UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~September 3130, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-10768

MEDIWARE INFORMATION SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

New York	11-2209324
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



11711 West 79th Street
Lenexa, Kansas	66214
(Address of principal executive offices)	(Zip Code)

(Registrant's telephone number, including area code): (913) 307-1000

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~[X] Yes [ ] No~~

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No Yes [ _] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated Filer [ ] Non-accelerated filer [ ] Smaller reporting company [X ] (Do not check if a smaller reporting company)

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of ~~May~~October 331, 2012, there were 8,~~228~~436,~~000~~966 shares of Common Stock, $0.10 par value, of the registrant outstanding.

MEDIWARE INFORMATION SYSTEMS, INC.

INDEX

		Page
PART I	Financial Information
ITEM 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2012 (Unaudited) and June 30, 2011	4
	Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and June 30, 2012	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the Three and Nine Months Ended March 31, 2012 and 2011	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the Three Months Ended September 30, 2012 and 2011	5
	Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the Nine Months Ended March 31, 2012	6
	Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the Three Months Ended September 30, 2012	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31, 2012 and 2011	7
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended September 30, 2012 and 2011	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
	Review Report of Independent Registered Public Accounting Firm	1920
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2021
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	27
ITEM 4.	Controls and Procedures	2827
PART II	Other Information	28
ITEM 1.	Legal Proceedings	28
ITEM 1A.	Risk Factors	28
ITEM 6.	Exhibits	29
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Signatures		30
ITEM 6.	Exhibits	30
Signatures		31

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except shares)

	(Unaudited)
	(Unaudited) September 30, 2012			June 30, 2012
	March 31,			June 30,
	2012			2011
ASSETS
Current Assets
Cash and cash equivalents	$	37,~~406~~036		$	2940,~~987~~155
Accounts receivable (net of allowance of $1,887 and $1,434)		14,864			19,831
Accounts receivable (net of allowance of $1,866 and $1,854)		14,561			12,773
Inventories		~~694~~740			~~408~~1,045
Deferred income taxes		1,~~054~~001			~~866~~1,038
Prepaid expenses and other current assets		1,~~376~~585			1,~~302~~215
Total current assets		5554,~~394~~923			5256,~~394~~226
Fixed assets, net		1,~~222~~358			1,~~060~~232
Capitalized software costs, net		1314,~~935~~899			1214,~~909~~506
Goodwill, net		1314,~~327~~956			13,~~587~~338
Other intangible assets, net		612,~~300~~442			67,774
Other long-term assets		~~135~~118			86118
Total assets	$	9098,~~313~~696		$	8693,~~810~~194
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	1,~~543~~832		$	12,~~134~~715
Deferred revenue		1819,~~259~~859			2016,~~975~~096
Income taxes payable		~~223~~468			~~757~~1,097
Accrued expenses and other current liabilities		42,~~345~~727			4,~~783~~620
Total current liabilities		24,~~370~~886			2724,~~649~~528
Deferred income taxes		4,~~439~~770			4,~~189~~535
Total liabilities		28,809			31,838
Contingent consideration		2,463			-
Total liabilities		32,119			29,063
Stockholders' Equity
Common stock, $.10 par value; authorized 25,000,000 shares; 8,856,000 and 8,693,000 shares issued as of March 31, 2012 and June 30, 2011, respectively		886			869
Common stock, $.10 par value; authorized 25,000,000 shares; 9,068,000 and 8,865,000 shares issued as of September 30, 2012 and June 30, 2012, respectively		907			887
Additional paid-in capital		3739,~~756~~591			3638,~~069~~146
Treasury stock, 629,000 and 608,000 shares at March 31, 2012 and June 30, 2011, respectively		(3,956	)		(3,698	)
Treasury stock, 631,000 and 629,000 shares at September 30, 2012 and June 30, 2012, respectively		(3,978	)		(3,956	)
Retained earnings		2730,~~053~~317			2129,~~971~~516
Accumulated other comprehensive loss		(~~235~~260	)		(~~239~~462	)
Total stockholders' equity		6166,~~504~~577			5464,~~972~~131
Total Liabilities and Stockholders' Equity	$	9098,~~313~~696		$	8693,~~810~~194

See Notes to Unaudited Condensed Consolidated Financial Statements.

MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except earnings per share)

	Three Months Ended						Nine Months Ended
	(Unaudited) Three Months Ended September 30,
	March 31,						March 31,
	2012			2011
	(Unaudited)						(Unaudited)
Revenue
	2012			2011			2012			2011
System sales	$	3,828		$	4,390
Revenue
Services		12,157			11,063
System sales	$	5,036		$	3,360		$	13,222		$	9,594
Total revenue		15,985			15,453
Services		11,821			10,414			34,709			29,953
Cost and Expenses
Total revenue		16,857			13,774			47,931			39,547
Cost of systems (1)		964			744
Cost and Expenses
Cost of services (1)		4,293			4,398
Cost of systems (1)		1,418			529			2,999			1,433
Amortization of capitalized software costs		925			1,073
Cost of services (1)		4,530			4,044			13,293			11,551
Software development costs		1,438			1,630
Amortization of capitalized software costs		952			1,112			3,096			3,372
Selling, general and administrative		6,838			5,361
Software development costs		1,479			1,207			4,444			2,955
Total costs and expenses		14,458			13,206
Selling, general and administrative		6,133			4,654			16,894			14,262
Operating income		1,527			2,247
Total costs and expenses		14,512			11,546			40,726			33,573
Net interest and other income		8			4
Operating income		2,345			2,228			7,205			5,974
Income before income taxes		1,535			2,251
Net interest and other income (expense)		2			(8	)		7			(49	)
Income tax provision		(734	)		(758	)
Income before income taxes		2,347			2,220			7,212			5,925
Net income		801			1,493
Income tax provision		(491	)		(817	)		(2,130	)		(1,735	)
Other comprehensive income (loss)
Net income		1,856			1,403			5,082			4,190
Foreign currency translation adjustment		202			(97	)
Other comprehensive income, net of tax—
Comprehensive income	$	1,003		$	1,396
Foreign currency translation adjustment		145			132			4			208
Net income per Common Share
Comprehensive income	$	2,001		$	1,535		$	5,086		$	4,398
Basic	$	0.10		$	0.18
Net income per Common Share
Diluted	$	0.09		$	0.18
Basic	$	0.23		$	0.18		$	0.62		$	0.52
Weighted Average Common Shares Outstanding
Diluted	$	0.22		$	0.17		$	0.61		$	0.51
Basic		8,325			8,114
Weighted Average Common Shares Outstanding
Diluted		8,566			8,294
Basic		8,206			8,015			8,161			8,003
Diluted		8,461			8,220			8,383			8,170
(1) Excludes amortization of Capitalized Software Costs

(1) Excludes amortization of Capitalized Software Costs

See Notes to Unaudited Condensed Consolidated Financial Statements.

MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Amounts in thousands)

	Common Stock				Additional Paid-In			Treasury			Retained		Accumulated Other Comprehensive
	Shares		Amount		~~Additional Paid-In~~ Capital			~~Treasury~~ Stock			~~Retained~~ Earnings		~~Accumulated Other Comprehensive~~ Income (Loss)			Total
Balance at June 30, 2011		8,693	$	869	$	36,069		$	(3,698	)	$	21,971	$	(239	)	$	54,972
Balance at June 30, 2012		8,865	$	887	$	38,146		$	(3,956	)	$	29,516	$	(462	)	$	64,131
Exercise of stock options		83127		913		~~544~~860											~~553~~873
Issuance of common stock on vesting of restricted shares		7573		7		(7	)										-
Stock issued as bonus		53		1-		5347											5447
Repurchase of common stock (21 shares)									(258	)							(258	)
Repurchase of common stock									(22	)							(22	)
Stock based compensation expense						~~841~~239											~~841~~239
Tax benefit related to stock-based compensation						~~256~~306											~~256~~306
Foreign currency translation adjustment														4202			4202
Net income												~~5,082~~801					~~5,082~~801
Balance at March 31, 2012		8,856	$	886	$	37,756		$	(3,956	)	$	27,053	$	(235	)	$	61,504
Balance at September 30, 2012		9,068	$	907	$	39,591		$	(3,978	)	$	30,317	$	(260	)	$	66,577
(Unaudited)

(Unaudited)

See Notes to Unaudited Condensed Consolidated Financial Statements.

MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	(Unaudited)
	(Unaudited) Three Months Ended September 30,
	Nine Months Ended
	March 31,
	2012			2011
Cash Flows From Operating Activities
Net income	$	~~5,082~~801		$	41,~~190~~493
Adjustments to reconcile net income, to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		41,~~830~~771			41,~~721~~636
Loss on disposal of fixed assets		1			22
Stock based compensation expense		239			297
Stock based compensation expense		841			1,047
Deferred tax provision		273			(35	)
Deferred tax provision		62			92
Provision for doubtful accounts		54			246
Provision for doubtful accounts		834			478
Changes in operating assets and liabilities, net of effect of acquisition:
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(1,408	)		4,155
Accounts receivable		4,192			1,013
Inventories		308			(44	)
Inventories		(286	)		32
Prepaid expenses and other assets		(315	)		(296	)
Prepaid expenses and other assets		(123	)		(133	)
Accounts payable, accrued expenses and advances from customers		(262	)		(1,349	)
Accounts payable, accrued expenses and advances from customers		(3,336	)		980
Net cash provided by operating activities		1,461			6,103
Net cash provided by operating activities		12,097			12,442
Cash Flows From Investing Activities
Acquisition of fixed assets		(~~595~~141	)		(~~190~~235	)
Capitalized software costs		(41,~~120~~312	)		(~~4,178~~947	)
Acquisition of businesses		(516	)		(1,500	)
Acquisition of businesses, net of cash acquired		(4,476	)		151
Net cash used in investing activities		(5,~~231~~929	)		(51,~~868~~031	)
Cash Flows From Financing Activities
Proceeds from exercise of stock options		~~553~~873			-
Excess tax benefits from exercise of stock options and vesting of restricted stock		~~256~~306			93114
Repurchase of common stock		(~~258~~22	)		(~~195~~233	)
Net cash provided by (used in) financing activities		~~551~~1,157			(~~102~~119	)
Foreign currency translation adjustments		2192			~~289~~(139	)
Net change in cash and cash equivalents		7,419			6,761
Net (decrease) increase in cash and cash equivalents		(3,119	)		4,814
Cash and cash equivalents at beginning of period		29,987			23,340
Cash at beginning of period		40,155			29,987
Cash and cash equivalents at end of period	$	37,406		$	30,101
Cash at end of period	$	37,036		$	34,801
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes	$	~~2,345~~784		$	~~1,363~~412

See Notes to Unaudited Condensed Consolidated Financial Statements.

MEDIWARE INFORMATION SYSTEMS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited, condensed, consolidated financial statements contain all adjustments necessary to present fairly the financial position of Mediware Information Systems, Inc. (“Mediware” or the “Company”) and its results of operations and cash flows for the interim periods presented. Such financial statements have been condensed in accordance with the applicable regulations of the Securities and Exchange Commission and, therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with Mediware's audited financial statements for the fiscal year ended June 30, ~~2011~~2012, included in Mediware's Annual Report filed on Form 10-K for such fiscal year.

The results of operations for the three ~~and nine~~ months ended ~~March~~September 3130, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year. Certain costs previously included within cost of ~~system~~systems ~~sales~~ are included within ~~cost~~costs of services for the ~~periods~~period ended ~~March~~September 3130, 2012. Prior periods have been reclassified to conform to current period presentation.

~~The~~Merger condensed consolidated financial statements were prepared using accounting principles generally accepted in the United States (“GAAP”). These principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates.Agreement

On September 11, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Project Ruby Parent Corp., a Delaware corporation (“Parent”), and Project Ruby Merger Corp., a New York corporation and a wholly owned subsidiary of Parent (“Merger Subsidiary”), providing for the merger (“Merger”) of Merger Subsidiary with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Parent. Parent and Merger Subsidiary are controlled affiliates of Thoma Bravo, LLC.

At the effective time of the Merger, each share of Common Stock outstanding immediately prior to the effective time (other than shares held by Parent, Merger Subsidiary, or any subsidiary of Parent or held in the treasury of the Company or owned by any wholly-owned subsidiary of the Company) will be cancelled and converted into the right to receive $22.00 in cash, without interest. Consummation of the Merger is subject to customary conditions, including without limitation, the affirmative vote of the holders of a majority of the votes entitled to be cast at a meeting of shareholders held for the purpose of approving the Merger Agreement and the Merger, which has been called for November 8, 2012. If approved by shareholders, the Company will be delisted and will no longer be a registrant with the Securities Exchange Commission.

In connection with the execution of the Merger Agreement, the directors and named executive officers (who own shares) of the Company each entered into a Voting Agreement, dated the date of the Merger Agreement, with Parent, pursuant to which, among other things, each such director and officer agreed, subject to the terms and conditions set forth therein, to vote their shares of Common Stock in favor of the Merger Agreement and the transactions contemplated thereby.

2. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding, par value $0.10 (“Common Stock”), of Mediware. For the three ~~and nine~~ months ended ~~March~~September 3130, 2012 and 2011, the dilutive effect of Common Stock equivalents is included in the calculation of diluted earnings per share using the treasury stock method.

Options to purchase 55,000 and 110,000 shares of common stock have been excluded from the weighted average shares in the three and nine months ended March 31, 2012, respectively, as their effect was antidilutive. Options to purchase 217,000 and 371,000 shares of common stock have been excluded from the weighted average shares in the three and nine months ended March 31, 2011, respectively, as their effect was antidilutive.

3. TREASURY STOCK

In February 2008, the Board of Directors of the Company authorized Mediware to repurchase up to $4,000,000 of its Common Stock, at times and prices as the President and Chief Executive Officer or the Chief Financial Officer of the Company shall determine to be appropriate (the “Share Repurchase Program”). In October 2008, the Board of Directors expanded the Share Repurchase Program by $3,318,000, bringing the total amount authorized under the Share Repurchase Program to $7,318,000. The program has no expiration date, and Mediware has no obligation to purchase shares under the Share Repurchase Program.

As of March 31, 2012, the Company has repurchased a total of 590,000 shares of Common Stock at a cost of $3,503,000 under the Share Repurchase Program, excluding the transactions described below. As of March 31, 2012, the Company is authorized to purchase up to an additional $3,815,000 of Common Stock under the Share Repurchase Program.

The Company permits a net exercise for certain equity-based awards made to employees and directors. During the nine months ended March 31, 2012 and 2011, 21,096 and 18,675 shares of Common Stock with a fair value of $258,000 and $195,000, respectively, were surrendered in order to satisfy statutory tax withholding obligations in connection with the vesting of a stock-based compensation awards. These surrenders were accounted for as repurchases of common stock but are not part of our Share Repurchase Program.

As of September 30, 2012, the Company has repurchased a total of 590,000 shares of Common Stock at a cost of $3,503,000 under the Share Repurchase Program, excluding the transactions described below. As of September 30, 2012, the Company is authorized to purchase up to an additional $3,815,000 of Common Stock under the Share Repurchase Program.

The Company permits a net exercise for certain equity-based awards made to employees and directors. As of September 30, 2012 and 2011, 41,318 and 37,623 shares of Common Stock with a fair value of $475,000 and $428,000, respectively, were surrendered in order to satisfy statutory tax withholding obligations in connection with the vesting of a stock-based compensation awards. These surrenders were accounted for as repurchases of common stock but are not part of our Share Repurchase Program.

Shares of Common Stock repurchased by the Company are recorded at cost as treasury stock and result in a reduction of stockholders' equity in the accompanying condensed consolidated balance sheets. When shares are reissued, the Company will use the weighted average cost method for determining cost. The difference between the cost of the shares and the issuance price is added or deducted from additional paid-in capital.

Furthermore, under the Merger Agreement discussed in Note 1 above, Mediware has agreed not to repurchase any shares of Common Stock without the prior written consent of Parent and Merger Subsidiary except in connection with the exercise of outstanding options or the vesting of restricted stock.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of ~~certain~~cash ~~financial~~and ~~instruments~~cash equivalents, ~~such~~accounts asreceivable, accounts ~~receivable~~payable and ~~accounts~~accrued ~~payable~~expenses, approximate their fair value due to the short-term nature of their underlying terms.

The Company's non-financial assets measured at fair value on a non-recurring basis include assets and liabilities acquired in a business combination, goodwill and intangible assets, and other long-lived assets written down to fair value. To measure fair value for such assets, the Company uses techniques including an income approach, a market approach, and/or appraisals (Level 3 inputs). The income approach is based on a discounted cash flow analysis (“DCF”) and calculates the fair value by estimating the after-tax cash flows attributable to an asset, group of assets or a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the DCF require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in the DCF are based on estimates of the weighted-average cost of capital of a market participant. Such estimates are derived from analysis of peer companies and consider the industry weighted average return on debt and equity from a market participant perspective. A market approach values a business by considering the prices at which shares of capital stock of reasonably comparable companies are trading in the public market, or the transaction price at which similar companies have been acquired. If comparable companies are not available, the market approach is not used.

5. ACQUISITIONS

Strategic Healthcare Group, LLC

On September 10, 2012, the Company acquired certain assets of Strategic Healthcare Group, LLC (“SHG”). The SHG business provides blood management consulting, education and informatics solutions to blood collection centers, hospitals and healthcare systems in the United States. The acquisition expanded Mediware’s performance management software product and service offerings.

The purchase price paid for SHG assets consists of $4,476,000 in cash with potential additional cash consideration of up to $3,510,000 if the SHG business achieves certain future operating and financial performance criteria. The purchase price is also subject to a working capital adjustment. The Company estimated the fair value of the contingent consideration at the acquisition date to be $2,463,000 using a probability-weighted discounted cash flow model. This fair value is based on significant inputs not observable in the markets and thus represents a Level 3 measurement as defined in ASC 820.

The Company incurred insignificant legal, accounting and other professional fees related to this transaction, which were expensed. The results of the SHG operations are included in the accompanying financial statements from the date of acquisition. SHG revenue and earnings during the period from September 10, 2012 to September 30, 2012 were not significant.

The Company accounted for the SHG transaction as a business acquisition under applicable accounting guidance. The assets acquired and liabilities assumed of SHG were recorded as of the acquisition date, at their respective fair values. The preparation of these estimated fair values required the use of significant assumptions and estimates. These estimates were based on assumptions that the Company believes to be consistent with the assumptions that would be considered by market participants.

The following summarizes the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Purchase Price Allocation
Accounts receivable	$	332
Prepaid and other current assets		47
Fixed assets		139
Intangible assets subject to amortization		5,317
Goodwill		1,618
Accounts payable		(84	)
Deferred revenue		(430	)
Other long-term liabilities - contingent consideration		(2,463	)
Total purchase price	$	4,476

Details of acquired intangibles and goodwill are as follows (in thousands):

	Amount Assigned		Weighted Average Amortization Period	Risk-Adjusted Discount Rate Used in Purchase Price Allocation
Amortizable Intangible Assets
Tradenames	$	54	2.0 years		23.4%
Purchased technology - database		1,873	4.0 years		23.4%
Purchased technology - software		873	4.0 years		23.4%
Customer backlog		90	2.0 years		23.4%
Customer relationships		1,861	5.0 years		23.6%
Non-compete agreement		566	5.0 years		23.4%
	$	5,317

Goodwill	$	1,618

The Company valued the tradenames and purchased technology - database using the relief from royalty method of the income approach. The approach considers the hypothetical royalty or rental payment that the Company would be willing to pay to a third party in order to obtain the use and the rights to the intangible assets. This method requires the use of certain estimates, including future revenue, royalty rate and discount rate. The values assigned to the tradenames and database represent the estimated cost savings the Company would achieve by not having to license the intangible assets.

The Company valued the purchased technology - software using the cost savings method of the cost approach. The approach considers the current estimated cost of reproducing or replacing an asset, less accrued depreciation from functional obsolescence and economic obsolescence. Utilizing this approach, the Company estimated the fully burdened hourly rates for the developers who might be involved in the replacement of the current software. This amount was multiplied by the estimated number of hours to reprogram the software. Based on this methodology the Company assigned the value of software at $873,000. The Company will amortize this amount over the estimated useful life of four years.

The Company valued the customer relationships and customer backlog using the excess earnings method of the income approach. Utilizing this approach, the Company projected revenue and related expenses. These projected income amounts were then reduced by the return on contributory assets and discounted to present value. This method requires the use of certain estimates, including revenue growth rates, customer attrition, expenses, contributory asset charges and discount rates.

The Company valued the non-compete agreement using a discounted cash flow method of the income approach. Utilizing this approach, the Company prepared two discounted cash flow models, one that assumes a non-compete agreement is in place and a second that assumes the agreement is not in place. The value assigned to the agreement represents the difference between the present values of the two projections.

Goodwill is expected to be deductible for tax purposes.

Proforma information for the acquisition of SHG has not been presented as the acquisition is not significant.

Cyto Management System

On April 18, 2012, the Company acquired the assets of Cyto Management System (“CMS”) from Cobbler ICT Services BV for $2,191,000 paid in cash. The CMS software, which was deployed in Holland and Belgium at the date of acquisition, provides healthcare organizations a chemotherapy management solution to track patients, manage highly individualized medication-based treatment plans and help control costs and report outcomes associated with cancer therapies. The software utilizes a multilingual language platform that facilitates configuration for new international markets.

The Company incurred insignificant legal, accounting and other professional fees related to this transaction, which were expensed. The results of the CMS operations are included in the accompanying financial statements from the date of acquisition.

The Company accounted for the CMS transaction as a business acquisition under applicable accounting guidance. The assets acquired and liabilities assumed of CMS were recorded as of the acquisition date, at their respective fair values. The preparation of these estimated fair values required the use of significant assumptions and estimates. These estimates were based on assumptions that the Company believes to be consistent with the assumptions that would be considered by market participants.

The following summarizes the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Purchase Price Allocation
Intangible assets subject to amortization	$	2,184
Goodwill		7
Total purchase price	$	2,191

Details of acquired intangibles and goodwill are as follows (in thousands):

	Amount Assigned		Weighted Average Amortization Period	Risk-Adjusted Discount Rate Used in Purchase Price Allocation
Amortizable Intangible Assets
Tradename	$	13	2.0 years		22.6%
Purchased technology		1,721	5.0 years	24.0%	–	22.6%
Customer backlog		68	4 months		22.6%
Customer relationships		369	9.0 years	23.0%	-	25.0%
Non-compete agreements		13	6 months		23.0%
	$	2,184

Goodwill	$	7

The Company valued the purchased technology using the cost savings method of the cost approach. The approach considers the current estimated cost of reproducing or replacing an asset, less accrued depreciation from functional obsolescence and economic obsolescence. Utilizing this approach, the Company estimated the fully burdened hourly rates for the developers who might be involved in the replacement of the current software. This amount was multiplied by the estimated number of hours to reprogram the software. Based on this methodology the Company assigned the value of purchased technology at $1,721,000. The Company will amortize this amount over the estimated useful life of five years.

The Company valued the customer relationships and contracted backlog using the excess earnings method of the income approach. Utilizing this approach, the Company projected revenue and related expenses. These projected income amounts were then reduced by the return on contributory assets and discounted to present value. This method requires the use of certain estimates, including revenue growth rates, customer attrition, expenses, contributory asset charges and discount rates.

Goodwill is expected to be deductible for tax purposes.

Proforma information for the acquisition of CMS has not been presented as the acquisition is not significant.

Transtem, LLC

On January 3, 2012, Mediware acquired substantially all of the assets, excluding certain contracts, of St. Louis, MO-based Transtem, LLC (“Transtem”), a provider of software that manages the collection and transplantation of adult stem cells in cellular-based therapies and medical research in a growing field that includes cancer treatment and regenerative medicine. The acquisition ~~expands~~expanded Mediware’s blood and biologics management software product and service offerings.

The purchase price paid for Transtem consisted of an initial purchase price of $667,000 paid in cash. The Company incurred insignificant legal, accounting and other professional fees related to this transaction, which were expensed. The results of the Transtem operations are included in the accompanying financial statements from the date of acquisition.

The Company ~~has~~ accounted for the Transtem transaction as a business acquisition under applicable accounting guidance. The assets acquired and liabilities assumed of Transtem were recorded as of the acquisition date, at their respective fair values. The preparation of these estimated fair values required the use of significant assumptions and estimates. These estimates were based on assumptions that the Company believes to be consistent with the assumptions that would be considered by market participants.

The following summarizes the assets acquired and liabilities assumed at the acquisition date, net of cash acquired (in thousands):

	Purchase Price Allocation
Intangible assets subject to amortization	$	813
Accounts receivable		62
Goodwill		5
Accrued expenses		(213	)
Total purchase price	$	667

	Purchase Price Allocation
Intangible assets	$	830
Revenue in excess of billings		62
Accrued expenses		(225	)
Total purchase price	$	667

As of March 31, 2012, the Company has not completed the purchase price allocation between the various intangible assets. Pro forma information for the acquisition of Transtem has not been presented as the acquisition is not significant.

CareCentric, Inc.

On April 11, 2011, Mediware acquired certain assets of the home medical equipment, home health, home infusion, and billings and collections business of CareCentric National LLC (“CareCentric”).

The acquisition expands Mediware’s position in the Alternate Care Solutions (ACS) market. The CareCentric business has been integrated with Mediware’s existing ACS business line.

The purchase price paid for CareCentric consisted of an initial purchase price of $3,000,000, of which $2,084,000 was paid in cash. The Company has recorded total working capital adjustments of $1,067,000 and received $151,000 from the seller as part of the final working capital adjustment. The Company incurred $27,000 of legal, accounting and other professional fees related to this transaction, which were expensed. The results of the CareCentric operations are included in the accompanying financial statements from the date of acquisition.

The Company has accounted for the CareCentric transaction as a business acquisition under applicable accounting guidance. The assets acquired and liabilities assumed of CareCentric were recorded as of the acquisition date, at their respective fair values. The preparation of the valuation required the use of significant assumptions and estimates. These estimates were based on assumptions that the Company believes to be consistent with the assumptions that would be considered by market participants.

The following summarizes the assets acquired and liabilities assumed at the acquisition date, net of cash acquired (in thousands):

	Purchase Price Allocation
Intangible assets subject to amortization	$	2,707
Goodwill		371
Accounts receivable		1,041
Prepaid expenses and inventory		82
Accounts payable		(120	)
Deferred revenue		(2,148	)
Total purchase price	$	1,933

Details of acquired intangibles and goodwill are as follows (in thousands):

	Amount Assigned		Weighted Average Amortization Period		Risk-Adjusted Discount Rate Used in Purchase Price Allocation	~~Risk-Adjusted Discount Rate Used in Purchase Price Allocation~~
Amortizable Intangible Assets
Purchased technology	$	~~1,302~~813	5.0 years	~~5.0 years~~	24.0%	–	3522.06%
Customer relationships		997		5.0 years			35.0%
Goodwill	$	5
Customer relationships		371		6.0 years			22.5%
Customer Backlog		26		1 month			22.5%
Tradename		11		4.0 years			35.0%
	$	2,707
Goodwill	$	371

The Company valued the purchased technology, ~~customer~~using ~~relationships,~~the ~~contracted~~cost ~~backlog~~savings ~~and~~method ~~tradename~~of ~~using~~the cost approach. The approach considers the ~~excess~~current ~~earnings~~estimated ~~method,~~cost of reproducing or replacing an ~~income~~asset, ~~approach~~less accrued depreciation from functional obsolescence and economic obsolescence. Utilizing this approach, the Company ~~projected~~estimated ~~revenue~~the ~~and~~fully ~~related~~burdened ~~expenses. These~~hourly ~~projected~~rates ~~income~~for ~~amounts~~the ~~were~~developers ~~then~~who ~~reduced~~might bybe involved in the ~~return~~replacement onof ~~contributory~~the ~~assets~~current ~~and~~software. This ~~discounted~~amount was multiplied by the estimated number of hours to ~~present~~reprogram ~~value~~the software. ~~This~~Based ~~method~~on ~~requires~~this methodology the ~~use~~Company ofassigned ~~certain~~the ~~estimates,~~value ~~including~~of ~~revenue~~purchased ~~growth~~technology ~~rates~~at $813,000. The ~~technology~~Company ~~replacement~~will ~~rates,~~amortize ~~customer~~this ~~attrition,~~amount ~~expenses,~~over ~~contributory~~the ~~asset~~estimated ~~charges~~useful ~~and~~life ~~discount~~of ~~rates~~five years.

Goodwill is expected to be deductible for tax purposes.

Pro forma information for the acquisition of ~~CareCentric~~Transtem has not been presented as the acquisition is not significant.

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The carrying amount of the Company’s goodwill at ~~March~~September 3130, 2012 and June 30, ~~2011~~2012 was $1314,~~327~~956,000 and $13,~~587~~338,000, respectively. The change in goodwill is attributable to ~~finalizing~~ the ~~working~~September ~~capital~~2012 ~~position of the April 2011~~ acquisition of ~~CareCentric~~SHG assets.

Other Intangible Assets

The carrying amount of our other intangible assets as of ~~March~~September 3130, 2012 is as follows (in thousands):

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Useful Life (in years)
Purchased technology	$	38,~~982~~479	$	(12,~~483~~101	)	$	26,~~499~~378		3.15
Customer relationships		68,~~333~~540		(23,~~540~~148	)		35,~~793~~392		3.68
Tradename		11		(3	)		8		2.9
Customer backlog		274		(186	)		88		2.0
	$	10,326	$	(4,026	)	$	6,300
Non-compete agreements		703		(188	)		515		4.5
Tradenames		78		(9	)		69		1.9
	$	18,074	$	(5,632	)	$	12,442

Amortization expense for other intangible assets amounted to $459,000 and $1,303,000 for the three and nine months ended March 31, 2012, and $290,000 and $903,000 for the three and nine months ended March 31, 2011. The following represents the expected amortization in future periods (in thousands):13

Fiscal	Expected
Year	Amortization
2012 (Remainder)	$	455
2013		1,744
2014		1,662
2015		1,403
2016		893
Thereafter		143
	$	6,300

Amortization expense for purchased technology, which was recorded as selling, general and administrative expense, amounted to $324,000 for the three months ended September 30, 2012 and $162,000 for the three months ended September 30, 2011. Amortization expense for other intangible assets amounted to $690,000 for the three months ended September 30, 2012 and $422,000 for the three months ended September 30, 2011. The following represents the expected amortization in future periods (in thousands):

Fiscal Year	Expected Amortization
2013 (remainder)	$	2,461
2014		3,274
2015		2.949
2016		2,429
2017		1,086
Thereafter		243
	$	12,442

7. STOCK BASED COMPENSATION

The aggregate noncash stock based compensation expense totaled $~~269~~239,000 and $~~299~~297,000 for the three months ended ~~March~~September 3130, 2012 and 2011, respectively~~, and $841,000 and $1,047,000 for the nine months ended March 31, 2012 and 2011, respectively~~.

Stock Based Plans

The Company's 2011 Equity Incentive Plan, approved by the shareholders in December 2011, provides additional compensation incentives to encourage high levels of performance and employee retention. Key employees of the Company and directors, as well as persons who render services to the Company as consultants, advisors or independent contractors, are eligible to receive grants under this plan. The number of shares that may be issued under this plan is 2,000,000. Shares may be issued as either incentive stock options, nonqualified stock options, or restricted common stock. Options may be granted for a period of up to ten years. Restricted common stock awards may be subject to vesting restrictions and may be forfeited if certain performance factors are not maintained. As of ~~March~~September 3130, 2012, there were 1,~~966~~913,~~000~~004 shares available for issuance under this plan.

The Company's 2003 Equity Incentive Plan, approved by the shareholders in December 2003, provided additional compensation incentives to encourage high levels of performance and employee retention. Key employees of the Company and directors, as well as persons who rendered services to the Company as consultants, advisors or independent contractors, were eligible to receive grants under this plan. The number of shares that could be issued under this plan was 2,000,000 but use of the plan for new awards ceased upon the adoption of the 2011 Equity Incentive Plan. Awards outstanding under the plan were not affected. Shares were issued as incentive stock options, nonqualified stock options, or restricted common stock. Options may have a period of up to ten years. Restricted common stock awards may be subject to vesting restrictions and may be forfeited if certain performance factors are not maintained. The plan provided that a maximum of 1,700,000 shares could be issued as any combination of restricted stock, options and restricted stock unit awards. The additional 300,000 shares of common stock could only be granted as option awards. As of ~~March~~September 3130, ~~2011~~2012 no shares were available for issuance under this Plan.

The Company permits net share exercises of certain awards made to employees and directors. Shares reacquired under net share exercises are included within treasury stock.

The Merger Agreement discussed in Note 1 above requires the Company to settle all outstanding awards under the 2011 Equity Incentive Plan and the 2003 Equity Incentive Plan and to terminate the plans as of the effectiveness of the Merger.

Restricted Common Stock Awards

Beginning in fiscal 2007, each member of the Company’s ~~entered~~Board ~~into~~of ~~agreements~~Directors toreceived ~~provide~~an ~~long-term~~annual ~~incentive~~grant ~~compensation~~of ~~opportunities~~$10,000 toof ~~certain~~restricted ~~key~~common ~~employees. Under~~stock (the ~~terms~~“Director Shares”) as part of ~~these~~their ~~agreements,~~compensation for serving on the Company’s ~~granted~~Board ~~the~~of ~~employees~~Directors. The ~~35,000~~number ~~restricted~~of shares granted is determined based upon the fair market value of ~~common~~the Company’s stock ~~(the~~on ~~“Time-Based~~January ~~Shares”)~~1 of each year. ~~The~~These ~~Time-Based~~Director Shares ~~vested~~vest ~~over~~on aJune ~~three-year~~30 ~~period~~each fiscal year based upon the director’s continued ~~employment~~service ofon the ~~key~~Company’s ~~employee~~Board of Directors. ~~With~~The ~~respect to the Time-Based Shares, the~~ Company recorded compensation expense of $118,000 ~~and~~related ~~$3,000~~to these Director Shares for both the three ~~and nine~~ months ended ~~March~~September 3130, ~~2011,~~2012 ~~respectively~~and 2011. ~~There~~The ~~was~~Director noShares will result in compensation expense ~~related~~in tofuture ~~the~~periods ~~Time-Based-Shares~~of inup ~~the~~to ~~three~~$52,000, orrepresenting ~~nine~~the ~~months~~fair ~~ended~~value ~~March~~on ~~31,~~the ~~2012,~~date ~~and~~of ~~all~~the ~~compensation~~grant ~~expense~~less ~~related~~the toamount ~~the~~of ~~shares~~compensation ~~has~~expense ~~been~~already ~~recognized~~recorded.

Beginning in fiscal 2007, each member of the Company’s Board of Directors received an annual grant of $10,000 of restricted common stock (the “Director Shares”) as part of their compensation for serving on the Company’s Board of Directors. The number of Director Shares granted is determined based upon the fair market value of the Company’s stock on the first trading day of each calendar year. The Director Shares vest on June 30 of each fiscal year based upon the director’s continued service on the Company’s Board of Directors. The Company recorded compensation expense related to the Director Shares of $18,000 for each of the three months ended March 31, 2012 and 2011, and $52,000 for each of the nine months ended March 31, 2012 and 2011. The Director Shares will result in compensation expense in future periods of up to $17,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded.14

During fiscal ~~2008~~2010, the Company entered into agreements to provide long-term incentive compensation opportunities to certain employees. Under the terms of these agreements, the Company ~~granted~~will ~~the~~grant ~~employees~~up ~~220~~to a total of 168,~~000~~750 restricted shares of common stock (the “~~2008~~2010 Enhanced Performance Shares”) in three annual tranches. The ~~2008~~2010 Enhanced Performance Shares ~~vested~~vest ~~partially~~ upon both continued employment ofand upon the ~~key~~achievement ~~employees~~of ~~and~~certain ~~partially~~performance goals. Each tranche is deemed to be granted upon the ~~achievement~~annual establishment of ~~certain~~the performance ~~goals~~criteria. ~~The~~Through ~~Company~~year ~~recorded~~end noJune ~~compensation~~30, ~~expense~~2012, ~~related~~the toCompany ~~the~~had ~~2008~~granted 131,000 2010 Enhanced Performance ~~Shares~~shares. In ~~for~~each of the three months ended ~~March~~September 3130, 2012 and 2011 the Company granted 37,500 2010 Enhanced Performance Shares and recorded $164,000 and $159,000 of compensation expense, respectively. The Company will continue to assess whether or not the achievement of ~~$60~~any performance goals is probable at each reporting period,~~000~~ and ~~for~~will recognize the ~~nine~~related expense if and when the performance conditions become probable. In the three months ended ~~March~~September 3130, ~~2011. There~~2012 ~~was~~the noCompany reversed $25,000 of compensation expense related to 2,245 shares from the ~~2008~~second tranche of Enhanced Performance Shares inthat ~~the~~did ~~three~~not orvest. At ~~nine~~September ~~months ended March 31~~30, 2012, 110,255 2010 Enhanced Performance Shares had fully vested and all related compensation expense ~~related~~had been recognized. The third tranche of 45,000 shares awarded under the 2010 Enhanced Performance Shares may result in compensation expense in future periods of up to $473,000, representing the ~~shares~~fair ~~has~~value ~~been~~on ~~recognized~~the date of the grant less the amount of compensation expense already recorded.

Also under the terms of these agreements, the Company will grant up to a total of 56,250 restricted shares of common stock (the “Market Condition Shares”) in three annual tranches. The Market Condition Shares vest upon the achievement of certain market condition criteria and the continued employment of the key employees. Following the grants of the initial tranches, each tranche of the Market Condition Shares is deemed to be granted upon the annual reset of the market condition criteria. During each of the three months ended September 30, 2012 and 2011, the Company granted 12,500 of the Market Condition Shares and recorded $24,000 and $21,000 of compensation expense, respectively. At September 30, 2012, the first and second tranches of Market Condition Shares had fully vested and all related compensation expense had been recognized. The third tranche of 15,000 shares awarded as Market Condition Shares may result in compensation expense in future periods of up to $71,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded.

~~During~~A ~~fiscal~~summary ~~2010,~~of the ~~Company~~status ~~entered into agreements to provide long-term incentive compensation opportunities to certain employees. Under the terms~~ of ~~these agreements,~~ the Company’s ~~will~~nonvested ~~grant up to a total of 168,750~~ restricted ~~shares of~~ common stock ~~(the~~as ~~“2010 Enhanced Performance Shares”) in three annual tranches. The 2010 Enhanced Performance Shares vest upon both continued employment and upon the achievement~~ of ~~certain~~September ~~performance goals. Each tranche is deemed to be granted upon the annual establishment of the performance criteria. Through year end June~~ 30, ~~2011, the Company had granted 75,000 2010 Enhanced Performance Shares. There were no 2010 Enhanced Performance Shares granted in the three months ended March 31,~~ 2012 ~~or 2011~~, and inchanges ~~each~~during of the ~~nine months ended March 31, 2012 and 2011 the Company granted 37,500 2010 Enhanced Performance Shares. In the~~ three ~~and nine~~ months ended ~~March~~September 3130, 2012 ~~the Company recorded compensation expense related to the 2010 Enhanced Performance Shares of $159~~,~~000~~ and $477,000, respectively. In the three and nine months ended March 31, 2011 the Company recorded compensation expense related to the 2010 Enhanced Performance Shares of $127,000 and $386,000, respectively. The Company will continue to assess whether or not the achievement of any performance goals is ~~probable~~presented atbelow each reporting period, and will recognize the related expense if and when the performance conditions become probable. At March 31, 2012, the first tranche of 2010 Enhanced Performance Shares had fully vested and all related compensation expense had been recognized. The second tranche of 56,250 shares awarded under the 2010 Enhanced Performance Shares may result in compensation expense in future periods of up to $132,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded. Also under the terms of these agreements, the Company will grant up to a total of 56,250 restricted shares of common stock (the “Market Condition Shares”) in three annual tranches. The Market Condition Shares vest upon the achievement of certain market condition criteria and the continued employment of the key employees. Following the grants of the initial tranches, each tranche of the Market Condition Shares is deemed to be granted upon the annual reset of the market condition criteria. There were no Market Condition Shares granted in the three months ended March 31, 2012 or 2011, and in each of the nine months ended March 31, 2012 and 2011 the Company granted 18,750 Market Condition Shares. For the three and nine months ended March 31, 2012 the Company recorded $21,000 and $62,000, respectively, of compensation expense related to the Market Condition Shares. For the three and nine months ended March 31, 2011 the Company recorded $21,000 and $60,000, respectively, of compensation expense related to the Market Condition Shares. At March 31, 2012, the first tranche of Market Condition Shares had fully vested and all related compensation expense had been recognized. The second tranche of 18,750 shares ~~awarded~~amounts ~~as Market Condition Shares may result~~ in ~~compensation expense in future periods of up to $17,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded.~~thousands):

A summary of nonvested share activity for the nine months ended March 31, 2012, is presented below (share amounts in thousands):

	Market Condition Shares			Weighted Average Grant Date Fair Value		2010 Enhanced Performance Shares			Weighted Average Grant Date Fair Value
Nonvested at June 30, 2012		6		$	5.98		75		$	12.05
Granted		13			6.61		37			14.60
Canceled or forfeited		(4	)		5.78		(13	)		13.71
Vested		-			-		(54	)		11.32
Nonvested at September 30, 2012		15		$	6.56		45		$	14.55

	Market Condition Shares			Weighted Average Grant Date Fair Value		2010 Enhanced Performance Shares			Weighted Average Grant Date Fair Value		Directors Shares		Weighted Average Grant Date Fair Value
Nonvested at June 30, 2011		25		$	4.72		75		$	9.84		-		-
Granted		13			4.04		37			10.97		6		12.73
Canceled or forfeited		-			-		-			-		-		-
Vested		(19	)		4.55		(56	)		9.11		-		-
Nonvested at March 31, 2012		19		$	4.43		56		$	11.32		6		12.73

The foregoing information does not reflect any shares that are deemed not granted as described above.

13The fair value of the restricted shares is determined based on the average trading price of the Company’s shares on the grant date, except for the Director Shares which is determined based on the average trading price of the Company’s shares as of January 1 of each year, pursuant to the directors’ compensation plan and the Market Condition Shares which were valued by an outside party to take into account the market condition criteria.

~~The~~Restrictions ~~fair~~on ~~value~~shares of restricted stock will be caused to lapse immediately prior to the ~~restricted~~Merger, and the shares iswill ~~determined~~be ~~based~~subject onto the ~~average~~same ~~trading~~terms ~~price~~and conditions of the ~~Company’s~~Merger Agreement discussed in Note 1 above that are applicable to all other shares onof ~~the~~Common ~~grant~~Stock. ~~date~~However, ~~except~~if ~~for~~there ~~the~~are ~~fair~~any ~~value~~terms or conditions more favorable to a holder of ~~the~~restricted ~~Market~~stock ~~Condition~~under ~~Shares~~any ~~which~~employment ~~were~~or ~~valued~~related byagreement, anthose ~~outside~~terms ~~party~~or toconditions ~~take~~will ~~into~~remain ~~account~~in ~~the~~full ~~market~~force ~~condition~~and ~~criteria~~effect.

Stock Option Awards

The fair value of stock options is determined at the date of grant and is charged to compensation expense over the vesting period of the options. The fair value of options at date of grant ~~was~~is estimated using the Black-Scholes option pricing model. There ~~utilizing~~were no stock options granted in the ~~following~~three ~~assumptions:~~months ended September 30, 2012 and 2011.

	For the Three Months Ended March 31,					For the Nine Months Ended March 31,
	2012			2011		2012			2011
Risk-free interest rates		0.42	%		-		0.42	%		1.70	%
Expected option life in years		3.5			-		3.5			2.5
Expected stock price volatility		41	%		-		41	%		54	%
Expected dividend yield		0	%		-		0	%		0	%

The following table sets forth summarized information concerning the Company's stock options as of September 30, 2012 (shares and aggregate intrinsic value amounts in thousands):

There were no stock options granted in the three months ended March 31, 2011.

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at June 30, 2012		742		$	9.41
Exercised		(133	)		7.13
Forfeited or expired		(81	)		11.00
Outstanding at September 30, 2012		528		$	9.74		2.5	$	6,427
Options exercisable at September 30, 2012		331		$	9.43		2.1	$	4,131
Nonvested at September 30, 2012		197		$	10.27		3.2	$	2,296

The ~~risk-free~~strike ~~interest~~price ~~rate for periods within the contractual life~~ of the ~~option~~options is determined based on the ~~U.S.~~average ~~Treasury~~trading ~~yield~~price ~~curve in effect at the time~~ of the ~~grant. The~~ Company uses historical data to estimate option exercise and employee and director termination within the valuation model; separate groups of employees and directors that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted represents the period of time that options granted are expected to be outstanding. Expected volatilities are based on historical volatility of the Company’s ~~stock. The~~shares ~~Company~~on ~~has not paid any dividends in~~ the ~~past~~grant ~~and does not expect to pay any in the near future~~date.

The ~~following~~total ~~table~~fair ~~sets~~value ~~forth~~of ~~summarized~~shares ~~information~~vested ~~concerning~~during the ~~Company's~~three ~~stock~~months ~~options~~ended asSeptember of30, ~~March~~2012 31was $649,000. ~~2012~~Historically, ~~(share~~the ~~and~~Company ~~aggregate~~has ~~intrinsic~~issued ~~value~~new ~~amounts~~shares inupon ~~thousands):~~the exercise of stock options.

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at June 30, 2011		823		$	8.75
Granted		55			13.28
Exercised		(93	)		7.16
Forfeited or expired		(45	)		8.47
Outstanding at March 31, 2012		740		$	9.31		3.3	$	4,053
Options exercisable at March 31, 2012		443		$	9.16		3.3	$	2,490
Nonvested at March 31, 2012		297		$	9.53		3.4	$	1,563

The Company recorded $58,000 and $100,000 of compensation expense for stock options for the three months ended September 30, 2012 and 2011, respectively.

The exercise price of the options was determined based on the average trading price of the Company’s shares on the grant date for options granted under the Company’s 2003 Equity Incentive Plan. Under the Company’s 2011 Equity Incentive Plan, the exercise price of the options was determined based on the closing trading price of the Company’s shares on the grant date.

Cash received from the options exercised under all stock-based payment arrangements for the nine months ended March 31, 2012 was $553,000. In the nine months ended March 31, 2012, 17,000 options were exercised on a net issuance basis so that the number of shares issued to the award recipient was reduced and no cash was received by the Company. There were no stock options exercised in the nine months ended March 31, 2011. The aggregate intrinsic value of options exercised during the nine months ended March 31, 2012 was $593,000. Historically, the Company has issued new shares upon the exercise of stock options.

For the three and nine months ended March 31, 2012 the weighted average fair value at date of grant for options granted was $4.03. For the nine months ended March 31, 2011 the weighted average fair value at date of grant for options granted was $4.12 per option. There were no stock options granted in the three months ended March 31, 2011. The Company recorded $71,000 and $132,000 of compensation expense for stock options for the three months ended March 31, 2012 and 2011, respectively, and $250,000 and $485,000 for the nine months ended March 31, 2012 and 2011, respectively.

Estimated future stock-based compensation expense relating to outstanding stock options is as follows (in thousands):

Fiscal Years Ending June 30,	Future Stock Option Compensation Expense
2012 (remainder)	$	100
2013 (Remainder)	$	183
2013		245
2014		117
2014		106
2015		32
2015		23
2016		9
2016		5
2017		-
Total estimated future stock-based compensation expense	$	~~479~~341

~~The following table presents information relating to stock options at March 31, 2012 (share amounts in thousands):~~16

Options Outstanding							Options Exercisable
Range of Exercise Prices	Shares		Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Shares		Weighted Average Exercise Price
$ 0.00 - $ 4.49		10	$	3.89		1.6		10	$	3.89
$ 5.00 - $ 7.49		221	$	6.51		3.8		182	$	6.65
$ 7.50 - $ 8.99		110	$	8.85		3.0		21	$	8.83
$ 9.00 - $ 10.49		207	$	9.55		3.2		113	$	9.88
$ 10.50 - $11.99		20	$	11.19		4.2		-	$	0.00
$12.00 - $13.49		142	$	12.84		3.3		87	$	12.56
$13.50 - $14.99		30	$	13.73		1.8		30	$	13.73
		740						443

The following table presents information relating to stock options at September 30, 2012 (share amounts in thousands):

Options Outstanding							Options Exercisable
Range of Exercise Prices	Shares		Weighted Average Exercise Price		Weighted Average Remaining Life in Years		Shares		Weighted Average Exercise Price
$ 0.00 - $ 4.49		10	$	3.89		1.1		10	$	3.89
$ 4.50 - $ 7.49		97	$	6.08		1.4		80	$	6.01
$ 7.50 - $ 8.99		103	$	8.86		2.5		47	$	8.85
$ 9.00 - $ 10.49		148	$	9.45		2.7		98	$	9.63
$ 10.50 - $11.99		20	$	11.19		3.7		5	$	11.19
$12.00 - $13.49		108	$	12.93		3.1		61	$	12.67
$13.50 - $14.99		42	$	13.97		2.3		30	$	13.73
		528						331

Each option to purchase Common Stock that is outstanding as of the effective time of the Merger will be automatically cancelled in exchange for the right to receive the excess, if any, of $22.00 over the exercise price of such option, less applicable taxes required to be withheld.

8. INCOME TAXES

~~The~~Income ~~Company~~tax ~~recorded~~expense adecreased ~~provision for income taxes amounting~~ to $~~491~~734,000 orin ~~21% of income before income taxes for~~ the ~~three~~first ~~months~~quarter ~~ended~~of ~~March~~fiscal ~~31,~~2013 ~~2012~~ compared to ~~a provision of~~ $~~817~~758,000 orin ~~37%~~the same quarter of ~~income~~fiscal ~~before~~2012, ~~income~~primarily ~~taxes~~related ~~for~~to the ~~three~~decrease ~~months~~in ~~ended~~operating ~~March 31, 2011~~income. The ~~Company~~effective ~~recorded~~tax arate ~~provision~~increased ~~for income taxes amounting~~ to ~~$2,130,000 or 30~~48% ofin ~~income before income taxes for~~ the ~~nine~~first ~~months~~quarter ~~ended~~of ~~March~~fiscal ~~31,~~2013 ~~2012~~ compared to ~~a provision of $1,735,000 or 29~~34% ~~of income before income taxes for the nine months ended March 31, 2011. The decline~~ in the ~~effective~~same ~~tax~~quarter ~~rate~~of ~~between~~fiscal ~~the three months ended March 31,~~ 2012 ~~and March 31~~, ~~2011~~primarily ~~is mainly~~ due to ~~the~~nondeductible ~~recognition~~professional offees ~~additional~~paid ~~research~~in ~~and~~the ~~development~~first ~~tax~~quarter ~~credits~~of ~~and~~fiscal ~~higher~~2013 ~~benefit~~related ~~from~~to the ~~domestic~~Merger ~~production~~Agreement ~~activities~~and ~~realized upon~~ the ~~filing of the fiscal year 2011 tax returns~~Merger.

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. A valuation allowance is provided against net deferred tax assets when it is not more likely than not that a tax benefit will be realized. Income taxes include U.S. and foreign taxes.

As of ~~March~~September 3130, 2012, ~~as required by accounting guidance,~~ the Company’s unrecognized tax benefits totaled $~~596~~624,000. Accrued interest and penalties at ~~March~~September 3130, 2012 ~~amounted~~were to $~~206~~168,000. The Company recognizes accrued interest and penalties in income tax expense.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In general, the Company’s filed income tax returns are no longer subject to examination by the respective taxing authorities for years ending before June 30, ~~2008~~2009. However, to the extent utilized, the Company’s net operating loss carryforwards originating in closed years, remain subject to examinations.

9. SEGMENT INFORMATION

The Company has four distinct product lines: Medication Management systems, Blood and Biologics Management systems, Performance Management systems and Perioperative Management systems. Based on similar economic characteristics, as well as the nature of products, production processes, customers and distribution methods, the Company has aggregated these product lines into one reporting segment. Revenue by product line is as follows (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	For the Three Months Ended September 30,
	March 31,				March 31,
	2012		2011
	2012		2011		2012		2011
Medication Management Systems:
Medication Management Systems:
System sales	$	2,670	$	1,854
System sales	$	1,799	$	1,466	$	5,590	$	5,369
Services		5,593		5,437
Services		5,466		4,615		16,454		13,934
Billing and collections		1,305		1,100
Billing and collections		1,028		990		3,201		3,030
		9,568		8,391
		8,293		7,071		25,245		22,333
Blood and Biologics Management Systems:
Blood and Biologics Management Systems:
System sales		983		2,283
System sales		2,981		1,776		6,930		3,958
Services		4,654		4,034
Services		5,069		4,374		13,856		11,684
		5,637		6,317
		8,050		6,150		20,786		15,642
Performance Management Systems
Performance Management Systems
System sales		175		253
System sales		256		118		702		267
Services		464		328
Services		106		261		726		771
		639		581
		362		379		1,428		1,038
Perioperative Management Systems
Perioperative Management Systems
System sales		-		-
System sales		-		-		-		-
Services		141		164
Services		152		174		472		534
		141		164
		152		174		472		534
Total	$	15,985	$	15,453
Total	$	16,857	$	13,774	$	47,931	$	39,547

16Billing and collections revenue is generated from the acquired assets of Advantage Reimbursement, Inc., and to a lesser extent, certain assets of CareCentric, Inc.

Billing and collections revenue is generated from the acquired assets of ARI and to a lesser extent, certain assets of CareCentric. Revenue from one customer represented approximately 23% and 15% of Mediware’s consolidated revenue for the three and nine months ended March 31, 2012, respectively.

Selected financial information by geographic area is as follows (in thousands):

	For the Three Months Ended March 31,						For the Nine Months Ended March 31,
	For the Three Months Ended September 30,
	2012			2011			~~2012~~		~~2011~~
Revenue from Unaffiliated Customers:
United States	$	1514,~~122~~000		$	1213,~~469~~658		$	~~42,928~~	$	~~35,063~~
United Kingdom		1,735			1,305			5,003		4,484
Europe		1,985			1,795
Total	$	1615,~~857~~985		$	1315,~~774~~453		$	~~47,931~~	$	~~39,547~~
Net Income (Loss):
United States	$	~~1,762~~824		$	1,~~472~~329		$	~~4,809~~	$	~~3,901~~
United Kingdom		94			(69	)		273		289
Europe		(23	)		164
Total	$	~~1,856~~801		$	1,~~403~~493		$	~~5,082~~	$	~~4,190~~

	As of March 31,
		2012		2011
Identifiable Assets:
United States	$	80,560	$	68,374
United Kingdom		9,753		7,894
Total	$	90,313	$	76,268

	September 30,
	2012		2011
Identifiable Assets:
United States	$	89,655	$	78,765
Europe		9,041		8,086
Total	$	98,696	$	86,851

10. CONTINGENCIES

From time to time, Mediware becomes involved in routine litigation incidental to the conduct of its business, including employment disputes and litigation alleging product defects, intellectual property infringements, violations of law and breaches of contract and warranties. Mediware believes that such routine litigation, if adversely determined, would not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

~~Mediware~~Payment ~~is currently working with a longstanding vendor~~ of ~~third-party~~Fees software regarding the amounts invoiced by the vendor to Mediware for its use of the vendor’s product. The vendor prices its software licenses on a per-unit basis. The vendor is investigating whether it should have priced the software licensed to Mediware on a basis different than the vendor has invoiced Mediware over the past several years, which could result in additional required payments to the vendor. Although the vendor’s initial demands were substantially greater, during the second fiscal quarter Mediware and ~~the~~Expenses ~~vendor~~Pursuant ~~engaged in preliminary settlement discussions. Based on those discussions, which are ongoing, Mediware has estimated a range of possible loss of $0.1~~ to ~~$0.7~~Merger million related to this issue. Management and the vendor have agreed on an insignificant portion of the vendor’s position. Mediware has accrued $0.2 million related to this issue at March 31, 2012.Agreement

17The Company may be required to pay to Parent a termination fee in the amount of $5,769,000 (less any amount previously paid to Parent in reimbursement of Parent’s transaction expenses) if the merger agreement is terminated under certain specified circumstances. The Company may also be required to pay to Parent its reasonable and documented out-of-pocket fees and expenses (including legal fees and expenses) of up to $2,000,000 under certain specified circumstances in which Parent is not entitled to the termination fee described above.

11. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In ~~June~~July ~~2011~~2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. ~~2011~~2012-0502 “~~Comprehensive~~Intangibles ~~Income~~– Goodwill and Other (Topic ~~220~~350): ~~Presentation~~Testing ofIndefinite-Lived ~~Comprehensive~~Intangible ~~Income~~Assets for Impairment” (“ASU No. ~~2011~~2012-0502”)~~. Under ASU No. 2011-05~~, anto ~~entity~~simplify ~~has~~ the ~~option~~testing tofor ~~present~~a ~~the~~drop ~~total~~in value of ~~comprehensive~~intangible ~~income,~~assets ~~the~~such ~~components~~as ~~of net income~~trademarks, patents and ~~the~~distribution ~~components~~rights. Under ofASU ~~other~~No. ~~comprehensive~~2012-02, ~~income~~an ~~either~~entity inhas athe ~~single~~option ~~continuous~~of ~~statement~~first ofperforming ~~comprehensive~~a ~~income~~qualitative orassessment into ~~two~~determine ~~separate~~whether ~~but~~it ~~consecutive~~is ~~statements.~~more Inlikely ~~both~~than ~~choices,~~not that an ~~entity~~indefinite-lived isintangible ~~required~~asset tois ~~present~~impaired ~~each~~before ~~component~~proceeding ofto ~~net~~the ~~income~~quantitative ~~along~~impairment ~~with~~test ~~total~~in ~~net~~ASC ~~income,~~350-30 ~~each~~under ~~component~~which ofit ~~other~~would ~~comprehensive~~calculate ~~income~~the ~~along~~asset’s ~~with~~fair avalue. When ~~total~~performing ~~for~~the ~~other~~qualitative ~~comprehensive income~~assessment, ~~and~~the aentity ~~total~~must ~~amount~~evaluate ~~for~~events ~~comprehensive~~and ~~income.~~circumstances ~~ASU~~that ~~No.~~may ~~2011-05~~affect ~~eliminates~~ the ~~option~~significant inputs used to ~~present~~determine the ~~components~~fair ofvalue ~~other comprehensive income as part~~ of the ~~statement~~indefinite-lived ofintangible ~~changes in stockholders’ equity~~asset. ASU No. ~~2011~~2012-0502 is effective for ~~fiscal~~annual ~~years,~~ and interim ~~periods~~impairment ~~within~~tests ~~those~~performed for fiscal years, beginning after ~~December~~September 15, ~~2011~~2012. Early ~~and~~adoption ~~effects~~is ~~the~~permitted. The ~~presentation~~Company’s adoption of ~~financial~~this ~~statements~~guidance ~~and~~did ~~thus~~not ~~will~~ have noa material impact on ~~the~~its ~~Company’s consolidated~~ financial statements.

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, “Testing Goodwill for Impairment” (ASU 2011-08). Under ASU 2011-08, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If an entity believes, as a result of its qualitative assessment that the fair value of a reporting unit is greater than its carrying amount, performing the current two-step impairment test is not required. The guidance also includes a number of events and circumstances that an entity to consider in conducting the qualitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, if an entity has not yet issued financial statements for the most recent annual or interim period, provided the entity has not yet performed its annual impairment test. We do not expect this guidance to have a material impact on our financial statements.

12. SUBSEQUENT EVENTS

~~The~~Putative ~~Company~~Class ~~has performed its subsequent events review through the filing of these financial statements.~~Action

On ~~April~~October 18, 2012, a shareholder filed a putative class action lawsuit in the ~~Company~~Supreme ~~acquired~~Court of the ~~assets~~State of ~~Cyto~~New ~~Management~~York, ~~System~~County ~~(“CMS”)~~of ~~from~~New ~~Cobbler~~York, ~~ICT~~against ~~Services~~us, BVour ~~for~~directors, $2Thoma Bravo,~~200~~ LLC,~~000~~ ~~cash~~an affiliate of Parent and Merger Subsidiary, and Merger Subsidiary. The ~~CMS~~complaint ~~software~~for the case, ~~which~~styled isKempf ~~currently~~v. ~~deployed~~Mediware Information Systems, Inc. et al., Index No.: 653649/2012, alleges that the Company’s directors breached their fiduciary duties by failing to maximize shareholder value in ~~Holland~~the merger and ~~Belgium~~by failing to disclose certain material information in the proxy statement. The complaint also alleges that Thoma Bravo, ~~provides~~LLC ~~healthcare~~and ~~organizations~~Merger aSubsidiary ~~chemotherapy~~aided ~~management~~and ~~solution~~abetted these breaches. The complaint seeks to ~~track~~enjoin ~~patients,~~the ~~manage~~transaction ~~highly~~as ~~individualized~~well ~~medication-based~~as ~~treatment~~rescission, ~~plans~~damages, legal fees and ~~help~~other ~~control~~relief. As ~~costs~~of November 5, 2012, the Company had not been served with the complaint, and ~~report~~therefore ~~outcomes~~has ~~associated~~no obligation to respond. If the Company is served with ~~cancer~~the ~~therapies~~complaint, it intends to vigorously defend against the action as it does not believe that the claims alleged have merit.

The software utilizes a multilingual language platform that facilitates configuration for new international markets. The CMS acquisition provides Mediware the opportunity to enhance its systems and services offerings in JAC's current markets and to enter new markets.19

The purchase price allocation has not yet been determined, but is not expected to be material to Mediware’s financial statements. The acquired business will be included in the results of the Company from the effective date of the acquisition, April 18, 2012.

REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To ~~The~~the Board of Directors and Shareholders of

Mediware Information Systems, Inc.

We have reviewed the ~~accompanying~~ condensed consolidated balance sheet of Mediware Information Systems, Inc. and subsidiaries (the "Company") as of ~~March~~September 3130, 2012, the related condensed consolidated statements of operations and comprehensive income ~~for the three and nine month periods ended March 31~~, ~~2012 and 2011, and the related condensed consolidated statement of~~ stockholders’ equity ~~for the nine month periods ended March 31, 2012~~ and cash flows for the ~~nine~~ three-month periods ended ~~March~~September 3130, 2012 and 2011. These ~~interim condensed consolidated~~ financial statements are the responsibility of the Company'’s management.

We conducted our ~~reviews~~review in accordance with the standards ~~established~~of by the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures ~~to financial data~~ and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board ~~(United States)~~, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our ~~reviews~~review, we are not aware of any material modifications that should be made to the ~~accompanying interim condensed~~ consolidated financial statements referred to above ~~in order~~ for them to be in conformity with ~~accounting~~U.S. ~~principles~~ generally accepted inaccounting ~~the United States of America~~principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of June 30, ~~2011~~2012, and the related consolidated statements of operations and comprehensive income, stockholders'’ equity, and cash flows for the year then ended (not presented herein), and in our report dated September 610, ~~2011~~2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying ~~condensed~~ consolidated balance sheet as of June 30, ~~2011~~2012, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ EisnerAmper LLP

New York, New York

~~May~~November 76, 2012

The “ "Review Report of Independent Registered Public Accounting Firm”" included above is not a ‘“Report as part of Registration Statement’” prepared or certified by an independent accountant within the meanings of Section 7 and 11 of the Securities Act of 1933, and the accountants’' Section 11 liability does not extend to such report.

1920

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. The words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions identify some of the forward-looking statements. Forward-looking statements are not guarantees of performance or future results and involve risks, uncertainties and assumptions. The factors discussed elsewhere in this Form 10-Q and in Mediware’s Form 10-K for the year ended June 30, ~~2011 and in subsequent Quarterly Reports on Form 10-Q~~2012, could also cause actual results to differ materially from those indicated by the Company’s forward-looking statements. Mediware undertakes no obligation to publicly update or revise any forward-looking statements.

Mediware Information Systems, Inc. (including its subsidiaries, “Mediware” or the “Company”) is a New York corporation incorporated in 1970 with its corporate headquarters at 11711 West 79th Street, Lenexa, Kansas. The Company maintains an Internet website at www.mediware.com, at which information filed with or furnished to the Securities Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (the “Securities Exchange Act”) can be obtained under “Investor Relations” without charge as soon as reasonably practicable after such documents have been filed or furnished with the SEC. The Company may post at its website additional information important to its shareholders and to potential investors. Information on or linked to the Company website is not incorporated by reference into this Quarterly Report on Form 10-Q. Filings with the SEC can also be obtained at the SEC’s website, www.sec.gov.

Mediware licenses, implements and supports clinical and performance management information solutions and other services to healthcare facilities. We license our blood and biologics management solutions to hospitals. We license blood donor recruitment and management solutions to blood donor and plasma donor centers through our Blood Center Technologies business group. The Company’s medication management solutions are licensed to hospitals, long-term care, specialty pharmacy, home infusion, home/durable medical equipment, alternate care and behavioral health facilities. Our home infusion, specialty pharmacy, home/durable medical equipment, and alternate care products and services are licensed through the Company’s Alternate Care Solutions (“ACS”) business group, formed during fiscal 2010. Our cellular therapy products are licensed through the Company’s Cell Therapies Management business group formed during fiscal 2012. ACS also provides billing and collection services to the home infusion market. We license performance management software to hospitals, blood and plasma centers and alternate care facilities.

We generally license our blood management and biologics management software systems and certain of our medication management software systems to customers on a perpetual basis. The customers that license the software on a perpetual basis typically make up-front payments for the software license and payments for support services on an annual basis. In contrast, we generally provide our blood and plasma center solutions and certain of our medication management software systems and our alternate care products on a monthly subscription or term license basis. These customers pay Mediware a monthly fee for use and support of Mediware’s proprietary software. Customers may purchase services, including implementation, consultation and other ad hoc services, for additional fees which are generally billed as incurred. Beginning in fiscal 2010, we initiated our “maintenance plus” program through which our customers may elect to pay “in advance” on an annual basis for services that had historically been paid on an as-incurred basis. Performance management software is licensed on a perpetual and subscription or term license basis. We currently anticipate that over time an increased number of our systems (in all product lines) will be licensed on a subscription or term license basis.

During fiscal 2011 we started offering our full suite of products on a remotely hosted basis. The hosting services include installation, upgrades, patches and network configuration and repair as well as remote monitoring and help desk services. We anticipate that remote hosting will make our product offerings more attractive to many of our current and potential customers.

20During the fiscal year ended June 30, 2011, Mediware contracted with third parties to provide the LifeTrak®, InSight performance management software, HCLL, KnowledgeTrak and related services to the U.S. Military Health Service (“MHS”). Although substantially all contract payments to Mediware were already made, performance of these projects is currently expected to extend through the first half of fiscal 2013. These contracts are being accounted for using the percentage of completion method, which in this case requires us to recognize revenue based upon the ratio of the effort completed during the reporting period compared to our estimate of the total effort required to complete the project.

During the fiscal year ended June 30, 2011, Mediware contracted with third parties to provide the LifeTrak®, InSight performance management software, HCLL, KnowledgeTrak and related services to the U.S. Military Health Service (“MHS”). The contracts included substantial upfront payments, many of which have already been made. Performance of these projects is currently expected to extend through the first quarter of fiscal 2013. These contracts are being accounted for using the percentage of completion method, which in this case requires us to recognize revenue based upon the ratio of the effort completed during the reporting period compared to our estimate of the total effort required to complete the project.21

Merger Agreement

On September 11, 2012, Mediware entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Project Ruby Parent Corp., a Delaware corporation (“Parent”) and Project Ruby Merger Corp., a New York corporation and a wholly owned subsidiary of Parent (“Merger Subsidiary”), providing for the merger (“Merger”) of Merger Subsidiary with and into Mediware, with Mediware surviving the Merger as a wholly-owned subsidiary of Parent. Parent and Merger Subsidiary are controlled affiliates of Thoma Bravo, LLC.

At the effective time of the Merger, each share of Common Stock outstanding immediately prior to the effective time (other than shares held by Parent, Merger Subsidiary, or any subsidiary of Parent or held in our treasury or owned by any of our wholly-owned subsidiaries) will be cancelled and converted into the right to receive $22.00 in cash, without interest. Consummation of the Merger is subject to customary conditions, including without limitation, the affirmative vote of the holders of a majority of the votes entitled to be cast at a meeting of shareholders held for the purpose of approving the Merger Agreement and the Merger, which has been called for November 8, 2012. If approved by shareholders, the Company will be delisted and will no longer be a registrant with the Securities Exchange Commission.

In connection with the execution of the Merger Agreement, our directors and named executive officers (who own shares) each entered into a Voting Agreement, dated the date of the Merger Agreement, with Parent, pursuant to which, among other things, each such director and officer agreed, subject to the terms and conditions set forth therein, to vote their shares of Common Stock in favor of the Merger Agreement and the transactions contemplated thereby.

We may be required to pay to Parent a termination fee in the amount of $5,769,000 (less any amount previously paid to Parent in reimbursement of Parent’s transaction expenses) if the merger agreement is terminated under certain specified circumstances. We may also be required to pay to Parent its reasonable and documented out-of-pocket fees and expenses (including legal fees and expenses) of up to $2,000,000 under certain specified circumstances in which Parent is not entitled to the termination fee described above.

Blood and Biologics Management Products

Our flagship blood transfusion product is the HCLL™ transfusion software. We also provide our hospital customers HCLL donor software for use in hospital-based donor centers. In early fiscal year 2008, we announced our new BloodSafe™ suite of products. As of ~~March~~September 3130, 2012, BloodSafe is licensed for use at ~~fourteen~~13 facilities.

Our Blood Center Technologies business unit is intended to drive growth as we expand our focus in the blood donor and plasma market. Blood Center Technologies provides software tools and services to large, complex blood centers for donor targeting, donor recruitment, donation management, unit testing, blood component manufacturing, inventory control, sales and distribution. This is accomplished through a combination of our 510(k) cleared LifeTrak® software and a set of robust CRM and recruiting software products and capabilities. These products and capabilities enable us to deliver an integrated software solution for blood centers to improve collections and efficiency throughout the entire process from blood donor recruitment to hospital distribution. Through an acquisition in March 2010 we added e-learning content and technologies, along with certification tracking tools, to our Blood Center Technologies product offering. We offer this addition, KnowledgeTrak, on a subscription basis.

~~During~~In ~~the~~connection ~~second~~with ~~quarter~~a ~~of fiscal 2012, Mediware completed its response to~~ FDA ~~comments received during the fourth quarter of fiscal 2011 as part of the FDA’s latest Quality Systems Regulation~~ evaluation of our ~~510(k) cleared~~ software and ~~related~~ processes~~. In connection with the comment resolution process~~, Mediware notified its customers during the first quarter of fiscal 2012 that HCLL Donor and Transfusion software and the LifeTrak Donor software would need to be updated more frequently. ~~The~~ We ~~Company~~believe ~~expects~~that ~~its~~this communication positively impacted our fiscal 2012 services revenue and backlog related to the HCLL transfusion software and LifeTrak software ~~to increase as a result~~. ~~These services should be provided under rates and terms consistent with the Company’s overall professional services.~~

In June 2008, we released BiologiCare™, our first generation bone, tissue and cellular product tracking software. With the introduction of BiologiCare, we believe we are positioned to benefit from the emerging biologics market, which includes, among other things, bone, tissue and cord blood stem cells. BiologiCare can be integrated with our HCLL software or operate on a stand-alone basis. As of ~~March~~September 3130, 2012, BiologiCare is licensed for use at ~~two~~three facilities.

Following an acquisition consummated during the third quarter of fiscal 2012, we began offering the Transtem software for adult stem cell collection and transplantation. We have formed a Cell Therapies Management business unit to facilitate marketing and sales of Transtem and other similar products. As of ~~March~~September 3130, 2012, the Transtem software is licensed for use at five facilities.

In addition to our license of blood and biologics management software, we generate revenue from professional services and post-contract support. These ongoing support contracts accounted for 36% and 45% of the total revenue from blood and biologics management operations in the nine months ended March 31, 2012 and 2011, respectively.22

In addition to our license of blood and biologics management software, we generate revenue from professional services and post-contract support. These ongoing support contracts accounted for 58% and 38% of the total revenue from blood and biologics management operations in the periods ended September 30, 2012 and 2011, respectively.

Medication Management Products

Mediware’s medication management software product for larger and medium sized hospitals and healthcare institutions is WORx®. We also offer MediCOE, a physician order entry module, and MediMAR®, a nurse point of care administration and bedside documentation module, ~~that~~each of which are fully integrated with the WORx software. An acquisition in November 2008 expanded our product offering by adding, ~~the~~ Ascend ~~pharmacy software~~, a solution that meets the needs of small and medium size hospital, specialty pharmacy and home infusion facilities. To expand our capabilities and address a new industry mandate, we introduced MediREC in March 2007. As of ~~March~~September 3130, 2012, MediREC was licensed for use at ~~nine~~15 customer sites.

Selling our full suite of medication management products (WORx, MediMAR, MediCOE and MediREC) is a complex process involving multiple hospital departments. On the other hand, Ascend requires substantially smaller financial commitments from customers and is priced based on a subscription pricing model. Consequently, we anticipate that sales of the Ascend software products will begenerally ~~more consistent and~~ have shorter sales cycles than sales of the full suite of medication management products.

21We generate revenue from medication management software sales, professional services and post-contract support. Support contracts have accounted for 48% and 52% of the total revenue from medication management operations in the periods ended September 30, 2012 and 2011, respectively.

WeThrough ~~generate~~two ~~revenue~~acquisitions ~~from~~consummated ~~medication~~in ~~management~~December 2009 and an acquisition in April 2011, Mediware greatly increased our presence in the alternate care market. In fiscal 2010, Mediware formed the ACS business unit to capitalize on the growing strength of its product offerings. Our product offerings currently include: home infusion software, ~~sales~~specialty pharmacy software, ~~professional~~home/durable ~~services~~medical equipment software, and ~~post-contract~~home ~~support. Support~~healthcare ~~contracts~~software, ~~have~~as ~~accounted~~well ~~for~~as ~~52%~~billing and ~~49%~~collections services that are focused on the alternate care markets. These offerings are largely the combination of the ~~total~~home ~~revenue~~infusion ~~from~~offering ~~medication~~that ~~management~~Mediware ~~operations~~acquired in 2008 and the ~~nine~~home ~~months~~infusion, ~~ended~~specialty ~~March~~pharmacy ~~31,~~and ~~2012~~alternate care products acquired in December 2009 and April 2011. Mediware integrated the home/durable medical equipment, ~~respectively~~home health, home infusion, and billing and collections businesses acquired from CareCentric, Inc. with its existing ACS business.

~~Through~~Our ~~two~~United ~~acquisitions~~Kingdom ~~consummated~~operating inbusiness ~~December~~is ~~2009~~JAC ~~and~~Computer ~~an acquisition in April 2011~~Services, ~~Mediware greatly increased our presence in the alternate care market~~Ltd. In ~~fiscal 2010, Mediware formed an Alternate Care Solutions business unit to capitalize on the growing strength of its product offerings~~(“JAC”). JAC’s ~~Our~~ product ~~offerings~~offering ~~currently~~includes ~~include:~~its ~~home~~Pharmacy ~~infusion~~Management ~~software,~~system ~~specialty pharmacy software, home/durable medical equipment software,~~ and ~~home~~Electronic ~~healthcare~~Prescribing ~~software,~~module. The asElectronic ~~well~~Prescribing asmodule ~~billing~~has ~~and~~been ~~collections~~installed ~~services~~in ~~that~~approximately ~~are~~twenty ~~focused on the alternate care markets~~U.K. ~~These~~customer ~~offerings~~sites ~~are~~as ~~largely the combination~~ of September ~~the~~30, ~~home~~2012. The ~~infusion~~installed ~~offering~~base ~~that~~of ~~Mediware acquired in 2008 and~~ the ~~home~~Company’s ~~infusion,~~Pharmacy ~~specialty~~Management ~~pharmacy~~system ~~and~~product ~~alternate~~includes ~~care~~approximately ~~products~~50% ~~acquired~~of ~~in December 2009 and April 2011. Mediware integrated~~ the ~~home/durable~~trusts ~~medical~~within ~~equipment,~~National ~~home~~Health ~~health,~~Service ~~home infusion, and billing and collections businesses acquired from CareCentric with its existing Alternate Care Solutions business~~(“NHS”).

~~Our~~Through ~~United~~a ~~Kingdom operating~~ business isacquisition ~~JAC~~in ~~Computer~~April ~~Services~~2012, ~~Ltd.~~we added the Cyto Management System (~~JAC~~“CMS”) to our portfolio of products. ~~JAC’s~~The ~~product~~CMS ~~offering~~software ~~includes~~is ~~its~~deployed ~~Pharmacy~~in ~~Management~~Holland ~~system~~and Belgium and ~~Electronic~~provides ~~Prescribing~~healthcare ~~module~~organizations a chemotherapy management solution to track patients, manage highly individualized medication-based treatment plans and help control costs and report outcomes associated with cancer therapies. The ~~Electronic~~software ~~Prescribing~~utilizes ~~module~~a ~~has~~multilingual ~~been~~language ~~installed~~platform inthat ~~approximately~~facilitates 20configuration ~~U.K.~~for ~~customer~~new ~~sites~~international asmarkets. We ofbelieve ~~March~~that ~~31,~~the ~~2012. The~~CMS ~~installed~~software ~~base~~provides ofus the ~~Company~~opportunity to enhance our systems and services offerings in JAC’s ~~Pharmacy~~current ~~Management~~markets ~~system~~and ~~product~~to ~~includes~~enter ~~approximately~~new ~~50%~~markets. The ofCMS ~~the~~software ~~trusts~~has ~~within~~been ~~National~~installed ~~Health~~in ~~Service~~eight ~~(NHS)~~customer sites as of September 30, 2012.

The NHS in the U.K. initiated a national program to purchase healthcare information technology in 2004 (the National Program). JAC worked to position itself favorably as a provider of software under the National Program. However, JAC also worked directly with hospitals and trusts to hedge against delays and changes in the National Program. As a result of a change in government in the U.K. in 2010, the National Program, as it was originally designed, has been terminated. We believe that JAC’s efforts to work directly with hospitals and trusts over the last several years positions JAC well as it works to license software and sell services directly to hospitals and trusts that are no longer subject to the limitations of the National Program requirements.

Performance Management Products

Mediware’s performance management product is the InSight software system. The InSight system is a business and clinical intelligence software package used in more than 100 hospitals at ~~March~~September 3130, 2012. We have created a focused product strategy to make an entry level version of the InSight performance management software easily accessible and available to the users of our core products. Through a business acquisition in September 2012, we have added to our portfolio of products and services, blood management consulting, education and informatics solutions to blood collection centers, hospitals and healthcare systems in the United States under the name of Strategic Healthcare Group (“SHG”). We generate revenue from InSight software sales, professional services and post-contract support. Support contracts accounted for 3847% and 5845% of total ~~performance~~InSight ~~management~~system revenues in the ~~nine~~periods ~~months~~ ended ~~March~~September 3130, 2012 and 2011, respectively.

We have created a focused product strategy to make an entry level version of the InSight performance management software easily accessible and available to the users of our core products. It is our expectation that after using the InSight software, our customers will see the benefit of the product and will expand their use over time.23

Industry and Regulation

We believe that our customers’ recent capital investment decisions have been, and future decisions will be, impacted by recently enacted federal laws. Of specific importance to near term investment is the American Recovery and Reinvestment Act (“ARRA”), which became effective in 2009. This Act includes more than $38 billion of incentives to help healthcare organizations modernize operations through the acquisition and use of information technology solutions. The Health Information Technology for Economic and Clinical Health Act (“HITECH”) Act, a part of ARRA, provides roughly $2 billion in “‘jump start”’ funding that the Department of Health and Human Services is to distribute over a two year time frame beginning in 2011. ARRA also includes approximately $17 billion in Medicare and Medicaid incentives targeting the “‘meaningful use”’ of health record systems, systems interoperability, and the submission of data related to quality improvement initiatives.

22The government spending is intended to reduce inefficiencies and improve patient care through the use of technologies. ARRA, and specifically the HITECH Act, increases the pressure on hospitals and care providing institutions to adopt technology. The HITECH Act provides funding for facilities to launch improvement projects associated with key information technologies. Qualifying hospitals can receive payments over a period of approximately four or five years beginning in 2011 based on their use of certified health information technology systems. The HITECH Act also provides financial penalties to hospitals by reducing Medicare reimbursement payments for hospitals that do not comply with certain usage requirements by 2015.

~~The~~While ~~government~~Mediware ~~spending~~does isnot ~~intended~~believe tothat ~~reduce~~it ~~inefficiencies~~has benefited materially from these government initiatives and ~~improve~~may ~~patient~~see ~~care~~longer ~~through~~sales ~~the~~cycles ~~use~~as a result of ~~technologies.~~the ~~ARRA~~programs, ~~and~~the ~~specifically~~Company ~~HITECH,~~believes ~~increases~~that the ~~pressure~~additional government spending on ~~hospitals~~healthcare information technology and ~~care~~other ~~providing~~health ~~institutions~~reform tolegislation ~~adopt~~will ~~technology.~~stimulate ~~HITECH~~spending ~~provides~~across ~~funding~~a ~~for~~broad ~~facilities~~range toof ~~launch~~healthcare ~~improvement~~information technology projects. ~~associated~~Over ~~with~~time ~~key~~we ~~information~~expect ~~technologies.~~these ~~Qualifying~~initiatives ~~hospitals~~to ~~can~~create ~~receive~~new ~~payments~~opportunities, ~~over~~to aexpand ~~period~~the use of ~~approximately~~Mediware ~~four~~solutions orand ~~five~~to ~~years~~have ~~beginning~~a inpositive ~~2011~~impact ~~based~~ on ~~their~~the ~~use~~Company. WORx ofhas been certified ~~health~~so ~~information~~that ~~technology~~our ~~systems. HITECH~~customers ~~also~~receive ~~provides~~the ~~financial~~full ~~penalties~~benefit toof ~~hospitals~~the byHITECH ~~reducing~~Act, ~~Medicare~~Ascend ~~reimbursement~~has ~~payments~~not been certified. Mediware has applied for ~~hospitals~~such certification but there can be no assurance that such certification will be received if at all. We do not ~~comply~~believe ~~with~~that ~~certain~~this ~~usage~~absence ~~requirements~~of bycertification ~~2015~~has adversely affected sales of Ascend through September 30, 2012. However, if we fail to achieve the appropriate certification standards, we could face adverse consequences as its customers look to other certified vendors.

~~While~~We ~~Mediware~~do ~~does~~ not ~~believe~~currently ~~that~~expect itthe ~~has~~Patient ~~benefited directly~~Protection ~~from these government initiatives and may see longer sales cycles as a result of the programs~~Act, ~~the~~passed ~~Company~~in believes that the additional government spending on healthcare information technology and other health reform legislation will stimulate spending across a broad range of healthcare information technology projects. Over time we expect these initiatives to create new opportunities2010, to ~~expand the use of Mediware solutions and to~~ have a ~~positive~~material impact on ~~the~~our ~~Company~~business. ~~WORx~~Beginning ~~has~~in ~~been~~calendar ~~certified~~2013, ~~so that our customers receive~~ the ~~full~~Affordable ~~benefit~~Care ~~of the HITECH~~ Act~~. Mediware~~ ~~sought~~provides ~~certification during fiscal 2011 for Ascend and hopes~~ that ~~this~~a ~~product~~tax ~~will~~in bean ~~similarly~~amount ~~certified~~equal ~~before~~to ~~the~~2.3 ~~end~~percent of ~~fiscal~~the ~~2012. If~~price wefor ~~fail~~which toa ~~achieve~~manufacturer ~~the~~sells ~~appropriate~~its ~~certification~~medical ~~standards,~~devices ~~the~~will ~~Company~~have ~~could~~to ~~face~~be ~~adverse~~paid ~~consequences~~by aseach ~~its~~medical ~~customers~~device ~~look to other certified vendors~~manufacturer. ~~However,~~Because we dolicense ~~not~~medical ~~believe~~devices ~~that~~(including ~~Ascend~~our ~~system~~HCLL ~~sales~~and ~~through~~LifeTrak ~~the~~software ~~third~~products), ~~quarter~~we ofmay ~~fiscal~~be ~~2012~~impacted ~~have been adversely affected~~ by ~~the~~this ~~absence of certification~~tax.

We do not currently expect the Patient Protection and Affordable Care Act, passed in 2010, to have a material impact on our business.

Strategic Relationships and Acquisitions

We seek to develop strategic relationships that are complementary to our core markets and product set, and that provide a greater value proposition to the customer than could be realized without the strategic relationship. Our fiscal 2012 ~~and 2011~~ results were positively impacted by our strategic relationship with a company benefiting from HITECH Act spending.

Our business strategy includes the possibility of growth through acquisitions and other corporate transactions. We consummated ~~two~~ one strategic acquisition induring ~~fiscal~~the ~~2012,~~first ~~one~~quarter ~~strategic~~of ~~acquisition in~~ fiscal ~~2011~~2013, ~~three~~two strategic acquisitions in fiscal ~~2010~~2012 and ~~two~~one strategic ~~acquisitions~~acquisition in fiscal ~~2009~~2011. We believe that the acquisitions are an effective means to grow our business when existing products experience little growth. We also believe that these acquisitions offer good return on investment. There can be no assurance that we will be able to identify future strategic partners or reach mutually agreeable terms for a transaction if any such partners are identified.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our ~~condensed~~ consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an on-going basis, we evaluate these estimates, including those related to revenue recognition, capitalized software costs, goodwill, and stock-based compensation. We base these estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The discussion below of our financial condition and results of operations should be read in conjunction with Mediware’s audited financial statements for the fiscal year ended June 30, 2011, included in Mediware’s Annual Report filed on Form 10-K for such fiscal year.

Results of Operations for the Three Months Ended March 31, 2012 as Compared to the Three Months Ended March 31, 2011

Total revenue for the third quarter of fiscal 2012 was $16,857,000 compared to $13,774,000 in the third quarter of fiscal 2011, an increase of $3,083,000, or 22%. This increase reflects increased system sales and service revenue for blood and biologics management products and incremental revenues from our ACS business acquired in April 2011. Blood and biologics management products and services recorded total revenue of $8,050,000 in the third quarter of fiscal 2012, representing an increase of $1,900,000, or 31%, compared to $6,150,000 in the same quarter of fiscal 2011. Medication management products and services total revenue increased 17%, or $1,222,000 to $8,293,000 in the third quarter of fiscal 2012 compared to $7,071,000 in the same quarter of fiscal 2011. JAC’s contribution to total revenue of medication management products and services was $1,735,000 in the third quarter of fiscal 2012, representing an increase of $430,000, or 33%, compared to $1,305,000 in the same quarter of fiscal 2011. Performance management products and services recorded total revenue of $362,000 in the third quarter of fiscal 2012, representing a decrease of $17,000 or 4% compared to $379,000 in the same quarter of fiscal 2011.

System sales revenue, which includes proprietary and third party software licenses, hardware sales revenue and subscription revenue, amounted to $5,036,000 for the third quarter of fiscal 2012, an increase of $1,676,000 or 50% compared to $3,360,000 of system sales reported in the third quarter of fiscal 2011. System sales revenue for blood and biologics management products was $2,981,000 for the third quarter of fiscal 2012, an increase of $1,205,000, or 68%, compared to $1,776,000 in the same quarter of fiscal 2011. This increase is primarily attributable to HCLL license fees, including software purchased by the U.S. Military Health Service (“MHS”). System sales for the medication management products increased $333,000, or 23% to $1,799,000 in the third quarter of fiscal 2012 compared to $1,466,000 in the same period of fiscal 2011. This increase is primarily due to improved JAC and ACS system sales revenues. The increase was partially offset by fewer WORx and Ascend system sales. JAC recorded system sales of $404,000 for the third quarter of fiscal 2012, representing an increase of $236,000, or 140%, compared to $168,000 reported for the same quarter in fiscal 2011. Performance management system sales were $256,000 for the third quarter of fiscal 2012 compared to $118,000 in the third quarter of fiscal 2011.

Service revenue, which includes post contract support revenues, implementation services, maintenance services, including our “maintenance plus” program, reimbursable travel costs, and promotional services increased $1,407,000, or 14%, to $11,821,000 in the third quarter of fiscal 2012 compared to $10,414,000 for the same quarter in fiscal 2011. Service revenue for the blood and biologics management products totaled $5,069,000 for the third quarter of fiscal 2012, representing an increase of $695,000 or 16%, compared to $4,374,000 in the third quarter of fiscal 2011. The increase primarily reflects increased implementation revenue for our HCLL software related to the project with the MHS, partially offset by lower implementation revenue for our LifeTrak® software related to the project with the MHS due to a slower rate of project installation than prior periods. Service revenue for the medication management products increased $889,000, or 16%, to $6,494,000 in the third quarter of fiscal 2012 compared to $5,605,000 for the same quarter of fiscal 2011. This increase reflects incremental revenues from our ACS business acquired in April 2011, partially offset by lower services revenues from the WORx product line. Service revenue for JAC increased $194,000, or 17%, to $1,331,000 in the third quarter of fiscal 2012 compared to $1,137,000 in the third quarter of fiscal 2011. Service revenue for performance management products amounted to $106,000 for the third quarter of fiscal 2012 compared to $261,000 for the same period in fiscal 2011.

Cost of systems includes the cost of computer hardware and sublicensed software purchased from computer and software manufacturers by Mediware as part of its complete system offering. These costs can vary as the mix of revenue varies between high margin proprietary software and lower margin computer hardware and sublicensed software components. Cost of systems increased $889,000, or 168%, to $1,418,000 in the third quarter of fiscal 2012 as compared to $529,000 in the same quarter in fiscal 2011. The gross margin, excluding amortization of capitalized software costs, on system sales was 72% in the third quarter of fiscal 2012 compared to 84% in the same quarter in fiscal 2011. The decrease in gross margin is primarily due to an increase in the sale of lower margin third party products including hosting services and third party software during the third quarter of fiscal 2012 compared to the same period in fiscal 2011.

Cost of services includes the salaries and direct expenses of client service personnel and the direct costs associated with providing promotional services. Cost of services increased $486,000, or 12%, to $4,530,000 in the third quarter of fiscal 2012 as compared to $4,044,000 in the same quarter of fiscal 2011. The increase in cost of services is primarily attributed to incremental costs associated with our ACS business acquired in April 2011. Gross margin on service revenue was 62% for the third quarter of fiscal 2012 compared to 61% for the third quarter of fiscal 2011.

Amortization of capitalized software decreased $160,000 or 14%, to $952,000 in the third quarter of fiscal 2012 compared to $1,112,000 in the third quarter of fiscal 2011. The decrease occurred as past software development efforts became fully amortized. We anticipate that amortization costs will remain largely flat for the remainder of fiscal 2012 compared to the remainder of fiscal 2011 provided Mediware’s capitalization and cash expenditures for the remainder of fiscal 2012 continue at substantially the same rates as the comparable fiscal 2011 period.

~~Total~~Results ~~expenditures~~of Operations for ~~software development, including~~ the ~~capitalized~~Three ~~portion,~~Months ~~were~~Ended ~~$2,969,000~~September ~~in the third quarter of fiscal 2012 compared to $2~~30,~~199,000~~ ~~in the third quarter of fiscal~~ 2012, anas ~~increase~~Compared ~~of $770,000, or 35%. This increase is due largely~~ to ~~incremental costs associated with our ACS business acquired in April 2011. Software development costs not subject to capitalization increased $272,000, or 23%, to $1,479,000 in~~ the ~~third~~Three ~~quarter~~Months ofEnded ~~fiscal~~September ~~2012 compared to $1~~30,~~207,000~~ ~~in the third quarter of fiscal~~ 2011. The increase was due to a shift in the mix and timing of projects subject to capitalization. The Company expects to maintain its current investment in product development products in the near term.

~~Selling,~~Total ~~general~~revenue ~~and~~for ~~administrative~~the ~~(“SG&A”)~~first ~~expenses~~quarter ~~include~~of ~~marketing~~fiscal ~~and~~2013 ~~sales~~was ~~salaries~~$15,985,000 ~~commissions~~compared to $15,453,000 ~~travel~~reported ~~and~~in ~~advertising~~the ~~expenses~~same ~~and~~quarter ~~acquired~~of ~~intangibles~~fiscal ~~amortization~~2012, an increase of $532,000 or 3%. ~~Also~~Blood ~~included~~and isbiologics ~~bad~~management ~~debt~~products ~~expense;~~and ~~legal~~services revenue was $5,637,000 ~~accounting~~in ~~and~~the ~~professional~~first ~~fees~~quarter ~~and~~of ~~reserves;~~fiscal ~~administrative~~2013, ~~salaries~~representing ~~and~~a ~~bonus~~decrease ~~expenses;~~of ~~utilities~~$680,000 ~~rent~~or 11% compared to $6,317,000 ~~communications~~in ~~and~~the ~~other~~same ~~office~~quarter ~~expenses;~~of ~~stock-based~~fiscal ~~compensation~~2012. Medication ~~expenses~~management products and ~~other~~services ~~related~~total ~~direct~~revenue ~~administrative~~was ~~expenses. SG&A~~$9,568,000 ~~expenses~~in ~~increased~~the first quarter of fiscal 2013 representing an increase of $1,~~479~~177,000, or 3214%, compared to $68,~~133~~391,000 in the ~~third~~same quarter of fiscal 2012. JAC’s contribution to total revenue of medication management products and services was $1,793,000 in the first quarter of fiscal 2013 compared to $41,~~654~~795,000 in the ~~third~~same quarter of fiscal ~~2011~~2012. ~~This~~Performance ~~increase~~management isproducts ~~primarily~~and ~~due~~services torecorded ~~incremental~~total ~~costs~~revenue ~~associated~~of ~~with~~$639,000 ~~our~~in ~~ACS~~the ~~business~~first ~~acquired~~quarter of fiscal 2013, representing an increase of $58,000 or 10% compared to $581,000 in ~~April~~the ~~2011~~same ~~and~~quarter ~~increased~~of ~~professional~~fiscal ~~fees~~2012.

~~Income~~System ~~tax~~sales ~~expense~~revenue, ~~decreased~~which includes proprietary and third party software licenses, hardware sales and subscription revenue, amounted to $~~491~~3,828,000 infor the ~~third~~first quarter of fiscal ~~2012~~2013, a decrease of $562,000 or 13% compared to $~~817~~4,390,000 in the same quarter of fiscal ~~2011~~2012. ~~During~~System sales for blood and biologics management products was $983,000 for the ~~third~~first quarter of fiscal 2013, a decrease of $1,300,000 or 57% compared to $2,283,000 in the same quarter of fiscal 2012. This decrease is primarily attributable to lower HCLL license fees, including software purchased by the ~~Company~~U.S. ~~recognized~~Military aHealth ~~tax~~Service ~~benefit~~(“MHS”). System ~~related~~sales for medication management products increased $816,000, or 44% to $2,670,000 in the ~~reconciliation~~first quarter of ~~prior~~fiscal ~~year~~2013 ~~tax~~compared ~~estimates~~ to ~~actual~~$1,854,000 ~~tax~~in ~~liability~~the ~~incurred~~same period of fiscal 2012. ~~The~~This ~~Company~~increase ~~realized~~is ~~additional~~primarily ~~research~~due to higher Ascend and ~~development~~WORx ~~credits~~product line system sales and anincremental ~~increased~~revenues ~~domestic~~from ~~production~~our ~~activities~~CMS ~~deduction~~business acquired in April 2012. ~~The~~ These ~~Company~~increases ~~expects~~were ~~its~~partially ~~tax~~offset ~~rates~~by toa bedecrease ~~close~~in JAC system sales. JAC recorded system sales of $354,000 for the first quarter of fiscal 2013, representing a decrease of $268,000, or 43%, compared to $622,000 in the ~~statutory~~first ~~rate~~quarter of fiscal 2012. Performance management system sales were $175,000 for the ~~remainder~~first quarter of fiscal 2013, a decrease of $78,000 compared to $253,000 in the ~~year~~first quarter of fiscal 2012. System sales revenue comprised 24% of total revenue in the first quarter of fiscal 2013 compared to 28% in the same period of fiscal 2012.

~~Net~~Service ~~income~~revenue, ~~for~~which includes post contract support revenues, implementation services, maintenance services, including our “maintenance plus” program, reimbursable travel costs, and promotional services increased $1,094,000, or 10%, to $12,157,000 in the ~~third~~first quarter of fiscal 2013 compared to $11,063,000 for the same period in fiscal 2012. Service ~~was~~revenue for the blood and biologics management products totaled $14,~~856~~654,000 for the first quarter of fiscal 2013, representing an increase of $620,000, or 15%, compared to $14,~~403~~034,000 ~~during~~in the ~~third~~first quarter of fiscal ~~2011~~2012. The increase primarily reflects higher support revenue for our HCLL software. Service revenue for the medication management products increased $361,000, or 6%, to $6,898,000 in ~~net~~the ~~income~~first quarter of fiscal 2013 compared to $6,537,000 for the same quarter of fiscal 2012. The increase is ~~mainly~~primarily attributable to ~~increased~~higher ~~operating~~services ~~income~~revenue ~~associated~~for ~~with~~our ~~blood~~Ascend ~~and~~product ~~biologics~~line, ~~management~~JAC ~~products~~and billing and collection businesses. The increases were partially offset by lower services ~~and~~revenue ~~our~~from ~~acquired~~the WORx product line and ACS business. Service ~~and~~revenue afor ~~decrease~~JAC increased $266,000 or 23% to $1,439,000 in ~~income~~the ~~tax~~first ~~expense~~quarter of fiscal 2013 compared to $1,173,000 ~~partially~~in ~~offset~~the byfirst ~~increased~~quarter ~~SG&A~~of ~~expense~~fiscal 2012. Service revenue for performance management products amounted to $464,000 for the first quarter of fiscal 2013 compared to $328,000 for the same period in fiscal 2012. The increase was primarily attributable to incremental revenues from our SHG business acquired in September 2012.

~~Results~~Cost of ~~Operations~~systems ~~for~~includes the ~~Nine~~cost ~~Months~~of ~~Ended~~computer ~~March~~hardware 31and sublicensed software purchased from computer and software manufacturers by Mediware as part of its complete system offering. These costs can vary as the mix of revenue varies between high margin proprietary software and lower margin computer hardware and sublicensed software components. Cost of systems increased $220,000, ~~2012~~or 30%, to $964,000 in the first quarter of fiscal 2013 as ~~Compared~~compared to $744,000 in the ~~Nine~~same ~~Months~~period ~~Ended~~in ~~March~~fiscal 312012. The gross margin, ~~2011~~excluding amortization of capitalized software costs, on system sales was 75% in the first quarter of fiscal 2013 compared to 83% in the same quarter in fiscal 2012. The decrease in gross margin is primarily due to an increase in the sale of lower margin third party products including computer hardware, hosting services, and third party software and a decrease in the sale of higher margin proprietary software.

Total revenue for the nine months ended March 31, 2012 was $47,931,000 compared to $39,547,000 in the same period of fiscal 2011, an increase of $8,384,000 or 21%. The change in revenue is largely due to increased system sales and services for blood and biologics management products and incremental revenues associated with our ACS business acquired in April 2011, partially offset by lower system sales and services revenues from the WORx product line. Blood and biologics management products and services recorded total revenue of $20,786,000 during the first nine months of fiscal 2012, representing an increase of $5,144,000 or 33% compared to $15,642,000 in the same period of fiscal 2011. Medication management products and services experienced an increase in total revenue of $2,912,000 or 13% to $25,245,000 in the first nine months of fiscal 2012 compared to $22,333,000 in the same period of fiscal 2011. JAC’s contribution to total revenues of medication management products and services revenue was $5,003,000 during the nine months ended March 31, 2012, representing an increase of $519,000 or 12%, compared to $4,484,000 in the same period of fiscal 2011. Performance management products and services recorded total revenues of $1,428,000 in the nine months ended March 31, 2012 compared to $1,038,000 in the same period in fiscal 2011.

System sales revenue amounted to $13,222,000 for the nine months ended March 31, 2012, an increase of $3,628,000 or 38%, from $9,594,000 in the same period in fiscal 2011. System sales revenue for the blood biologics management products were $6,930,000 for the first nine months of fiscal 2012, an increase of $2,972,000 or 75%, compared to $3,958,000 in the same period of fiscal 2011. This increase is primarily attributable to HCLL license fees, including software purchased by the MHS. System sales for the medication management products increased to $5,590,000 in the first nine months of fiscal 2012 compared to $5,369,000 in the same period of fiscal 2011, representing an increase of $221,000, or 4%. This increase reflects the incremental revenues associated with the ACS business we acquired in April 2011, partially offset by lower WORx systems sales. JAC recorded system sales of $1,258,000 for the nine months ended March 31, 2012, representing an increase of $23,000, or 2%, compared to $1,235,000 reported for the same period in fiscal 2011. System sales revenue for performance management was $702,000 and $267,000 for the nine months ended March 31, 2012 and 2011, respectively.

Service revenue increased $4,756,000, or 16%, to $34,709,000 in the first nine months of fiscal 2012 compared to $29,953,000 for the same period in fiscal 2011. Service revenue for the blood and biologics management products totaled $13,856,000 for the first nine months of fiscal 2012 representing an increase of $2,172,000, or 19%, compared to $11,684,000 in the same period of fiscal 2011. The increase primarily reflects implementation revenue for our HCLL software related to the project with the MHS. Service revenue for the medication management products increased $2,691,000 or 16% to $19,655,000 in the first nine months of fiscal 2012 compared to $16,964,000 for the same period of fiscal 2011. This increase reflects incremental revenues from our ACS business acquired in April 2011, partially offset by lower services revenues from the WORx product line. Service revenue for JAC increased $496,000, or 15% to $3,745,000 in the first nine months of fiscal 2012 compared to $3,249,000 for the same period in fiscal 2011. Service revenue for performance management products was $726,000 and $771,000 for the nine months ended March 31, 2012 and 2011, respectively.

Cost of ~~systems~~services ~~can~~includes ~~vary as~~ the ~~mix~~salaries ofand ~~revenue~~direct ~~varies~~expenses ~~between~~of ~~high~~client ~~margin~~service ~~proprietary~~personnel ~~software~~ and ~~lower~~the ~~margin~~direct ~~computer~~costs ~~hardware~~associated ~~and~~with ~~sublicensed~~providing ~~software~~promotional ~~components~~services. Cost of ~~systems~~services ~~increased~~decreased $1105,~~566,~~000, or ~~109~~2%, to $24,~~999~~293,000 ~~for~~in the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 as compared to $14,~~433~~398,000 in the same period inof fiscal ~~2011~~2012. ~~The~~Gross ~~gross~~ margin, ~~excluding amortization of capitalized software costs,~~ on ~~system~~service ~~sales~~revenue was 7765% in the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 compared to 8560% in the same ~~period~~quarter in fiscal 2011. The decrease in gross margin is primarily due to an increase in the sale of lower margin third party products including hosting services and third party software during the first nine months of fiscal 2012 ~~compared to the same period in fiscal 2011~~.

~~Cost~~Amortization of ~~services~~capitalized ~~increased~~software decreased $1148,~~742,~~000, or 1514%, to $13925,~~293,~~000 ~~during~~in the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 as compared to $111,~~551~~073,000 in the ~~same~~first ~~period~~quarter of fiscal ~~2011~~2012. The ~~increase~~decrease inoccurred ~~cost~~as ofpast ~~services~~software isdevelopment ~~primarily~~efforts ~~attributed~~became tofully ~~incremental costs associated with our ACS business acquired in April 2011~~amortized. ~~Gross margin on service revenue was 62% for the first nine months of fiscal 2012 compared to 61% for the same period of fiscal 2011.~~

~~Amortization~~Total ofexpenditures ~~capitalized~~for software development, including the capitalized portion, were $2,750,000 in the first quarter of fiscal 2013 compared to $2,577,000 in the first quarter of fiscal 2012, an increase of $173,000, or 7%. Software development costs not subject to capitalization decreased $~~276~~192,000, or 812%, to $31,~~096~~438,000 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 compared to $31,~~372~~630,000 in the ~~same~~first ~~period~~quarter of fiscal ~~2011~~2012. The decrease ~~occurred~~was asdue ~~past~~to ~~software~~a ~~development~~shift ~~efforts~~in ~~became~~the ~~fully~~capitalization ~~amortized~~rate driven by the mix and timing of projects and the application of the capitalization rules.

~~Total~~Selling, ~~expenditures~~general ~~for~~and ~~software~~administrative ~~development,~~(“SG&A”) ~~including~~expenses ~~the~~include ~~capitalized~~marketing ~~portion,~~and ~~were~~sales $8salaries,~~564~~ commissions,~~000~~ intravel ~~the~~and ~~first~~advertising ~~nine~~expenses ~~months~~and ofacquired ~~fiscal~~intangible ~~2012~~assets amortization. Also ~~compared~~included tois ~~$7,133,000~~bad indebt ~~the~~expense; ~~first~~legal, ~~nine~~accounting ~~months~~and ofprofessional ~~fiscal~~fees; ~~2011,~~administrative ansalaries ~~increase~~and ofbonus $1expenses; utilities,~~431~~ rent,~~000,~~ orcommunications ~~20%. This~~and ~~increase~~other isoffice ~~due~~expenses; ~~largely~~stock-based tocompensation ~~incremental~~expenses ~~costs~~and ~~associated~~other ~~with~~related ~~our~~direct ~~ACS~~administrative ~~business acquired in April 2011~~expenses. ~~Software~~SG&A ~~development~~expenses ~~costs not subject to capitalization~~ increased $1,~~489~~477,000, or 5028%, to $46,~~444~~838,000 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 compared to $25,~~955~~361,000 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2011~~2012. The increase was primarily due to ahigher ~~shift~~amortization inexpense ~~the~~from ~~mix~~acquired ~~and~~intangible ~~timing~~assets as ofwell ~~projects~~as ~~subject~~increased toprofessional ~~capitalization~~fees. Increased ~~The~~professional ~~Company~~fees ~~expects~~relate primarily to ~~maintain~~the ~~its~~Merger ~~current~~Agreement ~~investment~~and ~~in product development products in~~ the ~~near term~~Merger.

~~SG&A~~Income ~~expenses~~tax ~~increased~~expense ~~$2,632,000,~~decreased ~~or 18%,~~ to $16734,~~894,~~000 in the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 compared to $14758,~~262,~~000 in the same ~~period~~quarter of fiscal ~~2011~~2012, primarily related to the decrease in operating income. ~~This~~ The ~~increase~~effective ~~primarily~~tax ~~reflects~~rate ~~incremental~~increased ~~costs~~to ~~associated~~48% ~~with~~in ~~our~~the ~~ACS~~first ~~business~~quarter ~~acquired~~of fiscal 2013 compared to 34% in ~~April~~the ~~2011~~same ~~and increased~~quarter of fiscal 2012, primarily due to nondeductible professional fees paid in the first quarter of fiscal 2013 related to the Merger Agreement and the Merger.

~~Income~~Net ~~tax~~income ~~expense~~for ~~increased to $2,130,000 during~~ the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 was $801,000, compared to net income of $1,~~735~~493,000 induring the ~~same~~first ~~period~~quarter of fiscal ~~2011~~2012, a decrease of $692,000 or 46%. ~~Higher~~Lower ~~operating~~margins ~~income~~on insystem sales, the ~~first~~incremental ~~nine~~amortization ~~months~~expense ofassociated ~~fiscal~~with ~~2012~~acquired ~~was~~intangible ~~the~~assets ~~principal~~and ~~cause~~higher ofprofessional fees contributed to the ~~increase~~decrease in net income.

Net income during the first nine months of fiscal 2012 was $5,082,000, compared to net income of $4,190,000 during the same period of fiscal 2011, an increase of $892,000, or 21%. The incremental operating income associated with blood and biologics management products and services and our acquired ACS business was partially offset by an increase in SG&A expense and increased software development expenditures.

Liquidity and Capital Resources

As of ~~March~~September 3130, 2012, Mediware had cash and cash equivalents of $37,~~406~~036,000 compared to $2940,~~987~~155,000 at June 30, ~~2011~~2012. A portion of the Company’s cash and cash equivalents resides outside of the United States. Repatriation of these funds could be negatively impacted by taxes. Working capital was $3130,~~024~~037,000 and $2431,~~745~~698,000 at ~~March~~September 3130, 2012 and June 30, ~~2011~~2012, respectively. The current ratio was 2.2 and 2.3 at ~~March~~September 3130, 2012 ~~compared~~and ~~to 1.9 at~~ June 30, ~~2011~~2012, respectively. Other than deferred tax liabilities and contingent consideration associated with the purchase of SHG, the Company does not have any material capital lease obligations, purchase obligations or long-term liabilities.

Cash provided by operating activities was $121,~~097~~461,000 during the first ~~nine~~quarter ~~months~~ of fiscal year ~~2012~~2013 compared to $126,~~442~~103,000 during the same ~~period~~quarter ofa ~~fiscal~~year ~~2011~~ago. The decrease in cash provided by operating activities is primarily due to changes in working capital, ~~partially~~and ~~offset~~to bya ~~higher~~lesser extent, a decrease in net ~~earnings~~income.

Cash used in investing activities was $5,~~231~~929,000 during the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~year 2013 compared to $51,~~868~~031,000 during the same ~~period~~quarter a year ago. The ~~decrease~~increase in cash used in investing activities is primarily attributable to the ~~decrease~~acquisition inof ~~payments~~SHG. Software ~~for~~costs ~~acquisitions~~capitalized in the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 ~~compared~~were toalso higher than in the same period in fiscal ~~2011~~2012.

Cash provided by financing activities was $~~551~~1,157,000 during the first ~~nine~~quarter ~~months~~ of fiscal ~~2012~~2013 compared to cash used in financing activities of $~~102~~119,000 during the same period of fiscal ~~2011~~2012. The ~~cash~~increase ~~provided~~in bycash from financing activities inis ~~the first nine months of fiscal 2012 was~~ primarily ~~from~~due ~~stock~~to ~~option~~proceeds ~~exercises~~received ~~and~~in ~~related~~the ~~tax~~first ~~benefits.~~quarter ~~There~~of ~~were~~fiscal no2013 ~~stock~~from ~~options exercised in~~ the ~~first~~exercise ~~nine months~~ of ~~fiscal~~employee ~~year~~stock ~~2011~~options.

We currently use cash flow from operations to fund our capital expenditures and to support our working capital requirements. We expect that future cash requirements will principally be for capital expenditures, working capital requirements, stock repurchases and other strategic initiatives. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our projected capital expenditures, working capital needs, any future share repurchases, and other cash requirements at least through March 31, 2013.26

~~Our~~We ~~liquidity~~currently isuse ~~influenced~~cash byflow ~~our~~from ~~ability~~operations to ~~execute~~fund on our ~~strategies~~capital inexpenditures aand ~~competitive~~to ~~industry~~support our working capital requirements. ~~Factors~~We believe that ~~may~~our ~~affect~~existing ~~liquidity~~cash ~~include~~balances ~~our~~and ~~ability~~cash toflow ~~penetrate~~from ~~the~~operations ~~market~~will ~~for~~be sufficient to meet our ~~products,~~projected ~~maintain~~capital orexpenditures, ~~reduce~~working ~~the~~capital ~~length~~needs, ofany ~~the~~future ~~selling~~share ~~cycle~~repurchases, and ~~collect~~other cash ~~from~~requirements ~~clients~~at asleast ~~systems~~through ~~are~~the ~~licensed~~next ortwelve ~~implemented and services completed~~months.

Our liquidity is influenced by our ability to perform on our strategies in a competitive industry. Factors that may affect liquidity include our ability to penetrate the market for our products, maintain or reduce the length of the selling cycle, and collect cash from clients as systems are licensed or implemented and services completed.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Mediware is subject to market risks from foreign currency fluctuations due to the operations of ~~JAC~~the Company’s European businesses. During the last three years, Mediware has not entered into any derivative financial instruments or engaged in other hedging transactions to reduce its exposure to such risks.

Operating in international markets involves exposure to the possibility of volatile movements in foreign exchange rates. The currencies in each of the countries in which ~~JAC~~Mediware’s ~~operates~~European businesses operate affect:

•

the results of Mediware’s international operations reported in United States dollars; and

• the value of the Mediware’s international net assets ~~of JAC~~ reported in United States dollars.

These exposures may impact future earnings or cash flows. Revenue from ~~JAC~~business conducted in Europe represented approximately 1012% ~~and 9%~~ of Mediware’s consolidated revenue ~~for~~in each the three months ended ~~March~~September 3130, 2012 and 2011~~, respectively, and 10% and 11% for the nine months ended March 31, 2012 and 2011, respectively~~. The economic impact of foreign exchange rate movements is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. These changes, if material, could cause Mediware to adjust its financing and operating strategies. Therefore, to isolate the effect of changes in currency does not accurately portray the effect of these other important economic factors. As foreign exchange rates change, translation of the income statements of ~~JAC~~our European businesses into ~~U.S.~~United States dollars affects ~~year~~period-over-~~year~~period comparability of operating results. Any foreign currency impact onof translating assets and liabilities into dollars is included as a component of stockholders’ equity. ~~Our~~Mediware’s net income for the three months ended ~~March~~September 3130, 2012 ~~was positively impacted by a $2,000 foreign currency movement,~~ and ~~negatively~~September ~~impacted for the nine months ended March 31~~30, ~~2012, by an $8,000 foreign currency movement. Our net income for the three months ended March 31,~~ 2011 ~~was~~were ~~negatively~~not ~~impacted~~materially ~~by a $2,000 foreign currency movement, and positively~~ impacted ~~for the nine months ended March 31, 2011,~~ by ~~a $9,000~~ foreign currency movement. ~~These foreign currency adjustments are primarily due to the currency valuation of the British pound against the United States dollar.~~

ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures as of ~~March~~September 3130, 2012. Disclosure controls and procedures are defined in the Securities Exchange Act as controls and other procedures of the Company designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and include controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits to the SEC is accumulated and communicated to the Company’s management, including the CEO and CFO, to allow timely decisions regarding required disclosure. Based on its review and evaluation, the Company’s management has concluded that the Company’s disclosure controls and procedures are effective as of ~~March~~September 3130, 2012.

There were no changes in Mediware’s internal controls over financial reporting that occurred during the three months ended ~~March~~September 3130, 2012 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting. ~~Notwithstanding the foregoing,~~ Mediware recently reported the departure of Michael Martens, the Company's CFO, effective February 15, 2012. Mr. Robert W. Watkins was named the Company's new CFO. Inherent with any change in management is a change in the understanding of the control environment and the internal controls. Mediware believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.

~~PART II OTHER INFORMATION~~27

PART II.OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Mediware from time to time becomes involved in routine litigation incidental to the conduct of its business, including employment disputes and litigation alleging product defects, intellectual property infringements, violations of law and breaches of contract and warranties. Mediware believes that such routine litigation, if adversely determined, would not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

~~Item~~On 1AOctober 18, 2012, a shareholder filed a putative class action lawsuit in the Supreme Court of the State of New York, County of New York, against us, our directors, Thoma Bravo, LLC, an affiliate of Parent and Merger Subsidiary, and Merger Subsidiary. The ~~RISK~~complaint ~~FACTORS~~for the case, styled Kempf v. Mediware Information Systems, Inc. et al., Index No.: 653649/2012, alleges that the Company’s directors breached their fiduciary duties by failing to maximize shareholder value in the merger and by failing to disclose certain material information in the proxy statement. The complaint also alleges that Thoma Bravo, LLC and Merger Subsidiary aided and abetted these breaches. The complaint seeks to enjoin the transaction as well as rescission, damages, legal fees and other relief. As of November 5, 2012, the Company had not been served with the complaint, and therefore has no obligation to respond. If the Company is served with the complaint, it intends to vigorously defend against the action as it does not believe that the claims alleged have merit.

~~You~~ITEM should carefully consider the risk factors disclosed in our Annual Report on Form 10-K for the year ended June 30, 2011 and in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 included under Item 1A ~~“Risk Factors” in addition to the other information set forth in Item 1A and elsewhere in this report~~. ~~The~~RISK risks described in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.FACTORS

WeYou ~~may~~should carefully consider the risk factors disclosed in our Annual Report on Form 10-K for the year ended June 30, 2012 included under Item 1A “Risk Factors” in addition to the other information set forth in this report, including the risk factors set forth below. The risks described below and in our Annual Report on Form 10-K are not bethe ~~able~~only risks facing our Company. Additional risks and uncertainties not currently known to ~~manage~~us or ~~successfully~~that ~~integrate~~we ~~acquired~~currently ~~businesses~~deem to be immaterial also may materially adversely affect our business, financial condition and/or ~~technologies~~operating results.

WeThere ~~have~~are ~~recently~~risks ~~consummated a strategic acquisition~~ and ~~may~~uncertainties ~~pursue~~associated ~~additional~~with ~~strategic~~the ~~acquisitions,~~consummation ~~investments~~of ~~and relationships in~~ the ~~future, and we may not be able to successfully manage our operations if we fail to successfully integrate acquired businesses and technologies, which could adversely affect our operating results.~~Merger

There are a number of risks and uncertainties relating to the consummation of the Merger. These risks include the following:

the risk that the Merger may not be completed in a timely manner or at all, which may adversely affect our business and the price of our Common Stock;

the failure to satisfy the conditions to the consummation of the Merger, including the adoption and approval of the Merger Agreement and approval of the Merger by our shareholders and the receipt of certain governmental and regulatory approvals;

the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement, including a termination under circumstances that could require us to pay a termination fee of $5,769,000 to Parent or to reimburse Parent for certain of its costs and expenses up to $2,000,000; and

the outcome of any legal proceedings that may be instituted against us related to the Merger Agreement or the Merger.

Our business could be adversely impacted as a result of uncertainty related to the Merger.

There are a number of risks and uncertainties relating to the impact of the Merger on our business. These risks include the following:

the effect of the announcement or pendency of the Merger on our business relationships, operating results and business generally;

the potential adverse effect on our business, properties and operations because of certain covenants we agreed to in the Merger Agreement;

risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the Merger;

risks related to diverting management’s attention from our ongoing business operations; and

the amount of the costs, fees, expenses and charges related to the Merger Agreement and Merger.

AsITEM ~~part of our business strategy, we may seek and complete strategic business acquisitions that are complementary to our business~~2. On ~~April~~UNREGISTERED ~~18,~~SALES ~~2012,~~OF weEQUITY ~~acquired~~SECURITIES ~~the~~AND ~~assets~~USE ofOF Cyto Management System, a comprehensive chemotherapy management software solution to track patients, manage highly individualized medication-based treatment plans, help control costs, and report outcomes associated with cancer therapies. On January 3, 2012, we acquired substantially all assets of Transtem, a provider of software that manages the collection and transplantation of adult stem cells in cellular-based therapies and medical research. On April 11, 2011, we acquired certain assets of CareCentric’s home/durable medical equipment, home health, home infusion and billing and collections business. During the three years ended June 30, 2011, we consummated five other strategic acquisitions. Acquisitions, such as the Cobbler ICT Services, Transtem, and CareCentric businesses, have inherent risks which may have a material adverse effect on our business, financial condition, operating results or prospects, including, but not limited to, the following:PROCEEDS

•The ~~failure~~following totable ~~successfully~~lists ~~integrate~~Mediware’s ~~the~~share ~~business~~repurchases ~~and~~during ~~financial~~the ~~operations,~~three ~~services,~~months ~~intellectual~~ended ~~property~~September 30, ~~solutions or personnel of the acquired business~~2012:

• diversion of management’s attention from other business concerns

Period	Total Number of Shares Purchased			Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Program(1)		Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program(1)

July 2012		1,547	(2)	$	14.14	(2)		--	$	--

Total		1,547		$	14.14			--	$	3,815,000

•(1) The ~~failure~~Board of Directors approved a share repurchase program on February 6, 2008, and modified it in October 2008, to ~~achieve~~authorize ~~projected~~Mediware ~~synergies~~to purchase up to $7.318 million of its Common Stock, at times and ~~performance~~prices ~~targets~~that the President and Chief Executive Officer or Chief Financial Officer of the Company determine to be appropriate. The program has no expiration date, and Mediware has no obligation to purchase shares under the program. Since inception, 590,000 shares were repurchased and placed in treasury under this program. No shares were repurchased during the quarter ended September 30, 2012 under this program. Under the Merger Agreement, Mediware has agreed not to repurchase any shares of Common Stock without the prior written consent of Parent and Merger Subsidiary except in connection with the exercise of outstanding options or the vesting of restricted stock.

•(2) Shares ~~loss~~purchased ofwere ~~customers~~surrendered orby ~~key~~employees ~~personnel~~in oforder to satisfy statutory tax withholding obligations in connection with the ~~acquired~~vesting ~~business~~of stock-based compensation awards.

• possibility that the due diligence process in any such acquisition may not completely identify material issues associated with product quality, product architecture, product development, intellectual property issues, key personnel issues or legal and financial contingencies, and29

• a possible write-off of intellectual property and acquired intangible assets.

If we fail to successfully integrate the Cyto Management System, Transtem, CareCentric or other acquired businesses or fail to implement our business strategies with respect to these acquisitions, we may not be able to achieve projected results or support the amount of consideration paid for such acquired businesses.

ITEM 6. EXHIBITS

Exhibit 2.1	Agreement and Plan of Merger, dated as of September 11, 2012, by and among Mediware Information Systems, Inc., Project Ruby Parent Corp. and Project Ruby Merger Corp. Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K, filed on September 11, 2012.
Exhibit 10.1	Form of Voting Agreement. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K, filed on September 11, 2012.
Exhibit 11	Schedule of Computation of Net Earnings Per Share
Exhibit 15	~~Consent~~Acknowledgment of Independent Registered Public Accounting Firm
Exhibit 31.1	Rule 13a-14(a)/15d-14(a) Certification
Exhibit 31.2	Rule 13a-14(a)/15d-14(a) Certification
Exhibit 32.1	Certification Pursuant to 18 U.S.C. 1350

101.INS** XBRL Instance

101.SCH** XBRL Taxonomy Extension Schema

101.CAL** XBRL Taxonomy Extension Calculation

101.DEF** XBRL Taxonomy Extension Definition

101.LAB** XBRL Taxonomy Extension Labels

101.PRE** XBRL Taxonomy Extension Presentation

**XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

2930

SIGNATURES

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

	MEDIWARE INFORMATION SYSTEMS, INC.
	(Registrant)
May 8, 2012	/s/ T. KELLY MANN
Date	T. KELLY MANN
	PRESIDENT AND CHIEF EXECUTIVE OFFICER

	MEDIWARE INFORMATION SYSTEMS, INC.
	(Registrant)

May 8, 2012	/s/ ROBERT W. WATKINS
November 7, 2012		/s/ T. KELLY MANN
Date	~~ROBERT W. WATKINS~~	T. KELLY MANN
	CHIEF FINANCIAL OFFICER
		PRESIDENT AND CHIEF EXECUTIVE OFFICER

November 7, 2012		/s/ ROBERT W. WATKINS
Date		ROBERT W. WATKINS
		CHIEF FINANCIAL OFFICER

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