<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.

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

         For the transition period from _____________ to _____________.

                         Commission File Number: 0-19749

                              CHEMTRAK INCORPORATED

            Delaware                                     77-0295388
            --------                                     ----------
(State or other jurisdiction of              (I.R.S Employer Identification No.)
 incorporation or organization)

                    929 E. Arques Avenue, Sunnyvale, CA 94086
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (408) 773-8156

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock $.001 par value
                                (Title of Class)

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

                                 Yes [X] No [ ]

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

Class:  Common Stock $.005 par value    Outstanding at August 1, 1998: 3,486,126
        ----------------------------



<PAGE>   2



                              CHEMTRAK INCORPORATED
                                      INDEX

<TABLE>
<CAPTION>
                                                                                           PAGE
                                                                                            NO.
                                                                                           -----
<S>                                                                                         <C>
PART I. FINANCIAL INFORMATION
                Item 1: Financial Statements (unaudited)

                Condensed Balance Sheets as of June 30, 1998 and December 31, 1997            3

                Condensed Statements of Operations for the three and six months ended
                June 30, 1998 and 1997                                                        4

                Condensed Statements of Cash Flows for the six months ended June 30,
                1998 and 1997                                                                 5

                Notes to Condensed Financial Statements                                    6-10

                Item 2:  Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                                 11-14

PART II.  OTHER INFORMATION

                Item 6:  Exhibits and Reports on Form 8-K                                   15

SIGNATURES                                                                                  16

EXHIBITS
</TABLE>



                                       2


<PAGE>   3



                              CHEMTRAK INCORPORATED
                            CONDENSED BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
                                                       ----------------------------------
                                                         June 30,         December 31,
                                                           1998               1997
                                                       -------------    -----------------
                                                       (unaudited)
<S>                                                    <C>              <C>             
Current assets:
    Cash and cash equivalents                          $    244,000     $      1,114,000
    Accounts receivable, net                                443,000              220,000
    Inventories                                             723,000            1,068,000
    Prepaid expenses and other current assets               116,000              201,000
                                                       -------------    -----------------
      Total current assets                                1,526,000            2,603,000
Property and equipment, net                               1,282,000            1,616,000
Other assets                                                 66,000               66,000
                                                       -------------    -----------------
      Total assets                                     $  2,874,000     $       4,285,000
                                                       =============    =================

                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                   $  1,355,000     $        393,000
    Accrued payroll and benefits                             94,000              200,000
    Other accrued liabilities                               142,000              413,000
    Current portion of long term debt                       293,000              200,000
    Accrued royalties                                       238,000              293,000
                                                       -------------    -----------------
      Total current liabilities                           2,122,000            1,499,000
Deferred revenue                                             44,000                   --
Accrued rent                                                305,000              311,000
Long term debt, net of current portion                      287,000              267,000
                                                       -------------    -----------------
      Total liabilities                                   2,758,000            2,077,000
                                                       -------------    -----------------

Stockholders' equity:
    Preferred stock                                              --                   --
    Common stock                                             17,000               14,000
    Additional paid-in capital                           46,856,000           43,728,000
    Deferred compensation                                   (24,000)             (31,000)
    Accumulated deficit                                (46,733,000)         (41,503,000)
                                                       -------------    -----------------
      Total stockholders' equity                            116,000            2,208,000
                                                       -------------    -----------------
Total liabilities and stockholders' equity             $  2,874,000     $      4,285,000
                                                       =============    =================
</TABLE>



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



                                       3

<PAGE>   4

                              CHEMTRAK INCORPORATED
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                     Three Months Ended June 30,           Six Months Ended June 30,   
                                                  -------------------------------       -------------------------------
                                                          1998               1997               1998               1997
                                                  ------------       ------------       ------------       ------------
<S>                                               <C>                <C>                <C>                <C>         
Net revenue:
  Product revenue                                 $    823,000       $    870,000       $  1,877,000       $  1,478,000
  Funded research and other revenue
                                                        22,000                 --             22,000            833,000
                                                  ------------       ------------       ------------       ------------
    Total net revenue                                  845,000            870,000          1,899,000          2,311,000
                                                  ------------       ------------       ------------       ------------
Costs and expenses:
  Cost of product revenue                              851,000            517,000          1,792,000          1,221,000
  Research and development                             168,000            579,000            361,000          1,032,000
  Marketing, general and administrative              2,621,000          1,530,000          4,227,000          3,153,000
                                                  ------------       ------------       ------------       ------------
    Total costs and expenses                         3,640,000          2,626,000          6,380,000          5,406,000
                                                  ------------       ------------       ------------       ------------
Operating loss                                      (2,795,000)        (1,756,000)        (4,481,000)        (3,095,000)
Interest and other income, net                          33,000            102,000             57,000            146,000
                                                  ------------       ------------       ------------       ------------
Net loss                                            (2,762,000)        (1,654,000)        (4,424,000)        (2,949,000)
Accretion and dividends
  related to preferred stock                          (334,000)                --           (772,000)                --
                                                  ------------       ------------       ------------       ------------
Net loss attributable to common stockholders      $ (3,096,000)      $ (1,654,000)      $ (5,196,000)      $ (2,949,000)
                                                                                        ============       ============
Net loss attributable to common stockholders
per common share and per common
share - assuming dilution                         $      (0.19)      $      (0.13)      $      (0.34)      $      (0.24)
                                                  ============       ============       ============       ============
Shares used in calculating net loss
attributable to common stockholders per
common share and per common
share - assuming dilution
                                                    16,122,000         12,855,000         15,092,000         12,470,000
                                                  ============       ============       ============       ============
</TABLE>

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


                                       4

<PAGE>   5

                              CHEMTRAK INCORPORATED
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                      Six Months Ended June 30,
                                                    ------------------------------
                                                        1998              1997
                                                    -----------       -----------
<S>                                                  <C>               <C>        
Cash flows from operating activities:
  Net loss                                          $(4,424,000)      $(2,949,000)
  Adjustments to reconcile net loss to
    net cash used in operating activities:
      Interest expense and financing
          charges on debentures                              --           105,000
      Depreciation and amortization                     365,000           403,000
      Loss on disposal of fixed assets                       --           170,000
      Accrued rent                                       (6,000)           20,000
      Stock option compensation and other                 5,000                --
      Purchase of advertising media for
        common stock                                    400,000                --
  Changes in operating assets and liabilities:
    Accounts receivable                                (223,000)          (35,000)
    Inventories                                         345,000          (983,000)
    Prepaid expenses and other current assets            85,000           189,000
    Accounts payable                                    923,000           (41,000)
    Accrued payroll and benefits                       (106,000)          (34,000)
    Other accrued liabilities                          (326,000)           47,000
    Deferred revenue                                     44,000           350,000
                                                    -----------       -----------
        Net cash used in operating activities        (2,918,000)       (2,758,000)
                                                    -----------       -----------
Cash flows from investing activities:
  Proceeds from sales of
   available-for-sale securities                             --           567,000
  Purchases of property and equipment                   (31,000)         (121,000)
                                                    -----------       -----------
        Net cash (used in)/provided by
              investing activities                      (31,000)          446,000
                                                    -----------       -----------

Cash flows from financing activities:
  Proceeds from issuance of preferred
    stock A, net                                      1,119,000                --
  Proceeds from issuance of preferred
    stock B, net                                        917,000                --
  Proceeds from issuance of common
   stock                                                     --            62,000
  Proceeds from issuance of long term
    debt                                                250,000                --
  Repayment of long-term debt                          (117,000)               --
  Fees incurred to obtain additional
     financing                                          (90,000)               --
                                                    -----------       -----------
       Net cash provided by financing
          activities                                  2,079,000            62,000
                                                    -----------       -----------

Net decrease in cash and cash equivalents              (870,000)       (2,250,000)
Cash and cash equivalents at beginning
  of period                                           1,114,000         4,125,000
                                                    -----------       -----------
Cash and cash equivalents at end of
  period                                            $   244,000       $ 1,875,000
                                                    ===========       ===========

Supplemental disclosure of non-cash financing
  activities:
Conversion of convertible debentures
  and accrued interest to common stock              $        --       $ 1,629,000
                                                    ===========       ===========
Conversion of preferred stock and
   accrued dividends to common stock                $ 1,144,000       $        --
                                                    ===========       ===========
Accretion and dividends related
   to preferred stock                               $   772,000       $        --
                                                    ===========       ===========
Dividends accrued on not converted
   Series A and B Preferred Stock                   $    19,000       $        --
                                                    ===========       ===========
Prepayment of advertising media
   through issuance of Common Stock                 $   400,000       $        --
                                                    ===========       ===========
</TABLE>


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



                                       5

<PAGE>   6

                              CHEMTRAK INCORPORATED

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                                   (UNAUDITED)


Note 1. Basis of Presentation

     The accompanying unaudited condensed financial statements as of June 30,
1998 of ChemTrak Incorporated (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring
adjustments considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended June 30, 1998, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1998, or any future interim period.

     These financial statements and notes should be read in conjunction with the
Company's audited financial statements for the year ended December 31, 1997
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission.

     The Company has funded its operations to date through product sales and
public and private equity and debt financings. The Company has suffered
recurring losses related primarily to research and development costs and
marketing expenditures on its products. The Company will require substantial
additional funding during 1998 in order to meet its current budgeted operating
needs and to complete the development and marketing activities in which it is
currently engaging, and to launch these products in the consumer marketplace.
The Company intends to seek additional funding through collaborative agreements
with corporate partners or through additional equity or debt financings. There
can be no assurance that the Company will be able to enter into such
arrangements on acceptable terms, or at all or will be able to successfully
reduce discretionary spending by a sufficient amount on a timely basis. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. With the decrease in the
price of the Company's Common Stock, the Company believes it will be difficult
or impossible to obtain the required funding to maintain operations for the
second half of 1998. (See "Liquidity and Capital Resources.")

Note 2. Computation of Net Loss Attributable To Common Stockholders per Common
        Share and per Common Share - assuming dilution

     The Company adopted Financial Accounting Standards Board Statement No. 128
"Earnings Per Share" as of December 31, 1997, and accordingly all prior periods
have been restated, as applicable. Net loss attributable to common stockholders
per common share and per common share - assuming dilution, are computed using
the weighted average number of shares of Common Stock outstanding. Common
equivalent shares from stock options, warrants and preferred stock are excluded
from the computation of net loss per common share - assuming dilution as their
effect is antidilutive.

     Stock options and warrants to purchase 1,096,053 shares of Common Stock at
prices ranging from $0.75 to $9.75 per share were outstanding at June 30, 1998,
but were not included in the computation of diluted net loss per common share
because they were antidilutive. The aforementioned stock options and warrants
could potentially dilute earnings per common share in the future.



                                       6

<PAGE>   7

                              CHEMTRAK INCORPORATED

               NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

                                   (UNAUDITED)

Note 3. Inventories

     Inventories are stated at the lower of standard cost (which approximates
actual costs on a first-in, first-out basis) or market. Inventories consisted of
the following:


<TABLE>
<CAPTION>
                                     June 30, 1998    December 31,1997
                                     -------------    ----------------
<S>                                    <C>             <C>          
Raw materials...................       $  367,000      $     652,000
Work in process.................           30,000             37,000
Finished goods..................          326,000            379,000
                                       ----------      -------------
       Total....................       $  723,000      $   1,068,000
                                       ==========      =============
</TABLE>



Note 4. Preferred Stock

          The Board of Directors has authority to issue the undesignated
Preferred Stock in one or more series, without stockholder approval, with voting
and conversion rights which could adversely affect the voting power of the
holders of the Common Stock and have the effect of delaying, deferring or
preventing a change in the control of the Company.

    In January 1998, the Company issued 1,300 shares of Series A 6% Cumulative
Convertible Preferred Stock (Series A Preferred Stock) to seven private
investors. The net proceeds to the Company were $1,119,000 after deducting
selling commissions. During the three months ended June 30, 1998, 735 shares of
Series A Preferred Stock have been converted into 2,477,434 shares of Common
Stock. In addition, accrued dividends of $15,022 have been converted into 55,291
shares of Common Stock. For the six months ended June 30, 1998, 1,125 shares of
Series A Preferred Stock have been converted into 3,117,438 shares of Common
Stock. In addition, accrued dividends of $19,274 have been converted into 62,273
shares of Common Stock.

    PURCHASE PRICE; CONVERSION RIGHTS. Each share of the Series A Preferred
Stock was offered at a purchase price of $1,000 and a Stated Value of $1,000.
Beginning 60 days following the issuance of the shares of Series A Preferred
Stock, each holder of shares of Series A Preferred Stock has the right at any
time, and from time to time, to convert some or all such shares into fully paid
and nonassessable shares of Common Stock.

    Any such conversion shall occur according to the following formula: the
number of shares of Common Stock issuable upon conversion of each share of
Preferred Stock will equal (i) the sum of (A) the Stated Value per share and
(B) accrued and unpaid dividends on such share, divided by (ii) the Conversion
Price. The Conversion Price shall be equal to the lesser of: (i) 75% of the
average of the Closing Bid Price (as defined below) of the Common Stock for the
five trading days immediately preceding the date of issuance of the Preferred
stock; or (ii) 75% of the average of the Closing Bid Price for the five trading
days immediately preceding conversion of the Preferred Stock. The Closing bid
Price shall mean the closing bid price of the Common Stock as reported from the
Nasdaq SmallCap Market (or if not reported by Nasdaq as reported by such other
exchange or market where traded). The minimum aggregate Stated Value able to be
converted will be at least $25,000 (unless if at the time of such conversion
the aggregate Stated Value of all shares of Preferred Stock registered to the
holder is less than $25,000, then the whole amount may be converted).

    Two years after the issuance of the Preferred Stock (the "Mandatory
Conversion Date"), any shares of Preferred Stock not previously converted into
shares of Common Stock shall automatically be converted into shares of Common
Stock at the Conversion Price. On and after the Mandatory Conversion Date, all
dividends on the Preferred Stock shall cease to accrue and the shares
represented thereby shall no longer be deemed outstanding and all rights of the
holders thereof as stockholders of the Company shall cease and terminate,
except the right to receive the shares of Common Stock upon conversion.

    PREFERENTIAL CUMULATIVE DIVIDENDS. The holders of outstanding shares of
Series A Preferred Stock are entitled to receive preferential dividends in cash
out of any funds of the Company legally available at the time for declaration
of dividends before any dividend or other distribution will be paid or declared
and set apart for payment on any shares of any Common Stock or other class of
stock junior to the Series A Preferred Stock (the Common Stock and such junior
stock being hereinafter collectively the "Junior Stock") at the rate of 6%
simple interest per annum on the Stated Value per share payable quarterly when
and as declared; provided, however, there these preferential cumulative
dividends, if not paid, will accumulate as a liability of the Company. In
addition, fully paid and non-assessable shares of Series A Preferred Stock at a
rate of one share of Series A Preferred Stock for each $1,000 of such dividend
not paid in cash, and the issuance of such additional shares, will constitute
full payment of such dividend.

    The dividends on the Series A Preferred Stock will be cumulative whether or
not earned so that if, at any time, full cumulative dividends at the rate
aforesaid on all shares of the Series A Preferred Stock then outstanding from
the date from and after which dividends thereon are cumulative to the end of
the quarterly dividend period next preceding such time shall not have been paid
or declared and set apart for payment, or if the full dividend on all such
outstanding Series A Preferred Stock for the then current dividend period shall
not have been paid or declared and set apart for payment, the amount of the
deficiency shall be paid or declared and set apart for payment (but without
interest thereon) before any sum shall be set apart for or applied by the
Company or a subsidiary of the Company to the purchase redemption or other
acquisition of the Series A Preferred Stock and before any dividend or other
distribution shall be paid or declared and set apart for payment on any Junior
Stock and before any sum shall be set aside for or applied to the purchase,
redemption or other acquisition of Junior Stock.

    Dividends on all shares of the Series A Preferred Stock begin to accrue and
be cumulative from and after the date of issuance thereof on a quarterly basis.

    LIQUIDATION RIGHTS. In the event of the dissolution, liquidation or
winding-up of the Company, whether voluntary or involuntary, the holders of the
Series A Preferred Stock will be entitled to receive before any payment of
distribution will be made on the Junior Stock, out of the assets of the Company
available for distribution to stockholders, the Stated Value per share of
Series A Preferred Stock and all accrued and unpaid dividends to and including
the date of payment thereof. Upon the payment in full of all amounts due to
holders of the Series A Preferred Stock, then the holders of the Junior Stock
of the Company will receive, ratably, all remaining assets of the Company
legally available for distribution. If the assets of the Company available for
distribution to the holders of the Series A Preferred Stock are insufficient to
permit payment in full of the amounts payable as aforesaid to the holders of
Series A Preferred Stock upon such liquidation, dissolution or winding-up,
whether voluntary or involuntary, then all such assets of the Company will be
distributed to the exclusion of the holders of shares of Junior Stock ratably
among the holders of Series A Preferred Stock.

    Neither purchase nor the redemption by the Company of shares of any class
of stock nor the merger nor consolidation of the Company with or into any other
corporations nor the sale or transfer by the Company of all or any part of its
assets will be deemed to be a liquidation, dissolution or winding-up of the
Company for the purposes of the liquidation rights that would be available
under the financing. The Investors will enjoy a right of participation in any
proposed public offering of Common Stock and a right of first refusal in the
event of any future equity financing.

    REDEMPTION PROVISION. The Company may elect to redeem all or part of the
Stated Value of the Series A Preferred Stock upon payment of an amount of
dollars equal to the number of shares of Common Stock that could be obtained by
converting into the Company's Common Stock that amount of Stated Value plus
accrued but unpaid dividends and any other sums payable in respect of that
Stated Value at the conversion price in effect on the date notice of redemption
is given to the holder (the "Redemption Date") multiplied by the average of the
Closing Bid price of the Common Stock for the five trading days immediately
preceding such date. The Company may not redeem any amount which the holder has
elected to convert, including a notice of conversion given after the Redemption
Date but prior to receipt by the holder of the payment under the redemption
provisions.

    VOTING RIGHTS. The shares of Series A Preferred Stock have no voting
rights. The shares of Common Stock into which the Series A Preferred Stock is
converted will have full voting rights upon such conversion.

    ACCRETION. The conversion formula does not contain an upper limit on the
number of shares of Common Stock that may be issued upon conversion. The 25%
beneficial conversion feature attached to the Series A Preferred Stock has been
recognized and measured by allocating a portion of the proceeds equal to the
intrinsic value of that feature to additional paid-in capital. The intrinsic
value was calculated at the date of issue (January 23, 1998) as the difference
between the issue price and the fair market value of the Common Stock into
which the Series A Preferred Stock is convertible multiplied by the number of
common shares into which the Series A Preferred Stock is convertible. The
discount resulting from the allocation of proceeds to the beneficial conversion
feature is analogous to a dividend and has been recognized as a return to the
Series A Preferred Stockholders over the minimum period of which that return
can be realized, which is 60 days after issuance. The "deemed dividend" of
$433,333 was accreted to accumulated deficit in the first three months of 1998.

    On July 9, 1998, the stockholders of the Company approved the issuance and
sale of up to 5,000 shares (the "Financing") of 6% Cumulative Series B
Convertible Preferred Stock, $0.001 par value per share (Series B Preferred
Stock), convertible into Common Stock pursuant to a formula that includes a
lower-than-market conversion price in a private placement of up to $5,000,000 to
qualified persons (the "Investors").

    In April and June of 1998, the Company issued a total of 1,102
shares of the Series B Preferred Stock to twelve private investors. The net
proceeds to the Company were $917,000 after deducting selling commissions and
related expenses. All of the 1,102 shares of Series B Preferred Stock remain
outstanding as of June 30, 1998.

    CONVERSION RATE ADJUSTMENTS. In case the Company shall at any time (A)
declare any dividend or distribution on its Common Stock or other securities of
the Corporation other than the Series A and Series B Preferred Stock, (B) split
or subdivide the outstanding Common Stock, (C) combine the outstanding Common
Stock into a smaller number of shares, or (D) issue by reclassification of its
Common Stock any shares or other securities of the Company, then in each such
event the Conversion Rate shall be adjusted proportionately so that the holders
of Series A and Series B Preferred Stock shall be entitled to receive the kind
and number of shares or other securities of the Company which such holders
would have owned or have been entitled to receive after the happening of any of
the events described above had such shares of Series A and Series B Preferred
Stock been converted immediately prior to the happening of such event (or any
record date with respect thereto). Such adjustment shall be made whenever any
of the events listed above shall occur. (See Note 5).

    DILUTIVE EFFECT. The issuance of the Series B Preferred Stock in April and
June, 1998, may have a substantial Dilutive Effect on current stockholders. The
number of shares of Common Stock issuable upon conversion of the Series B
Preferred Stock may increase substantially in certain circumstances, including,
but not necessarily limited to, circumstances wherein the trading price of the
Common stock declines before conversion. In addition, there is no upper limit on
the number of shares of Common Stock that will be issued upon conversion of the
Series B Preferred Stock.



                                       7

<PAGE>   8

                              CHEMTRAK INCORPORATED

               NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

                                   (UNAUDITED)


    PURCHASE PRICE; CONVERSION RIGHTS. Each share of the Series B Preferred
Stock was offered at a purchase price of $1,000 and a Stated Value of $1,000.
Beginning 90 days following the issuance of the shares of Series B Preferred
Stock, each holder of shares of Series B Preferred Stock has the right at any
time, and from time to time, to convert some or all such shares into fully paid
and nonassessable shares of Common Stock.

    Any such conversion shall occur according to the following formula: the
number of shares of Common Stock issuable upon conversion of each share of
Series B Preferred Stock will equal (i) the sum of (A) the Stated Value per
share and (B) accrued and unpaid dividends on such share, divided by (ii) the
Conversion Price. The Conversion Price shall be equal to 75% of the average of
the Closing Bid Price of the Common Stock for the five trading days immediately
preceding conversion of the Preferred Stock, but at no time higher than 100% of
the Fixed Strike Price per share. The Closing Bid Price shall mean the closing
bid price of the Common Stock as reported from the Nasdaq SmallCap Market (or if
not reported by Nasdaq as reported by such other exchange or market where
traded). Fixed Strike Price shall mean the average Closing Bid Price of the
Common Stock for the five trading days immediately preceding the date of
issuance of the Series B Preferred Stock. The minimum aggregate Stated Value
able to be converted will be at least $25,000 (unless if at the time of such
conversion the aggregate Stated Value of all shares of Preferred Stock
registered to the Holder is less than $25,000, then the whole amount may be
converted).

    Two years after the issuance of the Series B Preferred Stock (the "Mandatory
Conversion Date"), any shares of Series B Preferred Stock not previously
converted into shares of Common Stock shall automatically be converted into
shares of Common Stock at the Conversion Price. On and after the Mandatory
Conversion Date, all dividends on the Series B Preferred Stock shall cease to
accrue and the shares represented thereby shall no longer be deemed outstanding
and all rights of the holders thereof as stockholders of the Company shall cease
and terminate, except the right to receive the shares of Common Stock upon
conversion.

    PREFERENTIAL CUMULATIVE DIVIDENDS. The holders of outstanding shares of
Series B Preferred Stock are entitled to receive preferential dividends pari
passu with Series A Preferred Stock, in cash out of any funds of the Company
legally available at the time for declaration of dividends before any dividend
or other distribution will be paid or declared and set apart for payment on any
shares of any Common Stock or other class of stock junior to the Series A and
Series B Preferred Stock (the Common Stock and such junior stock being
hereinafter collectively the "Junior Stock") at the rate of 6% simple interest
per annum on the Stated Value per share payable quarterly when and as declared;
provided, however, that these preferential cumulative dividends, if not paid,
will accumulate as a liability of the Company. In addition, fully paid and
non-assessable shares of Series B Preferred Stock at a rate of one share of
Series B Preferred Stock for each $1,000 of such dividend not paid in cash, and
the issuance of such additional shares, will constitute full payment of such
dividend.

    The dividends on the Series B Preferred Stock will be cumulative whether or
not earned so that if, at any time, full cumulative dividends at the rate
aforesaid on all shares of the Series B Preferred Stock then outstanding from
the date from and after which dividends thereon are cumulative to the end of the
quarterly dividend period next preceding such time shall not have been paid or
declared and set apart for payment, or if the full dividend on all such
outstanding Series B Preferred Stock for the then current dividend period shall
not have been paid or declared and set apart for payment, the amount of the
deficiency shall be paid or declared and set apart for payment (but without
interest thereon) before any sum shall be set apart for or applied by the
Company or a subsidiary of the Company to the purchase redemption or other
acquisition of the Series B Preferred Stock and before any dividend or other
distribution shall be paid or declared and set apart for payment on any Junior
Stock and before any sum shall be set aside for or applied to the purchase,
redemption or other acquisition of Junior Stock.

    Dividends on all shares of the Series B Preferred Stock begin to accrue and
be cumulative from and after the date of issuance thereof on a quarterly basis.



                                       8

<PAGE>   9

                             CHEMTRAK INCORPORATED

              NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

                                  (UNAUDITED)

    LIQUIDATION RIGHTS. In the event of the dissolution, liquidation or
winding-up of the Company, whether voluntary or involuntary, the holders of the
Series B Preferred Stock will be entitled to receive before any payment or
distribution will be made on the Junior Stock, out of the assets of the Company
available for distribution to stockholders, the Stated Value per share of Series
B Preferred Stock and all accrued and unpaid dividends to and including the date
of payment thereof. Upon the payment in full of all amounts due to holders of
the Series B Preferred Stock, then the holders of the Junior Stock of the
Company will receive, ratably, all remaining assets of the Company legally
available for distribution. If the assets of the Company available for
distribution to the holders of the Series B Preferred Stock are insufficient to
permit payment in full of the amounts payable as aforesaid to the holders of
Series B Preferred Stock upon such liquidation, dissolution or winding-up,
whether voluntary or involuntary, then all such assets of the Company will be
distributed to the exclusion of the holders of shares of Junior Stock ratably
among the holders of Series A and Series B Preferred Stock.

    Neither purchase nor the redemption by the Company of shares of any class of
stock nor the merger nor consolidation of the Company with or into any other
corporation or corporations nor the sale or transfer by the Company of all or
any part of its assets will be deemed to be a liquidation, dissolution or
winding-up of the Company for the purposes of the liquidation rights that would
be available under the Financing. The Investors will enjoy a right of
participation in any proposed public offering of Common Stock and a right of
first refusal in the event of any future private equity financing.

    REDEMPTION PROVISION. The Company may elect to redeem all or part of the
shares of outstanding Series B Preferred Stock upon payment of Stated Value
(plus any dividends accumulated thereon) multiplied by 1.333 (the "Redemption
Price"). After the date, (the"Redemption Date") on which the Company gives
written notice to the holder of the Company's intent to redeem the Preferred
Stock, the holder shall have five business days to notify the Company if such
holder elects to convert the Preferred Stock to Common Stock (rather than have
the Preferred Stock redeemed by the Company).

    If the Company cannot issue shares of Common Stock pursuant to the
conversion provisions of the Series B Preferred Stock for any reason, the holder
of those shares of Series B Preferred Stock for which the Company is unable to
issue Common Stock, solely at such holder's option, may elect to require the
Company to redeem all or part of such Series B Preferred Stock at the Redemption
Price within ten business days of receiving notice; provided the Company can
make such a distribution to such holders under the provisions of the state
corporation laws then applicable. In the event the Company receives a conversion
notice from more than one holder of Series B Preferred Stock on the same day,
and the Company is able to convert some, but not all, of such Series B Preferred
Stock, the Company will convert from each such holder electing to have Series B
Preferred Stock at such time an amount equal to such holder's pro rata
amount(based on the number of Preferred Shares held by such holder relative to
the number of Series B Preferred Stock outstanding) of all Series B Preferred
Stock being converted and the remaining shares that cannot be converted will be
redeemed pro rata at such time at the Redemption Price.

    VOTING RIGHTS. The shares of Series B Preferred Stock have no voting rights.
The shares of Common Stock into which the Series B Preferred Stock is converted
will have full voting rights upon such conversion.

    ACCRETION. The conversion formula does not contain an upper limit on the
number of shares of Common Stock that may be issued upon conversion. The 25%
beneficial conversion feature attached to the Series B Preferred Stock has been
recognized and measured by allocating a portion of the proceeds equal to the
intrinsic value of that feature to additional paid-in capital. The intrinsic
value was calculated at the date of issue on April 6 and June 29, 1998, as the
difference between the issue price and the fair market value of the Common Stock
into which the Series B Preferred Stock is convertible multiplied by the number
of common shares into which the Series B Preferred Stock is convertible. The
discount resulting from the allocation of proceeds to the beneficial conversion
feature is analogous to



                                       9

<PAGE>   10

                              CHEMTRAK INCORPORATED

               NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

                                   (UNAUDITED)

a dividend and has been recognized as a return to the Series B Preferred
Stockholders over the minimum period in which that return can be realized, which
is 90 days after issuance. The "deemed dividend" of $334,006 on the April
issuance was accreted to accumulated deficit in the second quarter of 1998. The
"deemed dividend" of $33,340 on the June 29 issuance will be accreted to
accumulated deficit in the third quarter of 1998.

Note 5 Subsequent Events

    On June 20, 1998, the Company announced that it had approved a one-for-five
reverse split of the Company's Common Stock effective July 31, 1998. More than
90 percent of the Company's stockholders approved the reverse split at the
annual meeting of stockholders held on July 9, 1998. On July 31, 1998,
17,430,629 Common Shares, each with a par value of $0.001, underwent a reverse
split into 3,486,126 shares, each with a par value of $0.005. If all of the
remaining 175 shares of Series A Preferred Stock converted to Common Stock on
August 12, 1998, using the Conversion Price of $0.16743 which is 75% of the
average of the Closing Price of the Common Stock for the immediate five
preceding days, 1,045,213 shares of Common Stock would be issued to the holders
of Series A Preferred Stock. Similarly, if all of the 1,152 outstanding shares
of Series B Preferred Stock converted to Common Stock on August 12, 1998, then
6,880,487 shares of Common Stock would be issued to the holders of Series B
Preferred Stock. It is anticipated that the Company's stock will trade for 20
trading days, under the symbol CMTRD before returning to trading as CMTR.


    On July 2, 1998, the Company issued $50,000 of Series B Preferred Stock to
one private investor. The net proceeds to the Company were $43,500 after
deducting selling commissions. The Company has the option to convert the accrued
dividends on the Series B Preferred Stock, computed at the rate of 6% per annum,
into Common Stock of the Company in lieu of cash payments.

    Each share of the Series B Preferred Stock was offered at a purchase price
of $1,000 and a stated value of $1,000. Beginning 90 days following the issuance
of the shares of Series B Preferred Stock, each holder of shares of this
Preferred Stock has the right at any time, and from time to time, to convert
some or all such shares into fully paid and nonassessable shares of Common
Stock.

    The Series B Preferred Stock, after adjustment to account for any accrued
dividends that have not been paid, is convertible at a conversion price equal to
75% of the five-day average closing bid price immediately prior to the
conversion date of the Series B Preferred Stock but at no time higher than 100%
of the five-day average closing bid price immediately preceding the date of
issuance of the Series B Preferred Stock.

    The 25% beneficial conversion feature attached to the Series B Preferred
Stock and the intrinsic value calculations for the Series B Preferred Stock are
calculated in the same way as described in Note 4 for the Series A and Series B
Preferred Stock. The "deemed dividend" of $16,667 will be accreted to
accumulated deficit in the third quarter of 1998.

    On July 21, 1998, the Company announced that it had transferred the listing
of its stock to the Nasdaq over-the-counter bulletin board.


                                       10

<PAGE>   11

                              CHEMTRAK INCORPORATED

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

    This Report contains, and incorporates by reference, certain forward-looking
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995 and the rules promulgated pursuant to the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended) that are based on
the beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. Such
forward-looking statements are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. When used in this document and in the
documents incorporated herein by reference, the words "anticipate," "believe,"
"estimate," "expect" and similar expressions, as they relate to the Company or
its management, are intended to identify such forward-looking statements. Such
statements reflect the current views of the Company or its management with
respect to future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, the Company's actual results,
performance or achievements could differ materially from those expressed in, or
implied by, any such forward-looking statements. Factors that could cause or
contribute to such material differences include those are set forth in the
Company's 1997 Annual Report to Stockholders which is incorporated by reference
in the Company's Form 10-K (as amended on Form 10-K/A), and the Company's Form
10-K, as amended. The inclusion of such forward-looking information should not
be regarded as a representation by the Company or any other person that the
future events, plans or expectations contemplated by the Company will be
achieved. The Company undertakes no obligation to release publicly any updates
or revisions to any such forward-looking statements that may reflect events or
circumstances occurring after the date of this Report.


OVERVIEW

    ChemTrak develops, manufactures, markets and sells easy-to-use personal
medical diagnostic systems for over-the-counter and point-of-care markets
worldwide. Currently, most diagnostic testing is performed in clinical
laboratories, with results not received by the physician or the patient for
several days. In contrast, the Company's products permits the consumer or the
physician to perform diagnostic tests and receive results within minutes. Three
products are currently commercially available and are being distributed by
ChemTrak in the United States: The CholesTrak Home Cholesterol Test, ColoCARE, 
Home Test to Detect the Early Warning Signs of Colorectal Disease, and Parent's
Alert Home Drug Test Service, a counselor supported home drug test service
committed to helping parents prevent and eliminate drug abuse by their children.
The Company also introduced the AccuMeter H. pylori test to determine the
presence of bacterium associated with duodenal and peptic ulcers, and the
AccuMeter Theophylline test, a point of-care quantitative assay for
theophylline, a drug commonly used to treat asthmatics, both of which have been
cleared for marketing to physicians' office labs by the FDA.

    As of June 30, 1998, the Company had an accumulated deficit of approximately
$46,733,000. The ability of the Company to achieve profitability is highly
dependent upon numerous factors including, but not limited to, the Company's
ability to directly market and distribute its CholesTrak, ColoCARE, and Parent's
Alert products in the United States, successful completion of the Company's
regulatory approval process to market in the United States products under
development, and the Company's ability to provide product in sufficient, cost
effective quantities. Due to the uncertainty of these factors, it is difficult
to reliably predict when such profitability may occur, if at all. Until such
time as it achieves profitability, the Company is likely to require additional
capital to finance its operations.

    The development and marketing of consumer medical devices is capital
intensive. The Company has funded its operations to date through product sales
and public and private equity and debt financings. The Company will require
substantial additional funding in order to complete the development and
marketing activities in which it is currently engaging, and to launch these
products in the consumer marketplace. The Company intends to seek additional
funding through collaborative agreements with corporate partners or through
additional equity or debt financings. With the decrease in the price of the
Company's Common Stock, the Company believes it will be difficult or impossible
to obtain the required funding to maintain operations for the second half of
1998. (See "Liquidity and Capital Resources").


                                       11

<PAGE>   12

    The Company has historically experienced significant fluctuations in its
operating results and anticipates that these fluctuations may continue. The
market price of the shares of the Company's Common Stock, like that of other
emerging medical technology companies, has been highly volatile. Various factors
including, but not limited to, fluctuations in the Company's operating results,
technical and regulatory developments, and general market and economic factors,
may have a significant effect on the market price of the Company's Common Stock.


RESULTS OF OPERATIONS

NET REVENUE

    Total net revenue decreased to $845,000 for the three months ended June 30,
1998 from $870,000 for the three months ended June 30, 1997. Product revenue
decreased to $823,000 in the three months ended June 30, 1998 from $870,000 in
the three months ended June 30, 1997, primarily due to lower shipments of
Cholestrak(R). Total net revenue decreased to $1,899,000 for the six months
ended June 30, 1998 from $2,311,000 for the same period last year, when there
were higher revenues from funded research. Product revenue increased to
$1,877,000 for the six months ended June 30, 1998 from $1,478,000 for the same
period last year. This was primarily due to increased revenue from both Parent's
Alert Home Drug Service and ColoCARE Home Test to Detect the Early Warning Signs
of Colorectal Disease. On June 10, 1998, the Company announced that it had
signed an agreement with Pfizer Inc. of New York to develop a disposable,
quantitative, fingerstick whole blood test for one of Pfizer's drugs in
development using the Chemtrak's patented AccuMeter technology. 

COST OF PRODUCT REVENUE

    Cost of product revenue for the three months ended June 30, 1998 increased
to $851,000 from $517,000 for the three months ended June 30, 1997. For the six
months ended June 30, 1998, cost of product revenue rose to $1,792,000 from
$1,221,000 for the six months ended June 30, 1997. The increase for both the
three and six month periods was due to both manufacturing inefficiencies
experienced in launching the Company's line of home diagnostic products and to
the second quarter 1997 decrease in the raw material reserve due to a decrease
in obsolete and slow moving items.

    Product gross margin as a percentage of product revenue decreased to a
negative 3% for the three months ended June 30, 1998 from a positive 41% for the
same period in 1997. Product gross margin as a percentage of product revenue
decreased to a positive 5% for the six months ended June 30, 1998 from a
positive 17% for the six months ended June 30, 1997. These decreases were
primarily due to the reasons noted in the prior paragraph.

RESEARCH AND DEVELOPMENT

    Research and development expenses decreased to $168,000 in the three months
ended June 30, 1998 from $579,000 for the three months ended June 30, 1997. For
the six months ended June 30, 1998, research and development expenses decreased
to $361,000 from $1,032,000 for the six month period ended June 30, 1997. The
decrease for both the three and six month periods was due to the reorientation
of the Company and the decision in 1996 to convert from a research and
development-focused company to a market-driven consumer-medical-products
company.


MARKETING, GENERAL AND ADMINISTRATIVE

    Marketing, general and administrative expenses increased to $2,621,000 for
the three months ended June 30, 1998 from $1,530,000 for the three months ended
June 30, 1997. For the six months ended June 30, 1998, marketing, general and
administrative expenses were $4,227,000 as compared to $3,153,000 for the six
months ended June 30, 1997. These increases were primarily due to the higher
costs of test marketing the Parent's Alert Home Drug Service product as well as
support of existing products.



                                       12

<PAGE>   13

INTEREST AND OTHER INCOME, NET

    Interest and other income, net decreased to $33,000 in the three months
ended June 30, 1998 from $102,000 for the three months ended June 30, 1997. For
the six months ended June 30, 1998, interest income and other, net decreased to
$57,000 from $146,000 for the same period last year. The decrease in both
periods was primarily due to reduced levels of cash and cash equivalents.

ACCOUNTS PAYABLE

    Accounts payable increased to $1,355,000 for the six months ended June 30,
1998 from $393,000 as of December 31, 1997. This increase was due to severe cash
flow difficulties experienced by the Company. The Company has held a meeting of
its creditors and has been granted a moratorium on payment of its unsecured
accounts as of June 16, 1998. The Company has granted Credit Managers
Association (CMA) a blanket security interest in the Company's assets to be held
in trust for all unsecured creditors. The security interest given to CMA is
junior to any existing liens. The granting of the security interest to CMA is in
return for the moratorium on collection activity and is to insure that all
creditors are treated fairly and equitably.

LIQUIDITY AND CAPITAL RESOURCES

    For the six months ended June 30, 1998, the Company obtained net proceeds of
$2,079,000 from financing activities, primarily from the issuance of preferred
stock. As of June 30, 1998, the Company had cash and cash equivalents of
$244,000. During the six months ended June 30, 1998, the Company had a net
decrease of $870,000 of cash and cash equivalents. This was primarily due to a
decrease of $2,918,000 of cash and cash equivalents associated with its
operations mainly as a result of its six month operating loss, offset by
$2,079,000 of net proceeds obtained from financing activities.

    The Company believes that its existing capital resources, together with
internally generated funds and funded research, will need to continue being
augmented by funds received through collaboration agreements, equity financings,
or debt offerings. With the decrease in the price per share of the Company's
Common Stock, the Company believes it will be difficult or impossible to obtain
the required funding needed for its operations in the second half of 1998. The
Company has held a meeting of its creditors and has been granted a moratorium on
its payment of unsecured accounts as of June 16, 1998, until such time that the
Company can complete a private placement, locate a merger and/or acquisition
candidate.

    The Company has taken steps to restructure its operations to reduce costs
and expenses. As of July 1, 1998, the Company had reduced staffing by 18 full
time employees, discontinued the use of 11 consultants and temporary or part
time employees and reduced salaries of 13 other employees. The Company has also
reduced future raw material inventory purchases and the Company's marketing
budget for the second half of 1998.


IMPACT OF THE YEAR 2000 ON INFORMATION SYSTEMS

    The Company has purchased an upgrade to its present computer software and
hardware, which, according to the vendor, will be able to properly recognize the
dates commencing in the Year 2000. The upgrade is currently being tested and if
the tests are successful it may be in use by the end of 1999.

    The Company will utilize both internal and external resources to implement
the upgrade and test the software for the Year 2000 modifications.

    The Company has not initiated formal communications with all of its
significant suppliers and large customers. To date the Company has not found any
material impact which may result from the failure of its computers and computer
software of its vendors, suppliers and customers. However, the Company plans to
make an assessment of this issue during 1999 and if appropriate, develop an
action plan to correct it.



                                       13

<PAGE>   14

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 131 requires publicly held
companies to report financial and other information about key revenue-producing
segments of the entity for which such information is available and is utilized
by the chief operating decision maker. Specific information to be reported for
individual segments includes profit or loss, certain revenue and expense items
and total assets. A reconciliation of segment financial information to amounts
reported in the financial statements would be provided. SFAS No. 131 is
effective for the Company for the year ending December 31, 1998. The Company
operates in one business segment; namely, the development, manufacturing, and
marketing of easy-to-use diagnostic tests for the worldwide point-of-care
markets.



                                       14

<PAGE>   15

                              CHEMTRAK INCORPORATED

                           PART II. OTHER INFORMATION


Item 6. Exhibits and Reports on Form 8-K

        a)  Exhibits

              27.1 Financial Statement Schedule

        b)  Reports on Form 8-K

              A report on Form 8-K was filed with the Securities and Exchange
              Commission on May 29, 1998 reporting that the Company has raised
              approximately $1 million from the private placement of shares of
              redeemable convertible Series B Preferred Stock pursuant to
              Subscription Agreements and Questionnaires dated as of April 6,
              1998; April 8, 1998; April 28, 1998; and April 29, 1998,
              respectively.



                                       15

<PAGE>   16


                              CHEMTRAK INCORPORATED

                                   SIGNATURES


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


Date:  August 14, 1998              CHEMTRAK INCORPORATED


                                    /s/  Donald V. Fluken
                                    --------------------------------------------
                                    Donald V. Fluken
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



                                       16

<PAGE>   17


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number        Description
-------       -----------
<S>           <C>                       
  27          Financial Data Schedule
</TABLE>