<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                         COMMISSION FILE NUMBER 1-11831
                              SABRATEK CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                                   36-3700639
                     (I.R.S. EMPLOYER IDENTIFICATION NUMBER)

                                    DELAWARE
         (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)

                           8111 NORTH ST. LOUIS AVENUE
                             SKOKIE, ILLINOIS 60076
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

                                 (847) 720-2400
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") during the preceding 12 months (or for such shorter
period that the registrants were required to file such reports), and (2) have
been subject to such filing requirements for the past 90 days.

                            Yes    X       No            
                                -------       -------

As of November 3, 1998, 9,814,344 shares of Sabratek Corporation's Common Stock
were outstanding.



<PAGE>   2


                              SABRATEK CORPORATION

                                    FORM 10-Q
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I     FINANCIAL INFORMATION
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                      <C>
Item 1.    Financial Statements

           Consolidated Balance Sheets
           September 30, 1998 (Unaudited) and December 31, 1997............................................3

           Consolidated Statements of Operations
           Three Months and Nine Months Ended September 30, 1998 and 1997 (Unaudited)......................4

           Consolidated Statements of Cash Flows
           Nine Months Ended September 30, 1998 and 1997 (Unaudited).......................................5

           Notes to Consolidated Financial Statements (Unaudited)..........................................6

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


PART II    OTHER INFORMATION

Item 1.    Legal Proceedings..............................................................................12

Item 2.    Changes in Securities..........................................................................12

Item 6.    Exhibits and Reports on Form 8-K...............................................................12
</TABLE>




                                      -2-

<PAGE>   3

                              SABRATEK CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30, DECEMBER 31,
                                                                        1998        1997
                                                                   ------------  -----------
                            ASSETS                                  (UNAUDITED)

<S>                                                                  <C>          <C>      
Current assets:
  Cash & cash equivalents                                            $  53,097    $  19,598
  Investments in marketable securities                                   2,002        5,004
  Receivables:
      Trade, net of allowance for doubtful accounts
      Of $837 and $503 at September 30, 1998
      And December 31, 1997, respectively                               21,361       15,293
      Other                                                                789          208
                                                                     ---------    ---------
  Total receivables                                                     22,150       15,501
                                                                     ---------    ---------
  Inventories                                                           22,189       13,719
  Other current assets                                                   1,329          821
                                                                     ---------    ---------
Total current assets                                                   100,767       54,643
                                                                     ---------    ---------
Property, plant and equipment, net                                       5,682        3,546
Notes receivable                                                         3,274          233
Investments in marketable securities                                    19,976         --
Intangible assets, net                                                  19,820       12,644
Other                                                                    2,817          101
                                                                     ---------    ---------
                                                                     $ 152,336    $  71,167
                                                                     =========    =========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Short-term debt, including capital lease obligation                $      24    $      25
  Accounts payable                                                       3,675        3,718
  Payroll & commissions                                                    811        2,039
  Warranty                                                                 336          304
  Accrued expenses                                                       2,871          300
  Other                                                                    192          102
                                                                     ---------    ---------
Total current liabilities                                                7,909        6,488
                                                                     ---------    ---------
Long-term debt                                                          85,000         --
Long-term obligations                                                      340          264
                                                                     ---------    ---------
Total liabilities                                                       93,249        6,752
                                                                     ---------    ---------
Stockholders' equity:
  Preferred stock, par value $.01; 200,000 authorized, 0 issued           --           --
  Common stock, par value $.01; 25,000,000 authorized,
      10,803,728 issued, 9,803,728 outstanding at September 30,
      1998; 10,325,280 issued and outstanding at December 31, 1997         108          103
  Additional paid-in capital                                            78,269       71,344
  Treasury stock                                                       (19,340)        --
  Other                                                                    (11)         (12)
  Accumulated other comprehensive income                                   373           44
  Accumulated deficit                                                     (312)      (7,064)
                                                                     ---------    ---------
Total stockholders' equity                                              59,087       64,415
                                                                     ---------    ---------
                                                                     $ 152,336    $  71,167
                                                                     =========    =========
</TABLE>



          See accompanying notes to consolidated financial statements



                                     -3-
<PAGE>   4

                              SABRATEK CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             Three Months Ended          Nine Months Ended
                                                                 September 30,             September 30,
                                                          -----------------------------------------------------
                                                              1998          1997         1998         1997
                                                          -----------------------------------------------------
<S>                                                       <C>             <C>          <C>          <C>    
     Net sales                                            $    18,808     $  11,751    $  50,265    $ 29,065
     Cost of sales                                              8,489         5,231       22,206      12,416
                                                          -----------------------------------------------------
     Gross margin                                              10,319         6,520       28,059      16,649
     Selling, general and administrative expenses               6,433         4,757       18,022      12,663
                                                          -----------------------------------------------------
     Operating income                                           3,886         1,763       10,037       3,986
                                                          -----------------------------------------------------
     Other income (expense):
           Interest income                                      1,203           374        2,546         931
           Interest expense                                    (1,277)          (16)      (2,344)        (37)
           Other                                                    -             -            -         (32)
                                                          -----------------------------------------------------
     Net income before taxes                                    3,812         2,121       10,239       4,848

           Provision for income taxes                           1,297            42        3,487          97
                                                          -----------------------------------------------------
     Net income                                           $     2,515     $   2,079    $   6,752    $  4,751
                                                          =====================================================

     Basic income per share                               $      0.24     $    0.21    $    0.64    $   0.51
                                                          =====================================================
     Basic weighted average shares outstanding                 10,454        10,106       10,474       9,405
                                                          =====================================================
     Diluted income per share                             $      0.23     $    0.18    $    0.59    $   0.45
                                                          =====================================================
     Diluted weighted average shares outstanding               11,018        11,605       11,460      10,665
                                                          =====================================================
</TABLE>


          See accompanying notes to consolidated financial statements.









                                      -4-

<PAGE>   5
                              SABRATEK CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                           -----------------------------------------
                                                            September 30,         September 30,
                                                                1998                   1997
                                                           -----------------------------------------
<S>                                                           <C>                    <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                 $      6,752           $      4,751
   Adjustments to reconcile net income to
   Net cash used in operating activities:
      Depreciation and amortization                                  1,964                    697
      Deferred compensation                                              1                      3
      Non-cash expense                                                   -                    179
      Non-cash interest expense                                      2,338                      -
      Tax effect of stock option exercises                           3,487                      -
      Provision for bad debts                                          335                    198
      Changes in assets and liabilities:
         Receivables                                                (6,355)                (5,983)
         Other receivable                                           (1,405)                  (182)
         Deferred revenue                                                -                     35
         Inventories                                                (8,471)                (5,658)
         Other current assets                                         (491)                     -
         Accounts payable                                              (77)                (1,019)
         Accrued liabilities                                        (1,196)                   513
         Long term obligations                                         (46)                     -
         Other                                                         323                   (620)
                                                           -----------------------------------------
Net cash used in operating activities                               (2,841)                (7,086)
                                                           -----------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property, plant, equipment                            (2,800)                (1,399)
  Collection (issuance) of note receivable                          (2,217)                    83
  Purchase of intangible assets                                     (8,026)                (7,108)
  Purchases of marketable securities                               (19,641)                (2,507)
  Sale and maturity of marketable securities                         2,996                  2,905
  Purchase of Rocap, Inc., net of cash acquired                          -                 (1,433)
  Purchase of CMS Healthcare, net of cash acquired                    (195)                     -
                                                           -----------------------------------------
Net cash used in investing activities                              (29,883)                (9,459)
                                                           -----------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of short-term debt                                        (19)                  (319)
   Repayment of long-term debt                                           -                     (1)
   Purchase of treasury stock                                      (19,340)                     -
   Proceeds (payments) of capital lease, net                            82                   (105)
   Proceeds from issuance of long-term debt, net                    82,057                      -
   Proceeds from exercise of stock options and warrants              3,443                  3,419
   Proceeds from issuance of stock, net                                  -                 21,605
                                                           -----------------------------------------
Net cash provided by financing activities                           66,223                 24,599
                                                           -----------------------------------------
Increase in cash and cash equivalents                               33,499                  8,054
Cash and cash equivalents at beginning of period                    19,598                 10,447
                                                           -----------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                    $     53,097           $     18,501
                                                           =========================================
</TABLE>



          See accompanying notes to consolidated financial statements


                                      -5-

<PAGE>   6



                              SABRATEK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1998 AND 1997
                                   (UNAUDITED)

(1)      CONSOLIDATED FINANCIAL STATEMENTS

         The consolidated financial statements included herein have been
prepared by the Company, without audit, and include all adjustments of a normal
recurring nature which are, in the opinion of management, necessary for fair
presentation of the results of operations for the three month and nine month
periods ended September 30, 1998 pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures in these consolidated financial statements are adequate to make the
information presented not misleading. These consolidated financial statements
should be read in conjunction with the Company's financial statements and the
notes thereto included in the Company's Form 10-K filed by the Company with the
Securities and Exchange Commission for the year ended December 31, 1997. The
results of operations for the three month and nine month periods ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998.

(2)      SALE OF CONVERTIBLE NOTES

         In April, 1998, the Company sold in a private placement, 6% Convertible
Notes ("Notes") in an aggregate principal amount of $85,000,000. The Notes are
unsecured and mature on April 15, 2005. Interest is payable at a fixed rate of
6% on April 14 and October 15 of each year, commencing on October 15, 1998. The
Notes are convertible at any time prior to maturity at the option of the holder
into shares of common stock of the Company at a conversion price of $40.46 per
share. The Company may redeem the Notes, in whole or in part, at any time after
April 18, 2001.

(3)      ACQUISITION

         In July, 1998, the Company purchased all of the capital stock of CMS 
HealthCare, Inc. ("CMS"), a Florida corporation based in Tampa, for $160,000 in
cash. The Company could be obligated to make additional payments to the former
stockholders of CMS pursuant to an earnout formula on pre-tax income over a
specified period.

(4)      INVENTORIES

         Inventories shown on the consolidated balance sheets are comprised of
the following:


<TABLE>
<CAPTION>
                                                               September 30,      December 31,
                                                                    1998              1997
                                                               ------------       -----------
         <S>                                                   <C>                <C>
         Raw materials........................................ $     12,668       $     7,392
         Work in process......................................        3,498             2,497
         Finished goods.......................................        6,023             3,830
                                                               ------------       -----------
                                                               $     22,189       $    13,719
                                                               ============       ===========
</TABLE>


(5)      NOTES RECEIVABLE

         Notes receivable represent funds owed by third parties including those
with whom the Company has entered into license agreements. The notes bear
interest at 8% and are payable upon demand by the Company or at specified future
dates.



(6)      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

         Cash paid for interest during the nine month periods ended September 
30, 1998 and 1997 was $6,751 and $20,325, respectively.

(7)      EQUITY-RELATED ACTIVITY



                                      -6-


<PAGE>   7


         During the nine month period ended September 30, 1998, the Company
issued 232,107 shares, in aggregate, of common stock upon the exercise of stock
options pursuant to the Sabratek Corporation Amended and Restated 1993 Stock
Option Plan (the "Plan"). The option exercises resulted in proceeds to the
Company of $2,152,065, in aggregate. In addition, 8,844 shares of common stock
were issued pursuant to the Company's Stock Purchase Plan resulting in aggregate
proceeds of $201,757.

         Options for a total of 588,000 shares of common stock were granted
during the nine month period pursuant to the Plan at an exercise price equal to
the fair market value on the date of grant. The stock options vest over a
multi-year period.

         During the nine month period ended September 30, 1998, the Company
issued 237,497 shares, in aggregate, of common stock upon the exercise of
warrants. The warrant exercises resulted in proceeds to the Company of
$1,089,164, in aggregate.

         During the three month period ended September 30, 1998, the Company
purchased 1,000,000 shares of its outstanding common stock at an aggregate price
of $19,339,901, pursuant to its repurchase program adopted during the period.

         In August, 1998, the Company designated the relative rights and
preferences of a new Class of Series B Preferred Stock and adopted a Rights
Plan. Pursuant to such Plan the Company's Board of Directors declared a dividend
of one right for each share of the Company's common stock outstanding on
September 4, 1998. Each right gives the holder thereof the opportunity to
purchase one one-hundreth of one share of the Company's newly authorized Series
B Preferred Stock at a price of $150 (as adjusted from time to time) upon the
occurrence of certain events specified in the Plan. The Plan can be rescinded at
the discretion of the Company's Board of Directors.

(8)      COMPREHENSIVE INCOME

         In January, 1998, the Company adopted Statement of financial Accounting
Standards ("SFAS No. 130"), "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements, and requires a total for comprehensive
income to be provided in condensed financial statements of interim periods.
Comprehensive income includes all changes in stockholders' equity during the
period except those resulting from investments by owners and distributions to
owners. Comprehensive income for the nine months ended September 30, 1998 and
1997 consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                        Three Months Ended          Nine Months Ended
                                                           September 30                September 30
                                                       1998             1997        1998           1997
                                                       ----             ----        ----           ----
<S>                                                 <C>               <C>             <C>        <C>      
     Net income                                     $  2,515          $  2,079        6,752      $   4,751
     Other comprehensive                                          
         Income :
            Unrealized holding gains
              arising during the period                  361                 3          322             35
     Less: reclassification adjustment
            For amounts realized in net income             -                 5            7              5
                                                    --------          --------   ----------       --------
     Net unrealized gain                                 361                 8          329             40
                                                    --------          --------   ----------       --------
     Comprehensive income                           $  2,876          $  2,087        7,081       $  4,791
                                                    ========          ========   ==========       ========
</TABLE>





(9)      RECENT ACCOUNTING PRONOUNCEMENTS

         In June, 1997, the Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company is required to adopt this
new standard for periods ending after fiscal 1997, but is not required to be
reported in the interim consolidated financial statements in the first year of
application. This statement establishes standards for the way companies are to
report information about operating segments. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The Company is currently evaluating the impact of this standard on
disclosures required in its consolidated financial statements.





                                      -7-


<PAGE>   8

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


OVERVIEW

         The Company's founding vision and strategic focus is the creation of a
virtual hospital room for the alternate-site health care market. From its
inception in 1989 through mid-1992, the Company was in its development stage and
engaged primarily in research and development, product engineering and
activities related to obtaining clearance from the FDA for its first product,
the 3030 Stationary Pump. The Company has six years of operating history and,
although profitable since the third quarter of 1996, experienced significant
operating losses from its inception through mid-1996. Upon receiving FDA
clearance for the 3030 Stationary Pump in mid-1992, the Company focused its
efforts on creating a domestic and international sales and marketing network, as
well as a manufacturing capability, to assist in the distribution of its first
product to the alternate-site health care market. Concurrent with these sales
and marketing activities, the Company continued to fund the research,
development and regulatory clearance activities of other device and software
products.

         The Company commercially launched the 6060 Ambulatory Pump and related
disposable supplies in late 1995 and both MediVIEW(R) and the PumpMaster(R) in
late 1996. Since then, the Company has continued its sales and marketing
activities domestically and internationally for the distribution of its products
and continued to fund the research and development of additional products. On
February 25, 1997, the Company acquired substantially all the assets of Rocap,
Inc. which produces and markets pre-packaged injectable prescription
pharmaceuticals and pre-filled flush syringes. In addition, the Company derives
revenues from the servicing of products, sale of accessories, sale of extended
warranties and consulting services.

         The Company sells its products both directly to alternate-site and
acute-care providers, as well as to third-party distributors. The Company's
distributors and customers may make bulk purchases which may cause fluctuations
in quarterly revenues. The Company also markets and sells its products
internationally and, as a result, its revenues may be affected by fluctuations
in exchange rates. Failure to obtain regulatory approval for the distribution of
new products domestically or in international markets, or adverse regulatory
changes, may also affect the revenues of the Company.

         The Company has entered into strategic partnerships, including Unitron
and GDS, which provide components of the virtual hospital room. Management
intends to pursue additional acquisition and partnering opportunities in order
to further accelerate the development of the virtual hospital room.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS ENDED SEPTEMBER 30, 1997
AND NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS ENDED SEPTEMBER 30,
1997

         Net sales. Net sales increased $7.0 million to $18.8 million for the
three month period ended September 30, 1998 as compared to $11.8 million for the
three month period ended September 30, 1997, an increase of 60%. Net sales
increased $21.2 million to $50.3 million for the nine month period ended
September 30, 1998 as compared to $29.1million for the nine month period ended
September 30, 1997, an increase of 73%. The increase for the three month and
nine month periods is attributable to several factors; incremental unit sales
volume of the 3030 Stationary Pump and 6060 Ambulatory Pump and their respective
disposables, an increase in the average per unit selling price due to a higher
ratio of direct sales versus dealer sales, a significant increase in volume of
the Rocap product line acquired in February, 1997, additional sales of the
MediVIEW(R) and PumpMaster(R) products, revenues generated from product 
licensing and consulting services, and the sale of certain licensed products
from GDS Technology, Inc.

         Cost of Sales. Cost of sales increased $3.3 million to $8.5 million for
the three month period ended September 30, 1998 as compared to $5.2 million for
the three month period ended September 30, 1997, an increase of 62%. Cost of
sales increased $9.8 million to $22.2 million for the nine month period ended
September 30, 1998 as compared to $12.4 million for the nine month period ended
September 30, 1997, an increase of 79%. The increase for the three month and
nine month periods is primarily attributable to direct product costs associated
with incremental unit sales volume of the 3030 and 6060 infusion pumps and
related disposables, as well as the increased unit volume of the Rocap prefilled
syringe product line. To a lesser extent, the increase for the three month
period is attributable to amortization and period costs relating to the
expansion of production capacity.


                                      -8-

<PAGE>   9

         Gross Margin. Gross margin increased $3.8 million to $10.3 million for
the three month period ended September 30, 1998 as compared to $6.5 million for
the three month period ended September 30, 1997, an increase of 58%. Gross
margin increased $11.5 million to $28.1 million for the nine month period ended
September 30, 1998 as compared to $16.6 million for the nine month period ended
September 30, 1997, an increase of 68%. The increase for the three month and
nine month periods is due primarily to the incremental unit sales volume and the
per unit contribution thereon, including the allocation of fixed manufacturing
costs over a greater number of units. Gross margin as a percent of sales
remained unchanged at 55% for the three month period ended September 30, 1998,
as compared to the three month period ended September 30, 1997. Gross margin as
a percentage of sales decreased to 56% for the nine month period ended September
30, 1998, as compared to 57% for the nine month period ended September 30, 1997.
The decrease in percentage for the nine month period is attributable to the
lower average gross margin generated from the Rocap product line.

         Selling General and Administrative Expenses. Selling, general and
administrative expenses increased $1.6 million to $6.4 million for the three
month period ended September 30, 1998 as compared to $4.8 million for the three
month period ended September 30, 1997, an increase of 35%. Selling, general and
administrative expenses increased $5.3 million to $18.0 million for the nine
month period ended September 30, 1998 as compared to $12.7 million for the nine
month period ended September 30, 1997, an increase of 42%. The increase for the
three month and nine month periods is due primarily to the expansion of the
Company=s direct sales force and clinical support staff and associated travel.
Also contributing to the increase for the nine month period ended September 30,
1998 was three full quarters of expenses relating to the Rocap product line, and
the addition of administrative and management personnel. Selling, general and
administrative expenses as a percent of sales decreased to 34% for the three
month period ended September 30, 1998 as compared to 40% for the three month
period ended September 30, 1997. Selling, general and administrative expenses as
a percent of sales decreased to 36% for the nine month period ended September
30, 1998 as compared to 44% for the nine month period ended September 30, 1997.

         Operating Income. Operating income increased $2.1 million to $3.9
million for the three month period ended September 30, 1998 as compared to $1.8
million for the three month period ended September 30, 1997, an increase of
120%. Operating income increased $6.0 million to $10.0 million for the nine
month period ended September 30, 1998 as compared to $4.0 million for the nine
month period ended September 30, 1997, an increase of 152%. Operating income as
a percent of sales increased to 21% for the three month period ended September
30, 1998 as compared to 15% for the three month period ended September 30, 1997.
Operating income as a percent of sales increased to 20% for the nine month
period ended September 30, 1998 as compared to 14% for the nine month period
ended September 30, 1997. The increase in operating income is due primarily to
incremental gross margin generated by increased unit sales volume of new and
existing products, as described above.

         Interest Income. Interest income increased $826,000 to $1.2 million for
the three month period ended September 30, 1998 as compared to $374,000 for the
three month period ended September 30, 1997, an increase of 222%. Interest
income increased $1.6 to $2.5 million for the nine month period ended September
30, 1998 as compared to $931,000 for the nine month period ended September 30,
1997, an increase of 173%. The increase is attributable to a higher average
amount of cash available for investment as compared to that of the comparative
period. The Company completed a secondary public offering in April, 1997 which
resulted in proceeds to the Company of approximately $22 million, after
underwriting discounts and commissions. In addition, the Company completed the
sale of convertible notes in April, 1998 which resulted in net proceeds to the
Company of approximately $82.1 million.

         Interest Expense. Interest expense increased $1.2 million to $1.3
million for the three month period ended September 30, 1998 as compared to
$16,000 for the three month period ended September 30, 1997, an increase of
7,881%. Interest expense increased $2.2 million to $2.3 million for the nine
month period ended September 30, 1998 as compared to $37,000 for the nine month
period ended September 30, 1997, an increase of 6,235%. The increase



                                      -9-


<PAGE>   10


for the three month and nine month periods is attributable to the sale of 6%
convertible notes in April, 1998, for which interest expense is recorded at a
rate of $1.3 million per full fiscal quarter. Interest expense would be reduced
proportionately for any notes converted into common stock.

         Provision for Income Taxes. The provision for income taxes increased
$1.2 million to $1.3 million for the three month period ended September 30, 1998
as compared to $42,000 for the three month period ended September 30, 1997, an
increase of 2,988%. The provision for income taxes increased $3.4 million to
$3.5 million for the nine month period ended September 30, 1998, as compared to
$97,000 for the nine month period ended September 30, 1997, an increase of
3,495%. The provision for income taxes for the three month and nine month
periods ended September 30, 1998 reflects an estimated 34% effective annual tax
rate, after adjusting for allowable net operating loss carryforwards. The
provision for income taxes for the three month and nine month periods ended
September 30, 1997 was reversed in the 1997 financial statements as no federal,
state or alternative minimum tax was incurred due to allowable net operating
loss carryforwards and tax deductible compensation expenses.

         Net Income. Net income increased $436,000 to $2.5 million for the three
month period ended September 30, 1998 as compared to $2.1 million for the three
month period ended September 30, 1997, an increase of 21%. Net income increased
$2.0 million to $6.8 million for the nine month period ended September 30, 1998
as compared to $4.8 million for the nine month period ended September 30, 1997,
an increase of 42%. The increases in net income for the three month and nine
month periods were achieved primarily as a result of incremental gross margin
generated by increased unit sales volume of new and existing products, as
discussed above. The increase in net income was partially offset by an increase
in the provision for income taxes.




LIQUIDITY AND CAPITAL RESOURCES

         In April, 1998, the Company completed the private sale of 6%
Convertible Notes in an aggregate principal amount of $85,000,000 maturing in
2005. The interest is fixed and is payable semi-annually. The notes are
convertible into the Company's common stock at a conversion price of $40.46
anytime at the option of the noteholders. The Company may redeem the notes at
anytime after April 18, 2001. Upon the occurrence of a "Designated Event" the
Company is required to offer to redeem the notes. A designated event is defined
as a change in control or the cessation of trading of the Company's common
stock. Net proceeds to the Company were approximately $82.1 million and such
proceeds were used to purchase investment grade securities.

         As of September 30, 1998, the Company had approximately $75.0 million
in cash, cash equivalents, and investments in marketable securities, and had net
working capital of approximately $92.9 million. During the three month period
ended September 30, 1998, approximately $19.3 million was used to purchase
outstanding common stock of the Company pursuant to a repurchase program
approved by the Company's Board of Directors. In March, 1997, the Company
entered into a two-year credit agreement with a financial institution with up to
$9.5 million of available borrowing. As of October 31, 1998, no borrowing had
occurred under the credit agreement.

         The Company used cash in its operations of approximately $2.8 million
for the nine months ended September 30, 1998. Cash used in operations for the
period exceeds the Company's operating income for the same period due,
primarily, to the growth in trade accounts receivable and inventories as a
result of actual and anticipated growth in sales volume.

         During the third quarter of 1997, the Company entered into strategic
partnerships with Unitron and GDS. The Company has made cumulative cash payments
of $14.6 million to Unitron and GDS in cash license fees, in aggregate, pursuant
to the respective license agreements. In addition, should the Company decide to
exercise its right to acquire either Unitron or GDS, such acquisitions could
require additional outlays of cash.

         In September, 1997, the Company initiated a hedging program through the
use of forward contracts to 



                                      -10-


<PAGE>   11



minimize foreign currency fluctuation exposure. As of September 30, 1998, the
aggregate U.S. dollar amount of the contracts is $1,567,720 and such contracts
expire at various dates through March, 1999.

         Future liquidity and capital resources could be adversely influenced by
certain factors, including the Company's dependence on a relatively new customer
base, regulatory or legislative changes pertaining to health care, product
liability exposure regarding the delivery of medication, dependence on future
product development, and others. There can be no assurance that the Company will
not require additional financing and, in the future, seek additional funds
through bank facilities, debt or equity offerings and to the extent such
additional financing is not available, the Company could suffer material adverse
effects to its financial condition and the results of its operations.





YEAR 2000 STATUS

         Since their inception, all of the Company's products, including
software, have been developed with consideration for the millenium change.
Additionally, the products have undergone specific year 2000 date testing to
verify and validate compliance. The Company has made inquiry of its material
strategic partners, vendors, and suppliers and has received representation that
the devices and software that the Company currently licenses from third parties
have been determined to be year 2000 compliant. The Company continues the
process of verifying that its suppliers will not experience year 2000 problems
that could have a material adverse effect on the Company. Although the Company
knows of no problems in this regard, due to the ability of certain of the
Company's products to interact with other devices or software, the Company can
give no assurance that the performance of its products could not be directly and
indirectly affected by non-compliant products of a third party.

         The Company has assessed its systems and believes them to be year 2000
compliant. The Company will continue to assess its year 2000 exposure, including
systems of third parties on which the Company relies. If the Company's
management becomes aware of non-compliant systems that will adversely affect the
Company or its products, it will develop an action plan and assess the resources
necessary to resolve such problem.












                                      -11-

<PAGE>   12


                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On February 5, 1997, SIMS Deltec filed a complaint in the United States
District Court for the District of Minnesota alleging that Sabratek's
manufacture, use and/or sale of the MediVIEW(R) software in conjunction with its
infusion pumps infringes on a patent entitled "Systems and Methods of
Communicating with Ambulatory Medical Devices Such as Drug Delivery Devices"
previously issued to SIMS Deltec. Subsequently, SIMS Deltec filed other
pleadings that raised additional claims against Sabratek and three of its
employees including trade secret misappropriation, unfair competition and
interference with SIMS Deltec's customers. SIMS Deltec seeks injunctive relief,
unspecified monetary damages and costs. In addition, SIMS Deltec filed for a
preliminary injunction against Sabratek seeking to prevent on a preliminary
basis Sabratek's manufacture and sale of the MediVIEW(R) system. On August 4,
1997, the District Court denied the motion for preliminary injunction.
Additionally, one of the claims against a Sabratek employee has been dismissed
with prejudice. The Company and the individual defendants intend to vigorously
defend against the allegations made by SIMS Deltec. Protracted litigation or an
adverse outcome in this matter could have a material adverse impact on the
Company's business, financial condition and results of operations.

         In addition, Sabratek has filed a complaint against SIMS Deltec in the
United States District Court for the Northern District of Illinois alleging that
SIMS Deltec employees have made misstatements about Sabratek's products.
Sabratek has stated claims under the Federal Lanham Act to stop SIMS Deltec's
improper disparagement and has requested preliminary and permanent injunctive
relief, monetary damages and costs.

ITEM 2. CHANGES IN SECURITIES

         On August 20, 1998, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of Common Stock of
the Company to stockholders of record at the close of business on September 4,
1998. Except as set forth in the Rights Agreement referred to below, each Right
entitles the registered holder to purchase from the Company one one-hundreth of
a share of Series B Preferred Stock, par value $0.01 per share ("Series B
Shares"), at a price of $150.00 (the "Purchase Price"), subject to adjustment.
The Purchase Price shall be paid in cash. The description and terms of the
Rights are set forth in a Rights Agreement between the Company and LaSalle
National Bank, as Rights agent, a copy of which was annexed to the Current
Report on Form 8-K filed by the Company on August 25, 1998. The relative rights
and preferences of the Series B Shares are as set forth in the Registration
Statement on Form 8-A filed by the Company on August 25, 1998.

         During the nine month period ended September 30, 1998, the Company
issued the following securities without registration under the Securities Act of
1933, as amended.

         From February 12, 1998 to September 15, 1998, the Company issued
237,497 shares of common stock upon the exercise of warrants not covered by a
registration statement. The Company received aggregate proceeds of approximately
$1,089,164 upon the exercise of such warrants. All such issuances of common
stock were exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits

                                      -12-
<PAGE>   13

EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-K.)

<TABLE>
<CAPTION>
                                                                                                   Incorporation by
    Exhibit                                                                                          Reference (if
    Number                         Description of Documents                                           applicable)
    ------                         ------------------------                                           -----------
<S>              <C>                                                                                     <C>
     3.1         Articles of Incorporation ...........................................................    +

     3.2         ByLaws ..............................................................................    +

     4.1         Indenture, dated April 14, 1998 by and between the Company
                 and LaSalle National Bank, as Trustee ...............................................  ++++++

     4.2         Rights Agreement, dated August 20, 1998 by and between the
                 Company and LaSalle National Bank, as the Rights Agent ..............................  +++++++
     
     10.1        Agreement with Americorp Financial, Inc. re: Leasing Services,                           +
                 dated March 22, 1995 ................................................................

    10.1.1       Amendment, dated September 16, 1996, to Agreement with                                  
                 Americorp Financial, Inc. ...........................................................   +++

    10.2         Intentionally Omitted ...............................................................

    10.3         Intentionally Omitted ...............................................................

    10.4         Intentionally Omitted ...............................................................

    10.5         Intentionally Omitted ...............................................................

    10.6         Intentionally Omitted ...............................................................

    10.7         Intentionally Omitted ...............................................................

    10.8         Intentionally Omitted ...............................................................

    10.9         Intentionally Omitted ...............................................................

    10.10        Intentionally Omitted ...............................................................

    10.11        Intentionally Omitted ...............................................................

    10.12        Intentionally Omitted ...............................................................

    10.13        Pump Contract with Chartwell Home Therapies, dated November                              
                 22, 1993 ............................................................................    +

    10.14        Sales Agreement with Pharmacy Corporation of America, dated                              +
                 March 17, 1995 ......................................................................

    10.15        Sales & Marketing Agreement with Alpha Group, dated November 6,
                 1995 ................................................................................    +

    10.16        Intentionally Omitted ...............................................................

    10.17        Intentionally Omitted ...............................................................

    10.18        Intentionally Omitted ...............................................................

    10.19        Intentionally Omitted ...............................................................

    10.20        Intentionally Omitted ...............................................................

    10.21        Intentionally Omitted ...............................................................

    10.22        Intentionally Omitted ...............................................................
</TABLE>



                                      -13-
<PAGE>   14

<TABLE>
<S>              <C>                                                                                      <C> 
    10.23        Intentionally Omitted .............................................................. 
                                                                                                                    
    10.24        Intentionally Omitted .............................................................. 
                                                                                                                    
    10.25        Intentionally Omitted .............................................................. 
                                                                                                                    
    10.26        Stock Option Plan ..................................................................      +
                                                                                                                    
    10.27        Lease for Real Property located at 5601 West Howard, Niles, Illinois,                              
                 dated as of May 31, 1994 ...........................................................      +        
                                                                                                                    
    10.27.1      Amendment, dated October 30, 1996 to Lease for Real Property located at                            
                 5601 West Howard, Niles, Illinois ..................................................      +++      
                                                                                                                    
    10.28.1      Employment Agreement for K. Shan Padda .............................................

    10.29        Intentionally Omitted ..............................................................               
                                                                                                                    
    10.30        Asset Purchase Agreement, dated February 25, 1997, by and among Sabratek                           
                 Corporation; Rocap, Inc. and Elliot Mandell ........................................      ++       

    10.31.1      Employment Agreement for Stephen L. Holden .........................................
                                                                                                                 
    10.32        Employment Agreement for Elliot Mandell ............................................      ++       
                                                                                                                    
    10.33        Lease Agreement for property located at 11 Sixth Road, Woburn, Massachusetts,                      
                 dated February 1, 1997 .............................................................      ++++     
                                                                                                                    
    10.34        Lease Agreement for property located at 5 Constitution Way, Woburn,                                
                 Massachusetts, dated June 26, 1995 .................................................      ++++     
                                                                                                                    
    10.35        Lease Agreement for property located at 1629 Prime Court, Suite 100, Orlando,                      
                 Florida, dated March 11, 1997 ......................................................      +++++    
                                                                                                                    
    10.36        Lease Agreement for property located at 8350 Parkline Blvd., Orlando, Florida,                     
                 dated June 18, 1998 ................................................................      ++++++++ 
                                                                                                                    
    10.37        Credit Agreement, dated as of March 26, 1997, by and between the Company                           
                 as Borrower and LaSalle National Bank (formerly known as LaSalle Bank NI) as Lender       ++++++   

    10.38        Long Term Incentive Compensation Plan ..............................................

    10.39        Lease Agreement for property located at 8111 N. St. Louis, Skokie, Illinois,
                 dated May 15, 1998. ................................................................

    11.1         Statement Re Computation of Per Share Earnings .....................................      

    27           Financial Data Schedule ............................................................
</TABLE>

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

+         Incorporated by reference to the Company's Registration Statement on
          Form S-1, declared effective by the Commission on June 21, 1996 (File
          No. 333-3866).

++        Incorporated by reference to the Company's Current Report on Form 8-K
          filed with the Commission on March 11, 1997.

+++       Incorporated by reference to the Company's Annual Report on Form 10-K
          for the fiscal year ended December 31, 1996 filed with the Commission
          of March 31, 1997.

++++      Incorporated by reference to the Company's Registration Statement on
          Form S-1 declared effective by the Commission on April 4, 1997.

+++++     Incorporated by reference to the Company's Quarterly Report on Form
          10Q for the quarter ended March 31, 1997 filed with the Commission on
          May 15, 1997

++++++    Incorporated by reference to the Company's Registration Statement on
          Form S-3 declared effective by the Commission on July 14, 1998.

+++++++   Incorporated by reference to the Company's Current Report on Form 8-K
          filed with the Commission on August 25, 1998.

++++++++  Incorporated by reference to the Company's Quarterly Report on Form
          10Q for the quarter ended June 30, 1998 filed with the Commission on
          August 14, 1998.    


(b)       Reports on Form 8-K

          The Company filed a Current Report on Form 8-K on August 25, 1998
          announcing the adoption of a Rights Plan.      
<PAGE>   15


                                   SIGNATURES


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


                              SABRATEK CORPORATION



Date:  November 12, 1998          By:      /s/ K. Shan Padda           
                                           ------------------------------------
                                           K. Shan Padda
                                           Chairman and Chief Executive Officer



         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the undersigned, in his capacity as the principal
financial officer of the registrant.



Date:  November 12, 1998          By:      /s/ Paul S. Jurewicz        
                                           ------------------------------------
                                           Paul S. Jurewicz
                                           Principal Financial Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the undersigned, in his capacity as the chief
accounting officer of the registrant.



Date:  November 12, 1998          By:      /s/ Scott Skooglund         
                                           ------------------------------------
                                           Scott Skooglund
                                           Chief Accounting Officer






                                      -15-