Filed by Colorado MEDtech, Inc.
                                      Pursuant to Rule 425 under the Securities
                                          Act of 1933 and deemed filed pursuant
                                               to Rules 14a-12 and 14d-9 of the
                                                Securities Exchange Act of 1934
                                        Subject Company: Colorado MEDtech, Inc.
                                              Commission File Number: 000-12471

            THE FOLLOWING LETTER IS A PRELIMINARY COMMUNICATION PRIOR
       TO THE COMMENCEMENT OF AN EXCHANGE OFFER AND A PROXY SOLICITATION


October 6, 2000

Dear Colorado MEDtech Shareholder:

I'm writing to you today to give you a report on the  progress of our  business.
At our August 2000 earnings  conference  call, I told the  participants  that as
your new CEO I would meet with our  institutional  shareholders  and analysts to
talk about our efforts to position the company for future growth.  Over the last
two weeks I have traveled around the country to have these meetings.  I have had
the pleasure to discuss our restructuring  program and the management changes we
announced  on  August  22,  2000  with a number of you.  Key  components  of our
corporate restructuring program include:

o    The appointment of a new management team.
o    Positioning  the company for a near-term  turnaround  and operating  margin
     improvement.
o    Greater  focus  on   strengthening   our  core   businesses  in  designing,
     engineering,  and manufacturing  value-added  medical products to establish
     the platform of future growth. These four core businesses are:
     -- CMED/RELA
     -- Imaging & Power Systems
     -- CMED Manufacturing
     -- CIVCO
o    Cultivation of CIVCO's growth potential.
o    Rationalization  of the overall company to enhance long-term  profitability
     and growth as a quality leader in its core businesses.

     We believe  Colorado  MEDtech is  currently at an  inflection  point and is
poised to resume revenue and earnings growth next fiscal year and beyond.

     I am pleased to tell you that the announced changes are making a difference
at our  company.  With our  business  units  now  concentrated  around  our core
strengths,  our people are working  closer  than ever before to improve  project
performance and customer service. In addition,  we are seeing a renewed sense of
energy and employee morale throughout our  organization.  I am confident that we
will see the tangible results of these efforts soon.

     In the past  two  weeks,  it  became  clear  to me that  our  institutional
shareholders and analysts support the direction we are taking the company.  I am
gratified by that  support.  I realize  that many of you believe  that  Colorado
MEDtech  has not  communicated  well  with its  shareholders  and the  financial
community in the past. I pledge that those days are over. I will communicate and
welcome your feedback.

     We have some good  progress to report on the sales front.  During our first
fiscal quarter ended September 30, 2000, we increased  bookings that will put us
on track toward meeting our goals announced in August of improved results in the
second half of fiscal year 2001 and a resumption of growth in fiscal year 2002.

     During the first  quarter  we added many new  customers  and  expanded  our
business with General Electric  Medical Systems and Hitachi Medical  Corporation
for our imaging  power  systems  products.  We are excited  about the  continued
confidence that these important customers have shown in us.

     Other important  developments  which will contribute to our enhanced growth
include:

o    the transition  from  development  to  manufacturing  of a unique  oximetry
     device;
o    the addition of new contracts for  development of an imaging system for use
     in  coronary  bypass  surgery  and a device  for the  treatment  of  benign
     prostate hyperplasia and enlarged prostate; and
o    the  expansion of a software  development  project for an  ambulatory  drug
     delivery system.

          A number of you have asked me about the public statements made by HEI,
     Inc. and its Chairman, Anthony Fant. As I'm sure you know, on September 11,
     2000,  HEI  announced  that it would begin an exchange  offer for  Colorado
     MEDtech stock,  in which Colorado  MEDtech stock would be exchanged for HEI
     stock "having a value of" $12.00 per share,  subject to several conditions,
     including  that HEI  would not issue  more than 8.5  million  shares of its
     stock.

          HEI recently filed a letter to Colorado MEDtech  shareholders with the
     Securities  and Exchange  Commission,  and you may soon be  receiving  that
     letter.  In the  letter,  HEI  conceded  that if it makes  the offer it has
     discussed  in public and if the price of HEI's stock falls below $15.60 per
     share during a prescribed measurement term prior to an exchange, the stated
     value of the offer would be less than $12.00 per share.

          Since  HEI  announced  its  intention  to  make an offer,  the closing
     price of HEI stock has declined  from $23.50  (September  8, the day before
     the  announcement),  to as low as $14.50 on October 6, 2000.  HEI's  shares
     appear to be volatile and not to have much trading volume.

          Since  September 11 through  October 5, Colorado  MEDtech  shares have
     closed as high as $10 and as low as $8.50.

          HEI still has not commenced  its offer.  I do not know if or when they
     will do it.

          Today HEI announced that it intends to solicit  shareholders to call a
     special meeting of shareholders to remove the Board of Directors.  I do not
     know if or when they will do that  either.  We will  resist  any  effort to
     remove the Board.

          I met with Mr. Fant on September 22, 2000.  At that meeting,  Mr. Fant
     and other members of HEI management  gave us their  perspective on why your
     company  should be acquired  by HEI.  In my  opinion,  the reasons Mr. Fant
     listed for the  acquisition  were the type of general  statements one could
     make about the combination of any two technology companies. Further, one of
     HEI's  principal  rationales  for the  acquisition  was that HEI  wanted to
     become a larger  company.  Mr.  Fant  asked to make a  presentation  to our
     Board.

     I reported this back to the Colorado  MEDtech Board.  The  Board considered
the reasons  stated  by HEI and other  information they  had.  After review, the
Board declined Mr. Fant's request.

     Our Board  is  wel  aware  of its  duties  to you as shareholders.  We have
fulfilled and will continue to fulfill those duties.

     Finally,  I want  to share with  you some nice  recognition  we've received
recently:

o    September  2000--Colorado  MEDtech  was named to the Fortune  magazine  100
     Fastest Growing  Companies  list. In our second year on the list,  Colorado
     MEDtech was ranked 87th.  To be eligible for  consideration  on the Fortune
     list, companies had to have revenues and market  capitalization of at least
     $50 million,  and a 30% annual growth rate in both revenue and earnings per
     share for  three  years,  and must have  positive  earnings  in the  latest
     quarter.
o    August  2000-- The Denver Post  listed us as one of the 100  Top-Performing
     Public Companies.
o    October 2000 -- The Denver  Business  Journal has told us we will be listed
     as one of the Top 100 Colorado public companies.
o    October 2000 -- The company  received a Colorado  Technology  Fast 50 award
     from Deloitte & Touche.

     We are proud of thi  recognition. We are excited about  theopportunity we
have to grow this company and to increase value for all shareholders.

                                             Sincerely,

                                             /s/Stephen K. Onody

                                             Stephen K. Onody
                                             President and
                                             Chief Executive Officer


Additional Information

The statements in this letter that are not historical facts are  forward-looking
statements  that  represent   management's  beliefs  and  assumptions  based  on
currently available information. Forward-looking statements can be identified by
the  use of  words  such  as  "believes,"  "intends,"  "may,"  "will"  "should,"
"anticipated" or comparable terminology or by discussions of strategy.  Although
the Company  believes that the  expectations  reflected in such  forward-looking
statements are reasonable,  it cannot assure that these  expectations will prove
to be correct.  Such statements involve risks and uncertainties  including,  but
not limited to, the risk that the Company's  existing level of orders may not be
indicative of the level or trend of future orders, the risk that the Company may
not successfully  complete the work encompassed by current or future orders, the
risk that unforeseen  technical or production  difficulties may adversely impact
project timing and financial  performance,  the risk that the management changes
will not produce the desired results, the risk that acquired companies cannot be
successfully integrated with the Company's existing operations,  the risk that a
downturn in general economic conditions or customer budgets may adversely affect
research and development and capital  expenditure budgets of potential customers
upon which the Company is dependent,  and developments  that may occur regarding
Mr. Fant and HEI,  Inc.  Should one or more of these risks  materialize  (or the
consequences of such a development worsen), or should the underlying assumptions
prove incorrect, actual results could differ materially from those forecasted or
expected.  These  factors are more fully  described in the  Company's  documents
filed from time to time with the Securities and Exchange Commission. The Company
assumes no duty to update any forward-looking statements.

If   an    exchange    offer    commences,    the    Company    will    file   a
solicitation/recommendation  statement  regarding the exchange offer. If a proxy
solicitation  commences,  the Company and certain of its officers and  directors
may be  deemed  to be  participants  in the  solicitation  of  proxies  from the
Company's shareholders with respect to the transactions  contemplated above, and
a proxy statement to solicit proxies from the Company's  security holders may be
required to be filed.

Information  regarding  such officers and directors is included in the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1999, in its proxy
statement  for  its  1999  annual  meeting  and in its  filing  with  the SEC on
September 21, 2000 filed  pursuant to Rule 425 under the Securities Act of 1933,
as amended.  These  documents are available free of charge at the Securities and
Exchange Commission web site and from the Company's contact, each listed below.

The Company has retained  Wasserstein Perella & Co.  ("Wasserstein  Perella") to
assist the Company in evaluating its response to HEI's proposal,  for which they
received  and  may  receive  substantial  fees,  as  well  as  reimbursement  of
reasonable  out-of-pocket  expenses.  In  addition,  the  Company  has agreed to
indemnify  Wasserstein  Perella  and  certain  persons  related to them  against
certain liabilities,  including certain liabilities under the federal securities
laws,  arising out of their  engagement.  Wasserstein  Perella is an  investment
banking firm that provides a full range of financial  services for institutional
and individual clients. Wasserstein Perella does not admit that it or any of its
directors,  officers or employees is a  "participant" as defined in Schedule 14A
promulgated  under the  Securities  Exchange  Act of 1934,  as  amended,  in any
solicitation,   or  that  Schedule  14A  requires  the   disclosure  of  certain
information concerning Wasserstein Perella.

INVESTORS   AND  SECURITY   HOLDERS  ARE  ADVISED  TO  READ  ANY   SOLICITATION/
RECOMMENDATION  STATEMENT,  PROXY SOLICITATION  STATEMENT AND ANY OTHER RELEVANT
DOCUMENTS TO BE FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION
WHEN  THEY  BECOME  AVAILABLE,  BECAUSE  EACH OF THESE  DOCUMENTS  WILL  CONTAIN
IMPORTANT INFORMATION.  INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF
THESE DOCUMENTS WHEN AVAILABLE AND OTHER DOCUMENTS FILED BY THE COMPANY WITH THE
SEC AT THE SEC'S INTERNET WEB SITE AT  WWW.SEC.GOV.  THESE DOCUMENTS MAY ALSO BE
OBTAINED  FREE FROM THE COMPANY BY DIRECTING  SUCH REQUESTS TO: PETER J. JENSEN,
SECRETARY,  COLORADO  MEDTECH,  INC.,  6175 LONGBOW  DRIVE,  BOULDER,  CO 80301,
TELEPHONE: (303) 530-2660.

Contact:  Joele Frank, Wilkinson Brimmer Katcher
          Matt Sherman
          Dan Katcher
          Telephone: 212-355-4449