<PAGE>

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                             UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549
                               ____________

                               FORM 10-QSB

(MARK ONE)
     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF  THE SECURITIES EXCHANGE ACT OF 1934.

          For the quarter ended September 30, 1996

                             OR

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

                 Commission File Number:  0-27048
                           ____________

                            MECON, INC.

      (Exact name of registrant as specified in its charter)

              Delaware                       94-2702762
    (State or other jurisdiction          (I.R.S. Employer
  of incorporation or organization)     Identification Number)

                    200 Porter Drive, Suite 100
                    San Ramon, California  94583

  Registrant's telephone number, including area code:  (510) 838-1700

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 has been subject to such 
filing requirements for the past 90 days     X  Yes        No
                                            ----       ----

The number of shares outstanding of the registrant's Common Stock on 
September 30, 1996 was

                           5,916,188 shares

------------------------------------------------------------------

<PAGE>

                             MECON, INC.
                             FORM 10-QSB 
                          SEPTEMBER 30, 1996

                           TABLE OF CONTENTS

                                                             Page
PART I:  FINANCIAL INFORMATION 

Item 1.   Financial Statements                         

          Consolidated Balance Sheets as of
          September 30, 1996 and March 31, 1996      

          Consolidated Statements of Operations for the
          Three and Six Month Periods Ended September 30,
          1996 and 1995

          Consolidated Condensed Statements of Cash Flows
          for the Three and Six Month Periods 
          Ended September 30, 1996 and 1995 
     
          Notes to Consolidated Financial Statements 

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


PART II:  OTHER INFORMATION   

Item 1.   Legal Proceedings   

Item 2.   Changes in Securities    

Item 3.   Defaults upon Senior Securities    

Item 4.   Submission of Matters to a Vote of Security Holders

Item 5.   Other Information   

Item 6.   Exhibits and Reports on Form 8-K   

          Exhibits 11.1  Computation of Earnings per Share
                   27.0  Financial Data Schedules

SIGNATURES                                                  



<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                                 MECON, INC.
                         CONSOLIDATED BALANCE SHEETS
                               (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                 MARCH 31, 1996           SEPTEMBER 30, 1996
                                                                                                              (UNAUDITED)
<S>                                                                              <C>                      <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents                                                      $      15,205            $       11,631
  Short-term investments in marketable debt securities                                   4,775                     4,819
  Accounts receivable, net of allowances of $245 and $426 at March 31,                   2,769                     4,534
     and September 30, 1996, respectively
  Unbilled accounts receivable                                                             526                       662
  Related party receivable                                                                   1                        12
  Prepaid expenses                                                                         211                       467
  Other current assets                                                                     125                        18
                                                                               ---------------           ---------------
      Total current assets                                                              23,612                    22,143

Property and equipment, net                                                              1,009                     1,403
Software development costs, net                                                            924                     1,221
Other assets                                                                                36                        36
                                                                               ---------------           ---------------
                                                                                 $      25,581            $       24,803
                                                                               ---------------           ---------------
                                                                               ---------------           ---------------
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                               $         557            $        1,136
  Accrued salaries and benefits                                                            640                       596
  Note payable                                                                           1,936                         -
  Interest payable                                                                         519                         -
  Deferred revenue                                                                       1,333                     1,178
  Income taxes payable                                                                       -                       132
  Deferred taxes                                                                             -                       220
  Other accrued liabilities                                                                666                       115
                                                                               ---------------           ---------------
      Total current liabilities                                                          5,651                     3,377

Long-term obligations, less current portion                                                 29                        26

      Total liabilities                                                                  5,680                     3,438

Stockholders' equity:
Preferred stock, $.001 par value 5,000,000 shares authorized:
  none issued and outstanding
Common stock, $.001 par value; 50,000,000 shares authorized; 5,876,947                       6                         6
  and 5,916,188 issued and outstanding at March 31, and September 30,
  1996, respectively
Additional paid in capital                                                              24,511                    24,951
Accumulated deficit                                                                     (4,616)                   (3,557)
                                                                               ---------------           ---------------
      Total stockholders' equity                                                        19,901                    21,400
                                                                               ---------------           ---------------
                                                                                 $      25,581            $       24,803
                                                                               ---------------           ---------------
                                                                               ---------------           ---------------
</TABLE>

           See accompanying notes to financial statements


<PAGE>


                                  MECON, INC.
                     CONSOLIDATED STATEMENT OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  UNAUDITED
<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED SEPTEMBER 30,      SIX MONTHS ENDED SEPTEMBER 30,
                                                              --------------------------------      ------------------------------
                                                                  1995               1996              1995                1996
                                                              --------------------------------      ------------------------------
<S>                                                            <C>                <C>                 <C>                <C>
Revenue:
   Subscription and license                                    $    2,173         $    3,472         $    3,542        $    5,974
   Services                                                           840              1,138              1,731             2,111
                                                               -------------------------------      ------------------------------
      Net revenue                                                   3,013              4,610              5,273             8,085


Cost of revenue                                                     1,126              1,500              2,262             2,711
                                                               -------------------------------      ------------------------------
      Gross profit                                                  1,887              3,110              3,011             5,374

Operating costs:
   Research and development                                           509                455                925               850
   Sales and marketing                                                853                925              1,709             1,771
   General and administrative                                         535                793              1,078             1,404
   Merger and acquisition                                              -                  -                 -                 152
                                                               -------------------------------      ------------------------------
      Total operating costs                                         1,897              2,173              3,712             4,177
                                                               -------------------------------      ------------------------------
Operating income (loss)                                               (10)               937               (701)            1,197
                                                               -------------------------------      ------------------------------
Interest expense                                                      (74)                -                (138)              -
Interest and other income, net                                          6                211                 16               434
                                                               -------------------------------      ------------------------------
Income (loss) before provision for income taxes                       (78)             1,148               (823)            1,631
                                                               -------------------------------      ------------------------------
Provision for income taxes                                             -                 402                 -                572
                                                               -------------------------------      ------------------------------
      Net income (loss)                                        $      (78)        $      746         $     (823)       $    1,059
                                                               -------------------------------      ------------------------------
                                                               -------------------------------      ------------------------------
Accretion of redeemable preferred stock                        $      (55)        $       -          $     (110)       $      -
                                                               -------------------------------      ------------------------------
      Net income (loss) attributable to common stockholders    $     (133)        $      746         $     (933)       $    1,059
                                                               -------------------------------      ------------------------------
                                                               -------------------------------      ------------------------------
Net income (loss) per share                                    $    (0.03)        $     0.12         $    (0.22)       $     0.17
                                                               -------------------------------      ------------------------------
                                                               -------------------------------      ------------------------------
Shares used in computing per share data                             4,181              6,366              4,260             6,375
                                                               -------------------------------      ------------------------------
                                                               -------------------------------      ------------------------------
</TABLE>

           See accompanying notes to financial statements


<PAGE>

                                 MECON, INC.
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                               (IN THOUSANDS)
                                 UNAUDITED
<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED SEPTEMBER 30,      SIX MONTHS ENDED SEPTEMBER 30,
                                                              --------------------------------      ------------------------------
                                                                  1995               1996              1995                1996
                                                              --------------------------------      ------------------------------
<S>                                                            <C>                <C>                 <C>              <C>
 Net cash provided by (used in) operating activities            $   525            $  1,275           $   (669)         $   (923)
                                                              --------------------------------      ------------------------------
 Cash flows from investing activities
    Purchase of short term investments                                               (1,275)                 -               (43)
    Acquisition of property and equipment                          (128)               (308)              (205)             (571)
    Computer software development costs                            (157)               (178)              (256)             (346)
                                                              --------------------------------      ------------------------------
          Net cash (used in) investing activities                  (285)             (1,761)              (461)             (960)
                                                              --------------------------------      ------------------------------
 Cash flows from financing activities:
    Borrowings from bank                                              -                  -                 500                 -
    Repayment of bank borrowings                                      -                  -                   -            (1,936)
    Proceeds from issuance of common stock, net of issuance costs     -                  71                  -               245
    Repurchase of common stock                                        -                  -                 (34)                -
    Redemption of Series A preferred stock                         (195)                 -                (195)                -
                                                              --------------------------------      ------------------------------
          Net cash provided by (used in) financing activities      (195)                 71                271             (1,691)
                                                              --------------------------------      ------------------------------
 Net increase (decrease) in cash and cash equivalents                45                (415)              (859)            (3,574)
 Cash and cash equivalents at beginning of period                   286              12,046              1,190             15,205
                                                              --------------------------------      ------------------------------
 Cash and cash equivalents at end of period                     $   331            $ 11,631           $    331          $  11,631
                                                              --------------------------------      ------------------------------
                                                              --------------------------------      ------------------------------
</TABLE>

           See accompanying notes to financial statements


<PAGE>

                             MECON, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 1996 
                              UNAUDITED


(1)  INTERIM FINANCIAL INFORMATION

The consolidated interim financial statements of the Company presented herein 
have been prepared without audit pursuant to the rules and regulations of the 
Securities and Exchange Commission.  Accordingly, certain information and 
notes required by generally accepted accounting principles have been 
condensed or omitted.  In the opinion of management, these statements include 
all adjustments (all of which consist of normal recurring adjustments except 
as otherwise noted herein) necessary to present fairly the Company's 
financial position and results of operations for the interim periods 
presented.  These statements should be read in conjunction with the audited 
financial statements and notes thereto for the fiscal year ended March 31, 
1996 contained in the Company's Annual Report on Form 10-KSB which was filed 
with the Securities and Exchange Commission on July 1, 1996.  The results of 
operations for the six months ended September 30, 1996 are not necessarily 
indicative of the results of operations that may be expected for the year 
ended March 31, 1997.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and 
its wholly-owned subsidiary Managed Care Information Systems, Inc.  All 
intercompany balances and transactions have been eliminated.

ACQUISITION COSTS

Transaction costs and other expenses related to a specific acquisition are 
capitalized as incurred.  Such capitalized costs are either allocated to the 
acquired entity's purchase price or charged to earnings in the period the 
acquisition is aborted.  As of September 30, 1996, approximately $87,000 of 
such costs had been deferred.

INCOME TAXES

Income tax expense for the quarter ended September 30, 1996 is based on an 
estimated annual effective tax rate.

NET INCOME (LOSS) PER SHARE

Net income (loss) per share is computed using the weighted average number of 
common shares and common equivalent shares, if dilutive, outstanding during 
the period.  Common equivalent shares include convertible preferred shares, 
warrants and the exercise of stock options using the treasury stock method.  
A conversion of convertible preferred shares into 479,634 common shares and a 
cashless exercise of warrants into 57,013 common shares are included in the 
computation for the period ended September 30, 1995.  These shares have been 
included in the computation for this loss period when such shares would 
otherwise not be included as the impact would be antidilutive because the 
preferred stock and warrants converted into common stock on the closing of 
the Company's initial public stock offering.  In accordance with Securities 
and Exchange Commission Staff Accounting Bulletins and staff policy, net 
income (loss) per share included all common and common equivalent shares 
granted or issued within 12 months of the offering date as if they were 
outstanding for all periods that began prior to the Company's initial public 
stock offering, even if antidilutive, using the treasury stock method.

For the purposes of the net income (loss) attributable to common stockholders 
per share computation, net (loss) was increased by the amount of the periodic 
accretion for redeemable preferred shares.


<PAGE>

(3)  MERGER OF MANAGED CARE INFORMATION SYSTEMS, INC.

On March 29, 1996, the Company merged with Managed Care Information Systems, 
Inc. ("MCIS") in a pooling of interests transaction.  In connection with the 
merger, the Company exchanged 338,155 shares of its common stock for all of 
the outstanding shares of MCIS, assumed 33,052 common stock options, and 
assumed a note payable and accrued interest to a third party in the amount of 
$2.5 million which was repaid during the first fiscal quarter of 1997.  In 
addition, the Company recorded merger related charges during the first fiscal 
quarter of 1997 totaling $152,000.  Accordingly, all prior period financial 
information has been restated.

(4)  RECLASSIFICATIONS

Certain reclassifications have been made to the 1996 Consolidated Financial 
Statements to conform to the 1997 presentation.  Such reclassifications had 
no effect on previously reported results of operations.


<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The discussion and analysis below contains trend analysis and other 
forward-looking statements within the meaning of Section 27A of the 
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 
1934. The Company may from time to time make additional written and oral 
forward-looking statements, including statements contained in the Company's 
filings with the Securities and Exchange Commission and in its reports to 
stockholders. Such forward-looking statements are subject to certain risks 
and uncertainties that could cause actual results to differ materially from 
those reflected in the forward-looking statements. Factors that might cause 
such a difference include, but are not limited to, those discussed below 
under "certain factors bearing on future results" and elsewhere in this 
report. The Company does not undertake to update any forward-looking 
statement that may be made from time to time by or on behalf of the Company. 
Readers should carefully review the risk factors described in other documents 
the Company files from time to time with the Securities and Exchange 
Commission.

OVERVIEW

     MECON is a leading provider of operations benchmarking data, information 
products, design support software and consulting services to the hospital 
industry.  The Company's product line is based upon a proprietary operations 
benchmarking database containing cost and key performance information from 
over 640 hospitals nationwide.  From its incorporation until 1989, MECON's 
revenue was primarily derived from consulting services for acute care 
hospitals.  Since 1990, the Company has transitioned into providing a variety 
of products and services that employ its proprietary database comprised of 
acute care hospitals' operational cost and key performance information.  
During the first six months of fiscal 1997, approximately 74% of the 
Company's revenues were derived from database subscriptions and software 
licenses.  Within the acute care segment of the hospital market, MECON has 
marketed its products and services primarily to individual hospitals with 
over 100 beds.

     On March 29, 1996, the Company merged with Managed Care Information 
Systems, Inc. ("MCIS") in a pooling of interests transaction.  In connection 
with the merger, the Company exchanged 338,155 shares of its common stock for 
all of the outstanding shares of MCIS, assumed 33,052 common stock options, 
and assumed a note payable and accrued interest to a third party in the 
amount of $2.5 million which was repaid during the first fiscal quarter of 
1997.  In addition, the Company recorded merger related charges during the 
first fiscal quarter of 1997 totaling $152,000.  Accordingly, all prior 
period financial information has been restated.  Unless otherwise noted, 
management's discussion of financial results is based on restated figures.

     The Company's revenue has increased primarily due to greater market 
penetration of its database and software products, product enhancements, 
price increases, and increased support and data analysis fees related to the 
Company's expanded software customer base.  The Company's revenue is 
primarily derived from direct sales to end users. 



<PAGE>


RESULTS OF OPERATIONS

The following table sets forth certain operating data as a percentage of net 
revenue for the period indicated:

<TABLE>
<CAPTION>
                                                      Three Months Ended   Six Months Ended
                                                         September 30,        September 30,
                                                      ---------------------------------------
                                                        1995      1996      1995      1996
                                                      ---------------------------------------
<S>                                                   <C>       <C>       <C>        <C>
Subscription and license revenue                         72%       75%       67%       74%
Services revenue                                         28%       25%       33%       26%
                                                      ---------------------------------------
Net revenue                                             100%      100%      100%      100%
Gross margin                                             63%       67%       57%       66%
Research and development                                 17%       10%       18%       10%
Sales and marketing                                      28%       20%       32%       22%
General and administrative                               18%       17%       20%       17%
Merger and acquisition                                    0%        0%        0%        2%
                                                      ---------------------------------------
Operating income (loss)                                   0%       20%      (13%)      15%
Interest expense                                         (2%)       0%       (3%)       0%
Interest income                                           0%        5%        0%        5%
                                                      ---------------------------------------
Income (loss) before provision for taxes                 (2%)      25%      (16%)      20%
                                                      ---------------------------------------
Provision for income tax (expense) benefit                0%       (9%)       0%       (7%)
                                                      ---------------------------------------
Net income (loss)                                        (2%)      16%      (16%)      13%
                                                      ---------------------------------------
Accretion of redeemable preferred stock                  (2%)       0%       (2%)       0%
                                                      ---------------------------------------
Net income (loss) attributable to common stockholders    (4%)      16%      (18%)      13%
                                                      ---------------------------------------
</TABLE>

     REVENUE.  Revenue for the three months ended September 30, 1996 
increased 53% to $4.6 million compared to $3.0 million for the comparable 
period in the prior year. Subscription and license revenue for the three 
months ended September 30, 1996 increased 59% to $3.5 million compared to 
$2.2 million for the comparable period in the prior year and accounted for 
81% of the revenue growth. These increases were primarily due to an increase 
of new MECON-PEERx subscriptions, Optimis and Action*Point licenses and 
implementation services. Services revenue for the three months ended 
September 30, 1996 increased 31% to $1.1 million compared to $840,000 for the 
comparable period in the prior year. This increase was primarily due to an 
increase in software implementation services offset by a planned decrease in 
consulting revenue as a result of the Company's continued shift in focus to 
product sales from consulting services. Revenue for the six months ended 
September 30, 1996 increased 53% to $8.1 million compared to $5.3 million for 
the comparable period in the prior year. Subscription and license revenue for 
the six months ended September 30, 1996 increased 71% to $6.0 million 
compared to $3.5 million for the comparable period in the prior year and 
accounted for 89% of the revenue growth. These increases were primarily due 
to an increase of new MECON-PEERx subscriptions, optional MECON-PEERx reports 
and MECON-PEERx analyses sold back to the subscriber base and Optimis and 
Action*Point licenses.  Services revenue for the six months ended September 
30, 1996 increased 23% to $2.1 million compared to $1.7 million for the 
comparable period in the prior year. This increase was primarily due to an 
increase in optional MECON-PEERx reports, MECON-PEERx analyses sold back 
to the subscriber base and Software implementation services offset by a 
planned decrease in consulting revenue as a result of the Company's continued 
shift in focus to product sales from consulting services. 

     COST OF REVENUE.  Cost of revenue for the three months ended September 
30, 1996 increased 36% to $1.5 million compared to $1.1 million for the 
comparable period in the prior year, primarily due to additional staffing to 
support the Company's growth. Cost of revenue for the three months ended 
September 30, 1996 included $23,751 in amortization expense from the 
capitalization of software development expenses compared to $38,500 for the 
comparable period in the prior year.  The decrease in amortization expense 
was primarily due to certain software development costs capitalized prior to 
fiscal year 1996 being fully amortized compared


<PAGE>

to the amortization of software development costs capitalized related to 
MECON Optimis for Windows which was released in the third fiscal quarter of 
1996.   Cost of revenue for the three months ended September 30, 1996 
decreased to 33% of total revenue compared to 37% for the comparable period 
in the prior year, primarily due to improved utilization of customer support 
staff and lower travel expenses attributable to establishing regional offices 
in Chicago and Washington D.C. Cost of revenue for the six months ended 
September 30, 1996 increased 17% to $2.7 million compared to $2.3 million for 
the comparable period in the prior year, primarily due to additional staffing 
to support the Company's growth. Cost of revenue for the six months ended 
September 30, 1996 included $47,502 in amortization expense from the 
capitalization of software development expenses compared to $72,000 for the 
comparable period in the prior year. The decrease in amortization expense was 
primarily due to certain software development costs capitalized prior to 
fiscal year 1996 being fully amortized compared to the amortization of 
software development costs capitalized related to MECON Optimis for Windows 
which was released in the third fiscal quarter of 1996.  Cost of revenue for 
the six months ended September 30, 1996 decreased to 34% of total revenue 
compared to 43% for the comparable period in the prior year, primarily due to 
improved utilization of customer support staff and lower travel expenses 
attributable to establishing regional offices in Chicago and Washington D.C.

     RESEARCH AND DEVELOPMENT.  Research and development expenses for the 
three months ended September 30, 1996 decreased 11% to $455,000 compared to 
$509,000 for the comparable period in the prior year, primarily due to a 
shift from utilizing independent contract staff to full-time employees at 
lower rates.  During the three months ended September 30, 1996, $178,000 was 
capitalized for internally developed software related to product development 
compared to $157,000 for the comparable period in the prior year. Research 
and development expenses for the three months ended September 30, 1996 
decreased to 10% of total revenue compared to 17% for the comparable period 
in the prior year primarily due to the completion of the MECON-Optimis 
Windows-based product.  Research and development expenses for the six months 
ended September 30, 1996 decreased 8% to $850,000 compared to $925,000 for 
the comparable period in the prior year, primarily due to a shift from 
utilizing independent contract staff to full-time employees at lower rates.  
During the six months ended September 30, 1996, $346,000 was capitalized for 
internally developed software related to product development compared to 
$256,000 for the comparable period in the prior year. Research and 
development expenses for the six months ended September 30, 1996 decreased to 
11% of total revenue compared to 18% for the comparable period in the prior 
year primarily due to utilization of programming capacity developed in 
research and development.

     SALES AND MARKETING.  Sales and marketing expenses for the three months 
ended September 30, 1996 increased 8% to $925,000 compared to $853,000 for 
the comparable period in the prior year, primarily due to the Company hiring 
a Vice President of Marketing in the fourth fiscal quarter of 1996 and 
increased commissions as a result of increased revenue.  Sales and marketing 
expenses for the three months ended September 30, 1996 decreased to 20% of 
revenue compared to 28% for the comparable period in the prior year, 
primarily due to utilization of the capacity developed in sales and 
marketing. Sales and marketing expenses for the six months ended September 
30, 1996 increased 6%  to $1.8 million compared to $1.7 million for the 
comparable period in the prior year, primarily due to the Company hiring a 
Vice President of Marketing in the fourth fiscal quarter of 1996 and 
increased commissions as a result of increased revenue. Sales and marketing 
expenses for the six months ended September 30, 1996 decreased to 22% of 
revenue compared to 32% for the comparable period in the prior year, 
primarily due to utilization of the capacity developed in sales and marketing.

     GENERAL AND ADMINISTRATIVE.  General and administrative expenses for the 
three months ended September 30, 1996 increased 48% to $793,000 compared to 
$535,000 for the comparable period in the prior year, primarily due to 
increased staffing, failed acquisition costs of approximately $100,000, and 
general expenses related to an increase in business activity and 
infrastructure expenses related to a public company's operations.  General 
and administrative expenses for the three months ended September 30, 1996 
decreased to 17% of revenue compared to 18% for the comparable period in the 
prior year, primarily due to utilization of the capacity developed in 
administration.  General and administrative expenses for the six months ended 
September 30, 1996 increased 27% to $1.4 million compared to $1.1 million for 
the comparable period in the prior year, primarily due to increased staffing, 
failed acquisition costs of approximately $100,000, and general



<PAGE>

expenses related to an increase in business activity and infrastructure 
expenses related to a public company's operations.  General and 
administrative expenses for the six months ended September 30, 1996 decreased 
to 17% of revenue compared to 20% for the comparable period in the prior 
year, primarily due to utilization of the capacity developed in 
administration.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 1996, the Company had $5.2 million in billed and 
unbilled accounts receivable, including $922,000 in accounts receivable over 
90 days compared to $3.3 million in billed and unbilled accounts receivable 
at March 31, 1996, including $804,000 in accounts receivable over 90 days. 
This increase in accounts receivable, particularly the accounts receivable 
over 90 days, was primarily due to sales to integrated health networks that 
typically pay slower than independent hospitals.  In the first fiscal quarter 
of 1997, the company hired additional collection personnel to focus on 
accounts older than 90 days.  As a result, the average days in accounts 
receivable decreased 14% to 81 days as of September 30, 1996 from 94 days as 
of June 30, 1996.   

     As of September 30, 1996, the Company had net working capital of $18.8 
million including cash, cash equivalents and short-term investments of $16.5 
million.  The Company currently has no material commitments for capital 
expenditures. 

     The Company believes that the cash and short-term investments of $16.5 
million, together with anticipated cash flows from operations, will be 
adequate to fund its cash requirements for at least the next twelve months.  
During the fiscal year, the Company intends to complete the development and 
release of its PEERVIEW product and intends to hire customer service 
personnel as the installed customer base increases. 

CERTAIN FACTORS BEARING ON FUTURE RESULTS


VARIABILITY OF QUARTERLY RESULTS; SEASONALITY

     The Company's quarterly revenues and operating results have varied 
significantly in the past and are likely to vary substantially from quarter 
to quarter in the future.  Quarterly revenues and operating results may 
fluctuate as a result of a variety of factors, including: the Company's sales 
cycle and demand for its products and services; changes in distribution 
channels; changes in the Company's product mix; the termination of, or a 
reduction in, subscriptions to the Company's MECON-PEERx product; the loss of 
customers due to consolidation in the health care industry; customer delays 
in providing information needed by the Company to complete implementation of, 
and revenue recognition from, sales of the MECON-PEERx product; changes in 
customer budgets; investments by the Company in marketing, sales, research 
and development and administrative personnel necessary to support the 
Company's growth; the timing of new product introductions and enhancements by 
the Company and its competitors; marketing and sales promotional activities 
and trade shows; the unpredictability of revenues from consulting services; 
and general economic conditions.  Accordingly, the Company's operating 
results for any particular quarterly period may not be indicative of results 
for future periods.  Moreover, the Company's operating expense levels are 
relatively fixed and, to a large degree, are based on anticipated revenue 
levels.  Consequently, if anticipated revenues in any given quarter do not 
occur as expected, expense levels could be disproportionately high and may 
result in losses.


<PAGE>

     The Company's quarterly results have been, and may continue to be, 
affected by hospital budgeting practices that cause many discretionary 
purchase decisions to be made shortly before the budgetary year end, which 
generally occurs on June 30 or December 31.  Consequently, the Company's 
operating results have been somewhat seasonal.

DEPENDENCE ON PRINCIPAL PRODUCT

     For the six months ended September 30, 1996, approximately 74% of the 
Company's revenues were derived from subscriptions to its MECON-PEERx product 
and related services.  Accordingly, any significant reduction in 
subscriptions to such product would have a material adverse effect on the 
Company's business and operating results.  Although subscriptions to the 
MECON-PEERx database generally have three-year terms, there can be no 
assurance that customers will not cancel their subscriptions prior to the end 
of the subscription period.  In addition, although the Company has 
experienced a high customer renewal rate, there can be no assurance that the 
Company's customers will renew their subscriptions or that any renewal terms 
will be as favorable to the Company as existing terms.

INTEGRITY AND RELIABILITY OF DATABASE

     The Company's success depends significantly on the integrity of its 
database.  Although the Company tests data for completeness and 
consistency, it does not conduct independent audits of the information 
provided by its customers.  Moreover, while the Company believes that the 
benchmarking information contained in its database is representative of the 
operational aspects of various types of hospitals, there can be no assurance 
that such information is appropriate for comparative analysis in all cases or 
that the database accurately reflects general or specific trends in the 
hospital market. If the information contained in the database were found, or 
were perceived, to be inaccurate, or if such information were generally 
perceived to be unreliable, the Company's business and operating results 
could be materially and adversely affected.

COMPETITION

     The market for health care information systems and services is intensely 
competitive and rapidly changing.  The Company's competitors include other 
providers of operations and financial benchmarking data and services, 
providers of decision support software systems and management and health care 
consulting firms.  Furthermore, other major health care information companies 
not presently offering cost management solutions may enter the markets in 
which the Company competes.  Many of the Company's competitors and potential 
competitors have significantly greater financial, technical, product 
development and marketing resources than the Company, and currently have, or 
may develop or acquire, substantial installed customer bases in the health 
care industry.  The Company also faces significant competition from internal 
management information services departments of large hospital alliances or 
for-profit hospital chains, many of which have developed or may develop 
benchmarking information and other cost control solutions.   In addition, 
increased competitive pressures, among other factors, could lead to lower 
prices for the Company's products and services, thereby materially adversely 
affecting the Company's operating results. Accordingly, there can be no 
assurance that the Company will be able to compete successfully in the future.

MANAGEMENT OF GROWTH

     The Company is currently experiencing a period of rapid growth and 
expansion which has placed a significant strain on its personnel and 
resources. The Company's growth has resulted in an increase in the level of 
responsibility for the Company's key personnel, several of whom were only 
recently hired, including the Company's Chief Financial Officer, who joined 
the company in November 1994, and the Company's President and Chief Operating 
Officer, who joined the Company in September, 1996.  Failure to manage growth 
effectively, or to develop, maintain or upgrade management information and 
other systems and controls, could have a material adverse effect on the 
Company.  In addition, through the merger of MCIS in March 1996, the Company 
increased the scope of its product lines and operations.  This expansion in 
scope has resulted in an increased need for infrastructure and systems.  
Furthermore, this requirement is relatively more substantial due to the 
limited systems investment made by the Company prior to fiscal 1997.  This 
requirement includes, without limitation, securing adequate financial 
resources to


<PAGE>

successfully integrate and manage MCIS, retention of key employees, 
integration of management information, control and telecommunications 
systems, consolidation of geographically dispersed facilities, and 
integration of various functions and groups of employees, each of which could 
pose significant challenges.  Moreover, MCIS historically has not been 
profitable, and the Company must make significant and rapid improvements at 
MCIS for the merged operation to achieve profit margins comparable to the 
Company's historical results.  The Company's future operating results will 
depend in large measure on its success in implementing operating and 
financial procedures and controls, improving communication and coordination 
among different operating functions, integrating certain functions such as 
sales and implementation, strengthening management information and 
telecommunications systems, and continuing to hire additional qualified 
personnel in all areas. There can be no assurance that the Company will be 
able to manage these activities and implement these additional systems and 
controls successfully, and any failure to do so could have a material adverse 
effect upon the Company's operating results.

DEPENDENCE ON STRATEGIC RELATIONSHIPS

     A key element of the Company's business strategy is to develop 
relationships with leading industry organizations in order to increase the 
Company's market presence, expand distribution channels and broaden the 
Company's product line.  The Company has recently entered into strategic 
relationships with Arthur Andersen LLP and HBOC.  The Company believes that 
its success in penetrating new markets for its products and services depends 
in large part on its ability to maintain these relationships and cultivate 
additional relationships.  There can be no assurance that the Company's 
existing or future strategic partners will not develop and market products in 
competition with the Company or otherwise discontinue their relationships 
with the Company, or that the Company will be able to successfully develop 
additional strategic relationships.

CONSOLIDATION AND UNCERTAINTY IN THE HEALTH CARE INDUSTRY

     Many health care providers are consolidating to create larger health 
care delivery enterprises  with greater regional market power.  Such 
consolidation could erode the Company's existing customer base and reduce the 
size of the Company's target market.  In addition, the resulting enterprises 
could have greater bargaining power, which may lead to price erosion of the 
Company's products and services.  The reduction in the size of the Company's 
target market or the failure of the Company to maintain adequate price levels 
could have a material adverse effect on the Company.

     The health care industry is subject to changing political, economic and 
regulatory influences that may effect the procurement practices and operation 
of health care industry participants.  During the past several years, the US 
health care industry has been subject to an increase in governmental 
regulation of, among other things, reimbursement rates and certain capital 
expenditures. Several lawmakers have announced that they intend to propose 
programs to reform the US health care system.  These programs may contain 
proposals to increase governmental involvement in health care, lower 
reimbursement rates and otherwise change the operating environment for the 
Company's customers.  Health care industry participants may react to these 
proposals and the uncertainty surrounding such proposals by curtailing or 
deferring investments, including those for the Company's products and 
services.  The Company cannot predict what impact, if any, such factors might 
have on its business, financial condition and results of operations.

UNCERTAINTY OF ENTRANCE INTO NEW MARKETS

     A substantial majority of the Company's revenues to date have been 
derived from sales to large hospitals in urban areas.  The Company's future 
success depends in part upon the Company's ability to market its products and 
services to other health care providers, including small and rural hospitals, 
long-term care facilities, large group medical practices, rehabilitation 
hospitals and surgical centers.  In order to develop the subscriber base 
necessary for the accumulation of meaningful operations benchmarking data for 
such new markets, the Company may be required to offer significant price 
discounts to prospective customers in such markets.  In addition, because 
such providers typically have smaller budgets than the Company's existing 
customers, entry into new markets may require the Company to offer lower 
priced versions of its products.   Sales of such new products may result in 
lower gross margins than sales to the


<PAGE>

Company's existing customer base.  Moreover, the entry into such new markets 
may require the Company to increase substantially its product development, 
marketing and other expenses.  There can be no assurance that the Company 
will be successful in entering new markets.

NEW PRODUCT DEVELOPMENT

     The Company's future success and financial performance will depend in 
large part on the Company's ability to continue to meet the increasingly 
sophisticated needs of its customers through the timely development and 
successful introduction of new and enhanced versions of its database and 
other complementary products and services.  Product development has been 
focused on enhancing existing products or introducing new products and has 
inherent risks, and there can be no assurance that the Company will be 
successful in its product development efforts or that the market will 
continue to accept the Company's existing or new products and services.  The 
Company believes that significant continuing product development efforts will 
be required to sustain the Company's growth.  There can be no assurance that 
the Company will successfully develop, introduce and market new products or 
product enhancements, or that products or product enhancements developed by 
the company will meet requirements of health care providers and achieve 
market acceptance.

POTENTIAL ACQUISITIONS

     For the three months ended September 30, 1996, the Company incurred 
failed acquisition costs of $100,000. The Company may continue to attempt 
to expand its product line through the acquisition of complementary 
businesses, products and technologies. Any such transactions would be 
accompanied by the risks commonly encountered in such transactions. In 
particular, business combinations include such risks as the difficulty of 
assimilating the operations and personnel of the combined companies, the 
ability to manage geographically remote units, the diversion of management's 
attention from other business concerns, the potential disruption of the 
Company's ongoing business, the risks of entering markets in which the 
Company has limited or no direct experience, the inability to retain key 
technical and managerial personnel, the inability of management to maximize 
the financial and strategic position of the Company through the successful 
integration of acquired businesses, additional expenses associated with 
amortization of acquired intangible assets and maintenance of uniform 
standards, controls, procedures and policies, and the impairment of 
relationships with employees and customers as a result of any integration of 
new personnel. In addition, acquisitions may involve the expenditure of 
significant funds. The Company's management has limited prior experience in 
managing acquisitions. There can be no assurance that the Company would be 
successful in overcoming these risks or other problems encountered in 
connection with such business combinations or that such transactions will not 
materially adversely affect the Company's business, financial condition or 
results of operations. In addition, such business combinations may involve 
the issuance of additional equity securities, which may be dilutive to 
stockholders.

DEPENDENCE ON KEY PERSONNEL

     The success of the Company and of its business strategy is dependent in 
large part on its key management and operating personnel, including its Chief 
Executive Officer and President, Vasu R. Devan.  The Company believes that 
its future success will also depend upon its ability to attract and retain 
highly-skilled technical, managerial and marketing personnel.  Such 
individuals are in high demand and often attract competing offers.  In 
particular, the Company's success will depend on its ability to retain the 
services of its executive officers.  The Company will also have an ongoing 
need to expand its management personnel and support staff.  The loss of the 
services of one or more members of management of key employees or the 
inability to hire additional personnel as needed may have a material adverse 
effect on the Company. 


<PAGE>

PART II:  OTHER INFORMATION

Item 1.   Legal Proceedings
               None

Item 2.   Changes in Securities
               None

Item 3.   Defaults upon Senior Securities
               None
          
Item 4.   Submission of Matters to a Vote of Security Holders
               
The following matters were approved at the Company's Annual Meeting of
Stockholders held on September 17, 1996:

     (a)  The following directors were elected:
     
             Directors              Votes For     Votes Withheld
             ---------              ---------     --------------
             Vasu R. Devan          5,674,928           100
             Raju Rajagopal         5,674,928           100
             William H. Kimball     5,674,928           100
             Walter G. Kortschak    5,674,928           100
             David L. Lowe          5,674,928           100
             Robert L. Montgomery   5,674,928           100
     
     (b)  The Stockholders approved the following proposals:
     
<TABLE>
<CAPTION>
                                                      Number of Common Shares Voted
               Proposal                        For         Against      Abstain     No Vote
                                               ---         -------      -------     -------
<S>            <C>                             <C>         <C>          <C>         <C>
          1)   Amendment to the 1995
               Stock Plan to increase the
               number of shares of Common
               Stock reserved for issuance
               thereunder by 550,000 shares    4,816,640   658,401      800         0
          
          2)   Ratification of appointment
               of KPMG Peat Marwick LLP
               as independent accountants      5,647,928   0            100         0
</TABLE>

Item 5.   Other Information
               None



<PAGE>

Item 6.   Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibits 11.1  Computation of Earnings per Share
Exhibits 27.0  Financial Data Schedules
 
(b) Reports on Form 8-K
 
The Company did not file any reports on Form 8-K during the three months 
ended September 30, 1996.  

<PAGE>

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.

                              MECON INC.
                              (Registrant)




     Date:   11/13/96         /s/ Vasu Devan
           ------------       ---------------------------
                              Vasu R. Devan
                              President and Chief Executive Officer




     Date:   11/13/96         /s/ David J. Allinson
           ------------       ---------------------------
                              David J. Allinson
                              Chief Financial Officer