FORM 10-K
                   SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C.  20549

(Mark One)

X  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange 
Act of 1934 (Fee Required)

For the fiscal year ended December 31, 1998 or 

___Transition report pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934 (No Fee Required)

For the transition period from            to                

Commission File Number             0-12516	

Dynamic Healthcare Technologies, Inc.	
(Exact name of registrant as specified in its charter)

Florida                           59-3389871
(State of Incorporation)         (IRS E.I.N.)

615 Crescent Executive Court, Fifth Floor, Lake Mary, Florida  32746		
(Address of principal executive offices)                     (ZIP Code)

(407) 333-5300			
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:    None			

Securities registered pursuant to Section 12(g) of the Act:    Common Stock		
                                                             (Title of Class)

Indicate by checkmark 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 aggregate market value of the voting stock held by non-affiliates, based 
on the average bid and asked prices as of March 8, 1999, was $14,816,100.  A 
total of 12,811,155 shares of the Company's common stock were held by persons 
and entities believed to be non-affiliated on March 8, 1999, and the closing 
bids and ask prices of the Company's common stock on this date were $1.125 
and $1.188, respectively.

As of March 8, 1999, there were 18,395,814 shares outstanding of the issuer's 
only class of common stock.

This report consists of fifty-six (56) pages.

The index to exhibits appears on page nineteen (19).


Documents Incorporated by Reference

(1)	Portions of the definitive proxy statement for the Company's 1998 
Annual Meeting of Shareholders, to be filed within 120 days of the end 
of the Company's fiscal year covered by this report, pursuant to 
General Instruction G(3) to Form 10-K.



                                        1



                                FORM 10-K
                  DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                                 PART I


Item 1.	Business

General

Dynamic Healthcare Technologies, Inc. ("Dynamic" or the "Company") is a 
leading provider of mission-critical healthcare information systems for 
clinical services departments and facilities. The Company's product line, 
DynamicVision(R), is a suite of image-, voice-, and web-enabled systems for 
anatomic pathology, radiology, laboratory, surgical services and health 
information management.  By making it possible for healthcare professionals to 
have access to the information they need about a patient anytime and anywhere, 
Dynamic's information systems contribute to higher quality and more cost-
effective delivery of care. Dynamic is headquartered in the greater Orlando 
area and has a key operations and development center near Boston.  The Company 
provides support for all of its systems and offers integration and other 
consulting services.

Dynamic currently serves more than 600 customers, most located in the United 
States.  Key customers include the UCLA Medical Center, Methodist Hospital of 
Memphis, Orlando Regional Health System, University of North Carolina 
Hospitals, University of Pittsburgh, University of Illinois at Chicago Medical 
Center, Memorial Sloan-Kettering Cancer Center, Advocate Health Care, Borgess 
Health Alliance, The Mayo Clinic and Medical College of Virginia.

The Company was originally incorporated in California in 1977, reincorporated 
in Nebraska in 1982 and subsequently reincorporated in Florida in 1996.  The 
Company's executive offices are located at 615 Crescent Executive Court, Fifth 
Floor, Lake Mary, Florida 32746. Its telephone number is (407) 333-5300 and 
its World Wide Web address is http://www.dht.com. 

Industry

The healthcare industry continues to undergo rapid and significant change.  
Cost containment pressures, industry consolidation, the increasing impact of 
managed care, the rising standards of healthcare quality, the availability of 
healthcare information on line, the shift from inpatient to outpatient care 
settings, competition amongst healthcare providers,  increasing involvement of 
patients in their healthcare  delivery process, and the expectation of and 
demand for instant access to information on the part of  physicians, patients 
and payers represent fundamental trends in today's healthcare operating 
environment.  While healthcare has been slower than other industries to 
recognize the value of information technology, industry surveys indicate that 
healthcare providers recognize that the key to effective cost control and 
quality management lies in the collection, availability and analysis of 
medical records to assess treatment patterns, resource utilization and 
outcomes. Caregivers, managers and third party payers face rapidly increasing
demand for information. 

While healthcare providers agree that they must invest in information systems 
technology to increase productivity and efficiency, measure and manage costs, 
and improve the quality of the services they deliver, much of their attention 
during 1998 was directed toward assuring Y2K compliance of their existing 
information systems. Additionally, the 1998 Annual Healthcare Information 
Management and Systems Society ("HIMSS") Leadership Study (February 99) 
indicates that 39% of the 1100+ survey respondents site Y2K compliance as the 
highest priority for their organizations over the next 12 months.  During this 
time period, it is expected that these efforts will continue to distract 
attention and divert some capital funds that might otherwise be used for new 
information systems. 

As the need for information continues to grow, hospitals, providers and payers 
of all sizes face the challenge of implementing healthcare information systems 
that are scaleable, capable of working with existing multiple legacy 
information systems and flexible to adapt to changes in the healthcare 
marketplace.  These systems must also integrate all aspects of managing the 
healthcare delivery process. 

The healthcare industry continues to consolidate. The breakup and downsizing 
of the nation's largest healthcare provider began in 1997 and continues today. 
This has led to new mergers and partnerships.  There continues to be fewer but 
larger healthcare entities and the emerging organizational model is the 
integrated delivery network ("IDN").  An IDN is a network of healthcare 
organizations that assumes and manages healthcare risk, provides coordinated 
care and is held financially and clinically accountable for the health of the 
population it serves.   



                                         2



IDNs require innovative information systems infrastructures to support their 
multi-entity, enterprise environments.  Their information systems must 
contribute to making the delivery of healthcare services more efficient and 
effective across the continuum of care.  They must deliver tangible cost 
reductions and measurable productivity and quality improvements, making the 
availability of complete, timely and cost-effective patient-centered 
information essential.

The shift from inpatient to outpatient care settings is another trend that 
influences the need for information systems that will connect multiple sites.  
When most care was delivered inside the walls of a hospital, paper records, 
slides, reports, X-ray film could be transported from department to 
department.  Managed care and increasing reimbursement pressures have forced a 
shift to outpatient surgery, ambulatory care centers and alternative delivery 
sites.  Information systems technology is vital to the ability of healthcare 
providers to manage patient care safely, effectively and cost-efficiently 
across multiple sites.  According to the HIMSS Leadership Survey, 84% of the 
respondents are using telehealth capabilities to communicate across multi-site 
environments - with medical image transmission being the highest priority for 
1999.  This is consistent with the company's focus on its radiology and 
Picture Archiving and Communication System (PACS) solutions. In addition to 
medical image transmission, telehealth applications include videoconferencing, 
professional continuing education as well as patient interviews and education.

The HIMSS Leadership study also confirmed that healthcare providers' attention 
to Y2K issues has had some impact on readiness to move ahead with enterprise-
wide electronic health record solutions.  However, this same survey indicates 
that US healthcare providers are beginning to make progress toward 
implementing computer-based patient records (CPR's). Ten percent of this 
year's respondents say that their organizations have an operational CPR system 
in place, 29% have begun to install a CPR system and 24% say that they have 
developed a CPR implementation plan.
 
It should be noted, however, that Y2K compliance concerns have had little or 
no impact on the implementation of solutions in clinical areas such as 
anatomic pathology, radiology and laboratory.  These departments are critical 
to a provider's ability to deliver healthcare services, and the need to 
collect, store, distribute and analyze data becomes more important as access 
to on-line information affects the expectation of patients, payers and 
physicians.  Healthcare providers also have an increasing need to compete in 
their marketplace, and sophisticated clinical information systems technology 
enables them to do so. 

The Company believes that its strategy for the delivery of image- voice- and 
web-enabled clinical information systems is congruent with today's provider 
environments.  In addition, by delivering solutions with a clinical emphasis, 
healthcare providers are building a basis for an electronic health record.  
 
Products and Services

Dynamic Healthcare Technologies uses the power of technology to improve 
patient care and lower costs by connecting people with information.  The 
Company's DynamicVision(R) family of clinical information systems streamlines 
departmental operations and brings together patient records including data, 
images, voice and text.  The DynamicVision family includes solutions for 
radiology, anatomic pathology, health information management, laboratory and 
Surgical Services.  Using these solutions, health professionals have access to 
the clinical information they need to make decisions and manage patient care, 
anytime, anywhere.

<TABLE>

Products 
Generally          Type of
Available          Solution       Description

<S>              <S>              <S>


I. Radiology                      Product line is DynamicVision for Radiology

Dynamic RadPlusTM  Radiology      Introduced in late 1997, Dynamic RadPlus
                   Information    is a voice and image-enabled client/server 
                   System         radiology information system that manages 
                                  clerical and administrative functions for
                                  the radiology department. Application areas 
                                  include scheduling, patient tracking, film
                                  tracking and department reporting.  

Maxifile(R)        Radiology      A first generation MUMPS-based radiology 
                   Information    information system that manages clerical and 
                   System         administrative functions for the radiology 
                                  department. Application areas include 
                                  scheduling, patient tracking, film tracking
                                  and reporting. The Company is aggressively
                                  promoting customer migrations from Maxifile
                                  to Dynamic RadPlus.  



                                     3



Dynamic 
PACSPlus(TM)     PACS             An information-enabled picture archiving and 
                                  communication system (PACS) that integrates 
                                  information from the radiology information 
                                  system with images and provides access to 
                                  the patient's complete radiology history 
                                  via local and remote PACSPlus workstations.
                                  The Company received FDA 510K clearance to
                                  market Dynamic PACSPlus in December 1998.  

Dynamic          Mammography      Dynamic Optima is an integral component of 
Optima(R)                         Dynamic RdPlus that computerizes patient 
                                  management, reporting and regulatory 
                                  requirements related to mammography 
                                  services. Through an OEM agreement, the
                                  Company markets the Penrad system under 
                                  the name Dynamic Optima.  Penrad Inc. is a
                                  Dynamic business partner.

Dynamic Talk      Continuous      Dynamic Talk is an integrated component of 
                  Speech          RadPlus and gives radiologists the option
                  Recognition     of dictating and editing their own 
                                  diagnostic reports using continuous speech
                                  recognition technology, thus reducing 
                                  transcription costs and delays in 
                                  communicating reports to physicians.

Dynamic WebSight  Teleradiology   WebSight is a browser-based teleradiology 
                                  system that provides radiologists and
                                  physicians with access to images and 
                                  information anytime/anywhere.

II. Anatomic 
    Pathology                     Product line is DynamicVision for Pathology

Dynamic CoPathPlus  Anatomic      Dynamic CoPathPlus is a voice and image-
                    Pathology     enabled client/server pathology information
                    System        system that automates specimen accessioning
                                  and case dictation, produces patient and 
                                  management reports, and provides SNOMED and 
                                  natural language retrieval of diagnoses.

CoPath  M          Anatomic       A first generation, MUMPS-based pathology 
                   Pathology      information system that automates specimen 
                   System         accessioning and case dictation, produces 
                                  patient and management reports, and 
                                  provides SNOMED and natural language
                                  retrieval of diagnoses. The Company is 
                                  aggressively promoting customer migrations
                                  from CoPath M to CoPathPlus.

Dynamic             Image        Dynamic PICSPlus is an integrated component
PICSPlus (TM)       Management   of Dynamic CoPathPlus.  It captures stores 
                    System       and  communicates high-resolution digital 
                                 microscope and gross images of pathology
                                 specimens.  The foundation of  PICSPlus is
                                 the AutoCyte Image Management System, (AIMS),
                                 a product of AutoCyte, Inc.  The company 
                                 has an exclusive marketing agreement with 
                                 AutoCyte, Inc.


Dynamic Talk       Continuous    Dynamic Talk gives pathologists the option of 
                   Speech        dictating and editing their own diagnostic 
                   Recognition   reports using continuous speech recognition 
                                 technology, thus reducing transcription
                                 costs and report delays.  

III.   Clinical 
       Laboratory                DynamicVision for Laboratory

Premier Series     Laboratory    Manages clerical and administrative functions
                   Information   in the clinical laboratory, including 
                   System (LIS)  monitoring and controlling specimens,
                                 ordering, tracking and results reporting.

LabPro 2000        Laboratory    LabPro is a first generation LIS that 
                   Information   manages the clerical and administrative 
                   System (LIS)  functions in the clinical laboratory, 
                                 including monitoring and controlling 
                                 specimens, ordering, tracking and results 
                                 reporting.  The Company is aggressively 
                                 promoting customer migrations from LabPro 
                                 to Premier Series.





                                         4
  


Products
Generally          Type of
Available          Solution                  Description

IV. Electronic 
    Document 
    Management                    Product line is DynamicVision for Health 
                                  Information Management

Dynamic            Electronic     An enterprise-wide, electronic document
RecordPlus(TM)     Document       management system that provides document 
                   Management     imaging and management, chart completion, 
                                  advanced workflow and business process 
                                  automation for the health information
                                  management department (medical records), 
                                  business office and other document 
                                  intensive departments. 

V.  Surgical Services             Product line is DynamicVision for Surgical 
                                  Services

Dynamic            Perioperative  SurgiPlus is a perioperative clinical 
SurgiPlus(TM)      Clinical       information system currently in development.
                   Information    The first application is Preoperative 
                   System         Evaluation. It comprises two components:
                                  A) a Preoperative Assessment that captures 
                                  and stores pertinent patient information, 
                                  history questionnaires, physical examinations;
                                  and B) a Preoperative Holding module that 
                                  captures and presents the documentation 
                                  related to final preparation of the 
                                  patient by nursing and anesthesia personnel. 
                                  Alpha testing for the  Preoperative 
                                  Assessment module is scheduled for Q1 1999.
                                  Additional modules of SurgiPlus are under 
                                  evaluation at this time.

</TABLE>


DynamicVision for Radiology
 
The Company's solution set for radiology comprises new, client/server 
architecture systems.  Competitive advantage is gained by the close 
relationship between the Radiology Information System (RIS) and the Picture 
Archiving and Communication System (PACS).  Information collected by the RIS 
is available to the PACS, and images captured by the PACS are available to the 
RIS.  The result is an "image-enabled" RIS combined with an "information-
enabled" PACS. Primary markets for the Company's radiology solutions include 
hospitals, clinics and independent diagnostic imaging centers.

DynamicVision for Radiology begins with Dynamic RadPlus, an image-enabled, 
client/server radiology information system.  RadPlus applications include 
scheduling, patient tracking, film tracking, reporting, and management of all 
radiology functions.  Using RadPlus, facilities can easily adapt to change 
with the unique Dynamic Customizer tool, which allows users to make screen 
modifications without the expense and delays of reprogramming by the vendor.  
RadPlus is also voice-enabled.  Through the Dynamic Talk continuous speech 
recognition solution, radiologists reduce or eliminate the costs and delays of 
transcription and immediately deliver results simply by speaking, editing, and 
then approving the reports on-line.  The Dynamic Optima mammography management 
system, is an integral component of RadPlus. It automates the reporting, 
patient management, and regulatory requirements related to mammography 
services. Through an OEM agreement, the Company markets the PenRad system 
under the name Dynamic Optima.  PenRad Inc. is a Dynamic business partner.

Dynamic PACSPlus is an information-enabled picture archiving and communication 
system, (PACS) that integrates information from the RIS with images-and 
provides access to this information from within the PACSPlus system. Dynamic 
WebSight, a vital component of PACSPlus, is a web-based teleradiology system 
that provides radiologists and physicians access to radiology images anytime, 
anywhere.

DynamicVision for Pathology

The Company's solution set for anatomic pathology (A/P) is a scalable, 
client/server solution that is enabled with advanced voice and imaging 
capabilities.

Dynamic CoPathPlus is a client/server anatomic pathology system that automates 
specimen accessioning and case dictation, produces patient and management 
reports, and provides SNOMED and natural language retrieval of diagnoses.  
CoPathPlus also enables facilities to adapt to change with Dynamic Customizer, 
that allows user modification of specimen data entry windows and report 
formats.  CoPathPlus is image-enabled through Dynamic PICSPlus, which captures 
high-resolution digital images of microscopic and gross specimens and 
permanently stores these images electronically with patient and diagnostic 




                                         5



data. DynamicVision for Pathology is voice-enabled with the Dynamic Talk 
continuous speech recognition solution, which expedites the pathology 
dictation process and results in shorter turnaround time in delivering patient 
reports to clinicians.

DynamicVision for Laboratory

Premier Series is a laboratory information system that provides functionality 
for specimen collection, testing, and result reporting.  Configured with a 
graphical user interface, Premier Series supports bar coding, instrument 
interfaces, paperless microbiology, multi-facility management, and optical 
storage.  Other features include quality assurance workload recording, 
management reporting, and expert system capabilities.  Premier Series 
integrates with highly specialized blood bank information systems, providing 
both transfusion and donor service software, as well as regulatory products.  
Premier Series complies with federal regulations and assists laboratories 
deciding upon the appropriate and medically necessary course of action in 
diagnosing and treating the patient.

DynamicVision for Health Information Management

Dynamic RecordPlus provides document management and workflow capabilities for 
the health information management department (medical records) as well as the 
patient accounting and other document-intensive departments. It enables health 
professionals to view patient records, result reports, and work list 
assignments. Comprehensive workflow features automate existing work processes 
for improved customer service and increased efficiency. RecordPlus also 
handles analysis and assignment of chart deficiencies, electronic signature of 
records, and release of information.  For the patient accounting department, 
Dynamic RecordPlus provides document management and workflow solutions to 
enhance the management and flow of accounting-related documents and tasks.  It 
enables accounting professionals to view financial records and work list 
assignments and automates existing work processes for improved customer 
service and increased efficiency.  RecordPlus also handles management and 
prioritization of billing claims, collections, and insurance verification.

DynamicVision for Surgical Services

SurgiPlus is a perioperative clinical information system currently in 
development. The first application is Preoperative Evaluation. It comprises 
two components: A) a Preoperative Assessment that captures and stores 
pertinent patient information, history questionnaires, physical examinations; 
and B) a Preoperative Holding module that captures and presents the 
documentation related to final preparation of the patient by nursing and 
anesthesia personnel. Alpha testing of the Preoperative Assessment module is 
scheduled for the first quarter of 1999.  Additional modules of SurgiPlus are 
under evaluation at this time.  They include scheduling, interoperative 
recording, post-operative care, 48-hour post anesthesia interview, pain 
management, report generation, quality control and outcomes analysis.

Consulting, Systems Integration and other Services

The Company provides a full range of professional consulting services 
including project management, implementation, planning, training and 
education.  The Company's technical services include network design, 
implementation and support, custom software development, interfaces, and 
modifications and systems integration.  The Company provides support services 
including 24-hour telephone support, and software maintenance and 
enhancements.

Research and Development 

The Company's research and development program is designed to extend the 
capabilities of existing products and develop new healthcare application 
solutions.  The Company believes that a substantial and sustained commitment 
to product development is important to the long-term success of its business.  
As of December 31, 1998, 54 professional employees were engaged in research 
and development activities.  During the years ended December 31, 1996, and 
1997 and 1998, the Company spent approximately $3,564,000, $8,336,000 and 
$8,064,000, respectively, on research and development.  Research and 
development expenditures have been directed toward, Dynamic RadPlus(TM), 
PACSPlus(TM), CoPathPlus(TM), RecordPlus(TM) and SurgiPlus(TM) product lines.
The Company's research and development benefits from customer input and user 
group forums.

Major Clients

The Company does not have a dependence on any single customer the loss of 
which would have a material adverse effect.  The Company does generate revenue 
almost exclusively through sales to the healthcare industry located in the 
United States.  Due to this concentration, substantially all receivables of 
the Company are from healthcare institutions which may be similarly affected 
by changes in economic, regulatory or other industry related conditions.  The 
Company currently has approximately 600 customers.  The majority of these 
customers are located within the United States.



                                         6



Backlog

As of December 31, 1998 the Company has a combined backlog of approximately 
$28 million.  The Company had contracts for the delivery of systems and 
services totaling approximately $13.8 million on December 31, 1998, compared 
to $8.4 million on December 31, 1997.  In addition, as of December 31, 1998 
the Company had contracts for the delivery of software support services 
billable at an annual rate of $14.2 million, compared to $12.6 million as of 
December 31, 1997.

Strategic Relationships

The Company has entered into strategic relationships with several leading 
technology developers to gain access to certain technologies that are 
integrated into the Company's systems.  In addition, through these strategic 
relationships, the Company is able to cross-market its internally developed or 
acquired technologies to customers of its business partners.

IBM - In 1997, the Company acquired IBM's Medical RecordsPlus enterprise 
document imaging and management system.  This AS/400 product is based on IBM's 
ImagePlus/400 image processing system.  The Company has also integrated IBM 
MedSpeak/Radiology(TM) solution into its RadPlus radiology information system
and MedSpeak/Pathology(TM) into its CoPathPlus anatomic pathology system under
the name Dynamic Talk.  This expands the functionality of these two solutions
to include continuous speech recognition for direct dictation of results, 
bypassing the need for transcription of diagnostic reports.  Continuous speech 
recognition allows radiologists and pathologists to dictate at a normal rate 
of speech for instantaneous report production, with little or no time lapse 
between the spoken and typed word.  The Company is also a remarketer of IBM 
hardware.

Sybase Corporation (Emeryville, CA) The Company is an Option Solutions(TM) 
Partner with Sybase Corporation.  This partnership enables Dynamic and Sybase 
to deliver enterprise client/server solutions.

AutoCyte, Inc. (Burlington, NC) The Company has an Original Equipment 
Manufacturer ("OEM") distribution agreement with AutoCyte, Inc., allowing the 
integration of the AutoCyte Image Management System (AIMS) into DynamicVision 
for Pathology. Marketed under the name PICSPlus, this solution combines 
sophisticated image management features with telepathology capabilities.  
Through this agreement, the Company has the exclusive rights to sell the 
AutoCyte(TM) Image Management System ("AIMS") within the laboratory and 
Anatomic pathology information systems markets in the U.S. and Canada.
AutoCyte was formerly known as Roche Image Analysis Systems.

Sunquest Information Systems (Tucson, Arizona) The Company has a value-added 
re-marketer agreement with Sunquest Information Systems ("Sunquest").  Under 
the terms of the agreement, Sunquest exclusively markets and sub-licenses the 
Company's CoPathPlus anatomic pathology solution to their existing base of 
clients.  Sunquest may also sell CoPathPlus, when bundled with their 
laboratory information system, in the general U.S. healthcare market and on a 
stand-alone product basis in the international market.

First Coast Systems (Jacksonville, FL) First Coast is an authorized reseller 
of DynamicVision for Laboratory.  Through this agreement, First Coast markets 
and sells the Premier Series Laboratory Information System as a complement to 
their hospital information system solution.

MediHealth Outsourcing (King of Prussia, PA) Dynamic and MediHealth have an 
agreement whereby Dynamic's document management and workflow solution, 
DynamicVision for Information Management provides the cornerstone for 
MediHealth to market health information management (medical records) 
outsourcing services to Dynamic clients. These include remote coding, interim 
management, and complete department outsourcing.

Integrated Visions, Inc. (Sebastian, FL) Security in accessing the 
DynamicVision for Information Management product line is enhanced through the 
use of biometric authentication technology (finger image, voice and face 
recognition) provided by Integrated Visions, Inc.

PenRad (Plymouth, MN) Through an OEM agreement, Dynamic markets the PenRad 
mammography management application as an integrated component of our complete 
radiology solution: DynamicVision for Radiology.

Talk Technology, Inc. (Brooklyn, NY) A strategic alliance with Talk 
Technology, Inc., enables Dynamic to market and provide service and support 
for an interfaced continuous speech recognition solution for our radiology 
product line, DynamicVision for Radiology, and our pathology product line, 
DynamicVision for Pathology.






                                         7




FileLink Corporation (Bloomington MN) Dynamic is an authorized reseller of 
FileLink Corporation's archive file management software which is used in 
conjunction with Dynamic PACSPlus, a part of the radiology product line,  
DynamicVision for Radiology.

Pegasus Imaging Corporation (Tampa, FL) The Company uses Pegasus Imaging 
Corporation's wavelet compression technology in the web-based teleradiology 
solution, WebSight, a component of Dynamic PACSPlus.  PACSPlus is a part of 
Dynamic's radiology product line, DynamicVision for Radiology.

Sales and Marketing

As of December 31, 1998, the Company had 36 full time employees in sales and 
marketing related functions.  The Company had 19 sales employees and 17 
marketing employees.  The compensation of the sales employees is substantially 
dependent on the achievement of individual sales targets.  Marketing personnel 
perform telemarketing, proposal development, demonstration coordination, 
develop business plans and product marketing programs, competitive analyses, 
sales collateral, audio and video products, coordinate trade shows, 
advertising, public relations, investor relations activities, and 
administrative support.

The Company's sales cycle is typically six to eighteen months and includes 
several steps:  (i) initial contact and qualification; (ii) development of 
proposal in response to request for a proposal or direct sales lead; (iii) 
business problem requirements definition; (iv) product demonstrations; (v) 
site visits; and (vi) contract preparation and negotiations.  Members of the 
Company's professional services, product management and sales support 
departments, and members of executive management assist the sales force in 
completing the proposal, conducting demonstrations and analyzing the 
requirements.  In support of the sales efforts, the Company advertises in 
trade journals, participates in trade shows, publishes articles and provides 
speakers for industry shows and conferences.  In addition, the Company 
receives qualified leads as well as support in proposal development, 
demonstrations and site visits from its strategic business partners, which 
include IBM, Sunquest Information Systems, AutoCyte, First Coast Systems and 
others.

Customers

Dynamic currently serves more than 600 customers, most located in the United 
States.  Key customers include the UCLA Medical Center, Methodist Hospital of 
Memphis, Orlando Regional Health System, University of North Carolina 
Hospitals, University of Pittsburgh, University of Illinois at Chicago Medical 
Center, Memorial Sloan-Kettering Cancer Center, Advocate Health Care, Borgess 
Health Alliance, The Mayo Clinic and Medical College of Virginia.

Competition

The market for information technology in the healthcare industry is intensely 
competitive. Many of the Company's competitors have significantly greater 
financial, research and development technical and marketing resources than the 
Company.  Competitors vary in size and in the scope and breadth of the 
products and services they offer.  The Company's systems compete both with 
other technologies and with similar systems developed by other companies.  
Other major information management companies, including the companies with 
whom the Company has strategic relationships, may enter the markets in which 
the Company competes.  In addition, in the professional and technical 
consulting segment, the Company competes with the consulting divisions of 
national accounting firms as well as national and regional healthcare 
specialty consulting firms.

Government Regulation

The United States Food and Drug Administration (the "FDA") has issued a 
guidance document addressing the regulation of certain computer products as 
medical devices under the Federal Food, Drug and Cosmetic Act  (the "FFDCA").  
To the extent that the computer software is classified as a medical device 
under applicable regulations, the manufacturers of such products are required, 
depending upon the product, to: register and list their products with the FDA 
(Class I), notify the FDA and demonstrated substantial equivalence to other 
products on the market before marketing such products (Class II) or, obtain  
FDA clearance by filing a Pre Market Application (PMA) that establishes the 
safety and effectiveness of the product (Class III).  The Company has two 
products currently classified as Class II Medical Devices: PACSPlus and 
Transfusion Service Manager ("TSM").  As a result of the characterization of 
certain of the Company's products as medical devices, the Company's 
manufacturing facilities are registered with the FDA and its manufacturing 
operations regarding devices are required to be in compliance with the FDA's 
rules and regulations.  The FDA conducted on-site inspections at the Company's 
former Maitland facility in May 1996 and at the Minnetonka facility in June 
1996.  Both inspections were concluded without incident.  On December 19, 
1997, the FDA issued a letter of Substantial Equivalence to the Company for 
the TSM product.  This letter was the positive outcome of the 510(k) 
submission process begun in March 1996.  On December 8, 1998, the FDA issued a 
letter of Substantial Equivalence for the Company's PACSPlus product.  This 
letter was the positive outcome of the



                                          8




Special 510(k) submission process begun in June 1998.  There can be no 
assurance that the Company ultimately will be able to obtain or maintain 
required FDA approvals to market its products.

Intellectual Property

The Company relies upon trade secrets, copyright laws and confidentiality 
agreements with employees and customers to protect its rights in its software 
technology.  The Company does not hold any patents nor has it filed copyrights 
with respect to any of its software technology.  Due to the rapid pace of 
innovation within the software industry, the Company believes that patent, 
trade secret and copyright protection are less significant than the Company's 
ability to further develop, enhance and modify its current products and other 
clinical information systems through the technology and creative skills of its 
personnel.  To minimize the possibility of third parties imitating the 
Company's systems, the Company licenses object codes only and does not license 
or otherwise distribute source codes.

The Company's employees are required to enter into confidentiality agreements 
which prohibit the disclosure of confidential information and which require 
employees to report and assign to the Company all concepts, developments, 
discoveries and inventions conceived during their employment.

The Company has obtained federal trademark protection for DynamicVision(R), 
CoPath(R), Maxifile(R), and Optima(R).  There can be no assurance that the 
legal protections and precautions taken by the Company will be adequate to 
prevent misappropriation of the Company's technology.  In addition, these 
protections do not prevent independent third-party development of 
functionally equivalent or superior technologies or services.  The Company
does not believe its operations or products infringe on the intellectual 
property rights of others.  

There can be no assurance that others will not assert infringement or trade 
secret claims against the Company with respect to its current or future 
products or that the Company will be successful in defending any such claim.

Employees

As of March 5, 1999, the Company had 212 full time employees, of which 54 were 
employed in research and development, 94 in client services, 28 in general and 
administrative and 36 in sales and marketing.  None of the Company's employees 
is represented by a labor union or subject to a collective bargaining 
agreement.  The Company has never experienced a work stoppage and believes 
that its employee relations are good.

Factors Affecting Forward-Looking Statements

This report, and other reports, proxy statements and other communications to 
stockholders, as well as oral statements made by representatives of the 
Company, may contain forward-looking statements and other risks detailed from 
time to time in the Company's filings with the Securities and Exchange 
Commission, that are subject to risks and uncertainties, including, but not 
limited to, the impact of competitive products and pricing, product demand and 
market acceptance, new product development, reliance on key strategic 
alliances, availability of products procured from third party vendors, the 
healthcare regulatory environment, fluctuations in operating results and with 
respect to, among other things, the Company's future revenues, operating 
income and earnings per share, as well as plans and objectives of management.  
Readers are cautioned not to place undue reliance on these forward-looking 
statements, which reflect management's analysis only as of the date hereof.  
The Company undertakes no obligation to publicly release the results of any 
revisions to these forward-looking statements which may be made to reflect 
events or circumstances after the date hereof or to reflect the occurrence of 
unanticipated events.  The following are some, but not necessarily all, of the 
factors that may cause the Company's actual results to vary materially from 
those which are the subject of any such forward-looking statements.

The Company is engaged in the business of developing, marketing and supporting 
computer software to its customers ("Company Software Products").  The 
Company also distributes products necessary for operation of Company Software 
Products and such products are sometimes obtained by customers of the Company 
from other sources ("Third Party Products").  Software that uses only two 
digits to identify a year in the date field may fail or create errors in the 
year 2000 ("Year 2000 Issues").  The impact of unresolved Year 2000 Issues, 
including possible (i) failure by the Company and vendors of Third Party 
Products to complete efforts to avoid or minimize Year 2000 Issues on a timely 
basis, (ii) failure of Customers to be ready to or cooperate in the deployment 
of Year 2000 versions of Company Software Products and Third Party Products on 
a timely basis, and (iii) deferral by customers of current installations and 
prospective purchase decisions with respect to Company Software Products may 
materially adversely impact the Company's business, financial condition and 
results of operations, or adversely affect the Company's relationships with 
customers, vendors or others.  Unless all material Year 2000 Issues involving 
the Company's computer software products are timely and properly identified, 
assessed, and remediated, and unless adequate contingency plans are properly 
formulated with respect to Year 2000 Issues, the Year 2000 Issues may 
materially adversely 



                                         9


impact the Company's business, financial condition and results of operations,
or adversely affect the Company's relationships with customers, vendors or
others.

The costs, timing and scheduling of deployment and installation of Year 2000 
versions of Company Software Products and Third party Products, as well as the 
ability of the Company to assist customers in the installation of Company 
Software Products, will depend in part on the readiness, ability and 
cooperation of customers and their suppliers.  Due to uncertainties associated 
with customers' readiness, cooperation and sources of products and services, 
there can be no assurance that Year 2000 Issues will not materially adversely 
effect the Company's business, results of operations, or financial conditions, 
or adversely affect the Company's relationships with customers, vendors or 
others.

Some customers and prospects of the Company operate in complex computing 
environments that include products and services not supplied by the Company. 
The costs, timing and scheduling by customers of work related to Year 2000 
Issues involving such products and services may cause some customers and 
prospects to defer current projects or prospective purchase decisions 
regarding Company Software Products.  If Year 2000 Issues cause customers and 
prospects to defer current projects or prospective purchase decisions, the 
Company's financial business and operational goals may be deferred or may not 
be realized at all, with the result that the Company's business, results of 
operations, or financial condition could be materially adversely affected.  
Due to uncertainties associated with customers and prospects, there can be no 
assurance that Year 2000 Issues will not materially adversely effect the 
Company's business, results of operations, or financial condition or adversely 
affect the Company's relationships with customers, vendors or others.

The costs of the Company's Year 2000 identification, assessment, remediation, 
testing, deployment and contingency planning efforts, and the dates on which 
the Company believes it will complete such efforts, are based upon 
management's current best estimates, which were derived using numerous 
assumptions regarding future events, including the continued availability of 
certain resources, third-party remediation plans, and other factors.  There 
can be no assurance that these estimates will prove to be accurate, and actual 
results could differ materially from those currently anticipated.  Specific 
factors that could cause such material differences include, but are not 
limited to, the availability of and cost of personnel trained in Year 2000 
Issues, the ability to correctly and effectively identify, assess, remediate, 
and test all relevant computer codes, equipment, and embedded technology, and 
similar uncertainties, the ability of the Company to timely install and deploy 
Year 2000 releases of Company Software Products and Third Party Products.  As 
a result of any of such factors alone or in combination, the Company may 
experience an increase in warranty and other claims.  In addition, since there 
is no uniform definition of "compliance with Year 2000," and since the 
Company sells a myriad of different combinations of products and services 
under varying contractual terms, the Company is not able to assess or estimate 
the possible impact of such possible claims.  No assurance can be given that 
the aggregate cost of defending and resolving such claims, if any, will not 
materially adversely affect the Company's results of operations.  Although 
some of the Company's agreements with manufacturers and others from whom it 
purchases products for resale contain provisions requiring such parties to 
indemnify the Company under some circumstances, there can be no assurance that 
such indemnification arrangements will cover all of the Company's liabilities 
and costs relate to claims by third parties related to Year 2000 Issues.

An important element of the Company's business strategy has been and may 
continue to be expansion through acquisitions, both to extend its customer 
base and to acquire strategic technology.  The Company's ability to expand 
successfully through acquisitions depends on many factors including the 
identification of appropriate acquisition opportunities, negotiation of 
suitable terms and management's ability to effectively integrate and operate 
the acquired businesses.  The Company competes for acquisitions with other 
companies, certain of which have significantly greater financial and 
management resources.  The Company's financial performance will be subject to 
the risks of the performance of the acquired businesses as well as the 
financial effects associated with integration of such businesses.

The healthcare industry is subject to changing political, economic and 
regulatory influences, many of which relate to control of healthcare costs.  
Such changes may affect operational aspects of the healthcare industry, 
including procurement practices and the availability and/or allocation of 
capital funds, which could result in greater selectivity, thus adversely 
impacting the Company's ability to sell its products.  The Company cannot 
predict with any certainty what impact, if any, future regulation or 
healthcare reform might have on its results of operations, financial condition 
or business.

The Company's quarterly revenues and results of operations have varied 
significantly as a result of a number of factors, including (i) the volume and 
timing of systems sales and installations; (ii) the timing of client 
acceptances; (iii) the length and complexity of the systems sales and 
installation cycles; (iv) seasonal buying trends as a result of clients' 
annual purchasing and budgeting practices.  The Company expects that these 
variations will continue for the foreseeable future.  The Company recognizes 
revenues from the software portion of system sales on a percentage-of-
completion method based upon completion of specified milestones.  As a result, 
the timing of revenue recognition varies considerably and could be impeded by 
a number of factors, including availability of Company personnel, the 
Company's need to allocate system installation resources to other 
installations or to research and development activities, availability of 
client personnel and other resources, and complexity of 


                                        10




the clients' needs and delays imposed by clients.  Any trend of delays in 
progress toward completing a material system installation or a number of 
smaller installations could reduce the revenues recognized in any given 
period and could have a material adverse effect on the Company's business 
and results of operations.  Because a significant percentage of the Company's
expenses, particularly employee compensation, is relatively fixed, variations
in the timing of systems sales and installations can cause significant 
variations in operating results from quarter to quarter.  If total revenues 
are below expectations in any period, the Company's inability to adjust 
spending to compensate fully for the lower revenues may magnify the adverse 
effect of such a shortfall on the Company's results of operations.  
Accordingly, the Company believes that period-to-period comparisons of revenue
and results of operations are not necessarily meaningful and should not be 
relied upon as indicators of future performance.

The Company expects that the United States Food and Drug Administration 
("FDA") is likely to become increasingly active in regulating computer 
software that is intended for use in health care settings.  In March 1994, the 
FDA issued a letter advising that the FDA considers medical devices to include 
software products intended for use in the manufacture of blood and blood 
components or for the maintenance of data used to assist personnel in making 
decisions concerning the suitability of blood donors and the release of blood 
or blood components for transfusion or further manufacture.  As such, the FDA 
determined that manufactures and distributors of these products, such as the 
Company, are subject to FDA regulation.  The FDA can impose extensive 
requirements governing pre- and post market conditions such as device 
investigation, approval, labeling and manufacturing.  Compliance with these 
new requirements and any future requirements imposed by the FDA could be 
costly and could delay or preclude the introduction of certain new products.  
The Company is unable to determine at this time the effect, if any, that these 
requirements may have on its business.

Competition in the Company's industry is subject to continual change in not 
only the products and services offered but also in the manner in which vendors 
are selected by customers.  Accordingly, the Company's continued success will 
be dependent on its ability to develop new products and services on a timely 
basis and at competitive prices.

The Company's systems include applications that may relate to confidential 
medical histories and treatment plans.  Improper disclosure of this 
information or any failure by the Company's systems to provide accurate and 
timely information could result in claims against the Company by its clients 
or their patients.  A successful claim brought against the Company in excess 
of its insurance coverage could have a material adverse effect on the 
Company's business or results of operations, and even unsuccessful claims 
could result in the expenditure of substantial funds in litigation and the 
diversion of management time and resources.  There can be no assurance that 
the Company will not be subject to such claims in the future, that such claims 
will not result in liability in excess of any insurance coverage maintained by 
the Company with respect to such claims, that insurance will cover such claims 
or that appropriate insurance will continue to be available to the Company at 
commercially reasonable rates.

While the Company maintains insurance protecting against certain asserted 
claims, there can be no assurance that its insurance coverage would adequately 
cover any or all such claims asserted against the Company.

The Company must anticipate and adapt to evolving industry standards and new 
technological developments.  The market for the Company's products is 
characterized by continued and rapid technological advances.  The Company's 
future success will depend in part on its ability to be responsive to these 
technological developments and challenges, which could also lower the cost of 
products and services or otherwise result in competitive pricing pressures.

The Company relies on a combination of trade secret, copyright and trademark 
laws, together with nondisclosure, other contractual provisions and technical 
measures to protect its proprietary rights in its products.  There can be no 
assurance that these protections will be adequate or that the Company 
competitors will not independently develop technologies that are equivalent or 
superior to the Company's technology.  Although the Company believes that its 
products and other proprietary rights do not infringe upon the proprietary 
rights of third parties, there can be no assurance that third parties will not 
assert infringement claims against the Company in the future.

The stock market has, from time to time, experienced extreme price and volume 
fluctuations, particularly in the high technology sector, which have often 
been unrelated to the operating performance of particular companies.  The 
Company experiences fluctuations in its stock price related to these general 
market swings as well as announcements of technological innovations, new 
product introductions by the Company or its competitors, market conditions in 
the computer software or hardware industries and healthcare reform measures.  
These fluctuations may adversely effect the Company's ability to make 
acquisitions utilizing its stock.



                                        11






Item 2.	Properties

The Company's corporate headquarters are located at 615 Crescent Executive 
Court, Suite 600, Lake Mary, Florida 32746.  The Lake Mary location consists 
of approximately 53,800 square feet of office space under a lease that expires 
March 1, 2005. In addition, the Company also maintains an office at Two 
University Office Park, 51 Sawyer Road, Waltham, Massachusetts 02154 as the 
Company's clinical solutions center.  The Waltham location consists of 
approximately 30,000 square feet under lease that expires on November 30, 
1999.  The Company believes that its current facilities are sufficient to meet 
its near-term requirements.

Item 3.	Legal Proceedings

In June 1998, the Company's action against the Company's former president and 
chief executive officer, in the District Court of Lancaster County, Nebraska, 
alleging fraud, negligence and breach of fiduciary duty, as well as the 
defendant's counter claim for defamation seeking $280,000 in severance pay in 
addition to two years worth of benefits, were simultaneously resolved.  The 
Company agreed to pay $82,000 in severance pay and $43,000 in defendant's 
legal expenses in the stipulation.  The $125,000 settlement and the related 
expense has been included in general and administrative expenses reported for 
the year ended December 31, 1998.

In July 1997, the Company commenced a declaratory judgement action in Dakota 
County, Minnesota District Court seeking a declaration that the Company had 
properly terminated the services of an individual.  The individual filed a 
counterclaim and demanded $200,000 in settlement of a claim alleging breach of 
contract, promissory estoppel and fraud.  The parties are engaged in discovery 
and trial is presently scheduled for the second quarter of 1999.  The Company 
is vigorously defending all claims made by the individual, and after 
consultation with its counsel has assessed the likelihood of an unfavorable 
outcome as remote.

As of the date hereof, there are no other material legal proceedings pending 
against the Company.  In the opinion of management, the legal proceedings in 
which the Company is involved will not have a material effect on the Company's 
consolidated financial statements.


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

No matter was submitted to a vote of the Company's security holders during the 
fourth quarter of 1998.




                                          12



                                      FORM 10-K
                         DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                                       PART II


Item 5.  Market for Registrant's Common Stock and Related Stockholder Matter

(a) The information called for by this item is incorporated herein by reference 
from page 55 of Exhibit 13 to this Form 10-K.
 
(b) As of March 10, 1999, there were approximately 3,700 shareholders of the 
Company's Common Stock.
 
(c) The Company has declared no cash dividends on its common stock since its 
inception and plans to continue to invest all earnings back into the 
Company in the foreseeable future.


Item 6.  Selected Financial Data

The information required by this item is incorporated herein by reference from 
page 25 of Exhibit 13 to this Form 10-K.


Item 7.  Management's Discussion and Analysis of Financial Condition and 
         Results of Operations

The information required by this item is incorporated herein by reference from 
page 26 through page 37 of 
Exhibit 13 to this Form 10-K.


Item 7(A).  Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is incorporated herein by reference from 
page 37 of Exhibit 13 to this Form 10-K.


Item 8.  Financial Statements and Supplementary Data

The information required by this item is incorporated herein by reference from 
page 38 through page 56 of Exhibit 13 to this Form 10-K.
    
	
Item 9.	  Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

There were no changes in and/or disagreements with accountants on accounting 
and/or financial disclosures during 1997 or 1998.






                                        13




                                    FORM 10-K
                       DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                                     PART III


Item 10.	Directors and Executive Officers of the Registrant

The information required by this item is incorporated herein by reference from 
the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders.


Item 11.	Executive Compensation

The information required by this item is incorporated herein by reference from 
the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders.


Item 12.	Security Ownership of Certain Beneficial Owners and Management

The information required by this item is incorporated herein by reference from 
the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders.


Item 13.	Certain Relationships and Related Transactions

The information required by this item is incorporated herein by reference from 
the Company's Proxy Statement for its 1999 Annual Meeting of Shareholders.




                                         14




                                      FORM 10-K
                         DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                                       PART IV



Item 14.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K


(a)	The following documents are filed as a part of this report:

 1.	Financial Statements
    -Independent Auditors' Report on the financial statements.
    -Balance Sheets as of December 31, 1997 and 1998.
    -Statements of Operations for the years ended December 31, 1996, 1997 and 
     1998.
    -Statements of Shareholders' Equity for the years ended December 31, 
     1996, 1997 and 1998.
    -Statements of Cash Flows for the years ended December 31, 1996, 1997 and 
     1998.
    -Notes to Financial Statements.

The Financial Statements listed above are all incorporated by reference to 
pages 38 through 56 of Exhibit 13 to this Form 10-K.

 2.	Financial Statement Schedules

Index                                               Schedule No.      Page No.
Independent Auditors' Report on Financial 
Statement Schedule                                      ---              16

Valuation and Qualifying Accounts                        II              17


All other schedules are omitted as the required information is inapplicable or 
the information is presented in the financial statements or related notes 
thereto.

 3.	Exhibits
							
    Exhibit 11:  Statement regarding computation of per share earnings.
    Exhibit 13:  1998 Annual Report to Security Holders.

(b)  No reports were filed on Form 8-K during the quarter ended 
     December 31, 1998.

		



                                         15



                             INDEPENDENT AUDITORS' REPORT

Board of Directors 
Dynamic Healthcare Technologies, Inc.:

Under date of February 19, 1999, we reported on the consolidated balance sheets 
of Dynamic Healthcare Technologies, Inc. as of December 31, 1997 and 1998 and 
the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1998, as contained in the annual report on Form 10-K for the year 1998.  In
connection with our audits of the aforementioned consolidated financial 
statements, we have also audited the related 1996, 1997 and 1998 information 
in the consolidated financial statement schedule as listed in the accompanying
index.  This consolidated financial statement schedule is the responsibility of
the Company's management.  Our responsibility is to express an opinion on the
1996, 1997 and 1998 information in this consolidated financial statement
schedule based on our audits.  

In our opinion, such 1996, 1997 and 1998 information in the consolidated 
financial statement schedule, when considered in relation to the basic 1996, 
1997 and 1998 consolidated financial statements taken as a whole, presents 
fairly, in all material respects, the information set forth therein.  



                                                   /S/KPMG LLP
                                                      KPMG LLP
         


Orlando, Florida
February 19, 1999





                                         16






                         DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                           VALUATION AND QUALIFYING ACCOUNTS
                      YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

                                       Schedule II
<TABLE>

               Balance At    Charged to   Write-Offs
              Beginning of    Cost and   Retirements &     Other   Balance At 
Description       Year        Expenses    Collections   Additions  End of Year

<S>              <C>         <C>         <C>          <C>          <C>


Year Ended December 31, 1996:

Allowance for 
Doubtful Accounts
Receivable       $140,837    $    --      $ 37,637     $222,902(1)  $ 326,102

Accumulated 
Amortization of 
Capitalized 
Software
Development 
Costs            $2,549,167  $1,128,402   $ 309,269    $    --      $ 3,368,300

Year Ended December 31, 1997:

Allowance for
Doubtful Accounts
Receivable       $ 326,102   $      --    $ 19,046     $    --      $ 307,056

Accumulated 
Amortization of
Capitalized
Software
Development
Costs            $ 3,368,300  $1,484,276  $ 23,305     $    --     $4,829,271


Year Ended December 31, 1998:

Allowance for
Doubtful Accounts
Receivable       $  307,056   $  206,805  $ 153,861    $    --     $ 360,000

Accumulated
Amortization
of Capitalized
Software 
Development 
Costs            $4,829,271   $ 1,756,798  $   --      $    --     $6,586,069


</TABLE>


(1) Other additions represents the valuation accounts of Dimensional Medicine, 
Inc. and Collaborative Medical Systems, Inc. acquired in acquisitions 
accounted for as purchase business combinations.



                                        17


                                   FORM 10-K
                     DYNAMIC HEALTHCARE TECHNOLOGIES, INC.

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
Commission File No. 0-12516
IRS E.I.N. 59-3389871

By:  /S/PAUL S. GLOVER                        Date:  March 25, 1999
        Paul S. Glover
        Vice President of Finance,
        Chief Financial Officer and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.

      Signature                   Title                   Date

/S/DAVID M. POMERANCE     Chairman of the Board        March 25, 1999
David M. Pomerance

/S/MITCHEL J. LASKEY      President, CEO, Treasurer
Mitchel J. Laskey         & Director                   March 25, 1999

/S/PAUL S. GLOVER         Vice President of Finance, 
Paul S. Glover            CFO & Secretary              March 25, 1999

/S/JERRY L. CARSON        Director                     March 25, 1999
Jerry L. Carson

/S/THOMAS J. MARTINSON    Director                     March 25, 1999
Thomas J. Martinson

/S/BRET R. MAXWELL        Director                     March 25, 1999
Bret R. Maxwell  

/S/DANIEL RAYNOR          Director                     March 25, 1999
Daniel Raynor 

/S/RICHARD W. TRUELICK    Director                     March 25, 1999
Richard W. Truelick  

/S/GUY RABBAT             Director                     March 25, 1999
Guy Rabbat





                                         18





                                      FORM 10-K
                        DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                                  INDEX TO EXHIBITS


                                                                       Page
Description of Exhibits                                               Number

Exhibit 11   Statement regarding computation of per share earnings.     20
Exhibit 13   Annual Report to Shareholders of Dynamic Healthcare
             Technologies, Inc. for the fiscal year ended 
             December 31, 1998.                                         22



	
                                         19




                                     FORM 10-K
                      DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                                     EXHIBIT 11




 
                                 Statement Regarding
                                    Computation of
                                  Per Share Earnings







                                        20




                    DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
          COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                                      AND
                    EARNINGS PER SHARE FOR THE YEARS ENDED
                      DECEMBER 31, 1996, 1997 AND 1998



<TABLE>
                                            Years Ended December 31,
                                        1996(1)       1997(1)      1998 

<S>                                  <C>            <C>            <C>


Earnings (loss) available for common 
shareholders

     Net earnings (loss)             $(15,618,372)  $ 1,042,958    $(9,012,690)
     Preferred stock dividends           (251,037)           --        (67,555)

Earnings (loss) available for
common shareholders                  $(15,869,409)  $ 1,042,958    $(9,080,245)


Common and common equivalent
Shares outstanding

Basic:
     Weighted average number of common 
     shares outstanding                9,224,775     17,905,214     18,127,641


Diluted:
     Weighted average number of common 
     shares outstanding                9,224,775     17,905,214     18,127,641


     Dilutive effect of options 
     and warrants using average
     market price                             --        526,200             -- 

     Weighted average common and 
     potential common shares 
     outstanding assuming full 
     dilution                          9,224,775     18,431,414     18,127,641


Earnings (loss) per share basic 
and diluted                            $  (1.72)     $     0.06     $    (0.50)


</TABLE>


(1)  Includes the operating results and related financial information of 
     Dynacor, Inc. which merged with Dynamic Healthcare Technologies, Inc.
     on May 22, 1997 in a business combination accounted for as a pooling
     of interests.





                                         21





                                     FORM 10-K
                      DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                                    EXHIBIT 13



                            Annual Report to Shareholders
                     of Dynamic Healthcare Technologies, Inc.
                    for the Fiscal Year Ended December 31, 1998







                                         22







                               OUTSIDE FRONT COVER
       


                       Dynamic Healthcare Technologies, Inc.
                                 1998 Annual Report




                                          23





 
                            INSIDE FRONT COVER


Dynamic Healthcare Technologies, Inc. is a leader in providing advanced 
information technologies for the healthcare industry.  Dynamic's enterprise 
information solutions enable healthcare providers to capture, manage and share 
electronic health information across the continuum of care.



                                 Contents

Company Profile.............................................................

Selected Financial Data.....................................................

Fellow Shareholders.........................................................

Focus & Execution Creating Value............................................

Management's Discussion and Analysis........................................

Financial Statements and Notes..............................................

Independent Auditors' Report................................................

Board of Directors and Officers.............................................

Shareholders Information....................................................





                                         24




                              SELECTED FINANCIAL DATA
                        FIVE YEARS ENDED DECEMBER 31, 1998
             (In thousands except per share data and current ratio)

The following selected financial data for the five years ended December 31,
1998, were derived from the financial statements of Dynamic Healthcare 
Technologies, Inc. and subsidiary.  These data should be read in conjunction 
with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the financial statements, related notes and other financial 
information included herein.

<TABLE>
                            1994(1)     1995      1996(2)    1997     1998
<S>                         <C>         <C>       <C>        <C>       <C>


Operating Revenues          $ 9,517     $12,088   $19,826    $36,545   $25,829

Restructuring Charge            686          --        --         --       --

Net Earnings (Loss) from
 Continuing Operations       (4,592)       (590)  (15,618)     1,043    (9,013)

Net Earnings (Loss) Per 
Common Share                  (0.79)      (0.09)    (1.72)      0.06     (0.50)

Working Capital              (2,976)      2,274     9,191      6,534      (255)

Current Ratio                   .54        1.56      1.80       1.59       .98

Total Assets                  8,539      11,557    31,825     32,977    30,604

Long-Term Liabilities           869       2,786       591        454     1,871

Shareholders' Equity          1,168       4,703    19,771     21,423    14,626

</TABLE>

The Company has declared no cash dividends on common stock since its inception.

(1)  Includes the operating results and related financial information since the
acquisition of Dynamic Technical Resources, Inc., accounted for as a purchase 
business combination, which occurred on August 23, 1994.
 
(2)  Includes the operating results and related financial information since the 
acquisitions of Dimensional Medicine, Inc. ("DMI"), on May 1, 1996 and 
Collaborative Medical Systems, Inc. ("CoMed"), on December 17, 1996, including
the non-recurring write off of in-process research and development of
$15,057,569 or $1.63 per common share, in connection with the CoMed
acquisition.  Both of these acquisitions were accounted for as purchase
business combinations.







                                        25




Item 7.

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

Overview

Dynamic Healthcare Technologies, Inc. ("Dynamic" or the "Company") 
develops, markets and supports a broad product line of information system 
solutions for radiology, anatomic pathology, clinical laboratory and 
electronic health record applications.  Dynamic's products are designed to 
enhance productivity, reduce costs and improve the quality of patient care by 
providing electronic storage and on-line access to patient information 
previously maintained on a variety of media.  The Company provides a full 
range of professional consulting services including project management, 
implementation, planning and support, custom software and interface 
development and modifications, and systems integration.  Dynamic provides 
support services including 24-hour telephone support, and software maintenance 
and enhancements.

Dynamic currently serves approximately 600 customers, most of which are 
located in the United States.  Key customers include the UCLA Medical Center, 
Methodist Hospital of Memphis, Orlando Regional Health System, Ohio State 
University Hospital, University of Pittsburgh, Temple University Hospital, 
University of Illinois at Chicago Medical Center, Memorial Sloan-Kettering 
Cancer Center, Advocate Health Care, Borgess Health Alliance, The Mayo Clinic 
and UniHealth.

During 1997, the Company introduced new technology product releases in 
virtually every market segment in which the Company competes.  Well-publicized 
healthcare information technology industry research indicates that sales 
cycles for these products typically range from 6-18 months in duration.  The 
disruption of in-process sales cycles by the new products introduction in 1997 
significantly impacted the Company's new system revenue for 1998.  During 
1998, operations focused on perfecting the initial installations of the 
products introduced in 1997, which further impacted revenue recognition in 
1998.  However, during the fourth quarter of 1998, the Company realized record 
new system sales bookings of $ 7.5 million and began 1999 with the highest new 
systems backlog in the Company's history of more than $13.8 million.  This 
together with more than $14.2 million in annualized customer support revenue 
under contract positions Dynamic to enter 1999 with a total revenue backlog of 
$28 million, also the highest in the Company's history.

In addition, during 1998 the Company reengineered its internal process of 
development, customer support and product installations.  This reengineering 
has resulted in the consolidation of three facilities into the Lake Mary 
headquarters, a common structure to the Company's product line which permits a 
higher level of cross utilization of technical professionals for development, 
support and installation services, and is expected to provided significant 
anticipated future cost efficiencies.  Base quarterly operating expenses, 
defined as total operating expenses less the cost of products sold, sales 
commissions and customer billable expenses, has been reduced to a budgeted 
amount of approximately $6.4 million for the first quarter of 1999 compared to 
$8.1 million in the first quarter of 1998.

On January 7, 1998 the Company announced the appointment of Scott E. Waldrop 
to the newly created position of Senior Vice President and Chief Operating 
Officer.  Waldrop joined the Company from Columbia/HCA Healthcare Corporation 
("Columbia") of Nashville, TN.  As Vice President, Information Systems 
Development for Columbia, he led a team of more than 450 people in 
establishing information strategies, product development or selection, and 
product support for all facilities and business lines.

On March 18, 1998 the Company reported that Mr. Nikhil Bhatt, Senior Vice 
President and Chief Technical Officer had voluntarily resigned from the 
Company.  Mr. Bhatt transitioned his responsibilities effective May 31, 1998.

On July 24, 1998 the Company entered into a $5,000,000 Revolving Line of 
Credit with Silicon Valley Bank, a commercial bank ("Bank").  The Revolving 
Line of Credit is secured by all existing Company assets and matures on July 
23, 1999.  The available borrowing capacity is subject to limitation based 
upon a percentage of qualified 




                                         26



receivables, and is contingent upon continuing compliance with a minimum
quick ratio (as defined), and the Company maintaining profitable operations
in 1999.

On July 29, 1998 the Company issued 1,000,000 shares of Series C Preferred 
Stock together with detachable Warrants to purchase an aggregate of 300,000 
Common Shares of the Company in a private placement transaction.  The 
transaction was solely subscribed to by executive officers and directors of 
the Company on terms negotiated by non-participating directors and executive 
officers with the Company's investment banker, and resulted in net proceeds to 
the Company of $1,814,000.

The Company's revenues are derived from (i) computer equipment sales and 
support, (ii) application software licenses, (iii) software support and (iv) 
services and other revenues.  The Company generally recognizes revenues from 
computer equipment sales at the time the products are shipped.  Computer 
system equipment sales and support revenues include hardware support contracts 
for a specific period from which revenue is recognized ratably over the 
corresponding contract period.  Application software license revenues are 
recognized when application software is delivered to the customer.  
Installation and training service revenues, included with application software 
licenses, are recognized as the services are performed.  Software support 
revenues principally include contracts for remote dial-up problem diagnosis 
and maintenance and corrective support services, each of which covers a 
specified period for which revenue is recognized ratably over the 
corresponding contract period.  Services and other revenues include project 
management, training, consulting, custom programming services, post-contract 
support obligations and others services, which are provided under separate 
contract and are recognized as services are performed.  Revenue from 
professional services and maintenance and support services typically increase 
as the number of installed systems increases.

Cost of products sold includes the cost of hardware sold, costs of third party 
software licenses and hardware support subcontracts.  Client service expense 
includes the direct and indirect costs associated with implementation and 
support personnel.  Software development costs include the direct and indirect 
salaries and wages of software research and development personnel, direct 
research and development expenses, and software amortization expense, reduced 
by capitalized software development costs.  Software development costs are 
expensed until such time as technological feasibility is established and then 
are capitalized in compliance with Statement of Financial Accounting Standards 
No. 86 "Accounting for Costs of Computer Software to be Sold, Leased or 
Otherwise Marketed."  Sales and marketing costs include direct and indirect 
salaries, commissions, joint marketing costs, advertising, trade show costs, 
user group cost and travel and entertainment expenses related to the sale and 
marketing of the Company's products and services.  General and administrative 
expenses include salaries and expenses for corporate administration, 
financial, legal and human resources.

The sales cycle for the Company's systems is typically six to eighteen months 
from initial contact to contract signing.  The product delivery cycle is 
variable.  Based on the customer's implementation plan, product delivery may 
take two or more years, particularly with enterprise-wide electronic 
healthcare record solutions involving significant and continuing customer 
service requirements.  Accordingly, the product delivery cycle depends upon 
the combination of products purchased and the implementation plan defined by 
the customer in the master sales agreement.  Each customer contract is 
separately negotiated.  The installation schedules for clinical information 
systems, or departmental electronic healthcare record implementations, 
typically require six to twelve months.  Under its standard master sales 
agreement, the Company generally receives a partial payment upon execution of 
the agreement, a hardware installment payment upon delivery of hardware, 
installation progress payments upon the completion of defined milestones and 
final payment, which may vary with each contract.






                                        27




Results of Operations

The following table sets forth, for each of the periods indicated, certain 
selected statement of operations data expressed as a percentage of total 
operating revenues:

<TABLE>


                                                       1996     1997     1998
<S>                                                    <C>      <C>      <C>

Operating revenues:
 Computer system equipment sales and support           20.0%    14.1%    10.2%
 Application software licenses                         32.7     35.4     20.9
 Software support                                      30.8     30.0     45.4
 Service and other                                     16.5     20.5     23.5
      Total operating revenues                        100.0    100.0    100.0
Costs and expenses:
 Cost of products sold                                 18.0     14.5     12.6
 Client services expenses                              32.9     31.0     42.4
 Software development costs                            15.5     16.2     25.7
 Sales and marketing                                   23.5     24.9     36.5
 General and administrative                            13.0     12.5     17.8
 In-process research and development                   75.9        -        -
     Total costs and expenses                         178.8     99.1    135.0
Operating income (loss)                               (78.8)     0.9    (35.0)
Other income (expense)                                  0.1      2.0      0.1
Income taxes                                              -        -        -
Net earnings (loss)                                   (78.7)%    2.9%   (34.9)%

</TABLE>





                                         28





Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
Revenues.  During the year ended December 31, 1998 the Company reported 
revenues of $25,829,000 a decrease of $10,716,000 from revenues for the year 
ended December 31, 1997.  During 1997, the Company recognized initial 
pathology application software license revenue of $2,777,000 under the value 
added re-marketing agreement with Sunquest Information Systems, Inc. (the 
"Sunquest Agreement"), and approximately $3,925,000 of revenue from pathology 
deliveries to the United States Department of Defense ("DOD"), hospitals under 
a sub-contract to the United States Defense Supply Service.  During 1998, only 
$202,000 of revenue was recognized under the Sunquest Agreement.  This 
represents $100,000 of revenue from licenses sold by Sunquest and $102,000 
from software support to Sunquest.  In addition, government revenue of only 
$1,299,000 was recognized during 1998.  The Company is however, a 
subcontractor under a Teaming Agreement with a prime contractor who was 
awarded a multi-year contract in April 1998 for services to the Office of the 
Assistant Secretary of Defense for Health Affairs.  The Prime Contractor on 
this project has not yet awarded any firm subcontract to the Company.    

Computer system equipment sales and support revenues decreased to 10.2% of 
total revenues for 1998, compared to 14.1% for 1997, a decline of $2,517,000.  
Neither the Sunquest Agreement nor deliveries to the Department of Defense 
hospitals had any associated hardware revenue. The disruption of in-process 
sales cycles by the new product introductions in 1997 significantly impacted 
the Company's new system revenue for 1998, and new system sales have 
historically been more hardware intensive than upgrades and add-on sales.  
Management does expect a higher involvement in the delivery of computer 
hardware to customers in connection with the DynamicVision, pathology and 
radiology product lines due to the Company's increasing emphasis of offering a 
sole source solution to customers.  

Application software license revenue during 1998, decreased by $7,521,000 over 
the same period a year ago, from $12,917,000 to $5,396,000.  The Company 
recognized initial pathology application software license revenue of 
$2,777,000 under the Sunquest Agreement and $100,000 of additional licenses 
thereunder during 1997.  Only $100,000 of application software license revenue 
was recognized under the Sunquest Agreement during 1998.  Also, during 1998, 
the Company recognized only $27,000 of pathology application software license 
revenue from government customers.  This represents a $1,902,000 decrease from 
the $1,929,000 of application software license revenue recognized during 1997 
through deliveries under a completed U.S. Government sub-contract agreement.  
In addition, other pathology application software license revenue decreased by 
$750,000 principally due to the timing of sales cycles following the 
introduction of the CoPath Client Server product in March 1997.  As a result, 
pathology application software license revenue decreased by $5,429,000.   
Laboratory software application license revenue for 1998 increased by $15,000.  
The Premier Series laboratory information system was acquired in May 1997 with 
the acquisition of Dynacor, Inc. accounted for as a pooling of interests.  
Initial new laboratory sales cycles were disrupted by the consolidation 
process and integration with the Company's LabPro 2000 laboratory information 
system.  The increase in laboratory system application revenues during 1998 
has principally resulted from successful customer migrations.  Radiology 
software application license revenues for 1998 declined by $1,344,000 compared 
to 1997.  This primarily resulted from the introduction of the new RadPlus 
client server version released for general availability in December 1997 
disrupting sales cycle for the older technology.   In addition, a multi-site 
radiology information system sale resulted in $1,488,000 of application 
software license revenue during 1997.  There was no multi-site radiology 
revenue during 1998.   Electronic health record application software license 
revenues declined by $717,000 due to lengthening sales cycles caused by market 
impacts related to year 2000 concerns, the growing influence of managed care, 
and new product releases.   

Software support revenues increased $745,000 to $11,723,000 for 1998, compared 
to $10,978,000 for the same period one year ago.  This increase is principally 
attributable to successful implementations of new systems.  As of December 31, 
1998, the recurring annualized billable support base is $12.1 million, with an 
additional $2.1 million of annualized software support revenue anticipated to 
be generated from delivery of the Company's existing new systems backlog.  

Service and other revenues decreased by $1,423,000 to $6,073,000 from 
$7,496,000.  This decrease principally results from the training and 
implementation services in connection with system installations to the DOD 
hospitals completed in 1997.  There was no such corresponding revenue during 
1998.  





                                         29





Cost of Products Sold.  Cost of products sold as a percent of total revenues 
for 1998 decreased to 12.6% from 14.5% for the same period 1997.  Hardware 
revenues during 1998 similarly decreased to 10.2% from 14.1% of total revenues 
for 1997, due to the decline in new system revenues as previously discussed.  
Third party product costs also expanded during 1998 as the Company completed a 
variety of interfaces to strategic software technology partners. 

Client Services Expense.  Client services expense for of 1998 decreased  
$363,000 to $10,958,000 from $11,321,000 for 1997, increasing as a percentage 
of sales from 31.0% to 42.4%.  The Company previously reported increased 
staffing in connection with the 1996 acquisitions of DMI and CoMed, the 
introduction of the DynamicVision product line in November 1996, and new 
product releases in 1997.  During 1997, the Company released for general 
availability client server versions of CoPath (March 1997), and RadPlus 
(December 1997), and new releases of PACSPlus (October 1997), and Dynamic 
RecordPlus (October 1997).   The unanticipated elongation of initial product 
sales cycles for these new products resulted in a significant decline in 
quarterly revenues and a disproportionate burden in client services expense.  
However, the Company decreased client services expenses while introducing 
these new products.

Software Development Costs.  Software development costs for 1998 increased to 
25.7% of total operating revenues from 16.2% incurred during 1997.  
Development efforts continued as part of the Company's overall growth 
strategy.  As such, the Company capitalized $3,174,000 or 39.4% of total 
software development costs during 1998 compared to $3,906,000 or 46.9% of 
total software development costs for 1997.  The development effort during 1998 
resulted in new releases and enhancements to the Company's client server 
products.     

Sales and Marketing.  Sales and marketing costs for 1998 as a percentage of 
total revenues, increased to 36.5% from 24.9% for 1997.  During 1997, the 
Company expanded and trained a national sales and marketing force in 
connection with the Company's external growth plans, in preparation for the 
launch of the Company's latest product releases.  This resulted in an increase 
in sales and marketing costs incurred during 1998 of $307,000 as compared to 
similar costs for 1997.  

General and Administrative Expenses.  General and administrative expenses for 
1998 increased by $51,000 to 17.8% of total revenues from 12.5% incurred 
during 1997. During 1998 the Company completed a functional reorganization and 
streamlining plan.  The Company re-engineered its internal development, 
customer support and product installation processes, resulting in 
consolidation of three facilities into the Lake Mary headquarters.  The re-
engineering accompanied the progression to a common structure to Dynamic's 
product line, a move which permits more cross utilization of technical 
professionals for development, support and installation services, and is 
expected to provide significant future cost efficiencies.  Base quarterly 
operating expenses - defined as total operating expenses less the cost of 
products sold, sales commissions and customer billable expenses - have been 
reduced to approximately $6.4 million for the first quarter of 1999 compared 
to $8.1 million during the first quarter of 1998.  The cost savings from 
completion of the plan, together with a $279,000 reduction in expenses accrued 
under the Company's management incentive compensation plan for 1998, were more 
than offset by increases in bad debt charges of $207,000, teambuilding 
expenses of $112,000, $125,000 in litigation settlement costs with the 
Company's former President and CEO, and $319,000 in non-recurring severance 
and termination benefits incurred in connection with the plan.

Other Income (Expense).   Net other income for 1998 decreased by $690,000 to 
$41,000, as compared to $731,000 for 1997.  The Company incurred approximately 
$139,000 in aggregate losses on sale and abandonment of fixed assets in 
connection with the office consolidation activities completed substantially 
during the third quarter of 1998.  Net interest income decreased by $509,000 
during 1998 principally due to the cash used by operating and investing 
activities.  In addition, net interest expense and financing costs increased 
by $42,000 principally due to amortization of deferred financing costs and 
interest charges associated with the line of credit established in July 1998.


Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996

Revenues.  The Company's total consolidated revenues were $36,545,000 for the 
year ended December 31, 1997, compared to $19,826,000 for the corresponding 
period of 1996, representing an increase of $16,719,000 or 84.3%.  During the 
year ended December 31, 1997 the Company reported pathology revenues of 
$15,784,000, representing 




                                         30






an increase of $14,913,000 over similar revenues in 1996, attributable to the 
acquisition of CoMed in late 1996.  Radiology revenues resulting from the 
Maxifile and PACsPlus+ product line acquired with DMI in May 1996, increased to 
$7,736,000 from $5,182,000 or by $2,554,000.  Management attributes this 
increase to the expanded market reach for the Company's product line that 
cross selling provided post acquisition of DMI and CoMed.  Laboratory 
information system revenue for the year ended December 31, 1997, declined by 
$872,000 to $8,004,000 compared to $8,876,000 reported for the same period 
1996.  LabPro 2000 installations during 1997 consisted of migrating customers 
from the prime platform to the IBM AS400 platform.  Migration contracts 
typically have nominal associated application software license revenue.   In 
addition, imaging revenues declined by $263,000 to $3,382,000 and other 
revenues increased by $387,000 to $1,639,000.  The Company experienced 
lengthened initial sales cycles for the DynamicVision product released for 
general availability in November 1996.  Other revenues increased principally 
as a result of converting add-on business from a customer base expanded through
acquisitions.

Computer system equipment sales and support revenues during the year ended 
December 31, 1997 increased $1,182,000 to $5,154,000 compared to $3,972,000 
for 1996, but declined as a percentage of total revenues to 14.1% from 20.0%. 
The increase in application software license revenues during 1997 overshadowed 
the increase in hardware revenues.  Hardware revenues can cause significant 
fluctuations in top line performance, but traditionally have had nominal 
impact on earnings due to its relatively low margins compared with other 
sources of Company revenue.    

Application software license revenue during 1997 increased by $6,443,000 or to 
35.4% of total revenues compared to 32.7% during 1996.  The Company recognized 
pathology application software license revenue of $7,639,000 during 1997, 
while during 1996 there was $597,000 of pathology revenues.  The pathology 
product line was acquired with CoMed in December of 1996.  Imaging software 
application license revenues decreased $268,000.  The DynamicVision product 
introduction announced in November 1996 was being significantly enhanced 
during 1997.  New anticipated product releases elongated initial sales cycles 
for DynamicVision. Radiology software application license revenues increased 
$128,000 as a result of post acquisition cross-marketing capabilities, and 
deliveries on a five site sale consummated during the third quarter 1997.  The 
decline in laboratory software application license revenues of approximately 
$467,000 is attributed to installations of LabPro 2000 during 1997 consisting 
primarily of migrating customers from the prime platform to the IBM AS400 
platform.  Migration contracts typically have nominal associated application 
software revenue.  Additionally, realignment of the laboratory sales force 
after the acquisition of Dynacor, including integration of the new Premier 
Series lab product, contributed to this decrease by diverting attention from 
the normal sales process.

Software support revenues increased $4,873,000 to $10,978,000 for 1997, 
compared to $6,105,000 for the same period one year ago, an increase of 79.8%.  
The acquisition of CoMed resulted in 1997 software support revenues from 
pathology of $4,363,000.  Additionally, successful installations continue to 
result in accretions in software support revenues.  As of December 31, 1997, 
the Company's recurring annualized billable support base has increased to 
$12.6 million, and an additional $1.2 million of annualized software support 
revenue was anticipated to be generated from delivery of the Company's 
existing new systems backlog.  

Service and other revenues increased by $4,221,000 to $7,496,000 from 
$3,275,000.  This increase principally results from the training and 
implementation services in connection with pathology system installations to 
the United States Department of Defense Military Treatment Facilities, and the 
five site radiology system sale closed during the third quarter of 1997.  

Cost of Products Sold.  Cost of products sold as a percent of total revenues 
for 1997 decreased by 3.5% to 14.5% from 18.0% for 1996.  Although, hardware 
revenues during 1997 decreased 5.9% to 14.1% from 20.0%, approximately 
$1,098,000 of costs attributable to third party software licensing, or 3.0% of 
total revenues, were included in the cost of products sold.  Third party 
software licensing costs result from the purchase of the Mumps operating 
system in connection with both the newly acquired pathology and radiology 
product lines, and royalties to IBM in connection with imaging sales.

Client Services Expense.  Client services expense for 1997 increased 
$4,790,000 to $11,321,000 from $6,531,000 for 1996.  However, as a percentage 
of total revenues during the respective periods, client services expense 
decreased to 31.0% from 32.9%.  The Company previously reported increased 
staffing in connection with the 1996




                                          31



acquisitions of DMI and CoMed, the introduction of the DynamicVision product
line, and the general release of CoPath C/S.  These increased costs were more
than offset by the increase in total revenues.   

Software Development Costs.  Software development costs for 1997 increased 
$2,839,000 to $5,914,000 from $3,075,000, an increase of .7% of total revenues 
to 16.2% from 15.5% incurred during  1996.  This department was reorganized 
during the fourth quarter of 1996 to coordinate the talent of the DMI and 
CoMed acquisitions.  The Company capitalized $3,906,000 of software 
development costs during 1997 compared to $1,618,000 for 1996.  As outlined in 
the Company's secondary offering in September 1996, the Company continued to 
significantly invest in development efforts as part of the Company's overall 
growth strategy. 

Sales and Marketing.  Sales and marketing costs for 1997 increased by 
$4,465,000 to $9,123,000 from $4,658,000, an increase of 1.4% of total 
revenues to 24.9% from 23.5% for the same period of 1996.  During late 1996 
and the first half of 1997, the Company expanded and trained a national sales 
and marketing force in connection with the Company's external growth plans, in 
preparation for the launch of the Company's new DynamicVision product line, 
and the general release of CoPath C/S, Maxifile C/S, and PACsPlus+ product 
lines in 1997. 

General and Administrative Expenses.  General and administrative expenses for 
1997 increased by $1,976,000, to $4,554,000 from $2,578,000 incurred during 
1996, but decreased as a percentage of total revenues by .5% to 12.5% from 
13.0%.  The Company has experienced considerable growth through the purchase 
acquisitions of CoMed and DMI and the pooling of Dynacor.  Additionally, 
$279,000 of compensation has been accrued and expensed for 1997 under the 
management incentive compensation plan.  There was no such expense incurred 
during the same period in 1996.  Despite these cost increases, the Company 
experienced offsetting cost reductions, principally in finance and 
administration, associated with consolidating the acquisitions.
  
Other Income (Expense).   Net other income for 1997 increased by $710,000 to 
income of $731,000, as compared to $21,000 for 1996.   Interest income 
increased by $441,000, and interest and other expenses decreased by $269,000 
for 1997 principally due to the availability of proceeds resulting from the 
Company's secondary offering completed in the fourth quarter of 1996.   


Liquidity and Capital Resources

As of December 31, 1998 the Company had cash equivalents of $1,962,000 and a 
working capital deficiency of $255,000, and a working capital ratio of .98 to 
1.

Accounts receivable and unbilled receivables as of December 31, 1998 increased 
from similar balances on December 31, 1997 by $459,000, or an increase of 
5.1%.  These balances as a percentage of the Company's total annualized 
revenues increased to 36.5% as of December 31, 1998 compared to 24.5% one year 
prior.  As a result, days sales outstanding in accounts receivable and 
unbilled receivables increased to 133.2 days as of December 31, 1998, compared 
to 89.6 days as of December 31, 1997.  Disrupted sales cycles in 1997 and 
early 1998, resulting from the new product introductions made in 1997, 
significantly impacted recognized new system revenues during 1998.  As an 
indication of this, support revenues grew as a percentage of revenues in 1998 
to 45.4%, up from 30.0% for 1997.  Since the Company's support base has a 
fourth quarter billing concentration, due to calendar year renewals, and 
support revenues became such a higher percentage of total Company revenues, 
both the total receivables balances and the days sales outstanding in 
receivables increased.

Contracts receivable as of December 31, 1998 decreased $1,326,000 to 
$1,766,000 as compared to the balance of $3,092,000 on December 31, 1997.  The 
Company entered into a licensing agreement with Sunquest Information Systems, 
Inc. resulting in initial licensing fees receivable in three installments of 
$1,000,000 each.  The first installment was collected upon signing on February 
7, 1997, the second installment was collected in 1998, and the final 
installment was contractually due February, 1999.  Subsequent to December 31, 
1998 the final installment was received.  The remaining change in contracts 
receivable is attributable to scheduled collections on monthly installment 
receivables from customers.

Other current assets as of December 31, 1998 increased $521,000 to $1,313,000 
from the 1997 year end balance of $792,000.  This resulted principally from an 
increase in deferred sales commissions.  During the fourth quarter of 1998




                                         32 



virtually no new systems sale bookings for the quarter were recognized as 
revenue, generating the increase in deferred commissions.

During 1998 the Company capitalized $3,174,000 of software development costs 
and purchased $2,872,000 of additional property and equipment.  Significant 
development efforts resulted in new releases and significant enhancements in 
both the RadPlus and CoPathPlus products.  In addition, enhancements continued 
on PacsPlus, WebSight, Premier Series, RecordPlus and AccessPlus (formerly 
DynamicVision Desktop).  The Company plans to significantly advance 
development of the perioperative information management system SurgiPlus and 
continues to enhance RadPlus, CoPathPlus, PACSPlus, WebSight and RecordPlus in 
1999.

Property purchases included equipment, leasehold improvements and furniture 
which were made primarily to accommodate the consolidation of the Company's 
former Maitland, Apple Valley and Minnetonka offices to the new corporate 
headquarters in Lake Mary, Florida.  This includes $1,490,000 of leasehold 
improvements capitalized, $1,237,000 of which was offset by lessor provided 
lease incentives on the Lake Mary facility.

Accounts payable and accrued expenses increased $1,208,000 to $4,231,000 as of 
December 31, 1998 from $3,023,000 as of December 31, 1997. Included in this 
increase was $196,000 of accrued sales compensation principally due to the 
increased selling activity in the fourth quarter of 1998 compared to the same 
quarter of 1997. In connection with the consolidation of Maitland, Apple 
Valley and Minnetonka offices to Lake Mary, Florida, as of December 31, 1998 
the Company accrued $185,000 of lease termination costs and $175,000 of build-
out costs.  Also included in accrued expenses as of December 31, 1998, was 
approximately $213,000 of severance and termination benefits associated with 
the Company's process re-engineering and cost reduction plan.

Deferred revenue as of December 31, 1998 increased by $273,000 to $6,729,000 
from $6,456,000.  This resulted principally from the increase in annual 
contract support base, and a corresponding increase in advance support 
billings during the fourth quarter of 1998.

Advanced billings as of December 31, 1998 increased by $568,000 to $1,828,000 
from the 1997 year end balance of $1,260,000.  This resulted principally from 
the record fourth quarter sales bookings in 1998 and the related increased 
receipt of customer deposits.

As of December 31, 1998 the Company reported $1,173,000 of total current and 
non-current deferred lease incentives, and no such balances on December 31, 
1997.  The lessor, in connection with the new Lake Mary office, provided 
approximately $1,237,000 of lease incentives which are being amortized evenly 
over the 78 month lease life, which began on September 1, 1998, as a reduction 
in office rent expense.

Other current and non-current liabilities as of December 31, 1998 increased by 
an aggregate of $345,000 from the December 31, 1997 balance of  $815,000 to 
$1,160,000. This increase is principally attributed to approximately $326,000 
of office rent expense accrued to offset the six month rent abatement provided 
under the new office lease agreement for the Lake Mary facility.

During 1998, the Company received $135,000 in proceeds from the exercise of 
employee options and warrants.

On July 24, 1998 the Company entered into a $5,000,000 Revolving Line of 
Credit with Silicon Valley Bank, a commercial bank ("Bank").  The Revolving 
Line of Credit is secured by all existing Company assets and matures on July 
23, 1999.  Interest thereon is payable monthly in arrears at the Bank's prime 
rate plus one and three quarters percent (9.5% on December 31, 1998).  
Available borrowing capacity is limited to the lesser of $3,000,000 or 60% of 
qualified receivables, $2,823,000 at December 31, 1998.  Future borrowing 
capacity is contingent on the Company's compliance with a minimum quick ratio 
(as defined) of 1.25 to 1, and maintaining profitable quarterly operations in 
excess of any increase in the carrying value of capitalized software 
development costs in 1999, at which time the borrowing capacity will be 
limited to the lesser of $5,000,000 or 70% of qualified receivables.  As of 
December 31, 1998 borrowings against this line of credit were $856,000, and 
$3,120 of interest expense on the line of credit had been recognized.

On July 29, 1998 the Company issued 1,000,000 shares of Series C Redeemable 
Convertible Preferred Stock ("Series C Preferred Stock") together with 
detachable Warrants to purchase an aggregate of 300,000 Common Shares of the



                                     33



 
Company in a private placement transaction, which resulted in net proceeds to 
the Company of $1,814,000.  The Series C Preferred Stock is convertible on a 
share for share basis to Common Stock, is non-voting, carries a $.16 per share 
cumulative annual dividend payable calendar quarterly in arrears, has a 
liquidation preference of $2.00 per share, may be automatically converted upon 
the Company's Common Stock sustaining sufficient trading at or above $4.00, 
and is redeemable by the Company on or after July 29, 2000 at a price of $2.00 
per share.  The Warrants are exercisable at $2.25 per Common Share at any time 
on or before July 29, 2003.  On September 29, 1998 Common Stock underlying the 
Series C Preferred Stock and Warrants ("Securities") was registered under the 
Securities Act of 1933, as amended.  On September 30, 1998 and December 31, 
1998 all of the then accrued Series C Preferred Stock dividends aggregating 
$27,555 and $40,000, respectively, were declared and paid.

During 1998 the employer match contribution of $349,454 to the Company's 
401(k) defined contribution savings plan was made through the issuance of 
208,823 shares of the Company's common stock at an average price of $1.67 per 
share.

As of December 31, 1998 the Company had net operating loss carryforwards for 
federal income tax purpose of approximately $20 million, which can be used to 
offset Federal taxable income in future years.  Future equity offerings 
combined with sales of the Company's equity during the preceding years may 
cause changes in ownership under Section 382 of the Internal Revenue Code of 
1986, as amended, which will limit the use of the Company's net operating loss 
carryforward existing as of the date of the ownership change.  In the event 
the Company has taxable income in the future, a change of ownership under 
Section 382 may result in the application of such limitations and could have a 
material adverse effect on the Company.

Management believes that existing cash, and funds available from alternative 
financing options, together with funds expected to be generated by operations 
will be sufficient to meet operating requirements for at least the next twelve 
months.

Year 2000

The Year 2000 issue is the result of computer programs being written using two 
digits, rather than four, to define the applicable year.  Any of the Company's 
programs, both those which the Company produces and sells to its customers and 
those programs which it uses to manage and administer its own affairs, that 
have time-sensitive software may recognize a date using "00" as the year 1900 
rather than the year 2000.  This could result in a major system failure or 
miscalculations.

The Company's internally used computer equipment, software and devices with 
embedded technology-including both information systems and non-information 
systems (together, "Internal Use Systems") - may fail to operate properly or 
as expected due to Year 2000 Issues.  This could result in a system failure or 
miscalculations causing disruption of the Company's operations, including 
among other things, a temporary inability to process transactions, send 
invoices, conduct communications, or engage in similar normal business 
activities.  In addition, computer software products sold, marketed, and 
supported by the Company ("Company Software Products") and the products of 
third parties that are distributed by the Company or others and are necessary 
for operation of Company Software Products ("Third Party Products"), may fail 
to operate properly or as expected due to Year 2000 Issues.  This could, 
result in system failures or miscalculations causing disruption of customers' 
operations, including among other things, a temporary inability to process 
transactions, send invoices, conduct communications, treat patients, or engage 
in similar normal business activities.  Further, products and services used by 
the Company's customers, but not supplied by the Company, could fail to 
operate properly or as expected due to Year 2000 Issues.  Customers' efforts 
to plan for such events could result in the deferral by customers of current 
installations of and plans to purchase Company Software Products.  The Company 
has undertaken various initiatives intended to address Year 2000 Issues with 
respect to Internal Use Systems, Company Software Products, and Third Party 
Products.  The Company has established working groups whose primary functions 
are to (i) develop and implement the Company's definition of Year 2000 
readiness, (ii) assess Internal Use Systems, Third Party Products and Company 
Software Products for Year 2000 Issues, (iii) monitor development, testing and 
remediation efforts with respect to Company Software Products, (iv) monitor 
testing of Company Software Products and Third Party Products, (v) review 
customer preparations to implement Year 2000 releases of Company Software 
Products, (vi) monitor and coordinate the Company's deployment plans and 
results with respect to Year 2000 releases of Company Software Products, 




                                         34


(vii) monitor and coordinate contingency plans with respect to Internal Use 
Systems, Company Software Products and Third Party Products, and (viii) provide
centralization, accuracy and consistency of the Company's communications 
regarding Year 2000 Issues.

The Company has engaged independent experts to assist in all of its efforts 
with respect to Year 2000 Issues and to independently evaluate and validate 
such efforts as of this time.

The Company has mailed letters or otherwise communicated with many of its 
significant vendors of Internal Use Systems and related service providers to 
determine the extent to which Year 2000 Issues affect products and services of 
such vendors and providers.  The Company is engaged in but has not completed 
efforts to communicate with other vendors and service providers involved in 
its Internal Use Systems to request more responses to its communications and 
to verify the responses received.  Due to uncertainties associated with 
vendors and service providers, the Company is unable to predict whether Year 
2000 Issues involved in its Internal Use Systems will have a material adverse 
effect on the Company's business, results of operations, or financial 
condition, despite the Company's current assessment to the contrary.

The Company works closely with vendors of Third party Products and has 
communicated with them to determine the extent to which their products and 
services are or will be Year 2000 compliant.  In addition, the Company is 
testing or plans to test Year 2000 releases of certain Third Party Products.  
Based upon its current assessment, the Company believes it has received 
adequate assurances that Third Party Product vendors expect to address all 
their significant Year 2000 Issues on a timely basis.  Due to uncertainties 
associated with Third Party Product vendors, the Company is unable to predict 
whether a material adverse effect on business, results of operations, or 
financial condition may result from Year 2000 Issues related to Third party 
Products, despite the Company's current assessment to the contrary.

The Company began development of Year 2000 versions of some Company Software 
Products in 1997 and continues to progress through development cycles with 
respect to some Company Software Products.  The Company began deploying Year 
2000 releases of Company Software Products in 1997 and expects to complete 
deployment of such releases for all products during the second half of 1999.  
The Company continues to test and monitor performance of Year 2000 releases of 
Company Software Products in customer environments.  The Company expects to 
deliver and deploy maintenance releases of Company Software Products in the 
ordinary course of business to remediate any Year 2000 Issues as identified 
during and after deployment of Year 2000 releases of Company Software 
Products.  Based on the Company's assessment, the Company believes continuing 
efforts will be required to assist customers in deploying and testing Year 
2000 releases of Company Software Products in their unique environments.  The 
Company expects an increase in service and support effort levels as the Year 
2000 approaches.

The Company develops, markets and supports many different products, and the 
amount of effort applied with respect to individual products varies from 
product to product.  The Company estimates that as of December 31, 1998 it had 
completed approximately 90% of the development efforts relating to Year 2000 
versions of all of the Company Software Products.  The projects comprising the 
remaining 10% of these efforts are in process and expected to be substantially 
completed in the first half of 1999.  The Company estimates that as of 
December 31, 1998 it had completed approximately 75% of the deployment efforts 
relating to Year 2000 versions of all Company Software Products.  The projects 
comprising the remaining 25% of these efforts are in process and are expected 
to be substantially completed in the first half of 1999, but the Company 
expects to continue efforts to remediate and maintain Year 2000 versions of 
Company Software Products in customer environments and to support customers' 
efforts relating to Year 2000 Issues through the early part of 2000.

The Company is currently engaged in but has not completed contingency planning 
to address personnel, resource, technical and communication issues relating to 
its service and remediation efforts.  The Company expects that its 
development, remediation, testing, deployment and contingency planning efforts 
with respect to Company Software Products will continue up to and beyond 
December 31, 1999, but expects the level of development, testing and 
deployment will decrease in 1999.

The Company has begun, but not yet completed, a comprehensive analysis of the 
operational, business and financial problems (including possible loss of 
revenue), if any, that would be reasonably likely to result from the impact of 
unresolved Year 2000 Issues, including possible (i) failure by the Company and 
vendors of Third Party Products to complete efforts to avoid or minimize Year 



                                         35




2000 Issues on a timely basis, (ii) failure of Customers to be ready to or 
cooperate in the deployment of Year 2000 versions of Company Software Products 
and Third Party Products on a timely basis, and (iii) deferral by customers of 
current installations and prospective purchase decisions with respect to 
Company Software Products.  The Company has not yet completed its contingency 
plans relating to Year 2000 scenarios it deems sufficiently probable to merit 
contingency planning.  The Company currently plans to complete such analysis 
and contingency planning by June 30, 1999.

The Company presently believes that Year 2000 Issues will not pose significant 
operational problems for the Company.  However, unless all material Year 2000 
Issues are timely and properly identified, assessed, and remediated, and 
unless adequate contingency plans are properly formulated with respect to Year 
2000 Issues, the Year 2000 Issue may materially adversely impact the Company's 
business, financial condition and results of operations, or adversely affect 
the Company's relationships with customers, vendors and others.

The costs, timing and scheduling of deployment and installation of Year 2000 
versions of Company Software Products and Third Party Products, as well as the 
ability of the company to assist customers in the installation of Company 
Software Products, will depend in part on the readiness, ability and 
cooperation of customers and their suppliers.  Due to uncertainties associated 
with customers' readiness, cooperation and sources of products and services, 
there can be no assurance that Year 2000 Issues will not materially adversely 
effect the Company's business, results of operations, or financial condition, 
or adversely affect the Company's relationships with customers, vendors or 
others.

Some customers and prospects of the Company operate in complex computing 
environments that include products and services not supplied by the Company.  
The costs, timing and scheduling by customers of work related to Year 2000 
Issues involving such products and services may cause some customers and 
prospects to defer current projects or prospective purchase decisions 
regarding Company Software Products.  If Year 2000 Issues cause customers and 
prospects to defer current projects or prospective purchase decisions, the 
Company's financial condition could be materially adversely affected.  Due to 
uncertainties associated with customers and prospects, there can be no 
assurance that Year 2000 Issues will not materially adversely effected the 
Company's business, results of operations, or financial condition or adversely 
affect the Company's relationships with customers, vendors and others.

The costs of the Company's Year 2000 identification, assessment, remediation, 
testing, deployment and contingency planning efforts, and the dates on which 
the Company believes it will complete such efforts, are based upon 
management's current best estimates, which were derived using numerous 
assumptions regarding future events, including the continued availability of 
certain resources, third-party remediation plans, and other factors.  There 
can be no assurance that these estimates will prove to be accurate, and actual 
results could differ materially from those currently anticipated.  Specific 
factors that could cause such material differences include, but are not 
limited to, the availability of and costs of personnel trained in year 2000 
Issues, the ability to correctly and effectively identify, assess, remediate, 
and test al relevant computer codes, equipment, and embedded technology, and 
similar uncertainties, the ability of the Company to timely install and deploy 
Year 2000 releases of Company Software Products, a failure of the Company to 
provide, obtain or make available adequate resources to assist customers in 
installing Year 2000 releases of Company Software Products and Third Party 
Products.  As a result of any such factors alone or in combination, the 
Company may experience an increase in warranty and other claims.  In addition, 
since there is no uniform definition of "compliance with Year 2000," and 
since the Company sells a myriad of different combinations of products and 
services under varying contractual terms, the Company is not able to assess or 
estimate the possible impact of such possible claims.  No assurance can be 
given that the aggregate cost of defending and resolving such claims, if any, 
will not materially adversely affect the Company's result of operations.  
Although some of the Company's agreements with manufacturers and others from 
whom it purchases products for resale contain provisions requiring such 
parties to indemnify the Company under some circumstances, there can be no 
assurance that such indemnification arrangements will cover all of the 
Company's liabilities and costs relate to claims by third parties related to 
Year 2000 Issues.

During 1997 the Company converted its human resources, time tracking, general 
accounting and payroll systems to systems which have been represented to be 
Year 2000 compliant.  The Company believes that all of its internal management 
information systems and non-information systems are currently Year 2000 
compliant and, accordingly, does not anticipate any significant expenditures 
to remediate or replace existing Internal Use Systems.



                                        36



Inflation and Changing Prices

The Company believes that the general state of the economy and inflationary 
trends have only a limited effect on its business.  Historically, inflation 
has not had a material effect on the Company.  Changing prices of computer 
hardware could have a material effect on the cost of materials sold and the 
related selling price of software and hardware sales.

Market Risk

The Company is exposed to interest rate changes primarily as a result of its 
variable rate line of credit used to finance the Company's short-term working 
capital needs and general corporate purposes.  The Company's interest rate 
risk management objectives is to limit the impact of interest rate changes on 
earning and cash flows and to lower its overall borrowing costs.

The Company's market risks associated with its line of credit borrowings 
outstanding is that the interest rate under the line of credit agreement is 
based on the prime rate plus one and three quarters percent (9.5% as of 
December 31, 1998).  The line of credit agreement expires on July 23, 1999.  
Fair value of the line of credit as of December 31, 1998 was equal to its 
carrying value of $856,000.

Recent Accounting Pronouncements

In October 1997, the AICPA issued Statement of Position (SOP) 97-2, Software 
Revenue Recognition, which supersedes SOP 91-1.  SOP 97-2 generally requires 
revenue earned on software arrangements involving multiple elements (i.e., 
software products, upgrades/enhancements, post contract customer support, 
installation, training, etc.) to be allocated to each element based on the 
relative fair values of the elements.  The Company adopted SOP 97-2 for 
software transactions entered into beginning January 1, 1998.  The impact of 
SOP 97-2 did not materially alter the Company's revenue recognition methods.





                                       37


 

                     DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                        CONSOLIDATED BALANCE SHEETS
                         DECEMBER 31, 1997 AND 1998


<TABLE>
                                                     1997         1998
<S>                                                  <C>           <C>

ASSETS

Current assets:
 Cash and cash equivalents                           $ 6,465,685   $ 1,962,426
 Accounts receivable, net                              6,066,305     6,847,498
 Unbilled receivables                                  2,900,702     2,578,078
 Contracts receivable - current                        1,409,571     1,150,754
 Other current assets                                    792,038     1,313,364
   Total current assets                               17,634,301    13,852,120

 Property and equipment, net                           3,699,761     5,167,436
 Capitalized software development costs, net           7,830,349     9,247,578
 Goodwill, net                                         2,070,581     1,663,032
 Contracts receivable - non-current                    1,682,780       615,645
 Other assets                                             59,258        58,469
                                                     $32,977,030   $30,604,280
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 Accounts payable and accrued expenses               $ 3,023,349   $ 4,231,540
 Deferred revenue                                      6,456,120     6,729,436
 Advance billings                                      1,259,876     1,828,351
 Line of Credit                                               --       856,000
 Deferred lease incentives - current                          --       190,231
 Other                                                   361,107       271,735
   Total current liabilities                          11,100,452    14,107,293
Deferred lease incentives - non-current                       --       982,862
Other                                                    453,788       888,358
   Total liabilities                                  11,554,240    15,978,513

Shareholders' equity:
 Series C redeemable convertible preferred stock 
  ($.01 par value; issued and outstanding 1,000,000
  shares with an aggregate liquidation preference of 
  $2,000,000, as of December 31, 1998, and a $.16 per
  share annual dividend).                                     --     1,811,327
 Common stock ($.01 par value; authorized 40,000,000 
  shares; issued and outstanding 18,008,210 and
  18,271,251 shares in 1997 and 1998, respectively).     180,082       182,713
 Warrants                                                     --         3,000
 Additional paid-in capital                           44,300,707    44,699,416
 Deficit                                             (23,057,999)  (32,070,689)
   Total shareholders' equity                         21,422,790    14,625,767
                                                     $32,977,030   $30,604,280

</TABLE>

See notes to consolidated financial statements.




                                         38





                       DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                    YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
                                         1996         1997         1998
<S>                                      <C>          <C>          <C>

Operating revenues:
 Computer system equipment sales
  and support                            $ 3,971,549  $ 5,154,256  $ 2,637,601
 Application software licenses             6,474,674   12,917,390    5,396,122
 Software support                          6,104,933   10,977,540   11,722,897
 Services and other                        3,275,124    7,495,923    6,072,679
   Total operating revenues               19,826,280   36,545,109   25,829,299
Costs and expenses:
 Cost of products sold                     3,566,608    5,321,053    3,242,556
 Client services expense                   6,530,687   11,321,158   10,958,132
 Software development costs                3,074,728    5,913,550    6,646,471
 Sales and marketing                       4,658,070    9,123,366    9,430,307
 General and administrative                2,577,776    4,554,028    4,605,237
 In-process research and development      15,057,869           --           --
   Total costs and expenses               35,465,738   36,233,155   34,882,703
   Operating income (loss)               (15,639,458)     311,954   (9,053,404)
Other income (expense):
 Interest expense and financing costs       (320,685)     (51,661)     (94,049)
 Gain (loss) on disposal of property              --       28,100     (139,063)
 Interest income                             341,771      754,565      273,826
   Total other income (expense)               21,086      731,004       40,714
Earnings (loss) before income taxes      (15,618,372)   1,042,958   (9,012,690)
Income taxes                                      --           --           --
Net earnings (loss)                     $(15,618,372) $ 1,042,958  $(9,012,690)

Net earning (loss) available for 
common shareholders                     $(15,869,409) $ 1,042,958  $(9,080,245)

Earnings (loss) per common share
   Basic and diluted                    $      (1.72) $      0.06  $     (0.50)

Weighted average number of common
shares outstanding                         9,224,775   17,905,214   18,127,641

</TABLE>

See notes to consolidated financial statements.




                                         39




                       DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
                                                    Common   Additional 
              Series Series Series Series Warrants  Stock    Paid-In   Deficit
              A        B      CM     C
                        Preferred    
<S>          <C>    <C>     <C>    <C> <C>    <C>    <C>         <C>

Balance, 
January 1, 1996,
as previously 
reported     $9,688 $37,500 $   - $   - $   - $68,616 $13,070,163 $(8,482,585)

Conversion of 
Series A
Preferred 
Stock         (9,688)           -     -     -  9,688            -           -

Conversion of 
Series B 
Preferred 
Stock              -  (37,500)  -     -      - 37,500           -           -

Preferred Stock 
Dividends          -        -   -     -      -      -   (275,881)           -

Issuance of
Common Stock       -        -   -     -      - 43,345  22,673,919           -

Exercise of 
Stock Options      -        -   -     -      -    609     142,434           -

Employee Stock 
Purchase Plan      -        -   -     -      -    314     101,156           -

Common Stock issued to effect 

CMDI acquisition   -        -    -    -      -  10,000  4,990,000           -

Issuance of 
Series CM Preferred 
Stock in connection
with the CoMed 
acquisition        -        -   60    -      -       -  2,999,940           -

Net loss           -        -    -    -      -       -          -  (15,618,372)

Balance,
December 31, 1996  -        -   60    -      -  170,072 43,701,731 (24,100,957)


Conversion of 
Series CM 
Preferred Stock    -        -  (60)   -      -    5,650     (5,590)         -

Exercise of Stock 
Options & Warrants -        -    -    -      -    3,721    384,387          -

Employee Stock 
Purchase Plan      -        -    -    -      -      639    220,179          -

Net income         -        -    -    -      -        -          -   1,042,958

Balance, 
December 31, 1997  -       -   -   -     -    180,082  44,300,707  (23,057,999)

Issuance of 
Series C Preferred
Stock and Warrants 
in Private Placement
Transaction        -     -   -  1,811,327   3,000   -           -           -

Exercise of Stock 
Options            -     -   -          -      -   271     54,167           -

Employee Stock 
Purchase Plan      -     -   -          -      -   510     80,523           -

Employee 401(k)
Plan Match         -     -   -          -      - 1,850    331,574           -

Preferred Stock
Dividends          -     -   -          -      -     -    (67,555)          -

Net Loss           -     -  -          -      -     -          -   (9,012,690)
               $ - $ - $ - $1,811,327 $3,000 $182,713 $44,699,416 $(32,070,689)

</TABLE>

See notes to consolidated financial statements.




                                        40


  
                     DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

<TABLE>
                                        1996           1997        1998
<S>                                     <C>            <C>         <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)                     $(15,618,372)  $1,042,958  $(9,012,690)

Adjustments to reconcile net earnings
  (loss) to net cash provided (used) 
  by operating activities:

 Depreciation and amortization             1,900,211    3,016,713    3,323,374
 Book value of disposed property              64,875       20,074      181,828
 Employer 401(k) contributions not 
  requiring cash                                  --           --      333,424
 Provision for doubtful accounts 
  receivable                                      --           --      206,805
 Purchased in-process research and 
  development                             15,057,869           --           --
Changes in assets and liabilities:
 Accounts receivable                       1,017,582     (440,096)    (987,998)
 Unbilled receivables                     (1,371,029)    (788,889)     322,624
 Contracts receivable                       (201,737)  (2,399,515)   1,325,952
 Other                                       169,619       73,144     (194,965)
 Accounts payable and accrued expenses       (53,683)     193,219    1,208,181
 Deferred revenue                            372,217    1,302,856      273,316
 Advance billings                         (1,005,682)  (1,718,541)     568,475
       Net cash provided (used) by
         operating activities                331,870      301,923   (2,451,664)

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of net assets of Dimensional
  Medicine Inc.                           (1,349,389)          --           --
 Purchase of Collaborative Medical
  Systems, Inc.                           (6,591,075)          --           --
 Capitalized software development costs   (1,618,060)  (3,906,254)  (3,174,028)
 Purchases of property and equipment      (1,098,553)  (1,841,306)  (1,142,941)
 Restricted cash released/(deposited)             --       60,000           --
        Net cash used by investing 
          activities                     (10,657,077)  (5,687,560)  (4,316,969)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Borrowings (repayments) under line of 
  credit, net                                     --           --      856,000
 Borrowings (repayments) under bank note
  payable                                 (2,800,000)          --           --
 Proceeds from issuance of common stock   22,961,777      608,926      135,471
 Proceeds from issuance of Series C 
  Preferred Stock and Warrants                    --           --    1,814,327
 Payment of preferred stock dividends       (275,881)          --      (67,555)
 Borrowings (repayments) capital lease 
  obligations and other debt                (400,619)    (208,040)    (472,869)
       Net cash provided (used) by 
         financing activities             19,485,277      400,886    2,265,374

Net increase (decrease) in cash and cash 
 equivalents                               9,160,070   (4,984,751)  (4,503,259)
Cash and cash equivalents, beginning 
 of year                                   2,290,366   11,450,436    6,465,685
Cash and cash equivalents, end of year   $11,450,436  $ 6,465,685   $1,962,426
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
 Interest paid                           $   320,685  $    51,661   $   94,049
 
NON-CASH TRANSACTIONS:
 Furniture and fixtures under capital
  lease                                  $        --  $        --   $  492,495
 Leasehold incentives received           $        --  $        --   $1,236,503

</TABLE>

See notes to consolidated financial statements.





                                       41




                     DYNAMIC HEALTHCARE TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998


A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business - Dynamic Healthcare Technologies, Inc. ("Dynamic" or the 
"Company") is a leading provider of mission-critical healthcare information 
systems for clinical services departments and facilities. The Company's 
product line, DynamicVision(R), is a suite of image-, voice-, and web-enabled 
systems for anatomic pathology, radiology, laboratory, surgical services and 
health information management.  Dynamic is headquartered in the greater 
Orlando area and has a key operations and development center near Boston.  The 
Company provides support for all of its systems and offers integration and 
other consulting services.

Basis of Consolidation - The consolidated financial statements include the 
accounts of Dynamic Healthcare Technologies, Inc. and its wholly-owned 
subsidiary, Collaborative Medical Systems Corp. which was incorporated on 
November 27, 1996 (collectively the "Company" or the "Registrant").  All 
significant inter-company transactions and accounts have been eliminated in 
consolidation.

On May 1, 1996, Dimensional Medicine, Inc. ("DMI") was purchased by and 
merged into DMI Acquisition Corporation ("DMIAC"), a newly formed wholly 
owned subsidiary of the Registrant.  The transaction was consummated by 
purchasing all of the outstanding common stock and retiring and assuming 
certain debt obligations of DMI.  The acquisition has been accounted for using 
the purchase method.  On September 2, 1996, DMIAC was merged with and into the 
Company.

On December 17, 1996, Collaborative Medical Systems, Inc. ("CoMed") was 
purchased by an merged into Collaborative Medical Systems Corp. ("CMSI"), a 
newly formed wholly owned subsidiary of the Registrant.  The transaction was 
consummated by purchasing all of the outstanding stock of CoMed using both 
available cash, and common and preferred stock of the Company.  The 
acquisition was accounted for using the purchase method.  Upon consummation of 
the transaction the Company wrote off the acquired in-process research and 
development (see also Note H).

Accounts Receivable - Accounts receivable is stated at net book value less an 
allowance for doubtful accounts of $307,000 and $360,000 for the years ended 
December 31, 1997 and 1998, respectively.  Bad debt expense for each of the 
years ended December 31, 1996, 1997, and 1998 was $0, $0, and $206,805, 
respectively.

Property and Equipment - Property and equipment is stated at cost less 
accumulated depreciation and amortization.  The cost of property and equipment 
is depreciated and amortized over the estimated useful lives of the related 
assets, ranging from five to ten years, using the straight-line method.

Software Development Costs - Costs incurred to establish the technological 
feasibility of computer software products are research and development costs 
and are charged to expense as incurred.  Costs of producing product masters 
subsequent to establishing technological feasibility, including coding and 
testing, are capitalized.  Capitalization of computer software costs ceases 
when the product is available for general release to customers. Amortization 
of capitalized software development costs for the years ended December 31, 
1996, 1997 and 1998 were $1,128,402, $1,484,276, and $1,756,798, respectively.  
Accumulated amortization of capitalized software development costs is 
$4,829,271 and $6,586,069 at December 31, 1997 and 1998, respectively.  
Capitalized software development costs are amortized using either the 
straight-line method over the estimated economic life of the products 
(initially five years) or the ratio of current revenues to current and 
anticipated revenues for the product, whichever results in the greater amount 
of amortization.  Unamortized capitalized costs of a computer software product 
in excess of its estimated net realizable value are expensed.  No such expense 
has been recorded for the years ended December 31, 1996, 1997 and 1998.





                                        42




Goodwill - Goodwill is stated at cost less accumulated amortization.  Goodwill 
is amortized using the straight-line method over a period of seven years.  
Amortization of goodwill for the years ended December 31, 1996, 1997, and 1998 
was $165,000, $408,000, and $407,549, respectively.  Accumulated goodwill 
amortization as of December 31, 1997 and 1998 was $782,556 and $1,189,805, 
respectively.  The Company assesses the recoverability of goodwill based upon 
projected operations over a period which represents the approximate remaining 
life of goodwill.  The Company evaluates the recoverability of goodwill based 
on this forecast of future cash from operations and income, and using a 
discount rate that reflects the Company's average cost of funds.

Revenues - Revenues are derived from the sale of computer hardware, licensing 
and sub-licensing of software, professional and technical consulting services, 
and maintenance and support services.  Each customer contract is negotiated 
separately.  Application software licenses and computer system equipment 
revenues are recorded when hardware and application software are delivered.  
Installation and training revenues, which are included with application 
software licenses revenues in the statements of operations are recognized as 
the services are performed.  Software support revenues principally include 
contracts for continuing support services which cover a specific period, and 
from which revenue is recognized ratably over the period of the contract.  
Also included in software support revenue are revenues from other significant 
continuing obligations and post contract support obligations, which are 
typically under separate contract and are recognized as the services are 
performed.  Services revenues are recognized as the services are performed.   

Employee Benefit Plan - The Company has a 401(k) defined contribution savings 
plan covering all full-time employees.  Eligible employees may elect to defer 
up to 20% of their compensation, but limited to the maximum allowed by the 
Internal Revenue Code.  Company contributions are made at the discretion of 
the Board of Directors and amounted to $186,829, $420,487, and $349,454 in 
1996, 1997 and 1998, respectively.  During 1998 the employer match 
contribution was made through the issuance of 208,823 shares of the Company's
common stock at an average issuance price of $1.67. 

Stock-Based Employee Compensation Plans - The Company accounts for its stock 
option plan in accordance with the provisions of Accounting Principles Board 
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees", and 
related interpretations.  As such, compensation expense would be recorded on 
the date of grant only if the current market price of the underlying stock 
exceeded the exercise price.  The Company adopted Statement of Financial 
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based 
Compensation", which permits entities to recognize as expense over the 
vesting period the fair value of all stock-based awards on the date of grant.  
Alternatively, SFAS No. 123 allows entities to continue to apply the 
provisions of APB Opinion No. 25 and provide pro forma net income and pro 
forma earnings per share disclosures for employee stock option as if the fair-
value-based method defined in SFAS No. 123 had been applied.  The Company 
elected to continue to apply the provisions of APB Opinion No. 25 and provide 
the pro forma disclosures of SFAS No. 123.

Income Taxes - Deferred income taxes are provided on items that are recognized 
in different reporting periods for financial accounting and income tax 
purposes using the then enacted tax rates. 

Earnings Per Share - Basic earnings per share is computed on the basis of the 
weighted average number of shares outstanding.  Diluted earnings per share is 
computed on the basis of the weighted average number of shares outstanding 
plus potential common stock which would arise for the exercise of stock 
options and warrants, if dilutive.

Cash Equivalents - For purposes of the statement of cash flows, the Company 
considers all highly liquid investments purchased with an original maturity of 
three months or less to be cash equivalents.

Use of Estimates - The preparation of financial statements in conformity with 
generally accepted accounting principles requires management to make estimates 
and assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of revenues and expenses during the 
reporting period.  Significant estimates relate to revenue recognition on 
contracts and to the recoverability of software development costs and 
goodwill.  Actual results could differ from those estimates.




                                         43



Concentration of Credit Risk - The Company generates revenue primarily through 
sales to entities operating within the healthcare industry located throughout 
the United States.  Due to this concentration, substantially all receivables 
at December 31, 1997 and 1998, are from healthcare institutions which may be 
similarly affected by changes in economic, regulatory or other conditions.  
The Company performs ongoing credit evaluations of its customers and generally 
does not require collateral.  The Company maintains reserves for potential 
credit losses and such losses have been within management's expectations.

The Company invests its excess cash in deposits with major financial 
institutions, in U.S. government agency securities and in commercial paper of 
companies with strong credit ratings.  Generally, the investments mature 
within 90 days and, therefore, are subject to little risk.  The Company has 
not experienced losses related to these investments.

Fair Value of Financial Instruments - The following methods and assumptions 
were used to estimate the fair value of the Company's financial instruments: 
The fair value of cash and cash equivalents approximates its carrying amounts 
because of the short maturity of those instruments.  The fair value of 
contract receivables approximates its carrying value, and is estimated by 
discounting the guaranteed minimum payments and unguaranteed contract 
residuals at the imputed incremental borrowing rates of the related customers 
(see also Note C herein).  The fair value of bank note payable and line of 
credit are estimated based on the current rates available to the Company for 
debt of the same remaining maturities and approximates its carrying amount.

Reclassifications - Certain prior year balances have been reclassified to 
conform to the 1998 presentation.

B  PROPERTY AND EQUIPMENT

Property and equipment consists of the following:				 
           
<TABLE>
                                                   December 31, 
                                              1997             1998
<S>                                           <C>              <C>

Furniture and fixtures                        $   845,992       $ 1,245,211
Equipment                                       6,161,529         6,848,943
Leasehold improvements                            181,523         1,553,173
                                                7,189,044         9,647,327
Less accumulated depreciation and 
amortization                                    3,489,283         4,479,891
                                              $ 3,699,761       $ 5,167,436

</TABLE>

C.  CONTRACTS RECEIVABLE:

Contracts receivable represent receivables from customers under long-term 
financing arrangements.

During the quarter ended March 31, 1997, the Company entered into a value-
added re-marketing agreement with Sunquest Information Systems, Inc. 
("Sunquest") for the non-exclusive sale of CoPath Client/Server product 
licenses.  The initial license fee of $3,000,000 was receivable in three (3) 
annual installments of $1,000,000 due in February 1997, 1998 and 1999.  As of 
December 31, 1998 contract receivables included $991,955 under this contract 
representing the present value of the remaining installment with an imputed 
interest rate of 8.25%.  Subsequent to December 31, 1998 the 1999 installment 
was collected.

On July 5, 1997, the Company entered into a multi-site radiology information 
system sale payable in varying monthly installments extending through March 
2003.  Total minimum installments due under this contract aggregate 
$5,754,000.  Deferred revenue equal to the present value of the minimum 
payments and estimated residual value discounted at an imputed rate of 8.5%, 
of $3,618,000 was initially recorded.  During 1997, $3,402,000 of revenue was 
recognized upon implementation of the system and $125,000 of interest income 
was recognized on the related contract receivable.  On November 28, 1997 the 
Company assigned its rights to receive minimum payments under this contract to 
a third party in exchange for cash.

Also included in contracts receivable are other amounts due from customers in 
monthly installments of principal and interest with initial terms ranging from 
one to five years.  The future minimum principal payments to be received under 
contract receivables as of December 31, 1998 are summarized as follows:




                                        44




             Year Ended December 31,
                      1999                   $1,150,754
                      2000                      106,122
                      2001                       90,803
                      2002                       21,515
                      2003                      397,205
                      Thereafter                     -- 
                      Total                  $1,766,399

D. LEASE OBLIGATIONS

On September 1, 1998 the Company relocated its corporate headquarters to 
Lake Mary, Florida.

Capital Leases

In connection with the Company's relocation, in September of 1998, the 
Company leased furniture and fixtures under a capital lease obligation.  
The capital lease obligation requires 36 non-cancelable monthly 
installments of $15,837 which began in October 1998, bears an interest 
rate of 9.8% and provides for a $100 purchase option to the Company at 
lease expiration in October 2001.  As of December 31, 1998, furniture and 
fixtures under the capital lease obligation are summarized as follows:

          Cost                                   $ 523,049
          Accumulated Depreciation                 (33,099)
          Net Book Value December 31, 1998       $ 489,950

Minimum future lease payments under the capital lease obligation as of 
December 31, 1998 are summarized as follows:
  
  Year Ended December 31,
           1999                                  $ 190,044
           2000                                    190,044
           2001                                    142,533
                                                   522,621
           Less:  Amount representing interest     (66,159)  
                                                   456,462
           Less:  Current portion of capital
                  lease obligation                (151,977)
           Non-current portion of capital 
           lease obligation                      $ 304,485

The capital lease obligation balances are included with other current and non-
current liabilities on the balance sheet.

Operating Leases

The Company leases office space under non-cancelable operating leases.  The 
leases call for monthly payments over terms of 36 to 78 months and include 
renewal options.  Total rent expense on all operating leases was $603,000, 
$1,217,000, and $1,609,000 for the years ended December 31, 1996, 1997 and 
1998, respectively.  The 1998 rent expense includes $185,000 of accrued lease 
termination charges included in accounts payable and accrued expenses as of 
December 31, 1998, resulting from consolidating the Apple Valley, Minnesota 
and Maitland, Florida facilities.

The future minimum rental payments under operating leases as of December 31, 
1998 are as follows:

            Year Ended December 31,
                     1999                     $1,618,869
                     2000                      1,028,180
                     2001                      1,045,916
                     2002                      1,064,112
                     2003                      1,082,840
                     Thereafter                1,352,540
                     Total                    $7,192,457




                                         45




Deferred Lease Incentives

In connection with lease of the Lake Mary office space the Company was 
provided $1,236,503 of lease incentives, which are being amortized on a 
straight line basis over the 78 month lease term beginning September 1, 1998, 
as a reduction in office rent expense.

E. NOTE PAYABLE

Included in other current and non-current liabilities is a note payable (the 
"Note").  The Note is payable in fixed monthly installments of $7,228, bears 
fixed interest at a rate of 8.74%, and matures on February 1, 2003.  On 
December 31, 1998 current and long-term portions on the Note were $62,820 and 
$239,184, respectively.

The Note was issued subject to the terms of the sale of the Company's right to 
receive minimum payments under a radiology system contract (the "Contract") 
(see also Note C).  The Note plus any accrued interest becomes immediately due 
should any of the following occur: 1) The Company fails to make a scheduled 
installment payment. 2) Any default in the agreement governing the sale of the 
minimum payments occurs.  3) The customer defaults on the terms of the 
Contract.  The Note is secured by all the hardware and software included in 
the Contract plus any payments due to the Company under the Contract other 
than the minimum payments sold.

As of December 31, 1998, maturities pursuant to the Note are as follows:

                 Year Ended December 31,
                          1999                 $  62,820
                          2000                    68,536
                          2001                    74,772
                          2002                    81,575
                          2003                    14,301
                          Total                $ 302,004

F.  LINE OF CREDIT

On July 24, 1998 the Company entered into a $5,000,000 Revolving Line of 
Credit Agreement with Silicon Valley Bank, a commercial bank ("Bank").  The 
Revolving Line of Credit Agreement is secured by all existing Company assets 
and matures on July 23, 1999.  Interest thereon is payable monthly in arrears 
at the Bank's prime rate plus one and three quarters percent (9.5% on December 
31, 1998).  Available borrowing capacity is limited to the lessor of 
$3,000,000 or 60% of qualified receivables, $2,823,000 at December 31, 1998.  
Future borrowing capacity is contingent on the Company's compliance with a 
minimum quick ratio (as defined) of 1.25 to 1, and maintaining profitable 
quarterly operations in excess of any increase in the carrying value of 
capitalized software development costs in 1999, at which time the borrowing 
capacity will be limited to the lessor of $5,000,000 or 70% of qualified 
receivables.  As of December 31, 1998 borrowings against this line of credit 
were $856,000, and $3,120 of interest expense on the line of credit had been 
recognized.

G. SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK

On July 29, 1998 the Company issued 1,000,000 shares of Series C Redeemable 
Convertible Preferred Stock ("Series C Preferred Stock") together with 
detachable Warrants to purchase an aggregate of 300,000 Common Shares of the 
Company in a private placement transaction, which resulted in net proceeds to 
the Company of $1,814,000.  The Series C Preferred Stock is convertible on a 
share for share basis to Common Stock, is non-voting, carries a $.16 per share 
cumulative annual dividend payable calendar quarterly in arrears, has a 
liquidation preference of $2.00 per share, may be automatically converted upon 
the Company's Common Stock sustaining sufficient trading at or above $4.00, 
and is redeemable by the Company on or after July 29, 2000 at a price of $2.00 
per share.  The Warrants are exercisable at $2.25 per Common Share at any time 
on or before July 29, 2003.  On September 29, 1998 common stock underlying the 
Series C Preferred Stock and Warrants ("Securities") was registered under the 
Securities Act of 1933, as amended.  On September 30, 1998 and December 31, 
1998 all of the then accrued Series C Preferred Stock dividends aggregating 
$27,555 and $40,000, respectively, were declared and paid (see also Note K).  




                                        46




H. CAPITAL STOCK, WARRANTS AND OPTIONS

During 1993, the shareholders approved and the Company adopted a stock warrant 
and option plan for directors and management employees (the "D&M Plan"), 
whereby 250,000 shares of common stock were reserved for issuance.  During 
1997, the shareholders approved increasing shares reserved for issuance 
pursuant to the D&M Plan to 650,000.  Under the D&M Plan directors' and 
management employee warrants are five year warrants which vest under varying 
terms and are issued at an exercise price equal to the market price of the 
Company's common stock on the date of grant.  During 1995, the shareholders 
approved an amendment to the D&M Plan to conform the terms of vesting to 40% 
upon grant plus 20% per year for each of three years thereafter, and to 
provide for early vesting upon death or employment termination without cause 
for all future options granted under the D&M Plan.  Additionally, annual 
warrants are issued to certain outside directors at the beginning of that 
director's third consecutive term in office.  Each annual warrant is for 5,000 
shares of the Company's Common Stock, has a five year term, has an exercise 
price equal to the average of the closing bid and ask prices of the Company's
Common Stock on the date of issuance, and is fully vested upon issuance.  At 
December 31, 1998 the Company had stock warrants and options outstanding to 
purchase shares of its common stock under the D&M Plan as follows:

<TABLE>
                Number         Presently      Price        Year     Expiration
               of Shares      Exercisable   Per Share    Granted       Date
<S>           <C>             <C>             <C>         <C>      <C>  

Directors'
Warrants:      10,000          10,000          $1.94       1994     June 1999
                5,000           5,000          $2.25       1994     June 1999
               15,000          15,000          $1.00       1995     June 2000
               15,000          15,000          $1.97       1996     Mar. 2001
               76,500          61,200          $6.06       1996     May  2001
               10,000           4,000          $5.88       1997     June 2002
               35,500          14,200          $1.44       1998     June 2003

Management
Employees'
Options:        7,500           4,500          $4.75       1996     Dec. 2001
               33,333          20,000          $5.00       1997     May  2002
               97,500          39,000          $3.28       1998     Jan. 2003
              305,333         187,900
</TABLE>

The Company adopted an incentive stock option plan in 1983 for key employees 
whereby 400,000 shares of common stock were reserved for issuance under the 
Plan.  Options granted vest 40%, 30% and 30% on the first, second and third 
anniversaries of their issuance, respectively and expire ten years after the 
date of grant.  At December 31, 1998 and December 31, 1997, the Company had 
granted options of 355,040 shares, of which options for 118,240 shares had 
been exercised, 231,800 expired unexercised and options for 5,000 shares were 
exercisable at a weighted average exercise price of $1.81 per share and a 
weighted average remaining contractual life of twenty-two months as of 
December 31, 1997 and ten months as of December 31, 1998.  No new options will 
be granted or were granted after 12/31/92 under the terms of this Plan.

During 1993, the shareholders approved and the Company adopted a new ten year 
incentive stock option plan for employees whereby 100,000 shares of common 
stock were reserved for issuance under the Plan.  The terms of this 1993 ISO 
Plan are similar to the 1983 Plan.  During 1995 and 1997, the shareholders 
approved increasing shares reserved for issuance pursuant to the 1993 ISO Plan 
to 600,000 then 1,500,000, respectively.  At December 31, 1998, the Company 
had granted options of 1,790,707 shares, 75,000 options had been exercised, 
682,379 options were terminated and options for 323,823 shares were 
exercisable at a weighted average exercise price of $3.02 and a weighted 
average remaining contractual life of 7.4 years.  As of December 31, 1998 
options for 1,033,328 shares were outstanding with a weighted average exercise 
price of $2.72 per share and a weighted average contractual life of 8.6 years.
Under both the 1983 Plan and the 1993 Plan, the exercise price for stock 
options may not be less than the market price of the Company's common stock at 
date of grant.



                                        47




As of January 1, 1998 and December 31, 1998, the weighted average exercise 
prices of options outstanding under the ISO Plans were $3.82 and $2.72, 
respectively.  Additionally, during 1998 the weighted average exercise prices 
of options exercised, granted and canceled under the ISO Plans were $1.12, 
$2.44 and $4.01, respectively.

Incentive stock option activity under the 1983 and 1993 Plans and price 
information follows:

<TABLE>
<S>                                             <C>         <C>   
                                                             Stock Option
                                                 Shares      Price Range	  
Balance at December 31, 1995                     193,050     $1.00 - $2.25
 Exercised                                       (35,410)    $1.00 - $2.25	
 Granted                                         447,500     $1.97 - $5.38	
 Canceled                                        (28,300)    $1.00 - $1.97	

Balance at December 31, 1996                     576,840     $1.00 - $5.38
 Exercised                                       (51,940)    $1.00 - $1.97
 Granted                                         397,707     $3.59 - $5.19
 Canceled                                        (61,360)    $1.00 - $5.00

Balance at December 31, 1997                     861,247     $1.00 - $5.38
 Exercised                                        (1,650)    $1.00 - $1.97
 Granted                                         757,750     $ .97 - $3.28
 Canceled                                       (579,019)    $1.00 - $5.38

Balance at December 31, 1998                   1,038,328     $1.00 - $5.25

</TABLE>

During 1993 the shareholders approved and the Company adopted an Employee 
Stock Purchase Plan effective for a five year period beginning January 1, 
1994.  The Company reserved 200,000 shares of common stock for issuance under 
the Plan.  During 1997, the shareholders approved increasing shares reserved 
for issuance to 600,000 shares, and during 1998 shareholders approved 
extending the Plan through December 31, 2003.  The Plan operates in one or 
more phases of six months each and is open for enrollment by employees working 
at least 20 hours per week and who have completed at least five months of 
service.  A summary of plan activity is as follows:

<TABLE>

     <C>       <C>                               <C>           <C>

   Phase #     Phase Ending Date            Shares Issued     Price
      1         June 30, 1994                   5,274        $ 1.650
      2         December 31, 1994               2,535        $  .980
      3         June 30, 1995                   6,256        $  .930
      4         December 31, 1995              22,575        $  .930
      5         June 30, 1996                  14,026        $ 2.045
      6         December 31, 1996              17,321        $ 4.202
      7         June 30, 1997                  23,826        $ 4.200
      8         December 31, 1997              40,116        $ 3.010
      9         June 30, 1998                  50,964        $ 1.590
     10         December 31, 1998              57,973        $  .680
                                              240,866
</TABLE>

Phase ten (10) shares were issued in January 1999.


The Company's Board of Directors, in connection with employment agreements, 
has granted employment options.  Employment options are exercisable for five 
years from the date of grant in accordance with a vesting schedule of 40% upon 
grant plus 20% per year for each of three years thereafter at an exercise 
price equal to the fair market value on the date of the grant.  On August 23, 
1994, the Company's Board of Directors, in connection with an employment 
agreement, granted options to Mitchel J. Laskey, the Company's President and 
then COO (now CEO), for 250,000 shares of common stock under similar terms at 
an exercise price equal to the fair market value on the date of the grant of 
$1.6875.  On September 13, 1995, the Company's Board of Directors reduced the 
exercise price on Mr. Laskey's employment options to $1.00 per share.  On 
December 17, 1996 the Company's Board of Directors, in connection with various 
other employment agreements, granted options covering 96,000 shares of common



                                        48



 
stock under similar terms at an exercise price equal to fair market value on 
the date of the grant of $5.00.  On January 1, 1997 the Company's Board of 
Directors granted additional employment options to Mitchel J. Laskey for 
50,000 shares of common stock under similar terms at an exercise price of 
$4.63 which represents the fair market value on the date of grant.  During 
1998 47,500 of the Mitchel J. Laskey January 1, 1997 options expired.  On 
January 1, 1998 the Company's Board of Directors approved additional options 
to Mitchel J. Laskey for 400,000 shares of common stock, 100,000 shares at a 
strike price of $6.00, $7.50, $9.00 and $10.50 each.  All of these employment 
option agreements provide for early vesting upon death or employment 
termination without cause and were issued at exercise prices no less than the 
fair market value of the shares on the date of grant.  As such, in accordance 
with APB 25 no corresponding compensation expense was recognized.

The Articles of Incorporation authorize 20,000,000 shares of $.01 par value 
common stock.  During 1997, the Company's shareholders approved increasing the 
number of authorized common shares to 40,000,000.

The Articles of Incorporation authorize 10,000,000 shares of $.01 par value 
preferred stock, in such series and variations in the relative rights and 
preferences, including voting rights, if any, between series as the Board of 
Directors shall determine. 

On July 31, 1995 the Company completed a Private Placement Offering issuing 
$775,000 of Subordinated Convertible Notes, bearing simple interest at 9% per 
annum, together with detachable warrants to purchase 155,000 shares of the 
Company's common stock, ("debt warrants").  The warrants are exercisable at 
$1.00 per common share, and are exercisable for five years from the date of 
issuance (70,000 in June 1995 and 85,000 in July 1995).  On November 28,1995 
all of the Subordinated Convertible Notes were converted into 968,750 shares 
of Series A Preferred Stock.  As of December 31, 1998, none of the debt 
warrants were exercised.

On December 5, 1995 the Company issued 3,375,000 shares of Series B Preferred 
Stock for $2.7 million, and on December 29, 1995 issued 375,000 shares of 
Series B Preferred Stock for an additional $300,000 in Private Placement 
transactions.

In connection with the Private Placement of the shares of Series B Preferred 
Stock, the Board of Directors of the Company authorized the issuance on 
December 8,1995 of warrants to purchase 210,000 shares of the Company's common 
stock for $1.00 per share to a financial consultant ("Series B warrants") for 
$25,000.  These warrants are exercisable for five years from the date of 
issuance.  As of December 31, 1998, none of the Series B warrants were 
exercised.

As of December 31, 1996 dividends declared and paid on Series A and Series B 
Preferred Stock were $57,931 and $217,950, respectively.  The Company's 
registration of the common stock underlying conversion of the Series A and 
Series B Preferred Stock was declared effective on September 27, 1996.  As 
such on September 27, 1996, 968,750 shares of Series A and 3,750,000 shares of 
Series B Preferred Stock were converted on a share for share basis to common 
stock.

On October 2, 1996 the Company received proceeds of $20,941,650 in a common 
stock offering from the issuance of 3,892,500 shares of common stock at $5.75 
per share net of underwriting commissions of $1,440,225.  Stock issuance costs 
incurred amounted to $714,846.  Pursuant to the terms of the offering a 
portion of the proceeds were immediately used to repay the subordinated notes 
payable of $1,000,000, the bank note payable of $2,743,882, and related 
accrued interest.

On October 30, 1996 the underwriters exercised their options to cover over-
allotments made in connection with the common stock offering.  Upon exercise, 
the Company received additional proceeds of $2,377,960 from the issuance of 
442,000 shares of common stock at $5.75 per share net of underwriting 
commissions of $163,540.

On December 17, 1996, in connection with the acquisition of CoMed, the Company 
issued 1,000,000 common shares and 6,000 shares of Series CM Preferred Stock, 
$.01 par value, to the former shareholders of CMSI.  The Series CM Preferred 
Stock was automatically converted into 564,996 shares of the Registrant's 
common stock at the close of business on August 29, 1997 ("Contingent 
Shares"), pursuant to a formula based upon the average closing bid and ask 
price of the Registrants common stock as quoted on the National Market for the 




                                        49




five (5) trading day period ending August 29, 1997 (the "CSAVG").  The CSAVG 
during this period was $5.175 and the number of shares of the Registrant's 
common stock issued as Contingent Shares was pro-rated accordingly.

During 1998 the employer match contribution of $349,454 to the Company's 
401(k) defined contribution savings plan was made through the issuance of 
208,823 shares of the Company's common stock at an average price of $1.67 per 
share.

I.  IN-PROCESS RESEARCH AND DEVELOPMENT

In-process research and development ("IPR&D"), costs identified with the 
purchase of CoMed on December 17, 1996, principally development efforts in 
connection with the CoPath client server product and client server development 
tool-kit, totaling $15,057,869, were expensed immediately following the 
acquisition.  The fair value of the acquired IPR&D was determined by 
independent appraisers under the income approach.  The income approach 
attempts to measure the income-producing capability of the acquired in-process 
activities and calculates the present value of the future economic benefits 
expected to be derived by successful completion of the IPR&D, net of allocable 
expenses and discounted to account for the level of risk associated with the 
purchased research.

J.  INCOME TAXES

The components of income tax expense (benefit) are as follows:

<TABLE>
                                                Year Ended December 31,
                                               1996       1997       1998 
<S>                                            <C>         <C>       <C> 
  Current income tax expense (benefit)
    before operating loss carry forward         $(347,000)  $    --   $     --
  Tax effects of temporary differences, net of   
    Changes in related valuation allowance        123,000    725,000   431,000
  Non-recognition of benefits of operating loss          
    Carry forward                                 224,000         --        --
  Benefits of operating loss carry forward             --   (725,000) (431,000)
                                                $      --   $     --  $     --
</TABLE>

Deferred income taxes reflect the net tax effects of operating loss and tax 
credit carryforwards and temporary differences between the carrying amounts of 
assets and liabilities for financial reporting purposes and the amounts used 
for income tax purposes.  The tax effects of significant items comprising the 
Company's net deferred tax as of December 31, 1997 and 1998, are as follows:  

<TABLE>
                                                    1997           1998
<S>                                                 <C>            <C>
 Deferred tax asset:
   Net operating loss carryforwards                  $4,883,000     $8,488,000
   Tax credit carryforwards                             655,000        655,000
   Other                                                282,000        458,000
                                                      5,820,000      9,601,000
 Deferred tax liabilities:
   Capitalized software development costs            (2,553,000)    (3,120,000)
   Other                                                (20,000)       (60,000)
 Net deferred tax asset                               3,247,000      6,421,000
 Valuation allowance                                 (3,247,000)    (6,421,000)
 Net deferred tax                                    $       --     $       --

</TABLE>

The net deferred tax asset is reduced by a valuation allowance due to the 
uncertainty associated with the realization of the net deferred tax asset.  
The valuation allowance increased $3,174,000 from the allowance of $3,247,000 
at January 1, 1998.

The provisions for Federal income taxes differs from the amount computed by 
applying the statutory rate to net earnings (loss) before income taxes for 
each of the three years in the period ended December 31, 1998 as follows:




                                         50



	
<TABLE>
                                                 Amount of Tax
                                          1996       1997        1998
<S>                                       <C>           <C>        <C> 

Computed expected tax expense (benefit)   $(5,310,000)  $ 355,000  $(3,154,000)
State taxes, net of federal benefit           (34,000)         --     (450,000)
In-process research & development 
    not deductible for tax                  5,120,000          --           --
Non-recognition (recognition) of the 
    benefits of operating loss carryforward 
    and the related valuation allowance 
    change                                    224,000    (355,000)   3,604,000
                                           $       --    $     --   $       --

</TABLE>

At December 31, 1998, the Company had unused net operating loss carryforwards 
for tax and alternative minimum tax purposes of approximately $20,894,000 and 
$19,320,000, respectively, and unused tax credits of approximately $655,000.  
These operating loss carryforwards and tax credits expire in varying amounts 
during 1999 through 2013.

K.  RELATED PARTY TRANSACTIONS

The Company expensed $165,000, $159,000 and $63,000 during 1996, 1997 and 
1998, respectively, for consulting and advisory fees paid to MMRI, Inc. which 
is majority owned by the Company's Chairman of the Board, David Pomerance.

The private placement transaction closing on July 29, 1998, more fully 
discussed in Note G, was solely subscribed to by executive officers and 
directors of the Company on terms negotiated by non-participating directors 
and executive officers with the Company's investment banker.

L.  LITIGATION

In June 1998, the Company's action against the Company's former president and 
chief executive officer, in the District Court of Lancaster County, Nebraska, 
alleging fraud, negligence and breach of fiduciary duty, as well as the 
defendant's counter claim for defamation seeking $280,000 in severance pay in 
addition to two years worth of benefits, were simultaneously resolved.  The 
Company agreed to pay $82,000 in severance pay and $43,000 in defendant's 
legal expenses in the stipulation.  The $125,000 settlement and the related 
expense has been included in general and administrative expenses reported for 
the year ended December 31, 1998.

In July 1997, the Company commenced a declaratory judgement action in Dakota 
County, Minnesota District Court seeking a declaration that the Company had 
properly terminated the services of an individual.  The individual filed a 
counterclaim and demanded $200,000 in settlement of a claim alleging breach of 
contract, promissory estoppel and fraud.  The parties are engaged in discovery 
and trial is presently scheduled for the second quarter of 1999.  The Company 
is vigorously defending all claims made by the individual, and after 
consultation with its counsel has assessed the likelihood of an unfavorable 
outcome as remote.

As of the date hereof, there are no other material legal proceedings pending 
against the Company.  In the opinion of management, the legal proceedings in 
which the Company is involved will not have a material effect on the Company's
consolidated financial statements.

M.  STOCK BASED COMPENSATION PRO FORMA INFORMATION

Options granted to the Company's directors and employees under the 1983 and 
1993 Incentive Stock Option Plans, various employment agreements, and the D&M 
Stock Option Plan (hereafter, the "Plans"), are accounted for under APB 
Opinion 25, Accounting for Stock Issued to Employees, and related 
interpretations.  The exercise price of each option granted under these Plans 
is at least equal to the market price of the Company's stock on the date of 
grant.  Accordingly, no compensation has been recognized for directors and 
employees under these Plans.  Had compensation cost for the Plans been 
determined based on the fair value of the options at the grant dates 
consistent with the method of Statement of Financial Accounting Standards 123, 
Accounting for Stock-Based Compensation (SFAS 123), the Company's net earnings 
(loss) and net earnings (loss) per share would have reflected the pro forma 
amounts indicated below.




                                         51



<TABLE>
                                                   1997            1998
<S>                          <C>               <C>             <C>

Net earnings (loss)           As reported       $1,042,958      $(9,012,690)
                              Pro forma         $  173,536      $(9,448,792)

Net earnings (loss)           As reported       $1,042,958      $(9,080,245)
  available to common         Pro forma         $  173,536      $(9,516,248)
  shareholder

Basic and diluted earnings    As reported       $     0.06      $     (0.50)
   (loss) per share           Pro forma         $     0.01      $     (0.52)

</TABLE>

The fair value of each option grant under SFAS 123 is estimated on the date of 
grant using the Black-Scholes option-pricing model.  Volatility was computed 
based on the daily common stock high, low and close information provided by 
NASDAQ for the twenty days prior to the close of trading on the date of each 
option grant, and range from 58% - 122% for options granted during 1995, 33% - 
165% for options granted during 1996, 61% - 114% for options granted during 
1997 and 59% - 234% for options granted during 1998.  Risk free rates of 6.5% 
for options granted with a ten year exercise period, and 6% for options 
granted with a three to five year exercise period were used for options 
granted during 1995 through 1997 and 5% for all options granted during 1998.  
The initial forfeiture rate under the 1993 ISO Plan for 1995, 1996 and 1997 
was 30%, under the D&M Plan for 1995, 1996 and 1997 was 15%, and ranged 
between 0% and 15% for options granted in connection with continuing 
employment agreements.  The initial forfeiture rate during 1998 under the 1993 
ISO Plan was 70%, under the D&M Plan 35% and for options granted in connection 
with employment agreements was 100%. Valuation of 1993 ISO Plan options were 
reduced by 20%, and the valuation of Non-ISO Plan options were reduced by 35%, 
to reflect the respective transfer restrictions.  The weighted average grant 
date fair value of options granted during 1996, 1997 and 1998, were $2.66, 
$2.23 and $0.41, respectively.
	
N.  UNAUDITED QUARTERLY INFORMATION

Quarterly operating results are summarized as follows (in thousands, except 
per share data):					


<TABLE>
                                    Three Months Ended (Unaudited)

1997                           March 31(1) June 30(1) September 30 December 31
<S>                            <C>         <C>        <C>          <C>

Total Operating Revenues       $10,748     $ 7,547    $10,554      $  7,696
Operating Income (Loss)          2,804      (1,931)       683        (1,244)
Net Earnings (Loss)              2,974      (1,766)       886        (1,051)
Net Earnings (Loss) Per Share      .17        (.10)       .05          (.06)
Shareholders' Equity            23,059      21,439     22,349        21,423

</TABLE>

(1)  Results include the accounts of Dynacor, Inc., with which the Company 
merged in a transaction accounted for as a pooling-of-interests on May 22, 1997.

<TABLE>
                                      Three Months Ended (Unaudited)

1998                            March 31    June 30  September 30  December 31
<S>                             <C>        <C>           <C>          <C>

Total Operating Revenues        $  6,034   $  6,327      $  8,319     $  5,149
Operating Income (Loss)           (3,015)    (2,252)           (9)      (3,777)
Net Earnings (Loss)               (2,919)    (2,199)         (100)      (3,776)
Net Earnings (Loss) Per Share       (.16)      (.12)         (.01)        (.21)
Shareholders' Equity              18,557     16,628        18,410       14,626

</TABLE>

                                        52




INDEPENDENT AUDITORS' REPORT






The Board of Directors
Dynamic Healthcare Technologies, Inc.:


We have audited the accompanying consolidated balance sheets of Dynamic 
Healthcare Technologies, Inc. as of December 31, 1997 and 1998, and the 
related consolidated statements of operations, shareholders' equity, and cash 
flows for each of the years in the three-year period ended December 31, 1998.  
These consolidated financial statements are the responsibility of the 
Company's management.  Our responsibility is to express an opinion on those 
consolidated financial statements based on our audits.  

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the consolidated financial 
statements are free of material misstatement.  An audit includes examining, on 
a test basis, evidence supporting the amounts and disclosures in the 
consolidated financial statements.  An audit also includes assessing the 
accounting principles used and significant estimates made by management, as 
well as evaluating the overall financial statement presentation.  We believe 
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of Dynamic 
Healthcare Technologies, Inc. as of December 31, 1997 and 1998, and the 
results of its operations and its cash flows for each of the years in the 
three-year period ended December 31, 1998 in conformity with generally 
accepted accounting principles.


                                                                 /S/KPMG LLP
                                                                    KPMG LLP





Orlando, Florida
February 19, 1999



                                        53




                              CORPORATE INFORMATION
                               Board of Directors

        David M. Pomerance                        Mitchel J. Laskey, C.P.A.
             Chairman                        President, Chief Executive Officer
Dynamic Healthcare Technologies, Inc.      Dynamic Healthcare Technologies, Inc.


       Jerry L. Carson                              Thomas J. Martinson
Executive Vice President and Chief                   Financial Officer
         President                                   Evans Enterprises
                                                   Martinson & Company, Ltd.


        Bret R. Maxwell                                 Daniel Raynor
       Managing Director                               Managing Partner
         First Analysis                               The Argentum Group


       Richard W. Truelick                                 Guy Rabbat
           President                                 Corporate Vice-President
       Truelick Associates                             Solectron Corporation

                               Executive Officers
         Mitchel J. Laskey                               Scott E. Waldrop
President and Chief Executive Officer                 Senior Vice President
              Treasurer                              Chief Operating Officer

         Michael L. Carlay                                Paul S. Glover
      Senior Vice President                          Vice President, Finance
       Sales and Marketing                 Chief Financial Officer and Secretary


                              Corporate Officers
         Steven J. Akerson                                 Brian M. Paige
Vice President, Corporate Operations               Vice President, Development


          Mary Lu Lander                                  Linda A. Moline
    Vice President, Marketing                Vice President, Consultant Services


        Michael A. Pomerance                           Frank M. Iafrato
  Area Vice President, Lab/Medical         Area Vice President, Radiology Sales
            Records Sales


         Joseph M. Johnson
Area Vice President, Pathology Sales


                                   Legal Counsel
                   Cohen, Berke, Bernstein, Brodie & Kondell, P.A.
                              2601 S. Bayshore Drive
                            Miami, Florida  33133-5460
                                   (305)854-5900
    Transfer Agent                                   Independent Auditors
Norwest Bank Minnesota, N.A.                              KPMG LLP
 161 North Concord Exchange                  111 North Orange Avenue, Suite 1600
St. Paul, Minnesota 55075                           Orlando, Florida 32801
     (612)450-4064                                       (407)423-3426



                                         54





                             STOCK TRADING INFORMATION


The Common Stock of Dynamic Healthcare Technologies, Inc. is traded on the 
NASDAQ National Market System under the NASDAQ symbol DHTI.

                            COMMON STOCK INFORMATION

The number of stockholders of record of the Company's Common Stock was 
approximately 3,685 on March 10, 1998.  High and low bid quotations for the 
Common Stock for the last eight quarters are presented below:

<TABLE>
                                          1997               1998
<C>                                   <C>     <C>        <C>     <C>

 Quarter Ended                        High     Low       High     Low
 March 31                            $8.6250 $4.5000    $3.7500 $2.2500 	
 June 30                              7.8125  4.0625     2.5630  0.8750 
 September 30                         6.0000  4.0000     2.3750  0.9380
 December 31                          6.5000  3.0630     1.1880  0.4690

</TABLE>
	  
The foregoing quotations reflect inter-dealer prices without retail mark-up, 
mark-down, or commission and may not necessarily represent actual 
transactions.


                 ANNUAL REPORT ON FORM 10-K, WITHOUT EXHIBITS

Dynamic Healthcare Technologies, Inc.'s annual filing with the Securities and 
Exchange Commission (Form 10-K) is available upon request without charge to 
shareholders by writing to:

                                 Cynthia Sucher
                           Investor Services Department
                      Dynamic Healthcare Technologies, Inc.
                            615 Crescent Executive Court
                             Lake Mary, Florida 32746
                                  (407) 333-5300



                                   ANNUAL MEETING

The Annual Meeting of Shareholders of Dynamic Healthcare Technologies, Inc. 
will be held on June 10, 1999, in Lake Mary, Florida.




                                          55





                            INDEPENDENT AUDITORS' CONSENT






The Board of Directors
Dynamic Healthcare Technologies, Inc.:


We consent to incorporation by reference in the registration statements (No. 
33 -72684, 33-72764 and 333-57713) on Form S-8 of Dynamic Healthcare 
Technologies, Inc. of our reports dated February 27, 1998, relating to the 
consolidated balance sheets of Dynamic Healthcare Technologies, Inc. as of 
December 31, 1997 and 1998, and the related consolidated statements of 
operations, shareholders' equity, and cash flows for each of the years 
in the three-year period ended December 31, 1998, and related schedule, 
which reports appear in the December 31, 1998 report on Form 10-K of 
Dynamic Healthcare Technologies, Inc.





                                                               /S/KPMG LLP
                                                                  KPMG LLP






Orlando, Florida
March 24, 1999










                                        56