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


                                    FORM 10-Q


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

For the quarterly period ended               August 31, 1997
                               --------------------------------------------

                                              or

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

For the transition period from                to    
                              ---------------   ---------------- 
   
                        MEDICUS SYSTEMS CORPORATION
             ------------------------------------------------------

             (Exact name of registrant as specified in its charter)

Delaware                                                     36-4056769
--------------------------------------------------------------------------------
(State or other jurisdiction                 (I.R.S Employer Identification No.)
 of incorporation or organization) 

One Rotary Center, Suite 1111, Evanston, Illinois   60201       (847) 570-7500
--------------------------------------------------------------------------------
(Address of principal executive offices)        (Registrant's telephone number)
Comission File Number   0-27614
                        ---------


   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 (2) has been subject to such
filing requirements for the past 90 days.

[X] Yes  [   ] No

There were 5,485,032 shares of common stock outstanding as of October 10, 1997.











<PAGE>





                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                           MEDICUS SYSTEMS CORPORATION
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                       August 31,                     May 31,
ASSETS                                                                                   1997                          1997
------                                                                                -----------                   -----------
<S>                                                                                <C>                          <C>  
Current assets                                                                           (Unaudited)
       Cash and cash equivalents                                                       $    371,761                $  1,205,135
       Accounts receivable and unbilled services, net of allowance for
         doubtful accounts of $1,742,195 and 1,713,008                                    8,615,200                  10,500,676
       Inventories                                                                          303,424                     214,264
       Prepaid expenses and other                                                           251,971                     258,725
       Prepaid and deferred income taxes                                                  2,025,238                   2,147,416
       Net assets of discontinued operation                                                  52,178                     111,381
                                                                                  ---------------------       -----------------
                                                                                         11,619,772                  14,437,597
                                                                                  ---------------------       -----------------
Property and equipment, net of accumulated
       depreciation of $5,331,012 and $5,080,110                                          2,142,357                   2,335,175
Internally developed software, net of accumulated
       amortization of $2,329,887 and $2,110,378                                          2,937,905                   3,087,849
Installment accounts receivable due after one year,
       net of unearned interest of $145,583 and $154,647                                    536,261                     533,488
Deferred income taxes                                                                     2,763,950                   2,454,563
                                                                                  ---------------------       -----------------
                                                                                       $ 20,000,245                $ 22,848,672
                                                                                  =====================       =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
       Accounts payable                                                                $    486,037                $    597,787
       Accrued compensation                                                                 272,464                     453,035
       Accrued restructuring charge                                                       1,875,909                   2,247,416
       Other accrued liabilities                                                          1,482,016                   1,138,226
       Deferred revenue                                                                   4,857,186                   6,910,599
       Notes payable                                                                      1,000,000                   1,000,000
                                                                                   --------------------       -----------------
                                                                                          9,973,612                  12,347,063
                                                                                   --------------------       -----------------
Notes payable                                                                             1,000,000                   1,000,000
                                                                                   --------------------       -----------------
Stockholders' Equity
       Preferred stock $1,000 par, 500 shares authorized and issued                         500,000                     500,000
       Common stock $.01 par:
         Authorized - 10,000,000 shares
         Issued - 6,492,926 and 6,487,159 shares, respectively                               64,929                      64,872
       Capital in excess of par value                                                    22,095,491                  22,063,715
       Capital in excess of par value - warrant                                             944,000                     944,000
       Less treasury stock:
         Preferred stock, at cost - 500 shares                                             (500,000)                   (500,000)
         Common stock, at cost - 1,007,002 shares                                        (5,687,418)                 (5,687,418)
       Accumulated deficit                                                               (8,390,369)                 (7,883,560)
                                                                                   --------------------       ------------------
                                                                                          9,026,633                   9,501,609
                                                                                   --------------------       ------------------
                                                                                       $ 20,000,245                $ 22,848,672
                                                                                   ====================       ==================


        The accompanying notes are an integral part of these statements.
</TABLE>


<PAGE>



<TABLE>
<CAPTION>


                                              MEDICUS SYSTEMS CORPORATION
                                               STATEMENTS OF OPERATIONS
                                                      (Unaudited)


                                                                                                Three Months Ended
                                                                                  --------------------------------------------------
                                                                                         August 31,                  August 31,
                                                                                            1997                        1996
                                                                                  ---------------------       ----------------------

<S>                                                                                <C>                         <C> 
Revenues
       Software products and services                                                 $  2,243,860                 $  1,815,736
       Maintenance and support services                                                  2,376,050                    2,381,043
                                                                                  ----------------------      ----------------------
                                                                                         4,619,910                    4,196,779

Costs and expenses
       Software products and services                                                      718,268                      454,102
       Maintenance and support services                                                  1,127,150                      816,611
                                                                                  ----------------------      ----------------------
                                                                                         1,845,418                    1,270,713

       Marketing, general and administrative                                             2,723,663                    2,139,479
       Research and development                                                            981,059                      505,920
                                                                                  ----------------------      ----------------------
                                                                                         5,550,140                    3,916,112
                                                                                   ---------------------      ----------------------

Operating income (loss)                                                                   (930,230)                     280,667

       Interest and other income                                                            42,514                      120,094
       Interest expense                                                                    (39,665)                         -
                                                                                  ----------------------      ----------------------

Income (Loss) from continuing operations before income
       taxes                                                                              (927,381)                     400,761

       Provision for (benefit from) income taxes                                          (357,041)                     159,543
                                                                                  ----------------------      ----------------------

Income (Loss) from continuing operations                                                  (570,340)                     241,218

Discontinued operation, net of taxes                                                        63,531                       50,998
                                                                                  ----------------------      ----------------------

Net income (loss)                                                                     $   (506,809)                $    292,216
                                                                                  ======================      ======================

Earnings (loss) per common and common equivalent share
       Continuing operations                                                          $      (0.10)                $       0.04
       Discontinued operation                                                                 0.01                         0.01
                                                                                  ----------------------      ----------------------
                                                                                      $      (0.09)                $       0.05
                                                                                  ======================      ======================

Weighted average common and common equivalent shares outstanding                         5,489,329                    6,473,252
                                                                                  ======================      ======================




        The accompanying notes are an integral part of these statements.


</TABLE>

<PAGE>








<TABLE>
<CAPTION>



                           MEDICUS SYSTEMS CORPORATION
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                                                                Three Months Ended
                                                                                ----------------------------------------------------
                                                                                        August 31,                   August 31,
                                                                                            1997                        1996
                                                                                ----------------------       -----------------------
<S>                                                                                <C>                         <C>   

Cash flows from operating activities
       Income (Loss) from continuing operations                                      $    (570,340)              $      241,218
       Adjustments to reconcile to net cash from operating activities:
        Depreciation of property and equipment                                             250,902                      284,609
        Amortization of internally developed software                                      219,511                       78,914
        Deferred income taxes                                                              (43,938)                      69,836
        Accrued restructuring charge                                                      (291,860)                    (386,798)
        Allowance for doubtful accounts                                                    150,000                          -
        Changes in certain current assets and current liabilities:
           Accounts receivable and unbilled services                                     1,660,193                      307,267
           Due from Managed Care Solutions, Inc.                                               -                        189,789
           Inventories                                                                     (89,160)                      35,332
           Prepaid expenses and other current assets                                      (136,517)                      59,479
           Accounts payable                                                               (111,750)                      (2,348)
           Accrued compensation                                                           (180,571)                    (721,699)
           Deferred revenue                                                             (2,053,413)                  (1,078,628)
        Other, net                                                                         341,017                     (402,062)
                                                                                 ---------------------       -----------------------
                                                                                          (855,926)                  (1,325,091)
                                                                                 ---------------------       -----------------------

Cash flows from investing activities
        Additions to property and equipment                                                (58,085)                     (40,480)
        Additions to internally developed software                                         (69,567)                    (500,887)
        Proceeds from maturity of short-term investments                                       -                      1,597,157
        Proceeds from sale of short-term investments                                           -                     10,888,023
        Purchases of short-term investments                                                    -                    (11,440,114)
                                                                                 ---------------------       -----------------------
                                                                                          (127,652)                     503,699
                                                                                 ---------------------       -----------------------

Cash flows from financing activities
        Sale of common stock                                                                27,470                       49,240
                                                                                 ---------------------       -----------------------
                                                                                            27,470                       49,240
                                                                                 ---------------------       -----------------------

Net decrease in cash and cash equivalents                                                 (956,108)                    (772,152)
Cash and cash equivalents, beginning of period                                           1,205,135                      765,312
Net cash activity from discontinued operation                                              122,734                      976,653
                                                                                 ---------------------       -----------------------
Cash and cash equivalents, end of period                                             $     371,761               $      969,813
                                                                                 =====================       =======================


        The accompanying notes are an integral part of these statements.
</TABLE>


<PAGE>





                           MEDICUS SYSTEMS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1 - BASIS OF PRESENTATION

   In  management's   opinion,  the  financial  statements  of  Medicus  Systems
Corporation (the "Company")  reflect all adjustments  (consisting only of normal
recurring  adjustments)  considered  necessary  for a fair  presentation  of the
operating  results for the  quarters  ended  August 31,  1997 and 1996.  Certain
reclassifications  have been made in the prior period  financial  statements  to
conform to the  current  period  presentation.  These  reclassifications  had no
effect on previously reported total assets, total liabilities, equity or results
of operations.

   Operating  results for the interim periods are not necessarily  indicative of
the results to be expected for the full year. The financial information included
herein should be read in conjunction with the financial statements and footnotes
thereto  included in the Company's Annual Report on Form 10-K for the year ended
May 31, 1997.

   During the quarter  ended  August 31,  1996,  the Company  performed  certain
administrative  services  for  Managed  Care  Solutions,  Inc.  ("MCS")  under a
services agreement  resulting from the spin off of the Company from MCS on March
1, 1996. During the quarter ended August 31, 1996, the Company received $175,000
in  consideration  for  these  services,  and  reduced  marketing,  general  and
administrative expenses by this amount.

NOTE 2 - DISCONTINUED OPERATION

   Effective May 31, 1997 the Company adopted a plan to discontinue its contract
services  line  of  business.  This  separate  line  of  business  consisted  of
information systems management contracts with one customer.  As a result of this
decision, the net assets of the contract services line of business,  principally
accounts receivable and unbilled services,  property and equipment, and accounts
payable and other  accrued  liabilities  have been  reclassified  in the Balance
Sheets  at August  31,  1997 and May 31,  1997.  In  addition,  the  results  of
operations  of the contract  services  business  have been  reclassified  in the
Statements of  Operations  and  Statements of Cash Flows for the quarters  ended
August 31, 1997 and 1996.

   The following  table  summarizes  unaudited  selected  financial  data of the
contract services business for the quarters ended August 31, 1997 and 1996:

                                             Three Months Ended
                                     -------------------------------------------
                                         August 31,              August 31,
                                              1997                    1996
                                     -------------------     -------------------
Revenues                                  $2,501,000               $2,497,000
Operating income                             103,000                   83,000


NOTE 3 - EARNINGS PER SHARE

   Earnings  (Loss) per common  share have been  computed by dividing net income
(loss) by the  weighted  average of common  stock and common  stock  equivalents
outstanding during the period.  Common stock equivalents include shares issuable
on the  exercise of stock  options and the warrant  (when  dilutive),  using the
treasury method from the date of grant.



                                                        


                                                         


<PAGE>





                           MEDICUS SYSTEMS CORPORATION
                    NOTES TO FINANCIAL STATEMENTS, Continued
                                   (Unaudited)


NOTE 4 - ACCRUED RESTRUCTURING CHARGE

   During  February,  1996,  the Company  commenced  a process to  evaluate  its
current strategic  position,  including the markets it expects to pursue and its
product offerings in those chosen markets. As a result of decisions made as part
of this evaluation  process,  the Company recorded $4.7 million in restructuring
charges,  representing  costs and expenses to exit  certain  product  lines,  to
abandon  certain  product  development  efforts and to provide  for  liabilities
resulting  from the strategic  redirection of the Company,  including  severance
costs.  Specifically,  the Company  decided to exit the Clinical Case Management
Systems   ("CCM")  and  the  Executive   Information   Systems   product  lines.
Additionally, product development efforts for the Clinical Data Systems Wincoder
V2 project and portions of the MACH 1 project,  which will no longer be utilized
in the Medicus  product line,  were abandoned and their  associated  development
costs,  which had been previously  capitalized,  were expensed.  Severance costs
associated with an officer and several  employees,  in addition to the write-off
of a portion  of the  Contract  Management  System,  were also  included  in the
restructuring charge.


   As part of an ongoing evaluation,  the Company refined its strategic planning
process during fiscal 1997, and assessed continuing  obligations associated with
the   implementation   of  the  plan.  The  Company  continued  the  process  of
implementing its plans during 1997 and,  following the stock repurchase from its
founder in the quarter ended February 28, 1997, recorded $2.8 million in charges
to  complete  its plan,  including  accruing  certain  costs to  reorganize  the
Company's  business  units,  to  abandon  certain  development  efforts,  and to
increase the allowance for doubtful accounts.  Specifically, the Company decided
to relocate operations for its Clinical Data Systems ("CDS") division,  based in
Alameda,  CA, to the Company's  Evanston,  IL corporate  offices.  Costs accrued
associated  with  the  relocation   included  costs  to  cancel  existing  lease
agreements,  to  terminate  employees  and to write down  abandoned  assets.  In
addition,  the Company  increased  its  reserves for product line exit costs and
severance  costs  that  relate  to the  remaining  customer  of  the  previously
discontinued CCM product line. Also, certain product development efforts for the
Company's  Patient  Focused Systems  ("PFS")  products were  abandoned,  and the
associated development costs, which had been previously capitalized,  along with
other related product line exit costs were expensed.  The Company also increased
its allowance for doubtful accounts due to the potential for certain  additional
billed  and  unbilled  accounts  to  become  uncollectible  as a  result  of the
decisions discussed above.


   The components of the restructuring  reserve,  which the Company expects will
be utilized during the next nine months, are as follows:

                                          August 31,                May 31,
                                            1997                     1997
                                    -------------------     --------------------
Product line exit costs             $        671,978        $         774,425
Business unit reorganization costs           579,986                  674,597
Employee termination and severance costs     623,945                  798,394
                                    -------------------     --------------------
                                    $      1,875,909        $       2,247,416
                                    ===================     ====================

   During the quarter  ended August 31, 1997,  the Company  incurred  $79,647 in
write-downs  of  accounts  receivable  and  $22,800 in  product  line exit costs
related to the remaining  customer of the  previously  discontinued  CCM product
line.  The Company  also paid  $94,611 in  business  unit  reorganization  costs
related to the relocation of the CDS division and $174,449 in severance benefits
and employee termination costs.



                                                      



<PAGE>





                           MEDICUS SYSTEMS CORPORATION
                    NOTES TO FINANCIAL STATEMENTS, Continued
                                   (Unaudited)


NOTE 5 - NOTE PAYABLE AND LINE OF CREDIT


   On December 5, 1996,  the Company  reached an agreement in principle with its
founder,  Richard C. Jelinek, to purchase from Mr. Jelinek, and a trust of which
he is a beneficiary  (the  "Trust"),  one million shares of Common Stock and 500
shares of Voting  Preferred  Stock.  In exchange,  the Company agreed to pay Mr.
Jelinek  and the Trust  $4.5  million in cash and $2.0  million  in 8%  two-year
promissory  notes,  and issued to Mr.  Jelinek and the Trust  400,000  five-year
warrants to purchase Common Stock at $8.00 per share.  The scheduled  maturities
of the notes are $1 million on March 19, 1998 and $1 million on March 19,  1999.
Interest costs incurred and paid on the promissory notes totaled $39,665 for the
quarter ending August 31, 1997.

   In April  1997,  the  Company  entered  into an  agreement  with a bank  that
provides  for a  secured,  revolving  line of  credit  up to a  maximum  of $2.5
million.  The credit  facility,  which has an initial  maturity  date of October
1998, bears interest at the bank's prime rate and provides the bank with a first
security interest in all assets of the Company.  Certain financial covenants and
reporting  requirements  are also  included in the  agreement.  As of August 31,
1997, the Company had not utilized the line of credit.



                                                      


<PAGE>





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

                           MEDICUS SYSTEMS CORPORATION
                              RESULTS OF OPERATIONS

   This report contains statements that may be considered forward-looking,  such
as the discussion of the Company's strategic goals, new products and cash flows.
These statements speak of the Company's plans,  goals or expectations,  refer to
estimates, or use similar terms. Actual results could differ materially from the
results  indicated by these statements  because the realization of those results
is subject to many uncertainties.

   Some of these  uncertainties  that may affect future results are discussed in
more detail  below under  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations." All forward-looking statements included in
this document are based upon information  presently  available,  and the Company
assumes no obligation to update any forward-looking statement.

   The Company's quarterly operating results  historically have varied depending
upon such  factors  as the  timing of  significant  sales and the  timing of new
product introductions.  Consequently, the results for any one quarter may not be
indicative of future operating results.

   The following  table sets forth for the periods  indicated (i) the percent of
revenues  represented  by certain  line  items in the  Company's  Statements  of
Operations and (ii) the percentage  change in each line item from the prior year
period.

                                       Percent of Revenues         Percentage
                                       Three Months Ended           Increase
                                       ---------------------       

                                       Aug. 31,     Aug. 31,        (Decrease)
                                         1997         1996         1996 to 1997
                                       --------     --------       ------------
Revenues
   Software products and services          49%           43%             24%
   Maintenance and support services        51            57               - 
                                          ----          ----            
                                          100           100              10
                                          ----          ----
Costs and expenses
   Software products and services (1)      32            25              58
   Maintenance and support services (1)    47            34              38
                                          ----          ----            
                                           40            30              45
   Marketing, general and administrative   59            51              27
   Research and development                21            12              94
                                          ----          ----            
                                          120            93              42
                                          ----          ----            
 
Operating income (loss)                   (20)            7              N/M
   Interest and other income                1             3             (65)
   Interest expense                        (1)            -              N/M
                                          ----          ----             

Income  (Loss) from continuing
   operations before income taxes         (20)           10              N/M
   Provision for(benefit from)income taxes (8)            4              N/M
                                          ----          ----            
Income  (Loss) from continuing
   operations                             (12)            6              N/M
Discontinued operation, net of taxes        1             1              25
                                          ----          ----            
Net income (loss)                         (11)%           7%             N/M
                                          ====          ====            

(1)   Shown as a percent of related revenues.

   Operating  revenues are derived  from two  sources:  (1) license fees and the
related services for licensing the Company's proprietary software products;  and
(2) maintenance and support services related to such software products.



                                                        


                                                        

<PAGE>





                           MEDICUS SYSTEMS CORPORATION
                        RESULTS OF OPERATIONS, Continued


SOFTWARE PRODUCTS AND SERVICES

   Revenues  increased 24% to $2.2 million  primarily due to the shipment of the
new Windows based  products from the Clinical Data Systems and Decision  Support
Systems divisions during the quarter.  Costs and expenses increased 58% compared
to the corresponding prior year period, and as a percentage of related revenues,
increased to 32% from 25%. The increase was  primarily  due to  amortization  of
capitalized  software for the newly released products.  Additionally,  costs and
expenses  for the  quarter  ended  August  31,  1996  include  the effect of the
Company's  decision to reduce its reserve for continuing  obligations on product
line exit costs by $200,000, as a result of negotiations with its customers.

MAINTENANCE AND SUPPORT SERVICES

   Revenues  remained  relatively  flat  at $2.4  million.  Costs  and  expenses
increased  38%  compared  to  the  corresponding  prior  year  period,  and as a
percentage  of related  revenues,  increased to 47% from 34%,  primarily  due to
additional  labor  costs  incurred  to support  new  product  releases  from the
Clinical Data Systems and Decision  Support  Systems  divisions and higher labor
costs resulting from personnel  shifts to maintenance and support  services from
development activities.

MARKETING, GENERAL AND ADMINISTRATIVE

   Expenses  increased  27% to 2.7 million.  The increase was  primarily  due to
$139,000 of expenses related to the move of the Alameda office that could not be
accrued for in fiscal  1997.  Additionally,  costs and  expenses for the quarter
ended August 31, 1996 included the effect of $175,000 in administrative fees the
Company received as a result of the services  agreement with MCS and a reduction
of reserves and of various items totaling approximately $250,000.

RESEARCH AND DEVELOPMENT

   Actual research and development  expenses  decreased 2% to $1,051,000 for the
quarter.  Research and development costs presented in the accompanying financial
statements were $981,000  compared to $506,000 in the  corresponding  prior year
period.  The Company  also  capitalized  software  development  costs of $70,000
compared to $471,000 in the  corresponding  prior year  period,  reflecting  the
release of new products in the current  quarter and the  resulting  cessation of
software cost capitalization.  Actual research and development expenditures were
47%  of  software  products  and  services  revenues  compared  to  60%  in  the
corresponding prior year period.

   During the first quarter of fiscal 1998,  the Company's  development  efforts
were focused on the Decision  Support Systems product line and the Clinical Data
Systems  product line.  During the first quarter of fiscal 1997, the Company was
engaged in several development projects,  including the Resource Case Management
System, and the Decision Support Systems product line.

INTEREST AND OTHER INCOME

   Interest and other income  decreased  65% to $42,000,  primarily due to lower
average cash balances during the quarter ending August 31, 1997.

INCOME TAXES

   The  Company's  effective  tax  rate  was  38.5%  compared  to  39.8%  in the
corresponding  prior  period.  The Company  plans to utilize  net tax  operating
losses  carried  forward from the prior year to the extent it has taxable income
in the current year.



<PAGE>





                           MEDICUS SYSTEMS CORPORATION
                        RESULTS OF OPERATIONS, Continued

                               FINANCIAL CONDITION


   As a result of the Company's  commitment to expand its software  products and
services,  funds are  required  to support  its  ongoing  product  research  and
development  activities  and the  infrastructure  required to serve its customer
base.  Historically,  cash  generated  from its operations has been an important
contributor  to  these  needs.  As a  result  of the  market  factors  adversely
affecting fiscal 1997 results, as well as the stock repurchase transaction,  the
Company was required to use a significant  portion of its cash  reserves.  It is
expected that,  following the restructuring  efforts begun in prior periods, the
Company will return to a situation  where cash from  operations  will provide an
important  source of liquidity  to support its normal  capital  needs,  although
numerous   factors,   including  any   reductions  in  revenues  from  currently
anticipated amounts, could affect the amount of such cash available.

   At August 31, 1997, the Company had available  cash reserves of $372,000.  In
addition, the Company had a $2.5 million standby credit facility available. $1.0
million of the principal amount of the Company's 8% promissory notes,  issued in
connection with the Company's stock repurchase agreement,  is due in March 1998.
In addition,  the Company anticipates cash outlays of approximately $1.9 million
in the next nine months, resulting primarily from its decision to reorganize its
business units and to exit certain product lines.

   While  the  Company  has  experienced  negative  cash  flows  from  operating
activities  during the past two fiscal  years,  management  believes  that, as a
result of significant reductions in expenses, its cash flows will improve. While
there can be no assurance that this will occur, the Company  currently  believes
that it will have adequate financial resources available from operations and the
available credit facility to provide  sufficient  liquidity to meet its ordinary
capital  requirements  for the  foreseeable  future,  including  the March  1998
payment  on the  promissory  notes and cash  outlays  related  to the  Company's
restructuring plan.


   During its second  fiscal  quarter,  the Company bills its clients in advance
for the next calendar year's  maintenance and support  services  provided on its
software  products.  This  generates  an  increase  in  the  Company's  accounts
receivable and deferred  revenue  balances  during those periods,  and increases
cash  balances in  subsequent  months as the  related  accounts  receivable  are
collected.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

   Statement of Financial  Accounting  Standards ("SFAS") No. 128, "Earnings per
Share," issued in February 1997, changes the method of calculating  earnings per
share and will be effective for the Company's financial  statements for the year
ending May 31, 1998. Earlier application is not permitted.  However, the Company
is permitted to disclose pro forma  earnings per share  amounts  computed  using
SFAS 128 in periods prior to adoption.  Upon adoption, all prior period earnings
per  share  data  presented  shall be  restated  to  conform  to SFAS  128.  The
calculation  of earnings per share under SFAS 128 is simpler than prior  methods
and more consistent with international accounting standards.  Because a majority
of the Company's common stock  equivalents have exercise prices in excess of the
Company's  Common Stock price, the Company does not believe that the adoption of
SFAS 128 will have a significant impact on amounts reported as net income (loss)
per common share.



<PAGE>





                           PART II - OTHER INFORMATION



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

         None.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         Exhibit 27 - Financial Data Schedule

(b)      Reports on Form 8-K

         The Company did not file any reports on Form 8-K during the quarter.



<PAGE>





                                   SIGNATURES


   Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                           MEDICUS SYSTEMS CORPORATION
                                  (Registrant)




     October 10, 1997                                 /s/  Patrick C. Sommers
-----------------------------------------        -------------------------------
                                                           Patrick C. Sommers
                                                              President
                                                      (Chief Executive Officer)




     October 10, 1997                                 /s/  Daniel P. DiCaro
-----------------------------------------        -------------------------------
                                                           Daniel P. DiCaro
                                                            Vice President
                                                      (Chief Financial Officer)