FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended March 31, 1999

                                       OR

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

For the transition period                             to        
Commission file number 1-11394

                             MEDTOX SCIENTIFIC, INC.
             (Exact name of registrant as specified in its charter)

              Delaware                                         95-3863205  
     (State or other jurisdiction of                       (I.R.S. Employer
      incorporated or organization)                         Identification No.)

         402 West County Road D, St.Paul, Minnesota                 55112  

      (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number including area code:             (651) 636-7466 


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.

                                    Yes X No

The number of shares of Common Stock, $.15 par value,  outstanding as of May 10,
1999, was 2,903,161.


<PAGE>


                             MEDTOX SCIENTIFIC, INC.

                                      INDEX

                                                                     Page

Part I     Financial Information:

           Item 1:

             Unaudited Consolidated Balance Sheets - March 31, 1999
             and December 31, 1998 ...............................       3

             Unaudited Consolidated Statements of Operations - Three
             Months Ended March 31, 1999 and 1998....................... 5

             Unaudited Consolidated Statements of Cash Flows - Three
             Months Ended March 31, 1999 and 1998....................    6

             Notes to Consolidated Financial Statements...........       7

           Item 2:

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

Part II   Other Information .....................................       17
             Signatures ...........................................     18

<PAGE>
                            MEDTOX SCIENTIFIC, INC.
                          CONSOLIDATED BALANCE SHEETS
                    (In Thousands except per share amounts)
                                  (Unaudited)
<TABLE>
<CAPTION>


                                                  March 31            December 31
                                                    1999                 1998
                                               -------------------------------------

<S>                                            <C>                   <C>    

Assets
Current assets
   Cash and cash equivalents                           $   699              $    -

   Accounts receivable:
         Trade, less allowance for doubtful
           accounts ($245-1999; $245-1998)               7,157                5,957
         Other                                              35                   30
                                               -------------------------------------
                                                         7,192                5,987
   Inventories:
         Raw materials                                     442                  444
         Work in process                                   230                  151
         Finished goods                                     96                   80
         Supplies                                          429                  432
                                               -------------------------------------
                                                         1,197                1,107

   Prepaid expenses and other                              689                  524
                                               -------------------------------------


         Total current assets                            9,777                7,618



Equipment and improvements:
    Furniture and equipment                             11,852               11,779
    Leasehold improvements                               1,287                1,283
                                               -------------------------------------
                                                        13,139               13,062
    Less accumulated depreciation
         and amortization                              (10,449)             (10,087)
                                               -------------------------------------

                                                         2,690                2,975
Goodwill, net of accumulated amortization of
    $3,277 in 1999 and $3,086 in 1998                   13,816               14,007

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


Total assets                                          $ 26,283             $ 24,600
                                               =====================================

</TABLE>

<PAGE>

                            MEDTOX SCIENTIFIC, INC.
                          CONSOLIDATED BALANCE SHEETS
                    (In Thousands except per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                  March 31            December 31
                                                    1999                 1998
                                               -------------------------------------


<S>                                             <C>                 <C>    

Liabilities and stockholders' equity
Current liabilities
   Line of credit                                      $ 3,928              $ 3,095
   Checks written in excess of bank balances           $     -              $   142
   Accounts payable                                      4,124                3,531
   Accrued expenses                                      1,986                1,724
   Current portion of restructuring accrual              1,065                1,079
   Current portion of long-term debt                       964                1,140
   Current portion of capital leases                       186                  186
                                               -------------------------------------

         Total current liabilities                      12,253               10,897


Long-term portion of restructuring accrual                  48                   76
Capital lease obligations                                  487                  516
Long term debt obligations                               1,977                1,785

Stockholders' equity 
   Preferred Stock, $1.00 par value:
         Authorized - 1,000,000 shares;
         Issued and outstanding - none
         none in 1999 and none in 1998                       -                    -
   Common Stock, $ .15 par value:
         Authorized - 3,750,000 shares;
         Issued and outstanding -
         2,903,100 shares in 1999 and
         2,899,669 shares in 1998                          437                  435
   Additional paid-in capital                           59,845               59,815
   Accumulated deficit                                 (48,588)             (48,748)
   Treasury stock                                         (176)                (176)
                                               -------------------------------------

        Total stockholders' equity                      11,518               11,326


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

Total liabilities and stockholders' equity            $ 26,283             $ 24,600
                                               =====================================


</TABLE>
<PAGE>

                            MEDTOX SCIENTIFIC, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands except per share amounts)

<TABLE>
<CAPTION>

                                                              Three Months Ended
                                                                   March 31
                                                            1999                1998
                                                     -----------------------------------------
                                                        (Unaudited)          (Unaudited)
<S>                                                <C>                       <C>   
Revenues

   Laboratory service revenues                                  $ 7,050               $ 6,547
   Product sales                                                    785                   532
                                                     -----------------------------------------
                                                                  7,835                 7,079

Cost of services                                                  4,839                 4,391
Cost of sales                                                       407                   352
                                                     -----------------------------------------
                                                                  5,246                 4,743

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

          Gross profit                                            2,589                 2,336

Operating expenses
   Selling, general and administrative                            2,020                 1,811
   Research and development                                         233                   307
   Interest and financing costs                                     176                   140
                                                     -----------------------------------------
                                                                  2,429                 2,258
                                                     -----------------------------------------

Net income (loss)                                                   160                    78
                                                     =========================================

Income per share-basic and diluted
                                                                    .06                   .03
                                                     =========================================

(1) Income per share for the three months ended March 31, 1998 has been restated
    to reflect a one-for-twenty reverse stock split in February 1999.

</TABLE>
<PAGE>




                                     MEDTOX SCIENTIFIC, Inc.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (In thousands)
                                           (Unaudited)
<TABLE>
<CAPTION>

                                                                      Three Months Ended
                                                                   March 31          March 31
                                                                  1999                 1998
                                                             -------------------------------------
<S>                                                         <C>                     <C>    
Operating activities
Net income                                                             $ 160                 $ 78
   Adjustments to reconcile net income to net cash
    used in operating activities:
      Depreciation and amortization                                      553                  486
      Changes in operating assets and liabilities;
         Accounts receivable                                          (1,204)                (402)
         Inventories                                                     (90)                  49
         Prepaid expenses and other                                     (165)                 (84)
         Accounts payable, accrued expenses and other                    854                  145
         Restructuring accrual                                           (42)                 (70)
                                                             -------------------------------------
Net cash used in operating activities                                     66                  202

Investing activities
    Purchases of equipment and improvements                              (77)                (521)

Financing activities
    Checks in excess of bank balance                                    (142)                   -
    Net proceeds from sale of common stock                                 2                    7
    Net proceeds from line of credit and long
       term debt                                                       7,727                5,386
    Principal payments on capital leases                                 (29)                 (36)
    Principal payments on line of credit and long
       term debt                                                      (6,848)              (4,779)
                                                             -------------------------------------
Net cash provided by financing activities                                710                  578
                                                             -------------------------------------

Increase  in cash and cash equivalents                                   699                  259
Cash and cash equivalents at beginning of period                           -                   58
                                                             -------------------------------------

Cash and cash equivalents at end of period                             $ 699                $ 317
                                                             =====================================



Supplemental noncash activities
During the three months ended March 31, 1999,  the Company  entered into capital
lease agreements totaling $58,300.

</TABLE>

<PAGE>

                             MEDTOX SCIENTIFIC, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 1999

NOTE A -- BASIS OF PRESENTATION

The  accompanying   unaudited   consolidated   financial  statements  of  MEDTOX
Scientific, Inc. (the "Company") have been prepared in accordance with generally
accepted  accounting  principles for interim financial  information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the  information  and notes  required by  generally  accepted
accounting principles. In the opinion of management, all adjustments (consisting
only  of  normal  recurring   adjustments)   considered  necessary  for  a  fair
presentation  of  financial  condition  and  results  of  operations  have  been
included.  Operating results for the three-month period ended March 31, 1999 are
not  necessarily  indicative  of the results that may be attained for the entire
year. These consolidated financial statements should be read in conjunction with
the  consolidated  financial  statements in the Company's  Annual Report on Form
10-K and the notes thereto included, for the year ended December 31, 1998.

The  Company's  stockholders  approved  a  one-for-twenty  reverse  stock  split
effective  February 23, 1999.  All stock options,  warrant,  share and per share
data included in this report reflect the effect of this reverse split.

Basic earnings per share is computed on the basis of the weighted average number
of common  shares  outstanding.  Diluted  earnings  per share is computed on the
basis of the  weighted  average  number of common  shares  outstanding  plus the
effect of outstanding stock options using "treasury stock" method.

(In thousands, except share and per share amounts)  Three Months Ended March 31
                                                    1999               1998


Net Income (A)                                     $160                $78
                                                    ===                 ==

Weighted average number of shares
    Of common stock outstanding (B)             2,875,288           2,880,196
                                                =========           =========

Dilutive effect of stock options                   16,000               0     
                                               ==========        =============

Common stock and common stock
     Equivalents (C)                            2,891,288           2,880,196

Net income per share:
     Basic (A/B)                                  $.06                 $.03
                                                  ----                 ----
     Diluted (A/C)                                $.06                 $.03
                                                  ----                 ----

<PAGE>


Reclassifications:  Certain reclassifications have been made to the 1998 
financial statements to conform with 1999 presentation.


Comprehensive Income:  Comprehensive income is a measure of all nonowner changes
in stockholders'  equity and includes such items as net income,  certain foreign
currency translation items, minimum pension liability  adjustments,  and changes
in the value of available-for-sales securities. For the three months ended March
31, 1999 and 1998,  comprehensive  income for the Company was  equivalent to net
income as reported.

Accounting  for  Derivatives:  In June 1997 the Financial  Accounting  Standards
Board released SFAS No. 133 "Accounting for Derivatives  Instruments and Hedging
Activities",  which will be effective for the company beginning January 1, 2000.
SFAS No. 133  establishes  new  accounting  reporting  standards for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts,  and for hedging  activities.  The Company has not yet  completed its
analysis of the effect,  if any,  this  standard  will have on future  operating
results.

NOTE B - DEBT

On January 14, 1998, the Company entered into a Credit  Security  Agreement (the
"Wells Fargo Credit  Agreement"  f/k/a "Norwest  Credit  Agreement")  with Wells
Fargo Business Credit (Wells Fargo),  f/k/a Norwest Business  Credit.  The Wells
Fargo Credit  Agreement  consists of (i) a term loan of $2,125,000,  (ii) a term
loan of $700,000, (iii) a revolving line of credit based upon the balance of the
Company's trade accounts receivable, and (iv) a note of up to $1,200,000 for the
purchase of capital  equipment for 1998. The term loan of $2,125,000  carries an
interest  rate equal to 1.25% above the publicly  announced  rate of interest by
Wells Fargo Bank Minnesota,  N.A. (the "Base Rate").  The $700,000 term loan has
an interest  rate equal to 3.00% above the Base Rate as does the line of credit.
The note for the capital  expenditures  carries an interest  rate equal to 1.25%
above the Base Rate. The Company utilized $4.5 million of the proceeds  received
from Wells  Fargo to pay off the  outstanding  loan  balance  owed to its former
lender.

On November  24, 1998 the Company and Wells Fargo  Business  Credit  amended the
Credit  Agreement.  The amended Wells Fargo Credit Agreement  consists of (i) an
increase in the  remaining  balance on the term loan to the  original  amount of
$2,125,000,  (ii) an increase in the remaining balance on the $700,000 term loan
to $417,000,  and (iii) a note of up to  $1,000,000  for the purchase of capital
equipment  for 1999.  As of March 31, 1999 the  $2,125,000  term loan  carried a
balance of $1,889,000; the $700,000 term loan carried a balance of $183,000; the
revolving line of credit balance was $3,928,000;  and the balance on the capital
equipment note was $327,000.

As of  December  31,  1998,  the  Company  was not in  compliance  with  certain
covenants of the Wells Fargo Credit Agreement.  However,  on April 12, 1999, the

<PAGE>

Company  amended the Wells Fargo Credit  Agreement  (the Third  Amendment).  The
Third  Amendment  waived the  Company's  noncompliance  with these  covenants at
December 31, 1998,  increased  the limit on the note for the purchase of capital
equipment  from  $1,000,000  to  $1,400,000  and also  modified the terms of the
financial covenants for 1999,  including the March 31, 1999 measurement date. As
of March 31, 1999 the Company was in compliance  with the covenants of the Wells
Fargo Credit Agreement as modified by the Third Amendment.

At March 31,  1999,  the Company  had  received  $575,000  ($400,00 of which was
received  during  the  first  quarter  of  1999)  from  private   placements  of
subordinated  debt,  with a maturity date of March 31, 2001. The debt carries an
interest  rate of 12% and has  accompanying  warrants  to  purchase  a number of
shares of common stock equal in exercise price to 25% of the notes purchased.

The Company has  determined  the value of the warrants at the date of the grants
to be $28,500.  The value of the warrants has been  accounted  for as additional
paid-in  capital and deducted  from the principal of the  subordinated  notes as
discount on debt issued.

The funds  received from the  amendment to the Wells Fargo Credit  Agreement and
the  private  placements  of  subordinated  debt were  used to fund the  working
capital needs of the Company.

NOTE C - SEGMENTS

     The Company has two  reportable  segments:  Product Sales and Lab Services.
The Product  Sales segment is made up entirely of MEDTOX  Diagnostics.  Products
manufactured  include  easy to use,  inexpensive,  on-site  drug  tests  such as
PROFILE(R)-II,  EZ-SCREEN(R),  and VERDICT(R). The Lab Services segment includes
MEDTOX  Laboratories. Services provided include forensic  toxicology,  clinical
toxicology, heavy metals analyses, courier delivery, and medical surveillance.

     In evaluating financial performance,  management focuses on net income as a
segment's measure of profit or loss.

Segment Information
     (In thousands)                    Lab Services    Product Sales      Total

  Three months ended March 31, 1999    
      Net Sales                         $  7,050        $   785         $ 7,835
      Segment Income (Loss)                  233            (73)            160
      Segment Assets                      15,634         10,649          26,283

  Three months ended March 31, 1998
      Net Sales                         $  6,547        $   532        $  7,079
      Segment Income (Loss)                  296           (218)             78
      Segment Assets                      14,767         10,983          25,750

<PAGE>

NOTE D - CONTINGENCIES

In February,  1999 the Company  settled a claim of patent  infringement  brought
against the Company by United  States Drug  Testing  Laboratories  on August 20,
1996. It was alleged that the Company  infringes two patents  allegedly owned by
United  States Drug Testing  Laboratories  relating to  forensically  acceptable
determinations of gestational fetal exposure to drugs and other chemical agents.
The Company while denying any  infringement  has settled with United States Drug
Testing  Laboratories  and has paid  United  States  Drug  Testing  Laboratories
$17,500 and issued  United  States Drug  Testing  Laboratories  2,500  shares of
common  stock  valued at $12,500.  The Company had  previously  accrued for this
contingency.  Accordingly,  the settlement of this matter did not effect results
of operations during the three months ended March 31, 1999.

On January  31,  1997,  the  Company  filed suit in  Federal  District  Court in
Minnesota  against  Morgan  Capital  LLC,  David  Bistricer  and Alex  Bistricer
alleging violation in Section 16b of the Securities and Exchange Act of 1934 and
seeking recovery of more than $500,000 in short-swing profits. Messrs. David and
Alex Bistricer are former directors of the Company.  On August 4, 1997, the U.S.
District Court granted  Defendants'  motion to dismiss the Company's  complaint,
ruling that the  Defendants'  conduct did not  constitute a violation of Section
16(b).  On October 29, 1997, the Company filed an appeal of that decision to the
United  States Court of Appeals for the Eighth  Circuit.  On July 21, 1998,  the
Eighth Circuit  reversed the District  Court  dismissal and remanded the case to
the District Court.  Cross motions to dismiss and for partial  summary  judgment
are pending.

The  Company is a  defendant  in a lawsuit  brought by a previous  landlord  and
pending in the Circuit Court of Cook County, Illinois. The landlord alleges that
the  Company  breached  the terms of a lease the Company  attempted  to issue in
connection  with an asset  acquisition.  Discovery is continuing in the case. In
December 1998,  the Court granted  summary  judgment  against the Company on the
issue of liability  and the matter is set for trial in June 1999 on the issue of
damages.

Under  the  MEDTOX  Laboratories  acquisition  agreements,  the  Company  may be
contingently  liable for certain tax  liabilities  incurred by the former MEDTOX
Laboratories  shareholders.  At the present time, the possible  liability  under
this  agreement  is not  reasonably  ascertainable  because  the  agreement,  as
written,  is ambiguous  and its intent is not clear.  Under the  agreement,  the
obligation,  if any, on the part of the Company  can be deferred  under  certain
circumstances and at the present time the Company believes this deferral will be
available to the Company for the foreseeable future.

<PAGE>

               Cautionary Statement Identifying Important Factors
             That Could Cause the Company's Actual Results to Differ
               From Those Projected in Forward Looking Statements

In  connection  with the "safe  harbor"  provisions  of the  Private  Securities
Litigation  Reform  Act of  1995,  readers  of this  document  and any  document
incorporated by reference  herein,  are advised that this document and documents
incorporated  by  reference  into  this  document  contain  both  statements  of
historical facts and forward looking statements.  Forward looking statements are
subject to certain risks and uncertainties,  which could cause actual results to
differ  materially  from those  indicated  by the  forward  looking  statements.
Examples  of forward  looking  statements  include,  but are not  limited to (i)
projections  of revenues,  income or loss,  earnings or loss per share,  capital
expenditures,  dividends,  capital  structure and other  financial  items,  (ii)
statements of the plans and objectives of the Company or its management or Board
of  Directors,  including  the  introduction  of new  products,  or estimates or
predictions  of actions  by  customers,  suppliers,  competitors  or  regulatory
authorities,   (iii)  statements  of  future  economic  performance,   and  (iv)
statements of assumptions  underlying  other statements and statements about the
Company or its business.

This document and any documents  incorporated by reference  herein also identify
important  factors which could cause actual  results to differ  materially  from
those indicated by the forward looking statements. These risks and uncertainties
include  price  competition,   the  decisions  of  customers,   the  actions  of
competitors,  the  effects  of  government  regulation,  possible  delays in the
introduction of new products,  customer acceptance of products and services, the
possible effects of the MEDTOX  acquisition and its related financings and other
factors which are described herein and/or in documents incorporated by reference
herein.

The cautionary  statements  made pursuant to the Private  Litigation  Securities
Reform Act of 1995 above and elsewhere by the Company should not be construed as
exhaustive or as any admission regarding the adequacy of disclosures made by the
Company prior to the effective date of such Act. Forward looking  statements are
beyond the  ability of the  Company  to  control  and in many cases the  Company
cannot predict what factors would cause results to differ  materially from those
indicated by the forward looking statements.
<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Introduction


MEDTOX  Scientific,  Inc. and its subsidiaries,  MEDTOX  Laboratories,  Inc. and
MEDTOX  Diagnostics,  Inc.,  are  referred  to herein as "the  Company".  MEDTOX
Laboratories,  Inc.  is a  toxicology  laboratory  which was founded in 1984 and
provides forensic toxicology,  clinical  toxicology,  and heavy metals analyses.
MEDTOX Diagnostics,  Inc. develops,  manufactures and markets on-site diagnostic
and screening tests which are used to detect  substances in humans,  foodstuffs,
animals, feed and the environment. The company is continuing to transition these
operating  units from being  providers  of high  quality  testing  services  and
devices into a broader service organization by supporting  underlying laboratory
analysis and point-of-care  devices with logistics  management,  data management
and overall program management services.

The Company has two reportable segments:  laboratory services and product sales.
Laboratory services include forensic toxicology,  clinical toxicology, and heavy
metal  analyses  as well as  logistics,  data,  and overall  program  management
services. Product sales include a variety of on-site screening products.

The Company commenced operations as Environmental Diagnostics, Inc. in June 1983
and until 1986 was a development  stage  company.  The Company became engaged in
the manufacture and sale of Conventional  Biodiagnostic  Products as a result of
its acquisition of Granite Technological Enterprises,  Inc. in 1986. The Company
entered the  laboratory  testing  market when it completed  the  acquisition  of
Princeton Diagnostic  Laboratories of America,  Inc., (PDLA) in 1994. On January
30, 1996 the Company,  then known as EDITEK,  Inc., completed the acquisition of
MEDTOX. In 1997, the Company changed its name to MEDTOX Scientific, Inc.


Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998

Laboratory Services

Revenues from Laboratory Services for the three months ended March 31, 1999 were
$7,050,000 as compared to $6,547,000  for the three months ended March 31, 1998.
The increase of $503,000 or 7.7% was primarily  attributable to an 8.2% increase
in laboratory  samples.  This  increase in unit volume was  partially  offset by
lower per unit prices.

The gross margin from the revenues  generated from the  laboratory  services was
31.4% for the three months ended March 31, 1999 as compared to a gross margin of
32.9% for the same period in 1998.  The  decrease in gross  margin is  primarily
attributable to lower unit prices.
<PAGE>

Selling,  general and administrate expenses for the three months ended March 31,
1999 were  $1,739,000,  compared to $1,547,000  for the three months ended March
31, 1998.  The increase of $192,000 or 12.4% in 1999 was primarily the result of
increased  depreciation  expenses and one time costs associated with the reverse
stock split.

Research and development  expenses  incurred during the three months ended March
31, 1999 were $80,000 as compared to $172,000 for the same period in 1998.  This
decrease of $92,000 was primarily the result of a decrease in personnel costs.

The  Laboratory  Services  segment  for the three  months  ended  March 31, 1999
incurred interest and financing costs of $159,000, compared to costs of $140,000
incurred  during the three months ended March 31, 1998  primarily as a result of
higher debt levels.

As a result of the above, the net incomes for the Laboratory Services segment of
the Company for the three months ended March 31, 1999 was $233,000,  compared to
the net income of $296,000 for the three months ended March 31, 1998.

Product sales

Revenues from Product Sales for the three months ended March 31, 1999  increased
47.5% to $785,000 as compared to $532,000  for the three  months ended March 31,
1998.  The increase was  attributable  to increased  sales in all product  sales
areas.

Product  sales  from  substance   abuse  testing   products   incorporates   the
EZ-SCREEN(R)  PROFILE(R)-II  and  VERDICT(R)-II  on-site  test  kits  and  other
ancillary  products  for the  detection of abused  substances.  Sales from these
products  increased  42.4% to $447,000 for the three months ended March 31, 1999
compared  to sales of  $314,000  in  1998.  The  increase  in  product  sales is
primarily  due to a  strong  response  to  the  introduction  of  the  Company's
second-generation test kit, PROFILE(R)-II.

Product sales from agricultural  diagnostic products increased 84.5% to $155,000
for the three  months  ended  March 31, 1999 compared  to $84,000  in 1998.  The
primary reason for the increase of $71,000 was the result of increased purchases
by the USDA for the  Company's  products.  The  USDA's  needs for the  company's
products  vary from  quarter to quarter  and sales to the USDA are  expected  to
fluctuate accordingly.

Sales  of  contract  manufacturing  services,   microbiological  and  associated
products  increased  35.1% to $181,000 for the three months ended March 31, 1999
compared to $134,000 in 1998.  This increase was due to increased  revenues from
both historical customers and new customers added in late 1998.

Revenues  generated  from products  sold to the U.S.  Department of Defense were
$2,000 for the three months ended March 31, 1999.  The revenues were realized as

<PAGE>

part of the final termination of the Company's contract with the U.S. Department
of Defense. The Company had no such sales during 1998.

Gross  margins from Product Sales for the three months ended March 31, 1999 were
48.2%  compared to 33.8% for the three months ended March 31, 1998. The increase
in gross margin from product sales was due to higher overall sales of products.

Selling, general and administrative expenses for Products Sales during the three
months  ended March 31, 1999 were  $281,000,  compared to $264,000 for the three
months ended March 31, 1998.  The increase of $17,000 or 6.4% was  primarily the
result of increased costs associated with the higher volume.

Research and  development  expenses  incurred for Product Sales during the three
months  ended March 31, 1999 were  $153,000 as compared to $135,000 for the same
period in 1998.  The  increase of $18,000 or 13.3% was  primarily  the result of
costs associated with the continued  development of the Company's new generation
on-site products.

For the three months ended March 31, 1999,  the Product Sales  segment  incurred
interest and financing costs of $17,000. There were no interest charges incurred
by this segment  during the three months ended March 31, 1998.  The interest and
finance costs were the result of the funds borrowed by the Company to fund asset
purchases and working capital requirements.

As a result of the  above,  the  Product  Sales  segment  net loss for the three
months  ended  March  31,  1999  was  ($73,000),  compared  to the  net  loss of
($218,000) for the three months ended March 31, 1998.

Material Changes in Financial Condition 

Laboratory Services

As of March 31, 1999 net accounts and notes  receivable for Laboratory  Services
were  $6,576,000  compared to $5,554,000 at December 31, 1998.  This increase of
$1,022,000 or 18.4% was primarily the result of higher sales for the month ended
March 31, 1999 as compared to the month December 31, 1998.

Prepaid expenses and other assets were $614,000 at March 31, 1999 as compared to
$503,000 at December 31, 1998.  This  increase of $111,000 or 22.1% is primarily
the result of renewal of annual licenses,  fees, and maintenance contracts which
will be amortized throughout the year.

At March 31,  1999,  Laboratory  Services had a total  balance of  restructuring
accruals of $1,113,000 compared to a balance of $1,155,000 at December 31, 1998.
The  decrease  of  $42,000 is the result of  certain  payments  made  during the
quarter ended March 31, 1999.
<PAGE>

At March 31,  1999,  Laboratory  Services  had a total loan  balance owed to its
financial  lender of  $6,016,000  compared to a total  balance of  $5,264,000 at
December  31, 1998.  The increase of $752,000 or 14.3% was the result  increased
borrowing during the quarter ended March 31, 1999.

Product Sales

At March 31, 1999, net accounts receivable for Product Sales were $581,000. This
$178,000 increase as compared to $403,000 at December 31, 1998 was primarily due
to higher  sales in the quarter  ended March 31, 1999 as compared to the quarter
ended December 31, 1998.

Prepaid  expenses and other assets were $75,000 at March 31, 1999 as compared to
$21,000 at December 31, 1998. The increase of $54,000 is primarily the result of
the renewal of certain annual  expenses  which will be amortized  throughout the
year.

At March 31, 1999,  the Product  Sales  segment had a total loan balance owed to
its financial  lender of $853,000,  compared to a total balance of $756,000 owed
at December 31, 1998. The net increase of $97,000,  or 12.8%,  was the result of
increased borrowing from the Company's line of credit to pay operating expenses.

Liquidity and Capital Resources

Cash received from debt financing has been the primary source of funding for the
working capital  requirements of the Company. At March 31, 1999, the Company had
cash and cash equivalents of $699,000 and available borrowings of $632,000.  The
Company believes that the aforementioned  capital will be sufficient to fund the
Company's planned  operations through 1999. While there can be no assurance that
the available  capital will be  sufficient to fund the future  operations of the
Company beyond 1999, the Company believes that consistent  profitable  earnings,
as well as access to debt and equity,  will be the primary basis for funding the
operations of the Company for the long term.

The  Company  continues  to  follow a plan  which  includes  (i)  continuing  to
aggressively monitor and control costs and (ii) increasing revenue from sales of
the Company's products,  services, and research and development contracts. There
can be no assurance  that costs can be  controlled,  revenues can be  increased,
financing may be obtained,  acquisitions successfully  consummated,  or that the
Company will continue to be profitable.

Year 2000

The "Year 2000" issue arises from the fact that many computer  systems rely on a
two-digit  date code to identify the year (e.g.  98 to represent  1998) and thus
may not be able to differentiate between the year 2000 and the year 1900. If not

<PAGE>

corrected,  systems  processing  date-dependent  information  may fail or create
erroneous results, causing disruptions of operations, including, but not limited
to,  a  temporary  inability  to  process  transactions,  report  results,  send
invoices, or engage in similar normal business activity.

The Company has completed its assessment of its internal computer systems and is
in the process of completing and testing modifications  required to a portion of
its  software so that its computer  systems  function  properly  with respect to
dates in the year 2000 and beyond.  The Company  presently  believes  that these
modifications to existing software and conversion to new software, the Year 2000
issue will not pose significant operational problems for its computer systems.

The Company  has  initiated  formal  communication  with all of its  significant
suppliers to determine  the extent to which the Company is  vulnerable  to those
third parties ability to resolve their own Year 2000 issues.  As there can be no
guarantee  that the systems of other  companies on which the Company relies will
be timely  converted  or that a  failure  to  convert  or a  conversion  that is
incompatible  with the Company's  system would not have an adverse effect on the
Company's  systems,  the  Company  is  developing  contingency  plans  including
alternate vendors and increased stock levels for all critical items.

The Company  anticipates  completing  the Year 2000 project prior to any adverse
impact on its computer  operating  system,  however,  if such  modifications and
conversions are not made, or completed timely,  the Year 2000 issue could have a
material  impact on the  operations  of the  Company.  The Company  continues to
assess  its  readiness  relative  to  Year  2000  issues  and  is  developing  a
contingency plan for all items not resolved at the end of the first quarter.

The cost of the Year  2000  project  is not  expected  to be  material.  Changes
required  to   internally   supported   software  are  minor   compared  to  the
modifications  performed in the normal  course of business and the Company plans
to use internal  resources and delay other  projects to complete these Year 2000
modifications.  Updates to  externally  supported  software  are  covered  under
existing  service  contracts or are not  anticipated  to have costs  material in
nature.

The  assessment of the impact,  cost, and completion of the Year 2000 project is
based on  management's  best estimates.  Actual results could differ  materially
from those anticipated by factors  including,  but not limited to, the continued
availability  of certain  resources,  third party  modification  plans,  and the
ability to locate and correct all relevant computer codes.


ITEM 2   CHANGES IN SECURITIES

During the three  months  ended March 31, 1999 the  Company  issued  warrants to
purchase  20,000 shares of common stock at an exercise price of $5.00 per share.

<PAGE>

The warrants were issued in connection with the private placement of $400,000 of
subordinated notes and were issued on the following dates:

        Date              Warrants           Subordinated Debt
        ----              --------           -----------------
January   4, 1999           2,500                $  50,000
January 20, 1999            5,000                $ 100,000
February 6, 1999           10,000                $ 200,000
February 7, 1999            2,500                $  50,000
                          -------                ---------

Total                     20,000                 $400,000

The Company has  determined  the value of the warrants at the date of the grants
to be $28,500.  The value of the warrants has been  accounted  for as additional
paid-in  capital and deducted  from the principal of the  subordinated  notes as
discount  on debt  issued.  Sales of the notes and  warrants  were  exempt  from
registration under SEC Rules 504 and 505 and Section 4 (1) of the Securities Act
of 1933.



ITEM 3   DEFAULTS ON SENIOR SECURITIES.  Inapplicable

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
------   -----------------------------------------------------

The Company held a special meeting of stockholders on February 22, 1999 to adopt
and approve an amendment of the Company's Certificate of Incorporation providing
for a one for twenty  reverse  stock split of  outstanding  Common  Stock of the
Company.  The amendment was approved by a vote of 2,309,935 in favor and 162,644
against.  The reverse  split was  effective  on February  23, 1999 and the stock
began trading on the new basis February 24, 1999.


ITEM 5   OTHER INFORMATION.  Inapplicable

ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K.  Inapplicable



<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.


Date:    May 11, 1999


                                     MEDTOX SCIENTIFIC, INC.

                                     By: /s/ Harry G. McCoy                 
                                         Harry G. McCoy, Chairman and President

                                     By: /s/ Richard J. Braun             
                                         Richard J. Braun, Chief Executive 
                                         Officer and Treasurer