per share--basic and diluted(a)..................... $ (0.12) $ (0.09) $ 0.01 $ (0.11)
Weighted average shares--basic and diluted(a)......................... 5,036 5,036 5,036 5,036

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

(a) Reflects the adoption of SFAS No. 128 (see Note 11).

(b) Loss before income taxes in the fourth quarter of fiscal 1997 included a
reduction of approximately $500,000 in certain reserves for sales allowances
and other liabilities. Such reductions were a result of management's ongoing
evaluation of estimated obligations.

INNOSERV TECHNOLOGIES, INC.

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTIONS/ END OF
DESCRIPTION OF PERIOD EXPENSES WRITE-OFFS PERIOD
- ---------------------------------------------------------------- ----------- ----------- ------------- -----------

ALLOWANCE FOR DOUBTFUL ACCOUNTS
April 30, 1996................................................ $ 1,429 $ (89) $ (325) $ 1,015
April 30, 1997................................................ 1,015 (8) (97) 910
April 30, 1998................................................ 910 80 (121) 869

ALLOWANCE FOR INVENTORY AMORTIZATION
April 30, 1996................................................ $ 3,460 $ 1,299 $ (148) $ 4,611
April 30, 1997................................................ 4,611 850 (421) 5,040
April 30, 1998................................................ 5,040 909 (130) 5,819

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this item will be included in the Registrant's
definitive Proxy Statement for InnoServ's Annual Meeting of Shareholders
scheduled for October 13, 1998, which will be filed with the Securities and
Exchange Commission and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.

(a) Financial Statements and Financial Statement Schedule:

The financial statements and schedule listed in the "Index to
Consolidated Financial Statements and Financial Statement Schedule"
included in Item 8 of Part II of this report, commencing at page 12, are
filed as part of this report.

(b) Reports on Form 8-K:

During the three months ended April 30, 1998, no reports were filed
by Registrant on Form 8-K.

The information required by this portion of Item 14 is set forth in
the Index to Exhibits beginning on page 34.

POWER OF ATTORNEY

The Registrant and each person whose signature appears below hereby appoints
each of Michael G. Puls and Thomas E. Hoefert as attorneys-in-fact, each with
full power to act alone, to execute in the name and on behalf of the Registrant
and any such person, individually and in each capacity stated below, one or more
amendments to this report, which amendments may make such changes in this report
as any of said attorneys-in-fact deems appropriate, and to file each such
amendment to this report together with all exhibits thereto and any and all
documents in connection therewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

INNOSERV TECHNOLOGIES, INC.
(REGISTRANT)

By: /s/ THOMAS HOEFERT
-----------------------------------------
Thomas E. Hoefert
DATE: JULY 17, 1998 VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

NAME TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ DUDLEY A. RAUCH
- ------------------------------ Chairman of the Board of July 17, 1998
Dudley A. Rauch Directors

/s/ SAMUEL SALEN Vice Chairman and
- ------------------------------ Secretary of the Board July 17, 1998
Samuel Salen, M.D. of Directors

/s/ MICHAEL G. PULS President and Chief
- ------------------------------ Executive Officer, July 17, 1998
Michael G. Puls Director

Vice President and Chief
/s/ THOMAS HOEFERT Financial Officer,
- ------------------------------ Principal Financial and July 17, 1998
Thomas E. Hoefert Accounting Officer

/s/ BERNARD J. KORMAN
- ------------------------------ Director July 17, 1998
Bernard J. Korman

NAME TITLE DATE
- ------------------------------ -------------------------- -------------------

/s/ MICHAEL M. SACHS
- ------------------------------ Director July 17, 1998
Michael M. Sachs

/s/ MICHAEL SANDLER
- ------------------------------ Director July 17, 1998
Michael F. Sandler

/s/ DAVID A. WEGMANN
- ------------------------------ Director July 17, 1998
David A. Wegmann

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------------

2.1 Agreement of Merger and Plan of Reorganization dated May 18, 1994, among Registrant, MMI Acquisition
Subsidiary, Inc., MEDIQ Incorporated and MEDIQ Equipment and Maintenance Services, Inc. (5).

3.1 Articles of Incorporation of the Registrant, as amended prior to September 14, 1988 (1).

3.2 Certificate of Amendment of Articles of Incorporation of the Registrant dated September 14, 1988 (3).

3.3 Certificate of Amendment of Articles of Incorporation of the Registrant dated September 26, 1995 (7).

3.4 Certificate of Determination of Preferences of Series A Preferred Stock of the Registrant (1).

3.5 Certificate of Amendment to Certificate of Determination of Preferences (3).

3.6 Bylaws of the Registrant, as amended (1).

4.1 Registration Agreement dated as of April 29, 1983 by and among the Registrant and certain investors (1).

4.2 Stock Purchase Agreement dated November 13, 1997 by and among Registrant, MEDIQ Incorporated and MEDIQ
Investment Services, Inc. (13).

9.1 Voting Agreement dated as of April 29, 1983 between Dudley A. Rauch and certain investors (1).

10.1 Employee Stock Purchase Plan (2).

10.2 Stock Purchase Agreement dated as of July 17, 1985 among Registrant and the shareholders of R Squared
Scan Systems, Inc. (2).

10.3 Form of Agreement of Indemnification between Registrant and Alan D. Margulis, Donald Moehring, M.D.,
Dudley A. Rauch, Michael Sachs, Samuel Salen, M.D., and David Wegmann as Directors and Ian MacSween,
Alan D. Margulis, Christopher J. Purcell and Dudley A. Rauch as officers (3).

10.4 1992 Stock Incentive Plan (4).

10.5 Employment Agreement between MEDIQ Equipment and Maintenance Services, Inc. and J. Thomas Owings and
Registrant (5).

10.6 Letter Agreement of Employment dated December 8, 1995 between Registrant and Michael G. Puls (7).

10.7 Form of Indemnity Agreement between Registrant and Thomas Carroll, Bernard Korman, Michael Puls, and
Michael Sandler as Directors and Thomas Hoefert as an officer (6).

10.8 Loan Agreement dated as of December 15, 1995 by and between Registrant and Overton Bank & Trust, N.A.
(6).

10.9 Revolving Credit Agreement dated as of August 12, 1996 in the principal amount of $500,000 payable by the
Registrant to Overton Bank & Trust, N.A. (8).

10.10 Revolving Credit Agreement dated as of October 12, 1996 in the principal amount of $500,000 payable by
the Registrant to Overton Bank & Trust, N.A. (9).

10.11 Revolving Credit Agreement dated as of November 12, 1996 in the principal amount of $500,000 payable by
the Registrant to Overton Bank & Trust, N.A. (9).

EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------------

10.12 Form of Security Agreement dated as of November 12, 1996 between Overton Bank & Trust, N.A. and each of
InnoServ Technologies, Inc., InnoServ Technologies Maintenance Services, Inc., Advanced Imaging
Technologies, Inc. and Sietec, Inc. (9).

10.13 Letter dated December 12, 1996 amending the Loan Agreement dated as of December 15, 1995, by and between
Registrant and Overton Bank & Trust, N.A. (9).

10.14 Stock Option Agreement dated as of December 11, 1996 by and between Registrant and Michael G. Puls (10).

10.15 Bonus Agreement dated December 20, 1996 between Registrant and Michael G. Puls (10).

10.16 Agreement dated March 28, 1997 amending the Bonus Agreement dated December 20, 1996 between Registrant
and Michael G. Puls (11).

10.17 Loan Agreement dated as of April 14, 1997 by and between Registrant and Overton Bank & Trust, N.A.

10.18 Term Loan Agreement dated as of April 14, 1997 in the principal amount of $1,197,573 payable by the
Registrant to Overton Bank & Trust, N.A. (11).

10.19 Security Agreement dated April 14, 1997 by and between Registrant and Overton Bank & Trust, N.A.

10.20 Letter Agreement of Employment dated September 10, 1997 by and between Registrant and Thomas E. Hoefert
(12).

10.21 Bonus Agreement dated as of September 29, 1997 between Registrant and Thomas E. Hoefert (12).

10.22 Letter dated December 5, 1997 amending the Loan Agreement dated as of April 14, 1997 by and between
Registrant and Overton Bank & Trust, N.A. (12).

10.23 Letter dated March 6, 1998 waiving the violation of the cash flow covenant of the Loan Agreement dated as
of April 14, 1997 by and between Registrant and Overton Bank & Trust, N.A. (14).

10.24 Agreement dated April 2, 1998 amending the Bonus Agreement dated December 20, 1996 between Registrant and
Michael G. Puls.

10.25 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 &
Trust, N.A.).

21.1 Subsidiaries.

23.1 Consent of Independent Auditors.

27.1 Financial Data Schedule.

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

(1) Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-1 (No. 2-91168) and incorporated herein by reference.

(2) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended May 2, 1986.

(3) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended April 28, 1989.

(4) Previously filed as an exhibit to the Registrant's Registration Statement
on Form S-8 (No. 33-66752) dated July 30, 1993.

(5) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended April 29, 1994.

(6) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the period ended January 31, 1996.

(7) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended April 30, 1996.

(8) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the period ended July 31, 1996.

(9) Previously filed as an exhibit to the Registrant's Quarterly Report on Form
10-Q for the period ended October 31, 1996.

(10) Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the period ended January 31, 1997.

(11) Previously filed as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended April 30, 1997.

(12) Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the period ended October 31, 1997.

(13) Previously filed as an exhibit to the Registrant's Form 8-K dated November
13, 1997.

(14) Previously filed as an exhibit to the Registrant's Quarterly Report on
Form 10-Q for the period ended January 31, 1998.