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 September 30, 1998.

Commission File Number:                                 0-12661

Exact Name of Registrant as Specified in its Charter:   IMTEC, Inc.

State of Incorporation:                                 Delaware

I.R.S. Employer Identification Number:                  03-0283466

Address of Principal Executive Offices:                 One Imtec Lane
                             Bellows Falls, VT 05101

Registrant's Telephone Number:                          802-463-9502



         Indicate  by check  mark  whether  the  registrant  (1) has  filled 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  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





APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

         Common shares outstanding as of October 29, 1998:   1,587,313



<PAGE>



                                   IMTEC, INC.

                                      INDEX

                                                                         Page #
Part I            Financial Information

                  Condensed Balance Sheets -
                       September 30, 1998 and June 30, 1998               3 - 4

                  Condensed Statements of Operations -
                       Three Months Ended
                           September 30, 1998 and 1997                    5

                  Condensed Statements of Cash Flows
                       Three Months Ended
                           September 30, 1998 and 1997                    6

                  Notes to Condensed Financial Statements                 7 - 8

                  Management's Discussion and Analysis of
                       Financial Condition and Results of Operations      9 - 11

Item 3.           Quantitative and Qualitative 
                       Disclosures about Market Risk                      11


Part II  Other Information

         Item 2   Changes in Securities                                   12

         Item 4   Submission of Matters to a Vote of
                  Security Holders                                        12

         Item 6   Exhibits and Reports on Form 8-K                        12

         Signatures                                                       13



<PAGE>

<TABLE>
<CAPTION>

                         PART I - FINANCIAL INFORMATION
                                   IMTEC, INC.
                            CONDENSED BALANCE SHEETS
                                   (Unaudited)

                                                              September 30,             June 30,
                                                                 1998                    1998  .
ASSETS

Current Assets:
<S>                                                           <C>                        <C>     
     Cash and cash equivalents                                $  16,772                  $ 84,100
     Accounts receivable:
         less allowance for doubtful accounts:
              September 30, 1998 - $207,000
                  June 30, 1998 - $198,000                    1,751,125                 2,259,107

     Inventories                                              2,363,814                 2,286,123
     Prepaid expenses and other                                  92,099                    60,725
     Deferred income taxes                                       85,941                    85,941
                                                           ------------               -----------

                  Total Current Assets                        4,309,751                 4,775,996
                                                           ------------              ------------

Property and equipment - net                                  1,795,705                 1,587,914

Deposits                                                         64,205                    60,347
Computer software - net                                          87,371                    97,469
Other intangibles - net                                       1,808,648                 1,832,023
                                                            -----------               -----------

                                                           $  8,065,680               $ 8,353,749
                                                            ===========               ===========
</TABLE>

                         The  accompanying  notes are an integral  part of these
condensed financial statements.



<PAGE>

<TABLE>
<CAPTION>

                         PART I - FINANCIAL INFORMATION
                                   IMTEC, INC.
                      CONDENSED BALANCE SHEETS (CONTINUED)
                                   (Unaudited)

                                                              September 30,             June 30,
                                                                 1998                    1998  .
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
<S>                                                         <C>                 <C>              
     Notes payable - bank                                   $   110,875         $               0
     Current installments of long term debt                     235,567                   235,567
     Accounts payable                                           440,133                   469,972
     Income tax payable                                          90,379                    33,323
     Accrued liabilities
         Salaries and wages                                     154,147                   486,555
         Commissions                                             54,280                    68,375
         Other                                                  311,521                   432,165
                                                            -----------               -----------

                  Total Current Liabilities                   1,396,902                 1,725,957

Long term debt less current installments                        497,925                   575,118
                 
Stockholders' equity:
     Common stock - $.01 par value;
         authorized 5,000,000 shares, issued and outstanding:
         1,586,713 shares September 30, 1998
         1,585,713 shares June 30, 1998                          15,867                    15,857
     Additional paid-in capital                               2,595,369                 2,591,629
     Retained Earnings                                        3,559,617                 3,445,188
                                                            -----------               -----------

                  Total Stockholders' Equity                  6,170,853                 6,052,674
                                                            -----------               -----------

                                                           $  8,065,680              $  8,353,749
                                                            ===========               ===========
</TABLE>

                         The  accompanying  notes are an integral  part of these
condensed financial statements.



<PAGE>

<TABLE>
<CAPTION>


                                   IMTEC, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                               Three Months Ended
                                                   September 30,
                                               1998           1997
                                               ----           ----
<S>                                       <C>            <C>       
Net Sales                                 $2,849,387     $2,619,525
Cost of Sales                              1,658,054      1,378,508
                                         -----------    -----------

              Gross Profit                 1,191,333      1,241,017

Selling, general and
     administrative expenses                 862,898        776,655
Research and development
     expenses                                122,271        133,789
                                         -----------    -----------

              Operating Income               206,164        330,573

Other Income (Expenses):
     Miscellaneous income
         and other expenses                      825         10,724
     Interest Expense                        (17,477)       (7,825)
                                          ----------      ---------

         Income  Before
              Income Taxes                   189,512        333,472

Income Tax Expense                            75,065        132,088
                                          ----------      ---------

     Net Income                          $   114,447    $   201,384
                                          ==========     ==========


Earnings per share - Basic                $     0.07    $      0.13
                                           =========     ==========

Earnings per share - Diluted              $     0.07    $      0.12
                                           =========     ==========
Shares for Basic Computation               1,585,735      1,553,088
Shares for Diluted Computation             1,665,419      1,624,773   

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

<PAGE>
<TABLE>
<CAPTION>
                                   IMTEC, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                                              Three Months Ended
                                                                    September 30,
                                                                  1998          1997
                                                                  ----          ----
Cash flows from operating activities:
<S>                                                            <C>            <C>     
     Net income                                                $114,447       $201,384
     Adjustment to reconcile net income to
     net cash from operating activities:
         Depreciation & amortization of property,
         plant, equipment and other assets                      143,999        164,714

Increase (decrease) in cash from:
     Accounts receivable                                        504,106       (390,044)
     Inventory                                                  (77,691)      (412,483)
     Marketable securities                                                         409
     Prepaid expenses and other assets                          (31,374)       (45,231)
     Accounts payable                                           (29,839)       350,734
     Income tax payable                                          57,056        (68,711)
     Accrued liabilities                                       (467,147)       (59,031)
                                                               ---------     ----------
     Net cash from operating activities                         213,557       (258,668)

Cash flows from investment activities:
     Expenditures for property & equipment,
         computer software and other
         intangible assets                                     (318,320)      (115,231)
     Acquisition of Customark                                                1,900,000
                                                               ---------     ---------

Cash flows from financing activities:
     Proceeds from issuance of notes                            110,875         99,922
     Principal notes payable to bank                                         1,200,000
     Principal payments on long term debt                       (77,193)     (116,795)
     Proceeds from issuance of stock                              3,753       
                                                             ----------      ---------
     Net cash from financing activities                          37,435      1,183,127
                                                              ---------      ---------
Net (decrease) in cash                                          (67,328)    (1,090,772)
Cash and cash equivalants at the beginning of period             84,100      1,352,562
                                                             ----------      ---------
Cash and cash equivalants at the end of period               $   16,772      $ 262,199
                                                             ==========      =========
Supplemental Information Disclosures:
         Interest paid                                           17,477          7,825
         Income tax paid                                         18,009        200,800
</TABLE>
                         The  accompanying  notes are an integral  part of these
condensed financial statements.

<PAGE>

                                   IMTEC, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

1 -      Basis of Presentation

         The financial  information included herein is unaudited:  however, such
information  reflects all  adjustments  (consisting  solely of normal  recurring
adjustments)  which are,  in the  opinion of  management,  necessary  for a fair
statement of results for the interim periods.

         The results of operations for the  three-month  period ended  September
30, 1998 are not  necessarily  indicative  of the results to be expected for the
full year.


2 -      Inventories

         Inventories consist of:
                                                September 30,          June 30,
                                                     1998                 1998

Finished Products                               $    64,408          $  158,907
Work in Process                                     374,958             190,122
Purchased Components                              1,924,448           1,937,094
                                                -----------         -----------
                                                $ 2,363,814         $ 2,286,123
                                                ===========         ===========

         Inventory  cost  consisted  of the  cost of  purchased  components  and
supplies, manufacturing labor and manufacturing overhead.


3 -      Liability for Estimated Product Warranty

         On  September  30, 1998 and June 30,  1998,  the  Company had  provided
$123,046 and $124,570  respectively, against future product  warranties based on
its  experience  with  customer  claims.  Warranty  expenses  charged  to income
amounted to approximately $22,600 for the three month period ended September 30,
1998 and $22,615 for the three-month period ended September 30, 1997.



<PAGE>


4 -      Earnings per Common Share

         In February 1997,  the Financial  Accounting  Standards  Board ("FASB")
issued  SFAS No. 128  "Earnings  per Share,"  which  establishes  standards  for
computing  and  presenting  earnings  per share and  applies  to  entities  with
publicly held common stock or potential common stock. Prior to 1998, the Company
computed  income per common  share  using the  methods  outlined  in  Accounting
Principles  Board  ("APB")  Opinion  No.  15,  "Earnings  per  Share,"  and  its
interpretations.  The  Company  adopted  SFAS No. 128 in 1998 and  restated  its
earnings per share for the first quarter of 1997. Previously reported income per
common  share for the three  months ended September 30, 1998 did not differ from
that computed using SFAS 128.

         Basic  earnings  per share was computed by dividing net earnings by the
weighted average number of shares of common stock  outstanding  during the year.
Dilutive  earnings per share  reflect the effects of the  Company's  outstanding
options (using the treasury stock method at the average price during the period)
except where such items would be antidilutive.

         A  reconciliation  of  weighted  average  shares  used  for  the  basic
calculation and that used for the diluted calculation was as follows:

                                          Three months ended September 30,
                                                 1998               1997

Weighted average shares - basic               1,585,735           1,553,088
Dilutive effect of options                       79,684              71,685
                                             ----------          ----------
Weighted average shares - diluted             1,665,419           1,624,773
                                             ==========          ==========


5 -      Pro forma Information

         On August 12, 1997,  IMTEC  acquired the  Customark  division of Markem
Corp. The following pro forma  reflects  operations had Customark been a part of
IMTEC since July 1, 1997.

         Period Ended        September 30, 1998             September 30, 1997
------------------------------------------------------------------------------
Revenues                           $2,849,387                     $2,814,129
Net Income                            114,447                        212,455
Diluted income per share                $0.07                          $0.13

         The unaudited pro forma results are not  necessarily  indicative of the
actual  results  of  operations  that would have  occurred  had the  acquisition
actually been made at the beginning of fiscal 1998.


<PAGE>


                                   IMTEC, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS


Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995

         The statements contained in the following  Management's  Discussion and
Analysis  of  Financial  Condition  and  Results  of  Operations  which  are not
historical are "forward looking statements" within the meaning of Section 27A of
the  Securities  Act of 1933,  as amended,  and  Section  31E of the  Securities
Exchange Act of 1934, as amended. These forward looking statements represent the
Company's present expectations or beliefs concerning future events,  however the
Company cautions that such statements are qualified by important  factors.  Such
factors, could cause actual results to differ materially from those indicated in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

RESULTS OF OPERATIONS

                      Three Months Ended September 30, 1998
              as compared to Three Months Ended September 30, 1997

         Revenues  for the three  months  ended  September  30,  1998  increased
approximately 8.8% from the corresponding period in 1997.

         Revenues from Bar Code labels and printing supplies were $2,088,463 for
the quarter ended  September 30, 1998 compared to $1,860,862 for the same period
last year.  Bar Code labels and  printing  supplies  represented  73.3% of total
revenue for the three months ended  September 30, 1998 compared to 71.0% for the
same period last year.  The  increase in Bar Code labels and  printing  supplies
sales in the three months ended  September 30, 1998,  when  contrasted  with the
same  period  in  1997, is primarily  attributable to an  increase in  sales and
marketing efforts.  The sales team almost doubled in size.  Management  believes
that the upward trend in the sales of Bar Code labels and printing supplies will
continue due to the sales and marketing efforts.

         Revenues from the sales of Industrial  Bar Code Equipment were $760,924
for the three months ended  September 30, 1998 compared to $758,663 for the same
period in 1997.  Industrial Bar Code Equipment sales  represented 26.7% of total
revenue for the three months ended  September 30, 1998 compared to 29.0% for the
same period last year.

         Total  backlog,  for  all  products,  as  of  September  30,  1998  was
approximately  $3,304,946 the majority of which is scheduled to ship by June 30,
1999.  Total backlog as of September 30, 1998 was $1,547,000.

         Cost of sales for the three months ended September 30, 1998 were 58.2%,
up from 52.6% for the same period in 1997. This increase is directly  related to
the  product  mix and the cost of setting up a new  facility  in the  Pittsburgh
area.

         Selling,  general  and  administrative  expenses  increased  11.1%   to
$862,898 for the quarter ended  September 30, 1998  as compared to $776,655  for
the quarter ended  September 30, 1997.    The increase is primarly due to of the
growth in sales and marketing personnel as well as increased marketing activity.
This is consistent with  management's  focus on increasing sales.
<PAGE>

         Research and  development  expenses for the quarter ended September 30,
1998 were $122,271 (4.3% of sales)  compared to $133,789 (5.1% of sales) for the
same period last year.

         The Company's  effective tax rate was approximately 40% for all periods
presented,  and are based on the Company's  estimated effective tax rate for the
full year.

         Net  income for the  quarter  ended  September  30,  1998 was  $114,447
compared to $201,384 for the quarter ended September 30, 1997. The major reasons
for this decrease are the increases in expenses as discussed above.


LIQUIDITY AND CAPITAL RESOURCES:

         As of September 30, 1998, the Company's  principal available sources of
liquidity  were, respectively, from operations  and a  $1,000,000  bank  line of
credit (of which  $889,125 was  available  at September  30, 1998). 

         Accounts receivables decreased from  $2,259,107  at June  30,  1998  to
$1,751,125  at  September  30,  1998,  a direct  result of the decrease in sales
revenues  from the  fourth  quarter  of Fiscal  1998  ($3,921,961)  to the first
quarter of Fiscal 1999 ($2,849,387).

         Inventories increased from $2,286,123 at June 30, 1998 to $2,363,814 at
September 30, 1998.

         The Company's capital commitments for fiscal 1999 are expected to be at
the same level as fiscal 1998.

         The  Company  believes  that it will be able to offset  the  effects of
inflation by selected price  increases in its products,  although it can give no
assurances in this regard.

         The Company anticipates that cash flows from operations,  together with
current cash balances and funds  available  under the  Company's  line of credit
will be sufficient to meet the Company's  working capital and capital  equipment
expenditure requirements for the foreseeable future.



<PAGE>


Recent Accounting Pronouncements

     SFAS No. 130 was adopted by the Company during the first quarter and it had
no  effect  upon the  Companys  financial  position,  results of  operations  or
financial   statement   disclosures   as  it  does  not  have  any  elements  of
comprehensive income. SFAS No. 131 will be adopted for the Companys fiscal 1999
annual financial statements. The Company is currently evaluating the effect that
the  new  standard  will  have  on  the  disclosures  in  its  annual  financial
statements.

     In June 1998, The Financial  Accounting and Standards Board issued SFAS No.
133,   Accounting for Derivatives  Instruments and Hedging Activities.  SFAS No.
133 establishes  accounting and reporting standards for derivative  instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities in the balance sheet and measure those  instruments
at fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal years
that begin after June 15, 1999.  The Company does not anticipate the adoption of
this statement to have a material impact on its financial statements.

Year 2000

     The Company has reviewed the issue of Year 2000.  All of the  manufacturing
and  accounting  software has been brought into  compliance,  effective June 16,
1998.  There are  neither  internal  clocks  nor  dating  mechanisms  within the
Company's  products  that would be effected by  changing  dates.  The Company is
confident  that its products and services will continue  uninterrupted  into the
new millennium. No material additional costs are anticipated at this time.

     The Company's  contingency plan in the event other parties should be unable
to  provide  Year  2000  compliant   electronic  data  is  to  revert  to  paper
documentation from these parties. However, to the extent that customers, vendors
or other  entities  with which the Company  has  material  relationships  do not
adequately  address  Year 2000  issues,  the Company  could  experience  payment
delays.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Companys   outstanding  long-term and short-term  debt at September 30,
1998 bears  interest at variable  rates;  therefore,  the  Companys   results of
operations would be affected by interest rate changes to the extent of the notes
outstanding.  Due to the  short-term  nature  and  insignificant  amount  of the
Companys   notes payable and the  decreasing  amounts of the long-term  debt, an
immediate 10 percent change in interest  rates would not have a material  effect
on the Companys results of operations over the next fiscal year.



<PAGE>



                           PART II - OTHER INFORMATION
Item 1 -      Legal Proceedings
              None
Item 2 -      Changes in Securities
              Not applicable
Item 3 -      Defaults upon Senior Securities
              None
Item 4 -      Submission of Matters to a Vote of Security Holders
              A.    October 26, 1998 - Annual Meeting of Stockholders

              B.    Election of Directors - all nominees elected

Item 5 -      Other Information
              None
Item 6 -      Exhibits and Reports on Form 8-K
              The Company filed no reports on form 8-K during the quarter
              Exhibit 27 - Financial Data Schedule

         




<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 hereunto duly authorized.

                                                     IMTEC, INC.






                                     BY:____/s/ Richard L. Kalich___________
                                                 Richard L. Kalich
                                        President & Chief Executive Officer






                                      BY:____/s/ George S. Norfleet III_________
                                                  George S. Norfleet III
                                                   Secretary / Treasurer