<PAGE>

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

                                  -----------

                                  FORM 10-QSB

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

                      For the quarter ended June 30, 1998

                                      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 small business issuer 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 210
                         San Ramon, California  94583
                   (address of principal executive officers)

        Issuer's telephone number, including area code: (925) 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 July 31, 
1998 was

                               6,229,112 shares

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

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                                       1

<PAGE>

                                  MECON, INC.
                                  FORM 10-QSB
                                 JUNE 30, 1998

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
<C>        <S>                                                              <C>
PART I:    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Consolidated Condensed Balance Sheets (unaudited) as of
           June 30, 1998 and March 31, 1998                                   3

           Consolidated Condensed Statements of Operations (unaudited) 
           for the Three Month Periods Ended June 30, 1998 and 1997           4

           Consolidated Condensed Statements of Cash Flows (unaudited) 
           for the Three Month Periods Ended June 30, 1998 and 1997           5

           Notes to Consolidated Condensed Financial Statements               6

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations                      8


PART II:   OTHER INFORMATION

Item 1.    Legal Proceedings                                                 15

Item 2.    Changes in Securities                                             15

Item 3.    Defaults upon Senior Securities                                   15

Item 4.    Submission of Matters to a Vote of Security Holders               15

Item 5.    Other Information                                                 15

Item 6.    Exhibits and Reports on Form 8-K                                  15

SIGNATURES                                                                   15

           Exhibits 11.1  Computation of Earnings (Loss) per Share           
                    27.0  Financial Data Schedules                           
</TABLE>

                                      2

<PAGE>

ITEM 1.  FINANCIAL STATEMENTS

                                  MECON, INC.
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                      June 30, 1998   March 31, 1998
                                                      ------------------------------
<S>                                                  <C>             <C>
                                    ASSETS
Current assets:
     Cash and cash equivalents                            $13,370        $12,647
     Securities available-for-sale, at market               3,548          3,844
     Accounts receivable, net of allowances of 
        $300 and $308 at June 30, 1998 and 
        March 31, 1998, respectively                        3,193          2,724
     Unbilled accounts receivable                             387            522
     Other current assets                                     458            358
                                                      ------------------------------
             Total current assets                          20,956         20,095

Property and equipment, net                                 1,519          1,430
Software development costs, net                             1,895          1,776
Other assets                                                    9              9
                                                      ------------------------------
                                                          $24,379        $23,310
                                                      ------------------------------
                                                      ------------------------------

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                      $1,380         $1,113
     Accrued salaries and benefits                            692            848
     Deferred revenue                                       2,095          1,741
                                                      ------------------------------
            Total current liabilities                       4,167          3,702

Long-term obligations, less current portion                    20             20
                                                      ------------------------------
            Total liabilities                               4,187          3,722
                                                      ------------------------------
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; 6,229,112, and 6,201,068 issued and
     outstanding at June 30, 1998 and March 31, 1998,
     respectively                                               6              6
   Additional paid in capital                              25,751         25,598
   Accumulated deficit                                     (5,565)        (6,016)
                                                      ------------------------------
             Total stockholders' equity                    20,192         19,588
                                                      ------------------------------
                                                          $24,379        $23,310
                                                      ------------------------------
                                                      ------------------------------
</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 June 30,
                                                        ---------------------------
                                                            1998           1997
                                                        ---------------------------
<S>                                                    <C>              <C>
Revenue:
     Subscription and license                              $2,798         $2,228
     Services                                               1,118            977
                                                        ---------------------------
            Net revenue                                     3,916          3,205

Cost of revenue                                             1,420          1,245
                                                        ---------------------------
Gross profit                                                2,496          1,960

Operating costs:
     Research and development                                 727            660
     Sales and marketing                                      722            558
     General and administrative                               658            845
     Reorganization charges                                     -            749
                                                        ---------------------------
            Total operating costs                           2,107          2,812
                                                        ---------------------------
Operating income (loss)                                       389           (852)
Interest and other income, net                                214            171
                                                        ---------------------------
Income (loss) before provision for income taxes               603           (681)
Provision for income taxes                                    152              -
                                                        ---------------------------
Net income (loss)                                            $451          ($681)
                                                        ---------------------------
                                                        ---------------------------
Basic earnings (loss) per share                             $0.07          ($0.11)
                                                        ---------------------------
                                                        ---------------------------
Weighted average common stock outstanding                   6,213          6,002
                                                        ---------------------------
                                                        ---------------------------
Diluted earnings (loss) per share                           $0.07         ($0.11)
                                                        ---------------------------
                                                        ---------------------------
Weighted average common and dilutive potential
   common stock outstanding                                 6,668          6,002
                                                        ---------------------------
                                                        ---------------------------
</TABLE>

    See accompanying notes to consolidated condensed financial statements

                                      4

<PAGE>

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

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                  June 30,
                                                            ---------------------
                                                             1998           1997
                                                            ---------------------
<S>                                                         <C>            <C>
Net cash provided by (used in) operating activities         $   812        ($308)
                                                            ---------------------
Cash flows from investing activities:
     Purchase of securities available-for-sale                  (14)      (2,491)
     Proceeds from sales or maturities of securities
        available-for-sale                                      311        3,410
     Acquisition of property and equipment                     (243)         (73)
     Computer software development costs                       (295)        (241)
                                                            ---------------------
            Net cash (used in) provided by investing 
              activities                                       (241)         605
                                                            ---------------------
Cash flows from financing activities:
     Proceeds from issuance of stock options and
        employee stock purchase plan                            152           49
                                                            ---------------------
            Net cash provided by financing activities           152           49
                                                            ---------------------
Net increase in cash and cash equivalents                       723          346
Cash and cash equivalents at beginning of period             12,647        9,211
                                                            ---------------------
Cash and cash equivalents at end of period                  $13,370       $9,557
                                                            ---------------------
                                                            ---------------------
</TABLE>

   See accompanying notes to consolidated condensed financial statements

                                      5

<PAGE>
                                  MECON, INC.

             NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                 JUNE 30, 1998
                                  (UNAUDITED)


(1)  BUSINESS OF THE COMPANY

     MECON, Inc. (the Company) provides subscriptions to an information 
database, licenses to software products, and consulting services to the 
health care industry. These products and services improve performance and 
reduce costs for health care organizations through the use of benchmark 
information, processes, and tools.

(2)  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 
consolidated financial statements and notes thereto for the fiscal year ended 
March 31, 1998 contained in the Company's Annual Report on Form 10-KSB.  The 
results of operations for the three months ended June 30, 1998 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, 1998, the Company has accounted for software and 
related revenues in accordance with Statement of Position (SOP) 97-2, 
SOFTWARE REVENUE RECOGNITION. SOP 97-2 generally requires revenue earned on 
software arrangements involving multiple elements to be allocated to each 
element based on the relative fair values of the elements. The revenue 
allocated to software products generally is recognized upon delivery of the 
products. The revenue allocated to postcontract customer support generally is 
recognized ratably over the term of the support and revenue allocated to 
service elements generally is recognized as the services are performed.

     Revenue generated from the initial year of a MECON-PEERx-TM- 
subscription and related MECON-PEERVIEW-TM- license and services contract is 
recognized ratably from the date of contract signing over the estimated time 
to deliver a customer's MECON-PEERx report, which is generally four to five 
months in duration. Revenue generated from a subsequent year subscription 
contract is recognized ratably over the estimated time to deliver a 
customer's subsequent year report, which generally takes four to five months 
beginning in the second or third year of the contract. Costs to deliver the 
MECON-PEERx products are estimated to be incurred evenly throughout the 
period beginning with the signing of a contract and ending with the delivery 
of a report. Revenue earned and unbilled is recorded as unbilled accounts 
receivable and amounts billed and unearned are recorded as deferred revenue.

     Revenue from MECON-OPTIMIS-TM- and MECON-Action-Point-SM- license and 
implementation services are recorded as deferred revenue and recognized upon 
completion of services. The Company offers post-contract customer support to 
its MECON-OPTIMIS and MECON-Action-Point customers. Revenue from maintenance 
and technical support services, including amounts bundled with the initial 
license fee, is 

                                      6

<PAGE>

recorded as deferred revenue and recognized ratably over the period the 
post-contract customer support services are provided.

     MECON-Advisory-SM- revenue is recognized as the services are performed or
as the customer's specific project is completed.

     The Company's adoption of SOP 97-2 did not have a material effect on the 
Company's financial statements for the three-month period ended June 30, 
1998. Prior to adoption of SOP 97-2, the Company accounted for software and 
related revenues in accordance with SOP 91-1, SOFTWARE REVENUE RECOGNITION.

REPORTING COMPREHENSIVE INCOME

     Beginning April 1, 1998, the Company adopted Statement of Financial 
Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE INCOME, which 
establishes standards for reporting and display of comprehensive income and 
its components in a full set of general purpose financial statements. For the 
three months ended June 30, 1998 and 1997, comprehensive income (loss) was 
equal to the net income (loss) reported on the consolidated condensed 
statements of operations.

(4)  REORGANIZATION AND OTHER SPECIAL CHARGES

     During the first quarter of fiscal 1998, the Company took action to 
reduce its ongoing quarterly operating expense base. As a part of the expense 
reduction effort, the Company decreased its workforce by 38 employees on 
April 17, 1997 and incurred a $749,000 reorganization charge during the first 
quarter of fiscal 1998. This charge was primarily comprised of employee 
severance and related benefits and additional costs associated with facility 
shutdowns.  At June 30, 1998, the reorganization plan is substantially 
complete as there are no significant costs remaining to be incurred.

(5)  EARNINGS (LOSS) 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 June 30,
                                                       1998                                                1997
                                  -----------------------------------------------     ---------------------------------------------
                                    Income             Shares          Per Share         Loss             Shares         Per Share
                                  (Numerator)       (Denominator)        Amount       (Numerator)      (Denominator)       Amount
                                  -----------------------------------------------     ---------------------------------------------
<S>                               <C>               <C>                <C>            <C>             <C>                <C>
BASIC EPS
Income (loss)                         $451              6,213             $0.07          ($681)            6,002           ($0.11)

EFFECT OF DILUTIVE SECURITIES
Stock options                            -                455                 -              -                 -                -
                                  -----------------------------------------------     ---------------------------------------------

DILUTED EPS

Income (loss) + assumed 
  exercises                           $451              6,668             $0.07          ($681)            6,002           ($0.11)
                                  -----------------------------------------------     ---------------------------------------------
                                  -----------------------------------------------     ---------------------------------------------
</TABLE>

Options to purchase 171,735 common shares at prices ranging from $11 to $24 
per share and 699,540 common shares at prices ranging from and $1 to $24 per 
share were outstanding during the three months ended June 30, 1998 and 1997, 
respectively, but were not included in the computation of diluted EPS because 
to do so would have been antidilutive for the periods presented.

                                      7

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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) 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 THE COMPANY'S QUARTERLY 
REVENUE.  DELAYS IN CONTRACT SIGNING COULD RESULT IN LOWER SERVICES REVENUES 
FOR THE COMPANY, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S 
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION, AND (2) 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 THE COMPANY, WHICH COULD HAVE A MATERIAL ADVERSE 
EFFECT ON THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION, 
AS WELL AS:

     - VARIABILITY OF QUARTERLY RESULTS AND SEASONALITY
     - DEPENDENCE ON PRINCIPAL PRODUCTS
     - INTEGRITY AND RELIABILITY OF DATABASE
     - COMPETITION
     - DEPENDENCE ON STRATEGIC RELATIONSHIPS
     - CONSOLIDATION AND UNCERTAINTY IN THE HEALTHCARE INDUSTRY
     - POTENTIAL ACQUISITIONS
     - DEPENDENCE ON KEY PERSONNEL

SUCH FACTORS ALSO INCLUDE THE RISK FACTORS LISTED FROM TIME TO TIME IN THE 
COMPANY'S OTHER SEC REPORTS, INCLUDING BUT NOT LIMITED TO, THE REPORT ON FORM 
10-KSB FOR THE YEAR ENDED MARCH 31, 1998, AND/OR FORM 10-QSB FOR THE QUARTER 
ENDED DECEMBER 31, 1997, COPIES OF WHICH ARE AVAILABLE FROM THE COMPANY'S 
INVESTOR RELATIONS DEPARTMENT.  THE COMPANY ASSUMES NO OBLIGATION TO UPDATE 
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB.

OVERVIEW

     MECON is a leading healthcare benchmarking solutions company. The 
Company's proprietary data, family of premium quality, easy-to-use software 
products and consulting services combine to produce and sustain optimum 
performance in healthcare delivery systems. From its incorporation until 
1989, MECON's revenue was primarily derived from consulting services for 
acute care hospitals. Since 1990, the Company has transitioned into providing 
a variety of products and services that employ its proprietary database 
comprised of acute care hospitals' operational cost and key performance 
information. For the three months ended June 30, 1998, approximately 71% of 
the Company's revenues were derived from database subscriptions and software 
sales. Within the acute care segment of the hospital market, MECON has 
marketed its products and services primarily to individual hospitals with 
over 100 beds.

     The following factors continue to contribute to the Company's 
performance during the first quarter of fiscal 1999. On November 25, 1996, 
the Company announced plans to complete the integration of Managed Care 
Information Systems, Inc. ("MCIS"), a pooling of interests transaction in 
fiscal 1996, centralize management of its product development, sales and 
product support organizations, accelerate its investment in the development 
of new clinical operations and quality measurement products and relocate its 
headquarters to larger facilities to accommodate these changes. These actions 
were intended to position the Company on a strong footing for long-term 
growth. 

     As a result of these integration, reorganization and product transition 
efforts, revenue and expenses for the third and fourth quarter of fiscal 1997 
were adversely affected. Revenue was impacted by declined productivity in the 

                                      8
<PAGE>

sales force that led to contract signing delays. The effect of such delays 
was a shortfall in revenue recognized in both the third and fourth quarters 
of fiscal 1997. This shortfall resulted in incurred operating losses, and 
accordingly, the Company announced that it would take corrective measures.

     On April 17, 1997, the Company announced a number of strategic and 
operational changes intended to improve the Company's financial performance. 
As a first step, the Company's original management team rejoined the Company 
and adopted a "back-to-basics" strategy of selling the Company's current 
products into its current market. Although the Company believed, and still 
believes, that additional healthcare market sectors targeted by the Company's 
accelerated investments in developing clinical operations and quality 
measurement products did represent growth opportunities for the Company, the 
Company also believed that continued efforts in these areas compromised both 
its leadership position in benchmark-based cost management solutions and its 
profitability.

     Tactics supporting this "back-to-basics" strategy include, but are not 
limited to, selling the MECON-Integrated Solution-TM- whenever possible, 
cross-selling existing products to existing customers and remaining firm on 
MECON-PEERx-TM- pricing related to the renewal of older, low margin 
subscriptions. The MECON-Integrated solution is a packaged product 
offering that includes a MECON-PEERx subscription, MECON-Advisory-TM- and 
MECON-OPTIMIS-TM-. Such a packaged offering assures that the customer achieves 
immediate, significant and sustainable cost savings by not only receiving 
benchmarked-based cost management reports that identify cost reduction 
opportunities by department but by also receiving MECON's integrated 
consulting approach of implementing such identified cost reduction 
opportunities and installing MECON-OPTIMIS, the Company's operational 
cost monitoring software tool, to assure cost reductions are sustained.

     Less than 50% of MECON-OPTIMIS customers are subscribers to MECON-PEERx 
because MECON-OPTIMIS predates MECON-PEERx and many of the early 
MECON-OPTIMIS customers, on current maintenance agreements, are now sales 
prospects for either MECON-PEERx or the MECON-Integrated Solution.  
Additionally, less than 10% of the MECON-ActionPoint customers are 
MECON-PEERx subscribers because the Company only recently began integrating 
the selling of MECON-ActionPoint, its only clinical product, with its 
operational cost management products.  Therefore, a cross-selling opportunity 
exists that has become a tactic of the "back-to-basics" strategy.

     Many of the older multi-year MECON-PEERx subscriptions were 
grandfathered at substantially lower prices. The Company has adopted a firm 
pricing policy to migrate expiring MECON-PEERx subscriptions to current list 
prices, and accordingly, certain of these subscribers may not renew their low 
margin subscriptions at higher margins due to pricing sensitivity. 
Accordingly, the Company is emphasizing replacing the revenue stream up for 
renewal more heavily than replacing all the expiring units. During the three 
months ended June 30, 1998, except for the hospital consortium renewal 
discussed below, the Company renewed essentially all expiring contracts at 
137% of the related customers' expiring contract values. However, as a result 
of this firm pricing tactic, the Company believes that some of the expiring 
contracts may not renew. One such contract that recently did not renew is a 
contract with a hospital consortium that covers approximately 40 academic 
teaching hospitals. During fiscal 1998, this contract totaled 7% of revenue. 
The original three-year contract, signed in fiscal 1992, was one of the 
Company's first multi-year contracts, was steeply discounted and hence 
contributed very low margins.  The majority of this revenue has historically 
been recognized in the second quarter of the fiscal year. As a result of the 
hospital consortium's non-renewal, the Company believes that in the second 
quarter of fiscal 1999 there may be nominal revenue growth compared to the 
comparable period in the prior fiscal year. The Company believes that the 
termination of this contract will not adversely effect future earnings.

     As a second step of the "back-to-basics" strategy, the Company took 
action to reduce its ongoing quarterly operating expense base. As a part of 
the expense reduction effort, the Company decreased its workforce by 38 
employees on April 17, 1997. This reduction was made in an effort to reduce 
the Company's

                                      9

<PAGE>

overall quarterly expenses, and along with the Company's renewed focus on its 
core markets, return the Company to profitability and growth. As a part of 
this expense reduction effort, the Company incurred a reorganization charge 
of $749,000 during the first quarter of fiscal 1998. This charge was 
primarily comprised of employee severance and related benefits and additional 
costs associated with facility shutdowns.

     The total value of contracts signed in the three months ended June 30, 
1998 increased 34% to $4.4 million compared to $3.3 million signed in the 
comparable period in the prior fiscal year and the Company's revenue 
increased by 22% to $3.9 million for the three months ended June 30, 1998 
compared to $3.2 million in the comparable period in the prior fiscal year. 
This disparity between the growth in total contract value signed and revenue 
recognized relates to a shift in contract mix in the first quarter of fiscal 
1999. A greater number, and total value, of contracts signed in the first 
quarter of fiscal 1999 were MECON-PEERx subscriptions, which tend to be 
multi-year contracts, compared to MECON-OPTIMIS, MECON-ActionPoint and 
MECON-Advisory, which tend to be only one-year contracts. Therefore, a 
greater proportion of total contract value signed in the first quarter of 
fiscal 1999 is recognized in future periods. Furthermore, given the shift in 
contract mix where a greater number, and total value, of contracts signed in 
the first quarter of fiscal 1999 were MECON-PEERx subscriptions, the Company 
believes that services revenue for the second quarter of fiscal 1999 may 
decrease sequentially from the first quarter of fiscal 1999 and the 
comparable period in the prior fiscal year.

     As a result of continued year-over-year increases in the total value of 
contracts signed since the adoption of the "back-to-basics" strategy, the 
Company has achieved year-over-year revenue growth. These increases in total 
contract value continue to build the Company's backlog, which is defined as 
the total value of contracts signed 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 first quarter of fiscal 1999 was 
$4.4 million compared to $3.9 million in revenue recognized, backlog 
increased by approximately $500,000 in the first quarter of fiscal 1999.

     An increasing base of recurring revenue is primarily driving 
year-over-year revenue growth.  Currently, approximately 50% to 75% of the 
Company's quarterly revenue is derived from backlog. The remaining 25% to 50% 
is generated from contracts signed during that respective quarter. The 
increase in the recurring base of revenue coupled with strong expense 
controls have returned the Company to profitability, excluding the 
reorganization charge in the first quarter of fiscal 1998, for the fifth 
consecutive quarter.

                                      10

<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
                                                                  JUNE 30,
                                                            -------------------
                                                            1998           1997
                                                            -------------------
<S>                                                       <C>             <C>
Statements of Operations
Revenue:
    Subscription and license............................      71%           70%
    Services............................................      29%           30%
                                                            -------------------
        Net revenue.....................................     100%          100%
    Cost of revenue.....................................      36%           39%
                                                            -------------------
Gross profit............................................      64%           61%

Operating costs:
    Research and development............................      19%           21%
    Sales and marketing.................................      18%           17%
    General and administrative..........................      17%           26%
    Reorganization charges..............................       0%           23%
                                                            -------------------
        Total operating costs...........................      54%           88%
                                                            -------------------
Operating income (loss).................................      10%          (27%)
Interest and other income, net..........................       5%            5%
                                                            -------------------
Income (loss) before provision for income taxes.........      15%          (21%)
Provision for income taxes..............................       4%            -
                                                            -------------------
Net income (loss).......................................      12%          (21%)
                                                            -------------------
                                                            -------------------
</TABLE>

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED 
JUNE 30, 1997

REVENUE

     Revenue for the three months ended June 30, 1998 increased 22% to $3.9 
million compared to $3.2 million for the comparable period in the prior 
fiscal year. Subscription and license revenue for the three months ended June 
30, 1998 increased 26% to $2.8 million compared to $2.2 million for the 
comparable period in the prior fiscal year and accounted for 80% of the 
revenue increase.  This increase was primarily attributable to an increased 
base of recurring revenue from multi-year subscription contracts sold in 
prior periods. The increase in recurring revenue is attributable to the 
company's strategy of requiring its customers to sign three year contracts 
for its MECON-PEERx product.

     The 14% increase in services revenue to $1.1 million from $977,000 was 
primarily due to the Company's current strategy of expanding customer support 
services, such as training programs and consulting projects, that build 
relationships with customers and enhance benefits customers derive from the 
Company's products. Although the Company anticipates a greater percentage of 
its future revenue to be derived from consulting services, consulting service 
contracts are significantly larger dollar contracts than MECON-PEERx, 
MECON-OPTIMIS and MECON-ActionPoint contracts. Therefore, the timing of 
contract signings and delivery of related services may impact the timing of 
revenue recognition, and as a result, consulting service revenue may 
significantly vary from quarter to quarter. Given the shift in contract mix 
where a greater number, and total value, of contracts signed in the first 
quarter of fiscal 1999 were MECON-PEERx subscriptions, the Company believes 
that services revenue for the second quarter of fiscal 1999 may decrease 
sequentially from the first quarter of fiscal 1999 and the comparable period 
in the prior fiscal year.

                                      11

<PAGE>

COST OF REVENUE

     Cost of revenue for the three months ended June 30, 1998 increased 14% 
to $1.4 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 an increase in MECON-PEERx, MECON-OPTIMIS and MECON-Action Point product 
delivery personnel. The employee count increased to 56 during the three 
months ended June 30, 1998 from 46 in the comparable period in the prior 
fiscal year. Cost of revenue for the three months ended June 30, 1998 
decreased to 36% of revenue compared to 39% for the comparable period in the 
prior fiscal year. While the dollars spent as a percentage of revenue 
decreased, the absolute dollars spent increased as the Company staffed for an 
increased base of customers. The decrease in percentage of revenue was 
primarily due to an increased revenue base related to recurring revenue from 
multi-year subscription contracts sold in prior years. The Company continues 
to leverage efficiencies in delivery related to such customers. The Company 
anticipates cost of revenue to increase in absolute dollars due to the 
increase in amortization of software development costs as the next generation 
of its products are released, as well as the anticipated hiring of product 
delivery personnel.

RESEARCH AND DEVELOPMENT

     Research and development expenses for the three months ended June 30, 
1998 increased 10% to $727,000 compared to $660,000 for the comparable period 
in the prior fiscal year. This increase was primarily due to an increase in 
technical and programming personnel. During the three months ended June 30, 
1998, approximately $295,000 was capitalized for internally developed 
software related to product development compared to $240,000 for the 
comparable period in the prior year. Research and development expenses for 
the three months ended June 30, 1998 decreased to 19% of revenue compared to 
21% for the comparable period in the prior fiscal year. This decrease as a 
percentage of revenue was primarily due to a planned product development 
effort with respect to anticipated revenue levels. While the dollars spent as 
a percentage of revenue decreased, the absolute dollars spent increased as 
the Company continues to develop the next generation of MECON-PEERVIEW, 
Version 5.0, through late fiscal 1999, and accordingly, the Company 
anticipates research and development spending to increase nominally in 
absolute dollars.

SALES AND MARKETING

     Sales and marketing expenses for the three months ended June 30, 1998 
increased 29% to $722,000 compared to $558,000 for the comparable period in 
the prior fiscal year. This increase was primarily due to an increase in 
employees, marketing activities, travel and office infrastructure. The 
employee count increased to 11 during the three months ended June 30, 1998 
from eight in the comparable period in the prior fiscal year.  Sales and 
marketing expenses for the three months ended June 30, 1998 increased to 18% 
of revenue compared to 17% for the comparable period in the prior fiscal 
year. This increase in percentage of revenue was primarily due to an increase 
in marketing activities to generate a market awareness of the Company's 
capabilities in consulting services. The Company anticipates sales and 
marketing expenses to increase in absolute dollars due to increased 
commissions related to an increasing customer base and marketing efforts.

GENERAL AND ADMINISTRATIVE

     General and administrative expenses for the three months ended June 30, 
1998 decreased 22% to $658,000 compared to $845,000 for the comparable period 
in the prior fiscal year. This decrease was primarily due to reductions in 
rent, legal and professional fees, and expenses related to office 
infrastructure. The reduction in rent and professional fees individually 
accounted for the largest portion of the decrease.  General and 
administrative expenses for the three months ended June 30, 1998 decreased to 
17% of revenue compared to 26% of revenue for the comparable period in the 
prior fiscal year. This decrease was primarily due to the aforementioned cost 
reduction initiatives. The Company anticipates general and administrative 
expenses to increase nominally in absolute dollars due to depreciation and 
amortization and a new corporate wide training program.

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<PAGE>

REORGANIZATION CHARGES

     No reorganization charges were incurred during the three months ended 
June 30, 1998 compared to $749,000 for the comparable period in the prior 
fiscal year. The decrease was primarily due to the series of management 
changes and corrective measures taken in the first quarter of fiscal 1998 as 
previously discussed compared to no such actions in the first quarter of 
fiscal 1999.

PROVISION FOR INCOME TAXES

     The increase in income taxes for the three months ended June 30, 1998 of 
$152,000 was primarily attributable to the Company achieving increasing 
profitability over the past five quarters, and therefore utilizing its net 
operating loss carryforwards and other tax credits. The remaining net 
operating loss carryforwards and tax credits taken in conjunction with the 
Company's anticipated profit is expected to result in an effective tax rate 
of 25% for fiscal 1999. Therefore, the Company provided taxes at such a rate 
in the first quarter of fiscal 1999. In the prior fiscal year, the Company 
had a larger net operating loss carryforward and tax credits and no history 
of profitability to provide a basis for an income tax provision.

LIQUIDITY AND CAPITAL RESOURCES

     At June 30, 1998, the Company's cash, cash equivalents and securities 
available-for-sale increased by $427,000 to $16.9 million compared to $16.5 
million at March 31, 1998 primarily as a result of strong cash collections 
and cash management. The Company generated $812,000 of cash flow from 
operating activities for the three months ended June 30, 1998 compared to 
cash used of $308,000 in the comparable period in the prior year. This 
improvement was primarily due to increased cash collections augmented by 
strong cash management. The Company's days of sales outstanding (DSO) 
remained relatively constant at 68 days at June 30, 1998 compared to 63 days 
at March 31, 1998.

     As of June 30, 1998, the Company had net working capital of $16.8 
million, including cash, cash equivalents and securities available-for-sale 
of $16.9 million. Given the Company's strong cash position as of June 30, 
1998, the Company has elected to have no outstanding debt facilities.  The 
Company currently has no material commitments for capital expenditures.

     The Company believes that with its access to financing sources, strong 
cash position, and lack of debt, it will be able to adequately fund its cash 
requirements for the next twelve months and the foreseeable future.

YEAR 2000

     The Company is reviewing its internal computer systems and product 
offerings to ensure these systems and offerings are adequately able to 
address the issues expected to arise in connection with the Year 2000. These 
issues include the possibility that software which does not have the capacity 
to recognize four digits in a date field may no longer function properly when 
use of that date becomes necessary.

     The Company is currently evaluating the status of its products, some of 
which are not at present Year 2000 compliant, and expects to implement 
programming changes necessary to address Year 2000 issues. The Company is 
also evaluating its internal systems and expects to implement the systems and 
programming changes necessary to address Year 2000 issues on an 
enterprise-wide basis. The Company is currently reviewing the cost of such 
actions. A significant proportion of these costs are not expected to be 
incremental costs to the Company, but will represent redeployment of existing 
Company resources. The Company expects such modifications to its products and 
internal systems will be made on a timely basis, and presently believes that, 
with modifications to existing software or converting to new software, the 
Year 2000 issue will not pose significant operational problems for the 
Company's computer systems; however, there can be no assurance there will not 
be a delay in, or increased costs associated with, the

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<PAGE>

implementation of such changes, and the Company's inability to implement such 
changes could have a material adverse effect on future results of operations.

     The Company has not fully determined the extent to which it may be 
impacted by third parties' systems, which may not be Year 2000-compliant. The 
Year 2000 computer issue creates risk for the Company from third parties with 
whom the Company deals on financial transactions worldwide. While the Company 
has begun efforts to seek reassurance from its suppliers and service 
providers, there can be no assurance that the systems of other companies that 
the Company deals with or on which the Company's systems rely will be timely 
converted, or that any such failure to convert by another company could not 
have a material adverse effect on the Company.

NEW ACCOUNTING STANDARDS TO BE ADOPTED

     Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING 
FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was issued by the 
Financial Accounting Standards Board in June 1998. SFAS No. 133 standardizes 
the accounting for derivative instruments, including certain derivative 
instruments embedded in other contracts. The Company anticipates that the 
adoption of SFAS No. 133  will not have an impact in the Company's financial 
statement.

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<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:
           Exhibits 11.1  Computation of Earnings (Loss) per Share
           Exhibits 27.0  Financial Data Schedules

(b)  Reports on Form 8-K:  
           The Company did not file any reports on Form 8-K during the three
           months ended June 30, 1998.


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: 8/13/98                          /s/ Vasu Devan
                                       --------------
                                          Vasu R. Devan
                                          President and Chief Executive Officer


Date: 8/13/98                          /s/ David J. Allinson
                                       ---------------------
                                          David J. Allinson
                                          Chief Financial Officer


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