<PAGE>


                                    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 December 31, 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 December
31, 1996 was

                                   6,000,377 shares
                                           
                                           

<PAGE>

                                     MECON, INC.
                                     FORM 10-QSB 
                                  DECEMBER 31, 1996
                                           
                                  TABLE OF CONTENTS
                                                                          Page
PART I:  FINANCIAL INFORMATION     

Item 1.  Financial Statements

         Consolidated Balance Sheets as of
         December 31, 1996 and March 31, 1996

         Consolidated Statements of Operations for the
         Three and Nine Month Periods Ended December 31, 1996 and 1995

         Consolidated Condensed Statements of Cash Flows for the
         Nine Month period Ended December 31, 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>

                                MECON, INC.
                       CONSOLIDATED BALANCE SHEETS
                               (IN THOUSANDS)
                                 UNAUDITED

<TABLE>
<CAPTION>
                                                       MARCH 31, 1996     DECEMBER 31, 1996
                                                       --------------     -----------------
<S>                                                   <C>                <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents                                $15,205             $11,160 
  Short-term investments in marketable debt securities       4,775               3,935 
  Accounts receivable, net of allowances of $245 and 
    $705 at March 31, and December 31, 1996, 
    respectively                                             2,769               3,738 
  Unbilled accounts receivable                                 526                 850 
  Prepaid expenses                                             211                 480 
  Other current assets                                         126                 172 
                                                         ---------             -------
      Total current assets                                  23,612              20,335 

Property and equipment, net                                  1,009               1,392 
Software development costs, net                                924               1,394 
Other assets                                                    36                  40 
                                                         ---------             -------
                                                           $25,581             $23,161 
                                                         ---------             -------
                                                         ---------             -------
                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                            $557                $892 
  Accrued salaries and benefits                                640                 278 
  Note payable                                               1,936                   -   
  Interest payable                                             519                   -   
  Deferred revenue                                           1,333               1,302 
  Other accrued liabilities                                    666                 724 
                                                         ---------             -------
      Total current liabilities                              5,651               3,196 

Long-term obligations, less current portion                     29                  25 

      Total liabilities                                      5,680               3,221 

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, and 6,000,377 issued and 
  outstanding at March 31 and December 31, 1996,
  respectively                                                   6                   6 
Additional paid in capital                                  24,511              25,072 
Accumulated deficit                                         (4,616)             (5,138)
                                                         ---------             -------
     Total stockholders' equity                             19,901              19,940 
                                                         ---------             -------
                                                           $25,581             $23,161 
                                                         ---------             -------
                                                         ---------             -------
</TABLE>

                    See accompanying notes to financial statements


<PAGE>

                                 MECON, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                 UNAUDITED

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED DECEMBER 31,        NINE MONTHS ENDED DECEMBER 31, 
                                                 -------------------------------        ------------------------------
                                                           1995            1996                    1995         1996
                                                 -------------------------------        ------------------------------
<C>                                                  <S>                <S>                 <S>                <S>  
Revenue:
 Subscription and license                                 $2,360         $2,163                   $5,902      $8,137
 Services                                                    983            889                    2,715       3,000
                                                 -------------------------------        ------------------------------

   Net revenue                                             3,343          3,052                    8,617      11,137

Cost of revenue                                            1,237          1,483                    3,499       4,194
                                                 -------------------------------        ------------------------------

Gross profit                                               2,106          1,569                    5,118       6,943


Operating costs:
 Research and development                                    555            676                    1,481       1,526
 Sales and marketing                                         837            906                    2,545       2,677
 General and administrative                                  602            826                    1,680       2,135
 Reorganization and other non-recurring costs                  -          1,459                        -       1,706
                                                 -------------------------------        ------------------------------

    Total operating costs                                  1,994          3,867                    5,706       8,044
                                                 -------------------------------        ------------------------------

Operating income (loss)                                      112         (2,298)                    (588)     (1,101)
                                                 -------------------------------        ------------------------------

Interest expense                                             (97)             -                     (235)          -
Interest and other income, net                                63            185                       78         619
                                                 -------------------------------        ------------------------------

Income (loss) before provision for income taxes               78         (2,113)                    (745)       (482)
                                                 -------------------------------        ------------------------------

Provision for income tax expense/(benefit)                     -           (532)                      65          40
                                                 -------------------------------        ------------------------------

Net income (loss)                                            $78        $(1,581)                   $(810)      $(522)

Accretion of redeemable preferred stock                        -              -                    $(109)          -

Net income (loss) attributable to common stockholders        $78        $(1,581)                   $(919)      $(522)
                                                 -------------------------------        ------------------------------
                                                 -------------------------------        ------------------------------

Net income (loss) per share                                $0.02         $(0.25)                  $(0.21)     $(0.08)
                                                 -------------------------------        ------------------------------
                                                 -------------------------------        ------------------------------

Shares used in computing per share data                    4,801          6,322                    4,431       6,438
                                                 -------------------------------        ------------------------------
                                                 -------------------------------        ------------------------------
</TABLE>


                See accompanying notes to financial statements


<PAGE>

                                MECON, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (IN THOUSANDS)
                                 UNAUDITED


<TABLE>
<CAPTION>
                                                FOR THE NINE MONTHS ENDED
                                                       DECEMBER 31,
                                                     1995        1996
                                                    ------      ------
<S>                                             <C>           <C>
Net cash (used in) provided by operating
  activities                                       $   (415)    $ (2,275)
Cash flows from investing activities:
    (Purchase)/Sale of short-term investments             -          840
    Acquisition of property and equipment              (382)        (669)
    Computer software development costs                (392)        (562)
                                                   --------     --------
      Net cash from investing activities               (774)        (391)

Cash flows from financing activities:
    Proceeds from bank borrowings                       850
    Repayment of note payable Borrowings from 
      bank                                             (850)      (1,936)
    Proceeds from repayment of stockholder's
      note receivable                                    16
    Payment of bank borrowings and capital leases       (11)          (4)
    Redemption of Series A preferred stock             (954)
    Redemption of Series B preferred stock           (1,000)
    Repurchase of common stock                         (284)
    Proceeds from issuance of common stock, net
      of issuance costs                              23,131          561
                                                   --------     --------
      Net cash provided by (used in) financing
        activities                                   20,898       (1,379)
                                                   --------     --------
Net increase in cash and cash equivalents            19,709       (4,045)
Cash and cash equivalents at beginning of
  period                                              1,190       15,205
                                                   --------     --------
Cash and cash equivalents at end of period         $ 20,899     $ 11,160
                                                   --------     --------
                                                   --------     --------
</TABLE>

               See accompanying notes to financial statements 




<PAGE>


                                     MECON, INC.
                                           
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                           
                                  DECEMBER 31, 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 nine months ended December 31, 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 December 31, 1996, no such costs had been
deferred.

INCOME TAXES
Income tax benefit for the quarter ended December 31, 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 December 31, 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.

(5)  REORGANIZATION AND OTHER NON-RECURRING COSTS

During the third quarter of fiscal 1997, the Company announced a plan to 
reorganize its operations by centralizing the management of its product 
development, sales and product support organizations to better achieve its 
strategic objectives.  In addition, during the third quarter of fiscal 1997,  
the Company began increasing its investment in the development of new 
products by approximately $100,000.  In connection with the implementation of 
this new corporate structure, the Company recorded a non-recurring pretax 
charge totaling $1,459,000 that primarily included a $1,337,000 charge for 
costs associated with the reorganization, and a $122,000 charge for an 
aborted acquisition.  Included in the costs associated with the 
reorganization were provisions for shutting down two of the Company's 
satellite offices in Chicago, Illinois and Calabassas, California,  employee 
reassignment and relocation, severance and related benefits, asset writedowns 
and a provision for accounts receivable that management believes may not be 
collectible.  As a result of these changes, the Company will relocate its 
headquarters to larger facilities.  The following table sets forth a 
description of the type and amount of reorganization costs recognized as 
expense during the three months ended December 31, 1996 and the remaining 
liability:

<TABLE>
<CAPTION>

                                                                                                          Accrual
                                                Total       Non-cash        Accrued                          At
Reorganization Cost                            Expense       Expense        Expense         Paid          12/31/96
-------------------                            -------       -------        -------         ----          --------
<S>                                        <C>              <C>            <C>           <C>             <C>
Salaries and termination benefits of six
employees                                     $564,000             $0       $564,000       $229,000       $335,000

Relocation and facilities shutdown             157,000              0        157,000         49,000        108,000

Professional fees                               55,000              0         55,000          5,000         50,000

Asset writedowns                               261,000        261,000              0              0              0

Provision for doubtful accounts                300,000        300,000              0              0              0
                                               -------        -------        -------        -------        ------- 
Total                                       $1,337,000       $561,000       $776,000       $283,000       $493,000


</TABLE>



(6) SUBSEQUENT EVENT

On January 22, 1997, the Company signed a lease for a new facility in San 
Ramon, California and paid a security deposit totaling $62,500.  The facility 
is approximately 34,000 square feet and will accommodate all of  the 
Company's operations except for field service representatives and personnel 
in the Company's Washington D.C. office.  The lease commences in June, 1997 
and expires in June, 2004.  Minimum lease payments required under the terms 
of the lease are $5.3 million, and the Company is required to maintain a 
$750,000 letter of credit with a bank to guarantee the landlord's investment 
in leasehold improvements. 

<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. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULTS OF THE RISK FACTORS SET FORTH UNDER "CERTAIN FACTORS
BEARING ON FUTURE RESULTS" BELOW AND ELSEWHERE IN THIS REPORT.

OVERVIEW

    MECON is a leading provider of operations benchmarking data, information 
products, decision support software and consulting services to the hospital 
industry.  The Company's primary product is based upon proprietary operations 
benchmarking data containing operational cost and key performance information 
from over 400 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 developed a variety of products and 
services that employ its proprietary data.  Today, the Company focuses on 
creating cost management solutions using a full array of software products, 
data and information and product oriented consulting services. During the 
first nine months of fiscal 1997, approximately 73% 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.


REORGANIZATION

    On November 25, 1996, the Company announced plans to complete the
integration of the Company's MCIS subsidiary, centralize management of its
product development, sales and product support organizations, increase
investment in the development of new products, and will relocate its
headquarters to larger facilities to accommodate these changes.  These actions
are intended to position the Company on a stronger footing for long-term growth.

    In connection with the implementation of this new corporate structure, 
the Company recorded a non-recurring pretax charge totaling $1.5 million that 
primarily included a $1.3 million charge for costs associated with the 
reorganization, and a $122,000 charge for an aborted acquisition.  Included 
in the costs associated with the reorganization were provisions for the 
closing of two of the Company's satellite offices in Chicago and Calabassas, 
California, employee reassignment and relocation, severance and related 
benefits, asset writedowns and a provision for doubtful accounts related to 
one of the Company's product lines.  Management believes its commitment to 
the development of new products may change the strategic direction of one of 
its product lines.  As a result, management believes there is an increased 
potential for returns of prior sales of products, and accordingly, has 
established a reserve for such returns, concessions and uncollectible 
accounts.  Total cash payments made through December 31, 1996 in connection 
with the reorganization were $283,000, and total non-cash expenses, including 
fixed asset writedowns and the provision for doubtful accounts, were $561,000 
 .  The company estimates that future cash payments totaling $493,000 will be 
made to complete the reorganization.

<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       Nine Months Ended
                                                                     December 31,           December 31,
                                                                -------------------------------------------
                                                                 1995        1996        1995        1996
                                                                -------------------------------------------
                                                                -------------------------------------------
<S>                                                              <C>       <C>          <C>         <C>
Subscription and license revenue                                  71%         71%         69%         73%
Services revenue                                                  29%         29%         31%         27%
                                                                -------------------------------------------
Net revenue                                                      100%        100%        100%        100%
Gross margin                                                      63%         51%         59%         62%
Research and development                                          17%         22%         17%         14%
Sales and marketing                                               25%         30%         30%         24%
General and administrative                                        18%         27%         20%         19%
Merger and acquisition                                             0%         48%          0%         15%
                                                                -------------------------------------------
Operating income (loss)                                            3%       (76%)        (8%)       (10%)
Interest expense                                                 (3%)          0%        (3%)          0%
Interest income                                                    2%          6%          1%          6%
                                                                -------------------------------------------
Income (loss) before provision for taxes                           2%       (70%)       (10%)        (4%)
                                                                -------------------------------------------
Provision for income tax (expense) benefit                         0%       (17%)          1%          0%
                                                                -------------------------------------------
Net income (loss)                                                  2%       (53%)        (9%)        (4%)
                                                                -------------------------------------------
Accretion of redeemable preferred stock                            0%          0%        (1%)          0%
                                                                -------------------------------------------
Net income (loss) attributable to common stockholders              2%       (53%)       (10%)        (4%)
                                                                -------------------------------------------

</TABLE>



    REVENUE.  Revenue for the three months ended December 31, 1996 decreased 
6% to $3.1 million compared to $3.3 million for the comparable period in the 
prior year. Subscription and license revenue for the three months ended 
December 31, 1996 decreased 8% to $2.2 million compared to $2.4 million for 
the comparable period in the prior year and accounted for 50% of the revenue 
decrease. These decreases were primarily due to delayed contract signing 
rates of MECON-PEERx subscriptions, Optimis and Action*Point licenses and 
implementation services contracts as a result of reduced sales force 
productivity during the implementation of the new corporate sales structure.  
Services revenue for the three months ended December 31, 1996 decreased 10% 
to $900,000 compared to $1.0 million for the comparable period in the prior 
year and accounted for 50% of the revenue decrease.  These decreases were 
primarily due to a decrease in software implementation services and 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 nine 
months ended December 31, 1996 increased 29% to $11.1 million compared to 
$8.6 million for the comparable period in the prior year. Subscription and 
license revenue for the nine months ended December 31, 1996 increased 37% to 
$8.1 million compared to $5.9 million for the comparable period in the prior 
year and accounted for 88% 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 nine months 
ended December 31, 1996 increased 11% to $3.0 million compared to $2.7 
million for the comparable period in the prior year. This increase was 
primarily due to an increase in optional MECON-PEERx reports and MECON-PEERx 
analyses sold back to the subscriber base and Software implementation 
services.

    COST OF REVENUE.  Cost of revenue for the three months ended December 31,
1996 increased 25% to $1.5 million compared to $1.2 million for the comparable
period in the prior year, primarily due to additional staffing to support the
Company's growth.  Although total revenue recognized for the three months ended
December 31, 1996 decreased 6% to $3.1 million compared to $3.3 million for the
comparable period in the prior year, the total value of new database and
software contracts signed during the three months ended December 31, 1996
increased 127% to $4.8 million from $2.1 million in the prior year.  Cost of
revenue for the three months ended December 31, 1996 included $41,000 in
amortization expense from the capitalization of software development expenses,
which remained essentially unchanged, compared to $45,000 for the comparable
period in the prior year.   Cost of revenue for the three months ended December
31, 1996 increased to 49% of total revenue compared to 37% for the comparable
period


<PAGE>

in the prior year, primarily due to a decrease in revenue while increasing 
staffing levels for new contracts signed during the third quarter of fiscal 
1997.  Cost of revenue for the nine months ended December 31, 1996 increased 
20% to $4.2 million compared to $3.5 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 nine months ended December 31, 1996 included 
$89,000 in amortization expense from the capitalization of software 
development expenses compared to $109,000 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 1997 being fully 
amortized compared to the amortization of software development costs 
capitalized related to MECON Optimis for Windows which was released in the 
third quarter of fiscal 1996.  Cost of revenue for the nine months ended 
December 31, 1996 increased to 41% of total revenue compared to 38% for the 
comparable period in the prior year, primarily due to a slowdown in the 
revenue growth rate in the third quarter of fiscal 1997 while staffing 
continued to increase to support the increase in the total value of contracts 
signed during the third quarter of fiscal 1997.

    RESEARCH AND DEVELOPMENT.  Research and development expenses for the 
three months ended December 31, 1996 increased 22% to $676,000 compared to 
$555,000 for the comparable period in the prior year, primarily due to the 
additions of technical and programming personnel related to new product 
development.  During the three months ended December 31, 1996, $159,000 was 
capitalized for internally developed software related to product development 
compared to $124,000 for the comparable period in the prior year. Research 
and development expenses for the three months ended December 31, 1996 
increased to 22% of total revenue compared to 17% for the comparable period 
in the prior year primarily due to a decrease in revenue coupled with a 
planned increase in new product development.  Research and development 
expenses for the nine months ended December 31, 1996 remained constant at 
$1.5 million primarily due to continued investment in new product 
development.  During the nine months ended December 31, 1996, $505,000 was 
capitalized for internally developed software related to product development 
compared to $392,000 for the comparable period in the prior year. Research 
and development expenses for the nine months ended December 31, 1996 
decreased to 14% of total revenue compared to 17% 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 December 31, 1996 increased 8%  to $906,000 compared to $837,000 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 higher 
commissions associated with the 127% increase in contract signed during the 
three months ended December 31, 1996 to $4.8 million from $2.1 million in the 
prior year.  Sales and marketing expenses for the three months ended December 
31, 1996 increased to 30% of revenue compared to 25% for the comparable 
period in the prior year, primarily due to a decrease in revenue coupled with 
increased contracts signed that generate increased selling and marketing 
expenses.   Sales and marketing expenses for the nine months ended December 
31, 1996 increased 8% to $2.7 million compared to $2.5 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 on an increase in contracts signed.  Sales and 
marketing expenses for the nine months ended December 31, 1996 decreased to 
24% of revenue compared to 30% 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 December 31, 1996 increased 37% to $826,000 compared to 
$602,000 for the comparable period in the prior year, primarily due to the 
Company hiring its new Chief Executive Officer in September, 1996, and 
increased staffing and facilities expenses related to an increase in business 
activity. General and administrative expenses for the three months ended 
December 31, 1996 increased to 27% of revenue compared to 18% for the 
comparable period in the prior year, primarily due to the hiring of 
additional personnel and added facilities to support increased business. 
General and administrative expenses for the nine months ended December 31, 
1996 increased 29% to $2.2 million compared to $1.7 million for the 
comparable period in the prior year, primarily due to the Company hiring its 
new Chief Executive Officer in September, 1996, increased staffing and 
facilities expenses related to an increase in business activity and 
infrastructure expenses related to a public company's operations. General and 
administrative expenses for the nine months ended December 31, 1996 remained 
constant at  19% of revenue, primarily due to utilization of the capacity 
developed in administration.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

    As of December 31, 1996, the Company had $4.6 million in billed and 
unbilled accounts receivable, including $638,000 in accounts receivable over 
180 days compared to $3.3 million in billed and unbilled accounts receivable 
at March 31, 1996, including $404,000 in accounts receivable over 180 days. 
This increase in accounts receivable, particularly the accounts receivable 
over 180 days, was primarily due to sales to integrated health systems that 
typically pay slower than independent hospitals.  In the first quarter of 
fiscal 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 16% to 79 days as of December 31, 1996 from 94 days as 
of the end of the first quarter of fiscal 1997.

    As of December 31, 1996, the Company had net working capital of $17.1
million including cash, cash equivalents and short-term investments of $15.1
million.  The Company currently has no material commitments for capital
expenditures. 

    The Company believes that the cash and short-term investments of $15.1
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 hire customer service personnel as the
installed customer base increases. 


CERTAIN FACTORS BEARING ON FUTURE RESULTS
    

    CERTAIN OF THE STATEMENTS ABOVE ARE FORWARD-LOOKING STATEMENTS.  IN
ADDITION, THE COMPANY MAY FROM TIME TO TIME MAKE ORAL FORWARD-LOOKING
STATEMENTS.  THE FOLLOWING ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY SUCH FORWARD-LOOKING STATEMENTS
AND SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS.

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.

    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 nine months ended December 31, 1996, approximately 73% 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

<PAGE>


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.

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.

INTEGRITY AND RELIABILITY OF DATABASE
    The Company's success depends significantly on the integrity of its
database.  Although the Company tests data for the 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.

MANAGEMENT OF GROWTH
    The Company is currently experiencing a period of growth and expansion
which has placed a significant strain on its personnel and resources.  The
Company's growth has resulted in a increase in the level of responsibility for
the Company's key personnel, several of whom were only recently hired, including
the Company's President and Chief Executive 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 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.

<PAGE>

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 uncertainly
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.

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.

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 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.

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
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.

<PAGE>

POTENTIAL ACQUISITIONS
    The Company may expand its product line through the acquisition of 
complementary businesses, products and technologies.  Acquisitions involve 
numerous risks, including difficulties in the assimilation of operations and 
products, the ability to manage geographically remote units, the diversion of 
management's attention from other business concerns, the risks of entering 
markets in which the Company has limited or no direct expertise and the 
potential loss of key employees of the acquired companies.  In addition, 
acquisitions may involve the expenditure of significant funds.  The Company's 
management has no prior experience in managing acquisitions.  There can be no 
assurance that any acquisition will result in long-term benefits to the 
Company  or that management will be able to manage effectively the resulting 
business.  In addition, such an acquisition 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.  The Company 
believes that its future success will also depend upon its ability to attract 
and retain highly-skilled technical or managerial and 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
                   None


Item 5.  Other Information
                   None

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits
Exhibit 11.1  Computation of Earnings per Share
Exhibit 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
December 31, 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:    2/14/96         /s/ Les Schmidt
                   -------------       ---------------
                                       Les Schmidt
                                       President and Chief Executive Officer






              Date:    2/14/96         /s/ David J. Allinson
                   --------------      ---------------------
                                       David J. Allinson
                                       Chief Financial Officer