<PAGE>

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

                                   FORM 10-QSB/A

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

                      For the quarter ended September 30, 1999

                                       OR

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

                           Commission File Number: 0-27048
                                  ------------

                                   MECON, INC.

        (Exact name of small business issuer as specified in our charter)

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

                           200 Porter Drive, Suite 210
                           San Ramon, California 94583
                    (address of principal executive offices)

         Issuer's telephone number, including area code: (925) 838-1700

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

The number of shares outstanding of our common stock on November 9, 1999 was
7,214,624 shares

Transitional Small Business Disclosure Format (check one):     Yes    X  No
                                                            ---      ---

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


                                       1

<PAGE>



                                   MECON, INC.
                                   FORM 10-QSB
                               SEPTEMBER 30, 1999

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                               PAGE
PART I:  FINANCIAL INFORMATION
<S>        <C>                                                                                <C>
Item 1.      Financial Statements

               Consolidated Condensed Balance Sheets (unaudited)  as of                         3
               September 30, 1999 and March 31, 1999

               Consolidated Condensed Statements of Income (unaudited) for the                  4
               Three and Six Month Periods Ended September 30, 1999 and 1998

               Consolidated Condensed Statements of Cash Flows (unaudited) for the              5
               Six Month Periods Ended September 30, 1999 and 1998

               Notes to Consolidated Condensed Financial Statements (unaudited)                 6

Item 2.      Management's Discussion and Analysis of                                           12
             Financial Condition and Results of Operations


PART II:  OTHER INFORMATION                                                                    22

Item 2.      Changes in securities and use of proceeds                                         22

Item 4.      Submission of Matters to a Vote of Security Holders                               22


Signatures                                                                                     24

Exhibits     11.1 Computation of Earning (loss) per share                                      25

             27.0 Financial Data Schedule                                                      26

</TABLE>


                                       2

<PAGE>



ITEM 1.  FINANCIAL STATEMENTS

                                   MECON, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                      September 30, 1999        March 31, 1999
                                                                  ------------------------ -----------------------
<S>                                                                     <C>                     <C>
                                     ASSETS
Current assets:
     Cash and cash equivalents                                            $  3,262                $  7,182
     Securities available-for-sale, at market                                3,744                   2,789
     Accounts receivable, net of allowances of $265 and $1,703
        at September 30, 1999 and March 31, 1999,  respectively              8,172                   5,517
     Unbilled accounts receivable                                              995                     745
     Prepaid expenses                                                          645                     192
     Other current assets                                                      237                     106
                                                                          --------                --------

             Total current assets                                           17,055                  16,531

Property and equipment, net                                                  2,035                   2,107
Software development costs, net                                              2,422                   2,414
Goodwill                                                                     3,064                   8,577
Deferred Income Taxes                                                        1,912                     --
Investment in iBusinessHub                                                     500                     --
Other assets                                                                   978                       9
                                                                          --------                --------

                                                                          $ 27,966                $ 29,638
                                                                          ========                ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable and other accrued liabilities                       $  2,990                $  2,558
     Accrued salaries and benefits                                             705                     899
     Deferred revenue                                                        2,725                   2,282
                                                                          --------                --------

            Total current liabilities                                        6,420                   5,739
                                                                          --------                --------

            Total liabilities                                                6,420                   5,739
                                                                          --------                --------

Stockholders' equity:
    Common stock, $.001 par value; 50,000,000 shares authorized;
       7,213,237, and 7,111,327 issued and outstanding at
       September 30, 1999 and March 31, 1999,
       respectively                                                              7                       7
    Additional paid in capital                                              27,853                  27,053
    Accumulated deficit                                                     (6,314)                 (3,161)
                                                                          --------                --------

             Total stockholders' equity
                                                                            21,547                  23,899
                                                                          --------                --------

                                                                          $ 27,966                $ 29,638
                                                                          ========                ========

</TABLE>

         See accompanying notes to consolidated condensed financial statements


                                       3

<PAGE>



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

<TABLE>
<CAPTION>
                                                          Three months ended          Six months ended
                                                             September 30,              September 30,
                                                      ---------------------------- ------------------------
                                                            1999          1998         1999         1998
                                                      --------------- ------------ ------------ ------------
<S>                                                   <C>            <C>          <C>          <C>
Revenue:
     Data products                                      $  4,608       $  3,731     $  8,145     $  6,641
     Consulting                                            2,309            428        5,508        1,546
                                                      --------------- ------------ ------------ ------------

         Net revenue                                       6,917          4,159       13,653        8,187

Cost of revenue                                            2,103          1,238        4,337        2,680
                                                      --------------- ------------ ------------ ------------

Gross profit                                               4,814          2,921        9,316        5,507

Operating costs:
  Research and development                                 1,083            597        2,236        1,324
  Sales and marketing                                      1,375            710        2,678        1,434
  General and administrative                                 991            704        2,044        1,494
  Goodwill impairment and other restructuring              6,447             --        6,447           --
   charges
  One-time acquisition-related charges                       638             --          638           --
                                                      --------------- ------------ ------------ ------------

         Total operating costs                            10,534           2,011      14,043        4,252
                                                      --------------- ------------ ------------ ------------

Operating income (loss)                                   (5,720)            910      (4,727)       1,255

Interest and other income, net                                95             230         200          445
                                                      --------------- ------------ ------------ ------------

Income (loss) before provision for income taxes           (5,625)          1,140      (4,527)       1,700

Provision for (benefit from) income taxes                 (1,747)            270      (1,373)         422
                                                      --------------- ------------ ------------ ------------

Net income (loss)                                       ($ 3,878)       $    870    ($ 3,154)    $  1,278
                                                      =============== ============ ============ ============

Basic earnings (loss) per share                         ($  0.54)       $   0.12    ($  0.44)    $   0.18
                                                      =============== ============ ============ ============

Weighted average common stock outstanding                  7,196           7,007       7,157        6,997
                                                      =============== ============ ============ ============

Diluted earnings (loss) per share                       ($  0.54)       $   0.12    ($  0.44)    $   0.17
                                                      =============== ============ ============ =============

Weighted average common and dilutive potential
   common stock outstanding                                7,196           7,459       7,157        7,488
                                                      =============== ============ ============ =============

</TABLE>

         See accompanying notes to consolidated condensed financial statements


                                       4

<PAGE>



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

<TABLE>
<CAPTION>

                                                                          Six months ended
                                                                            September 30,
                                                                   ---------------------------
                                                                       1999            1998
                                                                   ------------    -----------
<S>                                                               <C>             <C>
Net cash provided by (used in) operating activities:                ($ 1,265)       $  2,157

Cash flows (used in) provided by investing activities:
     Purchase of securities available-for-sale                        (1,463)           (562)
     Proceeds from sales or maturities of securities
        available-for-sale                                               508           1,016
     Acquisition of property and equipment                              (440)           (871)
     Computer software development costs                                (648)           (700)
     Cash paid for acquisitions and investments                         (775)
                                                                   ------------    -----------
            Net cash used in investing activities                     (2,818)         (1,117)
                                                                   ------------    -----------

Cash flows from financing activities:
     Proceeds from exercise of stock options and
        employee stock purchase plan stock sales                         163             163
                                                                   ------------    -----------
            Net cash provided by financing activities                    163             163
                                                                   ------------    -----------
Net (decrease)/increase in cash and cash equivalents                  (3,920)          1,203
Cash and cash equivalents at beginning of period                       7,182          12,812
                                                                   ------------    -----------
Cash and cash equivalents at end of period                          $  3,262        $ 14,014
                                                                   ============    ===========

Supplemental disclosure for noncash investing
activities:
Reduction of goodwill related to realization
  of LBA deferred tax                                               $    365             --
Stock issued in acquisitions                                        $    633             --

</TABLE>

      See accompanying notes to consolidated condensed financial statements


                                       5

<PAGE>

                                   MECON, INC.

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                               SEPTEMBER 30, 1999
                                   (UNAUDITED)


(1)      BUSINESS OF THE COMPANY

         MECON, Inc. is a leading provider of benchmarking solutions to the
healthcare industry. The benchmarking solutions we offer consist of
data/information products, decision support software and value-added
services. The principal focus of our products and services is to reduce costs
and improve efficiency and effectiveness of departmental and clinical
operations in the healthcare delivery system. Our main product line is based
upon an operations benchmarking database containing cost and key performance
information from hospitals nationwide. In addition to statistical data, the
database incorporates qualitative data derived from operational profiles
provided by hospitals that utilize our database-related products. Our
customers use the information provided by the operations benchmarking
database to develop and implement strategies to reduce costs and to
periodically measure actual performance to maintain the cost reductions
achieved.

         On March 31, 1999, we acquired the Implementation Consulting Group,
of HCIA, Inc. formerly known as LBA Healthcare ("LBA"), forming the
healthcare industry's first comprehensive clinical and operations cost
management solution. ICG has been renamed LBA Healthcare and is headquartered
in Denver and originally had 33 clinical consulting professionals (see
footnote 5, Notes to Consolidated Condensed Financial Statements for further
discussion). LBA's consulting services and data products are designed to lead
hospitals and physicians to improve their competitive position in clinical
service lines, with special focus in Cardiology, Pulmonary, Orthopedics, and
Neuroscience. LBA services include analyzing opportunities related to
physician practice patterns, developing physician gain-sharing and joint
venture models to align physician incentives, and identifying market
opportunities to protect and increase market share, clinical service line
revenue, and margins. This acquisition adds LBA's clinical consulting
services to our operations cost management solution. The acquisition was
accounted for as a purchase and the results of LBA's operations have been
included in our consolidated financial statements from the date of
acquisition of March 31, 1999.

         On July 14, 1999, we acquired Progressive Development, Inc. (PDI),
provider of a Web-based supply cost comparison database. PDI's products and
services are designed to reduce what healthcare providers pay for disposable
products and implants through the use of an online database. This database,
called MECON-PricePoint(TM), helps to lower supply acquisition costs by
providing comparative benchmarking data against actual supply costs provided
by other hospitals. Through the PricePoint database, healthcare providers
compare their supply pricing data against national and regional averages and
lowest recorded prices paid. The acquisition was accounted for as a purchase
and the results of operations have been included in our consolidated
financial statements from the date of acquisition.

On September 28, 1999, we made a $500,000 strategic investment in
iBusinessHub (IBH), an early stage development company focused on building
business-to-business e-commerce procurement engines for various vertical
markets. As a result of this investment, we own approximately 36% of the
outstanding stock of IBH. We will account for this investment using the
equity method of accounting.  This investment is expected to add
transactional functionality to our rapidly expanding healthcare community,
which is sharply focused on expense reduction and performance improvement.
Integral to this strategy is our recent acquisition of PDI, and its supply
cost comparison database.

         Also on September 30, 1999, we acquired Clinical Dynamics, Inc.
(CDI), provider of Web-based software reporting tools that analyze clinical
process and outcome metrics of care for clinicians and

                                       6

<PAGE>

administrators. CDI Providers is renowned for its highly functional,
Web-based software reporting tools which help providers create, manage, and
analyze clinical outcomes data. Its flagship Web-based product line,
DYNAMO(TM) (Dynamic Analysis of Measured Outcomes), provides information on
clinical performance through physician profiling, hospital benchmarking,
clinical pathway development, and practice variance analysis. The Dynamo
product suite provides clinicians and administrators with quick desktop
access to complex clinical, financial, and demographic patient data
information for day-to-day evaluation and decision-making. The acquisition
was accounted for as a pooling of interests and therefore all information
contained in the Consolidated Financial Statements has been restated to
reflect the pooling.

(2)      INTERIM FINANCIAL INFORMATION

         Our consolidated condensed interim financial statements presented in
this report have been prepared without audit under the rules and regulations
of the Securities and Exchange Commission. Accordingly, we have condensed or
omitted certain information and notes required by generally accepted
accounting principles. In the opinion of our management, these statements
include all adjustments (all of which consist of normal recurring adjustments
except as otherwise noted herein) necessary to present fairly our financial
position and results of operations for the interim periods presented. These
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the fiscal year ended March 31,
1999 contained in our Annual Report on Form 10-KSB. The results of operations
for the three and six months ended September 30, 1999 are not necessarily
indicative of the results of operations that may be expected for future
periods or the full year.

(3)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

         Beginning April 1, 1999, we adopted Statement of Position (SOP)
98-9, MODIFICATION OF SOP 97-2, SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO
CERTAIN TRANSACTIONS, which amends SOP 97-2, SOFTWARE REVENUE RECOGNITION,
regarding how to account for multiple-element arrangements and how
vendor-specific evidence is defined.

         Our adoption of SOP 98-9 did not have a material effect on our
financial statements for the three and six month periods ended September 30,
1999.

COMPREHENSIVE INCOME

         SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires the reporting
and display of comprehensive income and its components in a full set of
general-purpose financial statements. We have no components of other
comprehensive income and, accordingly, the comprehensive income is the same
as net income for all periods presented.

(4)      MERGER

         On September 30, 1999, we issued 774,000 shares of our common stock
and assumed all outstanding CDI options in exchange for all the outstanding
shares of common stock of Clinical Dynamics, Inc. (CDI), a provider of and
assumed all outstanding CDI options Web-based software reporting tools that
analyze clinical process and outcome metrics of care for clinicians and
administrators. The merger was accounted for as a pooling of interests, and
accordingly, our condensed consolidated financial statements have been
restated to include the financial position and results of CDI for all periods
presented.

                                       7

<PAGE>

         The results of operations previously reported by the separate
enterprises and the combined amounts presented in the accompanying
consolidated financial statements are summarized below (in thousands):

<TABLE>
<CAPTION>

                                                   MECON               CDI            COMBINED
                                                   -----               ---            --------
<S>                                           <C>                <C>                <C>
Three months ended September 30, 1998
          Total revenue                         $  3,973           $    186           $ 4,159
          Net income                                 809                 61               870

Three months ended September 30, 1999
          Total revenue                            6,531                386             6,917
          Net income (loss)                       (3,944)                66            (3,878)

Six months ended September 30, 1998                                                       --
          Total revenue                            7,889                298             8,187
          Net income                               1,260                 18             1,278

Six months ended September 30, 1999                                                       --
          Total revenue                           13,007                646            13,653
          Net income (loss)                       (3,279)               125            (3,154)

</TABLE>

Transaction and acquisition costs were approximately $638,000 and consisted
principally of transaction fees for attorneys, accountants and other related
charges and are included in acquisition related charges in the accompanying
Consolidated Statements of Operations. There were no conforming accounting
changes or intercompany transactions related to this merger.

(5) LBA HEALTHCARE

         On March 31, 1999, we completed the acquisition of certain assets
and liabilities of the Implementation Consulting Group (ICG) of HCIA Inc.,
formerly known as LBA Healthcare (LBA), for $7.5 million in cash. In
conjunction with the transaction, we allocated $8.6 million of the $9.8
million purchase price to Goodwill with an estimated life of 15 years. As of
the date of acquisition, revenues earned by ICG were related to the Clinical
Value Enhancement (CVE) and Strategic Business Development (SBD) business
lines.

         As a result of the purchase, certain acquisition related accrued
liabilities were recorded as of March 31, 1999. The following table sets
forth a description of the accrued liabilities for the period ended September
30, 1999:

<TABLE>
<CAPTION>

                                                               TOTAL                     ACCRUAL
                                                            LIABILITY AT     USED OR        AT
                   ACCRUED LIABILITIES                        3/31/99         PAID        9/30/99
                   -------------------                        -------         ----        -------
<S>                                                          <C>          <C>            <C>
Termination benefits accrual .........................         $539,000     $539,000           -
Accrued closure costs ................................          111,000       55,000       56,000
Direct acquisition costs  ............................          321,000      316,000        5,000
                                                           --------------- ------------ ------------
                                                               $971,000     $910,000      $61,000
                                                           =============== ============ ============

</TABLE>


                                       8

<PAGE>

         The following table represents pro forma results of operations as if
the acquisition had occurred on April 1, 1998. The pro forma information is
not necessarily indicative of the combined results that would have occurred
had the acquisition taken place on April 1, 1998, nor is it necessarily
indicative of results that may occur in the future (in thousands).

<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                  SEPTEMBER 30,         SEPTEMBER 30,
                                                                      1998                  1998
                                                                      ----                  ----
<S>                                                              <C>                    <C>
     PRO FORMA BASIS:
     Net revenues..............................................    $ 6,851                 13,253
     Net income (loss).........................................      1,625                  2,408
     Net income per share - basic..............................       .23                    .34
     Net income per share - diluted............................       .22                    .32

</TABLE>

         In the quarter ended September 30, 1999, we noted that the revenue
being generated by LBA's CVE business line was not meeting our expectations
which was based on the projections we received at the time of the
acquisition. Based on this information, we concluded that we could better
utilize our resources in other areas of the Company and decided to exit the
CVE business line. In accordance with an exit plan we developed, we have
notified fourteen (14) LBA employees of their termination. These individuals
were responsible for maintaining the VETCAR database which supported the
consulting being performed as part of the CVE business line. As of September
30, 1999, $52,000 of the initial accrual of $773,000 for accrued severance
costs had been paid.

         In consideration of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and our
decision to exit the business, we reviewed the goodwill associated with LBA
for impairment. We performed an undiscounted cash flow analysis based on
revenue projections expected to be received from future operations of LBA
which revealed that the goodwill was impaired. We estimated the fair market
value of the goodwill using a discounted cash flow model and recognized an
impairment charge of $5,555,000. Based on a 15 year cashflow projection,
assuming a growth rate commensurate with Mecon's overall growth rate and a 5%
discount rate, the forecasted cashflows represent managements best estimate of
future results.  The Company also wrote-off certain other capitalized
software costs associated with the CVE business.

         The special charge was comprised of (in thousands):
<TABLE>
<S>                                                                            <C>
         Impairment of goodwill..............................................    5,555
         Accrued severance costs.............................................      773
         Write-down of capitalized software costs............................      119
                                                                                   ---
                 Total.......................................................   $6,447
                                                                                ------
</TABLE>


(6) ACQUISITIONS & INVESTMENTS

Progressive Development, Inc.

         On July 14, 1999, we acquired Progressive Development, Inc. (PDI), a
provider of a Web-based supply cost comparison database. We issued 75,000
shares of our common stock at $8.125 per share, which was the value of our
stock on July 14, 1999, and paid $275,000 in cash in a transaction accounted
for using the

                                       9

<PAGE>

purchase method of accounting. In accordance with the purchase, we received a
client server software product, the services of the founder, and a royalty
stream. PDI did not have any assets and liabilities, employees, or customers
at the time of our purchase. Entire purchase price of $884,000 has been
allocated to goodwill that will be amortized over its estimated benefit
period of five years. At September 30, 1999, the balance of the goodwill was
$866,000, net of accumulated amortization of $18,000.

iBusinessHub

         On September 28, 1999, we invested $500,000 in iBusinessHub (IBH)
for 2,000,000 shares of IBH Series A preferred stock. IBH is a development
stage company focused on building business-to-business e-commerce procurement
engines for various vertical markets. In addition to the common shares, we
also received a warrant to purchase 2,000,000 shares of IBH common stock,
which may be exercised at any time. IBH has the right to cause Mecon to
exercise up to 800,000 warrants at a price of $0.25. Since our investment
constituted a 36% interest in the outstanding shares of IBH, the investment
has been accounted for using the equity method of accounting at September 30,
1999. IBH had no profits or losses at September 30, 1999, and, thus, there
was no effect on Mecon's financial statements for the quarter or six months
ended September 30, 1999.

(7) PROVISION FOR INCOME TAXES

         An impairment of goodwill related to the March 1999 LBA acquisition
was expensed in the current period for financial accounting purposes.  This
impairment will not be recognized in the current period for tax purposes but
will continue to be amortized over a 15 year period.   Mecon projects
adequate taxable income in subsequent periods to utilize these amortization
expenses.  Mecon's deferred tax asset was increased as a result of this
transaction.

        Certain other deferred tax assets from the LBA acquisition were
realized in the current period.  A valuation allowance related to such
deferred tax assets was released during the quarter as the deferred tax
asset was realized.  The realization of these assets resulted in a reduction
of the carrying value of the goodwill of $365,000.

       As a result of the above, Mecon recognized a deferred tax benefit of
$1.7 million and $1.4 million and a deferred tax asset of $2.1 million during
the 3 and 6 months ended September 30, 1999, respectively.

(8) SEGMENT INFORMATION

         We have adopted the provisions of SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
standards for the reporting by public business enterprises of information
about operating segments, products and services, geographic areas and major
customers. The method for determining what information to report is based on
the way management organizes our operating segments for making operating
decisions and assessing financial performance.

         Our Chief Operating Decision Maker is considered to be our Chief
Operating Committee (COC) which is comprised of our Chief Executive Officer
and our Senior Vice Presidents. The COC reviews financial information
presented on a consolidated basis accompanied by disaggregated information on
revenues by products and services for purposes of making decisions and
assessing financial performance. Effective April 1, 1999, we operate in two
business segments: data products and consulting.

Net revenue information regarding our operating segments is as follows (in
thousands):

<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED             SIX MONTHS ENDED
                                                             SEPTEMBER 30,                SEPTEMBER 30,
                                                    ---------------------------      ----------------------
                                                         1999           1998             1999        1998
                                                    -------------   ------------     -----------   ---------
<S>                                                   <C>             <C>             <C>          <C>
 STATEMENTS OF OPERATIONS
 Revenue:
    Data products..................................      $4,608         $3,731          $8,145       $6,641
    Consulting ....................................       2,309            428           5,508        1,546
                                                    -------------   ------------     -----------   ---------
       Net revenue.................................      $6,917         $4,159         $13,653       $8,187
                                                    =============   ============     ===========   =========

</TABLE>


                                      10

<PAGE>

         Our customers consist 100% of end users in the United States.
Accordingly, we do not produce reports that measure performance of revenues
by geographic region.

         We evaluate the performance of our operating segments based on
revenues only. We do not assess the performance of our segments on other
measures of income or expense, such as depreciation and amortization,
operating income or net income. In addition, as our assets are primarily
located in our corporate office in the United States and not allocated to any
specifics segment, we do not produce reports that measure the performance
based on any asset-based metrics. Therefore, we have presented segment
information only for revenues.

(9)      EARNINGS PER SHARE (EPS)

         The following table sets forth a reconciliation of the numerators
and denominators of the basic and diluted EPS computations:

<TABLE>
<CAPTION>

                                                      THREE MONTHS ENDED SEPTEMBER 30,
                                              1999                                         1998
                                                   (in thousands except per share amounts)
                          ------------- --------------- ------------    ------------- ---------------- -----------
                          Income(loss)      Shares       Per Share      Income(loss)      Shares       Per Share
                          (Numerator)   (Denominator)     Amount        (Numerator)    (Denominator)     Amount
                          ------------- --------------- ------------    ------------- ---------------- -----------
<S>                       <C>             <C>           <C>               <C>            <C>           <C>
BASIC EPS

Income(loss)                ($3,878)        7,196         ($0.54)           $870           7,007         $0.12
EFFECT OF DILUTIVE
   SECURITIES
Stock options                  --             --             --              --              452           --

                          ------------- --------------- ------------    ------------- ---------------- -----------
DILUTED EPS
Income(loss)
  + assumed exercises       ($3,878)        7,196         ($0.54)           $870           7,459         $0.12

                          ============= =============== ============    ============= ================ ===========
</TABLE>

         Options to purchase 470,175 common shares at prices ranging from $8
to $24 per share and 290,959 common shares at prices ranging from $8 to $24
per share were outstanding during the three months ended September 30, 1999
and 1998, respectively, but were not included in the computation of diluted
EPS because to do so would have been antidilutive for the periods presented.


                                      11

<PAGE>

<TABLE>
<CAPTION>

                                                         SIX MONTHS ENDED SEPTEMBER 30,
                                              1999                                          1998
                                                    (in thousands except per share amounts)
                          ------------- --------------- ------------    ------------- ---------------- -----------
                          Income(loss)      Shares       Per Share      Income(loss)      Shares       Per Share
                          (Numerator)   (Denominator)     Amount        (Numerator)    (Denominator)     Amount
                          ------------- --------------- ------------    ------------- ---------------- -----------
<S>                       <C>             <C>           <C>              <C>             <C>           <C>
BASIC EPS
Income(loss)                ($3,154)        7,157         ($0.44)          $1,278          6,997         $0.18
EFFECT OF DILUTIVE
   SECURITIES
Stock options                  --             --             --               --             491          (.01)

                          ------------- --------------- ------------    ------------- ---------------- -----------
DILUTED EPS
Income(loss)
  + assumed exercises       ($3,154)        7,157          ($0.44)         $1,278          7,488         $0.17

                          ============= =============== ============    ============= ================ ===========
</TABLE>

         Options to purchase 470,175 common shares at prices ranging from $8
to $24 per share and 201,735 common shares at prices ranging from $10 to $24
per share were outstanding during the six months ended September 30, 1999 and
1998, respectively, but were not included in the computation of diluted EPS
because to do so would have been antidilutive for the periods presented.


                                      11

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

EXCEPT FOR HISTORICAL INFORMATION, THE MATTERS DISCUSSED IN THIS REPORT ON
FORM 10-QSB ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO CERTAIN RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE PROJECTED. SUCH FACTORS INCLUDE:

(1) DEPENDENCE ON ACQUIRING DATA FROM CUSTOMER SYSTEMS WHICH MAY NOT YET BE
YEAR 2000 COMPLIANT, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON US, IF
CUSTOMERS ARE INCAPABLE OR UNWILLING TO SUBMIT DATA, (2) VARIABILITY IN
QUARTERLY REVENUES RELATED TO THE TIMING OF LARGE CONSULTING ENGAGEMENTS;
CONSULTING CONTRACTS ARE TYPICALLY LARGE DOLLAR CONTRACTS THAT REPRESENT A
MATERIAL PERCENTAGE OF OUR QUARTERLY REVENUE. DELAYS IN CONTRACT SIGNING
COULD RESULT IN LOWER SERVICES REVENUES FOR US, WHICH COULD HAVE A MATERIAL
ADVERSE EFFECT ON US, (3) NON-RENEWAL OF OLDER, STEEPLY DISCOUNTED CONTRACTS
AT HIGHER PRICES DUE TO PRICING SENSITIVITY; TERMINATION OF CUSTOMER
RELATIONSHIPS COULD RESULT IN LOWER SUBSCRIPTION REVENUES FOR US, WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON US, AND (4) OTHER FACTORS INCLUDING:

         - VARIABILITY OF QUARTERLY RESULTS AND SEASONALITY
         - DEPENDENCE ON PRINCIPAL PRODUCTS
         - INTEGRITY AND RELIABILITY OF THE DATABASE
         - COMPETITION
         - DEPENDENCE ON STRATEGIC RELATIONSHIPS
         - CONSOLIDATION AND UNCERTAINTY IN THE HEALTHCARE INDUSTRY
         - EFFECTS OF POTENTIAL ACQUISITIONS
         - DEPENDENCE ON KEY PERSONNEL
         - INTEGRATION OF ACQUIRED BUSINESS
         - UNCERTAINTIES CONCERNING INTERNET-RELATED BUSINESS STRATEGY

SUCH FACTORS ALSO INCLUDE THE RISK FACTORS LISTED FROM TIME TO TIME IN OUR
OTHER SEC REPORTS, INCLUDING BUT NOT LIMITED TO, OUR REPORT ON FORM 10-KSB
FOR THE YEAR ENDED MARCH 31, 1999, COPIES OF WHICH ARE AVAILABLE FROM OUR
INVESTOR RELATIONS DEPARTMENT. WE ASSUME NO OBLIGATION TO UPDATE THE
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS QUARTERLY REPORT.


                                      12

<PAGE>

OVERVIEW

         We are a leading healthcare benchmarking solutions company. Our
proprietary data, family of premium quality, easy-to-use software products
and consulting services are designed to combine to produce and sustain
optimum performance in healthcare delivery systems. From our incorporation
until 1989, our revenue was primarily derived from consulting services for
acute care hospitals. Since 1990, we focused upon building critical mass in
our PEERnext database, formerly known as PEERx, as well as increasing the
installed base for software products, MECON-OPTIMIS and MECON Action-Point.
As a result, we have transitioned into providing a variety of products and
services that employ our proprietary database comprised of acute care
hospitals' operational cost and key performance information.

         We continue to improve and expand our capabilities to serve the
changing needs of the healthcare industry, and are guided by key objectives,
including: striving to provide the best, most complete portfolio of database,
advisory, and software capabilities; seeking and utilizing the best
technologies available--including widening our Web-based business platform;
continuing to fulfill our commitments to customers; and increasing our
ability to meeting their evolving performance improvement needs.

         In fiscal 1999, we acquired the Implementation Consulting Group Unit
of HCIA, Inc. (formerly known as LBA Healthcare), introduced MECON-Practice
Management Profiler-TM- and MECON-Material Solutions-SM- and released
MECON-PEERnext-TM-, the new Web-based benchmark database product. With fiscal
and regulatory pressures mounting, many healthcare providers and institutions
across the country are exhibiting signs of financial stress, and we believe
that the industry is intensifying its search for viable solutions. Therefore,
we are seeking to bridge the information gap by developing and expanding our
clinical and operational offerings. Our strategic activities, along with our
core business strategies, continue to focus on assisting customers in
identifying where the greatest opportunities for improvement lie, and then
putting systems in place to correct the problems, and sustain the results
over time.

         In fiscal 2000, we launched our integrated product delivery
platform, MECON.com and our e-Health strategy. We launched an e-Health
strategy because we believe that our products and services are perfectly
suited for Web-based delivery. Furthermore, we believe that our value
proposition of immediate, significant and sustainable performance improvement
to health care providers is enhanced through internet connectivity with us
and others seeking solutions to their performance improvement challenges. We
define e-Health as a Web-connected community of clinicians, operating
managers and executives who derive significant value through access to
actionable content, sharply focused on performance improvement. Our community
has been rapidly expanding as a result of core business growth and
acquisitions. Since our mission is focused on being the independent, credible
one-stop resource for healthcare performance improvement content and
consulting, we believe we are well-positioned among the healthcare community
to offer the rich combination of performance improvement content, consulting
and commerce capabilities via the Web.

         Our e-Health strategy centers around three main business lines,
including a Web-based information content business, value-added consulting
business, and buyer-centric e-commerce procurement business. Our current
portfolio of database and information products can be generally classified as
information content business. The PEERnext operational benchmarking database,
InfoSource on-line peer networking tool, MECON-OPTIMIS-TM- productivity
information system, MECON-PricePoint-TM- price comparison database, and the
CDI-DYNAMO-TM- (Dynamic Analysis of Measured Outcomes) clinical and outcomes
database all represent our current capabilities. With the Internet as its
primary medium, we continue to broaden content, expand the customer base,
build high margin value-added on-line tools, and build a captive community of
users that routinely tap MECON.com to access information.

         With our strong roots in consulting and our firm belief that
services are integral to leveraging full value from information products, we
continue to build our consulting practice to complement those capabilities in
our information content business. Today, our consulting capabilities include
operations

                                      13

<PAGE>

consulting, materials solutions consulting, and LBA's clinical consulting.
Working in concert with our information content segment of the business, we
intend to continually broaden our consulting capabilities, and expand our
customer base through new and cross-selling programs.

         Coupled with our healthcare domain knowledge, we believe we are well
positioned to enhance our customer value proposition by supplying comparison
shopping and transactional services to our community. Our acquisition of PDI
for its Web-based comparison shopping database, and partnership with
iBusinessHub for its procurement engine represents a powerful combination of
comparison shopping and on-line purchasing. This is designed to enable our
large network of potential buyers to benefit from the competitive advantages
and choices available through direct, on-line supply purchasing.

         Our performance improvement vision has three dimensions -
operational performance, clinical performance, and quality management.
Operational performance involves improvement of the functional efficiency of
the hospital; clinical performance involves improvement of clinical practices
of physicians; and quality management involves improvement of medical
outcomes and patient satisfaction. We believe that an integrated approach of
information content, value-added consulting, and commerce is necessary to
drive significant and sustainable performance improvement in all three
dimensions. Our historical strength has been in the operational performance
improvement domain. However, in March 1999, with the acquisition of LBA
Healthcare, we added consulting capabilities in the clinical performance
improvement dimension. However, we noted that the revenue being generated by
LBA's CVE business line was not meeting our expectations which was based on
the projections we received at the time of the acquisition. Based on this
information, we concluded that we could better utilize our resources in other
areas of the Company and decided to exit the CVE business line. In accordance
with the exit plan we developed, we have notified fourteen (14) LBA employees
of their termination. These individuals were responsible for maintaining the
VETCAR database which supported the consulting being performed as part of the
CVE business line. As of September 30, 1999, $52,000 of the initial accrual
of $773,000 for accrued severance costs had been paid.

     In consideration of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and our
decision to exit the business, we reviewed the goodwill associated with LBA
for impairment. We performed an undiscounted cashflow analysis based on revenue
projections expected to be received from future operations of LBA which
revealed that the goodwill was impaired. We estimated the fair market value
of the goodwill using a discounted cash flow model and recognized an
impairment charge of $5,555,000. Based on a 15 year cashflow projection,
assuming a growth rate commensurate with Mecon's overall growth rate and a 5%
discount rate, the forecasted cashflows represent managements best estimate of
future results. The Company also wrote-off certain other capitalized software
costs associated with the CVE business.

         With the subsequent acquisition of CDI in the second quarter of
fiscal 2000 and its Web-based clinical content database product DYNAMO, we
began to integrate LBA's clinical consulting force with CDI's content
application to create an integrated solution similar to our operational
performance improvement solution. With the strength of DYNAMO, coupled with
LBA's clinical consultants and the PricePoint comparison shopping database,
we intend to capitalize on the market opportunity for clinical performance
improvement.

         We believe that being the "one-stop-shop" for our community is
essential to becoming the business-to-business e-Health leader. Therefore, we
are focused upon integrating our acquired components into MECON.com. Today,
the operational content is available for the community through the MECON.com
portal. We plan to integrate our clinical content, comparison shopping and
procurement enabler products through MECON.com.

         As a result of strong growth in the core business augmented by
acquisitions, the total value of new contracts signed during the second
quarter of fiscal 2000 increased 43% to a record $7.3 million compared to
$5.1 million for the comparable period in the prior fiscal year, and also
expanded 18% sequentially from the $6.2 million signed in the first quarter
of fiscal 2000. During the second quarter of fiscal 2000, we added 39 new
clients to our client base and captured renewal contracts from 17 existing
clients. Of $7.3 million, consulting contract value signed represented
approximately $3.3 million and the data products contract value signed
represented approximately $4.0 million.

         The total contract value signed during the period builds our
backlog, which is defined as the total value of all contracts that have not
been recognized as revenue. Backlog is then depleted by the revenue
recognized during the period. Since the total value of contracts signed in
the second quarter of fiscal 2000 was $7.3 million compared to $6.9 million
in revenue recognized, backlog increased by approximately $400,000 in the
second quarter of fiscal 2000. Currently, approximately 45% to 55% of our
quarterly revenue is derived from backlog. The remaining 55% to 45% is
generated from contracts signed during that respective quarter. The increase
in the recurring base of revenue, renewals, consulting contracts and

                                      14

<PAGE>

leveraging the internet for data delivery coupled with strong expense
controls have continued to drive improvement in our gross margins. As a
result of increased spending in marketing activities related to creating a
greater market place awareness regarding our consulting capabilities and new
products recently acquired, operating margins have slightly decreased.

                                      15

<PAGE>


RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED              SIX MONTHS ENDED
                                                            SEPTEMBER 30,                  SEPTEMBER 30,
                                                    ---------------------------      -----------------------
                                                        1999           1998             1999         1998
                                                    ------------  -------------      -----------  ----------
<S>                                                     <C>           <C>              <C>          <C>
 STATEMENTS OF OPERATIONS
 Revenue:
    Data products..................................       67%           90%              60%          81%
    Consulting ....................................       33%           10%              40%          19%
                                                    ------------  -------------      -----------  ----------
       Net revenue.................................      100%          100%             100%         100%
 Cost of revenue...................................       30%           30%              32%          33%
                                                    ------------  -------------      -----------  ----------
 Gross profit......................................       70%           70%              68%          67%
 Operating costs:
    Research and development.......................       16%           14%              16%          16%
    Sales and marketing............................       20%           17%              20%          18%
    General and administrative.....................       14%           17%              15%          18%
     Other special charges                               102%           --               52%          --
                                                    ------------  -------------      -----------  ----------

          Total operating costs....................      152%           48%             103%          52%
                                                    ------------  -------------      -----------  ----------
 Operating income(loss) ...........................      (83%)          22%             (35%)         15%
 Interest and other income, net....................        1%            6%               1%           5%
                                                    ------------  -------------      -----------  ----------
 Income(loss) before provision for(benefit from)         (81%)          27%             (33%)         21%
    income taxes...................................
 Provision for (benefit from) income taxes.........      (25%)           6%             (10%)          5%
                                                    ------------  -------------      -----------  ----------
 Net income(loss) .................................      (56%)          21%             (23%)         16%
                                                    ============  =============      ===========  ==========

</TABLE>

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998

REVENUE

         Revenue for the three months ended September 30, 1999 increased 66%
to $6.9 million compared to $4.2 million for the comparable period in the
prior fiscal year. Data products revenue increased 24% to $4.6 million
compared to $3.7 million for the comparable period in the prior fiscal year.
Consulting revenue increased 439% to $2.3 million compared to $400,000 for
the comparable period in the prior fiscal year and accounted for 68% of the
total increase in revenue.

         The increase in data product revenue was primarily attributable to
higher levels of contract value signed, shorter cycle times to integrate
customers' data into the database and an expanding base of recurring revenue
from multi-year subscription contracts sold in prior years.

         The increase in consulting revenue was primarily attributable to an
increase in operational consulting engagements sold augmented by the
acquisition of LBA's clinical consulting business in March 1999. During the
quarter ended September 30, 1999 approximately $3.3 million of consulting
contracts were sold compared to $850,000 in the comparable period for the
prior fiscal year. Such consulting revenues are typically earned over a
nine-month period. We anticipate consulting to remain a significant portion
of our revenue as a result of our value proposition strategy of assuring that
our customers derive immediate, significant and sustainable performance
improvement from our solution of data, consulting and software. Consulting
service contracts are significantly larger dollar contracts than the data
products. Therefore, the timing of contract signings and delivery of related
services may impact the timing of revenue recognition, and as a result,
consulting revenue may significantly vary from quarter to quarter.

                                      16
<PAGE>

COST OF REVENUE

         Cost of revenue for the three months ended September 30, 1999
increased 70% to $2.1 million compared to $1.2 million for the comparable
period in the prior fiscal year. The increase in cost of revenue was
primarily attributable to the acquisitions of LBA, increased personnel in our
core business increased travel expenses and increased amortization of
software development costs. The number of employees delivering products or
consulting services increased to 82 during the three months ended September
30, 1999 from 60 during the comparable period in the prior fiscal year.
Amortization of software development costs increased to $373,000 for the
three months ended September 30, 1999 from $172,000 for the comparable period
in the prior fiscal year. The remainder of the increase was primarily
attributable to travel expenses to implement our products. Cost of revenue
for the three months ended September 30, 1999 remained constant at 30% of
revenue compared to the same period in the prior fiscal year. Although there
was a change in revenue mix towards lower margin consulting business, this
change in mix was offset by efficiencies gained in our Web-based delivery of
data and higher utilization rates of our consulting staff. Although we
anticipate cost of revenue to increase in absolute dollars due to the
increase in amortization of software development costs from future releases
of new products, we anticipate costs of revenue to decrease as a percent of
revenue as we continue to leverage efficiencies in delivery related to our
multi-year subscriptions and internet delivery strategies.

RESEARCH AND DEVELOPMENT

         Research and development expenses for the three months ended
September 30, 1999 increased 81% to $1.0 million compared to $597,000 for the
comparable period in the prior fiscal year. This increase was primarily due
to the addition of technical programming staff from the acquisitions of LBA
and a decrease in capitalized software development costs. The number of
employees performing research and development activities increased to 34
during the three months ended September 30, 1999 from 22 during the
comparable period in the prior fiscal year. During the three months ended
September 30, 1999, approximately $335,000 was capitalized for internally
developed software related to product development compared to $405,000 for
the comparable period in the prior year. Research and development expenses
for the three months ended September 30, 1999 increased to 16% of revenue
compared to 14% for the comparable period in the prior fiscal year as a
result of the aforementioned factors. However, although we anticipate
research and development spending to increase in absolute dollars, we
anticipate they will decrease as a percent of revenue as we move from the
initial product development efforts for new products to programming, testing
and release management.

SALES AND MARKETING

         Sales and marketing expenses for the three months ended September
30, 1999 increased 94% to $1.4 million compared to $710,000 for the
comparable period in the prior fiscal year. This increase was primarily due
to the acquisitions of LBA, increased commissions related to record levels of
contract value signed in the second quarter of fiscal 2000, marketing
activities and travel expenses. The number of employees performing selling
and marketing activities increased to 24 during the three months ended
September 30, 1999 from 12 during the comparable period in the prior fiscal
year. Sales and marketing expenses for the three months ended September 30,
1999 increased to 20% of revenue during the three months ended September 30,
1999 compared to 17% during the comparable period in the prior fiscal year.
We anticipate sales and marketing expenses to increase in absolute dollars
but remain relatively constant as a percent of revenue. The anticipated
increase in absolute dollars is expected to be primarily attributable to
increased commissions related to an increasing customer base and more robust
marketing efforts related to our consulting capabilities and MECON.

GENERAL AND ADMINISTRATIVE


                                      17

<PAGE>

         General and administrative expenses for the three months ended
September 30, 1999 increased 41% to $991,000 compared to $704,000 for the
comparable period in the prior fiscal year. This increase was primarily due
to the acquisitions of LBA, additional accounting personnel related to
increased business, amortization of goodwill associated with the purchase of
LBA, and rent, travel and telephone expenses. The number of employees
performing general and administrative activities increased to 16 during the
three months ended September 30, 1999 from 14 during the comparable period in
the prior fiscal year. General and administrative expenses for the three
months ended September 30, 1999 decreased to 14% of revenue compared to 17%
of revenue for the comparable period in the prior fiscal year. This decrease
was primarily due to leveraging existing infrastructure and ongoing cost
reduction initiatives. We anticipate general and administrative expenses to
increase in absolute dollars and remain relatively constant as a percent of
revenue as a result of the aforementioned factors.

PROVISION FOR INCOME TAXES

         An impairment of goodwill related to the March 1999 LBA acquisition
was expensed in the current period for financial accounting purposes. This
impairment will not be recognized in the current period for tax purposes but
will continue to be amortized over a 15 years period. Mecon projects adequate
taxable income in subsequent periods to utilize these amortization expenses.
Mecon's deferred tax asset related to goodwill was increased as a result of
this transaction.

         Certain other deferred tax assets from the LBA acquisition were
realized in the current period. A valuation allowance related to such
deferred tax assets was released during the quarter as the deferred tax asset
was realized. The realization of these assets resulted in a reduction of the
carrying value of goodwill and no tax benefit was created.

REVENUE

         Revenue for the six months ended September 30, 1999 increased 67% to
$13.6 million compared to $8.2 million for the comparable period in the prior
fiscal year. Data products revenue increased 23% to $8.1 million compared to
$6.6 million for the comparable period in the prior fiscal year. Consulting
revenue increased 256% to $5.5 million compared to $1.5 million for the
comparable period in the prior fiscal year and accounted for 72% of the total
increase in revenue.

         The increase in data product revenue was primarily attributable to
higher levels of contract value signed, shorter cycle times to integrate
customers' data into the database, an expanding base of recurring revenue
from multi-year subscription contracts sold in prior years and new PEERnext
and PEERx contracts signed during the six months ended September 30, 1999
contributed to the remainder of the increase.

         The increase in consulting revenue was primarily attributable to an
increase in operational consulting engagements sold augmented by the
acquisition of LBA's clinical consulting business in March 1999. During the
quarters ended June 30, 1999 and September 30, 1999 approximately $5.9
million of consulting contracts were sold compared to $1.4 million in the
comparable period for the prior fiscal year. Such consulting revenues are
typically earned over a nine-month period. We anticipate consulting to remain
a significant portion of our revenue as a result of our value proposition
strategy of assuring that our customers derive immediate, significant and
sustainable performance improvement from our solution of data, consulting and
software. Consulting service contracts are significantly larger dollar
contracts than the data products. Therefore, the timing of contract signings
and delivery of related services may impact the timing of revenue
recognition, and as a result, consulting revenue may significantly vary from
quarter to quarter. Our customer intimacy strategy includes expanding
customer support services, such as training programs and consulting projects,
which build relationships with customers and enhance benefits customers
derive from our database. We anticipate consulting to remain a significant
portion of our revenue as a result of the customer intimacy strategy and the
anticipated growth of LBA's revenues.

COST OF REVENUE

         Cost of revenue for the six months ended September 30, 1999
increased 62% to $4.3 million compared to $2.7 million for the comparable
period in the prior fiscal year. The increase in cost of revenue


                                      18

<PAGE>

was primarily attributable to the acquisition of LBA, increased personnel and
related costs and increased amortization of software development costs. The
number of employees delivering products or consulting services increased to
82 during the six months ended September 30, 1999 from 61 during the
comparable period in the prior fiscal year. Amortization of capitalized
software development costs increased to $641,000 for the six months ended
September 30, 1999 from $344,000 for the comparable period in the prior
fiscal year.

RESEARCH AND DEVELOPMENT

         Research and development expenses for the six months ended September
30, 1999 increased 69% to $2.2 million compared to $1.3 million for the
comparable period in the prior fiscal year. This increase was primarily due
to the addition of technical programming staff from the acquisitions of LBA,
an increase in MECON technical programming personnel, and a decrease in
capitalized software development cost. An increase in supplies expense related
to Action Point Year 2000 remediation efforts and depreciation expense from
the purchase of additional computer equipment accounted for the remainder of
the increase. During the six months ended September 30, 1999, approximately
$648,000 was capitalized for internally developed software related to product
development compared to $700,000 for the comparable period in the prior year.
The decrease in software development costs capitalized primarily related to
the timing of development activities qualifying for capitalization associated
with new product development. Currently, we are developing functional
specifications related to certain new products planned for release in early
fiscal 2001 and have not begun the coding and programming activities that
qualify for capitalization. The completion of the beta testing and
programming efforts related to MECON.COM and MECON-PEERnext version 2.0,
which were released in July and May 1999, respectively, accounted for the
remainder of the decrease. We anticipate research and development spending to
increase in absolute dollars but decrease as a percent of revenue as we move
from the initial product development efforts for MECON-PEERnext version 2.0
to programming, testing and release management.

SALES AND MARKETING

         Sales and marketing expenses for the six months ended September 30,
1999 increased 87% to $2.7 million compared to $1.4 million for the
comparable period in the prior fiscal year. This increase was primarily due
to the acquisitions of LBA, increased commissions related to record levels of
contract values signed, additional staffing, and increases in salaries,
marketing activities and travel. The employee head count increased to 24 from
12 for the comparable period in the prior fiscal year. The increase was due,
in part, to the addition of 7 employees from LBA. Sales and marketing
expenses for the six months ended September 30, 1999 increased to 20% of
revenue during the six months ended September 30, 1999 compared to 18% during
the comparable period in the prior fiscal year. We anticipate sales and
marketing expenses to increase in absolute dollars but remain relatively
constant as a percent of revenue due to increased commissions related to an
increasing customer base and more robust marketing efforts related to our
consulting capabilities and MECON.COM.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses for the six months ended
September 30, 1999 increased 37% to $2.0 million compared to $1.5 million for
the comparable period in the prior fiscal year. This increase was primarily
due the acquisition of LBA, additional accounting personnel related to
increased business, and amortization of goodwill associated with the purchase
of LBA, offset by reductions in the provision for bad debts, professional
fees, and expenses related to office infrastructure. General and
administrative expenses for the six months ended September 30, 1999 decreased
to 15% of revenue compared to 18% of revenue for the comparable period in the
prior fiscal year. This decrease was primarily due to leveraging existing
infrastructure and ongoing cost reduction initiatives. We anticipate general
and administrative expenses to increase in absolute dollars and remain
relatively constant as a percent of revenue as a result of the aforementioned
factors.


                                      19

<PAGE>

PROVISION FOR INCOME TAXES

         An impairment of goodwill related to the March 1999 LBA acquisition
was expensed in the current period for financial accounting purposes. This
impairment will not be recognized in the current period for tax purposes but
will continue to be amortized over a 15 years period. Mecon projects adequate
taxable income in subsequent periods to utilize these amortization expenses.
Mecon's deferred tax asset related to goodwill was increased as a result of
this transaction.

         Certain other deferred tax assets from the LBA acquisition were
realized in the current period. A valuation allowance related to such
deferred tax assets was released during the quarter as the deferred tax asset
was realized. The realization of these assets resulted in a reduction of the
carrying value of goodwill of $365,000.

         As a result of the above, Mecon recognized a deferred tax benefit of
$1.4 million and a deferred tax asset of $2.1 million for the 6 months ended
September 30, 1999.

        In the prior year, the income tax provision of $422,000 was
attributable to our increased profitability and the use of net operating loss
carry forwards and other tax credits.

LIQUIDITY AND CAPITAL RESOURCES

         At September 30, 1999, our cash, cash equivalents and securities
available-for-sale decreased by $3.0 to $7.0 million compared to $10.0
million at March 31, 1999 primarily as a result of cash used in operations,
purchases of property and equipment, cash paid for acquisitions and
investments and cash paid for the development of new software products. We
used $1.3 million of cash flow from operating activities for the six months
ended September 30, 1999 compared to generating $2.2 million in the
comparable period in the prior year. This decrease was primarily due to the
payment of non-recurring liabilities incurred in connection with the purchase
of LBA, PDI and CDI and a slower than expected process of receiving cash on
our receivables.

         Our days sales outstanding (DSO) increased to 106 days at September
30, 1999 compared to 91 days at March 31, 1999. Cash collections and cash
management slowed this quarter due in part to the increased economic
challenges facing hospitals in general and, in particular, for some of our
customers. Additionally, our increased focus on closing and integrating
acquisitions during the second quarter of fiscal 2000 resulted in short-term
management distractions. We have taken steps to increase momentum and
management focus on cash collections by hiring additional personnel solely
focused on cash collections.

         As of September 30, 1999, we had net working capital of $10.6
million, including cash, cash equivalents and securities available-for-sale
of $7.0 million. We believe that with our access to financing sources, strong
cash position, and lack of debt, we will be able to adequately fund our cash
requirements for the next 12 months. However, given our growth and
acquisition activity as of September 30, 1999, we have elected to actively
pursue establishing a credit facility during fiscal 2000. There can be no
assurance that we will be able to obtain such a facility on terms favorable
to us, if at all. We currently have no material commitments for capital
expenditures.

YEAR 2000

         We have completed the evaluation of our internal systems and have
also completed implementation of systems and programming changes necessary to
address Year 2000 issues on an enterprise-wide basis. During the second
quarter of fiscal 2000 this remediation plan (consisting of upgrading and
replacement of certain product versions) has been implemented and tested for
compliance.

         We have evaluated the status of our products and implemented
programming changes necessary to address Year 2000 issues. With modifications
to existing software or converting to new software, the Year 2000 issue has
not posed significant operational problems for our computer systems; however,
we cannot assure there will not be increased costs associated with, the
implementation of such changes, and our inability to implement such changes
could have a material adverse effect on future results of operations.

         We have not fully determined the extent to which we may be impacted
by third parties' systems, which may not be Year 2000 compliant. The Year
2000 computer issue creates risk for us from customers' financial information
gathering systems and other third parties with which we deal on financial
transactions. While we expect to complete our efforts to seek assurance from
our suppliers, service providers and customers by the end of 1999, we cannot
assure that the systems of other companies that we deal with or on which our
systems rely will be timely converted, or that any such failure to convert by
another company could not have a material adverse effect on us. If we
determine that a material number of customers cannot collect their data
because of Year 2000 issues, as a contingency plan, we currently intend to
staff accordingly to collect the data manually.


                                      20

<PAGE>

         We rely on third parties for services such as telecommunications,
Internet service, utilities and other key services and supplies. We are
seeking confirmation from such service providers that their systems are Year
2000 compliant. Interruption of those services or supplies due to Year 2000
issues could adversely affect our operations. We are also subject to external
forces that might generally affect industry and commerce, such as utility or
transportation company Year 2000 compliance failures. We have completed the
process of updating and upgrading our internal information systems. Although
the replacement of information systems is not in direct response to Year 2000
concerns, we expect that all new internal information systems implemented in
1999 will be Year 2000 Compliant.

         Known or unknown Year 2000 errors or defects in our internal systems
and products, lack of Year 2000 compliance by third party software
incorporated in our products and/or interruption of services from our
external service providers due to Year 2000 problems could result in failure
or disruption of our products and operations, delay or loss of revenue,
diversion of development resources, damage to our reputation, or claims or
litigation, any of which could adversely affect us. Some commentators have
predicted significant litigation regarding Year 2000 compliance issues, and
we are aware of such lawsuits against other software vendors. Because of the
unprecedented nature of such litigation, it is uncertain whether or to what
extent we may be affected by it.

         We currently respond to customer concerns about our products on a
case-by-case basis. We believe that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues in a variety of ways,
including the decision to delay purchasing our products until the Year 2000.
We believe that it is not possible to predict the overall impact of these
decisions.

         At this stage in our analysis and remediation process, it is
difficult to specifically identify the cause and the magnitude of any adverse
economic impact of the most reasonably likely worst case Year 2000 scenario.
Our reasonably likely worst case scenario would include the unavailability of
our major internal systems to our employees and the failure of our products
to operate properly, causing customers' systems and/or operations to fail or
be disrupted. Such worst case scenario also would include the failure of key
vendors and/or suppliers to correct their own Year 2000 issues, which
failures could cause failure or disruption or our operations or products. If
a worst case scenario occurs, we may incur expenses to repair our systems or
upgrade our products, face interruptions in the work of our employees, lose
service and product license revenue, not be able to deliver downloads of our
products, incur service expenses and suffer damage to our reputation. Any or
all of the above events could have an adverse economic impact on us.

         We have developed a comprehensive contingency plan to address
situations that may result if we are unable to achieve Year 2000 readiness of
our critical operations. The cost of developing and implementing such a plan
may itself be material. To date, we have not incurred significant
expenditures for our Year 2000 remediation efforts as we have deployed
existing resources to address Year 2000 issues noted. Although we do not
anticipate the costs to address our Year 2000 issues to be material, the
costs of Year 2000 remediation work and the date on which we plan to complete
such work is based on management's best estimates, which are derived from
assumptions about future events, including the availability of certain
resources, third-party remediation plans and other factors. In addition,
undetected errors or the failure of such systems to be Year 2000 compliant
could create significant record-keeping and operational deficiencies.
Accordingly, if Year 2000 modifications, evaluations, assessments and
conversions are not made, or are not completed in time, the Year 2000 problem
could have an adverse impact on us.


                                      21

<PAGE>



PART II:  OTHER INFORMATION

Item 1.  Legal Proceedings
                         None

Item 2.  Changes in Securities and Use of Proceeds

The following shares of common stock were issued in connection with the
acquisition of Progressive Development on July 14, 1999:

<TABLE>
<CAPTION>
                                                                               Price
                                                                                per
Name                                   # of shares                             Share
----                                   -----------                             -----
<S>                                   <C>                                     <C>
Steve Ferrins                          37,500                                  $ 8.125
Steve Musachia                         37,500                                  $ 8.125
</TABLE>

The following shares of common stock were issued in connection with the
acquisition of Clinical Dynamics, Inc. on September 30, 1999:

<TABLE>
<CAPTION>
                                                                               Price
                                                                                per
Name                                   # of shares                             Share
----                                   -----------                             -----
<S>                                   <C>                                     <C>
Larimore Cummins                       425,700                                 $ 6.375
Craig Wilson                           174,150                                 $ 6.375
Kelly O'Keefe                          174,150                                 $ 6.375
</TABLE>

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

The following matters were approved at our Annual Meeting of Stockholders
held on August 13, 1999:

(a) The following directors were elected:

<TABLE>
<CAPTION>

         Directors                  Votes For     Votes Withheld
         ---------                  ---------     ---------------
<S>                               <C>               <C>
         Vasu R. Devan              5,999,382         203,401
         Raju Rajagopal             5,999,532         203,251
         Kathy Brittain White       6,000,073         202,710
         Richard McCann             5,999,532         203,251
         M. Greg Allio              5,999,382         203,401

</TABLE>

Kathy Brittain White resigned as a director on October 11, 1999.

(b) The Stockholders approved the following proposals:
                          Number of Common Shares Voted

<TABLE>
<CAPTION>

Proposal                                      For             Against            Abstain         No Vote
--------                                      ---             -------            -------        -------
<S>                                     <C>                   <C>                 <C>               <C>
Ratification of appointment
of KPMG LLP
as independent accountants                6,200,483             1,950                350              0

Amendment to the 1995 Stock Plan to
increase the number of shares of Common
Stock reserved for issuance thereunder
by 450,000 shares                         3,016,385         2,153,408              4,609      1,028,381

</TABLE>


Exhibit  11.1  Computation of Earnings (Loss) per share

         27.0 Financial Data Schedules


                                      22

<PAGE>


SIGNATURES

Under the requirements of the Securities Exchange Act of 1934, we have duly
caused this report to be signed on our behalf by the undersigned, thereunto
duly authorized.

                                        MECON INC.
                                        (Registrant)

   Date:  11/15/99
                                        /s/ Vasu Devan
                                        -----------------------
                                        Vasu R. Devan
                                        President and Chief Executive Officer

    Date:  11/15/99                     /s/ David J. Allinson
                                        -----------------------
                                         David J. Allinson
                                         Chief Financial Officer


                                      23