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 PRESS RELEASE IS A PRELIMINARY COMMUNICATION PRIOR
       TO THE COMMENCEMENT OF AN EXCHANGE OFFER AND A PROXY SOLICITATION

FOR IMMEDIATE RELEASE:                                                      NEWS
October 10, 2000                                                     NASDAQ-CMED

               COLORADO MEDTECH SENDS LETTER TO HEI, INC.

BOULDER,  Colorado - Colorado MEDtech, Inc. (Nasdaq:  CMED) today announced that
Stephen K. Onody, the Chief Executive Officer and President of the Company, sent
the following letter to HEI, Inc.:

October 9, 2000

Via Facsimile
Mr. Anthony Fant
Chairman of the Board &
Chief Executive Officer
HEI, Inc.
P.O. Box 5000
1495 Steiger Lake Lane
Victoria, MN  55386

Dear Mr. Fant:

     At the request of my fellow Colorado MEDtech directors,  I am responding to
your letter dated October 5, 2000.

     We  understand  that you have engaged legal counsel to represent HEI and do
not believe that it is our responsibility to advise you on legal interpretations
of  documents or your  litigation  strategy.  Even if we were to undertake  that
task,  you have not  provided us with  adequate  information  on which to form a
conclusion.  In  addition,  you  have  already  chosen  to file a  lawsuit,  and
consequently you have already picked a forum to resolve these matters.

     Please feel free to contact me if you have any questions.

                                           Very truly yours,

                                           /s/ Stephen K. Onody

                                           Stephen K. Onody
                                           Chief Executive Officer &
                                           President


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.

Colorado  MEDtech,  Inc.,  through its wholly owned  subsidiaries  and operating
divisions,  is a leading full-service  provider of advanced medical products and
comprehensive outsourcing services.

                                     # # #

Contact:

Joele Frank, Wilkinson Brimmer Katcher
Matt Sherman / Dan Katcher
212-355-4449