UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

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

For the quarterly period ended March 31, 2009

OR

oTRANSITION 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)

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.   S 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 £     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      S
(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   S No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of April 25, 2009, there were 7,655,000 shares of Common Stock, $0.10 par value, of the registrant outstanding.

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EXPLANATORY NOTE

The Company filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2009  with the SEC on May 11, 2009 (the “Original Filing”). This Amendment No. 1 is filed to correct two clerical errors in the Original Filing. First, the Original Filing did not include a check mark in the box reflecting that the Company is not a Shell Company (as defined in Rule 12b-2 of the Exchange Act).   Second, Item 4 “Controls & Procedures” in the Original Filing indicated that  there were no material changes in Mediware’s internal controls over financial reporting that occurred during the three and six-months ended March 31, 2009.  Item 4 has been modified to reflect that there were no material changes in Mediware’s internal controls over the financial reporting period that occurred during the three and nine-months ended March 31, 2009.

This Amendment No. 1 does not reflect events that have occurred after the date of the Original Filing and does not modify or update the disclosures in the Original Filing in any way except as specifically described in this Explanatory Note.

The certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed and furnished, respectively as exhibits 31.1, 31.2 and 32.1 to the Original Filing have been executed and filed as exhibits to this Amendment No. 1

MEDIWARE INFORMATION SYSTEMS, INC.

INDEX

		Page
PART I	Financial Information
ITEM 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2009 (Unaudited) and June 30, 2008	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the Three and Nine Months Ended March 31, 2009 and 2008	5
	Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the Nine Months Ended March 31, 2009	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31, 2009 and 2008	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
	Review Report of Independent Registered Public Accounting Firm	20
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	32
ITEM 4.	Controls and Procedures	34
PART II	Other Information	34
ITEM 1.	Legal Proceedings	34
ITEM 1A.	Risk Factors	34
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
ITEM 6.	Exhibits	36
Signatures		37

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PART I FINANCIAL INFORMATION

1. FINANCIAL STATEMENTS

MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except shares)

	(Unaudited)
	March 31,			June 30,
	2009			2008
ASSETS
Current Assets
Cash and cash equivalents	$	21,322		$	22,741
Accounts receivable (net of allowance of $706 and $748)		7,820			6,812
Inventories		297			102
Deferred income taxes		870			872
Prepaid expenses and other current assets		924			937
Total current assets		31,233			31,464
Fixed assets, net		1,720			1,831
Capitalized software costs, net		13,960			15,512
Goodwill, net		9,260			7,378
Other intangible assets, net		2,534			1,386
Other long-term assets		48			57
Total Assets	$	58,755		$	57,628
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	1,373		$	1,044
Advances from customers		7,941			7,718
Accrued income taxes		1,138			485
Accrued expenses and other current liabilities		2,993			3,222
Total current liabilities		13,445			12,469
Deferred income taxes		4,563			5,268
Total liabilities		18,008			17,737
Stockholders' Equity
Preferred stock, $.01 par value; authorized 10,000,000shares; none issued		-			-
Common stock, $.10 par value; authorized 25,000,000shares; 8,245,000 and 8,180,000 shares issued
as of March 31, 2009 and June 30, 2008, respectively		823			818
Additional paid-in capital		32,114			31,419
Treasury stock, 590,000 and 549,000 shares at March 31, 2009 and June 30, 2008, respectively		(3,503	)		(3,318	)
Retained earnings		11,867			10,863
Accumulated other comprehensive income (loss)		(554	)		109
Total stockholders' equity		40,747			39,891
Total Liabilities and Stockholders' Equity	$	58,755		$	57,628

See Notes to Unaudited Condensed Consolidated Financial Statements.

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MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except earnings per share)

	(Unaudited) Three months ended March 31,						(Unaudited) Nine months ended March 31,
	2009			2008			2009			2008
Revenue
System sales	$	2,700		$	2,659		$	7,152		$	8,881
Services		7,502			7,180			22,898			20,361
Total revenue		10,202			9,839			30,050			29,242
Cost and Expenses
Cost of systems (1)		996			835			2,703			2,209
Cost of services		2,580			2,364			7,888			6,878
Amortization of capitalized software costs		1,449			1,441			4,452			4,312
Software development costs		1,036			1,035			2,794			2,981
Selling general and administrative		3,466			3,852			10,983			12,528
Total costs and expenses		9,527			9,527			28,820			28,908
Operating income		675			312			1,230			334
Interest and other income		51			195			299			734
Interest and other (expense)		-			(7	)		3			(41	)
Income before income taxes		726			500			1,532			1,027
Income tax expense		(243	)		(184	)		(528	)		(585	)
Net income		483			316			1,004			442
Other comprehensive income
Foreign currency translation adjustment		(33	)		(1	)		(663	)		(7	)
Comprehensive income	$	450		$	315		$	341		$	435
Net income per Common Share
Basic	$	0.06		$	0.04		$	0.13		$	0.05
Diluted	$	0.06		$	0.04		$	0.13		$	0.05
Weighted Average Common Shares Outstanding
Basic		7,643			7,918			7,648			8,076
Diluted		7,943			8,273			7,972			8,411

(1) Excludes amortization of Capitalized Software Costs

See Notes to Unaudited Condensed Consolidated Financial Statements.

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MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Amounts in thousands)

	Common Stock												Accumulated
	Shares		Amount		Additional Paid-In Capital			Treasury Stock			Retained Earnings		Other Comprehensive Income (Loss)			Total
Balance at June 30, 2008		8,180	$	818	$	31,419		$	(3,318	)	$	10,863	$	109		$	39,891
Exercise of stock options		22		1		66											67
Issuance of common stock on vesting of restricted shares		43		4		(4	)										-
Stock based compensation expense						619											619
Repurchase of common stock									(185	)							(185	)
Excess tax benefits from  exercise of non-qualified stock options						14											14
Foreign currency translation adjustment														(663	)		(663	)
Net income												1,004					1,004
Balance at March 31, 2009 (Unaudited)		8,245	$	823	$	32,114		$	(3,503	)	$	11,867	$	(554	)	$	40,747

See Notes to Unaudited Condensed Consolidated Financial Statements.

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MEDIWARE INFORMATION SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	(Unaudited)
	Nine Months Ended
	March 31,
	2009			2008
Cash Flows From Operating Activities
Net income	$	1,004		$	442
Adjustments to reconcile net income, to net cash provided by operating activities:
Depreciation and amortization		5,265			4,900
(Gain) Loss on disposal of fixed assets		(24	)		11
Stock based compensation expense		619			493
Deferred tax provision		(531	)		372
Provision for doubtful accounts		232			31
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		(1,417	)		2,504
Inventories		(193	)		99
Prepaid expenses and other assets		16			(27	)
Accounts payable, accrued expenses and advances from customers		1,922			1,722
Net cash provided by operating activities		6,893			10,547
Cash Flows From Investing Activities
Acquisition of fixed assets		(418	)		(1,171	)
Proceeds from sale of fixed assets		47			-
Capitalized software costs		(2,900	)		(2,546	)
Acquisition of Integrated Marketing Solutions, LLC		(314	)		(5,524	)
Acquisition of Hann’s On Software, Inc.		(3,483	)		-
Net cash used in investing activities		(7,068	)		(9,241	)
Cash Flows From Financing Activities
Proceeds from exercise of stock options		67			-
Repurchase of common stock		(185	)		(3,318	)
Excess tax benefit from the exercise of stock options		14			-
Principal payments on note payable		-			(4	)
Net cash used in financing activities		(104	)		(3,322	)
Effect of exchange rates on cash and cash equivalents		(1,140	)		(7	)
Net change in cash and cash equivalents		(1,419	)		(2,023	)
Cash at beginning of period		22,741			22,789
Cash at end of period	$	21,322		$	20,766
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes paid	$	394		$	154

See Notes to Unaudited Condensed Consolidated Financial Statements.

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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, 2008, 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 31, 2009 are not necessarily indicative of the results to be expected for the entire fiscal year.

The results of operations of acquisitions are included in the financial statements from their respective acquisition dates.

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 (“Common Stock”) of Mediware.  For the three and nine months ended March 31, 2009 andMarch 31, 2008, the dilutive effect of Common Stock equivalents is included in the calculation of diluted earnings per share using the treasury stock method.

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, 2009, 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, including 13,000 shares of Common Stock purchased at a cost of $58,000 during the three months ended March 31, 2009 and 41,000 shares of Common Stock purchased at a cost of $185,000 during the nine months ended March 31, 2009.  As of March 31, 2009, the Company is authorized to purchase up to an additional $3,815,000 of Common Stock under the 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 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.

4. ACQUISITIONS

Hann’s On Software, Inc.

On November 20, 2008, Mediware acquired substantially all of the assets of Hann’s On Software, Inc., a California corporation (“HOS”).  HOS provided medication management solutions to the small hospital, specialty pharmacy and home infusion markets through integrated software solutions that address the complex work flow and patient safety needs of these markets.

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Mediware believes it will be able to provide medication management solutions to a broader range of customers as a result of this acquisition.  The Company plans to continue offering its WORx pharmacy product line to the larger acute care hospitals and behavioral health facilities, while the HOS product line will provide comprehensive solutions for the smaller hospital, specialty pharmacy and home infusion markets.

Mediware expects the HOS products to generate revenue by licensing its proprietary software, and by providing professional services and support for its product lines.  Generally, HOS customers are charged an initial start-up fee along with monthly fees for the continued use and support of the software.  Software license fees are recognized up front, subject to the requirements of the American Institute of Certified Public Accountants Statement of Position 97-2, “Software Revenue Recognition.”  Professional services and support revenues are recognized as the service is delivered.

The purchase price paid for the assets of HOS consists of an initial purchase price of $3,455,000 paid in cash at the closing, plus contingent consideration up to $645,000 based upon the achievement of certain revenue and contractual milestones through December 2009.  The purchase price is also subject to a working capital adjustment.  The Company incurred $28,000 of legal and accounting fees related to this transaction which have been included in goodwill.  The Company expects to finalize the purchase price, including all contingent consideration, by December 2009.  The results of the HOS operations are included in the accompanying financial statements from the date of acquisition.

The Company has accounted for the acquisition of HOS as the purchase of a business under U.S. Generally Accepted Accounting Principles.  The assets and liabilities of HOS were recorded as of the acquisition date, at their respective fair values.  The purchase price allocation is based on the estimated fair value of assets acquired and liabilities assumed.  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 reasonable.  However, actual results may differ from these estimates.

The following summarizes the preliminary purchase price allocation (in thousands):

	Purchase Price Allocation
Accounts receivable	$	197
Inventories		5
Prepaid and other current assets		38
Fixed assets		48
Intangible assets subject to amortization		1,441
Goodwill		2,056
Other long-term assets		9
Accounts payable		(25	)
Advances from customers		(263	)
Accrued expenses and other current liabilities		(23	)
Total Purchase Price	$	3,483

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The excess of the purchase price over the fair value of net tangible assets acquired was allocated to specific intangible asset categories as follows (in thousands):

	Amount Assigned		Weighted Average Amortization Period	Risk-Adjusted Discount Rate Used in Purchase Price Allocation
Amortizable Intangible Assets
Purchased technology	$	403	5.0 years		16.0	%
Customer relationships		958	7.0 years		16.0	%
Non-compete agreements		80	2.0 years		16.0	%
	$	1,441	6.2 years
Goodwill	$	2,056

The Company believes that the estimated tangible assets represent fair value at the date of acquisition.  The fair value of an asset is defined as the amount for which an asset or liability could be bought or sold in a current transaction between knowledgeable, unrelated willing parties when neither party is acting under compulsion.

The Company valued the purchased technology 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, technology replacement rates, customer attrition, expenses, contributory asset charges and discount rates.  Based on this methodology the Company assigned the value of purchased technology at $403,000.  The Company will amortize this amount over the estimated useful life of five years.

The Company valued the customer relationships 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.  Based on this methodology the Company assigned the value of customer relationships at $958,000.  The Company will amortize this amount over the estimated useful life of seven years.

The Company valued the non-compete agreements using the with/without method of the income approach.  This methodology determines the impact on discounted net cash flow should the restricted parties decide to compete directly against the Company.  This method requires the use of certain estimates, including projected cash flows, discount rates and probability factors related to the likelihood of future competition.  Based on this methodology the Company assigned the value of non-compete agreements at $80,000.  The Company will amortize this amount over the estimated useful life of two years.

Goodwill is expected to be deductible for tax purposes.

Unaudited proforma information for the acquisition of HOS has not been presented as the acquisition is not significant.

Integrated Marketing Solutions, LLC

On October 31, 2007, Mediware acquired substantially all of the assets of Integrated Marketing Solutions, LLC, a Maryland limited liability company (“IMS”).  IMS was a provider of software products and services to blood and plasma donation centers.  IMS serviced the blood donor center industry by providing integrated software, programs and services to support donor recruitment, call centers, customer service, hospital services, sales and prospecting.   Following the acquisition, the Company expanded its offering of software products and services targeting blood and plasma donation centers in North America and Europe.  This software addresses the competitive nature of the blood supply market by enabling blood and plasma collection facilities with web-based tools to better manage relationships with donors, staffing and hospitals.  These products facilitate blood and plasma donor centers’ donor recruitment and retention, improve blood drives, and enable hospitals with electronic tools to order, ship and track products.

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The acquired IMS assets, which are now part of Mediware’s Blood Centers Technology group, generate revenue through subscription sales of web-based applications along with professional and promotional services to its customers. Subscription revenue is recognized evenly over the subscription period. Professional and promotional revenue are recognized as the services are rendered.

The purchase price paid for the assets of IMS consisted of an initial purchase price of $5,458,000 paid in cash at the closing.  Additionally, the Company paid contingent consideration of $369,000 based on the successful achievement of certain revenue milestones.  The Company also received $55,000 from the seller as part of the final working capital adjustment.  The contingent consideration and the final working capital adjustment were fully accrued at June 30, 2008, and paid in July 2008.  The Company incurred $66,000 of legal and accounting fees related to this transaction which have been included in the total purchase price.  The results of the IMS  business are included in the accompanying consolidated financial statements from the date of acquisition.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The change in the carrying amount of our goodwill during the nine months ended March 31, 2009 is as follows (in thousands):

Carrying amount as of June 30, 2008	$	7,378
Acquisition of HOS		2,056
Tax benefit of amortization		( 174	)
Carrying amount as of March 31, 2009	$	9,260

Other Intangible Assets

The carrying amount of our other intangible assets as of March 31, 2009 is as follows (in thousands):

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Useful Life (in years)
Purchased technology	$	876	$	(163	)	$	713		4.1
Customer relationships		2,014		(264	)		1,750		6.0
Non-compete agreements		115		(44	)		71		1.1
	$	3,005	$	(471	)	$	2,534

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Amortization expense for other intangible assets amounted to $131,000 and $293,000 for the three and nine months ended March 31, 2009, and $67,000 and $111,000 for the three and nine months ended March 31, 2008.  The following represents the expected amortization in future periods (in thousands):

Fiscal Year	Expected Amortization
2009		131
2010		503
2011		479
2012		463
2013		400
Thereafter		558
	$	2,534

6. STOCK BASED COMPENSATION

The Company accounts for stock-based compensation in accordance with SFAS 123R, which establishes a fair value-based method of accounting for stock-based compensation.  The aggregate noncash stock based compensation expense totaled $185,000 and $242,000 for the three-months ended March 31, 2009 and 2008, respectively, and $619,000 and $493,000 for the nine months ended March 31, 2009 and 2008, respectively.

Stock Based Plans

The Company's 2003 Equity Incentive Plan, approved by the shareholders in December 2003, provides additional compensation incentives to encourage high levels of performance and employee retention.  Key employees of the Company, directors, and 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.  The plan provides that a maximum of 1,700,000 shares may be issued as any combination of restricted stock, options and restricted stock unit awards.  The additional 300,000 shares of common stock can only be granted as option awards.  As of March 31, 2009, there were 1,034,000 shares available for issuance under this Plan.

The Company's 2001 Stock Option Plan, approved by the shareholders in January 2002, provides additional compensation incentives for high levels of performance and productivity by management, other key employees of the Company, directors, and persons who render services to the Company as consultants, advisors or independent contractors.  Up to 900,000 shares may be issued and sold under such plan and may be issued as either incentive stock options, to eligible persons, or nonqualified stock options.  Options may be granted for a period of up to ten years, with option prices not less than fair market value on the date of grant for incentive stock options, not less than 85% of fair market value for nonqualified stock options, and not less than 110% of fair market value for owners of more than 10% of the Company's outstanding voting stock.  As of March 31, 2009 no options were available to be issued under this Plan.

Restricted Common Stock Awards

During fiscal 2006, the Company entered into agreements to provide long-term incentive compensation opportunities to certain key employees.  Under the terms of these agreements, the Company granted the employees 200,000 restricted shares of common stock (the “Performance Shares”).  The Performance Shares vest in fiscal 2007, 2008 and 2009 only if Mediware achieves certain performance goals based on revenue and earnings per share.  The Company has not recorded any compensation expense related to the Performance Shares because it is not probable the performance goals will be met.  The Company will continue to assess whether or not the achievement of any performance goals are probable at each reporting period, and will begin recognizing the related expense if and when the performance conditions become probable.  As of March 31, 2009, 75,000 of these Performance Shares were outstanding.  The Performance Shares may result in compensation expense in future periods of up to $699,000, representing the fair value on the date of the grant, if it becomes probable the performance goals will be met.

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Beginning in fiscal 2007, the Company entered into agreements to provide long-term incentive compensation opportunities to certain employees.  Under the terms of these agreements, the Company granted the employees 35,000 restricted shares of common stock (the “Time-Based Shares”).  The Time-Based Shares vest over a three-year period based upon the continued employment of the key employee.  The Company recorded compensation expense of $7,000 and $16,000 for the three-months ended March 31, 2009 and 2008, respectively, and compensation expense of $4,000 and $79,000 for the nine months ended March 31, 2009 and 2008, respectively.  These amounts include a benefit related to the forfeiture of certain non-vested Time-Based Shares of $12,000 and $18,000 for the nine months ended March 31, 2009 and 2008, respectively.  There were no forfeitures in the three-month periods ended March 31, 2009 or March 31, 2008.  The Time-Based Shares will result in compensation expense in future periods of up to $20,000, representing the fair value on the date of the grant less the amount of compensation expense already 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 the three-months ended March 31, 2009 and 2008, respectively, and $53,000 for each of the nine-months ended March 31, 2009 and 2008, respectively.    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.

During fiscal 2008, the Company entered into agreements to provide long-term incentive compensation opportunities to certain employees.  Under the terms of these agreements, the Company granted the employees 220,000 restricted shares of common stock (the “Enhanced Performance Shares”).  The Enhanced Performance Shares vest partially upon continued employment of the key employees and partially upon the achievement of certain performance objectives.  The Company recorded compensation expense related to the Enhanced Performance Shares of $120,000 and $115,000 for the three-months ended March 31, 2009 and 2008, respectively, and $419,000 and $323,000 for the nine-months ended March 31, 2009 and 2008, respectively.  The Company will continue to assess whether or not the achievement of any performance goals is probable at each reporting period, and will recognize the related expense if and when the performance conditions become probable.The Enhanced Performance Shares may result in compensation expense in future periods of up to $655,000, representing the fair value on the date of the grant less the amount of compensation expense already recorded.  This amount includes $110,000 of unrecognized time-based compensation expense related to the continued employment of the key employees.

Estimated future stock-based compensation expense related to time-based restricted stock is as follows (in thousands):

Fiscal Years Ending June 30,	Time-Based Shares		Enhanced Performance Shares (Time-Based Portion)		Director Shares		Total
2009	$	6	$	37	$	17	$	60
2010		10		67		-		77
2011		4		6		-		10
Total estimated future stock-based compensation expense	$	20	$	110	$	17	$	147

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A summary of the status of the Company’s nonvested restricted common stock as of March 31, 2009, and changes during the nine-months ended March 31, 2009, is presented below (shares amounts in thousands):

	Performance Shares		Weighted Average Grant Date Fair Value		Time-Based Shares			Weighted Average Grant Date Fair Value		Director Shares		Weighted Average Grant Date Fair Value		Enhanced Performance Shares			Weighted Average Grant Date Fair Value
Nonvested at June 30, 2008		75	$	9.32		20		$	7.29		-	$	-		208		$	6.63
Granted		-		-		-			-		15		4.68		-			-
Canceled or forfeited		-		-		(7	)		6.78		-		-		-			-
Vested		-		-		(5	)		8.50		-		-		(38	)		6.53
Nonvested at March 31, 2009		75	$	9.32		8		$	6.98		15	$	4.68		170		$	6.65

The 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 the first trading day of each calendar year, pursuant to the directors’ compensation plan.

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 estimated using the Black-Scholes option pricing model utilizing the following assumptions:

	For the Three Months  Ended March 31,				For the Nine Months Ended March 31,
	2009	2008			2009			2008
Risk-free interest rates	No Options		2.7% - 2.8	%		2.8	%		2.7% - 4.8	%
Expected option life in years	Granted		2-3			2-3			1-5
Expected stock price volatility			35% - 41	%		51	%		34% - 41	%
Expected dividend yield						-			-

The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield 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; the range given above results from groups of employees and directors exhibiting different behavior.  Expected volatilities are based on historical volatility of the Company’s stock.  The Company has not paid any dividends in the past and does not expect to pay any in the near future.

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The following table sets forth summarized information concerning the Company's stock options as of March 31, 2009 (share and aggregate intrinsic value amounts in thousands):

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at June 30, 2008		976		$	8.42
Granted		10			3.89
Exercised		(22	)		3.00
Forfeited or expired		(45	)		6.73
Outstanding at March 31, 2009		919		$	8.59		3.4	$	65
Vested and expected to vest at March 31, 2009		919		$	8.59		3.4	$	65
Options exercisable at March 31, 2009		739		$	9.06		2.7	$	63

The strike price of the options is determined based on the average trading price of the Company’s shares on the grant date.

Cash received from options exercised under all stock-based payment arrangements was $67,000 for the three and nine-months ended March 31, 2009.  The aggregate intrinsic value of options exercised during the nine months ended March 31, 2009 was $32,000.  Historically, the Company has issued new shares upon the exercise of stock options.

The weighted average fair value at date of grant for options granted during the three and nine months ended March 31, 2009 was $1.32 per option, and $2.15 per option for the nine-months ended March 31, 2008.  The Company recorded $40,000 and $58,000 of compensation expense for stock option plans for the three months ended March 31, 2009 and 2008, respectively, and $143,000 and $127,000 for the nine months ended March 31, 2009 and 2008, respectively.

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

Fiscal Years Ending June 30,	Future Stock Option Compensation Expense
2009	$	37
2010		95
2011		42
2012		10
Total estimated future stock-based compensation expense	$	184

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A summary of the status of the Company’s nonvested options as of March 31, 2009, and changes during the nine months ended March 31, 2009 is presented below (share amounts in thousands):

Nonvested Options	Shares			Weighted Average Grant Date Fair Value
Nonvested at July 1, 2008		215		$	2.22
Granted		10			1.32
Canceled or expired		-			-
Vested		(45	)	$	2.21
Nonvested at March 31, 2009		180		$	2.17

The total fair value of shares vested during the nine months ended March 31, 2009 was $100,000.

The following table presents information relating to stock options at March 31, 2009 (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		145	$	3.70		0.9		134	$	3.69
$	4.50 - $ 7.49		229	$	6.83		6.4		60	$	6.91
$	7.50 - $ 8.99		119	$	8.19		1.6		119	$	8.19
$	9.00 - $ 10.49		172	$	10.13		3.4		172	$	10.13
$	10.50 - $11.99		92	$	10.89		1.2		92	$	10.89
$	12.00 - $13.49		117	$	12.45		3.4		117	$	12.45
$	13.50 - $14.99		45	$	13.74		4.9		45	$	13.74
			919						739

7. INCOME TAXES

The Company accounts for income taxes under the asset and liability approach.  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.

In June 2006, the FASB issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”).  FIN 48 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes.  In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties and accounting in interim periods and requires expanded disclosures with respect to the uncertainty in income taxes.  The Company has adopted FIN 48 effective July 1, 2007.

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As of March 31, 2009, the Company’s unrecognized tax benefits totaled $380,000, including $19,000 relating to accrued interest and penalties, which related to tax positions which, if recognized, would affect the annual effective tax rate.  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 ended before June 30, 2005.  In January 2009, the Company was notified that the Internal Revenue Service will be examining its fiscal 2007 Federal income tax return.  The examination has not yet been completed and the outcome cannot be determined at this time.

During the nine-months ended March 31, 2008, the Company reduced its deferred tax assets by approximately $225,000 in connection with fully vested non-qualified employee stock options which terminated as a result of the departure of certain employees.

8. SEGMENT INFORMATION

The Company has three distinct product lines:  Medication Management systems, Blood 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 operating divisions into one reporting segment.  Revenue by product line are as follows (in thousands):

	For the Three Months Ended March 31,				For the Nine Months Ended March 31,
	2009		2008		2009		2008
Medication Management Systems:
System revenue	$	1,619	$	1,558	$	3,740	$	5,670
Service revenue		3,572		2,959		10,665		8,613
Blood Management Systems:
System revenue		1,070		1,101		3,401		3,205
Service revenue		3,686		4,018		11,573		11,142
Perioperative Management Systems:
System revenue		11		-		11		6
Service revenue		244		203		660		606
Total	$	10,202	$	9,839	$	30,050	$	29,242

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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,
	2009		2008		2009		2008
Revenue from Unaffiliated Customers:
United States operations	$	8,719	$	8,174	$	25,808	$	25,121
United Kingdom operations		1,483		1,665		4,242		4,121
Total	$	10,202	$	9,839	$	30,050	$	29,242
Net Income:
United States operations	$	209	$	35	$	481	$	42
United Kingdom operations		274		281		523		400
Total	$	483	$	316	$	1,004	$	442

	March 31,
	2009		2008
Identifiable Assets:
United States	$	53,828	$	52,960
United Kingdom		4,927		5,829
Total	$	58,755	$	58,789

9.  CONTINGENCIES

In February 2007, the California Supreme Court denied the petition for a review filed by former Mediware employee Donnie L. Jackson, Jr. regarding the decision of the Third Appellate District in Sacramento, California to vacate the award of attorney’s fees previously obtained by Mr. Jackson and to remand the case to Superior Court of El Dorado County, California for further proceedings.  Mr. Jackson had previously successfully moved for summary judgment on claims by GlobalMed Technologies, Inc. (“Global Med”) that he misappropriated trade secrets and breached certain contractual covenants.  The trial court had awarded fees, costs and interest against Global Med based on Mr. Jackson’s employment contracts. In the event that Mr. Jackson ultimately prevails in this case, which was commenced on September 23, 2002 by Global Med, the Company would be eligible to be reimbursed for certain attorneys’ fees and costs plus interest advanced to Mr. Jackson by the Company in connection with Global Med’s claims.  If Mr. Jackson does not prevail, Mediware could be responsible under an agreement with Mr. Jackson for damages and certain fees and costs awarded to Global Med, which could be material.

In addition to the foregoing, 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 business, financial condition, results of operations or cash flows.

10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, (“SFAS 157”). This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The adoption of SFAS 157 on July 1, 2008 did not have a material impact on the Company’s financial position, results of operations or cash flows.

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In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (“SFAS 159”). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently with having to apply complex accounting provisions. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 on July 1, 2008 did not have a material impact on the Company’s financial position.

In December 2007, the FASB issued Statement No. 141 (revised), Business Combinations (“SFAS 141(R)”). The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. SFAS 141(R) is effective for acquisitions dated on or after the first annual reporting period beginning on or after December 15, 2008, with early adoption prohibited. The Company is currently evaluating the impact of the pending adoption of SFAS 141(R) on its results of operations and financial condition.

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. The Company is currently evaluating the impact of the pending adoption of SFAS 160, but does not anticipate that the provisions of SFAS 160 will have a material impact on the financial statements.

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REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To 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 31, 2009, and the related condensed consolidated statements of operations and comprehensive income (loss) for the three and nine-month periods ended March, 31 2009 and 2008, cash flows for the nine-month periods ended March 31, 2009 and 2008, and statement of stockholder’s equity for the nine-months ended March 31, 2009.  These interim condensed consolidated financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards established 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, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

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, 2008, 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 2, 2008, 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, 2008 is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

Eisner LLP

New York, New York

April 29, 2009

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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, 2008 and in subsequent Quarterly Reports on Form 10-Q, 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.

Overview

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 reports filed with 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 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 develops, markets, licenses, implements, services and supports clinical management information solutions.

The Company develops,  licenses and sells its blood and biologics management solutions to hospitals and its medication management solutions to hospitals, long-term care, specialty pharmacy, home infusion and behavioral health facilities.   Mediware licenses and sells its blood donor recruitment and management solutions to blood donor and plasma donor centers through its Blood Center Technologies business group. 

The software systems that Mediware provides to its customers typically consist of the Company's proprietary application software, third-party licensed software and third-party hardware.  Mediware generally licenses its medication management, blood management and biologics management software systems to customers on a perpetual basis.   These customers typically make an up-front payment for the software license fees and payments for support services on an annual basis.     In contrast, Mediware generally provides its blood and plasma center solutions and its MediREC software and its recently acquired HOS products on a monthly subscription basis. These customers pay Mediware an initial start-up fee and a monthly fee for use and support of Mediware’s proprietary software.  Under both payment models, customers may purchase services, including implementation and additional consultation services, for additional fees which are generally billed as incurred.  Mediware currently anticipates that over time an increased number of its systems will be licensed on a subscription basis.

Mediware markets its blood donor and its blood and biologic management products primarily in the United States. The Company markets its medication management solutions in the United States and in the United Kingdom, with different software systems designed for the specific requirements of each market. The Company has operations in the United Kingdom relating to the systems licensed and sold primarily in that market as well as Ireland and South Africa. All other operations are in the United States.

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Market Positioning

Mediware designs, develops and markets software solutions targeting specific processes within healthcare institutions. Software products are sold to hospitals, long-term care, specialty pharmacy, home infusion and behavioral health facilities and stand alone blood and plasma donation centers. The Company believes that its competitive advantages include rich product knowledge and a long history of innovation in the areas of medication and blood software products.

Traditional healthcare environments leverage disparate information systems and manual processes throughout the care process. This results in reduced efficiency as well as increased safety risks due to the potential for human error and delayed access to patient information and records. Errors and risks associated with medications, blood, or biologics can often result in tragic consequences, a fact that can raise the awareness and priority of Mediware solutions.

The Company’s strategy is to address targeted clinical areas with “suites” of applications that provide clinicians one data environment for the information relating to the prescribing, preparation, and administration of drug, blood and/or biologics therapies. Mediware’s products manage each step of the therapeutic process in one system environment, including: ordering, fulfillment, administration, and documentation, to provide care providers a “closed loop” process for blood and medication therapies.  The process-centric integrated data environments provided by Mediware’s blood, biologic and medication management solutions seamlessly extend the discipline and controls of the pharmacy and blood bank to patient units, operating room suites, and other venues where adverse events occur. The Company believes this closed loop process differentiates it from the industry’s catalog and “best of breed” vendors. 

In November 2008, the Company acquired substantially all the assets of Hann’s On Software, Inc, a California corporation (“HOS”).  HOS provided of medication management solutions to the small hospital, specialty pharmacy and home infusion markets through  integrated software solutions which address the complex work flow and patient safety needs of these markets.

The Healthcare Information Systems Industry

The healthcare industry in the United States is highly fragmented, complex, and inefficient. While advances in medical technology have provided physicians, nurses and other caregivers leading edge diagnostic and therapeutic technologies, the information systems supporting the management of clinical processes in complex healthcare organizations have not made comparable progress. Mediware believes that a substantial portion of clinical workflow still depends upon manual paper-based processes interfaced with various automated or semi-automated functionally oriented clinical systems. Examples of functionally oriented clinical systems include pharmacy, radiology, blood bank and nursing documentation.

As a result, the healthcare industry is generally economically inefficient and produces significant variances in medical outcomes.  While waste and utilization rates are rarely made public, patient safety and the publicity surrounding medical errors have focused a tremendous amount of scrutiny on hospitals and care providing institutions. Recent news reports, professional studies and government actions have highlighted patient safety errors and influenced governmental activity.

For example:

· In July 2006, the Institute of Medicine published a study on medication errors. The study found that on average a patient suffers one medication error every day the patient stays in the hospital. The study concluded that 1.5 million people are harmed and thousands are killed each year in hospitals due to medication errors. In addition to the patient risk, the study estimated that errors cost the nation at least $3.5 billion annually.

· In September 2007, The Joint Commission Journal on Quality and Patient Safety included a study on medication errors. The study found that almost 5% of the medication errors identified were attributable to the use of medication abbreviations that resulted in miscommunication.  It found that 81% of such errors occurred during prescribing, 14% occurred during transcribing and 3% occurred during dispensing. The study suggested that electronic medication ordering tools can help reduce this source of human error.

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· The Joint Commission on Accreditation of Healthcare Organizations (“JCAHO”), which has oversight responsibility for hospitals, has the authority to revoke the accreditation of hospitals that fail to meet JCAHO standards of care.  A hospital’s failure to meet JCAHO’s standards could result in the loss of critical Medicare and Medicaid reimbursement revenue.  JCAHO’s mandates require hospitals to document all of a patient’s home medication when a patient is admitted to the hospital or enters the emergency room, and to reconcile that list with the medications prescribed in the hospital and repeat this process when the patient is transferred in the hospital and when the patient is discharged.

· The Serious Hazards of Transfusion (“SHOT”), an on-going study in the United Kingdom, reviewed facilities accounting for 92% of that country’s blood supply. Of the errors identified, 15% resulted from errors during requesting, prescription or sample collection; 29% occurred in the blood bank and 50% were due to error when collecting and/or administering blood. The study also found that the single most important factor in transfusion errors is misidentification of the patient. As a result, the study recommended the evaluation of computerized aids and barcode technology to confirm that the correct unit of blood is administered to the patient.

· Incidents where tissue suppliers distributed products that were improperly acquired and fraudulently documented have become public through high profile cases involving prestigious hospitals transplanting infected tissues into unsuspecting patients. While regulatory changes are difficult to predict, hospital oversight of these materials is increasing. Prominent cases include the 2005 scandal around Biomedical Tissue Services, a New Jersey company that is accused of using stolen bodies and shipping nearly 20,000 potentially tainted body parts. In 2006, the FDA shut down Donor Referral Services of Raleigh, N.C. due to “serious deficiencies” in its processing, donor screening and record-keeping.

The Company believes that in addition to healthcare industry evolution and reports, studies and actions like those identified, the impact of specific potential health threats such as the variant Creutzfeldt-Jakob (mad cow) virus will require healthcare organizations to re-examine their ability to track and analyze patients, donors, procedures and outcomes. Mediware's products, which integrate operating and clinical systems, are targeted to facilitate solutions to these healthcare industry issues.

The Company anticipates that a continued increase in government regulation, public and competitive pressure regarding errors occurring in hospitals, as well as new health threats, will continue to drive the industry’s expenditures on clinical information systems.  Further, the economic stimulus bill passed by Congress and signed by President Obama  in early 2009, allocates $19 billion in grants and incentives for companies and practices to buy health information technology.   Additionally, President Obama  has asked Congress to further expand its investment in healthcare information technology in next year’s budget and beyond.  The Company believes that over time, these increases in   government spending on health care information technologies will increase funding available to hospitals for spending on health care information technologies and could increase the resources hospitals have to purchase Mediware products.   Mediware believes that its product strategy and offerings can play a role in moving healthcare information technology standards forward to deliver significant results for patients and customers.

Competition in the market for clinical information systems is intense. The principal competitive factors are the functionality of the system, its design and capabilities, site references, the demonstrated need, ability to install, process redesign capabilities, reputation, software platform, the potential for enhancements, price, departmental versus enterprise sales and salesmanship. Another key factor is the strategic position the incumbent, or major healthcare information systems vendor, has in the customer site. Different dynamics and competitors, however, affect each of the Company's products and each sale.

Blood and Biologics Management Products

Hospital Transfusion and Donor Products

The Company supplies information and management software systems to hospital blood banks and transfusion centers.  Hospitals face pressures to manage blood inventory and improve the safety of the blood supply by reducing errors, improving screening and increasing throughput and cost efficiencies. These pressures exist despite pressures across the healthcare industry to reduce costs and to address ongoing personnel shortages. Mediware's blood management software systems are intended to help hospitals and blood centers address these issues. The software is designed to reduce costs through automatic report production, decreased paperwork, and automated billing. The Company's products are also designed to improve blood supply safety through the use of user-defined truth tables, among other features.  

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The Company’s flagship blood transfusion product is the HCLL transfusion software.  Mediware also provides its hospital customers its complementary HCLL donor software module for use in hospital-based donor centers. The HCLL software (HCLL Transfusion and HCLL Donor) addresses blood donor recruitment, blood processing and transfusion activities for hospitals and medical centers.  These systems are designed to be user intuitive, scalable, and support product management, resource management, quality control and testing. They include advanced data mining and data management intelligence capabilities, which can be utilized by facilities of all sizes, including, small hospitals, large medical centers, multi-facility enterprises and central transfusion services. HCLL software also can address the needs of hospitals for operating centralized transfusion services, an area that is as a key to controlling the rising cost of blood products. As of March 31, 2009, the HCLL software was in productive use at nearly 225 sites. The Company has licensed the software for use at approximately 300 facilities.

The Company is also looking to new products and markets to continue its growth in the blood management. In early fiscal year 2008, the Company announced its new BloodSafe™ suite of products. The BloodSafe suite includes hardware and software which enable healthcare facilities to securely store, monitor, distribute and track blood products from locations removed from the hospital’s blood bank. Components of the BloodSafe suite include blood tracking and monitoring software, computer controlled refrigerators, and handheld point of care tools to verify accurate patient identification and document transfusion activities. BloodSafe can be integrated with Mediware’s HCLL software or operate on a stand-alone basis. Mediware expects its first BloodSafe customer to begin productive use of the integrated product in the fourth quarter of fiscal 2009.

Blood Center Technologies

The Company also 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 the Company’s 510(k) cleared LifeTrak® software and the products and capabilities acquired in Mediware’s November 1, 2007 acquisition of substantially all of the business assets of Integrated Marketing Solutions, Inc (“IMS”).  The addition of IMS to Mediware’s blood center strategies enables the Company 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.  Since the acquisition of IMS, Mediware has been aggressively integrating software and capabilities to streamline the effectiveness of blood centers, from donor recruitment, through the clinical laboratory, to hospital management. With the addition of the IMS components, LifeTrak has robust clinical capabilities with modern and effective CRM technologies that enable blood centers to improve the effectiveness of coordinated blood drive campaigns while still meeting the strict FDA regulations for safe blood management. Combining IMS and LifeTrak technologies, it is estimated that Mediware products support over 50% of the U.S. blood supply at some point in the collection, testing and distribution processes.

To capitalize on the integration of IMS and to focus on the unique needs of the blood center market segment, on July 8, 2008 Mediware announced the launch of Blood Center Technologies (“BCT”).  Mediware’s BCT business unit is a customer focused team that combines the IMS assets with Mediware LifeTrak assets to drive growth as Mediware expands its focus in the blood donor market.  As of March 31, 2009, the BCT business unit had software in productive use at over 305 facilities.

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Biologics Products

Hospitals are beginning to face the same pressures to manage biologic product inventory and improve safety by reducing errors, improving screening and increasing throughput and cost efficiencies as they have faced with blood products for years.   In June 2008, Mediware released BiologiCare, the Company’s first generation bone, tissue and cellular product tracking software.  The software leverages the HCLL software platform and Mediware’s blood banking expertise to address the important needs of hospitals as they begin to manage bone, tissue, cord blood stem cells and other biologic products.     BiologiCare is designed specifically to track and manage transplantable materials in hospitals, surgery centers and other healthcare facilities. The products enable users to document donors, tissue vendors and tissue recipients and to comply with current regulations regarding transplantable materials.  With the introduction of BiologiCare, Mediware believes it is 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 Mediware’s HCLL software or operate on a stand-alone basis.  Mediware expects its first Biologicare customer to begin productive use of the software in the summer of 2009.

The Company continues to concentrate on growing all aspects of its blood management business: hospital transfusion and donor products, biologics products and blood center technology products.  The blood management products are marketed primarily through the Company’s direct sales force, and the Company is working to develop complementary reseller relationships. In addition to its sale of software, the Company generates revenue from professional services and post-contract support.

The blood management products compete primarily with vendors of laboratory information systems (“LIS”) providing a blood bank subsystem as a part of their laboratory product, as well as other companies that market stand-alone blood bank systems. The LIS vendors are much larger companies with greater technical, marketing, financial and other resources than the Company. We believe these competitors include Cerner, McKesson, and Meditech.   We believe that stand-alone lab or blood bank vendors include Sunquest, Global Med Technologies and SCC Soft.  The Company believes, however, that due to the functionality of the HCLL software, the Company is well-positioned in the blood bank system market and that it has a good reputation with its customers, including many of the most sophisticated healthcare systems in the United States. On the blood donor side of the business, we compete against several of the companies listed above as well as Haemontics, Blood Bank Computer Services Company, MAK Software and others.

Medication Management Products

The Company also supplies medication management solutions to hospitals, mental health facilities, specialty pharmacies, home infusion facilities, penal institutions and other institutions that require the administration and management of medication. The Company’s medication management solutions are designed to help customers improve patient safety while reducing costs and improving clinical documentation. Additionally, the solutions help medical facilities comply with increasing regulatory and governmental requirements.

The Company’s principal software product for medication management is WORx, a core pharmacy information system designed to manage inpatient and outpatient pharmacy operations. WORx software has features and functions designed to help improve patient safety and manage pharmacy operations effectively. As of  March 31, 2009, the WORx software was in productive use at approximately 180 sites.  The product's market acceptance encompasses hospitals that are primarily medium to large in size, including multi-facility healthcare systems.  The acquisition of substantially all of the HOS assets expanded Mediware’s product offering by adding a pharmacy solution that meets the needs of small and medium size hospital, specialty pharmacy and home infusion facilities.  The Company currently plans to continue offering the WORx product line to larger acute care hospitals and state behavioral health facilities, while the HOS product line offers a comprehensive solution for the small and medium size hospital, specialty pharmacy and home infusion markets.   The HOS acquisition added approximately 320 hospital and home infusion sites to Mediware’s medication management customer base.

In fiscal 2004, the Company released MediCOETM and MediMAR®. These products are fully integrated with the WORx software and provide a complete closed loop drug therapy management system with a physician order entry module (MediCOE) and nurse point of care administration and bedside documentation module (MediMAR).

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The MediCOE software provides clinicians an efficient, effective method to enter medication orders and manage drug therapy. Orders entered in the MediCOE software undergo a prospective evaluation based on the patient’s current medical profile to identify potential adverse outcomes. Potential problems can be identified by the clinician at order entry and can be corrected or explained at the point of care.

The MediMAR software, on the other hand, serves as an electronic medication administration and bedside documentation record. It produces a dynamic and complete representation of the patient’s medication profile, including clinician orders, medication list, allergies, notes and clinical alerts to increase patient safety. The MediMAR software uses bar code, wireless, handheld, and other technologies to allow caregivers efficient and accurate methods to document patient medication administration and provide nurses additional safety measures at the point of care.

As of March 31, 2009, the MediCOE and MediMAR products have been licensed for use in 3 and 18 separate customer sites, respectively.

To expand the Company’s capabilities and address a new industry mandate, the Company introduced MediREC in March 2007. This medication management product assists in achieving compliance with a recent JCAHO mandate, which requires hospitals to document all of a patient’s home medications when a patient is admitted or enters the emergency room, and to reconcile that list with the medications prescribed in the hospital. That process must be repeated each time the patient is transferred within the hospital and again when the patient is discharged. At March 31, 2009, MediREC was licensed for use at 7 customer sites.

The Company continues to target its large WORx software customer base and new customers with the MediCOE and MediMAR products and markets MediREC to this customer base and new customers as well. The Company has increased its focus on behavioral health and other specialty healthcare markets where the HOS pharmacy software offers an easy to install robust solution and the integrated features and functionality included in the WORx, MediMAR, MediCOE and MediREC software products can provide fully integrated medication management solutions.

Selling the Company’s full suite of medication management products (WORx, MediMAR, MediCOE and MediREC) is a complex process involving multiple hospital departments and, therefore, results in substantially longer sales cycles compared to stand-alone WORx sales. This has resulted in less predictable contract closures and a need to recognize software license revenue over multiple quarters (in some cases). On the other hand, the HOS software requires substantially smaller financial commitments from hospitals, specialty pharmacies, and home infusion facilities and is priced based on a subscription pricing model.  Consequently, Mediware anticipates that sales of these products will be more predictable and have shorter sales cycles.  The MediREC software is also being licensed to customers on a recurring, transaction basis, and Mediware expects that as the adoption of MediREC increases, the sale and implementation cycles for MediREC to be shorter than for the full suite of products.

The Company generates revenue from medication management software sales, professional services and post-contract support. Support contracts currently account for over half of the revenue from medication management operations. As the HOS contribution to the Company’s revenue increase and the sale of MediCOE and MediMAR products increase, the Company expects that license fee revenue will increase and support revenue will make up a smaller portion of the Company’s revenue.

The Company’s medication management products compete against the products of the other niche competitors’ and some of the largest providers of healthcare information technology, including Cerner, General Electric, Siemens, Eclipsys and others. These competitors often have significantly greater resources than Mediware, but the Company believes that its products are well positioned and have functionality that can lead to growth in this competitive environment. The medication management products are marketed directly through the Company’s sales force and other marketing channels, including reseller agreements with distribution partners and focused sales channels.

The Company's United Kingdom operating business is JAC Computer Services, Ltd. (“JAC”).  JAC markets and provides support for its pharmacy management and electronic prescribing systems throughout the U.K., Ireland and South Africa. JAC includes an installed base of approximately 200 customer sites, representing over 100 National Health Service (“NHS”) acute hospitals or trusts in the U. K. JAC’s product offering includes JAC’s Pharmacy Management System and Electronic Prescribing module. The prescribing module is a medication management solution complete with physician medication order entry and nursing medication administration. This module is being installed in approximately 20 U.K. customer sites as of March 31, 2009, and allows hospitals to improve patient safety relevant to medication management. The Company’s Pharmacy Management system product handles medication tracking from ordering and delivery to dispensing. The installed base includes approximately 50% of the trusts within the NHS.

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In the beginning of 2004, the NHS in England initiated a national program to purchase healthcare information technology. The government has identified that program as the “Connecting for Health” program (the “National Program”). This program is designed to develop an integrated clinical software solution for hospitals in order to support the modernization of patient care in England. The NHS has entered into contracts to license software and services, but the National Program has experienced delays. JAC has been able to work with the integrated service providers and the government to position itself favorably as a provider of software.  In July 2008, JAC was appointed to the ASCC (Additional Supply Capability and Capacity) framework contract in both the e-prescribing and pharmacy (stock control) categories.  Appointment to the ASCC framework provides healthcare organizations with a contracting vehicle to work directly with JAC to procure specialist e-prescribing and/or pharmacy stock control services as an alternative to the national program.  The JAC products are marketed directly through JAC’s sales force and other marketing channels, including reseller agreements in South Africa.   JAC recently entered into a multi-year contract in South Africa under which JAC will license its software to as many as 40 public sector hospitals for the Provincial Government of the Western Cape.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related notes to financial statements. Actual results could differ from those estimates.  The Company’s significant areas of estimation include determining the allowance for uncollectible accounts, valuing certain accrued liabilities and determining whether the carrying value of goodwill and capitalized software development costs and other intangible assets is impaired.

Results of Operations for the Three Months Ended March 31, 2009 as Compared to the Three Months Ended March 31, 2008

Total revenue for the third quarter of fiscal 2009 was $10,202,000 compared to $9,839,000 in the third quarter of fiscal 2008, an increase of $363,000, or 4%.  The increase in revenue is primarily due to an increase in service revenues associated with the medication management product lines partially offset by a decrease in service revenues associated with the blood management product lines.  Blood management products and services recorded total revenue of $4,756,000 in the third quarter of fiscal 2009, representing a decrease of $363,000, or 7%, compared to $5,119,000 in the same period of fiscal 2008.  Medication management products and services (including the results from the acquired HOS business but excluding JAC) recorded an increase in total revenue of $856,000, or 30%, from $2,852,000 in the third quarter of fiscal 2008 to $3,708,000 in the same period of fiscal 2009.  JAC recorded total revenues of $1,483,000 in the third quarter of fiscal 2009, representing a decrease of $182,000, or 11%, compared to $1,665,000 in the same period of fiscal 2008.  Perioperative management revenue increased from $203,000 during the third fiscal quarter 2008 to $244,000 during the same quarter 2009.  The Company does not actively market its perioperative management products.

System sales revenue, which includes proprietary software, third party software, hardware revenue and subscription revenue, amounted to $2,700,000 for the quarter ended March 31, 2009, which represents an increase of $41,000 or 2% compared to $2,659,000 of system sales reported in comparable quarter of fiscal 2008.   System revenue for the blood management products was $1,070,000 for the third quarter of fiscal 2009, a decrease of $31,000, or 3%, compared to $1,101,000 reported in the same quarter of fiscal 2008.  This decrease is primarily due to the anticipated decrease in HCLL system sales partially offset by increased subscription revenue associated with Blood Center Technologies sales.  We anticipate that recurring revenue from Blood Center Technologies will continue to grow and that our newer BloodSafe and BiologiCare offerings will begin to contribute more strongly to system revenues in the coming quarters.   In contrast, we believe that HCLL system sales will continue to contribute but will not show ongoing strong growth.  System sales for the medication management products (including the results from the recently acquired HOS business but excluding JAC) increased from $852,000 in the third quarter of fiscal 2008 to $922,000 in the third quarter of fiscal 2009, representing an increase of $70,000, or 8%.  This increase resulted primarily from system sales generated by the acquired HOS business and an increase in third party sales, partially offset by a decrease in WORx system sales.  JAC recorded system sales of $697,000 for the third quarter of fiscal 2009, representing a decrease of $9,000, or 1%, compared to $706,000 reported for the same period in fiscal 2008.  Although JAC experienced a 37% increase in system sales based on its local currency, the foreign exchange rate between the British Pound and the US Dollar has weakened significantly since the fiscal 2008 period and  JAC business success is not reflected in the US Dollar financial statements as a result.  JAC has benefited from its strong position with the National Program and the Company believes that JAC is well positioned to grow in the coming quarters.

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Service revenue, which includes recurring post contract support revenues, implementation services and promotional services, increased $322,000, or 4%, to $7,502,000 in the third quarter of fiscal 2009 compared to $7,180,000 for the same period in fiscal 2008.   Service revenue for the blood management products totaled $3,686,000 for the third quarter of fiscal 2009, representing a decrease of $332,000 or 8%, compared to $4,018,000 in the third quarter of fiscal 2008.  The decrease primarily is the result of a decrease in implementation activity related to the implementation of HCLL software systems, along with a decrease in promotional revenue associated with the Blood Center Technologies products.  Mediware anticipates that service revenue associated with the implementation of HCLL will continue to be strong through the remainder of fiscal 2009, but may slow thereafter, as we complete the majority of the remaining HCLL implementation projects.   Service revenue for the medication management products (including the results from the acquired HOS business but excluding JAC) increased $786,000, or 39%, to $2,786,000 in the third quarter of fiscal 2009 compared to $2,000,000 for the same quarter of fiscal 2008.  This increase reflects an increase in upgrade services, as existing customers continue to upgrade their WORx software systems to a new version of the software.   We are providing these upgrade services under a focused upgrade program designed to encourage customers to upgrade their software to help ensure that the customers have access to third party drug information in the WORx software.   We expect upgrade service revenue to remain strong for the remainder of the fiscal year as a result of this program, but this program-related revenue will wind down in the early part of the next fiscal year.  Service revenue for JAC decreased $173,000, or 18%, to $786,000 in the third quarter of fiscal 2009 compared to $959,000 in the third quarter of fiscal 2008.  This decrease is primarily the result of the declining foreign currency exchange rates.  In its local currency, JAC reported a 12% increase in service revenue for the quarter.  The Company expects service revenues to increase over the next year as JAC continues to expand its participation with the National Program.

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 $161,000, or 19%, to $996,000 in the third quarter of fiscal 2009 as compared to $835,000 in the same period in fiscal 2008 due to an increase in third party sales.  The gross margin, excluding amortization of capitalized software costs, on system sales was 63% in the third quarter of fiscal 2009 compared to 69% in the same quarter in fiscal 2008.  The decrease in gross margin is primarily due to the increase in the amount of third party software sold during the quarter and the smaller amount of high margin proprietary system sales during the third quarter of fiscal 2009 compared to the same period in fiscal 2008.

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 $216,000, or 9%, to $2,580,000 in the third quarter of fiscal 2009 as compared to $2,364,000 in the same period of fiscal 2008.  The increase in cost of services is primarily attributed to increases in the number of customer service personnel needed to facilitate the implementation of the HCLL projects and provide upgrade services to the existing WORx customers.  Gross margin on service revenue was 66% for the third quarter of fiscal 2009 compared to 67% for the second quarter of fiscal 2008.  Mediware anticipates that gross margins will remain consistent with the current levels for the remainder of fiscal 2009.

Amortization of capitalized software increased $8,000 or 1%, to $1,449,000 in the third quarter of fiscal 2009 compared to $1,441,000 in the third quarter of fiscal 2008.  This increase is primarily due to increased amortization of capitalized software costs related to recent releases of the LifeTrak, HCLL and WORx products.  We expect amortization of capitalized software to remain comparable with its current levels for the remainder of fiscal 2009, and we anticipate that amortization costs will decline significantly in fiscal 2010, provided Mediware’s capitalization rates and cash expenditures continue at substantially the same rate.  At our current level of investment in product development activities, we expect amortization of capitalized software to decline by approximately $700,000 in fiscal 2010.

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Software development costs include the non-capitalizable portions of salaries, consulting, documentation, office and other direct expenses incurred in product development activities.  Software development costs increased $1,000 to $1,036,000 in the third quarter of fiscal 2009 compared to $1,035,000 in the third quarter of fiscal 2008.  Expenditures for software development include amounts paid for both capitalizable and non-capitalizable development projects.  Total expenditures for software development were $1,994,000 in the third quarter of fiscal 2009 compared to $1,895,000 in the third quarter of fiscal 2008, an increase of $99,000, or 5%.  We believe the increase reflects our ongoing commitment to the maturation of our products, and we expect to maintain our current investment in product development in our blood management and medication management products in the near term.

Selling, general and administrative (“SG&A”) expenses include marketing and sales salaries, commissions, travel and advertising expenses.  Mediware also includes bad debt expense; legal, accounting and professional fees; salaries and bonus expenses; utilities, rent, communications and other office expenses; stock-based compensation expenses and other related direct administrative expenses.  SG&A expenses decreased $386,000, or 10%, from $3,852,000 in the third quarter of fiscal 2008 to $3,466,000 in the third quarter of fiscal 2009.  This decrease is primarily attributable to the restructuring efforts announced in the first quarter of fiscal 2008 and lower sales and legal expenses .  This decrease was partially offset by incremental costs associated with acquired HOS business.

Income tax expense increased from $184,000 in the third quarter of fiscal 2008 to $243,000 in the same period of fiscal 2009, as a result of the increase in operating income.

Net income for the third quarter of fiscal 2009 was $483,000, compared to net income of $316,000 during the third quarter of fiscal 2008, resulting in an increase of $167,000 or 53%.  The improvement resulted primarily from increased service revenues and a decrease in SG&A expenses.

Results of Operations for the Nine Months Ended March 31, 2009 as Compared to the Nine Months Ended March 31, 2008

Total revenue for the nine month period ended March 31, 2009 was $30,050,000 compared to $29,242,000 in the comparable period of fiscal 2008, an increase of $808,000, or 3%.  The increase in revenue is largely due to an increase in medication management and blood management service revenues, partially offset by a decrease in medication management system sales.   Blood management products and services recorded total revenue of $14,974,000 during the nine month period of fiscal 2009, representing an increase of $627,000, or 4%, compared to $14,347,000 in the same period of fiscal 2008.  Medication management products and services (including the results from the acquired HOS business but excluding JAC) recorded an increase in total revenue of $1,000 from $10,162,000 in the first nine months of fiscal 2008 to $10,163,000 in the same period of fiscal 2009.  JAC recorded total revenues of $4,242,000 during fiscal 2009, representing an increase of $121,000 or 3%, compared to $4,121,000 in the same period of fiscal 2008.  Perioperative management revenue increased from $612,000 during the first nine months of fiscal 2008 to $671,000 during the same period of fiscal 2009. The Company does not actively market its perioperative management products.

System sales revenue amounted to $7,152,000 for the nine months ended March 31, 2009, a decrease of $1,729,000 or 19%, from $8,881,000 in the same period in fiscal 2008.  System sales for the blood management products were $3,401,000 for the first nine months of fiscal 2009, an increase of $196,000, or 6%, compared to $3,205,000 in the same period of fiscal 2008.  System sales for the medication management products (including the results from the acquired HOS business but excluding JAC) decreased from $4,351,000 in the first nine months of fiscal 2008 to $2,010,000 in the same period of fiscal 2009, representing a decrease of $2,341,000, or 54%.  This decrease reflects a decrease in MediMAR sales revenue due to a significant MediMAR contract that was signed during the first quarter of fiscal 2008 and, to a lesser extent, a decrease in WORx revenue and MediREC revenue.  JAC recorded system sales of $1,730,000 for the first nine months of fiscal 2009, representing an increase of $411,000, or 31%, compared to $1,319,000 reported for the same period in fiscal 2008.

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Service revenue increased $2,537,000, or 12%, to $22,898,000 in the first nine months of fiscal 2009 compared to $20,361,000 for the same period in fiscal 2008.  Service revenue for the blood management products totaled $11,573,000 for the first nine month period of fiscal 2009 representing an increase of $431,000, or 4%, compared to $11,142,000 in the same period of fiscal 2008 primarily reflecting an increase in implementation activity for the HCLL software systems.  Service revenue for the medication management products (including the results from the acquired HOS business but excluding JAC) increased $2,342,000, or 40%, to $8,153,000 in the first nine months of fiscal 2009 compared to $5,811,000 for the same period of fiscal 2008.  This increase is a result of an increase in WORx upgrade services and incremental revenues from the acquisition of HOS.  Service revenue for JAC decreased $290,000, or 10%, to $2,512,000 in the nine month period of fiscal 2009 compared to $2,802,000 in the same period of fiscal 2008.  This decrease is primarily the result of the declining foreign currency exchange rates between the British Pound and the US Dollar.  In its local currency, JAC reported an 11% increase in service revenue for the nine-month period.

Cost of systems 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 $494,000, or 22%, to $2,703,000 during the first nine months of fiscal 2009 as compared to $2,209,000 in the same period in fiscal 2008.  The gross margin, excluding amortization of capitalized software costs, on system sales was 62% in the nine month period of fiscal 2009 compared to 75% in the same period in fiscal 2008.   The decrease in gross margin is primarily due to an increase in the amount of third party sales during the nine months and the smaller amount of high margin proprietary system sales during the first nine months of fiscal 2009 compared to the same period in fiscal 2008.

Cost of services increased $1,010,000, or 15%, to $7,888,000 during the first nine months of fiscal 2009 as compared to $6,878,000 in the same period of fiscal 2008.  The increase in cost of services is primarily attributed to increases in the number of customer service personnel needed to facilitate the implementation of the HCLL projects and provide upgrade services to the existing WORx customers.  Gross margin on service revenue remained consistent at 66% for the nine months of fiscal 2009 and 2008.

Amortization of capitalized software increased $140,000, or 3%, to $4,452,000 in the first nine months of fiscal 2009 compared to $4,312,000 in fiscal 2008.  This increase is primarily due to increased amortization of capitalized software costs related to recent releases of the HCLL and WORx products.

Software development costs decreased $187,000, or 6%, to $2,794,000 in the first nine months of fiscal 2009 compared to $2,981,000 in the same period of fiscal 2008. Expenditures for software development include amounts paid for both capitalizable and noncapitalizable development projects.  Total expenditures for software development were $5,694,000 in the first nine month period of fiscal 2009 compared to $5,527,000 in the same period of fiscal 2008, an increase of $167,000, or 3%.  This increase is primarily a result of higher investment in the blood management products during the first nine months of fiscal 2009 and incremental development costs associated with the acquired HOS business.

SG&A expenses include marketing and sales salaries, commissions, travel and advertising expenses.  Mediware also includes bad debt expense; legal, accounting and professional fees; salaries and bonus expenses; utilities, rent, communications and other office expenses; stock-based compensation expenses and other related direct administrative expenses.   SG&A expenses decreased $1,545,000, or 12%,  from $12,528,000 in the first nine months of fiscal 2008 to $10,983,000 in the same period of fiscal 2009.  The decrease in SG&A expenses is primarily attributable to the restructuring efforts announced during the first quarter of fiscal 2008 and decreases in sales, professional fees, medical and recruitment expenses.

Income tax expense decreased $57,000, from $585,000 during the first nine months of fiscal 2008 to $528,000 in the same period of fiscal 2009.  In conjunction with this decrease, the effective tax rate decreased from 57% for the nine months ending March 31, 2008 to 34.5% in the same period of fiscal 2009.  The decrease in the effective tax rate is primarily attributable to a $225,000 non-cash write-off of certain deferred tax assets relating to fully vested non-qualified stock options that were forfeited as a result of the departure of certain employees during the first quarter of fiscal 2008.

Net income during the first nine months of fiscal 2009 was $1,004,000, compared to net income of $442,000 during the same period of fiscal 2008, resulting in an increase of net income of $562,000, or 127%.  The improvement resulted primarily from increased service revenue and decreased SG&A expense partially offset by a decrease in system sales revenue.

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Liquidity and Capital Resources

As of March 31, 2009, Mediware had cash and cash equivalents of $21,322,000 compared to $22,741,000 at June 30, 2008.  Working capital was $17,788,000 and $18,995,000 at March 31, 2009 and June 30, 2008, respectively.  The current ratio was 2.3 to 1 at March 31, 2009 compared to 2.5 to 1 at June 30, 2008.  The Company does not have any material capital lease obligations, purchase obligations or long-term liabilities.

Cash provided by operating activities was $6,893,000 during the first nine months of fiscal year 2009 compared to $10,547,000 during the same period a year ago.  The decrease in cash provided by operating activities is primarily due to especially strong collections on accounts receivable during the first nine months of fiscal 2008 resulting in comparably slower collections of our accounts receivable in the first nine months of fiscal 2009 and a reduction in deferred tax liabilities partially offset by an increase in net income.

Cash used in investing activities was $7,068,000 during the first nine months of  fiscal 2009 compared to $9,241,000 during the same period a year ago.  The decrease in cash used in investing activities is primarily attributable to a decrease in the amount spent on acquisitions and fixed asset expenditures.  During the first nine months of fiscal 2009, Mediware paid an initial purchase price of $3,483,000 for the assets of HOS and another $314,000 as final payment for the IMS acquisition.  In the fiscal 2008 period, the Company paid $5,524,000 for the purchase price for the IMS business.

Cash used in financing activities was $104,000 during the first nine months of fiscal 2009 compared to $3,322,000 during the same period a year ago.  The cash used for financing activities in both the 2009 and 2008 period is primarily attributable to stock repurchases under our Share Repurchase Program.

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, any additional 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, repurchase of shares, and other cash requirements at least through the next twelve months..

Our liquidity is influenced by our ability to perform 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.  Exclusive of activities involving any future acquisitions of products or companies that complement or augment our existing line of products or any additional stock repurchases, we believe that current available funds and cash generated from operations will provide sufficient liquidity to meet operating requirements for the foreseeable future.  We continue to review our long-term cash needs.  Currently, there are no plans for additional outside financing, except that Mediware is considering establishing a new line of credit or an alternative source of financing that we may access upon demand.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Mediware is subject to market risks from interest rates due to the fluctuating rates paid on its cash equivalent balances and foreign currency fluctuations due to the operations of JAC. Mediware has observed increased volatility in market rates as overall economic conditions have deteriorated.  To date, Mediware has not entered into any derivative financial instruments or engaged in other hedging transactions to reduce its exposure to such risks.

Interest Rate Risk

Mediware is exposed to the impact of interest rate changes because of its substantial cash equivalent balances.  These balances are not held for trading purposes.

	Balance at March 31, 2009 ($ in 000)		Effective Interest Rate at March 31, 2009			Effect of 1% Change ($ in 000)
Cash Equivalents	$	21,322		1.0	%	$	213

At March 31, 2009, a 1% decrease in the current per annum interest rate for our cash equivalents each would result in $213,000 less interest income during the next fiscal year.  The foregoing calculation assumes an instantaneous one percentage point decrease in the rates of all of our cash equivalents and that the equivalents balance is the amount outstanding as of March 31, 2009.  The calculation, therefore, does not account for any differences in the market rates upon which the interest rates of our equivalents is based, or other possible actions, such as reinvestment in higher yielding instruments, that we might take in response to any rate decrease.

Concentrations of Credit Risk

Mediware maintains its cash and cash equivalents with financial institutions with high credit ratings.  At this time, the Company maintains deposits in federally insured financial institutions in excess of federally insured (FDIC) limits.  However, management believes that the Company is not exposed to significant credit risk.  The Company has not experienced any losses to its cash and cash equivalents.

Foreign Currency Exchange Rate Risk

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 operates, primarily the British pound, affect:

• the results of Mediware’s international operations reported in US Dollars; and

• the value of the net assets of JAC reported in US Dollars.

These exposures may impact future earnings or cash flows. Revenue from JAC represented approximately 15% and 17% of Mediware’s consolidated revenue for the three-months ended March 31, 2009 and 2008, respectively, and 14% for the nine-months ended March 31, 2009 and 2008. As foreign exchange rates change, translation of the income statements of JAC into U.S. dollars affect period-to-period comparability of operating results.  Our net income for the three and nine-months ended March 31, 2009 was negatively impacted by a $7,000 and $180,000 foreign currency movement, respectively, and was negatively impacted by a $9,000 and $3,000 foreign currency movement, respectively, for the three-months and nine-months ended March 31, 2008.

Assets and liabilities for JAC are matched in the local currency, which reduces the need for dollar conversion. Any foreign currency impact on translating assets and liabilities into US Dollars is included as a component of stockholders’ equity.

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.

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ITEM 4. CONTROLS AND PROCEDURES

Mediware’s management, under the supervision and with the participation of Mediware’s Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of Mediware’s disclosure controls and procedures as of the end of the quarter covered by this report.  Disclosure controls and procedures are defined in the Securities Exchange Act as controls and other procedures of Mediware designed to ensure that information required to be disclosed by Mediware 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 Mediware in the reports that it files or submits to the SEC is accumulated and communicated to Mediware’s management, including the CEO and CFO, to allow timely decisions regarding required disclosure.  Based on the foregoing review and evaluation, Mediware’s CEO and CFO have concluded that Mediware’s disclosure controls and procedures are effective as of March 31, 2009.

There were no material changes in Mediware’s internal controls over financial reporting that occurred during the three and nine-months ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

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 1A. RISK FACTORS

You should carefully consider the risk factors disclosed in our Annual Report on Form 10-K for the year ended June 30, 2008 and our subsequently filed Quarterly Reports on Form 10-Q included under Item 1A “Risk Factors” in addition to the other information set forth in this report. The 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.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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, 2009, 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, including 13,000 shares and 41,000 shares of Common Stock purchased at a cost of $58,000 and $185,000 during the three months and nine months ended March 31, 2009.  As of March 31, 2009, the Company is authorized to purchase up to an additional $3,815,000 of Common Stock under the Share Repurchase Program.

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The following table lists Mediware’s share repurchases during the third quarter of fiscal 2009:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Dollar Value of Shares That May Yet Be Purchased Under the Program
February 2009		13,000	$	4.67		590,000	$	3,815,000
Total		13,000	$	4.67		590,000	$	3,815,000

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ITEM 6. EXHIBITS

Exhibit 11	Schedule of Computation of Net Earnings Per Share
Exhibit 15	Consent 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

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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 15, 2009	/s/  T. KELLY MANN
Date	T. KELLY MANN
	PRESIDENT AND CHIEF EXECUTIVE OFFICER
May 15, 2009	/s/  MARK B. WILLIAMS
Date	MARK B. WILLIAMS
	CHIEF FINANCIAL OFFICER

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