<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   (Mark One)

 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
     EXCHANGE ACT OF 1934

 For the quarterly period ended December 31, 1996

                                       OR

 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from ___________________ to _________________

                         Commission file number 0-21596

                          MDL INFORMATION SYSTEMS, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                                  94-3167497
              --------                                  ----------
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                      Identification No.)

14600 Catalina Street  San Leandro, CA                      94577
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                  (Zip Code)

(510) 895-1313                                                                 .
--------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)


--------------------------------------------------------------------------------
        (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

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

                      Applicable Only to Corporate Issuers

Number of shares outstanding of each of the issuer's classes of common stock, as
of February 4, 1997;

Common Stock, $.01 Par Value  - 8,760,806 shares


<PAGE>   2
                                      INDEX

                          MDL INFORMATION SYSTEMS, INC.

<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                             PAGE
                                                                          NUMBER
<S>                                                                        <C>
Item 1.  Condensed Consolidated Financial Statements (Unaudited)

     Condensed consolidated balance sheets --
         December 31, 1996 and March 31, 1996                               3
     Condensed consolidated statements of operations --
         Three months and nine months ended December 31, 1996 and 1995      4
     Condensed consolidated statements of cash flows --
         Nine months ended December 31, 1996 and 1995                       5
     Notes to condensed consolidated financial statements--
         December 31, 1996                                                  6

Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                      7-14

PART II.  OTHER INFORMATION

Items 1-6      Not applicable                                               15
Item 6           Exhibits and Reports on Form 8-K                           15

SIGNATURE                                                                   16
</TABLE>







                                                                               2
<PAGE>   3
PART I.  FINANCIAL INFORMATION

                          MDL INFORMATION SYSTEMS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1996   MARCH 31, 1996
                                                              -----------------   --------------
                                                                 (UNAUDITED)           (A)
<S>                                                                <C>               <C>     
Current Assets:
  Cash and cash equivalents                                        $ 11,524          $ 15,134
  Accounts receivable, net                                           16,781            19,542
  Prepaid expenses and other assets                                   4,010             1,733
                                                                   --------          --------
             Total current assets                                    32,315            36,409

  Property and equipment, net                                         4,619             2,864
  Capitalized software development, net                              14,398            14,983
  Deferred tax asset                                                  2,556             2,556
  Other assets                                                        4,666               320
                                                                   --------          --------
             Total assets                                          $ 58,554          $ 57,132
                                                                   ========          ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Note payable                                                                       $  1,900
  Accounts payable                                                 $  1,307             1,429
  Accrued compensation                                                2,316             3,219
  Accrued royalties                                                   2,953             1,590
  Other accrued liabilities                                           1,505             1,496
  Deferred revenues                                                   4,139            10,913
                                                                   --------          --------
             Total current liabilities                               12,220            20,547

Stockholders' equity:
  Common stock, $.01 par value                                           87                85
  Paid-in capital in excess of par                                   18,253            16,426
  Retained earnings                                                  28,675            20,486
  Cumulative translation adjustment                                    (681)             (412)
                                                                   --------          --------
             Total stockholders' equity                              46,334            36,585
                                                                   --------          --------
             Total liabilities and stockholders' equity            $ 58,554          $ 57,132
                                                                   ========          ========
</TABLE>

(a) The balance sheet at March 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.


See accompanying notes to financial statements.



                                                                               3
<PAGE>   4
                          MDL INFORMATION SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                         DECEMBER 31,                       DECEMBER 31,
                                                -----------------------------       -----------------------------
                                                    1996              1995             1996               1995
                                                -----------       -----------       -----------       -----------
<S>                                             <C>               <C>               <C>               <C>        
Revenues:
    License and other                           $     9,235       $     7,581       $    25,265       $    20,599
    Database                                          7,232             5,187            13,895            10,730
    Maintenance                                       4,632             4,666            13,848            13,272
                                                -----------       -----------       -----------       -----------
                  Total revenues                     21,099            17,434            53,008            44,601
                                                -----------       -----------       -----------       -----------

Costs and Expenses:
    Cost of revenues                                  3,144             2,568             8,902             7,123
    Product development                               3,638             2,760            10,999             7,820
    Sales, marketing and customer service             7,526             6,797            20,744            19,133
    General and administrative                        1,607             1,068             4,431             3,095
                                                -----------       -----------       -----------       -----------
                  Total costs and expenses           15,915            13,193            45,076            37,171
                                                -----------       -----------       -----------       -----------

Income from operations                                5,184             4,241             7,932             7,430
                                                -----------       -----------       -----------       -----------

Other income (expense):
    Interest income (expense)                           116                (5)              318               (52)
   Other                                                455               285               906               575
                                                -----------       -----------       -----------       -----------

                  Total other income, net               571               280             1,224               523
                                                -----------       -----------       -----------       -----------

Income before income taxes                            5,755             4,521             9,156             7,953
Provision for income taxes                             (394)             (299)             (967)             (885)
                                                -----------       -----------       -----------       -----------

Net income                                      $     5,361       $     4,222       $     8,189       $     7,068
                                                ===========       ===========       ===========       ===========

Net income per common share                     $      0.57       $      0.45       $      0.85       $      0.77
                                                ===========       ===========       ===========       ===========

Shares used in computing net income
  per common share                                9,457,642         9,401,521         9,592,913         9,171,867
                                                ===========       ===========       ===========       ===========
</TABLE>


See accompanying notes to financial statements.

                                                                               4
<PAGE>   5
                          MDL INFORMATION SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  NINE MONTHS ENDED
                                                                     DECEMBER 31,
                                                                ----------------------
                                                                  1996          1995
                                                                --------      --------
<S>                                                             <C>           <C>     
Net cash provided by operating activities                       $  2,422      $  8,342

Cash flows used in investing activities:
    Purchase of property and equipment                            (2,961)       (1,173)
    Purchase of short-term investments                            (6,855)
    Proceeds from sales of marketable securities                   6,855
    Capitalized software development costs                        (3,000)       (4,538)
                                                                --------      --------
        Net cash used in investing activities                     (5,961)       (5,711)
                                                                --------      --------

Cash flows provided by (used in) financing activities:
    Payment of note payable                                       (1,900)       (1,250)
    Exercise of stock options                                      1,829         1,886
                                                                --------      --------
        Net cash provided by (used in) financing activities          (71)          636
                                                                --------      --------

Increase (decrease) in cash and cash equivalents                  (3,610)        3,267
                                                                --------      --------

Cash and cash equivalents at beginning of period                  15,134         4,889
                                                                --------      --------
Cash and cash equivalents at end of period                      $ 11,524      $  8,156
                                                                ========      ========
</TABLE>

See accompanying notes to financial statements.


                                                                               5
<PAGE>   6
                          MDL INFORMATION SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
DECEMBER 31, 1996

NOTE A -  BASIS OF PRESENTATION

MDL Information Systems, Inc. and its subsidiaries (collectively referred to as
"MDL" or the "Company") provide integrated solutions that accelerate high
throughput discovery and development in the life science and chemical
industries. The Company's software systems, databases, and services help
customers manage, communicate, and analyze the volumes of data associated with
modern R&D workflows. With applications supporting chemical and biological
information management, bioinformatics, automated synthesis and screening, and
materials science, the Company is committed to being a leading provider of new
technologies in the pharmaceutical, chemical and biotechnology industries.

The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three and nine month periods ended
December 31, 1996 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1997. The accompanying financial
statements should be read in conjunction with the Company's audited financial
statements for the year ended March 31, 1996.

These financial statements reflect the consolidation of MDL Information Systems,
Inc. and its subsidiaries at December 31, 1996 and March 31, 1996, the
consolidated results of operations for the three and nine months ended December
31, 1996 and 1995, and the consolidated cash flows for the nine months ended
December 31, 1996 and 1995. All significant intercompany balances and
transactions have been eliminated in consolidation. Certain reclassifications
have been made to reflect current presentation of financial information.

NOTE B - NET INCOME PER COMMON SHARE

Net income per share was computed using the weighted average number of common
shares outstanding and dilutive common equivalent shares attributable to stock
options. (see Exhibit 11.1)


                                                                               6
<PAGE>   7
ITEM 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q may contain forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results in any such forward-looking statements. Factors that might cause or
contribute to such a difference include, but are not limited to, those discussed
herein under the caption "Business Risks" and elsewhere in this Report as well
as potential fluctuations in quarterly results, product development,
technological change, competition, foreign sales, dependence upon key personnel,
management of growth and general economic and market conditions. A discussion of
such risks can be found in the Company's fiscal 1996 Annual Report on Form 10-K
under the caption "Risk Factors."

The Company is engaged in the development, marketing and support of scientific
information management software, chemical information databases and related
services. The Company's first product was MACCS. After introducing MACCS, the
Company continued to develop and introduce new products, including REACCS,
MACCS-II and CPSS, as well as a number of chemical information databases. In
September 1991, commercial shipments of ISIS (Integrated Scientific Information
System) commenced. ISIS offers an integrated client-server-based management
system for sharing scientific information throughout an organization. In March
1996, the Company released ISIS 2.0, a significant upgrade to ISIS. The Company
continues to invest in ISIS. MDL SCREEN, released in April 1996, is the only
industrial-strength software system for controlling the screening process. The
Company's ISIS, Central Library, and Project Library provide solutions for
managing chemical information and combinatorial libraries.

During the quarter ended December 31, 1996, the Company acquired exclusive
worldwide marketing rights to two important bioinformatics product lines: The
BioMerge System from Molecular Informatics, which gives biologists a powerful
system for managing gene sequence data; and the Bioinformatics Workbench from
the University of Illinois, which provides an intranet-based system for
delivering data and computing tools vital to genomic research. As of December
31, 1996, these products had not been released.

All of these products, together with a growing Professional Services business,
put the Company in the position of able to provide a comprehensive information
management system for high-throughput discovery.

BUSINESS RISKS

The market for integrated, client-server-based software continues to emerge.
Although the ISIS software has been licensed to a significant number of the
Company's customers, many of those customers have licensed a limited number of
seats and there can be no assurance that ISIS will achieve any further degree of
market acceptance. If ISIS does not achieve any further degree of market
acceptance, the Company's business, operating results and financial condition
will be materially adversely affected.


                                                                               7

<PAGE>   8

The Company's quarterly operating results have in the past and may in the future
vary significantly depending upon such factors as the timing of new product
introductions, changes in pricing policies by the Company and its competitors,
market acceptance of new products and enhanced versions of existing products,
the capital expenditure budgets of its customers and lengthy sales cycles.
Although a significant portion of the Company's revenues in each quarter result
from orders received in that quarter, the majority of the Company's expense
levels are fixed, based on expectations of future revenues. In addition, a
substantial amount of the Company's quarterly revenues have typically been
recorded in the third month of the quarter with a concentration of such revenues
in the last half of that month. The timing of the closing of large license
agreements increases the risk of quarter-to-quarter revenue and net income
fluctuations. As a result, if revenue is not realized as expected, the Company's
operating results will be materially adversely affected. The Company's quarterly
revenues and operating results have also varied due to seasonal factors. The
Company believes that this seasonality is a result of its customers postponing
capital expenditures until the end of their fiscal year, which in most cases
corresponds to the Company's fiscal quarter ending December 31. Due to all of
the foregoing, it is likely that in some quarterly reporting periods the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's common stock
would likely be adversely affected. The Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance.

OVERVIEW/NET INCOME

Net income for the quarter ended December 31, 1996 was $5.4 million or $.57 per
share compared to net income of $4.2 million or $.45 per share for the quarter
ended December 31, 1995. Total revenues increased by 21%. Total operating costs
and expenses increased proportionately by 21%.

Net income for the nine months ended December 31, 1996 was $8.2 million or $.85
per share compared to net income of $7.1 million or $.77 per share for the nine
months ended December 31, 1995. Total revenues increased by 19% which was offset
by a 21% increase in total operating costs and expenses.

At December 31, 1996 the Company employed 365 people as compared to 345 at
December 31, 1995.


                                                                               8
<PAGE>   9
RESULTS OF OPERATIONS

The following table sets forth, as a percentage of total revenues, certain items
in the consolidated statements of operations of the Company for the three and
nine months ended December 31, 1996 and 1995, respectively:

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED    NINE MONTHS ENDED 
                                                 DECEMBER 31,        DECEMBER 31,
                                              1996       1995      1996        1995
                                             ------------------   ------------------
                                              %REV       %REV      %REV        %REV
<S>                                           <C>        <C>        <C>        <C> 
Revenues:
    License and other                          44%        43%        48%        46%
    Database                                   34         30         26         24
    Maintenance                                22         27         26         30
                                             ----       ----       ----       ----
                Total revenues                100%       100%       100%       100%
                                             ----       ----       ----       ----

Costs and Expenses:
    Cost of revenues                           15%        15%        17%        16%
    Product development                        17         16         21         17
    Sales, marketing & customer service        36         39         39         43
    General and administrative                  7          6          8          7
                                             ----       ----       ----       ----
                Total costs and expenses       75         76         85         83
                                             ----       ----       ----       ----

Income from operations                         25         24         15         17
                                             ----       ----       ----       ----

Other income (expense):
    Interest income, net                                              1
    Other                                       2          2          1          1
                                             ----       ----       ----       ----
                Total other income, net         2          2          2          1
                                             ----       ----       ----       ----

Income before income taxes                     27         26         17         18
Provision for income taxes                     (2)        (2)        (2)        (2)
                                             ----       ----       ----       ----

Net income                                     25%        24%        15%        16%
                                             ====       ====       ====       ====
</TABLE>


                                                                               9

<PAGE>   10
REVENUES:

Total revenues for the quarter ended December 31, 1996 were $21.1 million, a 21%
increase over the $17.4 million reported for the quarter ended December 31,
1995. For the nine months ended December 31, 1996, total revenues were $53.0
million, a 19% increase over the $44.6 million reported for the nine months
ended December 31, 1995. The increase from quarter to quarter was primarily due
to a 39% increase in database revenues, a 53% increase in Professional Services
revenues, a 14% increase in total ISIS revenues and a 73% increase in MDL SCREEN
revenues offset by a 24% decline in MACCS and REACCS maintenance revenues. The
increase in the nine month period was primarily due to a 29% increase in
database revenues, a 15% increase in total ISIS revenues, a 63% increase in
Professional Services revenues and a 285% increase in MDL SCREEN revenues offset
by a 22% decline in MACCS and REACCS maintenance.

License and other revenues increased by 22% to $9.2 million for the quarter
ended December 31, 1996 from $7.6 million for the quarter ended December 31,
1995. License and other revenues increased by 23% to $25.3 million for the nine
months ended December 31, 1996 from $20.6 million for the nine months ended
December 31, 1995. In the quarter ended December 31, 1996, ISIS license revenues
were $6.3 million, up 9% from the $5.8 million recorded in the comparable
quarter ended December 31, 1995. Professional Services revenues were $2.1
million in the quarter ended December 31, 1996, an increase of 53% over the $1.3
million recorded in comparable period in 1995. MDL SCREEN license revenues were
$710 thousand in the quarter ended December 31, 1996, an increase of 68% over
the $424 thousand recorded in comparable period in 1995. In the nine month
period ended December 31, 1996, ISIS license revenues increased by 8% to $18.1
million over the $16.7 million recorded in the comparable period ended in 1995.
Professional services revenues were $5.3 million in the nine months ended
December 31, 1996, an increase of 63% over the $3.3 million recorded in the
comparable period ended December 31, 1995. MDL SCREEN license revenues were $1.6
million in the nine months ended December 31, 1996, an increase of 275% over the
$424 thousand recorded in comparable period in 1995. ISIS license revenues for
the quarter and nine months ended December 31, 1996 were 69% and 72% of total
license and other revenues, respectively, compared to 76% and 81% for the same
periods ended December 31, 1995.

Database revenues increased by 39% to $7.2 million for the quarter ended
December 31, 1996 from $5.2 million for the quarter ended December 31, 1995.
Database revenues increased by 29% to $13.9 million for the nine months ended
December 31, 1996 from $10.7 million for the nine months ended December 31,
1995. These increases were primarily due to increased new sales and renewals of
the ACD, CIRX, Metabolite, Spore and OHS database products. Database renewals
represented 47% and 58% of the total database revenues for the quarter and nine
months ended December 31, 1996, respectively, as compared to 60% and 64% for the
same periods ended December 31, 1995. Database renewals are expected to continue
to contribute a significant percentage of total database revenues in future
periods.

Maintenance revenues were down slightly to $4.6 million for the quarter ended
December 31, 1996 compared to $4.7 million for the quarter ended December 31,
1995. Maintenance revenues increased by 4% to $13.8 million for the nine months
ended December 31, 1996 from $13.3 million for the nine months ended December
31, 1995. In the quarter, ISIS maintenance increased by 24%, 



                                                                              10
<PAGE>   11

offset by a 26% decline in MACCS and REACCS maintenance. The increase in the
nine months ended December 31, 1996 as compared to the nine months ended
December 31, 1995 was due to a 34% increase in ISIS maintenance offset by a 23%
decline in maintenance revenues from the MACCS and REACCS product lines. In the
quarter and nine months ended December 31, 1996, 62% and 60%, respectively, of
maintenance revenues were recognized under contracts for the support of ISIS as
compared to 50% and 47% for the same periods ended December 31, 1995. The
Company expects ISIS maintenance revenues to continue to increase as the Company
enters into new contracts and customers deploy more ISIS seats. Maintenance
revenues related to the MACCS and REACCS product lines are expected to continue
to decline. Total maintenance revenues in future periods will depend on the mix
of these revenue sources.

Revenues from foreign sales of licenses and services include revenues
denominated in foreign currencies sold through the Company's foreign
subsidiaries and export revenues denominated in United States dollars sold
through the Company's distributors in Asia. The geographical distribution of
total revenues was as follows:

<TABLE>
<CAPTION>
                   QUARTER ENDED       QUARTER ENDED     NINE MONTHS ENDED     NINE MONTHS ENDED
                    DECEMBER 31,       DECEMBER 31,         DECEMBER 31,         DECEMBER 31,
                 1996        1996    1995        1995    1996        1996       1995      1995
                ---------------------------------------------------------------------------------
                $ REV       % REV   $ REV       % REV   $ REV       % REV      $ REV      % REV
<S>             <C>          <C>    <C>          <C>    <C>          <C>       <C>          <C> 
Region:                                                                       
United States    9,479        45%    7,782        45%   24,540        46%      19,657        44%
Europe           9,012        43%    7,355        42%   21,073        40%      18,607        42%
Asia/Pacific     2,608        12%    2,297        13%    7,395        14%       6,337        14%
                ---------------------------------------------------------------------------------
                21,099       100%   17,434       100%   53,008       100%      44,601       100%
                =================================================================================
</TABLE>

The geographical results can vary significantly quarter to quarter and may
continue to vary significantly in the future due to the size of the Company's
orders and the length of its sales cycle. The Company expects that revenues from
foreign operations and export sales will continue to account for a significant
percentage of its total revenues, and although the Company has entered into
foreign currency hedging arrangements to minimize its risk of loss, fluctuations
in foreign currency exchange rates could affect the Company's results of
operations in the future.

COSTS AND EXPENSES:

COST OF REVENUES

Cost of revenues increased by 22% to $3.1 million in the quarter ended December
31, 1996 from $2.6 million in the quarter ended December 31, 1995. Cost of
revenues increased by 25% to $8.9 million in the nine months ended December 31,
1996 from $7.1 million in the nine months ended December 31, 1995. Cost of
revenues includes the amortization of previously capitalized software
development costs, royalties on software and database licenses, the amortization
of acquired technology, and other production costs. Amortization of capitalized
software development was $1.0 million and $3.0 million in the quarter and nine
months ended December 31, 1996, respectively, compared to $1.2 million and $3.6
million in the same periods ended December 31, 1995. Royalty costs were $1.2
million and $3.1 million for the quarter and nine months ended December 31,
1996, 

                                                                              11


<PAGE>   12

respectively, as compared to $1.0 million and $2.3 million for the same periods
ended December 31, 1995. The increase in royalty costs was due to higher sales
of royalty bearing products. Other production costs increased due to the
shipment of ISIS 2.0 and SCREEN 1.0 and due to increased costs related to higher
Professional Services revenues.

PRODUCT DEVELOPMENT

The Company believes that a significant level of investment in product
development is essential to market leadership. Product development expense for
any period represents total product development expenditures less capitalized
software development costs for such period. Total product development
expenditures increased by 12% to $4.6 million in the quarter ended December 31,
1996 from $4.1 million in the quarter ended December 31, 1995. Total product
development expenditures increased by 17% to $14.0 million for the nine months
ended December 31, 1996 from $12.0 million for the nine months ended December
31, 1995. This increase was principally due to higher salaries and bonus
accruals in the development group. Development headcount at December 31, 1996
was 136 compared to 131 at December 31, 1995. The Company anticipates that it
will continue to commit substantial resources to product development in the
future.

The Company capitalizes software development costs based on development budgets
and begins to capitalize costs upon the establishment of technological
feasibility. The Company capitalized $1.0 million and $3.0 million of software
development costs for the quarter and nine months ended December 31, 1996,
respectively, compared to $1.4 million and $4.1 million for the same periods
ended December 31, 1995. The decrease in the amount capitalized in fiscal 1997
is due to the completion of ISIS 2.0, which was released in March 1996.

SALES, MARKETING AND CUSTOMER SERVICE

Sales, marketing and customer service expenses, which include sales commissions
and bonuses, increased by 11% to $7.5 million in the quarter ended December 31,
1996 from $6.8 million in the quarter ended December 31, 1995. Sales, marketing
and customer service increased by 8% to $20.7 million in the nine months ended
December 31, 1996 from $19.1 million in the nine months ended December 31, 1995.
The increase was primarily due to increases in headcount (from 161 at December
31, 1995 to 170 at December 31, 1996) and higher salaries, bonuses and
commissions earned in connection with increased revenues offset by the effects
of foreign currency movements on the European sales offices.

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased by 51% to $1.6 million for the
quarter ended December 31, 1996 from $1.1 million for the quarter ended December
31, 1995. General and administrative expenses increased by 43% to $4.4 million
for the nine months ended December 31, 1996 from $3.1 million for the nine
months ended December 31, 1995. The increase for both periods are attributed to
higher headcount including the promotion of Tom Jones from Executive Vice
President, Worldwide Sales to President and Chief Operating Officer in February
1996. General and administrative headcount was 59 and 53 at December 31, 1996
and 1995, respectively.



                                                                              12

<PAGE>   13

OTHER INCOME (EXPENSE)

Other income (expense) consists of interest income and expense, miscellaneous
income and expense and the realized gains and losses on foreign currency
denominated transactions. Total other income (expense) was $571 thousand and
$1.2 million for the quarter and nine months ended December 31, 1996,
respectively, as compared to $280 thousand and $523 thousand for the same
periods ended December 31, 1995. The Company realized foreign currency exchange
gains of $451 thousand and $893 thousand for the quarter and nine months ended
December 31, 1996, respectively, as compared to $285 thousand and $543 thousand
for the same periods ended December 31, 1995. Net interest income was $116
thousand and $318 thousand for the quarter and nine months ended December 31,
1996 as compared to net interest expense of $(5) thousand and $(52) thousand for
the same periods ended December 31, 1995.

PROVISION FOR INCOME TAXES

The provision for income taxes was $394 thousand and $299 thousand for the
quarters ended December 31, 1996 and 1995, respectively. The provision for
income taxes was $967 thousand and $885 thousand for the nine months ended
December 31, 1996 and 1995, respectively. The provision for these periods
relates primarily to foreign income and withholding tax. As of March 31, 1996,
the Company had available for federal income tax purposes approximately $21.1
million of net operating loss carryforwards which will expire beginning in the
year ending 2009 through 2011 if not used to offset future taxable income.

The Company has adopted, for all periods presented, Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires an
asset and liability approach for financial accounting and reporting for income
taxes. Under SFAS 109, the Company recorded a $2.6 million tax benefit in the
fourth quarter of fiscal 1996 which represents the portion of the Company's
deferred tax assets that management expects will be realized. Current accounting
standards require the recognition of such tax benefits when it becomes more
likely than not that they will be realized. On this basis, the Company intends
to evaluate the amount recognized during future periods based on current and
projected operating results.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1996, the Company had $11.5 million of cash and cash
equivalents and $20.1 million of working capital. Net cash provided by operating
activities was $2.4 million and $8.3 million for the nine months ended December
31, 1996 and 1995, respectively. While net income increased for the nine months
ended December 31, 1996 as compared to the same period ended December 31, 1995,
long-term receivables increased $4.3 million and the Company paid $2.7 million
in advanced royalties for the exclusive marketing rights to two bioinformatics
products. The Company used $3.0 million and $1.2 million in the nine months
ended December 31, 1996 and 1995, respectively, for the purchase of property and
equipment, principally computer hardware, peripherals and in-house software
upgrades. The Company expects that future purchases of property and equipment
will likely be proportional to the Company's employee base.

The Company has secured a line of credit with a bank that permits aggregate
borrowings of up to $5.0 million, subject to the balance of eligible accounts
receivable. The interest rate on such 


                                                                              13

<PAGE>   14

borrowings is prime plus 1/4% and the line matures in June 1997. On October 1,
1996, the Company paid the remaining balance of the note issued in connection
with the acquisition of the OHS database business. The $2.1 million payment
included $1.9 million of principal and $195 thousand of interest. The Company
believes that existing cash resources, amounts available under the line of
credit and expected cash flows from operations will be sufficient to fund the
Company's cash needs for at least the next twelve months. The Company expects
its liquidity needs for the next twelve months to be consistent with historical
requirements. The Company may, however, require additional funds to support its
working capital requirements or for other purposes and may seek to raise such
additional funds through public or private equity financings or from other
sources. There can be no assurance that additional financing will be available
or that, if available, such financing will be obtainable on terms favorable to
the Company.




                                                                              14
<PAGE>   15
PART II.  OTHER INFORMATION

Item 1:   Legal Proceedings -  Not Applicable

Item 2:   Changes in Securities - Not Applicable

Item 3:   Defaults Upon Senior Securities - Not Applicable

Item 4:   Submission of Matters to a Vote of Security Holders - Not Applicable

Item 5:   Other Information - Not Applicable

Item 6:   Exhibits and Reports on Form 8-K

          (A)      EXHIBITS

EXHIBIT
NUMBER:
-------

11.1      Computation of Earnings Per Common Share

          (B)      REPORT ON FORM 8-K - Not applicable

27.1      Financial Data Schedule

                                                                              15
<PAGE>   16
SIGNATURE

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.



                                 MDL INFORMATION SYSTEMS, INC.
                                       (Registrant)


                                   JOHN J. HANLON
Date: February 5, 1997           ----------------------------------
                                 John J. Hanlon, Senior Vice President - Finance
                                 (Principal Financial Officer)



                                                                              16
<PAGE>   17
                                Exhibit Index


Exhibit                 Description
-------                 ----------------------------

11.1                    Computation of Earnings Per Common Share

27.1                    Financial Data Schedule