<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB


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


               For the quarterly period ended September 30, 1997


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


                        Commission File Number: 0-24696


                           NATIONAL DIAGNOSTICS, INC.
             (Exact Name of Registrant as Specified in its Charter)


         Florida                                        59-3248917
         -------                           (I.R.S. Employer Identification No.)
(State or other jurisdiction of            
incorporation or organization)

755 West Brandon Blvd., Brandon, Florida                     33511
----------------------------------------                     -----
(Address of Principal Executive Offices)                   (Zip Code)

Registrant's Telephone Number, including area code:        (813) 661-9501

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities 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 [ ]

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

<TABLE>
<S>                                          <C>
Class:  Common Stock, No Par Value           Outstanding at November 12, 1997:  3,093,430
</TABLE>

Transitional Small Business Disclosure Format (check one)    YES [ ]    NO [X]

                                  Page 1 of 50

<PAGE>   2



                           NATIONAL DIAGNOSTICS, INC.

                              INDEX TO FORM 10-QSB


<TABLE>
<CAPTION>
                                                                      Page
                                                                     Number
                                                                     ------
<S>        <C>                                                       <C>
PART I.    FINANCIAL STATEMENTS                                         


Item 1.    Financial Statements


           Condensed Consolidated Balance Sheets at
                December 31, 1996 and September 30, 1997                3


           Condensed Consolidated Statements of Operations
                for the three and nine months ended September 30,
                1996 and 1997                                           5     


           Condensed Consolidated Statements of Cash Flows
                for the three and nine months ended September 30,
                1996 and 1997                                           6     


           Notes to Condensed Consolidated Financial Statements         8     


Item 2.    Management's Discussion and Analysis of Financial
                Condition and Results of Operations                    10     



PART II.   OTHER INFORMATION


Item 2.    Legal Proceedings                                           13     

Item 6.    Exhibits and Reports on Form 8-K                            13     


SIGNATURES                                                             14     
</TABLE>

                                       2

<PAGE>   3

ITEM - 1

                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>

                                                                                September 30,
                                                              December 31,           1997
                                                                 1996            (Unaudited)
                                                             -------------      -------------
<S>                                                          <C>                <C>                                             
Current assets:
  Cash                                                       $     104,335      $      39,325
  Accounts receivable, net of allowance of $664,402 in
     1996 and $739,106 in 1997                                   2,131,284          2,360,262
Due from related party                                               -                 23,819
Prepaid expenses and other current assets                          220,864            155,075
                                                             -------------      -------------


             Total current assets                                2,456,483          2,578,481
                                                             -------------      -------------

Property and equipment                                           9,481,198          9,989,183
  Less:  accumulated depreciation and
     amortization                                               (3,264,655)        (4,258,732)
                                                             -------------      -------------

              Net property and equipment                         6,216,543          5,730,451
                                                             -------------      -------------

Other assets:
     Excess of purchase price over net assets
     acquired, net of accumulated amortization
     of $61,274 in 1996 and $79,631 in 1997                        428,187            409,830
  Organization and start-up costs, net                              47,444             35,592
  Deposits                                                          51,020             55,409
                                                             -------------      -------------

              Total other assets                                   526,651            500,831
                                                             -------------      -------------



                                                             $   9,199,677      $   8,809,763
                                                             =============      =============
</TABLE>

See Accompanying Notes.

                                       3
<PAGE>   4



                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                         September 30,
                                                         December 31,       1997
                                                            1996         (Unaudited)
                                                         ------------    -------------
<S>                                                      <C>             <C>
Current liabilities:
  Lines of credit                                        $   993,818     $ 1,242,546
  Note payable                                                 4,294               -
  Note due related party                                      99,882          66,075
  Current installments of long-term debt                     105,410         210,000
  Current installments of obligations under
     capital leases                                        1,103,952       1,417,000
  Accounts payable                                         1,080,236       1,485,200
  Accrued radiologist fees                                   489,785         515,514
  Accrued expenses other                                     738,687         661,128
                                                         -----------     -----------

             Total current liabilities                     4,616,064       5,597,463

Long-term liabilities:
  Long-term debt, excluding current installments             619,227         600,082
  Obligations under capital leases, excluding
     current installments                                  3,454,456       2,752,579
  Deferred lease payments                                    236,912         190,580
                                                         -----------     -----------

             Total liabilities                             8,926,659       9,140,704
                                                         -----------     -----------

Stockholders' equity:
  Preferred stock, no par value, 1,000,000
     shares authorized, no shares issued
     and outstanding                                               -               -
  Common stock, no par value, 9,000,000 shares
     authorized, 2,539,629 and 3,093,430 shares
     issued and outstanding in 1996 and 1997                     686             779
  Additional paid-in capital                               2,320,497       2,899,138
  Retained earnings (accumulated deficit)                 (2,048,165)     (3,230,858)
                                                         -----------      ----------

             Net stockholders' equity (deficit)              273,018        (330,941)
                                                         ===========      ==========                       

                                                         $ 9,199,677      $8,809,763
                                                         ===========      ==========                      

</TABLE>

See Accompanying Notes.

                                       4
<PAGE>   5



                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                  Three months      Three months      Nine months       Nine months
                                                     ended              ended            ended             ended
                                                  September 30,     September 30,     September 30,     September 30,
                                                     1996               1997             1996              1997
                                                  (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)
                                                  -----------       -----------       -----------       -----------                
<S>                                               <C>               <C>               <C>               <C>
Revenue, net                                      $ 2,123,105       $ 2,535,390       $ 6,606,240       $ 7,724,625
                                                  -----------       -----------       -----------       -----------
Operating expenses:
  Direct operating expenses                         1,211,186         1,256,417         3,403,597         4,152,251
  General and administrative                          981,830         1,186,388         2,488,178         3,166,349
  Depreciation and amortization                       353,747           350,260           854,654         1,089,187
                                                  -----------       -----------       -----------       -----------

             Total operating expenses               2,546,763         2,793,065         6,746,429         8,407,787
                                                  -----------       -----------       -----------       -----------

             Operating income (loss)                 (423,658)         (257,675)         (140,189)         (683,162)

Interest expense                                      150,854           153,962           364,784           512,236
Other income                                            1,938             7,094            43,563            12,875
                                                  -----------       -----------       -----------       -----------

Income (loss) before income taxes                    (572,574)         (404,543)         (461,410)       (1,182,523)

Income taxes                                               --                --                --                --
                                                  -----------       -----------       -----------       -----------

             Net income (loss)                    $  (572,574)      $  (404,543)      $  (461,410)      $(1,182,523)
                                                  ===========       ===========       ===========       ===========


Net income (loss) per
  common share                                    $      (.22)      $      (.10)      $      (.18)             (.37)        
                                                  -----------       -----------       -----------       -----------         

Weighted average number of common
  shares outstanding                                2,598,077        *4,182,828         2,563,282         3,180,942
                                                  -----------       -----------       -----------       -----------
</TABLE>

   * Note:  1,800,000 shares were re-acquired seventy one days into the quarter.


See Accompanying Notes.

                                       5

<PAGE>   6




                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                        Three months    Three months   Nine months     Nine months
                                                           ended           ended          ended            ended 
                                                        September 30,   September 30,  September 30,   September 30,   
                                                             1996           1997           1996            1997                 
                                                         (Unaudited)     (Unaudited)   (Unaudited)     (Unaudited)
                                                        -------------   -------------  -------------   -------------            
<S>                                                      <C>             <C>             <C>             <C>         
Cash flows from operating activities:
 Net income (loss)                                       $(572,114)      $(404,543)      $(461,410)      $(1,182,523)
 Adjustments to reconcile net income (loss) to
 net cash provided by operating activities:
   Income taxes                                                 --              --              --                --
   Depreciation and amortization                           346,114         350,260         847,021         1,089,187
   Provision for Bad Debts                                  (3,283)          3,351          70,817            74,704
   (Increase) decrease  in accounts receivable              (4,149)        (24,603)       (652,423)         (303,682)
   Loss on disposition of equipment                            346           5,260           5,217             7,863
   (Increase) decrease in prepaid
     expenses and other current assets                      10,935         (16,743)         65,808            66,242
   Increase (decrease) in accounts payable                 (32,265)        245,427         387,095           585,832
   Increase (decrease)  in accrued radiologist fees          3,556         (47,126)         96,852            25,729
   Increase (decrease) in other accrued expenses            72,958         132,929          65,344           106,405
   Increase (decrease) in due to related parties           107,282              --         107,282                --
   Increase (decrease) in deferred lease payments          (15,343)        (16,637)         40,243           (46,332)
   Value of warrants issued for services rendered            8,000              --           8,000                --
                                                         ---------        ---------      ---------       -----------
                                                                                                        
   Net cash provided (used) by operating activities        (77,963)        227,575         579,846           423,425
                                                         ---------       ---------       ---------       -----------

Cash flows provided (used) by investing activities:
 Purchases of property and equipment                      (282,112)         (7,887)       (574,134)         (225,175)
 Increase in deposits                                        3,820          (7,146)         (7,539)           (7,965)
 Increase in organization & start-up costs                      --              --        (134,728)          (66,588)
                                                         ---------       ---------       ---------       -----------

   Net cash used by investing activities                  (278,292)        (15,033)       (716,401)         (299,728)
                                                         ---------       ---------       ---------       -----------

Cash flows provided (used) by financing activities:
 Increase in line of credit                                384,597          17,892         485,597           248,728
 Proceeds from long-term borrowings                             --              --              --           150,000
 Repayment of long-term borrowings                          (5,162)        (26,305)        (53,344)          (64,555)
 Proceeds of borrowing from related parties                     --              --          16,255           125,000
 Repayment  of borrowings from related parties              (7,871)        (61,000)         (7,871)          (67,167)
 Proceeds from other notes payable                              --              --              --           205,000
 Repayment from other notes payable                             --         (67,082)         (8,000)         (209,294)
 Principal payments under capital lease obligations       (138,117)       (187,586)       (413,304)         (654,409)
 Proceeds from issuance of common stock net                149,475          77,990         149,475            77,990
                                                         ---------       ---------       ---------       -----------

   Net cash provided (used) by financing activities        382,922        (246,091)        168,808          (188,707)
                                                         ---------       ---------       ---------       -----------

Net increase (decrease) in cash                             26,667         (33,549)         32,253           (65,010)
Cash  at beginning of period                               133,680          72,874         128,094           104,335
                                                         ---------       ---------       ---------       -----------

Cash at end of period                                    $ 160,347       $  39,325       $ 160,347       $    39,325
                                                         =========       =========       =========       ===========

</TABLE>

See Accompanying Notes.

                                       6
<PAGE>   7


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                               Three months     Three months   Nine months    Nine months
                                                                  ended            ended          ended         ended
                                                              September 30,    September 30,  September 30,  September 30,
                                                                  1996             1997           1996           1997
                                                               (Unaudited)      (Unaudited)    (Unaudited)   (Unaudited)

<S>                                                           <C>              <C>            <C>            <C>
Supplemental disclosure of cash
  flow information - Interest paid                              $  102,000     $   131,200     $  322,000    $   533,500
                                                                 =========       =========      =========      =========

     Stock issued as satisfaction for trade creditor  debt      $        -     $    29,620     $        -    $   205,140
                                                                 =========       =========      =========      =========    

     Stock issued for equipment acquisition                     $        -     $         -     $        -    $    20,000
                                                                 =========       =========      =========      =========

     Stock issued as satisfaction of related party debt         $        -     $         -     $   67,299    $   275,604
                                                                 =========       =========      =========      =========

     Stock issued in exchange for marketable securities         $        -     $         -     $        -    $ 1,800,000
                                                                 =========       =========      =========      =========

     Stock exchange for marketable securities rescinded         $        -     $(1,800,000)    $        -    $(1,800,000)
                                                                 =========       =========      =========      =========   

     Asset added under capital lease                            $1,331,285     $         -     $2,020,622    $   265,580
                                                                 =========       =========      =========      =========      

     Note received for pre-opening costs                        $        -     $         -     $   77,904    $
                                                                 =========       =========      =========      =========

     Note received on disposal of equipment                     $        -     $         -     $    9,770    $
                                                                 =========       =========      =========      =========

</TABLE>


See Accompanying Notes.

                                       7
<PAGE>   8


                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1)     SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed by National Diagnostics, Inc., and
Subsidiaries (the "Company") for quarterly financial reporting purposes are the
same as those disclosed in the Company's annual financial statements. In the
opinion of management, the accompanying condensed consolidated financial
statements reflect all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation of the information presented.

The quarterly condensed consolidated financial statements herein have been
prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company management believes the disclosures are adequate to make
the information not misleading, it is suggested that these quarterly condensed
consolidated financial statements be read in conjunction with the audited
annual financial statements and footnotes thereto.

In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.


MARKETABLE SECURITIES

The Company on June 27, 1997 acquired 127,773 shares of common stock (net of
14,197 shares given in payment of commission) of Equisure, Inc. (American Stock
Exchange: EQE) from an investment trust in exchange for its own common stock.
There was an agreement in place with the trust that in the event the market
value of the shares would go down, additional shares would be issued to
effectively eliminate the market risk. On August 4, 1997 the AMEX called a halt
to trading EQE shares on the AMEX. On September 9, 1997 the Company and the
trust agreed to rescind the transaction in its entirety.


OPERATIONAL MATTERS AND LIQUIDITY

The Company has a net loss for the quarter ending September 30, 1997 of
$404,543 and at September 30, 1997 has a working capital deficiency of
approximately $3,019,000. Collectively, these factors have resulted in late
lease payments which have payment acceleration provisions. In view of these
matters, recoverability of a major portion of the recorded asset amounts shown
in the accompanying balance sheet is dependent upon continued operation of the
Company, which in turn is dependent upon either the Company's ability to
succeed in its future operations or its ability to obtain additional funding.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence. The following commentary addresses the
Company's operations for the third quarter of 1997 and its plan to improve
future results. 

The Company attributes the loss in the third quarter primarily to the effect
the losses from its new start up facilities had on the Company: Orange Park in
its second full year of operation incurred a third quarter loss of $147,000 and
Riverside (opened July of 1996) had a loss of $126,000. Due to the expansion
and growth the Company's working capital has decreased to the extent that the
Company has fallen behind in meeting its lease and vendor obligations. Most of
the vendors have been

                                       8

<PAGE>   9

                           NATIONAL DIAGNOSTICS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



cooperative by allowing extended terms. The Company has received from its major
lessor a waiver of default based on the Company adhering to a workout schedule
which will bring the leases to current status by December, 1997. Other lessors
have also been cooperative with extended terms. The Company believes as the
increase in revenues for start ups continues and certain cost cutting measures
(estimated unaudited annual savings approximately $298,000) take effect that
the Company will return to a profitable position though no absolute assurances
can be given.

(2)     NEW ACCOUNTING PRONOUNCEMENT

The FASB has issued Statement of Financial Accounting Standards No. 128.
Earnings Per Share, which is effective for financial statements issued after
December 15,1997. Early adoption of the new standard is not permitted. The new
standard eliminates primary and fully diluted earnings per share and requires 
presentation of basic and diluted earnings per share together with disclosure 
of how the per share amounts were computed. The adoption of this new standard 
is not expected to have a material impact on the disclosure of earnings per 
share in the financial statements.


(3)     LEGAL ACTION

In December of 1995, the physician group terminated its contract for reading
service with the Brandon and SunPoint centers and in February of 1996, filed
suit against the centers alleging the centers materially breached the contract
by failing to pay physician fees timely and incorrectly billed certain
procedures. The physician group sought payment for services rendered
(approximately $178,000) and lost profits (approximately $850,000). In February
of 1997, the court denied the claim for lost profits and entered an award in
favor of the physician group relating to services rendered.

The company in prior years substantially reserved for the claim for services
and satisfied the judgement in February of 1997 by obtaining financing (which
has been repaid) for approximately $205,000 from its accounts receivable
lender. Subsequently, a motion by the physicians for a rehearing was denied.
The physicians filed a notice of appeal for the lost profits claim in April,
1997, which is currently pending.


(4)    MARKET DE-LISTING

On August 18, 1997 the Company was de-listed by the Nasdaq Stock Market, Inc.
("Nasdaq") from the Nasdaq Small Cap Market due to the Company no longer
meeting the listing requirements.

                                       9
<PAGE>   10


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS


The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the condensed
consolidated financial statements and notes thereto included elsewhere herein.

RESULTS OF OPERATIONS

Net revenues for the nine months ended September 30, 1997 were $7,725,000
compared to $6,606,000 for the same period in 1996, representing a 17%
increase. The increase is primarily attributable to an increase in the volume
of procedures performed. The Company generated net revenues of $776,000 in the
first three quarters of 1997 as a result of the addition of the National
Diagnostics/Riverside ("Riverside").

Direct operating expenses for the nine months ended September 30, 1997 were
$4,152,000 compared to $3,404,000 for the same period in 1996, representing a
22% increase. Approximately 54% of the increase in direct costs is directly
attributable to the addition of Riverside. The balance of the increase is the
result of higher medical supply costs experienced in each center, maintenance
contracts and repair costs in the Company's most mature and productive center,
and higher reading fee costs experienced in three of the four facilities.
Management believes it can obtain more favorable medical supply costs if
working capital were sufficient to meet vendor terms.

General and administrative expenses for the nine months ended September 30,
1997 were $3,166,000 compared to $2,488,000 for the same period in 1996,
representing a 27% increase. The increase is primarily attributable to the
addition of the Riverside facility and additional personnel costs. Personnel
were added in response to the increase volume of procedures performed overall
and the expansion of facilities.

The 27% increase in depreciation and amortization costs for the first nine
months of 1997 over that for the same period in the preceding year is primarily
attributable to the additional equipment acquired for the Riverside facility
and the fully amortized start-up costs of Riverside (approximately $54,000 in
first nine months).

The increased revenues over the revenues experienced in the same period in 1996
were offset by the 25% increase in operating expenses resulting in a net loss
of $405,000 and $1,183,000 for the quarter ending and nine month period ending
September 30, 1997, respectively. Year to date revenues for the Brandon
Diagnostic Center ("Brandon"), the Company's most mature center, were down by
four percent after a one time write down in the second quarter of approximately
$60,000 for a terminated capitation contract. The contract has been replaced
with fee for service contracts which the Company feels will allow for a more
timely realization of receipts. The slight decline in revenue coupled with
increased costs for maintenance contracts and medical supplies resulted in a
third quarter profit of $116,000 compared to $174,000 in the same quarter of
1996. Sunpoint Diagnostic Center ("Sunpoint") experienced a net loss in the
third quarter of approximately $17,000 on revenues of $375,000 compared to a
net loss of $23,000 on revenues of $292,000 in the same quarter of 1996. This
resulted primarily from an increase in personnel costs. Orange Park experienced
a loss of $147,000 on revenues of $698,000 for the quarter ending September 30,
1997 compared to a loss of $294,000 on revenues of $542,000 for the same
quarter in 1996. This is the result of the increased volume. Riverside, which
started up in the third quarter of 1996, experienced a $126,000 loss on
revenues of $303,000 compared to a $262,000 loss on revenues of $77,000 for the
same quarter in 1996.

                                      10
<PAGE>   11


LIQUIDITY AND CAPITAL RESOURCES

Due to the rapid expansion of facilities and increase in additional personnel
and related costs the Company has continued to experience difficulty in meeting
timely its current obligation to its vendors and lessors. At September 30,
1997, the Company had a working capital deficiency of more than $3,000,000. Due
to late payments in the first quarter of 1997 the Company was in default of its
capital leases. In April the Company received a conditional waiver of default
from its major lessor. The conditional waiver of default from its major lessor
contains a work out schedule where in all leases will be brought to a current
status by December 31, 1997. The Company is currently in compliance with the
work out agreement. The other lessors (approximately 17% of the total loans
outstanding at September 30, 1997) have been cooperating with the Company,
generally allowing not more than 60 days past due on lease payments. There is
no assurance the Company will be successful in achieving these goals.

Capital expenditures for the quarter ending September 30, 1997 approximated
$15,000.

In February of 1997 the Company settled its litigation with its prior
radiologists (see Item 2-Legal Proceedings). The settlement plus legal fees
approximated $205,000. This amount was borrowed from DVI in 1997, the balance
to be paid in full by August 29, 1997. The Company has satisfied the loan.

The Company refinanced its $2,000,000 line of credit with HealthCare Financial
Partners Funding, Inc. ("HFCP"), a lender specializing in medical receivables.
The lender has a first security interest on all accounts receivable. Interest
is at prime plus 2%. At September 30, 1997 the line availability and loan
balance approximated $14,000 and $1,243,000, respectively. After refinancing,
the loan balance on November 12, 1997 approximated $1,477,000 with an
additional side loan of $235,000. The loan balance on the line at November 12,
1997 was over advanced by approximately $230,000; which the Company is
satisfying with current charges and collections in accordance with a verbal
agreement with the lender.

The Company issued 19,398 shares of common stock in satisfaction of trade
creditor debt. In August of 1997, 52,000 warrants were exercised at a strike
price of $1.50 per share. The remaining unexercised warrants (approximately
85,000) expired September 19, 1997. On August 4, 1997, the AMEX called a halt
to the trading of EQE shares on the AMEX. On September 9, 1997 the Company, in
agreement with the trust, rescinded the stock exchange transaction in its
entirety and returned the EQE shares for the Company's own 1,459,188 shares it
had issued in the original exchange. The transactions are intended to improve
the operating and financial flexibility of the Company.

On August 18, 1997 the Company was notified by The Nasdaq Stock Market, Inc.
("Nasdaq") that the Company's securities would be de-listed from the Nasdaq
Small Cap Market (SM) effective with the close of business on August 18, 1997.
The Company had previously announced it was in discussions with Nasdaq
concerning the Nasdaq listing requirements and the Company's capital surplus.
Nasdaq took this action as a result of the Company no longer meeting the
listing requirements for continued listing.

In the quarter ending September 30, 1997 the company decreased its cash by
approximately $34,000. Operations contributed $228,000 of the total increases.
Purchases of equipment and a minor increase in other assets contributed $15,000
to the cash reduction. Financing activities used $246,000. 

In May of 1997, the Company entered into a Consulting Agreement with Capital
Access Bureau, Inc. ("CABI") for investor and public relations services. CABI
was to receive as compensation $350,000 recognizable and payable over the one
year term of the agreement in common shares of the Company. The Company was to
also issue six incentive stepped options of 75,000 shares each step beginning
at $1.50 per share (which approximates the value of stock at date of grant) and
stepped in fifty cent increments. CABI agreed to execute any in the money
options quarterly throughout the term of

                                      11

<PAGE>   12

the agreement. The Company has ceased issuing additional stock to CABI and is
currently negotiating a termination of the contract due to just cause. No loss
provision has been recognized by the Company.

The Company intends to curtail further external expansion (new start-ups or
acquisitions) until the Company's current new start-ups achieve acceptable
levels of operation, and/or the Company achieves additional capital infusion.
The Company is currently considering different alternatives which includes but
are not limited to capital infusion and/or merger or sale of the Company.

The Company continues to obtain new provider contracts and realize increasing
revenues from its new starts. Year to date revenues through September 30, 1997
have increased 17% over that realized for the same period of the preceding
year. The Company continues to look for cost cutting measures. In the third
quarter, the Company initiated steps to better utilize its human resources
which will result in an annual savings of approximately $298,000. As a result
of the Company increasing revenues, satisfaction of its property and equipment
needs for current operations, and if the Company's vendors and lessors continue
to allow a grace period of sixty to ninety days, the Company believes that its
presently anticipated short-term needs for operation, capital repayments and
capital expenditures for its current operations can be satisfied through
internally generated funds and existing credit facilities with HCFP. The
Company feels that its ability in the short-term to improve its working capital
is reasonably attainable. However, the Company is currently discussing capital
infusion alternatives which may consist of selling additional stock. Should the
above possibilities not materialize and to assure continued operations the
Company is prepared to sell off certain assets that have not yet matured
sufficiently to allow a positive return. There is no assurance that these
short-term needs can be met.

The Company's long term growth strategies will require additional funds. In the
event that the Company proceeds with the establishment of additional
facilities, or encounters favorable acquisition opportunities in the near
future, the Company may incur, from time to time, additional indebtedness and
attempt to issue equity or debt securities in public or private transactions.
There is no assurance that the Company will be successful in securing
additional financing or capital through equity or debt securities.

The Company's financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company's independent certified public
accountant's report on the Company's 1996 Financial Statements contained in the
Company's Annual Form 10-KSB included a going concern qualification. The
information contained in Note 2 to the Financial Statements included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1996 remains relevant related to the status of certain of the Company's
operational and funding matters and, accordingly, should be referred to in
conjunction with this Form 10-QSB.

                                      12
<PAGE>   13




PART II.                     OTHER INFORMATION



ITEM 2.  LEGAL PROCEEDINGS

No significant change.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         (a)      Exhibits

         10.48    Loan and Security Agreement, dated October 3, 1997 by and
                  between National Diagnostics, Inc., SunPoint Diagnostic
                  Center, Inc., National Diagnostics/Orange Park, Inc., National
                  Diagnostics/Riverside, Inc., Alpha Associates, Inc., Alpha
                  Acquisitions, Inc., Brandon Diagnostic Center, Ltd., and
                  HealthCare Financial Partners Funding, Inc.

         27       Financial Data Schedule (for SEC use only)

         (b)      Reports on Form 8-K

                  The Company filed on July 22, 1997, a Form 8-K indicating the
                  private placement with Sud Afric Suisse Trust in exchange for
                  Equisure, Inc. Common Shares valued at $1.8 million and debt
                  to equity conversions approximating $471 thousand.

                  The following financial statements were filed in the Form 8-K:

                  Condensed consolidated balance sheet as of March 31,
                  (historical and proforma) and May 31, 1997 (proforma).

                  Condensed consolidated statements of operations for year ended
                  December 31, 1996 and May 31, 1997 (proforma).

                                      13
<PAGE>   14

                                   SIGNATURES


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


Date: November 14, 1997


      NATIONAL DIAGNOSTICS, INC.



      /s/Curtis L. Alliston
      -------------------------------------
      Curtis L. Alliston
      President and Chief Operating Officer



      /s/Dennis C. Hult
      -------------------------------------   
      Dennis C. Hult
      Comptroller

                                      14

<PAGE>   15



                           NATIONAL DIAGNOSTICS, INC.

                          EXHIBIT INDEX TO FORM 10-QSB


<TABLE>
<CAPTION>

Exhibit
Number                            Description of Document                                 Page
------                            -----------------------                                 ----
                                                                                            
<S>      <C>                                                                              <C>
10.48    Loan and Security Agreement, dated October 3, 1997 by and between                 17        
         National Diagnostics, Inc., SunPoint Diagnostic Center, Inc., National
         Diagnostics/Orange Park, Inc., National Diagnostics/Riverside, Inc.,
         Alpha Associates, Inc., Alpha Acquisitions, Inc., Brandon Diagnostic
         Center, Ltd., and HealthCare Financial Partners Funding, Inc.

27       Financial Data Schedule (for SEC use only)

(b)      Reports on Form 8-K.
         
         The Company filed on July 22, 1997, a Form 8-K indicating the private
         placement with Sud Afric Suisse Trust in exchange for Equisure, Inc.
         Common Shares valued at $1.8 million and debt to equity conversions
         approximating $471 thousand.

         The following financial statements were filed in the Form 8-K:

         Condensed consolidated balance sheet as of March 31, (historical and
         proforma) and May 31, 1997 (proforma).

         Condensed consolidated statements of operations for year ended
         December 31, 1996 and May 31, 1997 (proforma).

</TABLE>



                                       15